Q1 2023 FiscalNote Holdings Inc Earnings Call
Thank you for standing by my name is Brianna and I'll be your conference operator today.
At this time I would like to welcome everyone to the fiscal note Q1 2023 earnings call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again press Star one.
I will now turn the call over to Sara Buda, Vice President of Investor Relations you May begin your conference.
Hi, everyone welcome to the fiscal note Q1 2023 earnings call. During this call. We may make certain statements related to our business that are forward looking statements under federal Securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks and uncertainties.
Our actual results could differ materially from expectations reflected in any forward looking statements.
A discussion of the material risks and other important factors that could affect our actual results. Please.
Refer to our SEC filings available on the SEC's Edgar system and on our website as well as the risks and other important factors discussed in today's earnings release.
Additionally, non-GAAP financial measures and other Kpis will be discussed on this conference call. Please refer to the tables in our earnings release and the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure.
With that I'd like to turn the call over to fiscal notes, Chairman and CEO and co founder Jim Hall.
Thank you Sarah.
On today's call, we will review, our first quarter as always I'll discuss our durable compounding revenue strong gross margin macro trends driving our business and more.
I'll also talk about our long term opportunities for asymmetric upside as we innovate around new products and customer segments.
And then turn it over to our CFO , John <unk> to talk about the details of our financials as we quickly pivot to approximately breakeven adjusted EBITDA in Q3 and positive adjusted EBITDA profitability in Q4.
Are you on a pathway to profitable long term growth called powder.
Before I begin let me start with a very brief overview of who you are and what we do for those new to the story.
At fiscal note, we're on a mission to help our customers make sense it would be complicated and constantly changing world. We live in delivering a proprietary AI enabled SaaS platform that aggregates and organizes regulatory political and macroeconomic information and analyze the impact on the organization.
Changes in policies regulations and laws impacted decision, making up almost every organization around the world from changes in regulatory requirements. The mandatory reporting requirements that organizations must comply with often on a global basis.
Using cutting edge machine learning AI capabilities, we aggregate synthesize and analyze massive amounts of legislative policy regulatory and macroeconomic data and information around the world and provide actionable intelligence to customers in a subscription model.
Yeah.
As such we're building an enduring company for the world's most important and influential decision makers.
These customers range from hundreds of government agency the public sector customers from the department of Defense. The White House every member of the house and the Senate and the U S Congress, the federal reserve and public sector organizations in Europe , and Asia, the major corporate customers, including happened Fortune 100 that need to stay on top of an ever shifting regulatory political and geopolitical.
Landscape in countries around the world.
These customers rely on physical note everyday to help interpret the impact of policy legislation and macroeconomic shifts on their institutions.
As a result.
The global customers in the commercial and public sectors depend on physical and SaaS platforms and analysis to discover process and navigate the impact of government policy, making on the organization and more importantly to take actions, which achieve business objectives, and minimize political and economic risks.
This forms the basis of our durable as long term growth.
We have become an increasingly mission critical and ubiquitous Bloomberg terminal, a political legislative and regulatory information at the local state federal and global level.
The same way that other information companies, such as S&P Global IHS, Markit Factset Morningstar, Costar and <unk> have innovated in their respective information field, that's going to continue to deliver mission critical information that has a direct impact on our customers' operations.
We've invested tens of millions of dollars in almost 10 years building a dispensable combination of data intelligence and AI technology to collect synthesize it makes sense of an exploding pace and volume of dynamic unstructured regulatory political and legal information around the world as well as the software tools to help our customers respond.
With that let me start with a summary of our financial results that serves as a platform for our pompe, having profitable growth in 2023 and beyond.
We clocked yet another quarter of Pompe, having highly predictable revenue.
Q1 revenue with $31 5 million marketing growth of 21% year over year and in line with the guidance we provided on our last call.
As we've demonstrated we have a highly predictable recurring revenue streams from a diverse customer base of thousands of organization that renew their contracts year after year.
