Copperleaf Technologies Inc. Q1 2023 Earnings Call

Speaker 1: Thank you. Good afternoon, everyone. Thanks for joining us to discuss covelets first quarter performance. I'm excited to share an update of our progress in 2023 and some of our future direction.

Speaker 1: On today's call, I'll make opening remarks before passing it over to Chris to provide a detailed review of the financial results. Following our prepared remarks, we'll open the call to questions.

Speaker 1: Properly, the first quarter result demonstrated continued momentum with material year-over-year growth across multiple sectors and geographies. During the first quarter, we delivered 28% year-over-year revenue growth and 29% growth in annual recurring revenue. We delivered these strong results while continuing to navigate uncertain economic conditions.

Speaker 1: With temporary associated headwinds like increased client signatory requirements and limited client resources.

Speaker 1: Properly first call the 2023 results reflect the team's commitment to prosecuting our pipeline, converting deals into backlog, ARR and revenue.

Speaker 1: We ended the quarter with a $110.5 million backlog and the largest pipeline of opportunities in our company's history, giving us confidence in our bookings in 2023 and into 2024.

Speaker 1: In the years that I've been part of the Copperleaf journey, I've had the privilege of seeing firsthand how Copperleaf solutions deliver value for clients as they roll out our value-based decision-making methodology and software across their businesses.

Speaker 1: Now as CEO , I've focused on driving increased adoption and penetration of our solutions globally to ensure everyone has access to our products and the value they generate. Over the past few years, Copperleaf has been focused on strengthening our market-leading solution and driving scalable growth.

Speaker 1: Today we're a leading provider of AI-powered enterprise decision analytics software solutions trusted by organizations in the electricity, natural gas, water, oil and gas, pharmaceutical and transportation industries across the globe to guide their investment decisions.

Speaker 1: As a direct result of our plan full approach to introducing menu market sectors, we've successfully expanded into the ports industry with our first win in the Middle East, as well as into upstream oil and gas here at home in North America.

Speaker 1: Tarega is at the forefront of the energy transition, lighting the path to carbon neutrality through the development of innovative solutions and the commitment to establishing and meeting environmental, social and governance targets. The organization is focused on improving the reliability of its asset base to provide customers with a safe, high performance grid.

Speaker 1: and accelerate the adoption of new technologies and energy sources.

Speaker 1: Popoli's portfolio will allow Terrega to optimize asset investment planning to ensure the organization can maximize the value of every investment they make.

Speaker 1: During the quarter, we also welcomed Scottish Water as our ninth UK-based water client and signed Sydney Water, our first Australian water client, underscoring the global applicability of our solution. This highlights the competitive advantage of using the COPPLES value model library to rapidly enable these new clients to be used.

Speaker 1: to align decision-making with strategic goals and maximize the value of their capital investment programs, operational activities, while proactively managing risk across their asset bases using tried and tested models.

Speaker 1: Water utilities are facing unprecedented headwinds, making it increasingly challenging to meet service level targets and minimise disruptions.

Speaker 1: Copperleaf provides water companies with proven tools to assess these complex challenges.

Speaker 1: providing a comprehensive understanding of asset risk.

Speaker 1: With an established position in the UK water market, our first win in Australia and a strong pipeline of opportunities, we're well positioned to drive adoption globally in water utilities.

Speaker 1: and the growing need for the solutions that we provide.

Speaker 1: apply the required resources where it's clear that the scope for growth is material and where we know we can provide substantial value to the largest clients in most sectors.

Speaker 1: In January of 2023, we established a global growth office to ensure that we have an efficient, coordinated approach to bringing together specific expertise in market sectors, products and partners, together with value engineering to support our go to market activities.

Speaker 1: With dedicated coppolis partner managers in place in each region, we're focused on expanding our reach and establishing the tools partner ecosystem instruction needed to efficiently scale the business. The Alliance ecosystem continued to gain traction during the quarter as our partners invested in expanding their coppolis practice areas.

