Q4 2023 Kinaxis Inc Earnings Call

Operator: Ladies and gentlemen, welcome to the Kinaxis, Inc. fiscal 2023 fourth quarter results conference call. Currently, all participants are in a listen-only mode.

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Operator: Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. I'd like to remind everyone that this call is being recorded today, Thursday, February 29th, 2024. I will now turn the call over to Rick Wadsworth, Vice President of Investor Relations at Kinaxis, Inc. Please go ahead, Mr. Wadsworth.

Following the presentation, we will conduct a question and answer session instructions will be provided at that time for you to queue up for questions.

I'd like to remind everyone that this call is being recorded today Thursday February 29th 2024.

I will now turn the call over to Rick Wadsworth, Vice President of Investor Relations at <unk>, Inc. Please go ahead Mr. Wadsworth.

Rick Wadsworth: Thanks, operator. Good morning, and welcome to the Kinaxis earnings call. Today we will be discussing our fourth quarter and year-end results, which we issued after the close of markets yesterday. With me on the call are John Sicard, our President and Chief Executive Officer, and Blaine Fitzgerald, our Chief Financial Officer. Before we get started, I want to emphasize that some of the information discussed on this call is based on information as of today, February 29, 2024, and contains forward-looking statements that involve risks and uncertainties. The actual results may differ materially from those set forth in such statements.

Thanks, a lot for Ya.

Good morning, and welcome to the Internet access earnings call today, we will be discussing your order and your end results, which we issued after closing markets yesterday.

On the call or Jones card, our President and Chief Executive Officer, and playing Fitzgerald, Our Chief Financial Officer.

Where we get started I went ahead and besides that some of the information discussed in this call was based on information as of today February 20th 29, 2024 and contains forward looking statements that involve risks and uncertainty.

Actual results may differ materially from those set forth in such statements for discussion of these risks and uncertainties you should review the forward looking statements disclosure in the earnings press release as well as in Cedar pilots.

Rick Wadsworth: For a discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in the earnings press release as well as in our CDAR file. During this call, we will discuss IFRS results and non-IFRS financial measures, including adjusted EBITDA. A reconciliation between adjusted EBITDA and the corresponding IFRS result is available in our earnings press release and our MD&A, both of which can be found on the IR section of our website, Kinaxis.com, and on CDAR. Participants are advised that the webcast is live and is also being recorded for playback purposes.

During this call we will discuss Ifr's results are known for his financial measures, including adjusted EBITDA.

Reconciliation between adjusted EBITDA and the corresponding efforts result is available in our earnings press release and R. M. DNA, both of which can be found on the Irish section of our website can access dotcom.

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Participants are advised that the webcast is live in is also being recorded for playback purposes archive of the webcast will be made available on the Investor Relations section of our website. Neither of this call or the webcast archives, maybe rerecorded or otherwise reproduced or distributed without prior written written permission from can access.

Rick Wadsworth: An archive of the webcast will be made available on the Investor Relations section of our website. Neither this call nor the webcast archive may be re-recorded or otherwise reproduced or distributed without prior written permission from us. To begin our call, John will discuss the highlights of our quarter and year, as well as recent business developments, followed by Blaine, who will review our financial results and outlook. Finally, John will make some closing statements before opening the line for questions. We have a presentation to accompany today's call, which can be downloaded from the Investor Relations homepage or our website. We'll let you know when to change slides. I'll turn the call over to John. Thank you, Rick. Good morning, everyone, and thank you for joining us today.

To begin or call journal discuss the highlights of report or near as well as recent business elements, followed by Duane who will review our financial results notebook.

Finally, John will make some closing statements before opening the line for questions you.

We have a presentation to accompany today's call, which can be downloaded from the investor Relations home page on our website.

Let you know when to change sides I'll turn the call over to John.

Thank you Rick good morning, everyone and thank you for joining us today.

John Ernest Sicard: I'll be starting with slide four. Let me start by saying how proud I am of the Kinaxis team. We delivered very strong annual SaaS growth of 24%, balanced with profitability that came in above expectation. Our adjusted EBITDA margin for the full year was 18.

I'll be starting with slide for.

Let me start by saying how proud I am of the connection team delivered very strong annual <unk>, 24% balance.

Balance with profitability that came in above expectations.

Our adjusted EBITDA margin for the full year was 18%.

John Ernest Sicard: And we had record free cash flow of over $75 million, more than 70% higher than ever before. In Q4, we experienced SAS revenue growth of 19% and adjusted even to a margin of 18%, which allowed us to finish the year within all our updated guidance targets. We had a huge quarter for renewals, a testament to the incredible value our customers derived from leveraging our unique concurrency approach to managing supply chains. As one noteworthy example, iconic consumer products company Bosch was both a renewal in the quarter and a source of significant new ARR, thanks to expansion activity. Bosch confirmed its longer-term commitment to Kinaxis as the platform of choice for supply chain planning.

And we had a record free cash flow of over $75 million more than 70% higher than ever before.

In queue for [noise].

We experienced SaaS revenue growth of 19%.

And adjusted EBITDA margin of 18%.

Which allowed us to finish the year within all our updated guidance targets.

We had a huge quarter for renewals a testament to the incredible value our customers derive from leveraging our unique concurrency approach to managing supply chain.

As one noteworthy example.

Iconic consumer products company boss.

With both the renewal in the quarter and a source of significant new a R. R. Thanks to expansion activity.

Boss confirmed there are longer term commitment to can access.

As the platform of choice for supply chain planning.

John Ernest Sicard: Together, our net customer wins, expansion into the base, and renewals activity fueled a record RPO level, both in total and for the SaaS element alone. FastRPO grew 28% from the end of Q3, and its three-year CAGR is a healthy 26%, demonstrating our exciting growth over a period of time. Now moving to slide five.

Together, our customer wins expansion into the base [noise] and.

And renewals activity fueled a record arpino level.

Both in total and for the SAS element along.

That's R. P O grew 28% from the end of Q3 and.

It's three year, a caterer is a healthy 26% demonstrating are exciting growth over a period of time.

I'm moving to slide five.

John Ernest Sicard: I'm thrilled to say that we won a record number of new customers, both in Q4 and for the full year. This is an impressive accomplishment that reflects, in part, our success across some key growth strategies that I've talked about before. For example, we want a record number of mid-market customers, a growth strategy we initiated just over three years ago and which has now become a meaningful part of our business today and is creating great expansion opportunities for our future. We also want a record number of small customers in our value-added reseller channel, which is just over a year old and is ramping up quickly. In all, over 40% of our new wins this year came from our mid-market or smaller customers, including through VAR.

I'm thrilled to say that we won a record number of new customers both in queue for and for the full year.

This is an impressive accomplishment that reflects in part our success across on some key growth strategies that I've talked about before or.

For example.

We want a record number of mid market customers a growth strategy, we initiated just over three years ago and has now.

Now become a meaningful part of our business today.

And it's creating great expansion opportunities for our future.

We also want a record number of small customers through our value added reseller channel, which is just over a year old and wrapping up quickly.

It all over 40% of our new when does this year came from our mid market or smaller customers, including through bars.

John Ernest Sicard: As we've mentioned in the past... We continued our efforts to move customers into the public cloud infrastructure. And I'm happy to report that we deployed the majority of our new customers in the public cloud through 2023. In fact, in Q3 and Q4, almost all our new customers were launched from either GCP or Microsoft Azure. Given the economic backdrop in 2023, our focus was to simply win the customer. And I'm extremely pleased we did that at a record pace. On previous calls in 2023, we talked about adding customers like ExxonMobil, Volvo, and Hobby, which is trusted by the world's largest quick service restaurants to handle their supply chain management needs. To that impressive list,

As we've mentioned in the past, we continued our efforts to moving customers into the public infrastructure and.

And I'm happy to report that we deployed the majority of our new customers in the public cloud through 2023 [noise].

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In Q3, and Q4 almost all our new customers were launched from either G C P or Microsoft Asher.

Given the economic backdrop in 2023, our focus was to simply when the customer.

And I'm extremely pleased we did that at a record pace.

On previous calls in 2023.

We talked about adding customers like Exxon Mobil Volvo and hobby.

It was trusted by the world's largest quick service restaurants to handle their supply chain management needs.

To that impressive list.

John Ernest Sicard: You can now add global names like performance running leader Brooks Sports, Switzerland-based global agricultural technology giant Syngenta, which has over $30 billion in sales. France-based global pharmaceutical group Servier, whose 20,000 employees make critical cardiology, oncology, and other drugs. Italian cosmetics leader Intercoast, who provides behind-the-scenes research and innovation for some of the world's biggest makeup lines. Norm approved.

You can now add to global names like performance running leader Brooks sports.

Switzerland based global agricultural technology giant Syngenta.

Which has over $30 billion in sales.

France based global pharmaceutical group Serviette.

He was 20000 plus employees make critical cardiology oncology and other drugs.

Italian cosmetics leader Intercoastal.

We provide behind the scenes research and innovation for some of the world's biggest makeup lines.

Nor magruder.

John Ernest Sicard: And finally, Kik Consumer Products, a leading North American private brand manufacturer delivering top-tier national brand equivalent cleaners, bleach, laundry, and dish care products. Our gross customer retention rate remained at an elite level in 2023, solidly in the 95 to 100% range that we target. And our win rate against our top three competitors remained very strong, closing over 60% of the deals we pursued against them in 2023. And none of them had a winning record against us.

Create the clamps and connectors systems that keep water and other vital fluids flowing smoothly for industries.

And for Society globally.

And finally kick consumer products are leading north American private brand manufacturer delivering top tier national brand equivalents cleaners, bleach laundry and dish care products.

Our growth customer retention rate remained at an elite level of 2023 saw those solidly in the 95 to 100 per cent range that we target.

Okay now when raised against our top three competitors remained very strong closing over 60% of.

Of the deals with the pursuit against them in 2023 and.

And none of the three had a winning record against us.

John Ernest Sicard: Even with this success, I do see room for improvement as recent additions to our sales team continue to gain tenure with Kinaxis, and as we continue to offer more value through rapid response. I'm on slide 6.

Even with the success.

I do see room for improvement as recent additions to our sales team continue to gain tenure with can access.

As we continue to offer more value for rapid response.

Mm on slide six.

John Ernest Sicard: Today, we are a global leader in supply chain management, empowering businesses of all sizes to orchestrate their end-to-end supply chain network, from multi-tier strategic planning through down to the second execution and last mile delivery. New offerings that we have recently launched, like supply chain execution and Enterprise Scheduling.

Today, we are a global leader and supply chain management and power and businesses of all sizes to orchestrate, they're into and supply chain network for multi tiered strategic planning through down to the second execution at last mile delivery.

New offerings that we have recently launched.

Like supply chain execution.

Enterprise gasoline.

John Ernest Sicard: Sustainable supply chain and planning.ai offer an additional opportunity for growth in 2024 and beyond. In January, we launched AI and ML-powered capabilities tailored to help retailers manage the complexity of their operations on a massive scale, including tens of thousands of locations, countless skus, and constant promotion. Complicated Inventory Barrier

Sustainable supply chain and planning got AI offer an additional opportunity for growth in 2024 and a head.

