Q1 2024 Copperleaf Technologies Inc Earnings Call

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Operator: Good afternoon, and welcome to Copperleaf's first quarter 2024 results conference call. At this time, all lines are in listen-only mode.

Good afternoon, and welcome to <unk> first quarter 2024 results conference call at this time all lines are on listen only mode.

Operator: Following the call, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, May 9, 2024. Your hosts today are Paul Sakrzewski, Chief Executive Officer of Copperleaf, and Chris Allen, the company's Chief Financial Officer and Chief Operating Officer.

Operator: During the call we will conduct a question and answer session.

Operator: Any time during this call you require immediate assistance. Please press star zero with the operator.

Operator: Oh, it's being recorded on Thursday may nine two working for your hosts today are Paul Sikorski Chief.

Operator: Chief Executive officer of copper Lee.

Operator: Chris Allen, the company's Chief Financial Officer, and Chief operating Officer before we begin I'm required to provide the following statement respecting forward looking information.

Operator: Before we begin, I'm required to provide the following statement respecting forward-looking information. During the call today, the company will make forward-looking statements that are based on assumptions and therefore subject to risk and uncertainties that could cause actual results to differ materially from those projected. The company undertakes no obligation to make these statements except as required by law.

Operator: You can read about these risks and uncertainties in regulatory filings that were filed earlier today. Also, the commentary today will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the two can be found in the company's regulatory documents, which are available on cedarplus.ca or on our website.

Operator: The call today the company will.

Operator: Forward looking statements that are based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Operator: The company undertakes no obligation to undertake these statements except as required by law.

Operator: You can read about these risks and uncertainties some regulatory filings I think we're fine.

Operator: Earlier today also the commentary today will include adjusted financial measures, which are non <unk> Rs.

Operator: Rs measures these should be considered as a supplement to and not a substitute.

Operator: Substitute for all.

Operator: Rs financial measures reconciliations between the two can be found in the company's regulatory documents, which are available on SEDAR plus dossier or on our website.

Operator: In addition, commentary today will include key performance indicators that help measure performance, identify trends affecting the business, formulate business plans, and make strategic decisions. Such key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies.

Operator: In addition.

Operator: Commentary today will include key performance indicators that help elevate the business.

Operator: <unk> performance identity trends affecting the business.

Operator: One relate business plans and make strategic decisions such key performance indicators.

Operator: May be calculated in a manner different than similar key performance indicators.

Operator: We used by other companies.

Operator: Yes.

Operator: And with that I'd like to turn the conference over to Paul.

Cruise Jeep: So cruise Jeep. Please go ahead.

Operator: Thanks very much. And good afternoon, everyone.

Speaker Change: Thanks very much.

Speaker Change: And good afternoon, everyone. Thanks for joining us to discuss <unk> 'twenty 'twenty four first quarter results I'm excited to provide an update of outperformance and sell off coal and share some of our plans for the future.

Paul Sakrzewski: Thanks for joining us to discuss Copperleaf's 2024 first quarter results. I'm excited to provide an update on our performance since our last call and share some of our plans for the future. As is our usual format, I'll make opening remarks before passing the call over to Chris to provide a detailed review of the financial results. Following our prepared remarks, we'll open the call to questions.

Speaker Change: As is our usual format I'll make opening remarks before passing it over to Chris to provide a detailed review of the financial results. Following our prepared remarks, we'll open the call to questions.

Paul Sakrzewski: During the first quarter, Copperleaf performed well across all of our key metrics. This was highlighted by a 32% year-over-year increase in annual recurring revenue and a 32% growth in our backlog, which reached a record $145.5 million at the end of March. Our robust ARR growth highlights our success, expanding our client base and adding to our existing clients, and provides us with visibility for a consistent and predictable growth in our cash flow.

Chris: During the first quarter Copper-leaf performed well across all of our key metrics. This was highlighted by a 32% year over year increase in annual recurring revenue and a 32% growth in our backlog, which reached a record $145 5 million at the end of March.

Paul Sakrzewski: Our robust <unk> growth highlights our success, expanding our client base and adding to our existing clients and provides us with visibility for a consistent and predictable growth about cash flows I.

Paul Sakrzewski: I'd remind listeners that as we become a predominantly SaaS company, an increasing percentage of our expected annual revenue is recognized from contracts that are already in place at the beginning of the year. Further to that point, of our Q1 closing backlog of $145.5 million, $79.5 million will be realized within the next 12 months. This gives us confidence in our accelerating revenue growth for the year. First quarter revenue increased 29% year over year to $25.8 million.

Paul Sakrzewski: I'd remind listeners that as we become a predominantly SaaS company, an increasing percentage of our expected annual revenue is recognized from contracts that are already in place at the beginning of the year.

Paul Sakrzewski: Further to that point all of our Q1 closing backlog of $145 5 million $79 5 million will be realized within the next 12 months. This gives us confidence in our accelerating revenue growth for the year.