And we continue to secure new customers as well from state governments to Fortune 100 enterprises. These.
These customers rely on physical out everyday health interpret the impact of policy legislation and macroeconomic shifts on their institution and more importantly to take actions, which achieve their business objectives.
We also continue to deliver consistently high gross profit margin.
Q1, adjusted gross margins were 80% in the quarter.
These margins are a hallmark of physical note and stemmed from our SaaS business model AI pedigree and data rich products.
All of which form the basis for strong cash flow in the future.
On the bottom line, our adjusted EBITDA loss was in line with expectations of approximately $7 million. It has a real detail through a combination of the ongoing <unk> growth and a diligent focus on cost we are reiterating our plan to reduce our adjusted EBITDA loss, notably starting in Q2 and to be approximately breakeven in Q3 and profitable in Q4 on an <unk>.
Adjusted EBITDA basis.
John will walk you through the details.
Our cash position at the end of the quarter was $47 5 million and we have an additional 94 billion of debt capacity subject to conditions.
We continue to have sufficient capital to fund our growth and as we've stated we are capitalized fully and do not require any additional capital raises to achieve our plan of adjusted EBITDA profitability and over time free cash flow.
Turning to the management Kpis, we delivered run rate revenue of $134 million, including our late January acquisition of Dragonfly <unk>.
Excluding at Dragonfly organic run rate revenue was $126 million.
Our annual recurring revenue was 119 billion marketing pro forma growth of 10% year over year and 9% on an organic basis, excluding dragonfly.
This is in line with our expectations and we expect <unk> to continue to ramp through the year as it usually does.
Also internally, you're seeing benefits from the operational and organizational changes we have been implementing and we expect to see the benefits of those improvements reflected in our accelerating second half group.
For the quarter net revenue retention was 96% and adjusted <unk> was approximately 98% for the first quarter adjusting for the impact of the anticipated exploration of the legacy noncore content licensing relationship that was inherited as part of a prior acquisition.
Trailing 12 month basis, our net revenue retention was 97%.
Overall net revenue retention remained strong a strong reflection of our successful cross selling upsell model.
Must have mission critical solutions, we deliver for our customers.
We reiterated our guidance for 2023 with GAAP revenue of 136 million to $141 million marketing growth of 20% to 24% year over year.
We also expect run rate revenue of $148 million to $155 million for the year and as you mentioned our path to profitability remains on track.
Our guidance and continued performance are driven by our predictable compounding revenue growth strong recurring revenue.
High revenue retention and high gross margin profile.
As a result of these fundamentals we continue to reiterate our guidance for positive adjusted EBITDA profitability in Q4, it will translate into free cash flow in the future.
Now, let me touch on some of the macro trends that serve as a backstop for our group.
Our market is driven by political events in a regulatory environment that continued to increase in complexity at an unprecedented pace.
In the U S alone in the 2022 legislative session.
The combined statehouses introduce more than 84000 bills enacted 24000 of them.
Each of these legislative bodies are supplemented by tens of thousands of regulatory bodies across the country that consistently pass a myriad of rules and regulations that impact every single industry.
From health care access to funding the consumer data privacy to labor and employment regulation legislation and regulation vary greatly from state to state and city to city, creating a myriad of compliance and operational issues for organizations.
<unk> sell and operate their businesses across the U S as well as government agencies, who legislate track and act on those regulations.
On a global level regulation policymaking is also at an all time high.
New EU legislative acts of increased 13% since 2020 alone.
Moreover, deregulation from the EU to China, often quickly extend from local to global creating large regulatory complexity that spreads globally, particularly around issues such as semiconductors that transitioned to the new energy economy Crypto assets. The data Act and climate change legislation with significant variation in how and when each region adopt and implement.
These regulations.
