Docebo Inc. Q1 2023 Earnings Call
Good morning, everyone and welcome to the Deutsche Bank Q1, 2023 earnings call.
All participants are currently in listen only mode. We will open the lines for a question and answer session for analysts following the presentation.
Instructions will be provided at that time for research analysts to ask questions. We ask that analysts please limit themselves to two questions and we turned to the queue for any follow ups.
I'd now like to turn the call over to Deutsche Both Vice President of Investor Relations, Mike Mccarthy. Please go ahead Mike.
Thank you operator before we begin their chip I would like to remind listeners that certain information discussed today may be forward looking in nature such forward looking information reflects the company's current views with respect to future events.
Any such information is subject to risks uncertainties and assumptions that could cause actual results to differ materially from those projected in forward looking statements.
More information on the risks uncertainties and assumptions relating to forward looking statements. Please refer to dovetail those public filings, which are available on SEDAR and Edgar.
During the call we will reference certain non I F. R S financial measures.
We believe these measures provide useful supplemental information about our financial performance.
They are not recognized measures and do not have standardized meanings under ifr S. P.
Please see our MD&A for additional information regarding our non <unk> financial measures, including for reconciliations to the nearest I FRS measures.
Please note that unless otherwise stated all references to any financial figures are in U S dollars.
Now I'd like to turn the call over to Doug Chambers, CEO Claudio Farabaugh.
And thank you for joining our first quarter earnings call with me today.
Our president and CEO and Scott on the hour.
Our CFO .
I will start my comments this morning with a brief high level summary of our results. We are pleased to report revenue growth with March quarter results coming in at the end of our guidance range at 32% on a constant currency basis.
Our profitability exceeded our guidance with our adjusted EBITDA margin, reaching five 3%.
As the <unk> brand reach we saw a wider customer base in Q1 across volumes.
No.
Our Blackwater and versatility allows us to take advantage of global opportunities across use cases.
Is that about the region, our business mix and we are happy to see our investments in new European market gains momentum.
We closed some of our largest center.
In Q1 with companies in Germany, and France, including a major transportation and logistics solution provider that operates in over 100.
These worldwide.
From a product perspective.
General.
The content creation model digital shaper maintain as its performance from Q4 and achieved.
To reiterate in Q1.
The turbo Ultra technology.
Shell to delivering these things.
So over the past four years, our work in AI enabled us to fine tune, our offering and data model, particularly in content automation and embedded Sir do we deleverage in multiple languages.
Just on the data moves to the LMS and that led to our product. We think should every learning journey is a hyper personalized disease intern program.
Productivity per hour.
Furthermore, we are continuing to announce what AI control panel that will give our customary I'll Tahiti or now daily semi company data can be used.
The management of our profit study data is an important requirement for enterprise and.
And the table diesel technology is built around these key need.
As we look at the broader operating environment, we continue to see longer deal cycle, especially in the enterprise segment. We are pleased that in the face of such headwinds that we have.
Largely executed our growth strategy.
They need better revenue grow.
Improving profitability as we move through the year.
Looking forward. Our main goal is to grow the company effectively no matter, what the economic condition may be.
We are also focused on improving operational efficiency and the start of this quarter. We took actions that we believe will optimize the critical part of muscle of our organization.
Thank you aspect of these involve the blood tubing, our organizational Yaqui, which allows for faster decision, making closer to the customer by streamlining processes and reducing middle management layer, we are better positioned to quickly respond to customer needs to drive innovation and foster a culture of high.
The performance.
Regarding our capital allocation our strategy remains focused on tuck in deals that's subpart to principal.
We see great idea chip products and features.
Part of our build versus buy.
Second we look for innovative team that <unk> gotcha.
Shortly after the end of the quarter, we announced the acquisition of Pir Board. This acquisition aligns with our strategy of seeking out great technology they've gone.
Women with Jabil got offering while also adding engineering talent to our team.
We the community learning got this beautiful brands, we are materially strengthen our customer and partner for any use case.
We bring a desk community learning features to the growing number of enterprise customers being serviced by the chip.
In regard to future M&A opportunity, we will evaluate each auction basis.
Potential to address multiple use cases.
Leverage our increasing use of Adi.
This will enable us to deliver new innovation.
Such as hyper personalize it.
Ladies enablement.
Thanks.
In conclusion, although the microeconomic environment might continue to be challenging we are replacing there to take advantage of opportunities that provide sustainable.
No.
Our emphasis on growth combined with operational efficiency and our data is to treat their more demanding performance stands out of it.
We've always said to strengthen our position as the clear.
We never managing from these economic cycle now I would like to turn the call over or they feel when we gave you an operational update.
Okay.
Thank you Claudio and good morning, everyone.