Speaker 1: can deliver to organizations globally.

Speaker 1: Cooperation between SAP and Copperleaf will provide our mutual clients with best-in-class capabilities to further unlock value in their business and achieve their strategic goals.

Speaker 1: During Q1, Coppolaif released version 23.1 of its product suite, which introduced numerous new features, including a configurable performance management dashboard, enabling flexible and powerful visualization and adaptation of plans, and improved support for multi-part or dependent projects.

Speaker 1: coupled with an intuitive graphical user interface which will drive better outcomes and further improved optimization results.

Speaker 1: Percopelif is executing on the plan we put in place prior to our IPO. 2022 was a planned investment year to Percopelif with a focus on hiring talent, increasing capacity, and laying the framework necessary to drive future growth. With the right people and strategies now in place, and a refreshed operating model, Percopelif is now in place.

Speaker 1: focuses squarely on execution to drive continued growth.

Speaker 1: 2023 is a year focused on execution and ensuring that those investments are generating value. Our attention will remain on holding headcount flat, managing our costs carefully and delivering deals and bookings, which will lead to strong ARR and backlog growth in the second half of the year. For the remainder of 2023, we expect our growth to be driven by the

Speaker 1: investments in sales and marketing which are leveraging our investments in sales and marketing sorry which are demonstrating early positive results with some examples of accelerated deal velocity in increased lead generation and pipeline creation.

Speaker 1: And lastly, expansion of our alliance ecosystem, which includes new partners like SAP.

Speaker 1: With that backdrop, I firmly believe that Copperleaf is well positioned for the next phase of growth, enabling us to make substantial progress in 2024 on our path back to profitability.

Speaker 1: I look forward to building on the solid foundation with established as we continue to transform how the world sees value. I'll now tend to call over to Chris to review up an actual result in more detail.

Speaker 2: Excellent. Thanks Paul and good afternoon everyone.

Speaker 2: We're pleased to report that our first quarter 2023 results continued to deliver growth across our key financial metrics. Revenue for the quarter ended March 31, 2023 with an increase of 28% from 15.6 million in the comparative period driven by the delivery of new clients and expansion within existing clients. Extraction revenue for the first quarter was 11.3 million and increased by about $2.5 million.

Speaker 2: from prior periods to be recognized or caught up in Q4 2022. For reference, without the catch up, subscription revenue in Q4 2022 would have been 10.9 million. Professional services revenue for the first quarter was 6.9 million compared to 6 million in the prior year.

Speaker 2: and this segment represented 35% of our Q1 2023 revenue. Perpetual internal license revenue for the first quarter was 1.8 million compared to 0.5 million in the prior year, and this segment represented 9% of Q1 2023 revenue.

Speaker 2: Our annual recurring revenue at March 31, 2023 was 49.1 million, a 29% increase compared to 38 million at March 31, 2022.

Speaker 2: As of March 31, 2023, our net revenue retention rate was 111%, reflecting expansion within our client base and our strong renewal history. This percentage will vary period to period due to the timing of large expansion contracts within our existing client base and the mix between perpetual and SaaS expansion deals.

Speaker 2: Revenue backlog was $110.5 million at March 31, 2023, a 15% increase from $96 million as at March 31, 2022.

Speaker 2: Gross profit was $13.7 million representing a gross margin of 68%, a 22% increase from $11.2 million and a gross margin of 72% in Q1 2022. Gross margin has decreased temporarily due to a combination of increased partner subcontracting costs in the quarter.

Speaker 2: plus the increased headcount, travel costs and product support related to our growing client base.

Speaker 2: As a result of our planned investments to capitalize on the inflection in the decision analytics market, we had an adjusted EBITDA loss of $10 million for the quarter compared to an adjusted EBITDA loss of $9 million in the prior year. Net loss for the quarter ended March 31, 2023 with $11.8 million or a loss of $0.17 per share.

