Q4 2024 Zuora Inc Earnings Call

Operator: Please wait; the conference will begin shortly. Good afternoon.

Please wait the conference will begin shortly.

[music].

Rob: My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Zuora fourth quarter fiscal year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Rob: Good afternoon, My name is Rob and I will be your conference operator today at this time I would like to welcome everyone to these or a fourth quarter fiscal year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers'.

Rob: After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Luana Wolk, Vice President, Investor Relations, you may begin your conference. Thank you.

Rob: There will be a question and answer session if you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again Presti Star one. Thank you want to walk Vice Pres.

Luana Wolk: Good afternoon, and welcome to Zuora's fourth quarter fiscal 2024 earnings conference call. On the call, we have Tien Tzuo, Zuora's founder and chief executive officer, and Todd McElhatton, Zuora's chief financial officer. On the call, we have Tien Tzuo, Zuora's founder and chief executive officer, and Todd McElhatton, Zuora's chief financial officer.

Esther Relations: Esther Relations you may begin your conference.

Esther Relations: Thank you good afternoon, and welcome to the fourth quarter of fiscal 'twenty 'twenty four earnings conference call.

Speaker Change: On the call we have changed though.

Chang: Founder and Chief Executive Officer.

Chang: Todd Mcelhatton doors, Chief Financial Officer.

Luana Wolk: Robbie Trauber, our President and Chief Revenue Officer, will be joining us for the Q&A session. During today's call, we will make statements that represent our expectations and beliefs concerning future events that may be considered forward-looking under federal securities law. These statements reflect our view only as of today and should not be relied upon as representative of our views as of any subsequent date.

Chang: Rob <unk>, President and Chief revenue officer will be joining us for the Q&A session.

Chang: Today's call, we will make statements that represent our expectations and beliefs concerning future events that may be considered forward looking under federal Securities law.

Chang: Statements reflect our view only as of today and should not be relied upon as representative of our views as of any subsequent date, we disclaim any obligation to update any forward looking statements or outlook.

Luana Wolk: We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to several risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion on the material risks and other important factors that could affect financial results, please refer to our filings with the SEC. And, finally, unless otherwise noted, all numbers except revenue mentioned today are non-GAAP. You can find a reconciliation from GAAP to non-GAAP results for both the current and the prior year in today's press release. A press release and a replay of today's call can be found on Zuora's Investor Relations website at investor.zuora.com. Now I'll turn the call over to you, Tien.

Chang: These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from expectation.

Chang: Further discussion on the material risks and other important factors that could affect our financial results. Please refer to our filings with the SEC.

Chang: Finally, unless otherwise noted all numbers, except revenue mentioned today are non-GAAP.

Chang: You can find a reconciliation from GAAP to non-GAAP results for both the current and prior year in today's press release.

Chang: Our press release and a replay of today's call can be found on <unk> Investor Relations website at Investor that Laura Dot Com now ill turn the call over TMT.

Tien Tzuo: Thank you, Luana, and thank you, everyone, for joining Zuora's fourth quarter fiscal 2024 earnings call. I'd imagine there are quite a few questions based on the information we shared in our filing a few weeks ago. You all saw that our Q4 ARR growth fell short of where we were trying to land. We'll go through the details of the quarter. But the bottom line is this, in an uncertain year, we strengthened our position in the marketplace by focusing on what was in our control, namely, accelerating new logo acquisition, continuing to innovate our market-leading multi-product portfolio, investing in the success of our customers, and delivering balanced growth and profitability. For the full fiscal 2024, subscription revenue was within the high end of guidance at $383.4 million, up 13% year over year.

Chang: Thank you Laura and thank you everyone for joining <unk> fourth quarter fiscal 2024 earnings call.

Speaker Change: I'd imagine there are quite a few questions based on the information we shared in our filing a few weeks ago.

TMT: You will recall that our Q4, our growth fell short of where we were trying to land will go through the details of the quarter.

TMT: Bottom line is this in an uncertain year, we strengthened our position in the marketplace by focusing on what was in our control, namely accelerating new logo acquisition continuing to innovate on market, leading multi product portfolio investing in the success of our customers and delivering balanced growth.

TMT: And profitability.

TMT: For the full fiscal 2020 for subscription revenue was within the high end of guidance at $383 4 million up 13% year over year.

Tien Tzuo: ARR grew 10.4%, falling short of what we were hoping to land. And the trailing 12-month DBRR ticked two points lower, primarily from one large churn, which I'll talk about later on the call. At the same time, non-GAAP operating income improved by over $44 million year-over-year, exceeding the high range of our guidance by nearly $3 million, a big, big highlight for the year. And our adjusted free cash flow improved $72 million year-over-year, allowing us to generate over $44 million of cash in a year.

TMT: <unk> grew 10, 4% falling short and we were hoping to land.

TMT: And the trailing 12 months DB Arctic two points lower primarily from one large churn, which I'll talk about later on the call.

TMT: At the same time non-GAAP operating income improved by over $44 million year over year exceeding the high range of our guidance by nearly $3 million a.

TMT: A big Big highlight for the year in.

TMT: And our adjusted free cash flow improved $72 million year over year, allowing us to generate over $44 million of cash in a year.

Tien Tzuo: In Q4, we also saw the biggest year-over-year increase in new logos that we've seen in eight quarters. And during the quarter, nearly 60% of our customers who renewed in Q4 actually increased their spend with us. To put all this in context, let's go back to the start of the fiscal year. Like many other companies, we were seeing signs of a general slowdown in IT spending. Many expressed that the office of the CFO was an area that could be affected, and there was a general consensus that there was going to be a slowdown in the digital transformation projects that had driven technology spending over the previous few years. And so we adjusted. Specifically, we said we would do two things.

TMT: In Q4, we also saw the biggest year over year increase in new logos that we've seen in eight quarters and in the quarter nearly 60% of our customers who renewed in Q4 actually increased their spend with us.

TMT: To put all this in context, let's go back to the start of the fiscal year.

TMT: Like many other companies one year ago, we were seeing signs of a general slowdown.

TMT: Spending.

TMT: Many expressed that the office of the CFO with an area that could be affected and there is a general consensus that there was going to be a slowdown in the digital transformation projects that have driven technology spending over the previous few years.

TMT: And so we adjusted specifically, we said we would do two things.

Tien Tzuo: First, as we've been highlighting in the last few earnings calls, we shifted to doing faster rounds at a lower ACV, but of course, still focus on what we believe is the sweet spot of the markets, large enterprises and fast growing disruptors. In other words, the leaders of today and of tomorrow.

TMT: First as we've been highlighting in the last few earnings calls, we shifted to doing faster lands at a lower HCV.

TMT: But of course still focus on what we believe is the sweet spot of the market large enterprises and fast growing disruptors in other words, the leaders of today and tomorrow.

Tien Tzuo: Second, we said we would strike a good balance between growth and profitability, and we committed to making progress towards the Rule of 40 framework. As it turns out, this was the right approach. As the year progressed, we did indeed see a pause in digital transformation projects. In FY24, we saw fewer seven-digit ATV new logo deals. And in Q4, we did see these deals continue to push. However, our strategy of pursuing smaller, faster markets allowed us to sign almost 30% more new logos in fiscal 24 as compared to the previous year. In fact, if you just look at Q4, we signed on over 40% new logos compared to Q4 of last year. And this is with some fantastic companies, including Sony Network Communications, who will be bringing on approximately 1.5 million subscribers, and Infor, a global leader in business cloud software for industry-specific markets with over $3 billion in annual revenue, one of Europe's largest airlines. They selected Zora to scale their exclusive travel program with new strategic offerings.

TMT: Second we said, we would strike a good balance between growth and profitability and we are committed to making progress towards the rule of 40 framework.

TMT: As it turns out this was the right approach as the year progress we did indeed see a pause in digital transformation projects in FY 'twenty four we saw fewer seven digit ATB new logo deals and in Q4, we did see these deals continue to push.

TMT: However, our strategy of pursuing smaller faster lands allowed us to sign almost 30% more new logos in fiscal 'twenty four as compared to the previous year. In fact, if you just look at Q4, we signed on over 40% new logos compared to Q4 of last year and this is with some.

TMT: Plastic companies, including Sony Network Communications, who will be bringing on approximately one 5 million subscribers or in for a global leader in business cloud software for industry specific markets with over three 1 billion in annual revenue.

TMT: For one of Europes largest airlines they select resort to scale their exclusive travel program with new strategic offerings or one of the leading brands a private member clubs and hotels with over 70 locations around the world or even a leading marketing SaaS platform used by 80%.

Tien Tzuo: We're one of the leading brands of private member clubs and hotels with over 70 locations around the world, or even a leading marketing SaaS platform used by 80% of the Fortune 1000. Fantastic companies all around. We also saw sales cycles shorten. In fact, when I look at new logo deals between $100K and $500K in ACV, these deals closed 25% faster as compared to FY23. Now while this new logo strategy meant lower top line growth, we also executed on our commitment to deliver balanced growth and profitability, and we did it by rapidly expanding our bottom line. In fact, we ended the year at 24 against the rule of 40 metric tons, which exceeded what we initially set out to do.

TMT: So the fortune 1000 fantastic companies all the amounts. We also saw sales cycles shorten the fact, when I look at new logo deals between 100, K 500, Kt ACB. These deals close 25% faster as compared to FY2023.