Paul Sakrzewski: This revenue growth was driven by a 32% growth in subscription revenue, 27% growth in services revenue, and 20% growth in our perpetual and term-based license revenue. Results from the first quarter highlight the benefits of the operating model refresh we implemented in 2023, supported by continuing industry demand for the solutions we provide. Throughout the first quarter, we actively expanded our presence in core sectors while gaining momentum in new sectors, creating opportunities for future growth.

Paul Sakrzewski: First quarter revenue increased 29% year over year to $25 8 million. This revenue growth was driven by a 32% growth in subscription revenue, 27% growth in services revenue and 20% growth in a perpetual and term based license revenue.

Paul Sakrzewski: <unk> from the first quarter highlights the benefits of the operating model refresh we implemented in 2023.

Paul Sakrzewski: Coded by continuing industry demand for the solutions we provide.

Paul Sakrzewski: Throughout the first quarter, we actively expanded our presence in core sectors, while gaining momentum in new sectors, creating opportunities for future growth we.

Paul Sakrzewski: We reinforced beachheads in established markets by adding to our footprint in transportation and upstream oil and gas while further globalizing our client base in the water sector. In March, we announced that EDP had selected Copperleaf for asset investment planning for two of its distribution businesses operating in Portugal and Spain. Like many energy companies, EDP must overcome a number of critical business challenges to achieve net zero carbon goals.

Paul Sakrzewski: We reinforced beachhead in established markets by adding to our footprint in transportation and upstream oil and gas while further globalizing our client base in the water sector.

Paul Sakrzewski: In March we announced that Edp had selected copulate Peracid investment planning for two of the distribution businesses operating in Portugal, and Spain like.

Paul Sakrzewski: Like many energy companies Edp must overcome a number of critical business challenges to achieve net zero carbon calls we believed that the copper leach solution will support these two operators to take a proactive approach not only to decarbonization, but also to embedding best in class risk management, and we will provide the agility.

Paul Sakrzewski: We believe that the Copperleaf solution will support these two operators to take a proactive approach, not only to decarbonization but also to embedding best-in-class risk management and will provide the agility they need to plan for an uncertain future with concrete, as transportation emerges as an important and relatively new sector for Copperleaf. We announced during the quarter that Vancouver International Airport has selected Copperleaf Portfolio to optimize its asset investment planning. By utilizing Copperleaf's software, YVR will be better positioned to understand where, when, and what to invest in to appropriately mitigate risk and, most importantly, achieve their ambitious strategic goals in the most resource-efficient manner.

Paul Sakrzewski: <unk> they need to plan for an uncertain future with confidence.

Paul Sakrzewski: As transportation images as an important and relatively new sector for copper lead we announced during the quarter that Vancouver International Airport has selected copulate portfolio to optimize their asset investment planning.

Paul Sakrzewski: By utilizing Copper-leaf software why VR will be better positioned to understand where when and what to invest in to appropriately mitigate risks and most importantly achieve their ambitious strategic goals in the most resource effective manner.

Paul Sakrzewski: In Q1, we expanded our growing global energy practice with the addition of European energy infrastructure company Hassunit, a leading energy network company operating in the Netherlands and in northern Germany. Passini launched a European public tender in late 2023 for a risk-based asset management software solution, and following a thorough competitive evaluation, Copperleaf's portfolio for risk-based asset management emerged as the most suitable choice to meet the company's requirements. Hassini joins a growing list of European gas transmission system operators using Copperleaf to make risk-based asset management decisions that maintain the safety of the network, achieve strategic goals, and maximize value. The Copperleaf solution will enable Hassini to face the energy transition with confidence and ensure the reliability of its network.

Paul Sakrzewski: In Q1, we expanded our growing global energy practice with the addition of European Energy infrastructure company has seen.

Paul Sakrzewski: A leading energy network company operating in the Netherlands and in Northern Germany.

Paul Sakrzewski: <unk> launched a European public tender in late 2023 for risk based asset management software solution and following a thorough competitive evaluation copel its portfolio for risk based asset management emerged as the most suitable choice to meet the company's requirements.

Paul Sakrzewski: <unk> joins a growing list of European gas transmission system operators using copper late to make risk based asset management decisions that maintain the safety of the network achieve strategic goals and maximize value. The Copa <unk> solution will enable husky need to pace, the energy transition with confidence and ensure that we.

Paul Sakrzewski: Liability of that network.

Paul Sakrzewski: In addition to new client acquisitions, our client success management team continues to play a crucial role in shaping the client journey and identifying opportunities for material expansion within our installed base to drive even more value for our existing clients. These efforts resulted in an expansion in our net revenue retention rate to 113% in Q1. CSMs are a vital part of our business and ensure that we understand the unique needs and goals of our individual clients and proactively address any challenges they may encounter, further reducing risk, enhancing client satisfaction, and driving lifetime value.

Paul Sakrzewski: In addition to new client acquisitions, our client success management team continues to play a crucial role in shaping the client journey and identifying opportunities for material expansion within our installed base to drive even more value for our existing clients.

Paul Sakrzewski: These efforts resulted in an expansion in our net revenue retention rate to 113% in Q1.