In quarter, one our companywide average contract value or <unk> increased 7% to $47000 from approximately $43800 at the end of the first quarter of 2022.
ACB for new customers in the quarter was approximately $50000.
During the quarter, we signed 112 net new customers, including several valuable enterprise deals.
This is reflected in our continued growth in annual contract value ACD.
Customers continue to derive measurable value from the table Fleury platform.
Particularly in multiple use case environments.
Notable customer wins in quarter one included the Neal.
The platform for innovative video experiences.
<unk> has chosen the table to help them with their compliance professional development and Onboarding needs.
The table also partnered with <unk> Corporation, a global manufacturer of materials processing machinery and aerial work platforms.
<unk> showed the table to address our customer and partner training needs.
Well as.
Onboarding and professional development for their employees.
In addition, the Jimbo's learning platform has been selected by freedom mortgage one of the largest full service mortgage company and a top veterans administration, VA and barrel, our zinc administration as HCA lender in the United States.
Freedom mortgage chose the chambal for multiple internal and external use case.
In Europe , we landed one of our biggest enterprise deals in the region. When we signed a large French based the transportation and logistics solutions company operating in over 160 countries will partner with the shape or to address a combination of internal and external learning use cases that include.
Customers partners and employees.
Finally in Germany, we signed the deal with notes chips kg.
One of the world's leading manufacturers of construction materials for interior designer building installation and design ceilings.
Now Gibbs kg chose the Cheddar Bo to address multiple internal and external learning use cases, including sales enablement in a retail customer and channel partner training requirements.
It is important to note that Germany, and France are large and important new markets.
We are very pleased to see our early investments in these countries continues to build momentum with these large enterprise wins.
It is important to note that the company is partnering with the Chevron have diverse needs for training, both the internal and external learners across different industries.
When viewed together this demonstrates the broad horizontal appeal of our solutions.
Despite economic challenges and longer deal cycles, the schedule executed effectively and invested in supporting future business growth.
Though deal elongation remained consistent in the quarter.
Washington, and the table navigated wildly, but healthy growth.
This highlights the company's resilience and ability to adapt to the changing business environment, while staying focused on its growth objectives.
In his previous comments Todd will discuss actions, we have taken to improve operating efficiency and to hold ourselves to more demanding performance parameters.
Allow me to elaborate on these actions and provide further context on what we're doing.
Our sales and marketing focus is on operating more efficiently as we move forward, we examine our cost of customer acquisition CAC lifetime value to CAC and other leading indicators that drive these results.
Although we don't judge performance based on a single quarter, we will make adjustments necessary to achieve <unk> growth combined with battery CAC efficiency.
As you may recall from the previous quarter, we have invested in technology systems and processes to gain operating leverage.
As enabled us to operate as a more leaner organization and at the same time eliminate non productive layers of management.
We have also optimized our inbound and outbound lead generation engine.
These actions aimed to strengthen our pipeline coverage and support our most productive sales executives.
Back in March I concluded my prepared comments by sharing two reasons why we are excited about 2023.
These reasons are unchanged as we position the chamber for the future.
First our market is vast and presents numerous greenfield opportunities, particularly when considering the external alert.
As the leading platform for customers with multiple use case needs internal employees and external learners. The chubb is a trusted partner for consolidation of tech stacks and delivering better returns on invested dollars for our customers in fact, we.
We are making the strategic investments necessary in both innovation and systems processes and people.
That are needed to continue to disrupt the enterprise landscape.
Partnerships like <unk> and acquisitions, such as peer board are making a strong the table even stronger.
With that I would like to hand, the call over to Kurt.
Thank you Alicia and good morning, everyone.
For those interested a detailed breakdown of our financial results for the three months ended March 31, 2023 can be found in our press release.
D&A and financial statements, which are now available on our website and also filed on SEDAR and Edgar.
We reported total revenue for the first quarter grew to 41 5 million an increase of 29% from the prior year.
Revenue increased by 32% after adjusting for the impact of foreign exchange.
Subscription revenues were $38 8 million, representing 94% of total revenue for the quarter.
Annual recurring revenue was $164 9 million an increase of 29% after adjusting for the foreign exchange impact from the strengthening of the U S dollar.
We added 112 net new customers in the fourth quarter as we ended the quarter at 3506 customers an increase of 19% year over year.
Average contract value was approximately 47000 for the first quarter, an increase from 46000 for the fourth quarter of 2022, and a 7% year over year growth.
We continue to see the CMO being adopted at multi use case laptop with almost 80% of our customers using placebo for two or more use cases, and 55% of customers using the CMO for three or more use cases.
Gross retention was flat compared to the prior quarter and net retention declined modestly in Q1, driven by slower and module expansion.