Speaker 2: compared to a net loss of 10.9 million or a loss of 16 cents per share in the prior year. We finished the quarter with 145.9 million in cash compared to 149.5 million in cash at the end of fiscal 2022, which places us in a strong financial position to build on our advantage and further penetrate the investment planning and decision analytics market.

Speaker 2: With our strong unit economics, we remain focused on making thoughtful, long-term investments that will drive accelerated growth in 2023 and beyond. As we continue to expand our reach, we're confident that our focus on operational excellence will drive best-in-class margins, expand our leadership position in the growing decision analytics market, and accelerate our progress.

Speaker 3: by the one on your touch tone phone. You will hear a three tone prompt acknowledging your request. If you would like to withdraw your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Maxim Matyszewski with RBC Capital Markets.

Speaker 1: Please go ahead. Thank you. Good evening. I just wanted to touch on the pipeline. In terms of the pipeline for 2023, is it still too early to have indications of how bookings will progress into the back half of 23?

Speaker 4: Or do you have like a decent sense now in terms of visibility from, you know, the conversations that you have ongoing right now in terms of how kind of, you know, the Q3 and Q4 bookings will progress?

Speaker 1: Yeah, thanks Max. I mean, we've got a good part one. It's distributed globally. And we see it growing across all the different market sectors and within the core sectors that we're penetrating and also some new sectors that we're introducing.

Speaker 1: We are going to be back in heavy as usual, which is in line with our clients buying patterns, generally speaking Q3 and Q4 heavy again this year. But the pipeline is well and truly enough to cover what we're calling for the year, and we think that it represents substantial growth on last year.

Speaker 4: I just wondering if you could touch on the recent wins and the kind of the go-to-market strategy with clients in the newer industries like ports and in oil sands. Are you having success there because of the consulting partners or is this more of a result of

Speaker 4: the sales and marketing investments you've already made and being able to establish more direct relationships.

Speaker 1: It's a combination of both. We've certainly seen partner activity increase and I think that we're more coordinated with our partners now. We've had good opportunistic success with partners over the years but it feels like we're more coordinated and we're taking a...

Speaker 1: a joint approach to most of the markets where we are. But obviously global coverage is something as well. The deal in the Middle East is a direct deal and it's largely due to the fact that we have people on the ground and if the project is kicked off and the client is happy, engagement looks good. I'm actually.

Speaker 4: think about the potential for that to move higher. You obviously have close relationships with your customer. So I'm wondering how you balance the customer satisfaction side of it, you know, with the measurable value out of the software as providing customers. And it is easier to have those conversations with...

Speaker 4: existing customers on renewal or do you just try to set appropriate pricing with new logos right away?

Speaker 1: Yeah, we're constantly reviewing our pricing. We introduce new products and the different parts of the suite generate different value. Like I said, we introduced a global growth office and one of the benefits of the copper leaf solution is that it does.

Speaker 1: demonstrate material value almost from the day that you switch it on.

Speaker 1: We're getting better at articulating that value, which obviously has a knock-on effect of the price that we can command in the market. And it's a focus area for us to make sure that we're doing post-implementation value audit so that the client and the client in the install base and we are lined up on just how much value the product is.

Speaker 1: clients.

Speaker 1: in ways that they can understand in terms of their business. So it's an ongoing effort to make sure that we're fully priced in the market. And that's a balance between how much we can command in each deal. And how quickly we want to go.

Speaker 5: Thanks for passing on. Thanks, Max.

Speaker 3: Our next question comes from Thanos Mofopoulos.

Speaker 3: with BMO capital.

Speaker 2: Please go ahead. Hi, good afternoon. Regarding the spending climate and sales cycles, is it sort of status quo or has it gotten any better or worse over the last 90 days? Hey, Dennis. I don't think it's changed much.

Speaker 1: You know, we've come into a new year and I think there was a reasonable amount of optimism coming into the new year. But you know, we've seen a little bit of financial insecurity with a couple of banks in North America and it's different per region.