TMT: Now while this new logo strategy meant lower topline growth. We also executed on our commitment to deliver balanced growth and profitability and we did it by rapidly expanding our bottom line. In fact, we ended the year at 24 against the rule of 40 metric, which exceeded what we initially set out to do.

Tien Tzuo: When you net down the year, we executed on the strategy we set out at the start of the year. We were agile and able to quickly adapt to market conditions. We focused well on the things that were in our control, specifically profitability and free cash flow.

TMT: When you net down the year, we executed on the strategy, we set out at the start of the year, we were agile and able to quickly adapt to market conditions, we focus well on the things that were in our control.

TMT: Specifically profitability and free cash flow and as such we enter FY 'twenty five in a stronger position.

Tien Tzuo: And as such, we now enter FY25 in a stronger position. Now, what has enabled this strategy, of course, is our differentiated technology and our amazing customer base. First, our products are built on a differentiated cloud architecture, one that I call loosely coupled but tightly integrated, meaning our customers can start with any of our products, but then as they add additional products and modules over time, everything just works together. So you can start with revenue, or start with billing, or Zephyr, or payments, and then expand within our portfolio. Here are just two examples from Q4. The first one is Toast, a leading restaurant technology management software company used by approximately 106,000 restaurant locations with over $3.9 billion in annual revenue.

TMT: Now what enabled the strategy of course is our differentiated technology and a really amazing customer base.

TMT: First our products are built on a differentiated cloud architecture, one that I call loosely coupled with tightly integrated meaning our customers can start with any of our products, but then as we add additional products and modules over time everything just works together. So you can start with revenue, we'll start with building zephyr or payments and then.

TMT: <unk> within our portfolio Here's just two examples from Q4. The first one is toast a leading restaurant technology management software company used by approximately 106000 restaurant locations with over $3 $9 billion in annual revenue.

Tien Tzuo: Now, Toast was a Zuora revenue customer, and in Q4, I'm proud to say that they added Zuora billing. Toast needed an enterprise-grade modernization platform that could keep up with their rapid growth and a flexible solution capable of managing their dynamic business models. The second example is The Globe and Mail, Canada's leading national news brand with over 6 million monthly users.

TMT: Now toast with a zero revenue customer and in Q4, I am proud to say that they added Dora billing toast needed an enterprise grade monetization platform that can keep up with their rapid growth and a flexible solution capable of managing a dynamic business models.

TMT: The second example is the globe and mail, Canada's leading National news brand with over 6 million monthly users.

Tien Tzuo: After going live with Zuora, Billing, and Q4, they added Zephyr to help them accelerate the growth of their digital news description through greater pricing and bundling flexibility. Second, we put a lot of work this year into shortening our deployment times to get our customers live on our monetization technology even faster. For example, early in the year, we announced a new deal with Telus Corporation, Canada's second largest communications technology company with more than $20 billion in annual revenue. And in Q4, they went live in just around 90 days, which is pretty amazing. Or the AP Press, an independent global news organization that reaches 4 billion people every day.

TMT: Youre going live resort billing in Q4, they added zephyr to help them accelerate the growth of their digital media subscription through greater pricing and bundling flexibility.

TMT: Second we put a lot of work this year to shortening our deployment times to get our customers live on our monetization technology even faster.

TMT: For example, you might remember early in the year, we announced a new deal with <unk> Corporation, Canada. The second largest communications technology company with more than $20 billion with annual revenue and in Q4. They went live in just around 90 days, which is pretty amazing.

TMT: The associated press.

TMT: Tennant Global news organization that reaches 4 billion people every day and Q4. They went live on Zephyr with its new donations capability as they continue to grow their direct to consumer offering.

Tien Tzuo: In Q4, they went live on Zephyr with its new donations capability as they continue to grow their direct-to-consumer offering. Third, our product is sticky and allows our customers to grow with us. This past year, we had the best retention rate since we went public. We are at the core of what our customers do. And once we are alive, we become an important part of their DNA.

TMT: Third our product is sticky.

TMT: And it allows our customers to grow with US this past year, we had the best retention rates. Since we went public we are at the core of what our customers do and once we are live we become an important part of their DNA.

Tien Tzuo: And we've seen that when we sign on a new customer, they become a long-term growth engine. As we look at our cohorts, even after five years and beyond, these companies continue to show consistent growth with us. And this is why we describe ourselves as a long-term durable business. In fact, we saw it in Q4, when a leading CRM platform renewed with Zuora billing, and over time, as our customers, they have increased their billing volume by over 8x. Four, after a long-time customer Bridgestone, the world's largest tire and rubber company, acquired Azuga's fleet management platform, they expanded their work with us. In Q4, Bridgestone went live on Zuora to power its software solutions as it progresses towards its goal to drive 20% of its revenue from recurring services by 2025.

TMT: And we've seen that when we sign on a new customer they become a long term growth engine.

TMT: As we look at our cohorts, even after five years and beyond these companies continue to show consistent growth with US and this is why we describe ourselves as a long term durable business.

TMT: We saw it in Q4 with a leading CRM platform with new with <unk> 1 billion and over time as our customers. They have increased their billing volume by over eight X.

TMT: Or after a longtime customer bridgestone, the world's largest tire and rubber company acquired Azuka fleet management platform. They expanded their work with us in Q4 zero when live on Europe to power its software solutions that Richard on progresses towards their goal to drive 20% of their revenue from recurring <unk>.

TMT: <unk> by 2025.

Tien Tzuo: Finally, we have a proven, committed field organization, which, in my biased view, is the best in the industry to help ensure our customer base continues to benefit from our technology. And here's how we saw this come to life last year: our customers with multiple products, as well as our highest ARR accounts, they had the highest level of customer satisfaction. Our customers say our platform is flexible and powerful but still easy to use.

TMT: Finally.

TMT: We have a proven committed field organization.

TMT: Which in my bias view as the best in the industry to help ensure our customer base continues to benefit from our technology.

TMT: Here's how we saw this come to life last year, our customers with multiple products as well as our highest <unk> accounts. They have the highest level of customer satisfaction are.

TMT: Our customers see our platform is flexible and powerful but still easy to use in fact, one of our top 10 customers recently awarded us as their top innovation partner, recognizing our innovation enable them to introduce new licensing metrics that drove a greater impact on their business.

Tien Tzuo: In fact, one of our top 10 customers recently awarded us as their top innovation partner, recognizing how our innovation enabled them to introduce new licensing metrics that drove a greater impact on their business. So now, let's look forward to FY25. The headline is we remain committed to our strategy of faster, lighter landings and adding great new logos to our install base. This is the right strategy, and in the long run, it makes us a stronger company. Let me highlight three areas that we are focused on for improvement and one potential area of opportunity. First, unfortunately, there are two large churns that are affecting our revenue growth for this upcoming fiscal year.

TMT: So now let's look forward to slide 25.

TMT: The headline is we remain committed to our strategy of faster lighter lands and adding great new logos to our installed base. This is the right strategy and over the long run it makes us a stronger company.

TMT: Let me highlight three areas that we're focused on of improvements and one potential area of opportunity.

TMT: Unfortunately, there are two large churns that are affecting our revenue growth for this upcoming fiscal year. It is important to call out that we do not believe these indicate a broader trend across our business, but I believe it's important to highlight to you all.

Tien Tzuo: It's important to call out that we do not believe these indicate a broader trend across our business, but I believe it's important to highlight to you all. The first instance we saw in Q4 was a large customer that had experienced macro headwinds in their industry, and they faced digital transformation and budget cuts. It's important to note that this customer was not yet live. That being said, as we reflect on what we could have done better, we do believe that faster go-lives will continue to reduce the likelihood of these events, and so you will see us continue to focus on this area. The second one is a change that we are going to see in Q1, and this is factored into our guide.

TMT: The first instance, we saw in Q4 with a large customer.

TMT: Experienced macro headwinds in their industry and they face digital transformation budget cuts and it's important to note that this customer was not yet live.

TMT: That being said as we reflect on what we could have done better. We do believe that faster go lives will continue to reduce the likelihood of these events and so you will see us continue to focus on this area.

TMT: The second one is the churn that we are going to see in Q1 and this is factored into our guide.

Tien Tzuo: This is a company that signed on a number of years ago, and they had a digital transformation vision that, unfortunately, has not yet become a reality, and their processes are still very much traditional one-off transactions. These anomalies do not change the strategy we have in place, but they do highlight the continued need for us not only to close the right type of customer but also to continue to focus on reducing time to go live. Second, another area we are working on is what I'll call consumption billing. Now, we've had consumption billing since day one, but, of course, we cannot rest on our laurels. In fact, we believe as more technology companies adopt AI and artificial intelligence, they will need to shift more of their pricing model to consumption-based pricing models.

TMT: This is a company that signed on a number of years ago and they had a digital transformation vision and unfortunately has not yet become a reality and their processes are still very much traditional one off transactions.

TMT: Now these anomalies do not change the strategy we have in place. So they do highlight the continued need for us not only to close the right type of customer, but also continue to focus on reducing time to go live.

TMT: Secondly, another area. We are working on is what I'll call consumption billing now we've got consumption billing since day, one and of course, we cannot rest on our laurels. In fact, we believe is more technology companies adopt AI artificial intelligence, they will need to shift more of their pricing model to consumption based pricing.