Gross profit margin for the first quarter improved by 120 basis points year over year to 81% of revenue and was consistent with the prior quarter.
Total operating expenses for the first quarter increased to $33 8 million from $32 4 million for the prior year Peter.
G&A as a percentage of revenue declined to 18, 2% for the first quarter compared to 19% for the fourth quarter of 2022.
Adjusted for onetime acquisition costs G&A was 17, 6% of revenue.
As we go forward this year and next investors can expect that G&A is an area, where we will demonstrate the highest operating leverage.
Sales and marketing expense as a percentage of revenue was 45% for the first quarter as compared to 39, 8% for the fourth quarter, mainly due to higher seasonal payroll taxes in Q1 of each year.
The streamlining actions Claudia unless you spoke to earlier.
At the start of Q2 with a head count reduction of approximately 5% and Thats, primarily is related to sales and marketing and G&A.
There will be a partial impact of savings in the second quarter.
The full impact of savings come through in the third quarter.
R&D investment in the first quarter was $7 4 million or 17, 8% of revenue an increase from $6 4 million from the first quarter.
The sequential increase was primarily as a result of the strengthening of Europe .
Moving on from the expense line.
Even with the fewer revenue days and with seasonally high social taxes. We are pleased to report a beat in our adjusted EBITDA performance to $2 2 million for the first quarter of 2023.
Equate to an adjusted EBITDA margin of five 3% up nine 9% compared to the prior year.
Reiterating what was set in March we are deeply committed to driving growth and performance in the areas. We can control and expect to exit Q4, 2023 with a low double digit adjusted EBITDA margin.
We reported net income of $1 2 million for the first quarter of 2023 compared to 7 million net loss for the first quarter of 2022.
Adjusted net income for the first quarter of $2 2 million increase compared to a net loss of $1 3 million for the first quarter of 2022.
We generated negative free cash flow of $2 3 million in the first quarter, which was driven by the timing of annual bonus prepaid insurance and software expenses in Q1.
At the end of Q1, we held cash and cash equivalents of $216 million.
Share based compensation accounted for a modest three 1% of first quarter revenue compared to three 4% in the first quarter of 2022.
In April 2023, the company acquired clear Board.
And play community as a service platform for a total purchase consideration of <unk>.
Million.
We do not expect the acquisition to materially impact the fiscal year 2023 revenues our adjusted EBITDA.
Now for our Q2 2023 outlook.
We are operating in a difficult macro environment with deal elongation similar to the second half of 2022.
Our guidance is based on the assumption that current unfavorable macroeconomic conditions will continue.
We expect total revenues to range between $42 9 million and $43 2 million.
We expect gross margin to range between 80 and 81%.
We expect adjusted EBITDA margin to range between five five and six 5%.
A few noteworthy points on the second quarter guidance.
We expect subscription revenue to be 4% to 5%.
Higher than the overall company revenue, while professional services revenue will decline sequentially due to lower customer adds during the second quarter, we expect to incur approximately $3 5 million in one time charges related to the organizational streamlining initiatives that we discussed earlier.
This is not reflected in the adjusted EBITDA margin guidance.
In conclusion I want to focus your attention on a strategic point that is foundational to the Janesville DNA.
Growth is always our top priority and we have equipped our team to deliver good profitable growth, regardless of where we are in any economic cycle.
I also want to emphasize that we are bringing materials competitive strengths to bear as we execute this profitable growth strategy.
First we have a strong debt free balance sheet with $250 million in cash.
Second we have delivered profitability ahead of our schedule and a steadily improving adjusted EBITDA and free cash flow every quarter.
What is most notable about this performance is that we are realizing these results without compromising key investments in sales and marketing and R&D.
Im sorry.
Dilution from stock based comp is one of the lowest in the SaaS universe today.
We are dedicated to aligning our teams performance with the expectations of our shareholders.
That concludes my prepared remarks, operator, please open the line so that we can take some questions from the analysts.
Thank you, ladies and gentlemen, as stated we will take questions from analysts.
I would like to ask a question. Please press star followed by one on your Touchtone phone you will then hear a three pronged acknowledging your request and if you would like to withdraw from the queue. Please press star followed by two and using a speaker phone. We do ask that you. Please lift the handset before pressing any keys.
A reminder to please limit yourself to two questions and then queue up if you have more.
Thank you.
Your first question will be from Robert Young with Canaccord Genuity. Please go ahead.
Hi, good morning.
Two questions first one higher level.
This reporting cycle, there was a bit of concern.
Around the negative impact of AI on learning and given that you've been on.
Working on AI for a long time and that products in the market.
It would be great to get your thoughts on the near term impact you see positive or negative from AI on dose stable.
Okay.