In January we launched a I M L power capabilities tailored to help retailers manage the complexity of their operations.

Massive scale.

Including tens of thousands of locations countless skews constant promotions.

Complicated inventory variables.

John Ernest Sicard: These innovations include a brand new replenishment planning capability for optimal restock, as well as retail-specific enhancements to demand.ai and demand planning. The retail market is the largest of any we serve in terms of the number of potential customers, and we're excited to further penetrate this under supported verticals. All these innovations will help us win new customers and expand within our install base, where we now have a dedicated team focused on driving. In 2023, additions to our annual recurring revenue were split roughly 60-40 between new customers and expansion with existing. We have a massive opportunity to penetrate this rapidly growing group further, and I am pleased to see early success from this team.

These innovations include a brand new replenishment planning capability for optimal restocking as well as retail specific enhancements to demand.

And demand planning.

The retail market is the largest any we serve in terms of the number of potential customers.

We're excited to further penetrates this under supported critical.

All these innovations will help us win new customers and expand within our installed base.

Where we now have a dedicated team focused on driving results.

In 2023 <unk>.

Additions to our annual recurring revenue were split roughly 60, 40 between new customers and expansion with existing customers.

We have a massive opportunity to penetrate this rapidly growing group further and I am pleased to see early success from this team.

On to slide seven [noise].

John Ernest Sicard: I mentioned last quarter that our business development team indicated a record number of initial meetings with prospects, a stage in the funnel development prior to our type. I'm pleased to say that the team hit another all-time high in Q4, helping to drive a new all-time high for our four-quarter rolling pipeline, which is re-accelerated for the first time since early 2020. We're mindful of ongoing uncertainty in the macro environment, but we're encouraged by these green shoots of improvement. As mentioned on our last call, we have been intensifying our focus on profitability, and are in great shape to do that in 2022. And in 2023, we made important investments in sales and other functions that put Kinaxis in a much stronger position across our business. In 2024, we will take advantage of ongoing operating leverage to continue to march towards our midterm goal of 25% plus adjusted utility. I'll now turn the call over to Blaine to review the financials for the quarter and year and discuss our outlook in detail. I'll conclude with a few remarks after that. Blaine?

I mentioned last quarter that our business development team indicated a record number of initial meetings with prospects.

[noise] staged and the final development prior to our pipeline.

I'm pleased to say that the team had another all time high in queue for helping to drive a new all time high for our poor quarter willing pipeline.

Which is reaccelerated for the first time since early 2023.

We're <unk>, we're mindful of ongoing uncertainty of the macro environment, but we're encouraged by these green shoots of improvement.

As mentioned on our last call.

We have been intensifying our focus on profitability and are in great shape to do that in 2022 and in 2023, we made important [noise].

[noise] investments and.

Sales and other functions that put can access.

And a much stronger position across our business.

In 2024, we will take advantage of ongoing operating leverage to continue to market towards our mid term goal of 25 per cent plus adjusted EBITDA.

I will now turn the call over to Blaine to review the financials for the quarter and year and discuss our outlook in detail I'll conclude with a few remarks after that complaint.

Blaine Fitzgerald: Thank you, John. And good morning. As a reminder, unless noted otherwise, all figures reported on today's call are in U.S. dollars under IFRS, starting on slide eight. I'm pleased to report fourth-quarter results that delivered on our performance goals for the year. Total revenue in the fourth quarter was up 14% to $112 million, which is affected by the normal subscription term license revenue cycle. Our status revenue grew 19% to $69.9 million, and our subscription term license revenue was $2.9 million versus $9.1 million in Q4 of 2020. Subscription term licenses largely follow the normal cadence of renewals among our small group of on-premise customers, or those that have the option to move their deployments online.

Thank you John and good morning.

As a reminder, unless noted otherwise all fingers reported on today's call our U S dollars under I for us.

Starting on Friday.

I'm pleased to report fourth quarter results that delivered on our performance goals for the year.

Total revenue in the fourth quarter was up 14% to $112 million, which is affected by the normal subscription term license revenue cycle.

Are satisfactory grew 90 per cent to $69.9 million.

Subscription term license revenue with $2.9 million versus $9.1 million in Q4 2022.

Subscription term licenses largely follow the normal cadence of renewals among our small group of on premise customers are those that have the option to move their deployments opera.

Blaine Fitzgerald: Professional services activity resulted in $34.3 million in revenue for 31% growth over Q4 2020. This is a reflection of the record number of customer wins in the quarter and year. We remain focused on being a partner first when it comes to delivering professional service. But obviously, we're very pleased with this result. Maintenance and support revenue for the corridor was $4.9 million, up 12%. Fourth quarter gross profit increased 12% to $68.99.

Professional services activity resulted in $34.3 million in revenue for 31 per cent growth over Q4, 2000 trying to a reflection of the record number of customer wins and a quarter Andrea.

We remain focused on being partner first when it comes to delivering personal services, but obviously, we're very pleased with this result.

Maintenance and support revenue for the quarter was 4.9 million up 12%.

Fourth quarter gross profit increased 12% $68 $99.

Blaine Fitzgerald: Gross margin in the quarter was 62%, the same as the comparative period. Thoughtcore gross margin was 76% compared to 80% in the comparative period. Reflecting both the lower subscription term license level and the duplicative cost related to our public cloud transition. Surely, I'll talk about normalized results that adjust for these two factors. Professional services gross margin was extremely strong at 29% compared to 13% in Q4 2020 due to a favorable pricing environment and ongoing efficiencies in delivering products. Gross margin for just the Ibra was $19.7 million, for an 18% mark compared to 21% in the fourth quarter last year. Our profit in the quarter was $4 million, or $0.14 per diluted share, compared to $0.30 in Q4 last year.

Gross margin in the corner with 62 per cent the same that the comparative period.

Software gross margin with 76% compared to 80 per cent and the comparative period, reflecting both the lower subscription term license level and it just took it up costs related to a public power transition.

Surely I'll talk about Normalised results that are just for these two factors.

Professional services gross margin was extremely strong at 29% compared to 13 per cent 242000 trying to.

Due to a favorable pricing environment and ongoing efficiencies and delivering projects.

Adjusted EBITDA was $19.7 million.

Four and 18% market compared to 20, 21% in the fourth quarter of last year.

Our prophet and the quarter was $4 million or 14 cents per diluted share compared to 30 cents in queue for last year.

Blaine Fitzgerald: Again, these results were affected by the two factors I just mentioned. Cash flow from operating activities was $28 million compared to negative $2.3 million in Q4 2022. Cash, cash equivalents, and short-term investments grew to $209.3 million from $225.8 million at the end of 2022 and even up from $209 million last quarter, despite significant investments in a share bought by the Fed, which I'll discuss momentarily. Our record free cash flow for the year was $77.19, up from $6.3 million in 2022 and more than 70%, or $30 million, higher than in any previous year. The free cash flow margin was just over 18% and slightly higher than our adjusted EBITDA margin in 2020. Our goal is to deliver a trailing 12-month free cash flow margin that more closely mirrors our adjusted EBITDA margin, so we are pleased with this program. We remain highly focused on being a strongly caste-generative business. On slide nine.

These results were affected by the two factors I just mentioned.

Cash flow from operating activities was $28 million compared to negative 2.3 million in Q4 of 2022.

Cash cash equivalents and short term investments group $293 million from 225 $225.8 million at the end of 2022, and even up from $290 million last quarter. Despite significant investment interfere bye bye bye.

Which I'll discuss momentarily.

A record free cash flow for the year was $77.1 million up.

Up from $6.3 million in 2022.

More than 70% or $30 million higher than in any previous year.

The free cash flow margin was just over 18% and slightly higher than are adjusted EBIT margin in 2023.

Our goal is to deliver a tort trailing 12 month free cash flow margin about more closely mirrors are adjusted EBITDA. Martin. So we are pleased with his progress.

You mean highly focused on being a strongly cashed entered a business.

Mhm.

On slide nine R.

Blaine Fitzgerald: Our annual recurring revenue, or ARR, grew to $322 million, an increase of $18 million over Q3, which is over 60% higher than additions in any other quarter this year. Year over year, the ARR balance grew by 18%, which was less than its full potential given the cost of spending in the uncertain macro environment throughout 2023, as we've discussed throughout. Additionally, roughly 60% of our annual growth in AR came from new customers. Many software and supply chain peers rely much more on upsell activity for growth than we currently do. And that's a huge opportunity for us to have. Moving to slide 10, at quarter end, our total remaining performance obligations for RBO left 25% over the Q3 balance to a record $741 million and gained 24% from the year-ago period.

Annual recurring revenue or a R grew to $322 million.

An increase of $18 million or a Q3, which is over 60 per cent higher than the distant and any other quarter. This year.

Yeah every year the air balanced grew by 18%, which is less than his full potential giving cautious spending and then certain macro environment throughout 2023, as we've discussed throughout the year.

Significantly roughly 60% of her annual growth in air came from new customers.

Many software supply chain purist rely much more on upsell activity for growth than we currently do and that's a huge opportunity for us that.

Moving to slide 10 at quarter end, our total remaining performers obligations are RVO.

About 25 per cent over the Q3 with the balance to a record $741 million and gained 24% from the year ago period.

Blaine Fitzgerald: Of the RPO in total, 7.1 million relates to SAS, up 20% sequentially and 27% year-over-year. The three-year target for our total RPO is 25%, and 26% for our SAS RPO. I encourage you to focus on the excellent longer-term results, as quarterly results fluctuate significantly with normal renewal cycles. Our fourth quarter was characterized by both strong AR additions as well as very strong, A, B, or N for Da

Of the RPI total seminar 1 million relates to size business up 28% sequentially and 27% a year over year.

The three year Tiger are total Arco at 25 per cent and 26% for our styles are yeah.

I encourage you to focus on the excellent longer term result, as quarterly results fluctuating significantly with normal renewal cycle.

Our fourth quarter, when it's characterized by both strong era additions as well as very strong Michael.

<unk> 274 million converts to revenue in 2024.

Representing roughly 80% coverage of our phone you're satisfied at the midpoint.

Further details on our <unk> can be found in the revenue note to our financial.

Blaine Fitzgerald: $274 million converted to revenue in 2024. Representing roughly 80% coverage of our full year of SAS guidance at the, Further details on our RPO can be found in the revenue note to our financials. I will leave it to you to review our full year 2023 results in greater detail, but let me just reiterate what John said about our very strong performance. Our status growth of 24% is a standout result in an unusual year, and even after making important investments, we delivered an adjusted EBITDA margin of 18%, 4 percentage points above the midpoint of our initial guidance for the year. We also achieved record free cash flow in the year, won a record number of new customers with a 60% plus win rate against key competitors, and maintained 95% to 100% gross customers. I'd like to thank the whole Kinaxis team for such phenomenal results.

