Q3 2022 Kinaxis Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the <unk> incorporated fiscal 2022 third 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 a question.
I'd like to remind everyone that this call is being recorded today Friday November 4th 2022, I will now turn the call over to Rick Wadsworth Vice President of Investor Relations at can access incorporated. Please go ahead Mr. Wadsworth.
Thanks, operator, good morning, and welcome to the Codexis earnings call today, we will be discussing our third quarter results, which we issued after close of markets yesterday with me on the call. There Johnson card, our President and Chief Executive Officer, and claims 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 November four 2022.
It 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 our SEDAR filings.
During this call we will discuss <unk> results and non <unk> financial measures, including adjusted EBITDA and certain constant currency results and metrics a reconciliation between adjusted EBITDA and the corresponding <unk> result is available in our earnings press release, and our MD&A both of which can be found on the investor.
<unk> section of our website can access dot com and on SEDAR.
Participants 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. Neither this call nor the webcast archived may be rerecorded or otherwise reproduced or distributed without prior written permission from can access.
To begin our call John will discuss the highlights of our quarter as well as recent business developments, followed by Blaine Who'll 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. We will let you know when to change slides.
I'll now turn the call over to John .
Thank you Rick good morning, and thank you for joining us on this call today I'll be starting on slide four.
I'm pleased to report that the momentum in our business has continued as reflected in our exceptional third quarter performance, which included SaaS revenue growth of 21% or 28% in constant currency.
Total revenue growth of 39% or 49% in constant currency.
Adjusted EBITDA margin of 17% or 19% in constant currency. Once again, our accelerating performance allows us to increase aspects of our guidance for the year as Blaine will soon share with everyone.
Turning to slide five as I mentioned, our momentum in the business has remained consistent.
Nowhere is that more evident than our new customer wins.
Despite this summer months being historically slower for sales we closed an all time record number of customers for our third quarter and very nearly beat our all time quarterly record for bookings in history.
Year to date, we have over 40% more new customers than the same period last year and I'll remind you that the comparative period in 2021 showed exceptionally strong growth over 2020.
Quite simply.
Since the fourth quarter of 2020 and in each quarter since we have been experiencing.
The continuous and accelerating momentum in demand for our unique concurrent supply chain planning technique.
We are experiencing a significant inflection in the business.
As always.
We are humbled by the new global brands that put their trust and confidence in can access a small sample of the customers. We won in the quarter includes confluent medical technologies, a global leader in contract manufacturer supporting the design and development and manufacturing of lifesaving implants delivery systems.
In medical devices.
Karcher, the world's leading supplier of cleaning equipment and services for transportation and buildings. The company employees 14400 people located in 78 countries with over 50000 service centers worldwide.
Referrals are leading global healthcare company that develops plasma.
Plasma derived medicines and other innovative biopharmaceutical solutions.
And J S micro and the innovator in semiconductor materials solutions.
There are so many other global and iconic brands, we can't name today, but expect to be in a position to share them with you as we proceed through their deployment year to date. The split of new customers continues to be roughly 60 40 between enterprise accounts and those for mid market are smaller.
<unk>.
We're thrilled with our ability to serve such a broad universe of companies in verticals with a single SaaS offerings.
I'm also pleased to report that we continue to accelerate growth in our annual recurring revenue.
In the third quarter.
<unk> grew a record breaking 25% or just over 30% in constant currency terms.
Reflecting this acceleration our total backlog crossed the $5 billion.
For the first time growing to just under 550 million another record level.
All leading indicators of demand, including pipeline, an unsolicited inbound leads remain very robust.
We are confident that momentum in the business and the accelerated growth that comes with it is set to continue ahead.
We are very optimistic about our recent acquisition of <unk>, which offers exciting cross selling and greenfield opportunities, adding supply chain execution capabilities to our traditional supply chain planning solution makes us the markets only true end to end concurrent supply chain management solution.
Major differentiator in our market.
Both MTO and can access where separately recognized in the leaders quadrant of the 2022 control tower value matrix by nucleus research.
Rapid response was ranked highest of any vendor in the greater usability axes.
As you would have also seen during Q3 can access was further named a leader in three IDC market scape supply chain planning reports.
We're thrilled to be able to offer our solutions in more ways than ever through our private data centers.