Okay.
So Rob Mcleod you speaking.
First of all.
I think that.
If I want a publisher.
It will be very scattered on the impact of the EI because I mean, the AI will build the cold season content on its own.
Do not forget.
That.
<unk> is a delivery system that now is also becoming the content.
They've been generating six them.
That's why I'm incredibly excited about it.
Hey, Brett.
Regarding the competitor of the companies that have been that you said that this quarter by these Adi move.
But the comp and generate increased women we are adding features.
I think that not only limited to content.
For example, we are embedding in the table.
Our skill matching system that will integrate.
All the talent management, and Aps and skin management system inside the table.
Through and matching them with AI will synchronize skewed ontology of all the platform out there we go table, allowing the customer to use their own anthology inside we table on top of that and then just and it's not very sexy, but what we are working to ease in the yard.
Contoured panel that will give the customer a full control.
<unk> will use the data before implementing debris AI strategy, we need to be very careful on how we do it and be completely aligned with both the compliance is all over.
The award regulations are different between Europe , and North America. So <unk> is a broad topic.
But it is a topic, we love because allowing the table to experiment, a new way to train people.
And the goal of that or the quantity of those the very boring click and lead to training approach.
Odd being assimilated films are being new way to interact with the content.
Personalizing the content basically done they usually have learning style. So I don't see that as the tree.
Yes.
That's already make me excited there.
The tables and volumes up.
Sure.
Something we will benefit them.
Okay.
Okay. Thanks for all that.
Second question for me is more specific to the quarter I mean.
The incremental amount of <unk> added.
And the incremental customers that were lower than we've seen before and so if you could talk about that.
Particularly on the cadence through the quarter or was that the regional banking crisis at the end of the quarter and so should we when we look at how to model IRR should we be thinking most of the deals coming at the front of the quarter and the back quarters.
Spread evenly.
Any comments there.
On the slower amount of customers added in the cadence and I'll pass the line.
Robert just speaking of Hello.
Robert.
Q1, then.
Does that have some seasonal component.
And in addition to that we've experienced as a result to some of the macro noise banking nor is the challenges in the North America region.
It really affects the ingot to small and mid customers, but with that said I'd like to draw your attention to facts number one that we have the increased.
Average anr and the new logo at ARVO.
Dean.
And in addition to that our gross retention rates.
Remain consistent with quarter four 2022.
So with that said, we have work to do to re boost the performance on the small and mid market.
Offline growth.
That we're seeing and experiencing makes us extremely confident.
Okay.
Did that answer your question Mr. Young.
Thank you next question will be from Josh Baer at Morgan Stanley . Please go ahead.
Great. Thank you for the question I was hoping you could expand a little bit on the efficiency actions and head count reduction referenced in the prepared remarks, just wondering.
If they were previously contemplated in the prior forward commentary on on margins.
How you're speaking I provide the first part of the answer and I think that Scott and Ken can go deep on that from an aerial perspective I founded the company and they found frustrating that the great ideas that come from the field contribute incredible of everything.
But all adopt methodologies.
And so on and so on where stock is in the middle of the organization because that was decided that.
There was too much more accuracy and too much communication tended broken between executives and a high level manager and contribute the contributors are the foundation of the company. So what I said that was.
Lastly, the organization, let's say more you touch.
The team really differ.
The communication, reducing delay, yes, so prominent dental and audio.
Perfect.
Is there is one of these action, but I will leave.
Right.
That would kind of articulate better from this point of view.
Got it thanks, Tom Good morning, Josh.
I would say that to start with we regularly review the operating efficiency of the organization and and I think part of the efforts. This this quarter.
A couple of factors. One is we as you may have noted in the last quarter, we implemented some significant technology investments that went live in our CRM and our order to cash process that gives us some opportunities to streamline and make our organization efficient so to that extent that is that was factored in but I would say there is incremental.
Efficiencies that we have.
Implemented at the start.
Out of this quarter.
Quarter, which is April two to make the organization leaner and more efficient and so I would say there is an element of a reasonable element of.
That cost that will be more.
Not in the ecosystem, specifically in sales and marketing and G&A.
That's helpful and just any sense for what the plan is for head count growth in 2023.
Incorporating these actions.
Yes, so when we think about head count.
Think about mostly if I kind of break it down between the various operating lines.
We grow customers, we still look at making sure that from a services side just from a customer support.
In enterprise support perspective, you have the right.
Infrastructure as we are growing our book of business. So we'll see some incremental hiring there and then generally across the board what you will see US. This year is it will be some tactical investments in R&D as we are investing Todd you spoke about from an AI perspective in other areas, but overall you should expect us to be net new.
Slightly higher but.
In terms of the hiring.