Paul Sakrzewski: T S. EMS are a vital part of our business and ensure that we understand the unique needs and goals of our individual clients and proactively address any challenges. They may encounter further reducing risk enhancing client satisfaction and driving lifetime value.

Paul Sakrzewski: Our partner ecosystem continued to gain traction in the first quarter. Partners played significant roles in wins across all regions and led to increased lead generation, client satisfaction, and accelerated adoption. Our partnerships with SAP and Accenture continue to progress deal maturation and build additional pipeline in Q1. As we announced on our Q4 call, we worked with Accenture to secure the Alliander deal, which, along with Hasumi, is the latest in a growing list of successful joint projects with Accenture.

Paul Sakrzewski: Our partner ecosystem continued to gain traction in the first quarter partners had played significant roles in wins across all regions and led to increased lead generation client satisfaction and accelerated adoption.

Paul Sakrzewski: Our partnerships with SAP and Accenture continued to progress deal mantra maturation and build additional pipeline in Q1.

Paul Sakrzewski: As we announced on our Q4 call we worked with Accenture to secure the Eliana deal, which along with husky knee at the latest in a growing list of successful joint project with extension.

Paul Sakrzewski: Although it's still relatively early days, we believe our partnership with SAP is on track and showing good momentum. To reiterate previous messaging on this topic, with our traditional enterprise software sales cycles, commercial success in 2024 with SAP would be a strong indicator of the potential of the relationship to accelerate adoption of Copperleaf solutions. Our most recent partnership with Siemens was announced in Q4 of 2023. Under this agreement, Copperleaf and Siemens will integrate technical planning with value-based investment optimization to help utilities make investment decisions that accelerate the modernization of electricity grids to deliver on the increasing demand for decarbonized energy at greater capacity while maintaining reliability. Expansion and improvement of the electricity infrastructure are essential to address energy security and fulfill the rising supply needs resulting from the electrification of transport buildings and industrial sectors.

Paul Sakrzewski: Although it's still relatively early days, we believe our partnership with S&P is on track and showing good momentum.

Paul Sakrzewski: To reiterate previous messaging on this topic with our traditional enterprise software sales cycles commercial success in 2020 full with this it would be a strong indicator of the potential of the relationship to accelerate adoption of copper Leach solution.

Paul Sakrzewski: Our most recent partnership with Siemens was announced in Q4 of 2023.

Paul Sakrzewski: Under this agreement Copper-leaf and theme and to integrate technical planning with value based investment optimization to help utilities make investment decisions that accelerate the modernization of electricity grids to deliver on the increasing demand put decarbonize damaging at greater capacity, while maintaining reliability.

Paul Sakrzewski: Expansion and improvement of the electricity infrastructure is essential to address energy security and fulfill the rising supply needs, resulting from the electrification of transport buildings and industrial sectors.

Paul Sakrzewski: New clean power, increasingly integrated and modernized grids, and other related infrastructure must be deployed at unprecedented speed and scale to meet these challenges. This problem presents as an ideal application for Copperleaf, and in partnership with Siemens, we're actively working together with some of our mutual clients to develop solutions that combine our value-based decision solutions with market-leading techno analytics. The Copperleaf community was active in Q1 with the continued rollout of our successful and popular Copperleaf AIPM forum series in Italy, the Netherlands, and Japan.

Paul Sakrzewski: New clean power increasingly integrated and modernized grid and other related infrastructure must be deployed at unprecedented speed and scale to meet these challenges.

Paul Sakrzewski: This problem presents as an ideal application for Copel <unk>.

Paul Sakrzewski: And in partnership with Siemens, we're actively working together with some of our mutual clients to develop solutions that combine our value based decision solutions with market leading tech no analytics.

Paul Sakrzewski: A couple if community with active in Q1 with the continued rollout of our successful and popular Copper-leaf AIP Emporium series in Italy, the Netherlands and Japan.

Paul Sakrzewski: These events, again, saw strong participation from both existing clients and new prospects; thought leaders from the gas transmission, electricity transmission and distribution, manufacturing, and rail transportation sectors gathered to discuss best practices, explore innovative use cases, and gain a deeper understanding of how portfolio optimization and value-based decision making help businesses maximize capital efficiency, manage risk, and achieve strategic goals. At the AIPM Forum in Italy, Societe Gastote Italia, whose implementation only really quite recently went live, was eager to share their journey so far and the business value they're enjoying using Copperleaf.

Paul Sakrzewski: These events again saw strong participation from both existing clients and new prospects.

Paul Sakrzewski: Thought leaders from the gas transmission electricity transmission and distribution manufacturing and rail transportation picked has gathered to discuss best practices explore innovative use cases and gain a deeper understanding of how portfolio optimization and value based decision, making health businesses Maxim.

Paul Sakrzewski: <unk> capital efficiency manage risk and achieve strategic goals.

Paul Sakrzewski: At the AIP EMCORE I mean, Italy, so it's yet to guests 30 Italia, whose implementation only really quite recently went live.

Paul Sakrzewski: We're eager to share their journey.