As always and via public cloud with Microsoft Azure and now with Google Cloud platform.
Finally, I encourage you all to read our latest global impact report, which we released in September .
The success of our ESG initiatives is increasingly being recognized by all of the related rating agencies.
If you manage ESG focused funds, please reach out to Rick to discuss our meaningful progress here.
I'll now ask Duane to discuss results for the third quarter and share more details about our updated outlook Blaine.
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 high for us.
As I did last quarter I'll also be sharing certain non <unk> constant currency results and metrics, which estimate how our business would have performed excluding the effect of foreign currency rate fluctuations.
We discuss our methodology to the constant currency calculations in the news release.
While they are only estimates we believe they better demonstrate the trend of ongoing underlying momentum in our business we.
We intend to share this information only as long as we deem it to be truly relevant to the interpretation of our results.
Okay.
Starting on slide six.
Before I discuss the numbers I want to thank the entire can access team for allowing me to communicate these amazing results.
As I read through our outstanding Q3 results I get to deal with a huge smile on my face as our bets are paying off better than expected.
With that let's jump into it.
Total revenue in the third quarter was up 39% to $89 5 million and up 49% on a constant currency basis to $95 9 million.
SaaS revenue grew 21% to $54 million, but was up 28% on a constant currency basis to $57 4 million.
As you would expect an acceleration in our growth, which you've been following for some time is flowing through to higher SaaS revenue growth on a constant currency basis.
Subscription term license revenue was $5 8 million versus $2 million in Q3 of 2021.
This largely follows the cadence of renewals for our small group of on premise customers are those that have the option to move their deployments on premise.
Which included one new customer during the quarter.
Our professional services activity was strong gain resulting in $25 6 million in revenue or 76% growth over the corresponding quarter of 2021.
The ongoing rapid growth primarily reflects our recent acceleration in new customer wins Jenny.
Generally this revenue item varies from quarter to quarter based on the number size and timing of customer projects underway as well as the proportion of work assumed by partners.
Maintenance and support revenue for the quarter was $4 million up 28% from Q3 of 2021 and reflecting recent growth in the base of revenue from our small group of on premise customers.
We continue to be pleased with the diversity and strength of our total revenue base for the quarter, our 10 largest customers accounted for 22% of total revenues versus 26% in the comparable period with no customer accounting for greater than 10% of total revenues.
Third quarter gross profit increased by 29% to $55 1 million largely as a result of strong total revenue growth.
Gross margin in the quarter was 62% compared to 66% in Q3 of 2021.
Largely reflecting a higher proportion of lower margin professional services revenue in the mixed the impact of foreign exchange fluctuations on revenue and recent strategic investments and related teams.
Adjusted EBITDA was up 17% to $14 $8 million with a margin of 17% compared to 19% in the third quarter last year.
On a constant currency basis, our adjusted EBITDA was $17 9 million or 19% of revenue.
Our profit in the quarter was $1 6 million compared to a profit of <unk> 2 million in Q3 of 2021.
Cash used by operating activities was $3 6 million compared.
Compared to $11 $2 million in cash generated for the comparable period, largely reflecting normal fluctuations in balances of operating assets and liabilities.
At September 32022, cash cash equivalents and short term investments totaled $233 million roughly.
Roughly equal to the $233 4 million at the end of 2021, despite $33 $8 million in cash being used to finance our recent acquisition of NPL.
We remain pleased with our outstanding track record of cash generation.
I'd like to highlight our year to date performance on some key items.
SaaS revenue has grown 21% or 27% on a constant currency basis.
Total revenue has grown 47% or 54% in constant currency.
And our adjusted EBITDA margin of 22% of revenue or 23% on a constant currency basis.
Let's move to slide seven.
Turning to some key metrics.
Our annual recurring revenue grew 25% to $259 million, including currency impacts.
But currency movements masked even stronger underlying growth in constant currency, our AOR grew 30% year over year to $269 million.
Excluding amounts related to acquired MTO customers constant currency growth would have been 28%. These.
These record levels of growth reflect the unprecedented strength, we have recently experienced winning new accounts and have success, winning incremental business from our install base.
I'll remind you that the growth rate for the SaaS portion of the <unk> is higher.
For total IRR.
On slide eight our remaining performance obligation hit a record level at $549 million.