Mostly flat across the board and sales and marketing and G&A is where youll see a significant.
<unk>.
Great and then just one quick one on the opportunity side. It sounds like a lot of interest in Dow Chamber shape, just wondering if if a customer for example is spending.
Dollars annually, what happens to that annual contract value.
When a customer adds shape. Thank you.
Yes.
Question so that.
We don't give it out.
Josh in terms of the breakout of individual products in attach rates, but you can expect that as part of learned the timber shape has a reasonably good attach rate as well as a reasonably good.
And the team will shape as you think about the the differentiation in our model.
Compared to the to the industry.
I think to this that'd be also go to market from a perspective of enabling social learning to all of the organization rather than having only a number of individuals that create that content.
Which is the administrators are the content authors, but what we do with the table shape as empower the whole organization to utilize the utilized shape and create content and B b. The champions of social learning. So that gives us higher what effectively that means is that gives us higher ticket.
In terms of seats or licenses to our customers and Thats also a differentiator not only just the attach rate.
Yeah, Scott about shape, but something is happening and something.
Something is volume because I haven't seen that.
Such and you go through.
The attachment rate that was not there two quarters ago, what do we have now.
The spend is that.
Train of thought on the field.
Wanted to automate the leverage in general.
Inside shape, what they wanted to be but from.
Matt.
As a bunch of them.
Beyond that the stand out a bit.
Or anything like that.
That's something that seemed more legs on that.
Working on the flow of work.
Something to get.
Yes.
This is wes.
He is going.
This is why we are investing in that.
Really the debt that's meant Greg is speaking on his own.
We struggled for years to build a good product at the end of this page.
Thank you really appreciate it.
Thank you next question will be from Suzanne should come on at Stifel. Please go ahead.
Good morning, Gents, just wanted to touch on the global expansion opportunity.
Last quarter, you talked about encouraging traction in.
In certain European markets.
And you guys also highlighted a large deal that you closed this quarter in the region.
Can you talk a little bit about what's driving this.
Mental man.
And really what are your expectations for growth here over the near to mid term.
Sure.
Our investments in Europe , the Sudan.
And over time, we started with our investments in the U K and Nordics.
Of course after having been every page, where we have an office in the market in the southern linear regionally and locally.
More recently as you are aware, we invested in France, and Benelux luxury agenda as well as the very most recent investment in the docket German office region.
And we know we have.
Learned that it takes.
Time for the brand to observe seltzer in the regional markets for that.
Our fragmented they.
They buy slightly differently there is a different language in the region.
So the short answer to your question is it's a matter of execution in the field.
Bringing the brand to the top of mind of the bias and.
And I believe that the logo that we have announced in.
In the <unk> region.
Pretty significant organization is just the natural consequence of our investment in the region for our COO.
Quite some time now.
We're also noticing.
That the table is solving problems.
We need a platform that is multi use case that in the European market.
<unk> is a.
<unk> is solving the problem for all of them are more legacy competitors.
<unk>.
And so I think we have we are learning how to win.
From a more institutional on the installed base and these are starting to pay fruits and now it's all in a small and medium market, which frankly was the majority of our wins in the European region.
We're starting to see enterprise pipeline growth even in this region and we're very pleased with that.
Yes.
On top of that.
We have such an LTE balanced and healthy.
That we can be MB shoes on expanding abroad, the likely deal with the German office in Australia in office, but we have learned with the France altice in the U K office that start ramping and becoming a prominent player in the car.
Commentaries that take a little bit of time, but at the end of the day paid back.
At the end of the day before made this acquisition allowed us to lend new brands that we put on the ground.
And get great contract.
And this is what we are executing both in Australia and in Germany now.
We are looking forward to sharing more wins in the newer regions.
How many quarters.
Okay, great. Thank you for the feedback.
Second question is on.
Is on the partner channel can you guys share and update on it.
Yes.
The impact of partner channel had on the quarter end.
What you're seeing there in terms of.
In terms of the pipeline of opportunities going forward.
Lots of exciting things the partner channel is gaining momentum.
Our momentum in the sense that would've been.
On all fronts.
Alliances that part in there I see a real ecosystem on one end.
Many organizations.
Demonstrated an interest and we have identified targets for integration opportunities with adjacent players in the Florida mill the ISP partnerships.
And forming a framework of mutual CRO market longer.
Announced not too long ago, a partnership with them.
The services and software vendor called LP and from this partnership we have been noticing.
Very good outcomes from the very early days.
Because at the end of the day.
If there is an incredible opportunity and working with companies that have adjacent offering and it's very nice cock and end demand generation and value.
<unk> value for our customers and prospects. So so that's one.
Update well the other thing that I'm really pleased about is.