Regulatory risk is closely tied to geopolitical macroeconomic and operational risks and issues such as military conflicts and civil unrest spur politicians around the world to respond with new regulations, which in turn creates uncertainty for all organizations and significant topline and bottom line in fact companies that operate globally.
This is having a direct and significant impact on our customers and a recent Pwc survey of Ceos more than half of global CEO supported the changes in regulation will have the biggest impact on profitability in the industry in the next 10 years.
Last year alone Corporation's phase six $4 billion in penalties from FCC enforcement actions suffered $59 billion in losses from sanctions against Russia and supply chain disruptions may have caused over four trillion dollars in lost revenue in a single year.
This backstop is the underpinning of our business without physical note organizations face Emmanuel complex expensive and inefficient process for tracking assessing and taking action on regulations and geopolitical issues.
From the day, we sign the fiscal note, we saw a tremendous underserved opportunity to use AI to structure normalized analyzed and digitize that not the regulatory legal macroeconomic and geopolitical information and to a bed software workflows that make data useful and actions for our customers.
We believe that this remains a large global market opportunity.
We now have the breadth of data and the depth of AI that is unparalleled in our market.
As a result fiscal and is now positioned better than ever and better than anyone to build a category creator, which constantly innovate turn insights into actions convert challenges into opportunities and mitigate risk to protect operations.
It's one of our large multinational enterprise customers stated so let's go with empowers us to be at the forefront of the issues that matter most for our business.
Another client referred to the current regulatory environment is chaotic and pointing to Switzerland as a critical source of truth at a time of constant misinformation.
With that context, let me talk briefly about the underpinnings of our growth model and the opportunities for potential asymmetric upside in the long term.
Every day, our team focused on allocating capital to the areas of our business with the greatest return and highest upside.
As leaders, we think in terms of both evolutionary and revolutionary crews. So let me start with evolutionary group.
Quarter after quarter, we continue to deliver strong organic growth supplemented by accretive tuck in acquisition.
So it's a cross selling upsell opportunity among our customers across sectors. The model is simple we take our customers from the previous year renew them and up sell those customers with new products and capabilities to grow our business, while simultaneously, adding new customers each year.
Durability of our recurring revenue model reflects the strength of our products and deep customer relationships that we built.
This drives a high level of revenue predictability for our business as you've seen.
Further because of our 80% adjusted gross margin profile and our ongoing focus on Opex cost management model also drive significant operating leverage leading to adjusted EBITDA profitability in Q4 and free cash flow soon thereafter.
Looking ahead at scale, we expect to deliver the margin and cash flow model similar to other sector specific leaders in information services, which on average typically drive free cash flow margins well north of 20%.
So the evolutionary clockwise foundational organic revenue growth and margin profile of our business is very strong.
Every single quarter, we will continue to expand our business incrementally continue to renew our base of customers at a high rate, adding to our annuity like recurring revenue base and maintaining a disciplined strategy to maintain high gross margin and positive adjusted EBITDA.
In terms of additional growth opportunities as I mentioned in previous calls the European market stands as one of the most heavily regulated markets on the planet and yet only 13% of revenue comes from this market.
We are at the beginning stages of our European expansion and I believe that similar to other large scale information services leaders, we can build a business that can rival the size of our north American business with just our current products today.
Another market segment that we believe to display strong incremental growth because the <unk>.
State and local government market. According to the U S Census Bureau, there are approximately 90000 local governments in the U S alone each of these jurisdictions make decisions about everything from property taxes education funding zoning et cetera, I need to understand the relationship of state and federal policymakers as well as maintain their own relationships with their constituencies.
This quarter as an example, we announced a major deal with the Georgia legislature in the state Senate offices, Lieutenant Governor and members of the <unk> Board of Commissioners to do just that.
We believe there are opportunities like this in every state in the country.
Now, let me touch on revolutionary growth opportunities to accelerate our business and drive outperformance near term and long term. These are incubated opportunities that we have been cultivating as a management team that could at any moment take us beyond our clock like fundamental compounding growth and deliver asymmetric upside.