Up 4% to 6% from September 32021, and the first time, we've crossed the 5 billion threshold.
Of that total 489 million relates to SaaS business, which is up 37% year over year.
It is important to note that given the structure of mpls contracts only a negligible amount of the RPI increase related to acquired customers.
$55 $8 million of SaaS amount will be recognized as revenue in Q4 of 2022.
Further details on our <unk> can be found in the revenue note to our financials.
Turning to slide nine with respect to our outlook. We are pleased to be able to increase certain aspects of our guidance for fiscal 2022.
We now expect total revenue for 'twenty, two to be between 365 and $370 million.
Largely due to an improved view on professional services and subscription term license revenue.
We continue to expect that fiscal year 2022, SaaS revenue will grow between 21 and 23% over our 2021 level on a constant currency basis, we estimate that growth will be between 25 and 27%.
We now expect subscription term license revenue to be between 38% and $40 million with the increase resulting from expansions from a number of customers.
As you know 2020 was the peak of our subscription term license revenue cycle simply due to the volume of renewals for on premise customers scheduled for the period.
Throughout 2022, we have had some very meaningful renewals expansions and even some new customers joined this revenue pool, mostly because of options in your contracts to move their deployments on premise should they choose.
As a result, the total amount of revenue we earned from it from on premise customers over the full cycle has increased but the cadence between years for the related subscription term license revenue recognition has changed.
Today more contracts are longer than typical three year term, we've previously discussed.
We will give more specific guidance next quarter on what the updated cycle it looks like.
But given the new cadence subscription term license revenue in 2023 will be closer to one third the peak level, we're experiencing in 2022.
To have margin impacts as well.
We have increased our adjusted EBITDA margin guidance for fiscal 2022% to 18% to 20, 20%.
We are pleased with the balanced approach to growth and profitability that we have adopted so far in 2022, we are driven to accelerated growth in <unk> and SaaS revenue in constant currency, while still deriving solid profitability metrics.
I expect we will take a similarly balanced approach in 2023.
Though without the benefit of a peak in subscription term license revenue.
Given the unprecedented market conditions in front of us.
We have a great offering opportunity to reinvest our go to market teams. So we will we will do that while also remaining responsible with adjusted EBIT levels.
We're in the middle of our 2023 investment planning process now and we'll give you specific guidance next quarter.
With that I will turn the call back to John . Thank you Blayne, we're often asked by investors whether the momentum we're experiencing in our business.
As a temporary phenomenon driven by all of the disruption Covid all the disruption COVID-19 created and.
As soon to settle down in short we firmly believe the answer is no.
We have been experiencing a notable increase in demand for roughly two years now.
And there are no signs of slowing down now this doesn't field temporary one bit rather momentum in our market seems to have more room to accelerate.
Let me be clear, replacing failing legacy supply chain management systems and methods has become a globally urgent imperative.
Can access and more specifically our unique ability to deliver end to end concurrent supply chain management is leading the way.
Covid related challenges like mass massive shifts in demand component shortages inflation power uncertainty in various geographies and a myriad of other disruptions.
Have all served to test the resilience of our global supply chains, the Siloed excel dependent cascaded batch processing approaches of the past breeds lethargy in responding to disruption.
Covid didn't create the problem. It just highlight highlighted it at scale.
To levels. The organization that were previously unaware every board is asking every CEO what will you do next time.
Leaders in the market now view fully digitized concurrent supply chain management as a must have standard solution and we are increasingly seeing the benefits of that Renaissance.
As a result, and as Dwayne alluded to our focus remains on doing what's best for the long term success of can access.
We will continue to invest now to remain the leader in.
In this tremendous opportunity that continues to unfold right in front of us.
As always thank you all for taking the time to join US on the call today with that I'll turn the line over to the operator for Q&A.
At this time, if you'd like to ask a question simply press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Our first question will come from the line of Richard <unk> with National Bank Financial. Please go ahead.
Yes. Thank you John I just wanted to expand on your last comment about momentum could you maybe give us a take on how you sort of view.
Momentum coming from the market versus <unk> specific and really trying to assess here the scale of your market share gains today.
Yes, so there's a few things.
Leading indicators that we watch for above and beyond just pipeline, but unsolicited inbound leads has been up quarter over quarter every quarter for six quarters in a row.
And so that that is a critical.