Speaker 1: But it's hard to really pick a trend. I think people are still cautious about deploying capital. They're still cautious about taking on new digitization projects.

Speaker 1: We don't see a material difference in the last 90 days from an ease of closing point of view, but we're certainly hopeful that things will free up a little bit more as we go into the end of the year. But no huge difference that we can see.

Speaker 2: quite a step up from Q4. What drove that increase? Sure, I can take that one. You're just talking about the expense on R&D. And as we mentioned in that Q4 call,

Speaker 2: much of the expense that you saw there, that reduction from Q3 was effectively a reversal of accrued incentive compensation.

Speaker 2: So, I think the Q1 results that we see here with regard to both COGS and our operating expenses are pretty good indications of run rate that we'll see through the rest of the year.

Speaker 2: back to that. So with Q1, score smart and level, if we adjust for licenses and the license mix and any given quarter, would that be kind of indicative on the right for the next while? So I think we saw some, you know, some unique partner subcontracting cost in Q1 and will likely in Q2 as well.

Speaker 2: I still think that through the rest of the year it'll taper off a bit, so we still expect to be in and around the 70s for the rest of the year. Alright, I'll pass it along. Thanks.

Speaker 3: Your next question comes from Gavin Sayweather with Cormark.

Speaker 6: Please go ahead. Oh, thank you for taking my question. Hey, listen to your question.

Speaker 6: Just to close the loop on gross profit, it sounds like the subcontractor piece is maybe more transitory, whereas the component tied to headcount, travel, product support is maybe kind of permanent costs that you'll just leverage with growth. Is that the way to think about it?

Speaker 2: That's correct. Yeah, I mean, as we said last quarter, we didn't necessarily end with in 2022 with all of the backlog that we expected. So that does have an impact on on services revenue coming into Q1 as well as utilization to a degree. And that was further exacerbated just with again, this.

Speaker 6: unique kind of temporary partner subcontracting costs that we saw in the first quarter. Okay, great. And then net dollar retention has been kind of ticking up for a few quarters, but maybe still below kind of your targeted range. Maybe you can just touch on kind of the pipeline for expansions, whether those are materially easier than the new logos to get across the line.

Speaker 1: using the system for more software and services. But it is lumpy, you know, we have introductions of substantial new LOBs in some of the clients and where that happens the number ticks up, where it doesn't happen it's flatter. But we're also putting some concentrated effort through customer success manager.

Speaker 6: more opportunities to can spot a, we, we getting that to a position where it's more programmatic. Great. Then just lastly, I guess it's been, you know, kind of since the start of the year, since you implemented this global growth office model. Do you have any kind of early feedback or kind of data points that you can share in terms of?

Speaker 6: kind of the impact on that on the satellite offices and how they're able to move deals forward.

Speaker 1: Yeah, it's a good question. We've introduced, like I said, it's got four pieces to it. Effectively, it's people who carry the responsibility for ensuring that our product lines are being taken up by our clients and being included in new deals so that we've got good penetration and good coverage with our products across the heat map on the installed base, but also in new products.

Speaker 1: is important.

Speaker 1: And, you know, you're going to see a lot more coming out of the partner side of the business, which is the third plant. SAP is an early one. There are more partners in the pipeline that will be signing formal agreements with and having joint market. **

Speaker 1: marketing agreements with as we progress into the year. And then value engineering is the fourth plank and just making sure that, you know, for those strategic deals, we're building much more robust ROI statements and value statements for the clients and make sure that as we go in.

Speaker 2: No, I think we just lost Paul. Can we still?

Speaker 6: Paul can we still? I'm still here but Paul's...

Speaker 6: have dropped off. I think we got kind of most of that question I think unless you wanted to add anything Chris.

Speaker 2: No, I

Speaker 2: No, I

Speaker 2: Paul's going to have to try to jump back in here. Sorry, Gavin. Yeah, I think I covered the majority of it.

Speaker 6: Do you have another question, Devon? Devon, that's it for me. Thank you. Bye.