One area of focus for us is leveraging partnerships for larger and broader customer development and more efficient product development.
As you've seen we're starting to gain recognition as the preeminent leader in AI and data for managing regulatory geopolitical and operational risks earlier. This year, we announced the partnership with paradigm large integrator for National Security solutions.
Embedding in integrating our AI and data solutions with parents on National Security technologies, we bring mutual value to customers in the intelligence Defense Security health and state government sectors, who need large scale trust solutions that keep people safe and secure.
Federal agencies, and large government organizations have been fits going with customers for a very long time.
Through our own strategic growth initiatives and through partnerships, such as paradigm and other defense contractors, we see long term opportunities to secure large scale multiyear government contracts that could be transformative to our group.
Our leadership in AI and data is leading to other partnerships and integrations as well.
In March opening isolated physical is one of the 2014 inaugural trusted partners and the sole provider of legal political and regulatory data information the caller.
With AI research and to provide select content for users of opening eyes checked CPT platform.
Just two weeks ago, AI and data analytics leader data brakes also selected physical notes to provide regulatory and geopolitical data and information for their new data marketplace, which is accessed by more than 9000 customers.
And other AI industry leaders are reaching out to us about additional collaborations as well.
These new partnerships are testament to the importance of our sector and demonstrate fiscal it's clear leadership in our markets.
Another catalyst for upside is pure new product development, which is of course also driven by our decade long investment in AI.
We see compelling and timely opportunities organically extend our innovation to new areas of risk.
Correct, an overarching impact on our customers.
We will continue to launch new products that leverage our core competitive advantage here advancements in AI, such as chat GPT in GPT for when combined with a unique and defensible combination of data AI and human intelligence that we hope should result in faster time to market and more efficient product innovation that enables us to create new products in record time at an incredibly low.
Cost.
As an example, many of the world's largest enterprises are increasingly concerned about risks in their businesses and supply chain risks that our operational nature and impacted by the types of legal political regulatory and security issues that we track today.
We are uniquely positioned to bring new innovative solutions to market that directly address their biggest and most pressing concerns because of our long standing leadership in AI as well as our deepened regulatory datasets that empower businesses to predict understand quantify other types of risk that a tremendous impact on their operations.
This is just one of many internally driven product development opportunities that allow us to broaden and deepen our customer relationships pushed risk going into new areas of growth for our customers to provide new lines of revenue that provides significant expansion opportunities for future growth.
Tuned for more information in this area soon.
Finally, M&A remains a catalyst for incremental growth as well.
We continue to pursue selective M&A targets that can facilitate strong cross sell among our base of customers.
We've had great success with the majority of our acquisitions as they scale their solutions catalyze their growth and that incremental value for our customers.
Our January acquisition of Dragonfly is already generating opportunities as our customers look at security and operational risk and the markets they operate in.
In this environment, we continue to be selective in our acquisition target and structured but we remain opportunistic when we see clear opportunities for outsized growth.
In sum as leaders, we are constantly innovating around new customer segments, new product lines and new offerings. So we can expand the value we deliver for thousands of customers every day.
We continue to grow continue to maintain strong relationships with our customers through our retention and subscription model continue to support our high gross margin and long term free cash flow generation.
And we continue to innovate for the future by expanding our product suite and geographic footprint with a capital model that supports this profitably and beyond.
With these strong fundamentals, we remain focused on strategies that allow us to deliver our evolutionary growth and profitability goals, while positioning us for revolutionary asymmetric upside in the future.
We will continue to allocate our time and capital on the activities of innovations that generate the strongest returns and maintain our steadfast commitment to delivering superior customer value.
In summary, we are executing on the opportunities in front of us today, improving our compounded growth model.
Our business is driven by macro trends that continued to create a large amount of uncertainty from a policy perspective.