Element for us.
The other is the general interest we're seeing in mid market.
We were thrilled to have.
Uniquely a product that can satisfy the supply chain needs of companies that are $100 million in revenue and companies that are $100 billion in revenue and everybody in between.
And so we're definitely seeing.
A consistent message.
The market.
That that this Renaissance is absolutely real.
It's not just the.
Not just the performance in the business and as I stated.
In the opening remarks, I mean, 40% more.
Customers today than we had this time last year.
To me is this is just all proof and evidence of momentum in the business and.
Obviously, we just.
The other areas that I look at.
We just we just held an event here at headquarters in Ottawa, which was simulcast all over the world called <unk>.
Big ideas and supply chain.
And we completely outpaced our expectations on the number of prospects that attended.
At that event and again the cross section.
Between mid market enterprise that attended that section. So there is there is a lot of interest.
Now in.
And what I would call digitizing and modernizing supply chain methodologies for the next.
Three decades.
Okay, and Sir two quick related questions to that momentum.
Ears back you had this concerted effort to really elevate the brand from a marketing perspective.
Where are you today in terms of where you wanted to be relative to those initial objectives.
Yes, I'm never satisfied.
But I will say.
We have been.
While we have been notified that we are now the number one.
Inquiry.
For some of these major analyst firms out there that we have.
Surpassed the previous number one inquiry and supply chain management and we are now the number one inquiry.
Into these analyst firms and so that's great to me that is a statement that our message.
Is resonating with with the market and again our messages is we have the best technology in the world. It's.
It's great technology, you don't get me wrong, it's great. We have the best technique is the world we have the best.
Medicine for what ails supply chain today, and so we.
We are.
As Blaine said, where we are.
We're going to invest in and the momentum that we see we're in the middle of the planning cycle for 2023, and there is two areas of focus, especially for the front half of 2023, and one is sales and marketing.
Expanding coverage, there and on the marketing side.
Getting very loud and amplifying even more than we're amplifying.
Our message.
To the market.
Okay. Thanks for that John .
Right.
Our next question will come from the line of Dan OS Ms Coppola with BMO capital markets. Please go ahead.
Hi, Good morning, John I'll ask the macro question I mean, clearly at a high level youre not seeing any kind of a slowdown and just the opposite actually.
From your comments, but just if we drill into maybe some of the individual verticals are pockets is there anywhere where you've seen any kind of change in customer behavior.
From the macro I mean, our large enterprises going to more decision cycles are they kind of offering.
Their deployment plans.
Any anything any of the specific protocols that you can comment on or just looking at.
Yes, I wouldn't say, we're seeing anything specific.
Yeah.
On the macro level.
We haven't seen any notable impact.
Beyond the foreign exchange fluctuations, obviously, which had been quite dramatic.
Especially the yen the GBP and the euro.
But we haven't really seen anything other than that we are.
Are seeing accelerating.
As we mentioned.
The pipeline remains very strong and robust we're seeing great.
Traction with mid market.
So at a macro level I would say.
Nothing really really notable let me.
Maybe say one thing.
That I am tracking very carefully and I did mentioned this in the last earnings call.
That we are tracking overall cycle time to close.
I wanted to.
The one indicator I want to see.
As a a shrinking if you will in the overall site.
Sales cycle time.
And for the longest time over overall the cohort.
It was roughly 18 months and we still have some very large enterprises that take in some cases multiple years in some cases, we've closed them. This last quarter and that was a multi year.
<unk> iconic brand.
But finally got them over the line.
But we also closed a pretty iconic branded five months.
So I am tracking this very carefully and I think part of it is there is absolutely an urgency as I said. This is this is becoming urgent.
For many of these companies and the directives are coming right from the board.
That resilience is critical.
Establishing a resilient supply chain is a survival means.
Means to survival.
Zillionths isn't a competence, it's an outcome of one.
And I would say that competence that brings about resilience as agility.
And as you know can access is all about deriving hyper agility for supply chain so that.
It's one of the macro level things on monitoring panels and.
I'd say, it's a bit early to tell although the trend would suggest we're getting closer to that 12% to 13 month range.
We'll see if that sustains and hopefully shrinks to less than a year.
That's great to hear.
And then just a question wanted to ask was on public cloud deployments I mean, you announced a couple of cloud support earlier this year I'm just curious as to how that's progressing.