Paul Sakrzewski: And the business value, they're enjoying using coppola.

Paul Sakrzewski: Implementing our software has enabled SGI to assess the health status of their assets, practically identify optimum intervention type and dates based on clear value criteria, and then model and monitor how risk may evolve over time. Innovation remains at the core of our business. During Q1, Copperleaf released an updated version of its product suite with numerous new features, including enhanced enterprise reporting functionality that leverages cloud-native services, generative AI, online health functionality, and enhancements to the company's geospatial offering, allowing map-based visualization of asset portfolio hierarchies.

Paul Sakrzewski: Implementing our software has enabled STI to assist the health status of their assets practically identify optimum intervention asset.

Paul Sakrzewski: Intervention type end dates based on clear value criteria, and then model and monitor how risk may evolve over time.

Paul Sakrzewski: Innovation remains at the core of our business. During Q1 Copper-leaf released an updated version of its product suite with numerous new features including enhanced enterprise reporting functionality that leverage is cloud native services.

Paul Sakrzewski: Generative AI online help functionality.

Paul Sakrzewski: And enhancements to the company's geospatial offering, allowing map based visualization of asset portfolio hierarchies.

Paul Sakrzewski: Overall, our strong performance in Q1 underscores the effectiveness of our refreshed go-to-market model, which has sharpened our direct sales execution and increased partner engagement. Overall, our results speak to the significant value we provide to our clients and the growing need for the solution that Copperleaf provides. We anticipate continued robust growth in ARR and pipeline development throughout 2024 with our traditional Q4 weighting. These factors, combined with accelerating revenue growth and an ongoing disciplined approach to managing costs, position us for significant progress back toward profitability.

Paul Sakrzewski: Overall, a strong performance in Q1 underscored the effectiveness of our refreshed go to market model, which is shop in that direct sales execution and increased partner engagement.

Paul Sakrzewski: Overall, our results speak to the significant value, we provide to our clients and the growing need for the solution that <unk> provides.

Paul Sakrzewski: We anticipate continued robust growth in Iran, and pipeline development throughout 2024 with our traditional Q4 weighted.

Paul Sakrzewski: These factors combined with accelerating revenue growth and ongoing disciplined approach to managing costs position us for significant progress back towards profitability. This year.

Paul Sakrzewski: We have a great team, the right investments in place, and we remain focused on prudently managing cash and innovating across our entire business with the aim of driving execution in the near to medium term and, at that same time, laying down a sustainable global foundation for future profitable scaling and growth. I'll now turn the call over to Chris to review our financial results in more detail. Thanks, Chris.

Paul Sakrzewski: We have a great team the right investments in place and we remain focused on prudently managing cash and innovating across our entire business with the aim of driving execution in the near to medium term and at the same time laying down a sustainable global foundation for future profitable scaling and growth.

Paul Sakrzewski: I'll now turn the call over to Chris to review, our financial results in more detail. Thanks, Chris.

Chris: Thanks, Paul.

Christopher F. Allen: Good afternoon, everyone. We are pleased to report that our first quarter results continued to deliver growth across all of our key financial metrics. Revenue for the quarter ended March 31, 2024 was $25.8 million, an increase of 29% compared to $20 million in the comparative period. And this growth was driven by the continued addition of new clients and the expansion of existing clients.

Chris: Good afternoon, everyone. We are pleased to report that our first quarter results continued to deliver growth across all of our key financial metrics rare.

Christopher F. Allen: Revenue for the quarter ended March 31, 2024 was $25 8 million, an increase of 29% compared to $20 million in the comparative period and this growth was driven by the continued addition of new clients and the expansion of existing clients.

Christopher F. Allen: Our subscription revenue was $14.9 million for the quarter, an increase of 32% from the prior year, representing 58% of Q1 revenue as compared to 56% of revenue in Q1 2023. Professional services revenue for the first quarter was $8.8 million, an increase of 27% compared to $6.9 million in the prior year. This segment represented 34% of Q1 2024 revenue. And finally, we signed a large perpetual deal in Japan in the first quarter of 2024, bringing our total perpetual revenue for the quarter to $2.1 million, a 20% increase compared to $1.8 million in the prior year.

Christopher F. Allen: Our subscription revenue was $14 9 million for the quarter, an increase of 32% from the prior year, representing 58% of Q1 revenue as compared to 56% of revenue in Q1 2023.

Christopher F. Allen: Professional services revenue for the first quarter was $8 8 million, an increase of 27% compared to $6 9 million in the prior year. This segment represented 34% of Q1 2020 for revenue.

Christopher F. Allen: And finally, we signed a large perpetual deal in Japan in the first quarter of 2024, bringing our total perpetual revenue for the quarter to $2 1, million% to 20% increase compared to $1 8 million in the prior year.

Christopher F. Allen: And this segment represented 8% of Q1 2024 revenue. Over time, we expect to see a decrease in perpetual license revenue as a percentage of total revenue as we continue our transition to becoming a SA only. Annual recurring revenue at March 31, 2024 was $64.6 million, a 32% year over year increase compared to $49.1 million at March 31, 2023. Our net revenue retention rate was 113% at the end of the first quarter, reflecting expansion within our client base due to our strong renewal history.