Tien Tzuo: And so you're going to see this is an area that we will double down on. And I'm pleased to announce that since we launched advanced consumption back in June, we've had over 40 customers purchase the product, including seven go-lives. Third, in fiscal 25, you're also going to see us continue to focus on improving our go-to-market efficiency. You'll see us leaning into higher quality demand generation and efficient pipeline capabilities. And we've made changes in our marketing and alliances leadership to drive this. We will continue to invest in our partnerships with leading system integrators to help us on this journey. The last thing is the potential opportunity, and it's around the office of the CFO. When you look at the horizontal application stack, almost every application area has gone into the cloud, with one big exception, and that is a company's core ERP system. Now, most people will say that at some point in the future, a trend has to kick in to move ERP into the cloud.

TMT: Models, and so youre going to see this is an area that we will double down on and I am pleased to announce that since we launched advanced consumption back in June we've had over 40 customers purchased the product, including seven go lives.

TMT: Third in fiscal 'twenty. Five you are also going to see us continue to focus on improving our go to market efficiency.

TMT: See us leaning into higher quality demand generation and efficient pipeline capabilities and we've made changes in our marketing and alliances leadership to drive. This we will continue to invest in our partnerships with leading system integrators to help us down this journey.

TMT: The last thing is the potential opportunity and it's around the office of the CFO.

TMT: When you look at the horizontal application stack.

TMT: Every application area has gone into the cloud with one big exception.

TMT: That is our company's core ERP systems.

TMT: Now most people will say that at some point in the future.

TMT: <unk> has to kick in to move ERP into the cloud and obviously when that happens. We believe this is something that will benefit US now we're not saying it's going to happen. This year and we're not going to build that into our plan, but we are going to do is continue to focus on signing on some great New law.

Tien Tzuo: And obviously, when that happens, we believe this is something that will benefit us. Now, we're not saying it's going to happen this year, and we're not going to build that into our plan. What we are going to do is continue to focus on signing on some great new logos with the confidence that this will only make us stronger if and when the market for ERP projects improves. To summarize, as I look back on fiscal year 24, the strategies we put in place at the start of the year have put us in a good position for fiscal year 25. We will continue to add new logos at a faster pace.

TMT: Goes with the confidence that this will only make us stronger if and when the market for ERP projects reflects.

TMT: To summarize.

TMT: As I look back on fiscal year 'twenty for the strategy, we put in place at the start of the year have put us in a good position for fiscal year 'twenty five we will continue to add new logos at a faster pace. We will continue to invest in our market, leading multi product portfolio that has been proven over and over again to be critical.

Tien Tzuo: We will continue to invest in our market-leading multi-product portfolio that has been proven over and over again to be critical for driving success with recurring revenue models. We will continue to invest in amazing customer success, and we will continue to commit to delivering balanced growth and profitability. Finally, I want to thank all of our VEOs who contributed to our success in FY24. We would not be who we are today without your vision and your commitment.

TMT: For driving success with recurring revenue models, we will continue to invest and amazing customer success, and we will continue to commit to delivering balanced growth and profitability.

TMT: Finally, I want to thank all of our Ceos that contributed to our success in FY 'twenty four.

Speaker Change: Would not be who we are today without your vision and your commitments.

Tien Tzuo: With that, I will pass the call over to Todd to review our financials. Thank you, Tien. And thanks for joining our call. In Q4, we met our guidance on subscription revenue and total revenue while exceeding the high end range of non-gap operating income and full year adjusted free cash flow. In fact, our focus on efficiency yielded a significant $72 million improvement in our full year adjusted free cash flow compared to last year. At the close of the quarter, we announced a workforce reduction and our preliminary expectations for AR growth and DBRR for Q4 of fiscal 2024. The revised expectations were driven by the macroeconomic pressures we talked about as well as an unexpected customer churn we experienced. We significantly improved our bottom line and accelerated our new logo growth and White Upslower Topline Growth. We're focused on driving profitability, as we make progress towards the Rule of 30 by Q4 of fiscal 2025. Subscription revenue in Q4 was $100.2 million, growing 12% year over year in both constant currency and as reported.

Speaker Change: With that I will pass the call over to Todd to review our financials.

Todd E. McElhatton: Thank you Jane and thanks for joining our call.

Todd E. McElhatton: In Q4, we met our guidance on subscription revenue and total revenue while exceeding the high end range for non-GAAP operating income and full year adjusted free cash flow in fact, our focus on efficiency yielded a significant $72 million improvement our full year adjusted free cash flow compared to last year.

Todd E. McElhatton: At the close of the quarter, we announced a workforce reduction and our preliminary expectations for our growth and DB RR for Q4 for fiscal 2020 for.

TMT: The revised expectations were driven by the macroeconomic pressures, we've talked about as well as an unexpected customer churn we experienced with.

TMT: We significantly improved our bottomline and accelerated our new logo growth.

TMT: In light of slower top line growth, we're focused on driving profitability.

TMT: As we make progress towards our rule of 30 by Q4 of fiscal 2025.

TMT: Subscription revenue in Q4 was $102 million growing 12% year over year in both constant currency and as reported for the full year subscription revenue was $383 $4 million, representing 13% growth year over year as reported and 15%.

Todd E. McElhatton: For the full year, subscription revenue was $383.4 million, representing 13% growth year over year as reported and 15% in constant currency. As we continue to expand our partnerships with SIs, our professional services revenue decreased by 22% year over year, ending Q4 at $10.5 million and represented 9.5% of total revenue. For the full year, professional services revenue was $48.3 million, a year-over-year decline of 16%.

TMT: In constant currency.

TMT: As we continue to expand our partnerships with Si's are professional services revenue decreased by 22% year over year.

TMT: And in Q4 at $10 5 million and represented nine 5% of total revenue for.

TMT: For the full year professional services revenue was $48 3 million a year over year decline of 16%.

Todd E. McElhatton: Total revenue for Q4 was $110.7 million, up 7% year-over-year, and for the full year was $431.7 million, up 9%. Non-GAAP subscription gross margin in Q4 was 82%, an improvement of over 280 basis points year-over-year. For the full year, our non-GAAP subscription gross margin was 82%, which represented an improvement of over 230 basis points. Throughout the fiscal year, we realized continued margin performance from optimizing our hyperscalers and increasing efficiency. Non-GAAP professional services gross margin for Q4 was negative 10%, a decline of 215 basis points year over year. This was driven by our continued investment in our customers. For the full year, our non-GAAP professional services gross margin was negative 4%.

TMT: Total revenue for Q4 was $110 $7 million up 7% year over year and for the full year was $431 $7 million up 9%.

TMT: non-GAAP subscription gross margin in Q4 was 82% an improvement of over 280 basis points year over year.

TMT: For the full year, our non-GAAP subscription gross margin was 82%, which represented an improvement of over 230 basis points.

TMT: Throughout the fiscal year, we realized continued margin performance from optimizing our hyperscale.

TMT: And increasing efficiency.

TMT: non-GAAP professional services gross margin for Q4 was negative 10% a decline of 215 basis points year over year.

TMT: This was driven by our continued investment in our customers.

TMT: For the full year, our non-GAAP professional services gross margin was negative 4%.

Todd E. McElhatton: Looking ahead in Q1, we expect margins to be consistent with Q4 with sequential improvements throughout fiscal 2025. Our Q4 non-GAAP blended gross margin was 74%, an increase of over 550 basis points year-over-year. Our full-year non-GAAP blended gross margin was 72%, an increase of over 460 basis points.

TMT: Looking ahead in Q1, we expect margins to be consistent with Q4 with sequential improvement throughout fiscal 2025.

TMT: Our Q4 non-GAAP blended gross margin was 74% an increase of over 550 basis points year over year, our full year non-GAAP blended gross margin was 72%.

TMT: An increase of over 460 basis points.

Todd E. McElhatton: In Q4, non-GAAP operating income exceeded the height of our guidance by nearly $3 million, coming in at $15.9 million compared to $2.2 million in the prior year and representing a non-GAAP operating margin of 14% for the quarter. For the full year, our non-GAAP operating income was $47.5 million, resulting in an operating margin of 11%, or a 10-point improvement compared to last year. The operating margin improvements for Q4 and the full year are the result of disciplined spending as we remain committed to improving our bottom line. Despite the top-line headwinds, we have laid a path to achieve a rule of 30 by exiting fiscal 2025. As a reminder, we define the rule of 30 as a sum of year-over-year subscription revenue growth plus non-GAAP operating margin. Our fully diluted share count as of the end of the quarter was approximately 180.2 million shares using both the treasury stock and IF converted method.

TMT: In Q4, non-GAAP operating income exceeded the high end of our guidance by nearly $3 million coming in at $15 9 million compared.

TMT: Compared to $2 $2 million in the prior year and representing a non-GAAP operating margin of 14% for the quarter.

TMT: For the full year, our non-GAAP operating income was $47 $5 million, resulting in an operating margin of 11% or a 10 point improvement compared to last year.

TMT: The operating margin improvements for Q4 and the full year are the result of disciplined spending as we remain committed to improving our bottom line.

TMT: Despite the top line headwinds.

TMT: We have laid a path to achieve our rule of 30 exiting fiscal 2025.

TMT: As a reminder, we define the rule of 30 as a sum of year over year subscription revenue growth.

TMT: non-GAAP operating margin.

TMT: Our fully diluted share count as of the end of the quarter was approximately 182 million shares using both the treasury stock and if converted method.