Obviously that will eventually have financial implications in terms of Capex and margins, but very early days on that front or anything to say in that regard.
Yes. So this was one of those I would say existential risks to the business several years ago, we were thinking about scale.
Where.
In anticipation of this kind of momentum.
We wanted to make sure that we were not going to be.
Hindered if you will by the availability of hardware and data center capacity.
So we started that process.
And obviously have a great partnership a partnership with Microsoft Azure, we already have a customer live on that environment continue to roll that out.
And that gives us scale now more more recently.
And again, it's part of our scale equation, our relationship with Google.
And very shortly after that relationship with zinc we started our first deployment there too.
And so for US this is very critical to our scale equation and making sure that datacenter capacity is available.
To serve our customers regardless of the acceleration we are experiencing there in every geography that matters having.
Having two data public cloud providers is critical to our to our scale equation. So we're we're thrilled with both of these relationships obviously.
And we will be focused mostly in bringing net new accounts first and foremost.
Bringing them onto the public cloud environments first rather than transitioning existing accounts for obvious reasons.
So we're pretty excited about the relationships forming there.
Great. Thanks, Jonathan.
Our next question will come from the line of Robert Young with Canaccord. Please go ahead.
Good morning.
The sales efficiency has been improving over the last several quarters.
This quarter, if you just look at the period.
Costs currently are Orange I'm curious, though.
We're.
Signal.
And the sales organization significantly with a rapid start just curious if you could talk about that particularly.
Considering John's comment around the street cycle time to close.
It seems as though the sales for sure Rob Stanley matter, Yes.
I'll jump in Eric.
I love that metric sales efficiency is something very important to us when we think about our planning a vote.
Do we have the right sales force in place or is it large enough it's too small.
<unk>.
Youre absolutely right it is getting to be extremely strong.
We just got ahead of a quarter.
Andrew get myself in trouble at some point, because I've been saying Thats almost every single quarter for the last I think four quarters now our pipeline is getting bigger our convergent is getting better and our win rate is getting better every quarter that we get the same results and so we're in a position where our sales efficiency, obviously is getting a lot stronger and it's getting to the point where.
We just realized we need to keep on adding to that sales and marketing team because they are so strong and they are doing so well right now.
Our <unk> additions this is wendell extra metric I'm going to throw there are additions that we had in Q3 and we compare that to the <unk> additions that we had in Q3 of last year. It grew 168%.
I'll say it again, 168%.
Credible number.
Now part of it can be because of NPL, but we more than doubled.
Without MTO.
The team is on fire and its not just the sales team. It's the full organization that is really clicking right now.
But.
We're in a great position to keep that sales efficiently at a very very high high level at the same time, we need we need to invest into it and we need to make sure that we get to.
<unk> sales efficiency that will be maintained over a long period and get the most out of the volumes that are available right now.
Sure do.
We do our best to keep up with the demand and we're just fortunate position to have.
A strong sales efficiency when we're seeing a demand that is at an all time high.
Okay, that's great to hear.
The new ads and accordingly, even highlighting significant new ads for a while now.
Can you just talk about the cadence.
<unk> highlighted that is not normal for a summer quarter or maybe.
The summer quarter, but as you're exiting the summarize youre heading into Q4.
Cadence of that new win activity and that sort of pushing towards the end of the quarter as a strength.
Quarter.
Yeah.
As I said in the opening remarks, I don't see I don't see a slowdown in momentum here.
Based on.
On current activities based on the pipeline.
Based on market momentum based on.
Being the number one inquiry.
This obviously is a lot of focus on supply chain excellence and and I think a lot of focus on.
Manufacturers rethinking their their techniques and.
And looking for a breakthrough so I don't see a slowdown of Rob I think that momentum is upon us.
You know I would declare.
Perhaps very definitively we are experiencing inflection and so now it's a question of.
It's just a question of.
Of.
Being ready to absorb the success.
Okay and last question a quick one.
The net revenue retention.
Greater than 100% I'm, just curious is there any change there.
For investors.
Think about just given that the business shifting towards the joint orientation.
Of course.
Mr Davis.
David is there.
Give us a little more data on retention to soybean.
Sure.
Thanks.
New insight and then I'll pass there.
Yes.
