Q4 2023 Kaltura Inc Earnings Call
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Good morning, everyone and welcome to catch her fourth quarter and full year 2023 earnings call. All material contained in the webcast is the sole property and copyright of <unk> with all rights reserved for opening remarks, and introductions I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.
Thank you and good morning with me today from Calc for Iran, and you could feel co founder Chairman and Chief Executive Officer.
Your own Demasi, Chief Financial Officer, and John Doherty Cal towards incoming CFO.
Ron will begin with a summary of the results for the fourth quarter ended December 31, 2023, and the company's plans and expected trends for 2024.
Yeah, Ron will then review detailed financial results for the fourth quarter and full year of 2023, followed by the company's outlook for the first quarter and full year of 2024.
We will then open the call for questions.
Please note that this call will include forward looking statements within the meaning of the federal securities laws, including but not limited to statements regarding <unk> expected future financial results and management's expectations and plans for the business. These statements are neither promises nor guarantees and involve risks and uncertain.
Geez that may cause actual results to differ materially from those discussed here.
Important factors that could cause actual results to differ from forward looking statements can be found in the risk factors section of Couch Forest quarterly report on Form 10-Q for the quarterly period ended September 32023, and other filings, including the annual report on Form 10-K for the fiscal year.
And at December 31, 2023 to be filed with the SEC.
Any forward looking statements made in this conference call, including responses to your questions are based on current expectations as of today and couch or assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.
Please note, we will be discussing a non-GAAP financial measure.
That EBITDA from this call.
For a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP metrics. Please refer to our earnings release, which is available on the company's website at www dot investors Doc calc for Dot com.
Now I will turn the call over to Rod.
Thank you Erica and thank you everyone for joining us on the call. This morning.
Today, we reported total revenue for the fourth quarter of 2023, or $44 5 million up 1% year over year and subscription revenue of $40 8 million up 3% year over year.
Adjusted EBITDA for the quarter was <unk> 8 million.
We posted record high total revenues in the fourth quarter, which also marked the fifth consecutive quarter of year over year growth.
The quarter wrapped up a year, whereas we had previously forecasted.
Increased subscription revenue and growth rate.
Despite declining professional services revenues as expected total revenue growth rates also increased.
As for our bottom line in.
The fourth quarter was also a second consecutive quarter of adjusted EBITDA profitability and positive cash flow from operations. Both for the first time since 2020.
It was also our highest adjusted EBITDA results in the fourth quarter of 2020.
This concluded the year with Mark Bottomline improvements year over year, we posted $2 5 billion of adjusted EBITDA losses, compared to $28 3 million in the ear.
And reduced our cash flow used for operations by $38 5 million from $46 8 billion to $8 3 million.
As we draw 2023 to a close we are pleased to have achieved and surpassed our revenue and adjusted EBITDA guidance for the year to.
Delivering on our goal of accelerating revenue growth.
While also returning to adjusted EBITDA profitability in the past two quarters and as forecasted dramatically improving our cash flows.
Moving onto the business updates, while booking and retention results in the fourth quarter continued to be lower than in 2022.
We closed more deals.
We've hired new bookings and posted a higher gross retention rate than in each of the first three quarters of 2023.
In addition, the top of our sales funnel continued to show a sequential increase in the number of qualified leads in the past quarter.
We believe that our differentiated horizontal platform and continuous product portfolio expansion enables our customers to increasingly consolidate many video use cases internally and externally around culture and buy.
Doing so to reduce their costs and complexities and avoid disjointed workflows and content silos.
This consolidation brought forth in 'twenty to 'twenty three larger deals.
Continued to increase our average customer size as evidenced by record high Emt New logo RP would be record high average <unk> per customer in 2023, which we believe will help our future growth.
In the fourth quarter, we saw a new event platform garner traction.
We extended our reach within a pair of global enterprise software Giants to support them with our event the webinar offerings.
For internal communication and training as well as external marketing and partner enablement.
Additionally, a prominent technology company, what are you leveraging our events platform.
Substantially broadened the range of events supported by platform.
And a leading U S automotive company upgraded from flow towards webcasting to cultural events.
God events and Webinars, a fortune 100 financial institution, one largest in the earliest customers.
Purchased additional accessibility features to further extend the reach and inclusion of their internal video communication.
One of the world's largest restaurant chain has expanded its usage and increase its access to go towards product suite capabilities.