Our foundation of recurring revenue high adjusted gross profit margins and strong operational leverage will drive our business to adjusted EBITDA profitability in Q4 and strong free cash flow soon thereafter.
Strategically we have a unique and defensible combination of data AI and human intelligence that provides unparalleled value for our customers and a sustainable competitive advantage for physical metal.
While the strength of our fundamentals are not yet reflected in our stock price today, we are confident that long term, our valuation will align with the fundamentals of our business.
As leaders, we are 100% focused on building a durable profitable compounding growth company that provides unique value to the world's most important decision makers and scaling this business to 200, 300, 500, and a $1 billion in recurring revenue and beyond.
Now, let me turn it over to John for details on our financials and our outlook going forward.
Thank you, Tim and good morning, I'm going to spend some time, providing further details on the quarter I'll also discuss what to expect in terms of financial performance for this year and walk through our path to positive adjusted EBITDA and overtime positive free cash flow. Let me first start with revenue first quarter revenue was.
$31 5 million.
<unk> growth of 21% year over year in total and 10% growth on an organic basis.
We're executing on our strategy to deliver compounding growth driven by strong organic growth complemented by accretive strategic tuck in acquisitions.
As has been our track record and we expect to continue this revenue performance moving forward.
First quarter subscription revenue, which makes up 90% of our total revenue was $28 $5 million. This is an increase of 25% from a year ago and 14% on an organic basis.
Once again, showing our strong recurring revenue model.
Our advisory and other revenue was $3 1 million, a slight $200000 decline year over year.
We exited Q1 with run rate revenue of $134 million in total marketing, 10% growth year over year.
Run rate revenue is defined as <unk> plus non subscription revenue earned during the last 12 months.
As a key manager metric and serves as a baseline.
Subsequent quarters and beyond.
On an organic basis run rate revenues of $126 million, reflecting 9% growth on a pro forma basis as defined in our press release.
And all of our net revenue retention for the quarter was approximately 96%.
Trailing 12 month basis MLR was 97%.
Our rates can fluctuate slightly from quarter to quarter this quarter or NR was accepted by the anticipated conclusion of the large licensing contract with physical node inherited through an acquired business.
Excluding this contract roll offs MLR would have been 98% for the quarter.
Yeah.
We do find that NR rates are highest among our large enterprise and public sector accounts.
Among mid sized companies and trade associations.
Enterprise and strategic accounts now represent our largest fastest growing highest retention customer group that will continue to drive increasing total NR.
We are continuing to scale, our strategic enterprise accounts teams.
And reallocating our sales resources accordingly.
We grew our total annual recurring revenue or <unk> to a $119 million as of March 31, an increase of 19% compared to the same period in 2022.
Organic revenue as we define it was $113 million as of quarter end. This represents a 9% growth rate when compared to our IRR and Q1 of last year on a pro forma basis.
This is consistent with our expectation through the year as we anticipate most of your growth will take place in the second half of the year consistent with prior years.
Looking at gross profit, we continue to enjoy strong margins.
Our Q1 gross profit was $22 $6 million representing.
Representing a 72% margin.
First quarter non-GAAP gross profit was $25 $2 million.
Representing 80% gross margin after adjusting for amortization.
Sales and marketing costs were $12 $3 million for the quarter, an increase of $2 $8 million year over year.
R&D expenses were $5 1 million.
A reduction of about $1 million from a year ago due in part to increased efficiencies and the completion of certain rebuild project.
At a trivial content costs were approximately $443 million, a modest increase year over year.
G&A expense for the quarter was $18 million.
This includes approximately $5 $6 million related to the accounting treatment of non cash stock based compensation expenses. Excluding these noncash charges G&A was approximately $12 7 million an increase of about $2 million year over year, largely due to public company costs.
The operating loss for Q1 was $27 million in total this includes $645 million of stock based compensation.
A $5 8 million goodwill impairment charge related to the performance of our equilibrium software product versus its forecast.