I will leave it to you to review our full year 2023 results in greater detail, but let me just reiterate withdrawn fed about our very strong performance.

Our status growth of 24% is a standup result in an unusual year and even after making important investments we delivered an adjusted EBITDA margin of 18 per cent.

Or four percentage points above the midpoint of our initial guidance for the year.

We also she'd record free cash flow and the year when a record number of new customers with a 60 per cent plus when ray against key competitors and maintained 95, two 100% gross customer attention.

I'd like to thank the whole can of 15 per session, except some result.

As we move to slide 11, we're initiating our 2024 guidance.

By far the biggest determinant of annual fast growth is the AAR growth rate in terms of the year.

As you know we publish are precisely to give you a good leading indicator of our future sales growth trend.

For example.

We ended 22 with 24% error growth and groups as revenue 24% in 2023.

The relation relationship is not always one to one leg.

But are are.

And as director of momentum is by far the most important factor.

We expect that the connection between these two metrics will only become tighter as bad as in David and ever increasing portion of error.

Blaine Fitzgerald: As we move to slide 11, we are initiating our 2024 guidance. By far, the biggest determinant of annual fast growth is the AR growth rate and turn of the year. As you know, we publish ARR precisely to give you a good leading indicator of our future status growth trend. We ended 2022 with 24% ARR growth and group sales revenue of 24% in 2023. Of course, the relationship is not always one-to-one like this, but ARR grows, and its directional momentum is by far the most important factor.

We exited 20, frankly, 2023, with 18% error and a cortland expects status revenue growth of 17% to 19% in 2024.

As John pointed out we are seeing some encouraging green suit of improvement and environment and this could start to benefit are grown for 2024.

We expect total revenue 483 million to $495 million or 13 to 16 per cent growth.

This reflects 20th 24 at the lowest part of our normal subscription term life threatening cycle for which we expect $9 million to $11 million in a year.

Roughly 60% of the amount expected in Q1.

10 per cent in Q2, and the remainder split relatively evenly over the back half of the year.

Blaine Fitzgerald: We expect that the connection between these two metrics will only become tighter as status visits an ever-increasing portion of error. We exited 2023 with 18% AR growth, and accordingly expect status revenue growth of 17 to 19% in 2024. As John pointed out, we're seeing some curtain greets of Improvement in the Environment, and this could start to benefit A.R.R.O.A.D. for 2020.

Looking further ahead subscription term license, but it should roughly double from 2024 to 2025, and then increase approximately another third from there in 2026.

We expect that gross margin of 60 to 62 per cent and adjusted EBITDA margin of 16% to 18%.

Both Martin results are affected by the normal low point of the cycle for subscription term license revenue, which carries near 100 per cent margin.

And the duplicative costs related to our public cloud transition.

With respect to Capex in 2024, we expect to invest approximately $10 million to $11 million <unk>.

Including approximately $8 million for a private hosting infrastructure.

Would expect to invest significantly less enter data centers in 2025 actually continued to work towards a public cloud first bottle.

Moving to slide 12.

Blaine Fitzgerald: We expect total revenue of $483 million to $495 million, or 13% to 16% growth. This reflects 2024 as the lowest part of our normal subscription term license revenue cycle, for which we expect $9 to $11 million in debt. Roughly 60% of the amount expected in Q1, 10% in Q2, and the remainder split relatively evenly over the back half. Looking further ahead, subscription term licenses should roughly double from 2024 to 2025 and then increase by approximately another third from there in 2020. We expect a gross margin of 60-62% and an adjusted EBITDA margin of 16-18%.

As we discussed last call, we've been gaining operating leverage and intensify our focus on profitability.

As you can see that trend continued throat 2023.

Operating expenses continues to decline as a percentage of normalized revenue.

Normally as revenue averages are subscription term license revenue over a rolling a four year period to approximate related contract terms.

In 2024, we expect this trend to continue directly.

Investment allocation will ship someone as we absorbed previous investments in our sales force and focus new investment into exciting R&D initiatives, including a I.

Oh, that's right now take a few minutes to walk through the impact on 2023 results in 24 guidance of the normal subscription term license revenue cycle at our public cloud transition.

Turning to slide 13.

As you know due to accounting rules are reported subscription term license wreck is highly variable between periods. Despite a very stable underlying business.

Aberdeen, averaging that revenue over a four year rolling timeframe as described a moment moment ago provides a better view abnormalize software gross margin and adjusted EBIT margin.

Blaine Fitzgerald: Both margin results are affected by the normal low point of the cycle for subscription term license revenue, which carries near 100% margin, and the duplicative costs related to our public cloud transition. With respect to CapEx in 2024, we expect to invest approximately $10 to $11 million, including approximately $8 million for a private hosting infrastructure. We would expect to invest significantly less in our data centers in 2025 as we continue to work towards a public cloud first. Moving to slide 12.

Argue some public cloud started modestly in 2022.

Accelerated in 2023 and will continue to expand rapidly threat 2024, and 2025 to become a default posting choices with a small amount of private hosting remaining.

In the meantime, we're entering certain public cloud migration costs and significant equipped to pick it up call a supporting to infrastructure, including public hosting fees that aren't added back with you the depreciation at the servers and our private private cloud.

The analysis on this slide estimates and apples to apples view that allows you to better compare Margaret achievements with aspirin.

On this basis for 2023 normalized adjusted EBITDA was 21.5% and you can see the separate term license in public cloud trying to come back.

Our normal life software gross margin for 2023 with 77.8 per cent.

For 2024, we expect our normalized adjusted EBITDA margin guidance would be 24 to 26 per cent.

Blaine Fitzgerald: As we discussed on our last call, we've been gaining operating leverage and intensifying our focus on profitability. As you can see, that trend continued throughout 2020. As operating expenses continue to decline as a percentage of normalized revenue... Normalized revenue averages are subscription term license revenue over a rolling four-year period to approximate related contract terms. Our investment allocations will shift somewhat as we absorb previous investments in our sales force and focus new investments into exciting R&D. Including AI. I'll now take a few minutes to walk through the impact on 2023 results and 2024 guidance of the normal subscription term license revenue cycle and our public cloud transition. Turning to slide 13.

<unk> normalized software gross margin of 70 880 per cent.

Sure.

Both our software gross margin and it's just a EBIT are moving in the right direction.

Apple's basis.

We are confident that in the next one to three years under a public lab first model, we will achieve our midterm adjusted EBITDA margin target of 25 per cent plus.

This target is based on normalized revenue to remove their year to year volatility.

Gibson term life.

On slide 14, since our queue through results call. We have been very active on our normal course, disrobed, which allows us to purchase up to five per cent of our stock are approximately 1.4 million shares.

During the three months ended December 31st 2023, we repurchased approximately 329000 shares for a total investment of roughly $36.6 million.

We are pleased with these investments.

As I reflect on my four year anniversary can access I'm extremely proud to be able to say that our customer base.

Revenue free cash flow arceo and pipeline have all more than doubled over that time.

Blaine Fitzgerald: As you know, due to accounting rules, our reported subscription term life insurrection is highly variable between periods despite a very stable underlying. Averaging that revenue over a four-year rolling time frame, as I described a moment ago, provides a better view of normalized software gross margin and adjusted even margin. Our use of public clouds started mostly in 2020, accelerated in 2023, and will continue to expand rapidly throughout 2024 and 2025 to become our default host. With a small amount of private hosting remaining, In the meantime, we are incurring certain public cloud migration costs and significant duplicative costs of supporting two infrastructures, including public hosting fees that aren't added back to EVA through depreciation, as the servers in our private cloud are. The analysis on this slide estimates an apples-to-apples view that allows you to better compare a marginal achievement with past performance. On this basis, for 2023, normalize and adjust the EBITDA by 21.5%, and you can see the separate term license and public cloud transition. Our normalized software gross margin for 2023 was $77.8 billion.

And it feels like we're going we're only getting started.

Our market is in early stages and in excellent shape we.

We have an excellent competitive when ray and elite customer retention rate.

We are addressing companies of all sizes and more vehicles than ever with more products than ever to sell.

These are the views of our long term growth engine and we are fully focused on reaccelerate growth as we move forward, even as we improve profitability.

The last four years have been fun.

But I can't wait to see what happens over the next four I'm looking forward to kicking it off in 2024 with that I'll turn the call back to John.

[noise]. Thank you blame.

I'm moving to slide 15.

I still remember in 2023 can access was recognized by Gardner and the very top right corner of their magic watching.

Physician furthest incompleteness of vision.

And perhaps even more importantly for our customers and prospects Hyatt.

Highest and our ability to execute.

We were the first and only vendor to ever achieve that distinction.

It was the ninth consecutive time, we were named leader and the Magic quadrant and it goes a long way to explaining the strong wind rates and retention rates I mentioned earlier.

Slide 16.

Wow, we are clearly and established leader. It's also true that our opportunity is just beginning.

We have more than doubled our customer base in just the past three years.

2023, being the biggest contributor yet.

Today, we serve companies that help keep more than 100 billion Keith clean each year.

Blaine Fitzgerald: For 2024, we expect our normalized adjusted EBITDA margin guidance to be 24 to 25, including a normalized software gross margin of 78 to 80%. In short, both our software gross margin and agency EBITDA are moving in the right direction, and let's compare apples to apples. We are confident that in the next one to three years under a public cloud first model, we will achieve our midterm adjusted EBITDA margin target of 25% plus. This target is based on normalized revenue to remove the year-to-year volatility of subscription term limits. On slide 14, since our Q3 results call, we have been very active on our normal courses for a bit, which allows us to purchase up to 5% of our stock, or approximately 1.4 million shares. During the three-month end of December 31, 2023, we repurchased approximately 329,000 shares for a total investment of roughly $36.6 million.

<unk> more than 35 million pets are fed nutritious meals each year.

We help caffeinated over 85% of Canadians to real quick serve coffee.

The help supply 75 per cent of all tofu products of the U S.

We help support historic human journey into space, so much more.

The market for supply chain management is in excellent shape.

And I believe it's Renaissance will continue for many years to come.

Efficient and resilient supply chains require concurrency as a foundation and <unk>.

As reflected through our many new patents.

Our advancements in applying artificial intelligence machine learning and generative AI to that foundation.

Path to what I believe will be the new gold standard.

More importantly, this new gold standard will be accessible to all manufacturers from small size to enterprise and eventually for all market verticals.

Oh Tam is growing.

And we are working hard to serve every last opportunity that presents itself.

Thank you for your ongoing interest and can access all turned the line over to the operator for Q&A.

Yeah.

If you would like to ask a question Pet star followed by the number one on your telephone keypad.

Blaine Fitzgerald: We are pleased with the... As I reflect on my four-year anniversary at Kinaxis, I'm extremely proud to be able to say that our customer base, revenue, free cash flow, RPO, and pipeline have all more than doubled over that time. And it feels like we're only getting started. Our market is in the early stages and in excellent shape. We have an excellent competitive win rate and elite customer retention. We're addressing companies of all sizes in more verticals than ever. And we have more products than ever to sell. These are the fuels of our long-term growth engine, and we are fully focused on reaccelerating growth as we move forward, even as we improve profitability. The last four years have been fun, but I can't wait to see what happens over the next four.