Net revenue retention continues to be over 100%.
If I knew that hopefully will continue forever.
But it is getting stronger we haven't given an exact number it potentially at some point in the future we might but it is continuing to get stronger and stronger.
Each quarter, so we're very happy with that.
Most importantly, our gross retention.
The retention of our customers.
<unk>.
Before expansion is.
Extremely high.
Generally they can talk about.
I think enterprise.
Customers are companies that focus on enterprise customers to be.
Looking for a <unk>.
Gross retention something between 95, 100%.
We are in that range and we're at the high end of that range, which is.
Testament to how important our solution is to the customers that we have right now.
To answer your question on expansion and installed base.
We had a good quarter this quarter in terms of.
About a 60 40 split in terms of.
Where we had.
Net new versus expansion.
Is that something that we are going to continue to grow and now that we keep on growing that base of.
Customers, we expect that expansion in installed base will be more important in the future.
Thanks for taking my questions congrats on the momentum.
Thanks, Rob.
Your next question will come from the line of Paul <unk> with RBC capital markets. Please go ahead.
Thanks, so much good morning.
Obviously organic growth is very strong, but just wanted to hone in on NPL, how much does the company contribute to total revenue and the EBITDA in the quarter and then what magnitude or not did NPL contribute.
Materially.
And our appeal.
Sure.
Sure.
Across the board question on MTO and their impact for us.
As far as revenue.
Revenue our total revenue.
There we.
I already talked about the fact that.
They came to us with high single digit annual revenue.
You can almost figure out based on those numbers that it was.
I would say a fairly insignificant impact to our SaaS revenue and total revenue.
Adjusted EBITDA I would say, it's a positive impact but.
Not out of line with what our current margins are.
As I mentioned, we hit.
I said that we hit around 30% on a constant currency basis, but without MTO would've been around 28%.
And then the the last item you had asked about was <unk>.
So with.
The way that we've developed our contracts.
A little bit differently than how MTO put.
Put together their contracts and we are fairly strict.
Methodology on on what we consider to be IPO, and what we don't consider the IPO.
A much smaller amount of the MTO contracts. We've included in RPI. So it's.
I would say very immaterial.
Alright, thanks for laying that out.
I just wanted to go through it all and I understand that.
In terms of the business momentum.
Maybe it's overshadowed by the growth that you're seeing on the direct sales side.
But in the call in the prepared remarks, so it wasn't so much I mentioned on partners and the contribution from partners now how do we think about the momentum and the.
Sort of the force multiply that you're getting from partners here.
Yes, so I would say.
As as it has been for multiple years. The vast majority of net new accounts are partner influenced I'd say, the one thing I might call out that is.
Perhaps.
Different let's just say is our var program update.
We have now which we started.
Earlier that earlier in the year. So we now have over 25 participants in that program. In fact, I think we might actually be closer to 30.
And we've had <unk>.
Several wins in that area.
<unk> related and more targeted for this quarter so that.
That is where we are anticipating some acceleration in the quarters to come we are working very very hard on.
Focusing on training and enablement.
Building training programs and.
Establishing internal systems to support them.
Many of these borrowers are in geographies, where we don't have coverage right now.
And so we're really pleased with the program, thus far and I think youll see more news coming out in the quarters to come related to our var inspired winds.
Okay great.
Hotline.
Your next question will come from the line of Christian <unk> with eight capital. Please go ahead.
Hi, good morning, and thanks for taking my questions. The first one I wanted to ask is related to the macro there is some vertical some geographies, where we're starting to see supply chain constraints ease a little bit.
At least from following on our peripheral and some of the transcripts of tech companies at least.
Just wondering in your conversations with customers.
Are you seeing urgency change have you seen some customers how many more bandwidth flexibility.
Harsh I would exactly what <unk> solution they need.
Just wondering either way, whether you're seeing an acceleration or maybe more thoughtfulness from customers.
Macro changes here in the supply chain scenario evolves out of Covid.
Yes, I think you know.
There is no doubt that while.
In the throws of this pandemic.
Many manufacturers were struggling.
Many many many of them were struggling mightily and.
I would say that as we emerge from this pandemic there are new threats.
I've never had more conversations with CFO about inflation risk.
The speed at which inflation is occurring and recovering in different geographies and the impact that has on cash the impact that has on profit.