Christopher F. Allen: Segment represented 8% of Q1 2020 for revenue over time, we expect to see a decrease in perpetual license revenue as perpetual.

Christopher F. Allen: As a percentage of total revenue as we continue our transition to becoming a SaaS only company.

Christopher F. Allen: Annual recurring revenue at March 31, 2024 was $64 6 million or 32% year over year increase compared to $49 1 million at March 31 2023.

Christopher F. Allen: Our net revenue retention rate was 113% at the end of the first quarter, reflecting expansion within our client base on our strong renewal history.

Christopher F. Allen: As Paul mentioned, revenue backlog was a record $145.5 million at March 31, 2024, a 32% increase from $110.5 million as of March 31, 2023. Gross profit was $18.9 million, representing a gross margin of 73%, a 38% increase from $13.7 million and a gross margin of 68% in Q1 2023. Gross margin increased due to an increase in subscription, professional services, and perpetual license revenue and improved utilization of our professional services team, partially offset by an increase in headcount and the cost to support our growing client base.

Christopher F. Allen: As Paul mentioned revenue backlog was a record $145 5 million at March 31, 2024, or 32% increase from $110 5 million as at March 31 2023.

Christopher F. Allen: Gross profit was $18 9 million, representing a gross margin of 73% or 38% increase from $13 7 million and a gross margin of 68% in Q1 2023.

Christopher F. Allen: Gross margin increased due to an increase in subscription professional services and perpetual license revenue.

Christopher F. Allen: And improved utilization of our professional services team.

Christopher F. Allen: We offset by an increase in head count and the cost to support our growing client base.

Christopher F. Allen: We reported an adjusted EBITDA loss of $3.3 million compared to an adjusted EBITDA loss of $10 million in the prior year. The net loss for the quarter ended March 31, 2024 was $2.6 million, or a loss of $0.04 per basic and diluted share, compared to a net loss of $11.8 million, or a loss of $0.17 per basic and diluted share, in the prior year. The decrease in net loss was primarily due to an increase in revenue and a decrease in headcount when compared to Q1 2023.

Christopher F. Allen: We reported an adjusted EBITDA loss of $3 3 million compared to an adjusted EBITDA loss of $10 million in the prior year.

Christopher F. Allen: Net loss for the quarter ended March 31, 2024 was $2 6 million or a loss of four cents per basic and diluted share.

Christopher F. Allen: Paired to a net loss of $11 8 million or a loss of 17 cents per basic and diluted share in the prior year.

Christopher F. Allen: The decrease in net loss was primarily due to an increase in revenue and a decrease in head count when compared to Q1 2023.

Christopher F. Allen: We finished the quarter with a strong balance sheet with $33.5 million in cash and equivalents and $96 million in short and long-term investments, placing us in a strong financial position to build on our advantages and further penetrate the investment planning and decision analytics market. In conclusion, with a strong balance sheet, a refreshed operating model, improving partner traction, and solid unit economics, Copperleaf is well positioned to drive growth through 2024 and beyond.

Christopher F. Allen: We finished the quarter with a strong balance sheet with $33 5 million in cash and equivalents of $96 million in short and long term investments, placing us in a strong financial position to build on our advantage and further penetrate the investment planning in decision analytics market.

Christopher F. Allen: In conclusion with a strong balance sheet, our refreshed operating model improving partner traction and solid unit economics, Copper-leaf is well positioned to drive growth through 2024 and beyond.

Christopher F. Allen: As we continue to build on our advantage and further penetrate the decision analytics market, we're confident that our focus on operational excellence will drive best-in-class margins and accelerate our path to profitability. That concludes our prepared remarks. I'll now hand the call back over to the operator and open it up for questions.

Christopher F. Allen: As we continue to build on our advantage and further penetrate the decision analytics market were confident that our focus on operational excellence will drive best in class margins and accelerate our path to profitability.

Christopher F. Allen: That concludes our prepared remarks, I'll now hand, the back call back over to the operator and open it up for questions.

Speaker Change: Thank you.

Operator: Thank you. Ladies and gentlemen, we now begin the question and answer session. If you'd like to ask a question, please press star, fold by one on your telephone keypad. If you'd like to withdraw your question, please press star, fold by two. If you're using a speakerphone, please lift the handset before pressing any keys.

Speaker Change: Ladies and gentlemen.

Speaker Change: We will now begin the question and answer session, if you'd like to ask a question. Please press star followed by one on your telephone keypad, if you'd like to withdraw your question. Please press star followed by <unk>.

Operator: You're using a speaker phone please lift the handset before pressing any keys.

Operator: Your first question comes from Gavin Fairweather from Cormark. Please go ahead.

Speaker Change: Our first question comes from Gavin Fairweather Tour from Hallmark. Please go ahead.