Todd E. McElhatton: Let's look at some of the metrics for the quarter and the year. As we disclosed in our SEC filing several weeks ago, dollar-based retention ended at 106 percent, down two percentage points both quarter over quarter and year over year. As T noted, our DBR this quarter was impacted by an unexpected churn from a large customer that had yet to go live. In fact, this customer faced large budget cuts for the year given the impact of the macro environment on their business.

TMT: Let's look into some of the metrics for the quarter and the year.

TMT: As we disclosed in our SEC filing several weeks ago dollar based retention ended at 106% down two percentage points, both quarter over quarter and year over year.

TMT: As Tim noted our DVR this quarter was impacted by an unexpected churn from a large customer that had yet to go live.

TMT: In fact, this customer face large budget cuts for the year, given the impact of the macro environment on their business.

Todd E. McElhatton: This abnormal customer-specific turn created a one-point headwind in both ARR growth and DBRR. However, it's worth noting that this year we reached record levels of overall gross retention. We remain confident in our customer retention and product stickiness as we have a differentiated product portfolio that is mission critical for our customers. Our total RPO ended the year at $594 million, growing 19% year over year; non-current RPO grew 31% year over year to $271 million. These strong RPO figures were driven by a number of large multi-year renewals in Q4. We ended the quarter with 461 customers with a contract size at or above $250,000 in average contract value.

TMT: This abnormal customer specific churn created a one point headwind in both our growth and Edr.

TMT: It's worth noting that this year, we reached record levels of overall gross retention.

TMT: We remain confident in our customer retention and product stickiness as we have a differentiated product portfolio that is mission critical for our customers.

TMT: Our total <unk> ended the year at $594 million growing 19% year over year.

TMT: Non current RPI grew 31% year over year to $271 million. The strong RVO figures were driven by a number of large multi year renewals in Q4.

TMT: We ended the quarter with 461 customers with a contract size at or above $250000 and average contract value.

Todd E. McElhatton: This was up eight sequentially and up 30 year over year. This cohort represents 84% of our business as we further expand into the enterprise space. This quarter, we closed four deals with an ACV of $500,000 or more, down from six last year.

TMT: This was up eight sequentially and up 30 year over year.

TMT: This cohort represents 84% of our business as we further expand into the enterprise space.

TMT: This quarter, we closed four deals with an ACB of $500000 or more down from six last year.

Todd E. McElhatton: This includes one deal over $1 million, down from two last year. In the current environment, we continue to see less large transformational deals and more of a lighter land that will allow for future expansion. In fiscal 2024, we processed $139.9 billion of billing transactions and payment volume, a growth of 10% year over year. In addition, we processed $212.8 billion of revenue volume, a growth of 12% year over year. As a reminder, we provide these metrics on an annual basis as quarterly volumes ebb and flow. ARR landed at $403.1 million at the end of Q4 and grew 10.4%. Adjusted free cash flow was $14.6 million in the quarter, a significant improvement of nearly $32 million over Q4 of last year.

TMT: This includes one deal over $1 million down from two last year and the current environment. We continue to see less of large transformational deals and more of a lighter land that will allow for future expansion.

TMT: In fiscal 2024, we processed $139 $9 billion billion transactions and payment volume a growth of 10% year over year.

TMT: In addition, we processed 212 $8 billion of revenue volume.

TMT: <unk> of 12% year over year.

TMT: As a reminder, we provide these metrics on an annual basis as quarterly volumes ebb and flow.

TMT: <unk> landed at $403 $1 million at the end of Q4 and grew 10, 4%.

TMT: Adjusted free cash flow was $14 6 million in the quarter, a significant improvement of nearly $32 million over Q4 of last year.

Todd E. McElhatton: Adjusted free cash flow for the four-year period exceeded our guidance by over $7 million at $44.3 million, representing a $72 million increase over the prior fiscal year. Turning to the balance sheet, we ended the quarter with $514.2 million in cash and cash equivalents, a sequential increase of $20 million. Total CapEx for the quarter was $3.1 million and $10 million for the full year.

TMT: Adjusted free cash flow for the four year exceeded our guidance by over $7 million at $44 3 million, representing a $72 million increase over the prior fiscal year.

TMT: Turning to the balance sheet, we ended the quarter with $514 $2 million in cash and cash equivalents, a sequential increase of $20 million.

TMT: Total capex for the quarter was $3 $1 million and $10 million for the full year.

Todd E. McElhatton: Before turning to guidance, I want to provide a bit more context regarding our recent organizational changes. In late January, we made the difficult decision to reduce our workforce by roughly 8% net as we drive efficiency and optimization throughout the organization. In connection with this reduction, we incurred approximately $7 million of restructuring charges in Q4. We also expect to incur approximately $1 million in the first half of fiscal 2025. These charges, which were excluded from our non-GAAP results, consisted primarily of cash expenditures related to severance payments, health care costs, and job placement benefits for the impacted employees.

TMT: Before turning to guidance I want to provide a bit more context regarding our recent organizational changes in late January we made the difficult decision to reduce our workforce by roughly 8% net.

TMT: As we drive efficiency and optimization throughout the organization.

TMT: In connection with this reduction we incurred approximately $7 million of restructuring charges. In Q4, we also expect to occur approximately $1 million in the first half of fiscal 2025.

TMT: These charges were which were excluded from our non-GAAP results consisted primarily of cash expenditures related to severance payments health care costs and job placement benefits for the impacted employees.

Todd E. McElhatton: These actions are part of our enhanced efforts in driving efficient and profitable growth. Now turning to guidance, enterprises continue to scrutinize their investments.

TMT: These actions are part of our enhanced efforts in driving efficient and profitable growth.

Speaker Change: Now turning to guidance.

Speaker Change: Enterprises continue to scrutinize their investments we anticipate this trend will continue in the office of the CFO throughout fiscal 2025.

Todd E. McElhatton: We anticipate this trend will continue in the office of the CFO throughout fiscal 2025 and, as such, we are being judicious with our guidance. In addition, our professional services business will continue to be a smaller portion of our total revenue mix as we support our partners in leading customer implementations, which is consistent with the trends we've seen this past year. Now, turning to guidance.

Speaker Change: And as such are being judicious with our guidance.

Speaker Change: In addition, our professional services business will continue to be a smaller portion of our total revenue mix as we support our partners and leading customer implementations, which are consistent with the trends we've seen this past year.

Speaker Change: Now turning to guidance.

Todd E. McElhatton: I want to remind you that Q1 has two fewer days than Q4. For Q1, we currently expect subscription revenue of 98 to 99 million dollars, professional services revenue of 9.8 to 10.8 million dollars, total revenue of $107.8 to $109.8 million, non-GAAP operating income of $14 to $16 million, and non-GAAP net income per share of $0.06 to $0.07, assuming a weighted average share is outstanding approximately $146.

Speaker Change: Want to remind you that Q1 has two fewer days in Q4 <unk>.

Speaker Change: For Q1, we currently expect subscription revenue of 98% to $99 million professional services revenue of $9 eight to $10 $8 million.

Speaker Change: Total revenue of 107, eight to $109 8 million.

TMT: non-GAAP operating income of $14 million to $16 million and.

TMT: non-GAAP net income per share up 6% to seven.

TMT: Assuming a weighted average shares outstanding of approximately $146 9 million.

Todd E. McElhatton: For the full fiscal year 2025, we expect subscription revenue of $410 to $414 million and Professional Services revenue of 41 to 45 million dollars. Total revenue of $451 to $459 million, non-GAAP operating income of $79 to $81 million, and non-GAAP net income per share of $0.40 to $0.42, assuming a weighted average share outstanding of approximately $151.5 million. We also expect to be at an annual share dilution of approximately 4% for Fiscal 25. For this purpose, dilution is calculated by the number of equity awards granted, net of forfeitures during the fiscal year, divided by the total shares outstanding at the end of the fiscal year.

TMT: For the full fiscal year 2025, we expect subscription revenue of $410 million to $414 million professional services revenue of $41 million to $45 million.

TMT: Total revenue of $451 million to $459 million.

TMT: non-GAAP operating income of $79 million to $81 million and non-GAAP net income per share of 40% to 42.

TMT: Assuming a weighted average shares outstanding of approximately 151 5 million.

TMT: We also expect to be at an annual share dilution of approximately 4% for fiscal 'twenty five.

TMT: For this purpose dilution as calculated by the number of equity awards granted net of corporate tours during the fiscal year divided by the total shares outstanding at the end of the fiscal year.

Todd E. McElhatton: For the year, we expect DBRR of 104 to 106% and AR growth of between 8 and 10%. As Tien noted, these metrics reflect the headwinds we saw in Q4 and early Q1 due to churn activity by two customer-specific instances. We have made tremendous progress with our bottom line, and as I stated in prior quarters, we will continue to balance growth and profitability. We remain committed to our goal of exiting fiscal 25 at a rule of 30 run rate. We expect our adjusted free cash flow to be $80 million for the full year.

TMT: For the year, we expect DVR of 104% to 106% and ADR growth of between eight and 10%.

TMT: As Tim noted these metrics reflect the headwinds we saw in Q4 and early Q1 due to churn activity by two customer specific instances.

TMT: We have made tremendous progress with our bottom line and as I've stated in prior quarters, we will continue to balance growth and profitability. We remain committed to our goal of exiting fiscal 'twenty five at a rule of 30 run rate.

TMT: We expect our adjusted free cash flow to be $80 million for the full year. This represents a $35 million improvement year over year.