If you would like to remove your question press Star one again.

Your first question comes from the line of Daniel 10 with T. D. Kellen Your line is open.

Hi, good morning, really good bookings to score, but as you highlighted in the prepared remarks that also implies that the sauce or appeals 88 per cent of the 2024 Slash guide.

That implies a lower proportion of deals are expected to close in 2024 the historically.

I guess, we would have expected more deals clothing is the pipeline mature as you talked about the sales team moving up the learning curve. This year and I believe you revise your sales cycle of 12 months in the filings down from 18 months. So how do we reconcile the implied lowered deal closings when these dynamics would suggest otherwise.

John Ernest Sicard: I'm looking forward to kicking it off in 2024. With that, I'll turn the call back to John. Thank you, Blaine.

John Ernest Sicard: Moving to slide 15. As you'll remember, in 2023, Kinaxis was recognized by Gardner in the very top right corner of their magic block, position furthest in the completeness of vision. And perhaps even more importantly for our customers and prospects... We were the first and only vendor to ever achieve that distinction. It was the ninth consecutive time we were named a leader in the Magic Quadrant, and it goes a long way to explaining the strong win rates and retention rates I mentioned earlier. While we are clearly an established leader, it's also true that our opportunity is just beginning. We have more than doubled our customer base in just the past three years. With 2023 being the biggest contributor. Today, we serve companies that help keep more than 100 billion teeth clean each year. They ensure that more than 35 million pets are fed nutritious meals each year.

Yeah. Thanks Daniel.

And in a great question, you, obviously, you're referring to the fact that.

We have committed RP O for sad around 80 per cent.

[noise] I'm against what we're got into right now perhaps here is about 86%.

And we we obviously.

Don't include the termination.

Termination clauses, so any options there preterm termination clause or any renewals at her and that that number that that may can come in as well. So we we don't think that there should be a slowdown in 2024, we do think that that will continue to accelerate.

Let's see a lot of opportunities are pipeline as we mentioned that it doesn't at an all time high so right now it's just a matter of executing the way that we know how to in 2024.

Okay. Thanks, maybe some more details on the geographic on the different geographies as well.

John Ernest Sicard: We help caffeinate over 85% of Canadians through quick serve coffee, to help supply 75% of all tofu products in the U.S. We help support historic human journeys into space and so much more. The market for supply chain management is in excellent shape. And I believe its renaissance will continue for many years to come. Efficient and resilient supply chains require concurrency of the foundation, and, as reflected through our many new patents, our advancements in applying artificial intelligence, machine learning, and generative AI to that foundation are the path to what I believe will be the new gold standard. More importantly, this new gold standard will be accessible to all manufacturers.

If we look too APAC revenue declined by 17 per cent in Q4, I think it was also down 18 per cent G. Three U S growth seemed to slow to 6% are these student one time revenues in the comparable comparable periods or was there any changing customer churn any color would be appreciated. Thank you.

Overall I think.

Every every.

Every year, we have different areas of grow faster.

Faster and follow up versus other areas I think the the main thing that we've seen or the mere did extremely well in 24 and 30 is probably one of our.

Strongest years, when we've ever seen with within me.

North America I think it was a solid years, they started largest Ah Ah Ah region by far and so we don't see as much bearing from that area.

John Ernest Sicard: Small size to enterprise, and eventually for all market verticals. How TAM is growing. And we are working hard to serve every last opportunity that presents itself. Thank you for your ongoing interest in Kinaxis. I'll turn the line over to the operator for Q&A. If you would like to ask a question, press star followed by the number one on your telephone keypad.

And in APAC, we're continuing to.

Grow our presence there we have a new leader, which we are very excited about some of the opportunities that we have in front of us right now.

Thank you.

Your next question comes from the line of standards <unk> BMO capital markets. Your line is open.

Operator: If you would like to remove your question, press star 1 again. Your first question comes from the line of Daniel Chan with TD Cowan. Your line is open. Hi, good morning.

Hi, Good morning, just given deaths mid market has been ramping and the reseller channel has been ramping.

Blaine Fitzgerald: Really good bookings this quarter, but as you highlighted in the prepared remarks, it also implies that the SAS RPO is 88% of the 2024 SAS guide. I guess that implies a lower proportion of deals are expected to close in 2024 than historically. But I guess we would have expected more deals to close as the pipeline matures. You talked about the sales team moving up the learning curve this year, and I believe you revised your sales cycle of 12 months in the filings down from 18 months. So how do we reconcile the implied lower deal closings when these dynamics would suggest otherwise? Prop 0 is about 86%.

The implication is that enterprise graff has been subdued.

So if you could expand on that I get some of its macro and as you were looking to maybe better environment, but.

You know, it's I mean, our expansion from existing customers and falling at the pace you would expect in terms of new new Solwin's, our sales cycles, starting to look better and getting worse just in any color on the enterprise and then it would be helpful. Thanks.

Yeah. So you know that in 2023 I'd say.

The enterprise customer wins or roughly identical I'd say, two two sort of small to medium sized so.

Certainly we saw an uptick in small medium sized it as it relates to our.

Blaine Fitzgerald: And we obviously don't include the termination clauses, so any options that are for termination clauses or any renewals that are in that number may come in as well. So we don't think that there should be a slowdown in 2024. We do think that they'll continue to accelerate. We see a lot of opportunities. Our pipeline, as we mentioned, is at an all-time high. So right now, it's just a matter of us executing the way that we know how to in 2024. Okay, thanks. Maybe some more details on the geography, on the different geographies as well.

Is.

As it relates to our work with bars.

The enterprise market is still a massive opportunity for US you know, we mentioned before Exxon Mobil hobby.

Volvo.

In the past you know we had the biggest deal was in the enterprise account expansion in Q4.

Yeah that was the biggest.

That we had for the year, so it's still extremely healthy.

On the energy sector, we've talked about I saw on multiple I wanted to say we have.

Three maybe four of the top five in the world. So we're we're just getting started they're.

And these are these are these are companies that are turnover roughly $400 billion in revenue so they've got quite complex.

Blaine Fitzgerald: If we look to APAC, revenue declined by 17% in Q4. I think it was also down 18% in Q3. U.S. growth seemed to slow to 6%.

Supply chain and so we're not slowing down there by any stretch.

So I I don't know what the answer your question Santos I wouldn't say, there's anything peculiar about enterprise in the market today.

Blaine Fitzgerald: Are these due to one-time revenues in the comparable periods? Or was there any change in customer churn? Any color would be appreciated.

Maybe I was getting into this big we are obviously.

Two segments and we look at enterprise, there's enterprising theirs.

Enterprise.

And year over year, we have seen the large enterprise Ah slowdown compared to what we saw in 2022 and that was particularly because of the sales I cause we have attached to those particular sides.

Blaine Fitzgerald: Thank you. Overall, I think, um... Every, every, every year we have different areas that grow faster and slower versus other areas. I think that the main thing that we've seen is that EMEA did extremely well in 2023. It was probably one of the strongest years that we've ever seen with EMEA, by far. And so we don't see as much variance from that area.

Companies.

As you mentioned really well as the mid market is on fire right now and it's a group extremely well year over year enterprise per year over year, but large enterprise is really really big guys. It would take out longer getting over the over the line and some of the deals.

Blaine Fitzgerald: And in APAC, we're continuing to grow our presence there. We have a new leader, and we are very excited about some of the opportunities that we have in front of us right now. Thank you.

So just to clarify if you're looking at maybe the discrepancy between the Croft regarding for first asked revenue this year versus what you've done historically and versus your 30 per cent you know.

Longterm aspiration.

Operator: Your next question comes from the line of Thanos Moschopoulos with BMO Capital Markets. Your line is open. Hi, good morning.

Would it be primarily that's very large enterprise that would be the the main factor and then just directionally has not gotten any better or worse in recent weeks.

John Ernest Sicard: Um, just given that the mid market has been ramping and the reseller channel has been ramping, I guess the implication is that enterprise growth has been subdued. Um, so if you could expand on that, I guess some of it's macro, and as you're alluding to maybe better environments, but, Are expansions from existing customers unfolding at the pace you'd expect in terms of new initial wins? Are sales cycles starting to look better? Or are they getting worse? Just any color on the enterprise dynamic would be helpful. Thanks.

Yeah.

Uhm.

Okay.

Overall, we were going to have a different mix them, we anticipated to to get to work or we need our mid market, we need or S. N b to grow faster than an enterprising and large enterprise just because of the nature of how many customers. We have are the customer profiles, we have right now for those two sides of the customers.

Large enterprise, we expected to keep coming but they're still there a pipeline. It's just a matter of if they've been sitting here by flying longer than we had seen in 2022.

Alright, I'll just fine thanks.

Your next question comes from the line of Doug Taylor with Canaccord Genuity. Your line is open.

John Ernest Sicard: Yeah, so you know that in 2023, I'd say the enterprise customer wins were roughly identical, I'd say, to sort of small to medium size. So, you know, certainly, we saw an uptick in small to medium size as it relates to our work with BARS. The enterprise market is still a massive opportunity for us. You know, we mentioned before ExxonMobil, Hobby, and Volvo in the past. We had the biggest deal was an enterprise account expansion in Q4. And that was the biggest that we had for the year, so it's still extremely healthy. In the energy sector, we talked about Exxon Mobil. I want to say we have... 3, maybe 4 of the top 5 in the world.

Yeah. Thank you good morning, [noise] I appreciate the details you provided on slide 13 with respect to the normalization of your your cost bleeding a couple of questions here on the public cloud transition I believe last time, you had said you were.

I had a schedule can you update us on the status of the migration.

And perhaps speak to why and if it all over the course of this year, you're gonna see we're going to see the pressure from those duplicate costs start abating if at all.

Yeah, that's a good question so.

Overall I think we're we're on track and need your right. We I've taken Q2, we gotta live at a at a a stephen were migrating faster than.

Even but we would plan and what we wanted obviously, there's a there's.

As in the optimal time to do the transition and to do the migration. So that we can offload some of our costs at the right time that come from private cloud and then also turn it up on the on the public side, but there's also the optimization that you have from the.

John Ernest Sicard: So we're just getting started there, and these are companies that turn over roughly $400 billion in revenue, so they're quite complex. And so, we're not slowing down there by any stretch. So I don't, you know, to answer your question, Thanos, I wouldn't say there's anything peculiar about enterprise in the market.

The cost of that you have with either T. C. P. A reserve that we're going through a process of decreasing that unit costs and unit economics overtime.

What we've done is.

We've actually looked at a region by region and.