Gavin Fairweather: Oh, hey, good afternoon. Congratulations on the results. Maybe we can just start on the upsell. Nice to see the uptick in net dollar retention rates this quarter. Curious what you would attribute that to? Are budget constraints easing a little bit in the client base? Or have you made some changes to customer success processes, which has led to better

Gavin Fairweather: Oh, Hey, good afternoon. Congrats on the results maybe we can just start on the upsell and nice to see the uptick and that's all a retention rate. This quarter curious what you would attribute that to our budget constraints easing a little bit in the client base or if he made some changes to customer success milestones, which has led to better execution.

Paul Sakrzewski: Yeah, thanks, Gavin. Look, I think we're probably I think we're seeing the market conditions as more or less equivalent. I don't think we're seeing directionally things improving or getting worse one way or the other. I do think that we're getting better at executing on, you know, not only bringing in new logos into the fold but also working with our clients to identify new opportunities. And that's exactly what this was. You know, we put in place a dedicated CSM team, and they're doing a good job. So we're starting to see some of that operating model benefit.

Speaker Change: Yes, thanks, Kevin.

Gavin Fairweather: Look I think we are probably.

Paul Sakrzewski: But I think we're seeing the market conditions is more or less equivalent I don't think were seeing directionally things, improving or getting worse, one way or the other I do think the way getting better.

Paul Sakrzewski: At at executing on not only bringing in new logos into the pole, but also working with our clients to identify new opportunities and that's exactly what this was.

Paul Sakrzewski: We put in place a dedicated CSM team and they're doing a good job. So we're starting to see some of that operating model benefit.

Gavin Fairweather: Nice to hear, and you referenced, you know, the momentum in the partner selling motions. I think the general expectation, and we've spoken in recent quarters, is that that would build kind of later in the year. So curious if you would characterize this as seeing traction maybe earlier than expected.

Gavin Fairweather: Nice to hear and you referenced the momentum and the partner selling motions I think the general expectation and when we've spoken in recent quarters that would build kind of later in the air. So curious if you're you would characterize us as seeing traction maybe earlier than expected.

Paul Sakrzewski: No, I think, you know, we're seeing that evolve as we hoped it would. So all of the in-going sort of leading indicators are looking positive for us. You know, if we do see something show up early, that would be nice. But, you know, we're still in the position where we think that we should start to see actual results show up I think at the end of this year and then and then into next year.

Speaker Change: No I think.

Paul Sakrzewski: Yeah.

Paul Sakrzewski: We're seeing that evolved as we hoped it would so all of the ingoing sort of leading indicators looking are looking positive for us.

Paul Sakrzewski: If we do see something show up early that would be that it would be nice.

Paul Sakrzewski: But we're still in a position where we think that the.

Paul Sakrzewski: We should start to see.

Paul Sakrzewski: Actual results show up I think at the end of this year and and then and then into next year.

Gavin Fairweather: Okay, and then just lastly for me on services, nice acceleration in Q1 after kind of a tougher 2023. Can you just speak to the level of the services backlog which you have now and whether this level of billings can generally be maintained over the course of this year? Yeah, I'll take that one.

Speaker Change: Okay and then just lastly for me on services, a nice acceleration in Q on naphtha or kind of a tougher 2023 can you just speak to the level of the services backlog, but what you have now and weather kind of this level of billings can generally be maintained over the course of this year.

Christopher F. Allen: Yeah, I'll take that one, Gavin. So certainly, you know, as we discussed at the end of the year, entering the year with a good backlog, and so we were pleased to see that, you know, materialize in revenue in Q1. I guess, generally speaking, yeah, I'd say that's probably in the rough order of run rate we could expect for the year, recognizing that it does fluctuate from period to period. You know, clearly, we often tend to see slowdowns in the summer months. But I think that's a good run rate for the year.

Speaker Change: Yeah, I'll take that one galvin.

Christopher F. Allen: So certainly you know as we've discussed actually out at the end of the year entering the year with a good backlog and so we were pleased to see that.

Gavin Fairweather: Materialize in revenue in Q1.

Christopher F. Allen: I guess generally speaking yeah, I'd say that that's probably in the rough order of a run rate as we could expect I guess for the year recognizing that it does fluctuate period to period.

Christopher F. Allen: You know clearly we.

Christopher F. Allen: Often tend to see slowdowns in the summer months, but I think that's a good run rate for the year.

Gavin Fairweather: Thanks, so much the top line.

Operator: Your next question comes from Thanos from BMO Capital Markets. Thanos, please go ahead.

Christopher F. Allen: Your next question comes from Dan <unk> from BMO capital markets. Please go ahead.

Thanos: Hi, good afternoon.

Thanos Moschopoulos: Thank you all for joining us this afternoon. OPEX came in a fair bit lower than we were expecting. Can you provide some color in terms of the OPEX trajectory that we should see going forward with respect to the balance of the air?

Thanos: Opex came in a fair bit lower than.

Thanos Moschopoulos: We were expecting.

Thanos Moschopoulos: Can you provide some color in terms of the opex trajectory that we should see.

Thanos Moschopoulos: Thanks.

Thanos Moschopoulos: Going forward the balance of the year.