They're very well known global leader in the direct to consumer streaming video customer.
They picked him out of power its internal video on demand portal for employees and partners.
And the education sphere, we continued our global expansion by securing a large European University and a prestigious European business school as new customers. After conducting successful proof of concept with our product.
We also continued to increase the number of end users of our media and telecom platform with our topic near customers migrating hundreds of thousands of new households into our cloud TV service.
On the product front during the fourth quarter, we continued boosting our events platform with wells and permissions and rich registration reporting and advanced landing page editor and additional features that encourage into activity for both virtual and in person audiences.
Video portal now enables users to seamlessly stitch videos together.
And we also improved its user experience and branding options.
We added to our video player additional call to action capabilities, and enhanced podcast experience and customizable pre and post broadcast sleep.
That's a real time conferencing agreements continue to evolve with the launch of our proprietary new whiteboard, which complements existing third party integrations.
We have also introduced simulcast features to improve broadcast quality and network efficiency.
On the infrastructure front, we continue to support the original SaaS clouds and have made strategic investments in enhancing our capabilities around hold your own key options for enforcing our commitment to security and data sovereignty.
Oh, sorry, I was previously discussed we believe that we are in the cost of a transformative era. When a video first AI infused experiences will drive greater engagement and improved business results.
Past quarter, we extended our AI assistant to provide real time insights and suggested actions to organize this and presenters during webinars and other events like identifying changes in your engagement in real time, and initiating actions such as launching relevant quizzes unfold and evoking audience reaction.
The accelerated program, which we launched last quarter continues to grow with more technology partners, joining and more customers exploring with us the possibilities of AI powered video experiences and how they can support their interests and needs and boost their business results.
Throughout 'twenty 'twenty four we expect to gradually cater to many of their needs for AI to become an increasingly important part of our offerings.
As we look ahead to 2024 and beyond.
Just a bit of more favorable market environment that is expected to ease budgetary constraints for enterprises, particularly in North America.
We believe that enterprises will gradually reinvest in digital technologies, including a video based experiences for employees customers and prospects.
We believe that this will be fueled by an increasingly hybrid workplace with lesser travel in order to reduce costs and carbon emissions.
Both in the millennial and Gen Z workforce, which is booked the underlying on video.
And by the much greater expected, our Hawaii generated by AI infused video experience.
We believe collateral provides the most robust engaging and impactful advanced video based solutions.
In use cases, such as marketing and customer engagement employee and partner communication and training student learning and engagement in online entertainment.
Beyond this we believe we are unique and offering a single platform that addresses all of these use cases and others to follow.
Mentioned, we see the single platform approach not only boosting functionality reliability and scalability.
Also being much more cost effective.
We believe our advantages helped us outperform many of our competitors in the past and challenging year. We believe it will become even more impactful when improved macroeconomic conditions are expected to cause customers to start making longer term investments to elevate their systems quality performance and efficiency.
As mentioned, we've already seen this trying to affect our entire yourself funnel from growing leading demand indicators such as the number of new qualified leads.
Fueling higher win rates to continuing to increase our new logo ARPA average Iraqi customer.
In 2024, we will continue to focus on in theater to the growing demand for our <unk> platform from existing and new customers for both internal and external use cases.
We plan to continue our expansion down market and increase the size of our commercial sales team that sells low touch solutions to Smes and to the parks are within large enterprises.
Does that and while in 2023, we've reduced for the first time the size of our sales team to match, the lower enterprise budgets and longer sales cycles and to address those profitability goals.
This year, we plan to gradually re grow our sales force.
In summary.
We wrapped up a tough year with strong macroeconomic conduce headwinds weighed down our new bookings and gross retention and generated a revenue growth rate, albeit better than last year's guidance than that of the previous year is far below our historical level.
We enter 2024 with a robust product offering.
A clear strategic direction and a validated go to market pieces.
With market conditions, improving enterprise spending recovering and new opportunities arising from the eye. We believe we are well positioned to capture the increasing demand for video experience.
While we believe we have the right products and market positioning to support faster growth.
Given the still unclear macro conditions and considering last year's outcome, we're thoughtful with our revenue guidance for 2024.
Regardless of our topline growth, we are reaffirming our expectations posting both a positive adjusted EBITDA and positive cash flow from operations. This year.