Speaker 6: Hello, operator. We'll take our next question. Hello, operator.

Speaker 3: Your next question comes from Koji Aikita with Bank of America.

Speaker 3: Your next question comes from Koji Ikeda with Bank of America. Please go ahead.

Speaker 2: Hi, thanks for taking my question. This is George McGreehan on for Koji. I just wanted to ask in terms of sales and marketing productivity and how you've kind of ran headcount over the last couple of years.

Speaker 2: and now kind of getting a chance to keep that flat this year. I was going to ask if you could kind of maybe provide some color on how sales and marketing productivity is ramping, how headcount productivity is ramping there, and how that's kind of tracking in relation to your own internal.

Speaker 2: of executing on the plan last year which was to build the headcount the sales and marketing team round that out and we've done that and really as far as the productivity goes you know that the early green shoots it was we've said even in the last part conference call we can really point to the pipeline which we've seen increase as we said on

Speaker 2: So, as we've mentioned in prior conference call, there's quite wide variability on each one of our deals. They can range from a short as several months to close a deal to many months and years to close deals. And we've seen some of our new hires even closing new logos basically in that time frame.

Speaker 3: Your next question comes from Todd Copeland with CIBC.

Speaker 3: Todd Koopland with CIBC. Please go ahead.

Speaker 1: Oh, good evening. I wanted to circle back to sales cycle. I know you said you gave an answer to an earlier question. You didn't think there had been a change since last year. I thought you observed that the banking crisis and the financial crisis, the financial crisis,

a focus on digital budgets, I guess not loosening up was still an issue. So I guess in that context, has that banking crisis...

extended sales cycles. I don't know if we're reading too much into that observation but just curious how that specifically is impacting clients' views of your products. Thanks. Yeah thanks Todd. I mean I want to avoid coming across as a character like an amateur economist.

you know, capital preservation and cash preservation as it is capacity. You know, we're still seeing companies...

you know capital preservation and cash preservation as it is capacity. You know we're still seeing companies in strange the capacity

coming out of COVID and some of that is that they might have some reduced capacity or reduced tenure in their businesses, particularly in the deployment of new digitization projects.

But also there's a trend globally towards, you know, in migrating to the cloud away from, you know, on-prem solutions, you know, particularly the big ERP companies. And we're seeing that that's taking a lot of bandwidth as well. So, you know, it's a mixed bag. We don't see it any worse. We don't see it necessarily improving. But, you know, we'll certainly call it out as we...

Yeah, well dollars and almost more than that resources.

You know the the the IT functions particularly, you know, the ones who are tasked to you know point tasks with implementing new software solutions and new programs.

are focused very much on migrating and S4 HANA upgrades and things like that. So it's a resource thing as much as it is a budgetary issue.

Yeah, okay. And then whenever the market starts to turn or close rates

Can you just talk to the current state of the go-to-market? You made that observation on the Global Growth Office, but do you have all the pieces in place now, with the exception of the partners that you referenced? It is now blocking and tackling and then dealing with these market dynamics. Is there anything else to put in place on the go-to-market? They all do. Okay.

No, not really. I mean, I think the key functions are in place. You know, obviously we'll add capacity, you know, as we've got to see growth improved, you know, for the time being we've got the capacity that we need to prosecute the pipeline that we have. For the introduction of the global growth of the office.

sales training so that we can bring account executives up to speed quicker. Those things are all in place at the moment and you know the matter then of adding capacity as we see growth and I think we can do that not too far ahead of the curve going forward. We do have a critical mass of coverage globally now so there's a big difference between just increasing your footprint to try and get coverage globally.

and adding capacity in those places. So I think that the days of adding capacity well ahead of the curve are behind us, and we can add capacity pretty tight to the growth that we see emerging.

And I know you're very much a Q4 quarter. You called that out again this time.

When do you feel you'll have a better visibility on Q4s and not till you're into the quarter or a little earlier in the second half of the year, any observations to make on that would be helpful? Thanks a lot. That's all from me. Thank you.