Todd E. McElhatton: This represents a $35 million improvement year over year. In closing, while the macro backdrop continues to impact us in the near term, we are focused on showing disciplined bottom line leverage. We continue to focus on accelerating new logos with our strategy to land lighter and to expand alongside our customers, which will give us runway for accelerated growth in the second half of the year. We will keep our retention rate strong while improving profitability margins and increasing free cash flow generation. With that, Tien, Robby, and I will take your questions, and I'll turn it over to the operator. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from a line to Adam Hotchkiss from Goldman Sachs. Your line is open.

TMT: In closing, while the macro backdrop continues to impact us in the near term. We are focused on showing disciplined bottom line leverage we continue to focus on accelerating new logos with our strategy to land lighter and to expand alongside our customers. This will bring us runway for accelerated growth in the second half of the year.

TMT: <unk>.

TMT: We will keep our retention rates strong, while improving profitability margins and increasing free cash flow generation.

Speaker Change: With that teen Robbie and I will take your questions and I'll turn it over to the operator.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. Your first question comes from the line of Adam Hotchkiss from Goldman Sachs. Your line is open.

Adam R. Hotchkiss: Great. Thanks for taking my questions. I guess to start on the new logo side, I know you mentioned Sony and Infor and the increase in total new logos, net ads on a year-over-year basis. Just any more commentary on the types of customers you're adding besides the ones you mentioned? From a product perspective, what does a typical LIDAR LAN look like, and how should we think about landing contract values versus the eight net ads that you noted on the 250K plus side? Just any incremental color there would be helpful.

Adam R. Hotchkiss: Great. Thanks for taking my questions I guess to start on the new logo side I know you mentioned Sony in <unk>, four and the increase in total new logos.

Adam R. Hotchkiss: Ads on a on a year over year basis, just any more commentary on the types of customers you are adding besides the ones you mentioned.

TMT: From a product perspective, a typical lighter land looks like and how we should think about landing contract values versus the eight net adds that you noted on the 250 K plus side, just just any incremental color there would be helpful.

Tien Tzuo: Yeah, absolutely. So in addition to Sony Infor, I think we noted three more customers. You can see it's a fairly diverse mix. Actually, there was an airline that I mentioned, you know, this team here, there was a membership club, right, with 70 locations.

Speaker Change: Yeah, absolutely. So we in addition to Sony and four I think we noted on in three more customers you can see as a fairly diverse mix actually there was an airline that I mentioned.

Speaker Change: It's a 10 year there was a.

Speaker Change: Our membership club compared with 17 locations and there was definitely a traditional SaaS company I would not say the mix has changed too much I would say that we continue to focus on technology companies rated SaaS companies continue to do well, especially as they gear up for perhaps the churn the <unk>.

Tien Tzuo: And there was definitely a traditional SaaS company; I would not say the mix has changed too much. I would say that we continue to focus on technology companies, right? SaaS companies continue to do well, especially as they gear up for, you know, perhaps a turn in the IPO markets, at least the private ones. And we still continue to see, you know, healthy growth in our media segments as well. In terms of the type of deals, obviously, it's an arbitrary number, but we think that 100K to 500K is a good indication, but the deal is not too small, not too big.

Speaker Change: Yield markets at least the private ones and.

Speaker Change: And we still continue to see healthy growth in our media segments as well.

TMT: In terms of the type of deals.

TMT: Obviously, it's an arbitrary number but we thought that 100 key to 500 K is a good indication with the deal is not too small not too big and that's really where you like I said, we saw a pretty dramatic decrease.

Tien Tzuo: And that's really where, like I said, we saw a pretty dramatic decrease in sales cycle time. So I'd say that's how you think about the business. Okay, that's really helpful.

TMT: <unk> sales cycle time, so I'd say, that's how to think about the business.

Speaker Change: Okay. That's really helpful. Thanks, and then Todd I think you mentioned previously that our growth for the past fiscal year would be.

Todd E. McElhatton: Thanks. And then, Todd, I think you mentioned previously that ARR growth for the past fiscal year would be a good indicator of growth for fiscal 25. And it looks like there's a little bit of deceleration now baked into the guidance. So just curious, you know, how much of that is the two logo turns you mentioned versus maybe some incremental conservatism now that you're getting more review on the macro. Just any incremental color on the dispersion there would be useful.

Speaker Change: A good indicator of growth for fiscal 'twenty, five and it looks like there's a little bit of deceleration now baked into the guidance. So just curious how much of that is the two logo churns you mentioned versus.

TMT: It may be some incremental conservatism now that youre getting more and more of a view on the macro just any incremental color on the dispersion there would be useful.

Todd E. McElhatton: Hey, thanks a lot, Adam. So, as you said, we had one turn or one customer in Q4, that was a pretty significant turn that's going to give us, you know, a point of DBR headwind. And same thing on the ARR as we move into next year. When we took a look at just, you know, some of the larger deals, those deals continue to elongate in the cycle. And when we took a look at one of some of the things that, you know, continue to push out into the future, we've got another point there. And then the last one was, there is a large customer. And both of these turns that we've talked about, these aren't, they're not in our core verticals. And so, you know, not standard, one was not live, the other was an old company, actually, you know, they do porta potties, and, you know, was trying to make a digital transformation that didn't happen.

Speaker Change: Hey, Thanks, a lot Adam So as you said, we had a one turn of one.

TMT: Customer in Q4 that was a pretty significant churn that's going to give us a point.

TMT: <unk> DVR headwind and same thing on the <unk> as we move into next year. When we took a look at just some of the larger deals those deals continue to elongate and cycle and when we took a look at one of some of the things that continue to push out into the future. We've got another point there and then the last one was there is a large <unk>.

TMT: Customer.

TMT: Both of these churns that we've talked about these are non theyre not in our core verticals and so not standard one was not live. The other was an old company actually a two part of parties and was trying to make a digital transformation didn't happen and so that's giving us another point, so if I take those three things together.

Tien Tzuo: And so that's giving us another point. So if I take those three things together, those are the three points that we're seeing. And as we're just seeing elongated sales cycles, I think we really need to be really judicious and not assume that we're going to have some of the larger deals that we had, because that's really put a lot of headwind on us this year. So we're going to assume for all next year that we're landing lighter. And then we had those two turns that obviously brought through the entire year from an ARR growth perspective. And that's really what we've seen from a headwind perspective. Okay, all really helpful.

TMT: Those are the three points that we're seeing and as we're just seeing elongated sales cycles I think we run it would be really judicious and not assume that we're going to have some of the larger deals that we had because thats really put a lot of headwind on us. This year. So we're going to assume for all of next year that we're landing lighter and then we had those two churns that obviously bring through the entire year from an AOR growth.

TMT: And that's really what we've seen from a headwind perspective.

Speaker Change: Okay, all really helpful. Thanks, Tien Thanks Todd.

Adam R. Hotchkiss: Thanks, team. Thanks, Todd. Hey, thanks a lot, Adam. Your next question comes from the line of Chad Bennett from Craig Hallam. Your line is open.

Speaker Change: Hey, Thanks, a lot Adam.

TMT: Yes.

TMT: Your next question comes from the line of Chad Bennett from Craig Hallum. Your line is open.

Chad Michael Bennett: Great. Thanks for taking my questions. Just curious about kind of the map behind the narrative of our best retention rate since going public, considering the churn. Is that, I just, is that a gross retention number? Just kind of how do we think about that considering the churn? Chad, that absolutely is a gross retention rate.

Chad Michael Bennett: Great. Thanks for taking my questions just curious on kind of the math behind the narrative.

Chad Michael Bennett: Our best retention rate since going public considering the churn.

Chad Michael Bennett: That.

Chad Michael Bennett: Is that a gross retention number just kind of how do we how do we think about that considering the churn.

Chad Michael Bennett: Chad that absolutely is a gross retention rate and like I said, we were running well below where we thought we'd be we actually ended up landing right on plan for the full year, we had that unexpected churn.

Todd E. McElhatton: And like I said, you know, we were running well below where we thought we'd be, we actually ended up landing right on plan for the full year. We had that unexpected churn, you know, large company, really facing some big macro headwinds, maybe just give you a little bit more color, was a company that had not gone live, not in our core vertical, right up until before it churned. They were actually And then literally on a dime, it's like, not only are we not going to do the revenue thing, but we're canceling the whole project, and we're canceling all of our IT projects that aren't live. So that was something that was, you know, a surprise to us.

Chad Michael Bennett: <unk> company really facing some big macro headwinds, maybe just give you a little bit more color was a company that has not gone live not in our core vertical right up until before a churn they were actually talking to us they were looking to expand and brings our revenue on and then literally on a dime. It's like not only we are not going to do the revenue thing or campus.

Chad Michael Bennett: The whole project and we're canceling all of our it projects that arent lives. So that was something that was a surprise to us. So that's really what we're driving on it and again next year. You know we've got a timing issue linearity seems to be move forward. When we take a look at the full year that is what's driving it and again our customers are really sticky and once they go live we tend to keep them.

Todd E. McElhatton: So that's really what we're driving on it. And again, next year, you know, we've got a timing issue; the linearity seems to be moved forward. When we take a look at the full year, that is what's driving it. And again, our customers are really sticky. And once they go live, we tend to keep them, you know, for a long time.

Chad Michael Bennett: For a long time and in our top 100 customers only five customers haven't gone live yet.