Now before handing it over to your long term Aussie, our CFO to discuss our financial results in more detail.
I would like to address is planned transition, which we announced a few weeks ago.
First I'd like to extend tier one our deepest gratitude for his great contributions to the company throughout the past seven years.
Well its commitment to <unk> growth and as professional excellence have been invaluable.
We wish him success in his next endeavor as we have shared Iran. She'll remain CFO until March 1st and we'll continue to support the company throughout the second quarter to ensure a smooth transition.
We have a thing called sure once the coker in always a culture and while Youre Rolling is moving on Youll be think close and will forever remain our partner and friends of the company and me.
With that.
I am pleased to warmly welcome to briefly introduce to you our soon to be CFO, Mr. John Doherty.
Tom joined US earlier this month and so we took the reins as CFO on March one.
John brings more than three decades of financial and operational experience.
Most recently he served as CFO and COO with Magic leap.
Prior to that he served as CFO of publicly traded Interacciones until after its 8 billion plus acquisition.
Prior to that John held a variety of senior financial and operational roles at horizon, including head of corporate development, and Verizon ventures head of Investor Relations and CFO of multiple large divisions.
I am excited to welcome John to our team.
Spirit is that both financial and corporate development functions at large publicly traded enterprises will greatly contribute to our efforts, including our plans to explore strategic opportunities that advance our commercial goals welcome aboard Jon.
You, Ron and Hello to everyone on the call today I'm very excited to join Ron and the talented <unk> team.
Firmly believed that count to where it has the potential for significant growth and an exciting domain and that it is well positioned to lead the market I'm looking forward to the exciting journey ahead and to getting to know many of you personally soon.
Thank you John and now over to you Rob.
Thank you Ron and good morning, everyone.
I would like to start off by welcoming John and thinking on entertainment for their amazing positive anyway.
My opinion, that's got a tool that lets me with great clarity towards friendship and very strong pain relief.
I am very excited about the road ahead of the company and I'm confident that he has the right leadership right product.
And the right strategy in place to return to a meaningful profitable growth and to lead the market.
One man said actually will be support being joined the company when the full time basis for the second quarter to ensure a smooth transition.
I'll also say one cycle.
Only the controller.
Now back to our financial results.
The fourth quarter and full year fiscal year result today. Please note that I will be referring to non-GAAP metric adjusted EBITDA.
Consolidation will stop doing it.
non-GAAP financials is included in today's earnings release, which is available on our website at www dot investors that can do about that.
Total revenue for the fourth quarter ended December 31st 2020 free was $44 5 million up 1% he is already.
Subscription revenue was $40 8 million up 3% do you hold are you like professional services revenue contributed to sleep and 7 million download 18% year over year.
The remaining performance obligations were $195 3 million up 8% year over year of which we expect to recognize 59% as revenue over the next 12 months.
Recurring revenue was $164 7 million up 3% year over year.
Oh, and then tell our retention rate was 19, 9% in the fourth quarter up from 96% in Q4 2022.
We know E&P segment total revenue for the fourth quarter was $51 6 million up 5% to give over to you.
Subscription revenue was $50 4 million up 5% give over to you while professional services revenue contributed $1 1 million was up 13% people very well.
We've been our M and P segment total revenue for the fourth quarter was $12 9 million down 8% people variable subscription revenue was $10 4 million down 2% people hear you.
While professional services revenue contributed $2 5 million down 27% Eagle failure.
GAAP gross profit in the quarter was $28 6 million, representing a gross margin of 64% up from 63% in Q4 2022.
Within our E&P segment gross profit for the fourth quarter. It was 23 million representing a gross margin of 73% up from 70% gross margin in Q4 2022.
We've seen our E M and P segment gross profit for the fourth quarter was $5 6 million, representing a gross margin of 44%.
From 46% gross margin in Q4, 2022.
GAAP net loss in the quarter was $12 1 million 4.09 per diluted share.
Adjusted EBITDA for the quarter was <unk> 8 million improving from a negative $4 2 million in Q4 2022.
And now for the full year.
Total revenue for the year ended December 31st 2023 was $175 2 million up 4% year over year.
Subscription revenue was $1062 8 million up 7% peoples of video while professional services revenue contributed $12 4 million down 24% Eagle for Ya.
Within our E&P segment total revenue for 2020 freedom was $125 2 million.