Our current OEM partners first of all the ones that we are already working with and continue to perform in line and in past, our expectation, which makes us very happy and we believe that we have a very solid roster of candidates are prospects.
<unk>.
And looking forward to telling you more as.
As we have the right to share so.
Finally, I also want to share that we've been very active on the content side and we have initiated and if you will evolve there.
Conversations.
The issue now is even stronger in our the table content offsetting there.
We plan to continue to have growth from this module that has done really well for us.
Based on our plans and increase the partner offering we plan to improve even more the penetration of that product.
Our installed base.
All of.
This is valid for all partners I haven't mentioned the work is there.
And very strategic for Us and we are very happy with is the partnership on the system integrator front.
Whilst we don't have the right name.
Yes, because they're very stringent in that.
We are the premier prospects and logos to where we are teamed up with the significant system integrators.
These are teaming up Moshe.
Just the beginning of a long term a true deep partnership relationships and we're seeing that across the board from commercial enterprises throughout government opportunities. So the world of alliances has been incredibly active and we're really focused on it.
Okay.
That's perfect.
For taking my questions I'll pass the line guys.
Thank you next question will be from Daniel Chan of TD Cowen. Please go ahead.
Thanks, Hey, good morning, Scott last quarter, you mentioned that the revenue guidance that you provided is driven by the IRR. So if we look at your Q2 revenue guidance midpoint is looking for about 23% year over year growth, but <unk> grew about 28%. So just wondering what's accounting for the difference I know you called out professional services. There just wondering if there is.
Is there anything else in there.
Now that said, Dan it's primarily professional services.
We still see in line reasonably in line.
Revenue growth for the year at as you think about the number of units that are coming through from a services perspective, and also how we strategically investing in our customers as we onboard them.
<unk> is really what's driving us down predominantly.
Okay. Thanks for that and just given that we're halfway through Q2 just.
Any changes to the overall market sentiment that you can call out.
Yes.
Glen did you want to take that just overall market sentiment.
Flour, sorry, yeah cloud just thinking yes, I can.
Actually you know we.
We are seeing deeper in time, depending on different segments in different regions.
Incredibly well we are incredibly excited about all of the bottom.
Perform at the O solid the out of the team that they are selling in Europe , and so on and so on Europe . As you know some time is the more resilient.
Grow a moment of profanity doesn't go down in moments of crisis and that European well.
You asked a little bit more subject to volatility, especially in the commercial segment.
Well there on the large enterprise segment, we have see.
All the opportunities coming from other vendors, which is also one of the reason of the alliances with the bigger consulting firms they want to ship.
All of the legacy vendors to be cheap.
I'll start I'll try yes, probably.
He's doing well.
Yeah, I mean, they are octave, we are now in the exhibition in Singapore with Bottomless I don't want to provide any guidance about Australia, sorry, but one thing that good things that that I am excited that.
<unk>.
And then another thing that is.
Additional changes we are seeing that.
Our BD.
Generation.
Increasing the law.
Imparity today inbound and this is a direct consequence on us moving upmarket.
Market is not an inbound lead generation.
Segment.
And it's more of an outbound generation activity and that's why we are also.
But I won't deny that.
Team being more bullish on the outbound with outbound initiatives. So.
I think that on the on the mid to long term. We are excited to have and it gives them a business with a lot of initiatives a lot of newpage.
Not all the segments, we are investing in but this is a topic for the next quarter and.
Some M&A opportunities on the table.
I'm happy about that.
Thank you.
And your next question will be from Stephanie price at CIBC. Please go ahead.
Hi, good morning.
Triple has a very strong hakkinen just curious around.
If you could give us some more details on the sales and marketing optimization and how you're thinking about it affecting the CAC going forward.
Absolutely Stephanie.
The table, yes, there's always a very good cocky metrics.
Derive that I think are.
Primarily from an overall focus and cultural performance you've heard us talk about the desire to.
To focus on creating efficiency and as we grow that concept of efficiency, we want to maintain.
Having adding said that.
We continue to.
Monitor very carefully and closely.
Our win rates are.
Certainly.
The elongation of deals.
Particularly in the enterprise segment.
Is not always beneficial to capture of course.
But.
In addition, there are two notable deals losses, though and this is very important because the.
The pipeline continues to grow and it's actually been growing power gives me the reference to outbound both them.
Quarter over quarter as significantly as well as year over year.
So.
Efficiency is a factor of bringing in the deals that OMA and adding good the half's demand to server our capable sales executives and so on one hand, we're focused on doing everything possible to giving the right opportunities to the right salespeople.
And on the other end the feed.
Feeding the found NOLA.
The demand needed to maintain that efficiency. So there's a lot of there's a lot of work on that I would only add one more thing that we realized in this environment in order to be more efficient.