Tien Tzuo: And in our top 100 customers, only five customers haven't gone live yet. Okay, and just curious, you know, just were we recognizing subscription revenue from these two customers that didn't go a lot or have not gone live or are not going live? And if so, for how long?

Speaker Change: Okay, and just curious just.

Speaker Change: Where are we recognizing subscription revenue from these two customers that Didnt go a lot or have not went live or are not going live and if so for how long.

Todd E. McElhatton: So I don't have the exact dates when they went live, but as soon as we sign a contract, we begin recognizing our revenue as anybody in the SAS organization does, because we stand up that environment. They need that environment as they are working on their internal processes. So I think if any SAS company, as soon as they sign the contract, depending on how it ramps up, that is part of our revenue. So that was part of our run rate, and it was in the ARR. Yeah, and the second company, just to be clear, for over five years.

Speaker Change: So I.

Speaker Change: I don't have the exact date when they went live but as soon as we sign a contract we began recognizing our revenue as anybody in the SaaS organization does because we do standup that environment they need that environment as they are working in their internal processes. So I think if any SaaS company know as soon as they sign the contract depending on how it ramps that is part of our revenue so.

Speaker Change: That was part of our run rate and it was in the <unk> and the second company just to be clear.

Speaker Change: They have been live for.

Tien Tzuo: And so, You know, they have big ambitions for a digital transformation project. But if you look at their internal processes, I think we've mentioned on the call, they're still very much one-off transactions, and they just haven't really, really transformed. And so the overhead of using our system, ultimately, just wasn't good enough.

Speaker Change: Over five years and so.

Speaker Change: They are big ambitions for digital transformation projects that if you look at the internal processes I think we mentioned on the call.

Speaker Change: It is still very much one off transactions and they just never really really transformed and so.

Speaker Change: The overhead of using our system ultimately.

Speaker Change: It just wasn't a good fit.

Chad Michael Bennett: And then maybe just one last one, if I could, just on the service line and the gross profit there, we're clearly running at a negative gross profit, and, you know, I think the thought was going back a couple of years is that we were going to kind of sacrifice service revenue to invest in the channel and offer them that implementation revenue, and what we get back for that is obviously subscription revenue growth. That doesn't seem like it's happening.

Speaker Change: Got it and then maybe just one last one if I could just on the service line and the gross profit there.

Speaker Change: Clearly running at a negative gross profit and.

Speaker Change: Thank the thought was going back a couple of years is we're going to kind of sacrifice service revenue to invest in the channel and offer them up that implementation revenue and what we get back for that is obviously subscription revenue growth.

Speaker Change: That doesn't seem like it's transpiring and then the other Avenue is.

Todd E. McElhatton: And then the other avenue is. You know, we're investing in our customers directly. And, you know, our service revenue is going down, you know, materially year over year. Should we be running this at a negative gross margin business at this point? Yeah, I think for the full year, our objective is to run it slightly below where we are from a standpoint of, you know, the loss from Q4. And I just want to remind you, you know, Q4 is always a little bit special for us. We have in the US, which is a big chunk of our business is, you know, 67%. We have Thanksgiving week, and then we have the end of the year shutdowns that a lot of companies have. And so when you take those into account, we just have a lot fewer billable days.

Speaker Change: We're investing in our customers direct.

Speaker Change: And.

Speaker Change: Our service revenue is going down.

Speaker Change: Materially year over year.

Speaker Change: Should we be running this at a negative gross margin business at this point.

Speaker Change: John I think for the full year. Our objective is to run at slightly below where we are from a standpoint of the law.

Speaker Change: Loss from Q4, and I just remind you Q4 is always a little bit special for US we have in the U S, which is a big chunk of our business is 67%.

Speaker Change: We have a Thanksgiving week and then we have the end of the year shutdowns that a lot of companies have and so when you take those we just have a lot fewer billable days and that continues to put pressure on it from another standpoint, we do invest in customers. We're also investing in partners. Those are some of the investments we continue to evaluate them, but at this point. We believe those are prudent and those do help us drive topline.

Todd E. McElhatton: And that, you know, continues to put pressure on it. From another standpoint, we do invest in customers; we're also investing in partners. Those are some of the investments we continue to evaluate. But at this point, we believe those are prudent.

Tien Tzuo: And those do help us drive top-line subscription growth that has, you know, a very positive, you know, almost 83% margin for this company. And I think, Chad, the other point to it is, yeah, we are partners first on that. It is important.

Speaker Change: Subscription growth that has a very positive almost 83% margin.

Speaker Change: Company.

Speaker Change: Hi, Chad the other point to it as yes, we all call on the first one that is important and we do see a.

Chad Michael Bennett: And we do see, I mean, a source pipeline is an example when I increase my revenue 1.5 times year over year through our, Got it. Thank you for taking my question. Thanks, Chad.

Speaker Change: <unk> pipeline is an example, where not one five times year over year through our bonds.

Chad: Got it thank you for taking my questions.

Speaker Change: Thanks, Chad.

Patrick A. Schulz: Your next question comes from the line of Patrick Schulz from Baird. Your line is open. Hey, thanks for taking my question. I just appreciate all the color you provide around guidance. Kind of curious if you could dig into some of the more recent buying patterns and deal closure rates you're seeing from customers, excluding those two large customers that churned. For example, have customers been incrementally more cautious with their budgets now compared to late 2030? Just trying to get a better understanding of the buying environment that's embedded within guidance. Yeah, this is Tien. I'll chime in there. You know, if anything, you can sort of see a tale of two cities, right?

Speaker Change: Your next question comes from the line of Patrick <unk> from Baird. Your line is open.

Patrick: Hey, Thanks for taking my question just I appreciate all the color you provided around guidance kind of curious if you could dig into some of the more recent buying patterns and deal closure rates youre seeing from customers that excluding those two large customers that churned customers, then incrementally more cautious with their budgets now compared to late 'twenty three just trying to get a better understanding of the buying environment that's embedded within guidance.

Patrick: Yes. This is Tony I mean, I'll chime in there.

Tony: You can sort of see a tale of two cities right Theres two spectrums, if you will what we're seeing in.

Tien Tzuo: There are two spectrums, if you will. What we're seeing in overall customers is that recurring revenue models are really important. The shift to subscriptions is really important. And the technology sector, if anything, AI, is pushing more and more people to do, you know, consumption-based billing models.

Tony: Overall customers remained really interested recurring revenue models are really important the shift to subscription is really born in the technology sector. If anything AI is pushing more and more people to do consumption based billing models and so from a.

Tien Tzuo: And so from an overall trend for what we do and the market's need for what we do, we feel really, really good. But when it comes to specific deal cycles, we're seeing two ends of the spectrum, right? On the smaller deals, and let's call it, you know, less than $500K, we're actually seeing those deals close faster, and we're seeing good, good, healthy demand. I think there's just simply more scrutiny. You talk about, you know, a million, million and a half, $2 million ARR deal. Multiply that by three or five sometimes, right? Because they really see it through long-term investments. You're talking about a sizable approval. Those things just continue to receive a lot of scrutiny. Unknown Attendee You know, is there something out there that says do those start to loosen up?

Chad: Overall trend for what we do and the market need for it will be do we feel really really good when it comes to specific deal cycles. We're seeing two ends of the spectrum right on the smaller deals and let's call it less than 500 K.

Chad: We're actually seeing those deals close faster and we're seeing good good healthy demand I think there's just simply more scrutiny you talk about a million million half $2 million.

Chad: Our deal multiply that by three years or five sometimes rate because they really see it as a long term investments you are talking about a sizable approval.

Chad: Those things just have continue to have a lot of scrutiny.

Chad: Is there something out there that says do those start to loosen up.

Todd E. McElhatton: You know, perhaps, but it's not something that we're going to count on. We're going to build it into our model. I think one other thing, Patrick, that's also really important to note is these aren't lost deals. As a matter of fact, when we look at our win rates, they're at record levels.

Chad: But it's not something that we're going to count on we're going to build into our models.

Speaker Change: I think one other thing Patrick it's also really important to note.

Speaker Change: These arent lost deals matter of fact, when we look at our win rates, they're at record levels and in fact, some of the companies that are doing bundling and giving away their subscription billing, we're seeing over 80% win rate against those so it's real important to note. This is absolutely a macro phenomenon. This is not where we're not being successful against competitors and in fact I think.

Todd E. McElhatton: And in fact, some of the companies that are doing bundling and giving away their subscription billing, we're seeing over 80% win rate against those. So I think it's really important to note this is absolutely a macro phenomenon. This is not where we're not being successful against competitors. And in fact, I think another interesting thing is that, during the year, we actually took 17 deals away from our competitors, both high end and low end, where they said they really needed an enterprise solution at scale, and they came to Zuora because what they had wasn't doing what they needed. Yeah. I mean, that's absolutely true.

Speaker Change: Another interesting thing is during the year, we actually took 17 deals away from our competitors both high end and low end, where they said they really needed an enterprise solution at scale and they came to <unk> because what they had wasn't doing what they needed. Yes. That's absolutely true. If you think about all the customers that we mentioned on the call.

Tien Tzuo: If you think about all the customers that we mentioned on the call, I think of at least three or four or five of those that are competitive win backs, where maybe they picked a competitor, you know, two to three years ago, realize it doesn't have the functionality they need, and they want them coming back to us. Okay, thanks. That's very helpful. Appreciate the call there.