Yeah, thanks for the question. It starts to emerge, you know, in Q2 and Q3. You know, the nature of our long sales cycle is that you do start to get visibility on how solid the deals are and whether they're on a closing path several months in advance. So we'll, you know, as you go through the year, it's solid.

is always the big last six weeks. So it's always like that, and I think that we're getting better and more predictable at prosecuting those pipelines.

Great, thanks a lot. Okay. Ladies and gentlemen, as a reminder, should you have any questions, please press the star followed by the one.

Your next question comes from Robert Young with Canaccord Adjutant and Inuit. Please go ahead. Hi, good evening. I'll maybe add on to one of Todd's questions there on the capacity. I understand there's some of the

Maybe capacity on deployment being constrained as you said limited client resources, maybe subcontracting on your partners and so I'm just trying to get a sense of whether you have the deployment to sort of prosecute the the bottom of the funnel as you see it now, or is that a challenge? It's not a challenge internally for us. You know we've got good capacity in the in the

CX function across the three regions. And so it's not a problem for us internally. And that CX capacity has good tenure now as well. So you know, we've got very experienced people in each one of the regions. And again, just to call out a point I made a little while ago, there's a big difference between putting

Colleague tends to be fairly light on client requirements. So there's an element here of the fear of introducing a couple of these deals or a couple of projects to the mix.

being much more than the actual reality of it. Our implementations tend to be fairly light on requirements of the client, but they do line us up with other enterprise software companies. So, you know, just making sure that we articulate that to our clients and just make sure that they understand that it's not as heavy a lift to implement a copper leaf software.

a couple of solutions as it is say an Oracle or an SAP or an IBM solution for the most part is important to us. We need to make sure that clients are feeling comfortable about that. But it's more at the client level than internally equivalent.

Then maybe just a little bit of a partnership with SAP. Have you seen any uptick?

On that, like I said, that's a big profile announcement. And then I think you said that you're going to hit the FAP store in Q2. And so is that something that we should think of as an inflection or is that just a a milestone that you're looking forward to or if it gives it a little bit of an update there?

Yeah, so SAP on the store in Q2 is still where we're at.

There's been a lot of engagement between the teams globally. I've personally met with a lot of the SAP sales leaders across the three regions and there's a lot of excitement about the combination of properties and SAP.

So, and there's a lot of conversations going on around forming joint disputes with specific clients. So, we're seeing a lot of specific activity occur. It'll really kick off in earnest when we are actually up and running on the store. But, you know, I think that we're well ahead of the curve and the comment from FAT is that tartnet.

different partners coming through, both SI partners and technology partners.

You know, we need to put that in context and make sure that we're not talking too much about the VSEP relationship, which is incredibly important to us. But we're not 100% reliant on that, but seeing the uptick. The partner and EK system is a huge part of our future. It is the key to our scaling on a global basis.

and we're seeing really good progress in all those different categories of partners. And a lot of that is due to just focused execution on that.

And a bit of coming at age from a couple of years kind of you, we're at the point where the critical mass is sufficient so people start to build practices around what we do. So you know, it's the timing is good.

Very nice. And then last question would be on the Sydney water when seeing quite a lot of tailwind and water. That's a pretty big place to start in Australia. And so I'm curious why would the largest water...

the pick copper leaf is that a good reference for Australia? How does that imply? And you know the ability to sort of move quicker in Australia than in the UK. I know you've said in the past that water is very advanced in the United Kingdom.

And so is that, you know, you're seeing some of the benefit of even starting in the UK and then now bleeding out into other areas, no path line. Yeah, Sydney water is obviously a terrific logo for us in Australia. I mean, it's starting at the top is a good place to be. People look to Sydney water as a best practice company.

and they pride themselves on being a best practice company. And it's often the way that we work with clients who are most forward-looking, most technology forward and looking for technological advancement. And Sydney Water is certainly one of those companies. You know, we've been working on that deal for quite a while and we do find that the first win in a specific country takes a while.