Christopher F. Allen: Yeah, sure. I'll take that one. Hi Thanos.

Thanos Moschopoulos: Yeah sure I'll take that one hi panels.

Christopher F. Allen: So definitely a boost in both R&D and G&A coming off Q4. And I think both of those are good run rate numbers for the year, basically. As we've discussed on prior calls, we are, you know, carefully managing our costs. That includes, for us, the majority of our expenses, headcount, and largely aiming to hold those two departments fairly flat for the year. So I would, you know, I would expect those to be decent run rate numbers on both cost of revenue, so COGS, and sales and marketing.

Speaker Change: So definitely I check up on both R&D and G&A coming off Q4, and I think both of those are good run rate numbers for the year basically as we've discussed on prior calls we are.

Christopher F. Allen: Carefully managing our cost that includes for US you know the majority of our expenses head count and.

Christopher F. Allen: And largely aiming to hold those two departments fairly flat for the year. So I would you know.

Christopher F. Allen: I would expect those to be decent run rate numbers on both cost of revenue, so cogs and sales and marketing.

Christopher F. Allen: Again, we've been careful on hiring and will be through the first half just as we see our deals show up. So, you know, again, as we've indicated in prior calls, we expect to add capacity for both billable services, resources, and sales capacity through the back half of the year. So we will see those tick up through the year, not only for the headcount but on the cost of goods side, you know, with the projects and support of a growing customer base and on the sales side, commissions and related expenses for that as well.

Christopher F. Allen: Again, we've been careful on hiring and will be through the first half just as we see our our deals show up so.

Christopher F. Allen: Again as we've indicated in prior calls we expect to add capacity for both billable services resources and sales capacity through the back half of the year. So we will see those tick up.

Christopher F. Allen: Through the year.

Christopher F. Allen: Not only for the head count, but on the cost of goods side.

Christopher F. Allen: With with the projects and in support of our growing customer base and on the sales side commissions and related expenses.

Christopher F. Allen: For that as well.

Paul Sakrzewski: Great. Uh, Paul, can you expand on your progress in the transportation vertical? Obviously, you've had some good wins there recently, and it sounds like you have a growing pipeline in that sector. So maybe give us a bit of an update in terms of the traction you're seeing there.

Christopher F. Allen: Great.

Christopher F. Allen: Carl can you.

Paul Sakrzewski: Expand on your progress in the transportation vertical obviously, some good wins, there recently and it sounds like you have a growing pipeline in that sector.

Paul Sakrzewski: Maybe give us a bit of an update in terms of.

Paul Sakrzewski: The traction you're seeing there.

Paul Sakrzewski: Yeah, some of the things we've been able to announce, and some obviously remain in the background, and some of these have been expansion wins in organizations that we've previously announced. And we saw Houston Metro come through at the end of last year, and Copenhagen Metro as well. You know, those installations are now live and starting to be good references for us. And, like I said, we signed up YVR. Again, that was a win that we were able to announce during Q1, and that is now live.

Paul Sakrzewski: Yes, some of the some of the thing then as some of the things we've been able to announce and some come obviously remain in background and.

Paul Sakrzewski: Some of the debating expansion wins in.

Paul Sakrzewski: <unk> that we've previously announced and we saw Houston Metro come through at the end of last year in Copenhagen Metro as well.

Paul Sakrzewski: These installations in that live in and starting to be good references for us and like I said, we signed up one again that was a that was a win that we've been able to announced during Q3 Q1 end and that's a that is now live.

Paul Sakrzewski: And so, you know, as we build the first one, two, three references in each one of the, you know, the flavors in the transportation sector, those start to become good references for us, they come to our conferences, they speak well of us as the system goes live, and they start to generate value for us. So we're, we're starting to enjoy the benefit of that acceleration. One thing I will say is that we as a company, I think, again, just from an execution point of view, we've gotten better at going from the first, our clients that we see in the new sector, packaging that up properly, you know, publishing the lesson, turning that into a reference, and moving into the second, third, and fourth sale more quickly than we had as a traditional business, but we're seeing that nice acceleration.

Paul Sakrzewski: And so as we as we build the first one to three references in each one of the flavors and the transportation sector.

Paul Sakrzewski: <unk> start to become good references for us they come to our conferences they speak well of it.

Paul Sakrzewski: As the system goes live and they've got to generate value from them. So we're starting to enjoy the benefit of that that acceleration.

Paul Sakrzewski: One thing I will say is that we as a company I think again just from an execution point of view, we've gotten better at going from the third.

Paul Sakrzewski: Clients that we see it in your sector packaging net up properly publishing the lesson turning that into a a reference and moving into the second third and fourth tail more quickly than we had.

Paul Sakrzewski: As a as a traditional business but.

Paul Sakrzewski: We're seeing that nice acceleration in the transportation sector is a good sector for us.

Paul Sakrzewski: The transportation sector is a good sector for us. There are a lot of linear assets in there, the contiguous assets that we have some specialist software around. So it's a very good adjacency, and the problem sets up very well for Copperleaf. Adoption is accelerating.