Blaine Fitzgerald: Maybe I'll add to this, we have obviously two segments that we look at enterprise; there's enterprise, and there's what we consider large enterprise, and year over year, we have seen the large enterprise slow down compared to what we saw in 2022, and that's particularly because of the sales cycle we have attached to those particular sizes of companies. As you mentioned really well, the mid market is on fire right now, and it grew extremely well year over year. Enterprise grew year over year, but large enterprises, those really, really big guys, it's taking a lot longer getting over the line with some of the deals. So just to clarify, if you look at maybe the discrepancy between the growth you're guiding for for SAS revenue this year versus what you've done historically and versus your 30%, you know, long-term aspiration, would it be primarily that very large enterprise, that would be the main factor? And then, just directionally, has that gotten any better or worse in recent weeks? Uh, yeah, it's good.

And we have the first region that is which should be 100% migrated over will happen in 2024 and that will be probably the APAC region.

From there we're up so you're looking at it I'm here in North America to come online as well.

But what we're trying to do as much as possible is make sure. The economics makes sense for this migration so that we can actually.

You produced a duplicate of course, but also make sure that we do that and optimize fashion.

Okay. So in that are you.

Are you, saying then that you know even with a 6% public cloud normalization that we see here for fiscal 24 that is inclusive of some you know really fun to some degree by the end of the year [laughter].

Yeah, there should be some relief some of the one time migration costs that we're seeing right now will be alleviated I think by the end of this year.

There will be all the APAC duplicative costs that will be removed and it doesn't mean that we're not still migrating North America and India. We're just not doing 100 per cent of it at this stage part of the reason we're doing that is because of technical capabilities and part of the reason is because of.

Cost effectiveness, but by the end of this year, we should see some reduction in that duplicative cost segment.

Blaine Fitzgerald: Overall, we were going to have a different mix than we anticipated to get to where we are. We need our mid-market, and we need our SMBs to grow faster than enterprise and large enterprises just because of the nature of how many customers we have or the customer profiles we have right now for those types of customers. But it's a large enterprise. We expect it to keep coming. They're still in our pipeline. It's just a matter of them being sitting in our pipeline longer than we had expected in 2020. All right, I'll pass the line.

Okay. Let me just ask a question on the professional services organization you know.

Two parts one you once again I had a pretty impressive margin result, they're almost 30 per cent I think you referred to it is extremely strong [laughter]. So I'll reiterate the question as to the sustainability of those kinds of levels and the near a medium term and then the second part you know I I think from your guidance here.

Would suggest Ah ongoing gross of your professional services are kind of in line with the the sauce.

Operator: Thanks. Your next question comes from the line of Doug Taylor with Canaccord Januti. Your line is open. Yeah, thank you. Good morning.

Revenue growth for this year I just wanted to gauge your ability and willingness to continue to expand at that same pace here for you know in the coming years.

Blaine Fitzgerald: I appreciate the detail you provided on slide 13 with respect to the normalization of your costs. Blaine, I have a couple of questions here about the public cloud transition. I believe last time you said you were ahead of schedule. Can you update us on the status of the migration and perhaps speak to when, if at all, over the course of this year, you're going to see the pressure from those duplicate costs start abating, if at all? Yeah, a good question.

Yeah.

Gain a good point, we're trying to move more and more towards partner person I think we've been saying that for the last number of years, we're trying to I I would say that we've got some exciting developments on some of the partner side that I think will help accelerate this over the next year things that we can talk about it at this stage, but we do believe there is a path for it to stop.

To reduce the amount of professional services that were taking an end to getting put that in the hands of her partners before ourselves as we move forward.

Blaine Fitzgerald: So, overall, I think we're on track and you're right. I would say in Q2, we got a little bit ahead of our skis, and we're migrating faster than... Even what we would plan and what we wanted, obviously, there's an optimal time to do the transition and to do the migration so that we can offload some of our costs at the right time that come from the private cloud and then, obviously, turn it up on the public cloud side. But there's also the optimization that you have from the cost that you have with either GCP or Azure that we are going through, obviously, a process of decreasing that unit cost and the unit economics over time. What we've done is we've actually looked at it region by region, and we have the first region that should be 100% migrated over in 2024, and that will probably be the APAC region.

And and just to double back on the on the margin question for professional services and then I'll pass the line [noise].

Sure Yeah for a margin.

Yeah, we're extremely happy coming close to 30%.

Hitting I guess, 29% for.

Quarter growth it opening our eyes to against the pricing strength that we have in place as well as the utilization of her team to make sure that we're getting the most out of them as possible.

We had a I had already or we said that I I think that the ultimate place for us to land at around 80, 20, where we have 80 per cent margins on the subscription side and 20 per cent on the P.

P S side.

At the same time, we're starting to open her eyes, particularly if there might be more Martin available on the professional services. So.

Blaine Fitzgerald: From there, we're obviously looking at EMEA and North America to come online as well, but what we're trying to do as much as possible is make sure the economics make sense for this migration so that we can obviously reduce the duplicative costs but also make sure that we do that in an optimized fashion. Okay, so in that, are you saying then that, you know, even with the 6% public cloud normalization that we see here for fiscal 24, that is inclusive of some, you know, relief to some degree by the end of the year? Yeah, there should be some relief.

We do we do think that there are still some expansion the full year is around 22% and I think there's some expansion on top of that so.

We are we are planning right now for a little bit higher margins on on that front going forward.

Thank you.

Your next question comes from the line of Paul trader with RBC capital markets. Your line is open.

Oh, Thanks, very much good morning, I just wanted to hone in on renewables you commented on the prepared remarks Super Nosey really strongly saw an R. P. L. What trends are you seeing you know across the board in terms of renewables. Now is there are typically expansion include any <unk> any change in duration and then.

Blaine Fitzgerald: Some of the one-time migration costs that we're seeing right now will be alleviated. I think by the end of this year, there will be all the APAC duplicative costs that will be removed. And it doesn't mean that we're not still migrating to North America and EMEA.

Are you are you benefiting also from any pricing changes.

Yeah, So I'm the renewal friends.

A couple of considerations. One you know it is not uncommon to hit a renewal period that has an expansion.

Blaine Fitzgerald: We're just not doing 100% of it at this stage. Part of the reason we're doing that is technical capabilities. And part of the reason is because of the cost effect. But by the end of this year, we should see some reduction in that duplicative cost segment. Okay, and let me just ask a question on the professional services organization. Two parts. One, you once again had a pretty impressive margin result there, almost 30%. I think you referred to it as extremely strong.

Component to it we certainly we certainly track dot.

And then in the fourth quarter.

We had a rather large.

Seven year renewal with big expansion.

Which is really a testament of you know a company, who absolutely doubling down on our approach them and and and basically baking in the next seven years.

With us so.

So we are seeing you know those types of those types of negotiations as I mentioned earlier is while we you know our our churn is very low renewals is north of 95 per cent 95 to 100 per cent, what we target.

Blaine Fitzgerald: So, I'll reiterate the question as to the sustainability of those kinds of levels in the near and medium term. And then, the second part, you know, I think from your guidance here would suggest ongoing growth of your professional services, kind of in line with the SAS revenue growth for this year. I just want to gauge your ability and willingness to continue to expand at that same pace here in the coming years. Yeah. Again, a good point.

I consider that to be.

Best in class and your best in class and elite you know performance.

Now you know the fourth quarter, you know in terms of that particular renewal.

We saw it coming we didn't necessarily see.

You know I'd say the magnitude of the expansion in the.

A number of years is not common to go for seven years is not common that was more common to see three five.

Blaine Fitzgerald: We are trying to move more and more towards partner-first. I think we've been saying it for the last number of years; we're trying. I would say that we've got some exciting developments on some of the partner side that I think will help accelerate this over the next year, things that we can't talk about at this stage, but we do believe there is a path forward to start to reduce the amount of professional services that we're taking on and to, again, put that in the hands of our partners before ourselves as we move. And just to double back on the margin question for professional services, and then Sure.

Indeed.

Your next question comes from the line of Stephanie Priceless CIBC. Your line is open.

Hi, good morning.

<unk> and your prepared remarks that the pipeline exited Q4 at an all time high with grocery accelerating just hoping you can dig into that statement a little bad when you think about the error in the corner away cause it's kind of flat sequentially.

Typically occasionally strong corner, how how do you think about that pipeline converting into an outgrowth in an era of growth accelerated come here.

Blaine Fitzgerald: Yeah, for margins, yeah, we're extremely happy coming close to 30% or hitting, I guess, 29% for... Our core growth is opening our eyes to, again, the pricing strength that we have in place, as well as the utilization of our team to make sure that we're getting the most out of them as possible. We have always said that I think that the ultimate place for us to land is around an 80-20, where we have 80% margins on the subscription side and 20% on the PS side. But at the same time, we're starting to open our eyes to thinking that there might be more margin available on professional services. We do think that there's still some expansion, the full year is around 22%, and I think there's some expansion on top of that, so we are planning right now for a little bit higher margins on that front going forward. Thank you.

Well, we're we're certainly feeling pretty good about our when rage against our our top three competitors. We've been tracking that you know we have what I might call repaired a few failed deployments in the process and taken some business back.

From those competitors and so that I think is boating well [noise].

For.

You know for the pipeline as as we move forward were also tracking Ah very strong Ah sales.

Experience.

We enter 2024 as well and.

And the.

Based on what we see and of course, we're listening to other vendors, what they're saying.

Ah you know about macro economics, and they just kind of condition out there certainly is not.

What I would call predictable, but.

The fact that we're looking at is that we have doubled number of our accounts in three years. We've just had two years in a row with record breaking net new wins.

Operator: Your next question comes from the line of Paul Treiber with RBC Capital Markets. Your line is open. Thanks very much and good morning.

22 is a record breaker met new ads and twenty-three beat that number. So so we're feeling pretty good about the health of the of the pipeline were feeling good about.

I'm not seeing any you know what I'd say concentration problems in the pipeline, it's healthy and all geographies and all variables.

John Ernest Sicard: Just wanted to hone in on renewals. You commented in the prepared remarks that renewals are really strong; we saw that in RPO. What trends are you seeing across the board in terms of renewals? Is there typically expansion included in it, any change in duration?

Thanks for the color and then maybe one for you just fine.

More details on that cloud normalization and thanks for the color in the <unk> I just wanted to dig into it a little bit more. So if you think about physical twenty-five you know it should we expect the overall public cloud cost come down on other costs related to the North American in the transition that could offset the end of the APAC transition.

John Ernest Sicard: And then are you benefiting from any pricing changes? Yeah, so, you know, on the renewal front, a couple of considerations. One, it is not uncommon to hit a renewal period that has an expense component to it. We certainly, we certainly track it. And then in the fourth quarter, we had a rather large.

It may be related can you just touch on a private cloud Capex you mentioned in just about 24.

Sure.

So public cloud across in in across the board is going to go up I think that's it.

John Ernest Sicard: 7-Year Renewal with Big Expansion, which is really a testament to, you know, a company who absolutely is doubling down on our approach and basically baking in their next seven years with us. So we are seeing those types of negotiations. As I mentioned earlier, our churn is very low, our renewals are north of 95%, 95 to 100% is what we target. I consider that to be, If not best-in-class, near best-in-class, and elite performance.