4% people go to your subscription revenue was 126 million up six percentage while.
While professional services revenue contributed $12 6 million down 31% below videos.
We've you know EM and TS segment total revenue for 2020 fee. It was $50 million up 3% people there to you.
And what if any was $42 2 million.
8% people, even while professional services revenue contributed $7 9 million were down 19% at Evo variant.
Our net dollar retention rate was 1% in 2023 and was 1% in 2022.
GAAP gross profit in 2020 fleet was $112 2 million, representing a gross margin of 64% up from 63% gross margin in 2022.
Subscription revenue gross margin was 73% down from 74% in 2022.
Within our E&P segment gross profit in 2023.
91, 6 million, representing a gross margin of 73% up from 70% gross margin in 2022.
Subscription revenue gross margin was 79% up from 78% in 2022.
Within our MPC segment gross profits in 2020 free.
It was 26 million, representing a gross margin of 41% down from 48% gross margin in 2022.
Subscription gross margin was 55% down from 63% in 2022.
Adjusted EBITDA in 2023 was negative $2 5 million improving from a negative of $28 3 million in 2022.
Turning to the balance sheet and cash flow, we ended the quarter with.
$75 2 million in cash and marketable securities.
Cash provided by operating activity was $1 6 million in the quarter compared to $5 8 million net cash used in operating activities in Q4 2022.
For the full year 2020 free net cash used in operating activity was $8 3 million compared to $46 8 million net cash used in operating activities in 2022.
In the fourth quarter, we also entered into a new agreement with Orlando at extending the maturity and amending the certain financial terms.
Scuffing now a form 8-K filed on December 27, 2020 fleet.
I would now like to turn to our outlook for the first quarter of 'twenty 'twenty four and for the fiscal year ending December 31st 2024.
In the first quarter, we expect subscription revenue to range from a 1% decrease to 1% increase to between $59 9 million.
46 million and total revenue to range from a 1% decrease to a 1% increase to between $42 7 million and $43 5 million.
We expect an adjusted EBITDA to be between a negative <unk>.
5 million and the positive point $3 million.
For the full year, we expect subscription revenue to range from a 1% decrease to a 1% increase to.
So between $161 2 million and $164 2 million in total revenue to range from a 1% decrease to 1% increase to between $173 7 million and $176 7 million.
We expect adjusted EBITDA to be between zero and $1 million.
In summary, due to a tough macro condition and the industry headwinds, we closed a much slower year than.
Then use yet it will be better than last year's guidance and that of the previous year.
While we believe that we have the right product and market positioning to accelerate growth in that market conditions will gradually improve considering the market uncertainty and last year's outcome. We are thoughtful with our guidance for 'twenty 'twenty four.
We are satisfied to achieved our bottom line and cash flow to go for the passing game and are reaffirming our expectation of posting at both positive adjusted EBITDA and the positive cash flow from operation P. C.
With that we'll open the call for questions operator.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset.
Before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from Matt <unk> with Deutsche Bank. Please proceed with your question.
Hey, guys. Thanks, so much for taking the question maybe two if I could one Ron if you could talk about.
Some of the confidence you have in terms of improving market conditions that you referenced and when you could maybe see this driving more positive inflections in subscription revenue.
Then secondly, just in terms of competitive backdrop, if you could just talk about what you're seeing there and then any change in terms of competitive dynamics over the last couple of months. Thanks.
Okay.
Matt and Hello to everyone on the call today.
Start with the first one confidence where market conditions, let's wrap up what we had this quarter by way of demand and trends and a leading indicators.
As mentioned the highest bookings quarter of last year, albeit relatively flattish, but also the best retention that we had in the year past and it's also coming back to the levels that we had prior years, which are much better. So from a net booking perspective, it was a better quarter than the ones before again, it's been a tough.
Year, and it's another quarter of improvement, we're going to wait a bit and see where things go but it is headed in the right direction.
Important to note that as we wrapped up the year and our booking had come down from the year before by about 25% as mentioned earlier, we also had about 25% less salespeople than the year before which is the first time that we've actually done that and so productivity hasnt fallen down it is capped and now that we've become profitable we can invest in we can put more we believe we can.
Peter to the demand with more people. So it's not just about the demand, it's our ability to cater to the demand, but other points to your question about demand. We look at the leading indicators we had throughout the year. We look at the Q BMS are qualified by marketing leads they continue to grow and they grew sequentially throughout the whole year. They have come down from the year before at the beginning.