But once you get there, you can build off that. And we've seen how that works in the UK. And there's a good pipeline of water behind that. And obviously, this is going to accelerate it. And the team has kicked off the project. And the focus for us now at Sydney Water is to make sure that we're demonstrating value and that the project goes well. And they speak well of us.

And they're a great reference for Australia, but they're a great global reference as well. You know, water management in Australia is an important topic. You know, it's a pretty dry country and water conservation, circular economy, EST, sustainability, all of those things are on the agenda there. So it's a pretty exciting project for us.

And is North America still greenfield from a water perspective? Do you have any... Is there a reason why North America is maybe a little bit slower?

Yeah, it is Greenfield. There are some large water companies and we're obviously talking to them and there's a pipeline in North America but it's one of the more fragmented markets.

Yeah, it is Greenfield. There are some large water companies and, you know, we're obviously talking to them and there's a pipeline in North America, but it's one of the more fragmented markets. You know, so, you know, that's...

is one of the features of the UK and Australia. The water utilities tend to be quite big and that gives them the affordability to run to innovative solutions like ours. But we are, there's enough in North America and they are in the big end of the water market for us to focus on and we do expect that we'll deliver some UK water deals.

in the not too distant. Okay, thanks for taking on my questions.

Your next question comes from Dylan Becker with William Blair. Please go ahead. Hey guys, appreciate you taking the question here. Maybe not to continue on the sales efficiency side of the equation, but as you are seeing again you've ranked a lot of capacity there. I guess how are you interacting with clients? You have toplay the words of the question. Absolutely. Nope. Play it again. Ur Rasm546. Thanks. And then we move on. Yeah, so.

Yeah, thanks, Dylan. I mean, I think it's a continuum. We definitely walking into clients and having more discussion that progress quicker because I think this is a topic AIP and is definitely a topic that's on people's minds.

As their decision making landscape gets more complicated, they really are looking for software solutions to ensure that they can incorporate all of the different value drivers, apply the constraints and do more accurate and more capital efficient long term planning. So this is a topic that's on people's minds and it engages quickly.

Most of the clients that we work with are in the utility space, so our core of core is in utilities. They're pretty conservative and they're certainly conservative in new markets, in new sectors. So getting those conversations across the line is still an evangelization exercise. But again, just referencing the UK water market, where there is an established...

and features and functions are part of the discussion, but we also need to really focus on articulating value of it as I've said a bunch of times before. And just that needs to be in the language of the client. And I think that we're getting better and more efficient with that. And it helps to short circuit that evangelization process. Got it. That makes a ton of sense and I appreciate the color. I guess.

since you touched on again, yeah, some of the AIP topic coming up in nearly every discussion. How much does like the ESG and sustainability piece, and we talked a lot about this, but it seems like every month there's some sort of new mandate, right? So I wonder how much that is helping fuel, I think it was maybe, I don't know, a third of new business activity last year, but you've seen that, but pick that works on. Thanks.

Yeah, I mean most of our discussion has got some element of ESG in the MESDA and that's become a stronger and stronger trained over the past 24 months. And certainly a lot of our early measures in the model library are ESG focused.

So, you know, everybody's wrestling with that, the ability to incorporate ESG value drivers into their decision making. You know, some of these things are hard to measure, hard to quantify. You know, so being able to line up those value drivers.

next to the more traditional things of profitability and safety and reliability and have those things compare on an Apple's Rapples base, which is certainly on people's mind. And just about every discussion we have, it's got an ESG component to it. A lot of that is about decarbonization. There's a lot of the E. But more and more, people want or companies want to include

Thank you guys and nice job again.

There are no further questions at this time. I will now turn the call over to Mr. Sakruski. Thank you everybody for joining us today. We certainly appreciate the interest and we're looking forward to a good 2023.

I'm happy to, I'm happy to check any further questions if anyone has them otherwise we'll close the call.

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and I say please disconnect your lines.