Definitely gonna happen in North America a.

A pack and I mean, we we still have a drawing footprint in India and a pocket. If we haven't gotten 100 per cent we are still have it.

A significant percentage that has moved over.

So we should see that go up but we were your I think where you might be asking for you're looking at is the duplicate of course is that percentage is going to be as big as it was in 2025 and the answer is no not that that should strengths specifically because of of APAC.

John Ernest Sicard: Now, you know, the fourth quarter, you know, in terms of that particular renewal, we saw it coming. We didn't necessarily see the, you know, I'd say the magnitude of the expansion and the number of years. To go for seven years is not common, and it's more common to see three to five.

Also because of some of the optimization things that we're doing with the.

Across the globe with public cloud.

On the Union economics, which we expect to decrease significantly over the next over the next year.

Operator: End. Your next question comes from the line of Stephanie Price with CIBC. Your line is open. Hi, good morning.

In terms of Capex we.

<unk>. So we we mentioned that we're investing or we should be putting around $8 million.

John Ernest Sicard: You mentioned in your prepared remarks that the pipeline exited Q4 at an all-time high with growth re-accelerating. Just hoping you can dig into that statement a little bit when you think about the ARR growth in the quarter, which was kind of flat sequentially in what's typically a seasonally strong quarter. How do you think about that pipeline converting into ARR growth and ARR growth accelerating from here? Well, we're certainly feeling pretty good about our win rates against our top three competitors.

Of Capex that are related to private cloud in 2024.

One of the reasons that we've always had this belief that we want to have a hybrid environment.

We have C D embarked with T. C. P. We have the environment with with Microsoft for sure, but we will also have a private hosting element as well because there are arguments situations, particularly because of essentially Ah.

Ah security and and and some of our aerospace and defense that don't want to be on a public cloud environment.

John Ernest Sicard: We've been tracking that, you know; we have what I might call repaired a few failed deployments in the process and taken some business back from those competitors. And so that I think is boing well for the pipeline as we move forward. We're also tracking, you know, very strong sales growth as we enter 2024 as well. And based on what we see, and of course, we're listening to other vendors and what they're saying about macroeconomics and the condition out there, certainly it's not what I would call predictable, but the facts that we're looking at are that we have doubled the number of our accounts in three years. 22 is a record breaker, and that new ad in 23 beats that number.

Wherever venue have to keep it on our own private cloud until we we do have some investments that we have to maintain over time interesting happens that's coming due in 2024.

I expect your appropriate smaller portion in 2025.

But it'll be somebody will have to maintain going forward, but as a percentage of our total revenue it will be a smaller portion of as we grow.

Okay. Thanks for the color.

Your next question comes from line as Kevin Christian Rodney with Scotiabank. Your line is open.

Good morning, Uhm again on the a R. R. It's my it's my actually look at it on an accident Max Payne since it looks like it picked up slightly from 17 to 18 sort of went Grove that and then more bigger picture question actually that I know that <unk>, that's sort of blend in the term and the <unk>.

John Ernest Sicard: And so we're feeling pretty good about the health of the pipeline. We're feeling good about not seeing any, you know what I'd say, concentration problems in the pipeline. It's healthy in all geographies and all areas. Thanks for the color.

18 per cent the N D ear on air or can you give us a sense of what the <unk> are are corrupt would've been.

Blaine Fitzgerald: And then, Blaine, maybe one for you, just on a little bit more details around that cloud normalization, and thanks for the color on the slide there. I just wanted to dig into it a little bit more. So, if you think about fiscal 25, should we expect the overall public cloud costs to come down, or are there other costs related to the North American EMEA transition that could offset the end of the APAC transition? And maybe related, can you just touch on that private cloud CAVX you mentioned in fiscal 24? Sure.

Yeah it'd be great.

Couple of it and in fact.

If you look closely it is a slight record in our net are are that he would see in terms of what we had in queue for it almost looks like it's the same as what we had Q3 of 2022, but.

Technically we're we're slightly ahead.

But we don't break out the the the <unk> versus the term life is portion of Arab but I can tell you that the term life is.

A much smaller piece of that total amount less than 10%.

Blaine Fitzgerald: So public cloud costs across the board are going to go up. I think that's definitely going to happen in North America, APAC, and EMEA. We still have a growing footprint in EMEA and APAC. If we haven't gotten 100%, we are still having a significant percentage that has moved over. So we should see that go up, but I think what you might be asking for, and what you're looking at is duplic

It's it's very it's less than 10% of your area.

Yeah.

They probably <unk> excuse me.

Hi, I'm just trying to think about how do we think about sort of.

You know revenue.

Sort of <unk> have you had any <unk>.

Q1, I know you've given us the guide for 17 at 19 for the ear Bud stocks on the starting point for <unk>.

Mhm.

We don't give guidance for yeah.

Blaine Fitzgerald: Is that percentage going to be as big as it was in 2025? The answer is no, that should shrink, specifically because of APAC, but also because of some of the optimization things that we're doing with, I guess, across the globe with public cloud on unit economics, which we expect to decrease significantly over the next year. In terms of CapEx... We mentioned that we're investing, or should be putting around $8 million of CapEx that is related to private cloud in 2024. One of the reasons is that we've always had this belief that we want to have a hybrid environment. We have the environment with GCP, we have the environment with Microsoft Azure, but we will also have that private hosting element as well, because there are going to be some situations, particularly because of, essentially.

It's it's yeah, we we don't we don't provide guidance for for Q1, we're feeling.

Confidence in the full year and in that we should be able to achieve our guidance.

Okay got it no no no fair enough and it's another one for me.

<unk> you mentioned, 60% is that gotten better.

You know have that trending and if you. If you are losing against those three what are sort of some of the key reasons for why that may be the case.

Yeah. It is getting better I think you know as I. Just recently mentioned in fact, we we've been engaged in repairing some.

Challenges with our competitors and coming into repair there was those those deployments and we've been doing quite well in in in the winter right as well.

Blaine Fitzgerald: Security and some of our aerospace and defense systems that don't want to be on a public cloud environment, where we're going to have to keep it on our own private cloud. And so we do have some investments that we have to maintain over time. It just happens that it's coming due in 2024.

You know in some cases you know we are you know and this is a situation where we might be in a vertical that blue yonder has a stronger presence in.

Oh, we're not all equally strong and and every market vertical we're not equally strong with every use case.

And so I'd say you know if if there is any challenge.

Blaine Fitzgerald: I expect there will probably be a smaller portion in 2025, but it will be something we'll have to maintain going forward. But as a percentage of our total revenue, it will be a smaller portion as we grow. Okay, thanks for the color.

And again you know.

R R when rates have been north of 60%.

If there isn't a challenge we might see it in a market segment, where it's a little more Nathan for us and it's a little more mature.

The same you know could be true in situations where use cases.

Operator: Your next question comes from the line of Kevin Krishnaratne with Scotiabank. Your line is open. Hey there, good morning.

Are a little more Nathan for us.

And very mature for a particular competitive as it relates to S. A P.

Blaine Fitzgerald: Again, on the ARR, if I actually look at it on an XFX basis, it looks like it ticked up slightly from 17 to 18, sort of what drove that. And then a bigger picture question, actually, I know that that ARR growth does sort of blend in with the term and the SAS, so if you did 18% at the end of the year on ARR, can you give us a sense of what the SAS ARR growth would have been? Yeah, it has picked up a little bit, in fact. If you look closely, it is a slight record in our net ARR that you would see in terms of what we had in Q4. It almost looks like it's the same as what we had in Q3 of 2022, but technically, we're slightly ahead. But we don't break out the FAS portion versus the term license portion of AR, but I can tell you that the term license is a much smaller piece of that total amount, less than 10%. It's less than 10% of your ARR.

They've been on the president.

For as long as I've been here and and it's it's been decades, they're the incumbent and so.

And the other side of the equation that we will see.

As you know losing to do nothing.

Where somebody says I'm, just going to stay the course with what I own and not not make any further investments this year.

Interestingly, though.

You know even in the current pipeline, we're seeing a very similar situation where somebody made that.

That choice and the Lifesciences space three years ago.

And are now coming back to us and and you know much of that is I think the reflection that Ah continuing to leverage legacy approaches.

Wow, one might say that's economically.

Sound, it's it's certainly a challenge as it relates to building a it's.

I'd say, it's sustainable deficient and resilience supply chain and so but that's how I would provide color on that on that question. It's in some cases, you know competitors that are stronger in particular vertical in some cases.

Blaine Fitzgerald: Yeah, got it, but probably pacing a bit higher. I'm just trying to think about how we think about sort of the SaaS revenue set point sort of as you head into Q1. I know you've given us the guide for 17 to 19 for the year, but just thoughts on the starting point for us in Q1. We don't give guidance for Q1. We're feeling confident about the full year and that we should be able to achieve our guidance. Okay, I got it. No, no, no, fair enough.

More so S. A P wherever we'll see an account do nothing.

Got it thanks for that I, just wanted to slip one last one and I didn't see <unk>. What are you guys still committed to the 30 per cent sash growth outlook longer Kerman 35 per cent EBITDA margin. Thanks.

Yeah, so for.

Let's just go back to you I think you said longer term we gave me.

Midterm outlook for growth of 30 per cent.

John Ernest Sicard: And this is another one for me, just, on the other competitive win weight rates, you mentioned 60%. Has that gotten better? You know, how's that trending? And if you are losing against those three, what are sort of some of the key reasons why that may be the case?

Last year, and we all <unk> to 25% EBIT margin so.

Talk about a 30 per cent first at this stage I will say that the math has changed from <unk> because of 2023 and if you don't see it in our next two years.

John Ernest Sicard: Yeah, it is getting better. I think, you know, as I just recently mentioned, in fact, we've been engaged in repairing some challenges with our competitors and coming in to repair those deployments, and we've been doing quite well in the win rate as well. You know, in some cases, we are, you know, in a situation where we might be in a vertical that Blue Yonder has a stronger presence. We're not all equally strong in every market vertical. We're not equally strong in every use case, and so I'd say, you know, if there is any challenge. And again, you know, our win rates have been north of 60%.

But as you rightly pointed out is that the civil target for US absolutely. We think that we can we can get there for all the reason that we talked about on the on the the call at the great retention rate. The fact that we have a loyal customers that are driving a committed R. P. O. That's the highest it's ever been.

We think that we are in a position that with our new modules with the new verticals, we're going into that it is something that we have to have a target America, because we know it's it's capable mm.

But I will say in the next two years.

I don't have a site to 30 per cent at this stage.

John Ernest Sicard: If there isn't a challenge, we might see it in a market segment where it's a little more nascent for us, and it's a little more mature for them. The same, you know, could be true in situations where use cases are a little more nascent for us and very mature for a particular competitor. As it relates to SAP, they've been omnipresent. For as long as I've been here, and it's been decades, they're the incumbent, and so, you know, the other side of the equation that we will see... is, you know, losing to do nothing, where somebody says, I'm just going to stay the course with what I own and not make any further investments this year. Interestingly, though,

And the 25 per cent of just to keep it a absolutely we think that we're we're all that we think we're gonna.