And so risk is.
Is omni present, although different in Covid and so.
I would say.
The availability of supply might be easing the availability of containers.
Maybe easing although.
It's not back to its full state.
But the.
I'd say the velocity and ferocity of disruption is not easing it's just different.
And.
There's a lot of pressure, obviously with inflation, there's a lot of pressure on it.
On margin margin pressure.
And so many of these organizations are being asked to do more with less.
And that can only happen with the transformation in supply chain.
We have customers that have come to us and said, we we expect to double the size of the business with half of the people in supply chain.
That's the kind of model description that we see in terms of what the future holds.
And so I really don't see.
I don't see that.
Letting up frankly, I think thats going to continue.
It's going to continue to be the story for many many many in fact the years to come.
Okay, that's helpful and consistent on all the commentary earlier on the momentum.
The second question I'll ask here is more on the modeling side I think we've moved away from giving pointed capex guidance and I'm not necessarily your question that pad as we shifts towards partners like Google and Microsoft with the public cloud approach is it safe to think that <unk> capex requirements could.
Decrease over the coming quarters years could it become a much capital expenditure lighter company with this strategy.
Yes, good question.
We're actually already seeing that in the current year in terms of.
That transitioned to a little bit more of a public cloud or a hybrid environment.
But you should expect that.
Forward, our capex will be lighter than what you've probably seen in previous years.
Great. That's helpful. Thanks for taking my questions. This morning.
Your next question will come from the line of Steven to Kumar with Stifel. Please go ahead.
Good morning, gentlemen.
And congrats on another strong quarter.
102, one.
I want to ask a question specifically around the cloud strategy here.
<unk> from the scale Optionality that cloud brings.
Are there any incremental customer or partner categories or even use cases that our cloud first offerings could cause unlock for taxes.
I think the.
That's a wonderful question and in fact.
I think the one area that that could have some significant impact on us.
Through the relationships, both with Microsoft and Google is.
How that might influence access to their own customers.
That are already leveraging their platforms. It's early days.
In that.
I'd say related discussion.
But that that could be an area of <unk>.
Great interest in it could be an accelerant.
For us frankly, I don't see whatsoever that it brings about some some new use case that wasn't.
Available to us without it it really is a scale multiple multiplier for us first and foremost.
We have been what.
What I would say a cloud.
Cloud SaaS companies since 2005 and.
And so we've been.
We've been delivering our software that way for quite some time. This just gives US a force multiplier.
Having Microsoft and Google So again, I'd say really it's the relationships may unlock.
I would say.
Access.
Trusted relationships with.
With customers that are already on their on their respective platforms.
Great. Thank you.
I wanted to touch on the <unk> acquisition next.
Could you.
Could you speak a little bit about the.
The opportunity that you see from a cross sell perspective.
They're acquired basin.
How do you see NPL.
In terms of the influence on expanding your pipeline will help given the market opportunity.
Yeah.
That's another great question.
I'm really really excited about this this acquisition in.
Locking of arms with with MTO.
We have long been <unk>.
<unk> on supply chain planning as you know and.
We recognize that the.
The notion of concurrency and linking everything and every one in the planning world.
Is exceptionally potent and unique.
And with the acquisition of <unk> that brings us into end to end concurrent supply chain management. It is the blurring of the lines between planning and execution.
Think about the.
The potency of having.
Having concurrency between material emotion and promises made to customers and revenue at risk and everything else in between fully connected.
And so again, our very early days. This is a very recent acquisition for us, but the thesis behind this was really.
Elevating can access.
From being a supply of concurrent supply chain planning.
Provider to an end to end concurrent supply chain management provider blurring the lines between planning and execution and I truly believe this is this is yet another revolutionary step.
And very unique for the market.
We're getting great feedback from our customers already.
When they recognize what this will unlock for them.
Okay, great. Thank you for taking my questions ill pass the line guys.
Our next question will come from the line of Nick Agostino with Laurentian. Please go ahead.
Yes, good morning, I guess first question.
You guys put out some really positive encouraging news with regards to Asia obviously.
Adding lots of partners in that in that region and opening up an office there and I'm just wondering.
What can you just provide as far as the timing like why now what are you guys seeing in that part of the world.
Kind of suggests that.
Now is the right time to put the full on investment.
Yes, well first its a great central location for their support.