$144 million of transaction costs, largely related to the accounting treatment of the acquisition of dragonfly.
Our total interest expense was $6 $7 million of this cash interest expense was $4 $7 million, which is a good proxy for our quarterly cash interest expense going forward.
Pending on interest rates.
The GAAP net loss for Q1 was $19 million, which is reconciled to our adjusted EBITDA loss of $7 million in our press release.
Our balance sheet remains solid with $47 $5 million of cash and cash equivalents as of March 31.
We have sufficient capital to support our growth initiatives and fund our path to positive adjusted EBITDA in Q4 of this year as we stated in our last call. We are taking steps to reduce our operating expenses, which should result in $6 million to $7 million in your cost savings these cost.
<unk> steps include actions, we've already taken and will continue to take this year, including adjusting our talent allocation model.
Aligning our sales teams to focus on the highest potential clients and segments.
Using technology to improve our internal processes and workflows consolidated product development groups, and R&D teams and vendor consolidation and elimination.
These actions will start to benefit our adjusted EBITDA in Q2, and we will continue in the second half of the year lower cost combined with higher second half revenue will drive us to be approximately breakeven on an adjusted EBITDA basis in Q3 and generated positive adjusted EBITDA in Q4. This.
Brings me to our guidance for.
For Q2, we expect revenue of $32 million to $34 million.
Our adjusted EBITDA is expected to be a loss of $4 five to $3 $5 million, depending on revenue and the timing to realize the benefit of certain cost reductions.
For the full year, we are reiterating all of our guidance previously provided.
Our run rate revenue of $148 million to $155 million <unk>.
Inclusive of the recent dragonfly acquisition.
Excluding any future acquisitions, we may make.
GAAP revenue of $136 million to $141 million marketing growth of 20% to 24% year over year.
Including the acquisition of Dragonfly.
<unk> adjusted gross margins to continue at approximately 80%.
We are reiterating our guidance for adjusted EBITDA loss between eight and $6 million for the full year.
We are also providing new visibility to our plan to be adjusted EBITDA breakeven in Q3.
Given our guidance for the year, there's clearly been solid adjusted EBITDA profitability in Q4 of approximately $3 million to $5 million.
<unk> from the cost action, we've discussed previously in there.
Our seasonally stronger second half revenue.
As we continue to deliver strong 80% of adjusted gross margins leverage the operating platform. We have in place and continue to manage our costs, we expect to drive strong conversion of incremental revenue to adjusted EBITDA as.
As we reached the inflection point of adjusted EBITDA profitability in the short term. We expect this operating leverage will enable us to deliver strong free cash flow margins in the long term.
We have approximately $94 million of debt capacity subject to certain conditions.
Our lenders remain flexible and are supportive of the company is focused strategic acquisition program.
As Tim discussed we will continue to pursue selective M&A opportunities that are accretive to our profitability.
And to drive cross sell opportunities within our stable and growing base of thousands of customers.
And of course, given our stock price we were focused on transaction structure is heavily weighted towards earn out and structured stock consideration with terms to give long term upside with minimal dilution.
In closing we are delivering on top line growth.
As we executed on our strategy to build a compounding growth profitable business that drives mission critical solutions to the world's most important decision makers.
The secular trends propelling our business and creating sustainable demand.
From increasing regulation to geopolitical threats to macroeconomic uncertainty only fiscal note has the breath of AI enhanced data and human intelligence to help customers navigate this increasing operational complexity, we continue to leverage our investments.
To drive new growth opportunities and drive efficiencies throughout the organization with highly predictable recurring revenue strong gross margins and ongoing cost management, our path to profitability is clear and we have the operational structure and capital we need to scale this business and drive long.
Term value with that we will now open up the call to questions.
Operator.
At this time I would like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad.
Your first question comes from Mike Latimore with Northland Capital markets. Your line is open.