Of the year, but ever since have gradually climbed up and also the RFP submissions are also growing materially both sequentially and year over year.
That's a good sign and then lastly on that point, we are selling bigger deals and two bigger customers because of all the additional products and our strategy to consolidate around called draw for internal and external we've seen this year record our booth and continued increase in average RMR per customer.
Timed out win rates have remained high so if you look all of these things together I think for us. The spill. We believe things are going the right direction, we're talking to folks I think in North America more so than in Europe, there's conversation about more comfort around taking a decision. It was always the case that people said that in the mid to long term culture. It makes more sense not just because its a premium to <unk>.
<unk>, but the consolidation that we offer and enables them to have the silos less broken workflows and lesser total cost of ownership. It was just doing it in the tough year that it was was harder because people were looking very near sighted to additional cost just to get things shaken moved but as people look into the fall.
Following years, I think people are getting geared and ready to make the better decision for the mid to long term, which is called <unk>. So again, we're careful we're not you know.
Celebrating its been a tough year, we've talked about slower growth rates than we've seen in the past, but we've also delivered on what we said, we would and let's let's look out next year pans out and hopefully it continues to climb up.
To your second question around competitive change, we have not seen a material difference.
The last quarter. So we continue to lead for reasons that we've always led the four main differentiators for couture, one the depth of our Apis and the integration that we could offer enabling a lot more mission criticality.
And to the breadth of what we offer that enables us law for Vod live and real time, internal and external and as I said earlier to enable consolidation a third of the enterprise ability that we offer meaning by way of scale reliability security compliance and the last is the degree of engagement and analytics.
It comes from our products and we continue to see the strong we've not seen lower win rates were stronger competition coming from elsewhere. It's up to you to look at the end year results of the other companies I think most of the public companies out there have shown.
Growth rates, if not negative this year and we think that the reason that we have done relatively better is because of these advantages that addressed your question Scott.
It does yeah, just one quick follow up in terms of sales cycles are you seeing those maybe shorten.
Maybe stabilized just curious in terms of how that's been impacted as well of late.
As mentioned at the beginning of the year the pressures the headwinds that we've seen that cause this year to be our past year 2023 to be so off our east significant lengthening of the sales cycle as well as price pressures.
And we're still seeing that I'm too early to say that it's suddenly getting better but as mentioned since when rates are held in the top of the funnel is continue to grow but what comes in must come out and we are closing. These deals. So we believe there'll be more opportunity to close these deals in 2023 24 purchased.
That's great. Thank you so much.
Thank you Matt.
Our next question comes from George <unk> with Oppenheimer <unk> Co. Please proceed with your question.
Thank you for taking my question and just to start off John.
Best of luck on what's ahead and congratulations to you John.
Maybe Ron starting out West Canada.
Your comments on the sales productivity can you maybe give us some perspective on what you're expecting from a hiring perspective, this year and when those additions might happen during the year.
Sure happy to do that.
So first on sales productivity as mentioned it had kept compared to last year and I can also say, it's broadly aligned with our pre COVID-19 productivity.
But we had we do quite materially on Salesforce after growing it always year over years, rather 25% drop in order to be profitable, but also aligning us to the lesser productivity than during Covid. We're.
We're not ready given our profitability metrics and the ability of additional salespeople to contribute in a decent way, it's not as great. As it has always been we're ready to do that and even if it is the existing productivity over the last couple of years, it's still good.
And so far as numbers order of magnitude maybe another 10 at this point were doing it gradually we're doing it throughout the year, there's going to be more focused on inside sales commercial sales rather than outside sales, but we're going to increase both.
Because we want to continue going down market discussion, we could continue separately.
And that's important for us, but thats the order of magnitude does that address your question.
Yes.
And Iran, maybe on the.
Net expansion number.
It was up year over year, but it did decline a little bit on a quarterly basis.
Can you give us some perspective on what Youre seeing there from an expansion perspective, and what's your expectations are for 2024.
Yeah. So first of all there youre right. There was a decline of 1%. It was 19, 9% this quarter, but as you can see for the year. It was 100% we saved the day in the previous call that we believe that for the short term, it's going to be around the 100% base.
Based on the fact that we so as Ron mentioned the improvement in both booking.