Speaker Change: You can think of at least three or four or five of those that are competitive win backs, where maybe they pick the competitor two three years ago realized it doesn't have the functionality they need and they want them coming back to us.

Speaker Change: Okay. Thanks, that's very helpful. Appreciate the color there and then maybe one quick follow up to just on the go to market investments you guys mentioned, that's going to be a big focus for you guys is there an improvement in our go to market efficiency could you maybe talk about some of the investments you're making around this notion and how youre thinking about the partner channel method for this year. Thanks guys.

Robert J. E. Traube: And then maybe one quick follow-up on just the go-to-market investments. You guys mentioned that's going to be a big focus for you guys this year, improving go-to-market efficiency. Could you maybe talk about some of the investments you're making around this movement and how you're thinking about the partner channel investments for this year? Thanks, guys. So, hi, it's Robbie.

Robin: Hi, it's robin.

Robert J. E. Traube: We are making sure that as we look at going to market, we're keeping all of our criteria exactly flat. We'll focus very much on the marketing, the pipeline areas, in terms of how we create more demand around those particular areas and make that fast moving. Unknown Attendee.

Robin: We are making sure that as we look at go to market, we're keeping all of our.

Robin: Great.

Robin: Vaccine flat, we're focused very much on the market the pipeline areas in terms of how we create more demand around license to gradually make that fast moving and assets.

Tien Tzuo: Unknown Speaker: Yeah, maybe I'll add a little color on that. Think of it as how do we generate demand? And we generate demand primarily in two ways. We do it through ourselves, and we do it through our partners.

Robin: Yes.

Speaker Change: Yes, maybe I'll add a little color on that.

Speaker Change: Think about it is as how do we generate demand and we generate demand primarily through two ways. We do it through ourselves and we do it through our partners, we really like the partner demand those partners in previous calls we mentioned those deals close at a higher close rate they tend to be bigger.

Tien Tzuo: We really like to partner demand. Those partners on previous calls, we mentioned, you know, those deals close at a higher close rate, they tend to be bigger. Yes, you know, once you get into the seven-digit deals, our partners feel this too. There's just simply more scrutiny on those deals. But partners remain really, really important for us. And then on the pipeline side, you know, how we do demand, you know, is it through what the industry calls SDRs or BDRs? I think there's a transformation going on there.

Speaker Change: Yes, once you get into the seven digit deals.

Speaker Change: Partners view of there's two there's just simply more scrutiny on those deals but partners remains really really important for us.

Speaker Change: And then on the pipeline side, how do we do demand.

Robin: Is it through what the industry calls SDR <unk> I think there's a transformation there I think AI is going to help and I think we're going to be defined.

Tien Tzuo: I think AI is going to help. And I think we're going to be able to find ways to be much, much more productive in that group. Unknown Attendee, Patrick: Awesome, thank you.

Robin: Will it be much much more productive in that group.

Speaker Change: Thanks, Patrick.

Robin: Oftentimes.

Joseph Anthony Vafi: Your next question comes from a line of Joseph Vafi from Cantercourt. Your line is open. Hey, guys. Good afternoon.

Robin: Your next question comes from the line of Joseph <unk> from Canaccord. Your line is open.

Joseph: Hey, guys. Good afternoon, thanks for the questions just.

Tien Tzuo: Thanks for the questions. Just wondering if perhaps one of those two customers could come back at some point when when those IT projects begin again, and then just kind of wanted to make sure there was really no competitive, you know, influence on those deals. And then I'll have a quick follow up. Yeah, I mean, a company that did not go live with there was, you know, that industry is definitely hitting headwinds, if you will. And so absolutely, I mean, the business that we're in, in that company, his descriptions, his recurring revenue, are really important. That's why this did take us by surprise.

Joseph: Wondering I guess does it sound like perhaps one of those two customers could come back at some point when they when when those projects.

Speaker Change: Begin again.

Speaker Change: And then just kind of wanted to make sure there was really no competitive.

Joseph: Influence.

Joseph: On those deals and then a quick follow up.

Speaker Change: Yes, the company that did not go lives.

Speaker Change: That industry is definitely hitting.

Joseph: Headwinds if you will.

Joseph: And so absolutely the <unk>.

Joseph: Business that we're in in the company.

Joseph: As subscriptions as recurring revenue is really important and that's why this did take us by surprise.

Joseph Anthony Vafi: And so I'm certainly optimistic that eventually, you know, we'll have another shot to work with him and make him successful. Okay, great. And then, you know, on the workforce reduction, could you maybe drill down a little bit? And, you know, was it broad-based across the company? Was there certain areas where, you know, there was a little bit more reduction? And, you know, how do you see that reduction affecting, you know, R&D and getting to market? Hey, thanks a lot, Joe.

Joseph: And so I'm certainly optimistic that eventually will have another shot to work with them and make them successful.

Speaker Change: Okay, Great and then.

Speaker Change: On the workforce reduction is could you maybe drill down a little bit in.

Speaker Change: Broad based across the company or was there certain areas, where there was a little bit more reduction and how do you see that reduction affecting the R&D and the go to market.

Speaker Change: Hey, Thanks, a lot Joe. So this action was really focused on efficiency a little smaller than what we had done last time about 8% net and they give us $15 million of savings for the year and so maybe I would put it into the following buckets.

Todd E. McElhatton: So you know, this action was really focused on efficiency a little smaller than what we had done last time, about 8% net, and they gave us $15 million of savings for the year. And so maybe I would put it into the following categories: The first bucket is what we did in product and technology. And when we think about it there, as COVID started out, we did a lot of hiring, especially offshore. And when we did that, we hired a lot of generalists. And we also let people kind of be scattered throughout wherever they are.

Speaker Change: The first bucket is what we did and product and technology and when we think there is as Covid started out we did a lot of hiring, especially offshore and when we did that we hired a lot of generalists and we also let people kind of be scattered throughout wherever they were and we found was this just wasn't really effective for us we need, especially these generalists.

Todd E. McElhatton: And what we found was this just wasn't really effective for us. We need, especially these generalists and folks, to be where they're able to collaborate and get into an office, and we just weren't seeing productivity from them. And so those were some cuts that we made the decision to make. So from a standpoint of, we were able to get more efficient there, but we were seeing very little profitability. So we feel like there's not been a loss of capacity there. On the go-to-market side, I think Robby hit it as we're not divesting in capacity out in the field, but we're just getting a lot smarter on how we're generating pipeline, what we're doing through partners, what we're doing through marketing, and how we're spending our outbound. We've just learned that there are certain things that are really productive, and there are other areas that aren't.

Speaker Change: And folks to be where theyre able to collaborate and get into an office and we just weren't seeing productivity from them and so those were some reductions that we made the decision to make so from our standpoint, we were able to get more efficient there, but we were seeing very little profitability. So we feel like theres not a loss of capacity there on the go to market side.

Speaker Change: Ravi hit it is we're not divesting and capacity out in the field, but we're just getting a lot smarter on how we are generating pipeline, what we're doing through partners, what we're doing through marketing.

Speaker Change: How we're spending our outbound we've just learned there are certain things are really productive in areas other areas that arent in Alaska as we got really focused on G&A. There is a lot of areas, where we've invested in the last two years on process and technology that has just allowed us to get a lot more efficient and we're dropping those to the bottom line. So overall I think we got the right structure and we still have.

Todd E. McElhatton: And lastly, we got really focused on G&A. There's a lot of areas where we've invested in the last two years on process and technology. That's just allowed us to get a lot more efficient, and we're dropping those costs to the bottom line. So overall, I think we have the right structure, and we still have the investment that we need to deliver a leading product and go-to-market organization. Great, thanks for that color!

Speaker Change: The investment that we need to deliver the leading product and go to market organizations.

Speaker Change: Great. Thanks for that color and then just squeeze one more in I know you were targeting rule of 30.

Joseph Anthony Vafi: And then just going to squeeze one more in. I know you were targeting the rule of 30. And, you know, you're targeting it again here. But, you know, given kind of a couple of the moving parts on the top line and then the cost reductions, do you see yourself getting to the rule of 30 slightly differently than you did previously or last time you provided that outlook? Thanks a lot, guys.

Speaker Change: You are targeting and again here, but given kind of a couple of the moving parts on the top line and then the cost reductions.

Speaker Change: Do you see yourself getting to the rule of 30 slightly differently than you were previously or the last time you.

Speaker Change: <unk> provided that outlook. Thanks, a lot guys.

Todd E. McElhatton: So we've been really disciplined. We said at the beginning of the last year that we weren't sure exactly how things were going to go. If we didn't see the ability to put dollars on the top line that we continue to put on the bottom line. I said at the beginning of last year that, you know, we would do 6% plus profit. We delivered 11. We're going to continue to do that. So obviously, if you take a look at where we've given the guidance, you know, that's going to imply that we have over a 20% operating margin at the end of the year. So yeah, it'll probably be a little bit more on the bottom line. But we've certainly got, you know, an opportunity to accelerate on the top line. So I feel like we've got a lot of different avenues and a lot of different functions or a lot of different avenues for how we can get to that rule of 30, regardless of what the environment looks like.

Speaker Change: So we've been really disciplined we said at the beginning of the last year that we weren't sure exactly how things were going to go if we didn't see the ability to put dollars on the topline that we continue to put to the bottom line I said at the beginning of last year that we would do 6% plus profit. We delivered 11, we're going to continue to do that so obviously if you would.