We need them.
Dallas story during the sales cycle, there is a bit more return to over invest in focus.
And so you've heard me talk about in the past our desire to implement them.
Value selling this initiative is well underway.
So we are going to be able to very very very shortly to approach, particularly our need to large enterprise market with stories that are more volume focus that is the only feature focused.
That makes us.
The other assumption towards seasonal efficiency and by doing all these things our Taco will continue to improve over time, yes.
I wanted to add one thing about the truck.
He was also is also impacted by investment that you're doing the sales organization and opening offices abroad.
To try to conquer the word that is impacting on gas, but there is nothing back for a couple of years.
If you want to look from another angle is we are so capitalization debt.
We go sacrifice some point of CAC to opening new offices in top moment, because we are not approaching the market only from the short term, which we can do it because we are efficient from the capital, but also the long term of being strategic and try to go to market, which are which have bigger opportunities.
Our sales force in Germany, we're selling $1 billion.
So there is that there are markets that are incredibly.
Billing for us.
Thanks for the color and then just my second question curious around the <unk> acquisition, and how you think about folding it into the channel and what it brings.
Yeah. So.
As you know <unk>, we are investing in the unexceptional training customer and partner communities.
Part of the community needs collaboration collaboration and we see a lot TV video cable customer community photo startup on the phone and then goes to learn.
Collaboration between Gaslog partners could I did make important because the IP each other.
We have found the.
Pir Board, which was led by new hires is led by <unk>.
<unk> was already a plug and play plug in for Ela masses that want to create the community and we have acquired because the implementation time is.
Great.
So how are you.
The manager behind that a bit.
Big Big such a network of community.
So it created the group.
The big Big Social network. So the second step of this integration is a.
Improve automobile the typical to shatter, which is our stockholder in part thanks to me her knowledge and the technology.
Behind.
So it will be done in two phases phase number one let's build the community for our customers that uses the table as the customer community customer.
Training and partner training and bar number two let's build the such a learning part of the playbook or change together with me how are you.
NPA book and Stephanie.
And to that when we think of the customer makeup of the shape of the 3000 plus customers when he said in the past.
That.
More than 50% of our customers use the table for at least.
One external use case.
And when you think about those that use the table for an external use cases that the large majority of those are roughly 80%.
So current keeps me correct.
And are using it for the purpose of customer and partner education now.
In that hundreds of customers cohort.
The capability all the community team.
Technology is at top of mind, we have found that that's the most requested capability.
And finally after Cebula cloud you said it correctly, we have the Chambal community under our initiative the Chip Academy and up until now we've used a third party vendor frankly, because we didn't have that capability. So we have experienced ourselves.
Within our own customer education initiative, the need and the benefits.
For a community technology and the savings that have resulted out of it.
Made us want to own that technology. So now we have it. So now we can go to all those hundreds of customers and tell them that story showed in the product and we can use it ourselves for our own use.
Great. Thank you so much.
Thank you next question will be from Chris Christian escrow at eight capital. Please go ahead.
Hi, Good morning, I wanted to ask a question about your longer term view on growth and profitability. Thank you like to think of our business as a rule of 40 company.
Switching that software profile.
So my question is is the default way to think of the next couple of years as a steadily expanding our margin profile.
Or where do you see how a normalized environment looks before you make that growth versus profitability decision what are your thoughts longer term.
Good morning Christian.
Hi, Danielle ill take this one.
I think that.
Listen I think when you think about the chair, but we've always said growth is the number one primary factor of this organization, but we've also always said the profitable growth as part of the story as you look at.
The operating leverage that also coming in the ecosystem for the last two quarters.
Very quickly realized that we've not only hit that inflection point, but now youre seeing continued consistent operating leverage primarily coming out of some.
Slight improvement in cost of goods sold but the majority of it is coming from our discipline in G&A and certain discipline that you will also continue to see in sales and marketing and as you think about the current macroeconomic cycle.
As we continue to invest in our future product roadmap in terms of R&D as well as continued investment in sales and marketing to drive that long term growth. We can achieve good consistent growth even in a macro that challenging but up but deliver.
We will come out as true winners looking at the technology, we have the strength of our balance sheet.
And all the investments, we're making in R&D, but at the same time, we will deliver consistent EBITDA.
EBITDA moving up and Thats, a very strict and I'll leave you with this thought that's very straightforward math. If you look at my G&A as a percentage of revenue we have been dropping that a percent every quarter, maybe slightly higher this quarter and so that on a long term basis should be in and around the 10% to 12% Mark and Thats, where you will see the biggest operating lever.
Yes.
<unk>.
Thank you that's all very helpful. And then my second question I'll switch over both to the partner channel as well as you.