And our retention rates and we believe that we will be able to see it.
Coming to beat better numbers than the 100%, but at least for the short term and I believe that this is the new normal obviously, if and when we will see a reacceleration of both bookings and retention rates. We do believe that we will see an increase to the rates that we sold before COVID-19.
Which was in the low 100.
Okay.
Thank you.
Our next question comes from Gabriela Borges with Goldman Sachs. Please proceed with your question.
Hi, Good morning. Thank you I wanted to follow up Ron on your comments on the macro I. Appreciate the detail I wanted to understand why do you think is driving that how much of surface shafts Covid normalizes shnewer a couple of years and customers are ready to reinvest again any qualitative color from your customer conversations that you think.
Uh huh.
Well, thank you Gabriel.
I think we have the two back to back.
Issues right Covid was the first one when people said, we've just bought a lot gives us a bit of time to figure out what we're doing in a more strategic way.
And we heard a lot of that in 'twenty. The end of 2021 the beginning of 2022.
When people said listen there were a bunch of different systems that we had bought there is a bunch of new use cases that we're powering we want to make order in the whole thing give us a few quarters or less and we'll come back to you with thoughts and they said that they love. The fact that we can consolidate and to offer solution to Clos and the factor.
We can offer even more mission critical services that are more tightly integrated that could be customized and tailored to their needs and everybody said look we understand videos that new normal and something that happened year, we intend to do more on video just as this was getting ready to impact us we have the financial downturn, so I think ever since over the last year and a half couple of years.
It's more of the financial downturn than the post Covid impact.
People say look we already know that we want to have more there's just no no no. It was not the right time and so we had the price pressures and people staying with incumbent vendors, even if it's not the most ideal systems.
Saying that theyre going to make a switch later on but that's the main main rationale also bear in mind that sometimes some of the products definitely the internal ones. Our FTE based licenses and so if theres also reduction of Ftes because companies are letting go people as opposed to hiring and that in itself is also pushing against usage.
I think that was the biggest issue so far and what we're hearing from folks now is they're saying look we winded enough we need to be smarter about what we do our goals are not just 2024 goals. The Russell 2025, and beyond and we're spending too much money and it's too complex plus there's more things that need to be done.
I want to be cautious about this and our guidance is in that as well.
It's not yet time to celebrate this industry had gone down.
Gradually hopefully going to start going up again and but at this point, we're seeing our competitive advantage.
Being accepted in the market and there is interest in moving forward with some throw lets see how quad how quickly that goes.
That makes sense on the.
The sales productivity metrics remind us how long does it take typically far.
I'll kick off on top of the funnel, it's a close how long does it take typically for a salesperson to ramp up to full productivity and any color on the training and enablement that you're providing to help us from anthem Washington.
Thank you.
On the third one training enablement is up for the customers or enablement for our new salespeople.
The latter.
The salespeople okay. Good.
Let me start with the last I mean, we're definitely very structured in our onboarding folks into the company.
And we're a video first companies who have everything video side, we have an internal group. That's also expert and training our customers and they're the ones that are also helping us.
So we do that well to your first question connected to that.
The second one on the ramp time in our models, we put six months ramp for outside salespeople and three months round for CSS.
And we factor that into our expectations around booking I can tell you that most salespeople if they come in and get some leads that could start selling before.
But that's for us to be careful in our modeling around when cook when bookings going ahead, and so far as the sales timeline it varies between the different markets or in media and telecom, which is why most of our focus was not there. It was more on the E&P is longer sales cycles, if you're coming into a new logo it could be some.
Lines, a year and a half two years its long lengthy discussion and then even more so the deployment time are relatively long and the time that it takes all the way to profitability as longer back to my point, though.
During down times have always enjoyed the organic growth of users within the existing customers, which is quite significant this quarter. We added hundreds of thousands, but we're putting our foot off the gas a bit and try to hunt new customers that will take longer to bring in longer Nick revenue longer to make profit on.
On the enterprise side of the business, it's usually has been somewhere around six to 12 months.
Cycles, albeit that as we've come to offer more low touch products and we've moved from internal which is more content management to external which is more event they have shortened but.
Over the course of the last year given trends that have happened in the industry. It has started to elongate and we're seeing things go beyond the year, which is in line. If you talk to major large software companies out there, but we don't have enough statistical answer to tell you. If it's exact 12 months or 18 months, but it's not a few months on average we definitely have in time.