Speaker Change: Take a look at where we've given the guidance that's going to imply that we're over a 20% operating.

Speaker Change: Margin at the end of the year, so, yes, it'll probably be a little bit more on the bottom line, but we certainly got opportunity to accelerate on the top line. So I feel like we've got a lot of different avenues and a lot of different function or a lot of different avenues for how we can get to that rule of 30, regardless of what the environment looks like.

Operator: And again, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of Joshua Reilly from Needham. Your line is open. Hi, everyone. This is Michael on for Josh today. Thanks for taking my question. I just have two quick ones here.

Speaker Change: And again, if you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Next question comes from the line of Joshua Reilly from Needham Your line is open.

Speaker Change: Hi, everyone. This is Michael on for Josh today, Thanks for taking my question.

Michael: I just have two quick ones here first what are you seeing in terms of invoice volume growth returning.

Michael Ethan Rackers: First, what are you seeing in terms of invoice volume growth returning to maybe a more normalized level over time? And then could you help us understand the impact of lower invoice growth on the NRR? Thanks.

Michael: So maybe a more normalized level over time.

Speaker Change: And then could you help us understand the impact of lower invoice growth to the NRI.

Michael: Thanks.

Tien Tzuo: Yeah, I'll go ahead and feel that maybe Todd, you can jump in. But, Look, I think we said invoice volume was 10%, revenue volume was 12%; compare that to the growth of Unknown Attendee, Luana Wolk, Tien Tzuo, Eylon Liani, Zuora Inc., Unknown Attendee, Luana Wolk, Tien Tzuo, Eylon Liani, Zuora And we can certainly sell additional modules and capabilities within a product that they already have. And so our goal is to give our sellers, right, a broad toolbox, if you will, a tool bag to bring value to our customers.

Speaker Change: Yes, I'll go ahead and feel that maybe you can jump in but.

Speaker Change: Look I think we said invoice volume was 10% revenue volume was 12%.

Speaker Change: If you compare that to the growth.

Speaker Change: The GDP and the large countries you can certainly see that our customer base continues to grow and continues to have.

Speaker Change: A much healthier outsized growth compared to the general economy. So we're in the right part of the market when the revpar of the customer.

Speaker Change: Understand how does that correlate to us I think what you've seen us do and we've been pretty public about it over the last three four years to simply reduce our reliance on invoice volume growth for our own growth and so you've heard us talk about our multiple vectors of growth are multi product land and expand strategy today, we can grow by certainly volume.

Speaker Change: <unk> revenue scheduled revenue revenue growth.

Speaker Change: We had growth of invoice volume, but we can also grow by additional cross sell of products right billing customers that buy revenue Vice versa, you heard us talk about that on the call or even within each of these products. We continue to launch new innovations.

Speaker Change: Broad detection in the building products.

Speaker Change: <unk> and the revenue product and alike, and we can certainly sell additional modules and capabilities within our products that they already have and so our goal is to give our sellers.

Todd E. McElhatton: And as long as we continue to do that, you'll see us ability to grow with our customers. Yeah, maybe Michael, the only thing I would follow up with is, you know, we've talked in the past, maybe 30% or so of our revenue is driven by that volume metric. But you can't have, we don't have a natural correlation for the 10 to 12% growth because as our customers get larger, they get big economies of scale. And that's one of the reasons that there's not an easy correlation for that. And I think Tien hit it right on the money.

Speaker Change: A broad toolbox, if you will a tool bag to bring value to our customers and as long as we continue to do that you're going to see us ability to grow with our customers.

Speaker Change: Yes, maybe Michael the only thing I would follow up with as we've talked in the past, maybe 30% or so of our revenue is driven by that volumetric, but you can't have we not have a natural correlation for the 10% to 12% growth because as our customers get larger they get big economies of scale and Thats one of the reasons that.

Speaker Change: So theres not an easily correlation for that and I think <unk> hit it right. That's certainly a driver for us and as we've seen especially the SaaS market, which is more than 50% of our business as we've seen growth rates come down that's been a headwind for us. This year. We think we'll see this year that we get to the end of that headwind, but that certainly has caused a bit of a headwind for us and as we accelerate that will be.

Todd E. McElhatton: Now, that's certainly a driver for us. And as we've seen, especially the SaaS market, which is more than 50% of our business, as we've seen growth rates come down, that's been a headwind for us this year. We think, you know, we'll see this year that we get to the end of that headwind. But that certainly has caused a bit of a headwind for us.

Michael Ethan Rackers: And as we accelerate, that will be something that we'll be able to take advantage of. But we also have multiple other avenues where we can grow. And the fact that we have a $600 million opportunity within our install base, outside of volume, we think gives us a lot of ability to also grow within our install base. Awesome, thanks so much. I appreciate it.

Speaker Change: Something that we'll be able to take advantage of but we also have multiple other avenues, where we can grow and the fact that we have a $600 million opportunity within our install base outside of volume we think.

Speaker Change: It gives us a lot of ability to also grow within our install base.

Speaker Change: Awesome. Thanks, so much appreciate it.

Brent Thill: And we have time for one more question, and that comes from the line of Brent Thill from Jeffreys. Your line is open. Hello, thanks for the question. This is Eylon Liani on behalf of Brent Phil.

Speaker Change: And we have time for one more question and that comes from the line of Brent Thill from Jefferies. Your line is open.

Brent Thill: Hello, Thanks for the question.

Speaker Change: This is a long liana <unk> on for Brent Thill.

Eylon Liani: My first question is, most companies are telling us that the environment is improving. So other than the macro piece, is there anything structural that we should be aware of? And my second question is on the recent layoffs. How much of the cost savings from the layoffs are being reinvested versus flowing back through the margins? If you can help quantify that, that would be helpful. Thanks. Let me field the first one, and I'll let Todd field the second one.

Brent Thill: My first question is most companies are telling us that the environment is improving so other than the macro piece is there anything structural that we should be aware of and my second question is on the recent layoffs.

Brent Thill: How much of those.

Brent Thill: This cost savings from the layoffs are being reinvested versus flows back through to margins you can help quantify that that would be helpful. Thanks.

Speaker Change: Yeah, Let me field the first one on the <unk> field.

Speaker Change: The second one look we all read the news just like you all right is there a general sense that maybe in the U S. At least we dodged a recession.

Tien Tzuo: Look, we all read the news just like you all, right? Is there a general sense that, maybe, in the US, at least we dodged a recession or a soft landing? Is there a general sense that, hey, you know, maybe the Feds will start to lower interest rates? Was it going to be the start of the year? Was it going to be the end of the year?

Speaker Change: Soft landing is there a general sense that hey.

Speaker Change: Maybe the feds.

Speaker Change: We will start to lower interest rates was it going to be the start of the year with <unk> at the end of the year I'd say, we're picking up the same level of optimism in the air that other companies are but then.

Tien Tzuo: I'd say we're picking up the same level of optimism in the air that other companies are. But then, you know, I don't know if you've obviously been following some of the announcements today. You certainly see other companies be a little more muted in their expectations of what revenue growth will look like this coming year. So I think, you know, I think in this uncertain environment, it's good to be prudent. That's why I like our strategy, right?

Speaker Change: I don't know if you've obviously been following some of the announcements today, we starting this year the companys people aboard muted in their expectations of what revenue growth will look like this coming year. So I think.

Speaker Change: I think in this uncertain environment, it's going to be prudent and Thats why I like our strategy I like our strategy of saying look regardless of what's going on the macro we can continue to sign on new logos, we might be doing to the smaller <unk> smaller land.

Tien Tzuo: I like our strategy of saying, look, regardless of what's going on in the macro, we can continue to sign on new logos. We might be doing it in a smaller ACV, a smaller territory, you know, but that leads to faster sales cycles, that leads to more customers. We've got a proven engine that once we get the customers and we get them live, we can grow with them. You heard the stat that 60% of our customers who were new this year actually grew their spend with us. And so we feel good about the strategy that allows us to continue to set ourselves up to be in a great position for long-term, durable growth, regardless of what happens in the overall macro. Hello, and the only thing I'd also add to what Tien said is, you know, I probably talked to 20 plus CFOs in the most recent quarter.

Speaker Change: But at least the faster sales cycles that leads to more customers. We've got a proven engine that once we get the customers when we get them live we can grow with them you heard the stats about 60% of our customers who renew this year actually grew their spend with us and so we feel good about the strategy that allows us to continue to set ourselves up for the beat a great position for long term durable.

Speaker Change: Growth, regardless, what happens in the overall macro.

Speaker Change: Hello, I'm the only thing I would also add to what <unk> said is I, probably talked to 20, plus CFO is in the most recent quarter and when I talk about today all of them I think everyone's being very cautious in their outlook as they start thinking about this year. So I think the guidance that we've given is really prudent based on the macro from what we're seeing and hearing from our customers on your SEC.

Tien Tzuo: And when I talk to all of them, I think everyone's being very cautious in their outlook as they start thinking about this year. So I think the guidance that we've given is really prudent based on the macro from what we're seeing and hearing from our customers. On your second question, as I noted on the last call, about $15 million of that savings will go to the bottom line for the year. So I appreciate the question. This concludes today's conference call. Thank you for your participation. You may now disconnect. Please wait; the conference will begin shortly.

Speaker Change: Question as I as I noted on the last call was that there was about $15 million of that savings will go to the bottom line for the year. So appreciate the question.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

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