Great. Good morning, Congrats on the results.
Strong outlook there.
John I, just want to make sure I got the number down correctly did you say that you're expecting positive EBITDA of $3 million to $5 million in the fourth quarter.
That's right Mike.
Yes, we mentioned that we're approaching breakeven in the third quarter and <unk>.
Expectation of three to five in the fourth quarter.
Okay great.
And then just on the strategic account strategy can you elaborate a little bit more on that.
What are the resources you are devoting to that.
Whats the pipeline build look like and maybe what percent of the pipeline is in this category at a time.
Josh <unk>, our president here with us.
Great question.
Yeah, Hey, Mike.
Thanks for taking the time today, so we don't disclose down to those level of metrics down to that specific line, but I will tell you.
But generally speaking, we see a tremendous opportunity there.
As we can bring our full portfolio of products to larger enterprises, and really leverage what we've built across the portfolio of the entire company and we've seen our ability to do it.
Kind of case by case.
Within our enterprise approach generally we believe that by applying resources to focus on this.
We can drive.
Growth in that area going forward.
Great and then just in terms of the environment and overall.
Company any any change in sales cycles or deal sizes.
This year relative to the end of last year.
Yeah, Mike This is Josh so we're still.
We're continuing to see essentially the same issues in macro that we've been talking about for the past couple of quarters, where we.
We see some elongation of buying cycles.
<unk> budget pressure from.
Clients and we're continuing to work our way through that and that's built into our forecast for the year.
Alright.
No no change in those dynamics.
No no no clinically relevant Alaska, Yes, no no significant change.
Got it and just last on.
You talked about.
Asymmetric upside potential and I think one of the categories was.
Kind of that federal space.
Is that a fair.
Are those opportunities to sort of longer term at this point or are you tracking a few task orders today that could be meaningful.
Hey, Mike This is Tim so we have not actually forecast any.
Any of that upside that we've been talking about I think.
A lot of us.
Foundational element, we're laying down right now are.
Hum.
New upside in the future, but they have not forecast, but obviously, we have full time on them, we have people investing resources.
Do you think.
Substantial upside.
Does that lay out.
Yes.
Okay great.
Thank you best of luck.
Yes.
Yeah.
Your next question comes from Matt Van Vliet with BPI.
Line is open.
Hey, good morning, Thanks for taking the question.
I guess digging in a little more on the enterprise and strategic accounts side of things I Wonder if you could just walk us through kind of.
What percentage or how many of the modules that youre selling do you feel like are appropriate for a number of those customers.
The first part of the question. The second part what is what is sort of the.
The typical average of maybe the larger cohort of customers that have taken on the platform maybe expanded a couple of times.
A near term opportunity with the first part of your question being sort of the upper bound as you look at that opportunity.
Yeah, Matt This is Josh let me try to answer it and let me know if I captured or not I mean again, we don't we don't breakdown into specifics among the segments.
In terms of your question about what like what share of our products do we think are applicable there.
Generally speaking if you think about it from the perspective of a large multinational you.
You need to manage to a significant number of issues that range from legal and regulatory to political and policy too.
Security Cyber security.
Message resonate.
And the like and so we have solutions really across our various lines of business that span those needs. So I think that.
The use case depends on this particular business, but in terms of what their spirit.
Sorry, excuse me specific progress we saw dark.
But generally speaking we think that we have the opportunity to present bundles from amongst all of our products that will meet the needs of those larger enterprises.
Okay.
And then just any any help on sort of what that near term opportunity.
How many customers are using let's say half of the platform talking about they're all a lot of them are.
Selling and maybe capable of using it do you have customers that are already using a number of modules where it gives you the encouragement to say all right, let's put more resources, let's make this our hyatt.
Highest priority area, just trying to gauge kind of what the true near term opportunity is here and understanding why the resources or maybe even being diverted to that that component.
Sure I mean, well.
What I can tell you is.
We do see <unk>.