Across all hours right.
Is that 24 hour coverage.
I'd say.
The other.
Key element for us is talent.
It's a great great source of supply chain talent.
And obviously, we've been talking about talent wars, I'd say, theres somewhat subsiding, a little bit, but they're still omnipresent and.
And so this is giving us an opportunity to extend our talent pool.
And again another area for us to make sure that we are.
We're growing the team at a rate.
Commensurate with the acceleration in the momentum of the business.
That's really the.
The driving force behind our investments there.
Okay and then.
Just switching gears I know you've talked about on this call about good solid momentum and it doesn't sound like there's anything right now that youre seeing that that's going to slow that down and I'm. Just wondering with a lot of talk for 2023 of a potential recession can just trying to understand the downside risk can you just share.
Your thoughts maybe what clients are saying thinking.
And just your own past experience given the recession back in 2008, what sort of impact when you look at your business, what sort of impact should we be thinking about.
From a downside perspective, when it comes to the recession or a potential recession.
I see no negative impact that I only see a positive one.
I think supply chain excellence is recession proof really.
When you think about what businesses are forced to two.
To absorb in times like this it's they have to become.
Hyper efficient hyper agile.
In times of recession, and and as I said in many cases.
They look to automate.
Many of their supply chain functions.
They can continue to operate.
You know with potentially less investment.
And so this is what this is what technological advancement brings about and as I said earlier can I double the size of the company with half of the people can I run my supply chain with half the people.
So honestly.
I only see upside.
To the implications.
Of challenges in the market here and look.
I would say the opposite sorry, I would say the same thing in times of plenty.
Because we do have customers right now that can't.
They can't manufacturer enough. They basically told us we're going to sell 100% of the goods that we can make.
So in their case.
The economy is causing a giant.
A giant increase in demand.
And again in that case, they need hyper agility.
Which really I truly think that I don't think about it in terms of the economic macro.
Events of the World is driving the need for supply chain excellence I really just think about it in terms of disruption.
Do you have volatile supply <unk> demand for things that are constraint if thats. The world you live in you need to become hyper agile.
If youre not agile you will not have a resilient supply chain and so resilience is really what boards are asking their ceos about right now.
In fact, the narrative sounds very much like this your supply chain needs to be more resilient and oh by the way do less harm to the planet.
That's the most common narrative I hear your supply chain needs to be more resilient and oh by the way do less harm to the planet and so that is an omni present.
And urgent I would say need regardless of the economic conditions of the world right now.
Okay I appreciate that color excellent. Thank you.
Thank you.
Our next question will come from the line of Martin Toner with ATB capital markets. Please go ahead.
Thanks very much.
We won.
Most of my questions have been answered.
Quick one on <unk>.
The.
Our scale multiplier.
DCP does that mean that you can grow faster with the same amount of professional services.
Capacity, both internal and external.
I wouldn't I wouldn't classify it that way.
The speed at which we grow.
Quarter over quarter, and the speed at which we gain net new customers every time you win a customer you need data center capacity.
And.
No secret.
In terms of.
The world shortage in and chip manufacturing and silicon.
Part of our.
Scale strategy is to make sure we never run out of data center capacity.
And so that is sold.
I would say that the motivation for us to form strong bonds and relationships with Microsoft Azure and most recently <unk>.
Very strategic relationship with.
With Google.
And so that's how I would classify it.
Nothing more complex than that.
This gives us between the two.
It eliminates what I would call an existential threat that we win customers and we don't have hardware to put them fund.
So this is this is just eliminating that threat as we as we continue to scale.
Awesome, Thanks, Ron based.
Based on your comments about growing the sales force doesn't seem like the growth in sales and marketing expense.
Is likely to grow.
Less.
Next fiscal on an absolute dollar basis right.
That's a good assumption for sales and marketing.
Briefest answer as I can give you, but I think it's a good assumption.
Brief as good great quarter guys congrats.
The question. Thank you.
I will now turn the conference back over to management for any closing remarks.
Great. Thank you operator, and thank you everyone for participating on today's call. We appreciate your questions and your ongoing interest and support and can access we look forward to speaking with you again, when we report our fourth quarter results Bye for now.
This will conclude today's call. We thank you all for joining you may now disconnect.
Please wait the conference will begin shortly.
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