Gonna do it in the next one to three years and that it will be sustainable over a long term after that I think as you mentioned do we think we can get up to 30 and 35%. We do think that the the long term targets similar to wherever putting that status revenue growth number of 30 per cent as well.

Okay. Thanks appreciate the color.

Your next question comes from the line of Richard C with National Bank Financial Your line is open.

John Ernest Sicard: You know, even in the current pipeline, we're seeing a very similar situation where somebody made that choice in the life sciences space three years ago.

Yes. Thanks, I was just wondering if you guys could elaborate a bit more in terms of what's holding back. These large enterprise deals is just macro or is there. Some other reason mainly because [noise] I think you talked about sort of until the last question sort of seeing of course towards the sort of accelerating growth and now that seems to be the.

John Ernest Sicard: And are now coming back to us, and you know, much of that is, I think, the reflection that continuing to leverage legacy approaches. Well, one might say that economically... it's certainly a challenge as it relates to building a sustainable, efficient, and resilient supply chain. And so, but that's how I would provide color on that question. In some cases, you know, competitors that are stronger in a particular vertical. In some cases, especially SAP, where we'll see an account do not. Got it. No, thanks for that. I just want to flip one last one in.

Culprit in terms of the moderating growth. So just really trying to understand you know what's happening on that large enterprise side.

Yeah. So so Richard I'd say, a couple of things one you know I'm gonna rear rear iterate, what I've I've said past calls and we continue to see this.

Blaine Fitzgerald: I didn't see it in the deck, but are you guys still committed to the 30% SaaS growth outlook longer term and 35% EBITDA margin? Thanks. Yeah, so for, let's just go back to, I think you said longer term. We gave a midterm outlook for status growth of 30%. [inaudible] But, as you rightly pointed out, is that still a target for us? Absolutely, we think that we can get there. For all the reasons that we talked about on the call, that great retention rate, the fact that we have these loyal customers that are driving a committed RPO that's the highest it's ever been, we think that we are in a position that, with our new modules, with the new verticals we're going into, that it is something that we have to have as a target up there because we know it

And you know one of the larger deals for the fourth quarter.

Which felt quite assured Ah was delayed as a result of.

C E O and board level signatures that were required and those types of delays it appears that large enterprise.

That is more calm.

We're seeing that more common.

For the larger an extremely large enterprises and and I can maybe surmise that cash preservation.

You know reaction, let's just say by those by those accounts.

And certainly there's competition for dollars.

In large enterprise. So that's one of the one of the challenges were saying the other.

Less so.

A situation, where you know we're not getting those deals across the line but.

But they're getting smaller people are taking a bite sized chunks and.

Blaine Fitzgerald: But I will say in the next two years, I don't have a site to 30% at this date. And the 25% adjusted EBITDA, absolutely, we think that we're on that path. We think we're going to do it in the next one to three years and that it will be sustainable over the long term. After that, I think, as you mentioned, do we think we can get up to 30% and 35%? We do think that's a long-term target, similar to where we're putting that status revenue growth number at 35%. Okay, thanks. I appreciate the color.

Paying for their journey as they go.

And that's that's another trend that we've seen even in you know what I'd say the ultra high.

Enterprise now interestingly and this has happened multiple times.

It happened in queue for where Ah following very successful deployment with you know extremely large enterprise the expansion comes in.

You know at the size that we would have expected in a hole in the past. So so in some cases, we were seeing a delay in the expansion people are are starting their projects and a much smaller footprint.

Proving it out.

Operator: Your next question comes from the line of Richard Tse with National Bank Financial. Your line is open. Yes, thanks. I was just wondering if you guys could elaborate a bit more in terms of what's holding back these large enterprise deals. Is it just macro? Or is there some other reason?

And if we get to that proof point the expansions bring those enterprises back to there.

I'll call her full potential.

Okay and so when it comes with a pipeline can you made me comment about the mix between March and then mid market versus small.

It's it hasn't really.

John Ernest Sicard: Mainly because I think you talked about sort of the last question, sort of seeing a course towards this sort of accelerating growth, and now that seems to be the culprit in terms of the moderating growth. So just really trying to understand, you know, what's happening on that large enterprise side. Yeah, so Richard, I'd say a couple of things.

Changed that much as it relates to our Ah when rates you know approximately 50 per cent of our wins, where large enterprises 50 per cent were small and medium.

Barr program now has.

30, I believe 30 partners.

You know don't quote me on it precisely that number but it's it's close enough.

Approximately 30, and we're adding more these are these.

These are third parties and sellers and geographies that we're not in our survey serving a tab that we're not going after directly [noise].

John Ernest Sicard: One, you know, I'm going to reiterate what I've said in past calls, and we continue to see this. And you know, one of the larger deals in the fourth quarter, which felt quite assured, was delayed as a result of the CEO and board level signatures that were required and those types of delays. It appears, you know, that large enterprises that this is more common. We're seeing that more common for the larger and extremely large enterprises, and I can maybe surmise that it's cash preservation, a reaction, let's just say, by those accounts. And certainly, there's competition for dollars in large enterprises. So that's one of the, you know, one of the challenges we're seeing. The other...

So I think we'll see.

The mix of nephew wins will be grabbing land you know whoopi grabbing land you know through those through those mechanisms, but we still have a very healthy pipeline of enterprise deals that you'll you'll hear about throughout the year.

Okay, and just one last one for me it made a lot of organizational changes I think over the past call at 12 months, especially on the sales side. So when it comes collectively those changes.

Where do you think you are in terms of your peak productivity or in terms of where you want that group to be are you three quarters of the way there in 90 per cent. They're just trying to understand you know what point of scale you're out there.

John Ernest Sicard: It's less of a situation where we're not getting those deals across the line, but they're getting smaller. People are taking bite-sized chunks and paying for their journey as they go. And that's another trend that we've seen even in, you know, what I'd call the ultra high. Now, interestingly, and this has happened multiple times, it happened in Q4 where, following very successful deployments with, you know, extremely large enterprises, the expansion comes in at, you know, at the size that we would have expected in the whole in the past. So, in some cases, we're seeing a delay in the expansion. People are starting their projects in a much smaller footprint, proving it out. And if we get to that proof point, the expansions bring those enterprises back to their, We're all called folk. Okay, and so when it comes to the pipeline, can you maybe comment about the mix between March and... It hasn't really changed that much as it relates to our win rates.

Well you know like any.

Like any business you know I'm I'm always looking for operational efficiency in some cases, we have individuals that are you know that have planned retirements and things of that nature. So that's not uncommon.

And certainly we look you know at organizational structure for me anyway, I think about the next three to five years and they you know adjustments based on based on that thesis. So you know I don't I don't think there's there's anything really to call out other than normal normal normal normal course.

Business operations.

Okay.

A little bit of extra color on I I I I think what are the other things you were asking about it. So we added around 29% a year over year growth in sales and marketing.

And a large reason for that was because we increase our head count.

I'm a sales team at the back half of 2022 in the first half of 2023, and what we're seeing obviously used to getting to that 18 months.

Range, which is where our account exactly good extremely productive there are three and a half times more productive for somebody there's less than 12 months as an example.

John Ernest Sicard: Approximately 50% of our wins were large enterprises, and 50% were small and medium. Our VAR program now has... 30, I believe, 30 partners. Don't quote me on precisely that number, but it's close enough, approximately 30, and we're adding more.

And we've gone through a process of maturing and getting that tenured H E in place over the past year, and so we're expecting to see higher productivity from that team.

John Ernest Sicard: These are third-party resellers in geographies that we're not in, serving a TAM that we're not going after directly. So I think we'll see, as a mix of net new wind, we'll be grabbing land through those mechanisms. Okay. And just one last one for me.

As we go into 2024 as more and more the reach that 18 months range.

Okay got it thank you.

Your next question comes from line of Christians grow with a capital your line is open.

John Ernest Sicard: You've made a lot of organizational changes, I think, over the past, call it 12 months, especially on the sales side. What do you think you are in terms of... productivity? 34 of the way there, 90% there, just trying to understand. Well, you know, like any

Hi, good morning.

Could you comment on your typical expansion motion within your customer sometimes they sign on maybe for the last thing they would've been the past to get going so are you off selling capabilities.

John Ernest Sicard: Like any business, you know, I'm always looking for operational efficiency. In some cases, we have individuals that are, you know, that have planned retirements and things of that nature. So that's not uncommon.

So geography overtime homes that expansion accurate luck on average.

Yeah. The most typical is geography's, especially for large enterprises, it's not uncommon for them to tackle the use case focused on a geography.

John Ernest Sicard: And certainly, we look, you know, at organizational structure. For me, anyway, I think about the next three to five years and make, you know, adjustments based on that assumption. So, you know, I don't think there's anything really to call out other than normal, normal, normal, a business operation. I think one of the other things you were asking about is, we have around 29% year-over-year growth in sales and marketing. And a large reason for that was because we increased our headcount on the sales team in the back half of 2022 and the first half of 2023. And what we're seeing, obviously, is that we get into that 18-month range, which is where our account execs become extremely productive. They're three and a half times more productive than someone who's less than 12 months from taking this exam.

Excuse me.

Build a a build up a blueprint and then rinse and repeat and so for us that Ah geographic expansion leads to both.

You know two dimensions worth of growth, let's just say, but certainly on on on user accounts and things of that nature.

And and so that's I I would I would say that the most typical that we would see it is also for companies that are more mature geographically, where they they have a foundation across their entire enterprise then they'll look to expand different use cases, they may start with sales and operations planning for example.

And start moving into inventory optimization or other components the business. After the fact, so it's it's a bit of a mixed bag there with the one caveat that most of it is geographic.

Okay. That's helpful.

Then plenty of cash on the balance sheets buybacks are used to capital D.

<unk> what are your thoughts on M&A.

Appetite <unk>, let me see what can I tell you I'll look for 2024.

Blaine Fitzgerald: And we've gone through a process of maturing and getting that tenured AE in place over the past year. And so we're expecting to see higher productivity from that. As we go into 2024, as more and more of them reach that 18-month, Okay, got it. Thank you.

Oh and does the right circumstances.

I would open we have a new head of corporate development who's been with us for about a year now.

Obviously, you have helped me pipeline of opportunities that we've been looking for.

Hopefully as I mean.

Operator: Your next question comes from the line of Christian Sgro with eight capital. Your line is open. Hi, good morning.

Good and thoughtful company, where we're very picky about what we what we want or need to meet the needs of our product and.

John Ernest Sicard: Could you comment on your typical expansion motion with a newer customer? Sometimes they sign on, maybe for less than they would have in the past to get going. So are you upselling capabilities? your states or geographies over time? How does that expansion effort look on average? Yeah, the most typical is geography.

We don't want to have somebody not we're acquiring practical that obviously.

We also are company that's is trying to grow our profitability. So I don't want to have anything that's like a separate not stand in the way of us getting too.