<unk> portion of customers that are using multiple products already the number of products per customer.
Our increasing.
So in other words.
Within our existing sales structure, our previous sales structure, we were able to.
Create those bundles and do the right upsell and cross sell.
To meet the needs that we're seeing from those larger multinationals and so we believe that by taking these resources and focusing more on creating those broader bundles and being more intentional about what we actually bring to market that we can drive the growth in that way. So again, we don't disclose.
Specifics.
Q that segment, but.
But we're seeing.
Like I said, we're seeing users who buy onto these bundled offerings, we're seeing the number of products per customer increase and so we know the trends are there and with that focus and we think we can drive that further.
Okay very helpful. There and then.
Maybe for John .
As you look at it.
The <unk> cost savings initiatives you have there.
What could potentially.
Push those later into the year the ones, maybe not yet taken or what would give you maybe the internal confidence that the topline is growing at a faster clip youre seeing more uptake, especially as you incorporate more of these AI functionality.
And maybe you would start to hire a little bit sooner. So maybe it boils down to how much is head count related of those in process and yet to be taken cost initiatives and how much are more kind of structural costs are around different vendors or <unk>.
Paring back on certain internal spend.
Thanks Pat.
So head count.
<unk> four <unk>.
Vast majority of our total operating expenses so from an efficiency standpoint, that's going to be the primary source.
So efficiency as we drive forward and look at.
Leveraging our staff in each functional alignment of the business.
We've already identified and taken actions and will continue their tend to think about ways to be more efficient.
Down the road, we've also been very aggressive on the vendor side, we specifically looked at areas where.
Where we're spending the most and then focus.
<unk> focus on those contracts, but we've also eliminated a lot of contracts that just.
We made the decision we didn't we no longer need it.
As it relates to the revenue growth and matching revenue growth with cost reductions where we're.
On a biweekly basis looking at the pipelines, making sure that we're pacing towards what we expect in terms of.
Revenue growth and revenue ramp.
<unk>.
We'll continue to kind of monitor that but.
They committed to all aspects of our guidance both the revenue and the EBITDA that have a lot of levers to pull along the way if we see similar adjustments are necessary or opportunities to accelerate present themselves.
One segment or another.
Okay, great. Thank you.
Your next question comes from <unk> <unk>.
With D. A Davidson your line is open.
Hey, guys just excuse me just one question from me understanding your years are back half loaded from a new business standpoint, the guide.
Clearly implies greater sequential growth.
Q2 to Q3, and Q3 to Q4 on both a dollar basis and a percent basis excuse me that last year.
And just just what gives you the confidence.
To hit those numbers most companies at this time or guiding to smaller sequencers and smaller dollar growth back half of this year versus last year.
Thanks Rudy.
Yeah, I think first of all we look at the productivity of the sales team coming out of last year and what we.
Some slight changes we've made to team coming into this year, our first quarter performance.
It is in line with expectations. It's in line with prior years, we didn't have as kind of the exceptional event that we mentioned.
And impact on the net retention rate in the first quarter.
But for that I think our first quarter.
Performs very much like prior years, so I think that we're kind of in line for the type of ramp that we've seen in prior years and we have a broader.
Product selection that we have in prior years, we got more kind of innovation and new features.
To cross sell as well so there are a couple of new things.
We focused on and feel like.
So we monitor the pipeline.
By weekly with all of the teams just to make sure they remain.
On page for the for the expectations for the year and move resources around where we see growth opportunities. So we take opportunities to accelerate where we can.
Okay.
There are no further questions at this time I will now turn the call back over to Tim.
Alright. Thank you everybody appreciate everybody jumping on the call here, we've got it another great quarter and really looking forward to it.
Delivering on the results that we guided towards here and that will continue to execute on the business.
So I appreciate the time, thank you everybody.
This concludes today's conference call you may now disconnect.
Yeah.
Yeah.
Yeah.
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