Professional services work.
Just refresh us as probably an active strategy to shift some of the work to partners to system integrators did you see the achievable long term, a 90 10 subscription CRO services business or.
That over time to continue to talk to more and more subscription as you scale find more ways to offload some of that work.
Sure no doubt in mind that.
Maintaining our gross margin remains a focus for ours, but our goal is to balance that.
With the actually an approach that gives them more value to our customers.
What we have learned increasingly more and more every day is that organizations that learning projects, particularly as it pertains to high and mid market and enterprise and for sure in the strategic enterprises, they need more services.
And more sophistication in them.
The consulting out yes.
Yes, we add leverage partners and we will continue to do so services like for example managed services are a continued request and we believe that a healthy.
<unk> of that ex provisioning with some strategic partnerships that we mentioned that size before are the right angle to accomplish that said also we look at services not only from them and revenue split whether it's 90 10 or 80 20, but.
Also as a leading factor to maintaining high.
And positive gross retention because the reality is a learning platform is only as good as it is the strategy at <unk>.
Hi.
And.
When there is a not so strongest strategy and implementation again, particularly in the enterprise. It it usually leads to a impact on the retention side. So yeah.
Yes, we believe that a balanced mix with partners that will continue to exist.
But we believe there are more opportunity his software value services that impact both driving our retention.
Understood. Thanks for all the color unless youre a personal one.
Thank you.
Next question will be from Gavin Fairweather at core Mark. Please go ahead.
Sure Gavin.
100%.
Green.
We are extremely focused on <unk>.
Continuing in a moment in reach.
And pressure and everybody's focused especially on the enterprise front you spoke of the on consolidation.
We are investing our resources number one to strengthen our position with customers.
And to ensure that our renewals performed at the rate at which we have.
Top priority really is maintaining healthy customer relationships.
Number two is continued to expand.
The bees, we expand debate in two ways by adding users.
<unk> existing customers and by cross selling them.
Cross selling is an area that as we were organized.
The opinion that we have.
But for sure cloud you spoke about our enthusiasm on shape shape. In addition to connect in addition to contribute content.
In addition to other things that we will be doing thanks to peer board gave us the possibility to go back to the base and sell valuable additional module. So all in all our knowledge in the moderate Ah.
And here we.
We have the means to tomorrow, and we have plans to do so.
And I think the one just quick callout Gavin is as we said.
Gross retention I gave some other metrics on top of it. It gives you a sense of gross retention was flat quarter over quarter, we continue to see 80% of our customers use the table for two or more of their problems and almost 55% of our customers use use the table for three or more of their use cases. So when you think about the <unk>.
<unk> and we solve for our customers specifically revenue generating parts of their organization. We've continued to expand our expand okay, but within the within the organization and solve more departments problems that creates a.
Much stickier platform.
Thanks, so much.
Okay.
Thanks, so much.
As the macro causing growth in the pipeline to slow.
In addition to getting sales cycles.
Smart in that we are seeing the pipeline remained strong.
For sure. There is a there are different ways that we are accomplishing the growth in pipeline as mentioned by cloud before.
Our success, but right now is primarily derived from our outbound emotion. That's that's the end result.
The hour off move and Psoriatic markets move were primarily in <unk>.
And other thing that we're doing to contrast, the walk to ease.
Inbound the channel being frothy is we're investing again finally, thank god the post Covid era.
Our in person events. These are driving incredible outcomes, we were just last week.
A couple of weeks ago in the in the United Kingdom, and London actually I was last week.
As one of the largest learning events in the world, where we have them.
Collected an amount of leads that in the history of that conference.
We doubled it.
So.
I would say I would say certainly we're seeing a different dynamic in the demand the world and as a result of the different dynamics that we are approaching it in a slightly different ways.
Being very agile and using events in outbound.
As the growth mechanic, yeah, but invention outbound on the.
John .
That is the mid and large enterprise buyers that are not the buyer that plagued Google and ask for a demo I mean, they also the move of the <unk>.
Offering up market with sophisticated products like learn of data like the typical next.
Is the consequence of having a different composition of the pipeline now is made more by mid enterprise and large enterprise deals and then a different commercial segments.
So that's but it's our view is the logical that when you are just kind of built the sales cycle is elongated.
So it is also due to our new positioning of the table, which is communicating.
That are working with different kinds of customers.
This is reflected by the ECB, which is growing.
That's great. Thanks, so much that's all for me.
Thank you and at this time I would like to turn the call back to Mr. <unk>. Please go ahead.
Okay.
Thank you for being here again, I don't remember, how many earning calls with this already but can be probably 16 14.
Thanks, again and speaking of course, thank you so much.
Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and we do ask that you. Please disconnect your lines.
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