About 25% adjusted EBITDA mid term targets, it's we we.

We know when she's in the next one to three years. So if there's going to be somebody who could disrupt that that's something that we're not going to be looking at.

John Ernest Sicard: You know, especially for large enterprises, it's not uncommon for them to tackle a use case, focus on a geography, excuse me, build a blueprint, and then rinse and repeat. And so for us, that geographic expansion leads to both, you know, two dimensions of growth, let's just say, but certainly on user counts and things of that nature. And so that's, I would say, the most typical that we would see.

But.

Put it directly.

Cash will be used for.

For now and one of two ways, we're going to continue to look for how many opportunities that makes sense for us.

But also we ever normal course issuer bid we're gonna continue to.

<unk> stock when it makes sense and.

We have a lot of room to your to do that and the nice thing about not for I think for all the.

John Ernest Sicard: It is also for companies that are more mature geographically, where they have a foundation across their entire enterprise, then they'll look to expand different use cases. They may start with sales and operations planning, for example, and start moving into inventory optimization or other components of the business after the fact. So it's a bit of a mixed bag there with the one caveat that most of it is geographic. Okay, that's helpful.

Investors listening on is a 2020.

2023, we actually covered all of our stock based compensation, we had with her.

With their employees based on that.

By about how we got the place we're going to continue to do that and we think we're we're a healthier using our capital a place domesticate them.

I saw a hopeful color thanks for taking my questions.

Due to time constraints, we will need to limit the questions to one each to your next question comes from the line of <unk> with Stifel. Your line is open.

Blaine Fitzgerald: And then plenty of cash on the balance sheet. The buybacks are used as capital this year. But what are your thoughts on M&A, your appetite for M&A as you look at your outlook for 2024? Yeah, under the right circumstances, M&A is open. We have a new Head of Corporate Development who's been here with us for about a year now. Obviously, we have a healthy pipeline of opportunities that we've been looking for. But hopefully, there's a need for good, thoughtful company. We're very picky about what we want.

Good morning, and thanks for taking my question just wanted to touch on expansions you know just give them the record number of customer wins to date, how much of the expansion opportunity you see ahead in the near term is that is contractual versus not and and how do you see the the bookings mix.

Blaine Fitzgerald: It needs to meet the needs of our product. We don't want to have something that we're acquiring technical debt on. We're also a company that is trying to grow our profitability, and so I don't want to have anything that's going to stand in the way of us getting to that 25%. To keep it a midterm target that we know we can achieve in the next one to three years. So if there's going to be something that can disrupt that, it's something that we're not going to be looking at.

Of expansions vs net new evolving in the coming quarters. Just curious if this is gonna get to a 50 50 ratio or a may skew two expansions overtime.

Yeah, Yeah totally obsolete, we're at a 60 40 ratio right now which.

Alright, I would love to say about 60 40 ratio as long as we can.

Blaine Fitzgerald: But, to put it directly, that cash will be used, for now, in one of two ways. We're going to continue to look for M&A opportunities that make sense for us. But also, we have a normal course issue that we are going to continue to buy stock when it makes sense. We have a lot of room to do that, and the nice thing about that for investors listening in is that, for 2020-2023, we actually covered all of our stock-based compensation we had with our The Bulletproof Executive 2013, buyback that we had in place. We're going to continue to do that, and we think we're helpfully using our capital in place for that. That's all very helpful, Colin.

As long as the total number keeps on drawing.

I think it will start training towards a 50 50 as you mentioned over the next next year or so.

Obviously, a lot of opportunities, we see coming from expansion deals have.

My short or sales cycle and they flow through realized a lot quicker, obviously, because we're not generally going through a situation where.

We're not going through a situation, where we're against a competitor.

When you look at our peers that we we we go again a lot of them have two.

Two thirds of their.

Those are coming through expansion.

It's I I kind of look at them almost enviously, because I know how to be impacted us on our on our bottom line and I know that somebody that's in our future, but we are trying to be as patient as possible make by making sure that we get as much land as we can.

Blaine Fitzgerald: Thank you for taking my question. Due to time constraints, we will need to limit the questions to one each. Your next question comes from the line of Suthan Sukumar with Stiefel.

Doesn't stop us from saying, we need to start that that Ah that role of getting as many of our installed base customers.

Operator: Your line is open. Good morning, and thanks for taking my question. I just wanted to touch on expansions. You know, given the record number of customer wins to date, how much of the expansion opportunity you see ahead in the near term is contractual versus not? And how do you see the bookings going?

Expanding and Upselling cross selling them in any fashion, we can to to get them in the door to to help them out really driving thought it'd be neat within their own by chance.

[noise].

Your next question comes from the line of Mark Skip Hell with Luke capital market. Your line is open.

Blaine Fitzgerald: of expansions versus net new evolving in the coming quarters. Just curious if it's going to get to a 50-50 ratio or may skew to expansions over time. Yeah, yeah, so obviously we're at a 60-40 ratio right now, which...

Hi, Thank you for taking my question John just building on an earlier question about 18 to 24 months ago. You know the company expanded on the extent of sales capacity pretty meaningfully to drive for the growth and given the moderating a our our growth in.

Blaine Fitzgerald: I would love to stay at a 60-40 ratio as long as we can, as long as the total number keeps on growing. But I think it will start trending towards a 50-50, as you mentioned, over the next year or so.

Revenue growth I was wondering if you could.

Blaine Fitzgerald: Obviously, a lot of opportunities we see that come in from expansion deals have a much shorter sales cycle, and they flow through a lot quicker, obviously, because we're not generally going through a situation where we're against a competitor, but when we look at our peers that we compete with, we see that they are. The details are coming to your... And I kind of look at them almost enviously because I know how the impact is on our bottom line and I know that's something that's in our future, but we are trying to be as patient as possible by making sure that we get as much land as we can. But that doesn't stop us from saying we need to start that role of getting as many of our install-based customers, expanding and upselling, and cross-selling in any fashion we can. Your next question comes from Mark Schappel with Loop Capital Markets. Your line is open.

Just kind of comment on what your plans are with respect to a sales capacity coming here. So yeah. So.

So two things that I would say you know what I think about expansion I think about it two ways obviously.

Fantastic if you can get both but there's certainly the sash revenue growth that we're looking for but there's also that new accounts to make sure that we're building a strong base to expand it.

And as I said in the script.

You know 2023 was about winning customers eliminating all friction the way I've described it to sales is you have to make it irresponsible for someone to choose anyone but us.

And create conditions, where that can be true.

Knowing in advance what happens when you win a logo great. Thanks, you have is Blaine said.

John Ernest Sicard: Hi, John, just building on an earlier question, about 18 to 24 months ago, you know, the company expanded on or expanded sales capacity pretty meaningfully to drive further growth, and given the moderating ARR growth and SAS revenue growth, I was wondering if you could just kind of comment on what your plans are with respect to sales capacity in the coming year or so? [inaudible] So two things I would say, you know, when I think about expansion, I think about it two ways. It's fantastic if you can get both, but there's certainly the SAS revenue growth that we're looking for, but there's also net new accounts to make sure that we're building a strong base to expand on. And as I said in the script... Uh, you know, 2023 was about winning custody. Eliminating all friction.

You have an account that you can upsell into much simpler than landing it for the first time.

It's a part of our investment in in sales and and you know the training and everything that we've done over the last couple of years.

Well they yielded exactly what I might've hole.

Sure more sauce revenue would've been phenomenal, but we have more than doubled the number of counts.

Had to record breaking years in a row that new names that we came out farming to one of the investments. We made themselves was to build out a team and an executive that is solely responsible you know for serving the base. So [noise] I'm feeling pretty good about the decisions that we made in the past about about sales.

And is blamed you said I think you know.

When we do our work here in the next couple of years, you'll see a move.

John Ernest Sicard: The way I describe it in sales is you have to make it irresponsible for someone to choose anyone but us and create the conditions where that can be true. Knowing in advance what happens when you win a logo, great things. You have, as Blaine said, you have an account that you can upsell much simpler than, you know, landing it for the first time. And so part of our investment in sales and, you know, the training, everything that we've done over the last couple of years, has yielded exactly what I might have hoped. Sure, more SaaS revenue would have been phenomenal, but we've more than doubled the number of accounts. We've had two record-breaking years in a row of net new names that we can now farm into. One of the investments we made in sales was to build out a team and an executive that is solely responsible for serving the base.

Move to perhaps more of a 50 50 split between net new and and what is what is being farmed from from the net new accounts that were winning every year.

Your next question comes from the line of Martin Toner with ATB capital markets. Your line is open.

[noise]. Thanks, so much good morning, gentlemen, quick question on 2025, and the S. T L a cycle.

You're pointing out and slide 13 that.

<unk> margins are being impacted by public cloud normalization is the can we expect a normal cadence four S. T L in 2025, which would.

And you know what that will that create a shot in the arm for.

For emergency.

Yeah, 2025, as I talk about in a script, we're expecting it to double.

John Ernest Sicard: So I'm feeling pretty good about the decisions that we made in the past about sales, and, you know, when we do our work here in the next couple of years, you'll see a move to perhaps more of a 50-50 split between Net New and what is being farmed from the Net New accounts that we win every year. Your next question comes from the line of Martin Toner with ATB Capital Markets. Your line is open. Thanks so much. Good morning, gentlemen.

Yeah sure go from.

We we also had mentioned nine to 11, we'd expect us to double in 2025, and then increase approximately another third in 2026.

And so that that should put us closer to either normalized.

Total revenue, but we would expect.

And will you'd have to see if we do if you don't have that same slide.

And the presentation that shows the normalized EBIT you should expect the F. T L line to be closer to zero.

Blaine Fitzgerald: Quick question on 2025 and the STL cycle. You're pointing out in slide 13 that EBITDA margins are being impacted by public cloud normalization. Can we expect a normal cadence for STL in 2025, which would, and you know, would that create a shot in the arm for margins? Yeah, 2035, as I talked about in the script, we're expecting it to double, so STLs should go from, We obviously mentioned 9-11. We expect it to double in 2025 and then increase approximately by a third in 2026.

There are no further questions at this time I will now turn the call back over to Rick Wadsworth for closing remarks.

Great. Thank you operator, and thank you everyone for participating on stage call. We appreciate your questions as always and your ongoing interest in support of connections. We look forward to speaking with you again, when we report for first quarter results Bye for now.

This concludes today's call you may now disconnect.

Please wait the conference will begin shortly.

[music].

Blaine Fitzgerald: And so that should put us closer to the normalized total revenue that we would expect, and we'll use that to see if we have the same slide that I had in the presentation that shows the normalized alphabeta, you should expect the FTL line to be closer to zero. There are no further questions at this time. I will now turn the call back over to Rick Wadsworth for closing remarks. All right. Thank you, Operator, and thank you, everyone, for participating in today's call. We appreciate your questions, as always, and your ongoing interest in the support of Kinaxis.

Rick Wadsworth: We look forward to speaking with you again when we report our first quarter results. Bye for now. This concludes today's call. You may now disconnect.