Sometimes deals that come in and I'm talking about new logos not upsell that are that are we faster.
Education.
<unk> is a tweener, sometimes it's depending on the situations. There is also cycles around when they actually deploy the software for the new learning gear.
But I'd say, it's closer to enterprise and then the other ones that address your question Gabriel.
Yes, thank you for the detail.
Thank you.
Our next question comes from Ryan Koontz with Needham <unk> Co. Please proceed with your question.
Alright, Thanks for the question and welcome to John coming on Board.
On your guidance there for subscription for a year of flat how would you unpack that in terms of.
Turn and does sell kind of negative impacts on your.
Returning customers versus new new logos or.
New customers as part of that guide thanks.
Yeah first of all the and when you are saying about the declining guidance for Q1 actually what you see is that as Ron mentioned.
We had some pressure on the ear from bookings and retention level.
Each were lower than last than 2022, obviously, but at the same time, we do see.
An increase in Q4, both on retention rates and the booking rate at this point if you look on our forecast obviously, you would see an improvement because we are.
Barry into Q4, which was much higher than what was expected before the basis was higher.
So in effect, it's a decline but from our forecasting even compared to the numbers that you saw before it's not really the decline in the guidance for D. C and we do believe that there is.
Hopefully, we'll see continue increasing both retention rates and a and booking rate.
You will see any situation that the second part of daily to start to improve and obviously at this point, we are trying to be very thoughtful move out of guidance.
What was the specific other question it was around down sell versus new logo.
I can address that if you'd like.
Hum.
Let's start with the fact that we've not taken any assumptions that or not.
Happening already over the past few months.
So we're not assuming any strengthening we're not assuming any change we're assuming what things would remain albeit we do expect and hope that things are going to get better.
Meaning that if we're looking at retention rates that we're currently seeing we're expecting them to continue forward. We're also expecting from a ratio of downtown versus.
<unk> churn in the last quarter, only 12% of the churn or the loss that we've had of any dollar was associated with initial service or product. Most of it was budget issues pricing issues and the majority was still done through not full departure of customers, but it was down so and so we are.
Zooming in MBR that would continue the trends of what we've seen we're assuming productivity is with both upsell and you that are more or less in line.
So everything is at this point guided to flattish, which obviously, we've kept the necessary cushion for us, but we also want to be very very thoughtful given the past of the year that we've seen is there any more specific questions that you have on this do you want me to address fraud.
No that was good but a little follow up here if I could on the inside sales focus is more on.
Renewals or is this on.
More lead qualification for your inside sales.
So most of our customers are have been managed by outside sales.
<unk>, let's look at the average of our wheel.
Thousand ish customers and we have 175 ish million.
And revenues so the typical customer here is being us around 100.
Third and $70000. That's the average but if you also look at the median this is by and large large enterprise sales. What's happened as of recent is you know over the last couple of years as we've added the products that are enabling us to go downmarket as we're targeting both small and medium enterprises as well as departmental sales.
And by doing so we're going to be doing that through more low touch inside sales and therefore, because it's a new corporate for us it's not so much renewal. It is more new and we have that coming from the top of the funnel and we divide that based on the size of the opportunity between the different sales team now one other thing that we do.
Did do this year in order to kind of double click on the size of the opportunities because our big customers are quite big coming back to my earlier statement about our pool, we have a lot that have climbed five X and more in growth into multimillion dollar opportunity and we believe we could coffee piece that again and again, so what we've actually done this.
Year for the renewal side is taken at this point somewhere around a third of our customers that are larger and have moved them into a team that is more automated that's working on lower touch renewals in very structured approaches and if that works out we were going to graduate them to do more and more and we're going to leave.
<unk> the outside sales team to address the 80% of the revenue, which usually is 20% of the customers and get that five X 10 X growth and bring more and more in multimillion where very high figure our numbers. So we're we're thinking we're very thoughtful about how to optimize efficiency in the sales force and how to maximize the.
The output, but happy to talk more about that later if you'd like.
That's great. Thanks.
Thanks, so much for color that's all I got thank you Ryan.
As a reminder, if you would like to ask a question. Please press Star then one.
Our next question comes from Austin call of citizens JMP. Please proceed with your question.
Hey, there. Thanks for taking the question Ron I was just wondering if maybe you could talk about what some of your conversations have been like recently with regards to AI.
And kind of what those features are adding to your platform and what how what the response has been like from customers. Thanks.
Yes, Thank you Austin.
Over the last quarter and we just mentioned that we expanded our AI assistant for Webinars and events the quarter before we mentioned, how we did that for preparing events and we said that we're going to continue to add features that will be during the event in order to offer real time recommendations and how to increase engagement with added that were.
Seeing very good acceptance for that.
We're also working on a bunch of other features that we will announce when they come out.
In addition to our in house work have worked on our accelerator program and have increased the number of customers and vendors. There we have a couple of dozen each.
I mean, that's all we're thing continued trend, but I've mentioned earlier, it's not one of these things that you would expect an export are gonna come in and say here's the amount of revenue. This is you know how much it's moving the needle for the company. It's a multi your move and were advancing there.
That works too often.
I appreciate that you still hear me.
Yep.
Okay.
Just.
Do you have an ear.
At this time.
Yep.
Thank you all move onto our next question, which is coming from the lineup Michael turn with Wells Fargo. Please proceed with your questions.
Hey, guys. This is David Unger filling in for Michael Turner. Thanks for taking the question I just wanted to see if you can.
Double click on some of the demand trends I know, we heard some comments around the geography, but I wanted to double click on what you're saying by geography anything specific in terms of vertical strength. Thank you.
Sure on the G O side, we're seeing stronger in North America, but weaker Europe, it's been consistent throughout the year and it's connected immediately to macro and the current geopolitical situation et cetera.
On the vertical side.
Not so much just a demand issue we've been as mentioned over the last couple of years focused more on the enterprise more so than eating you are needing telecom just by way of how quickly that could convert the size of the dam and how quickly we can bring about our new technologies to market to bear.
See you deploy across all these I mentioned earlier, we closed.
To that extent education opportunities in Europe.
Are the two that I mentioned that are a bit less than the focus so we're talking and all I can tell you're meeting telecom, we increased a lot of users in Europe.
<unk> conversation with a bunch of customers that are generally outside of the U S. But if I were to say given the macro situation. Most of the focus of most of the upside is North America enterprise.
Okay I appreciate that and then just one more from me can you just talk about the biggest areas of focus as it relates to drive the profitability of the business. Thank you.
Yeah. So first of all I'm very content of the improvements that we've done over the last year.
As you know first of all the last quarter. It was the second quarter in a row of adjusted EBITDA profitability in cash flow profitability, a casual ops, which is great and the year had been a massive leap forward compared to use before it's not a big surprise, because we said that we're gonna do this and we have done this in the past we've demonstrated.
And yet again, what I like is that we've done that at the same time that we have hit our revenue goals and we are still growing faster than the industry and so the reason was that we did not drop the ball and completing the big important moves that we have made in order to expand our time or our <unk> in our competitive positioning over the last few years.
So we need while we cut I wouldn't say fat, but we made sure that at the right time, we reduce what we could reduce we didn't cut muscle and we're able to move forward to continue to grow let me turn into your own to give you a bit more thoughts about profitability in areas of focus maybe I'll have a couple of words after.
So two important points first of all with regard.
I think the gross margin we are working very out in order to continue to improve anything the short and you should probably not see a significant improve.
But we will try to get a few more points here and there.
In terms of the gross margin Ron mentioned, the fact that we are going to invest starting this begging says in marketing based on the change that we see in the market.
The assumption digits will continue to change.
As mentioned we are committed by the end of the day to post both both positive adjusted EBITDA and positive cash flow from operations <unk>.
Very much appreciate that detail. Thank you.
Thank you we have reached the end of our question and answer session. So I'd like to pass the far back of which around Yacca T. L for closing remarks.
Yep. Thank you everyone for your great questions and for participating today is mentioned were feeling okay. About the here that are passed we achieved what we said that we would and at the same time that we're strengthening our capability to lead the market for it it's been a tough year. We believe there's a good macro directions that are going to improve next year with thoughtful with a guidance.
And beyond anything and everything I Wanna. Thank again, your Unger Mozzie, Rosemary partnership and and work with the company is still with US in a month ago, I had helping us and to welcome John quite excited about him joining the team a lot of great things for us to do together this year.
Thank you everybody and have a beautiful day.
Ladies and gentlemen does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.
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