Paul Sakrzewski: There's a lot of linear assets in there.

Paul Sakrzewski: I can take it with that that we have some specialist software around so it's a very good adjacency in the <unk> and the problem sets up very well for a couple of weeks so until adoption is accelerating.

Paul Sakrzewski: Outside of utilities, would you characterize that as being the sector with the most opportunity as you look at the pipeline over the next 12-18 months?

Paul Sakrzewski: Outside of utilities would you characterize that as being the sector with the most opportunity.

Paul Sakrzewski: As you look at the pipeline over the next 12 18 months.

Paul Sakrzewski: Oh, it's certainly one of our positive sectors. I'd say probably, probably yes, but you know, oil and gas holds a lot of promise for us as well. So, you know, it's neck and neck with a couple of other things. But yeah, definitely one of the ones that we're most excited about.

Speaker Change: Oh, it's certainly one of the positive sectors.

Paul Sakrzewski: Probably probably yes, that's all.

Paul Sakrzewski: Oil and gas holds a lot of promise for us as well, so it's neck and neck with a with a couple of other things, but but yes, it's definitely one of the ones that we're most excited about.

Paul Sakrzewski: Great. I'll pass the line. Thanks.

Speaker Change: Great I'll pass along thanks.

Speaker Change: Thanks, Tim.

Operator: Your next question comes from Dylan Becker from William Blair. Dylan, please go ahead.

Paul Sakrzewski: Your next question comes from Dylan Becker William Blair. Please go ahead.

Dylan Tyler Becker: Hi guys, it's Faith. I'm here for Dylan.

Dylan Tyler Becker: Hi, guys at the same time per gallon congrats again on the corner I guess I kind of wanted to double click on the electrification opportunity here, we're seeing a lot of capital flow into the market. So it seems like its pretty high states from a decisioning standpoint, and just curious if you could add in some color what you're hearing from customers about this transition.

Faith: And if any regions or kind of looking to transition quicker than others or what this overall opportunity can mean for you guys.

Paul Sakrzewski: Congratulations again on the corner. I guess I kind of want to double click on the electrification opportunity here. We're seeing a lot of capital flow into the market, so it seems like it's pretty high stakes from a decision-making standpoint. I'm just curious if you could add some color to what you're hearing from customers about this transition and if any regions are kind of looking to transition quicker than others or what this overall opportunity can mean for you guys.

Faith: Yes, Thanks, Mike, we we see it as being a big opportunity and I think it's really only just getting going.

Paul Sakrzewski: Yes, thanks, Faith. We see it as being a big opportunity. And I think it's really only just getting going. You know, electric utilities are a reasonably traditional business. They are used to growing their networks over time and growing their capacity over time. There's a huge inflection point as, you know, transportation electrifies and, you know, and indeed buildings and, and also manufacturing. So economic growth is largely predicated on the provision of energy, and increasingly, that's down to the power companies.

Paul Sakrzewski: The electric utilities are a reasonably traditional.

Paul Sakrzewski: Business.

Paul Sakrzewski: They are used to growing their networks over time and growing their capacity over time, there's a huge inflection point as transportation electrified and and indeed.

Paul Sakrzewski: The buildings and.

Paul Sakrzewski: And also manufacturing.

Paul Sakrzewski: So economic growth is largely predicated on the.

Paul Sakrzewski: On the provision of energy and increasing that increasingly that's down to the power company. So they have to put in they have to make the most out of the network that they had which sometimes involves non wired solutions, just being just being more efficient in the way that they use their networks.

Paul Sakrzewski: So they have to put in, they have to make the most out of the network that they have, which sometimes involves non-wire solutions, just being more efficient in the way that they use their network. But the estimates are that they will need to 3x the capacity of their grid. And at the same time, they're trying to decarbonize all of those implied investments to get from point A, which is the current status quo, to a future 3X capacity decarbonized grid. All of those different implied investments that need to be made are a perfect use case. For example, sequencing nodes is a perfect use case for Copperleaf.

Paul Sakrzewski: But the estimates are that they will need to most countries will need to three X the capacity if they grids.

Paul Sakrzewski: And at the same time, they trying to Decarbonize all of those implied investments to get from point, a which is the current.

Paul Sakrzewski: Status quo to our future.

Paul Sakrzewski: <unk> capacity Decarbonize grid all of those different.

Paul Sakrzewski: Applied investments that need to be made.

Paul Sakrzewski: Perfect use case, he could think knows they were perfect use fake use case for copper lead and I think this is one of the really exciting things our relationship with demons is very exciting the model the current grid in the future grid and.

Paul Sakrzewski: And I think, you know, this is one of the really exciting things. Our relationship with Siemens is very exciting. They model the current grid and the future grid, and we help to close the gap between point A and point B with the most efficient use of investment. So we're very excited about the energy trend.

Paul Sakrzewski: We help to close the gap between point, a and point b with the most efficient use of use of investment. So we have we're very excited about the about the energy transition.

Paul Sakrzewski: You know, that for sure is exciting. If I could squeeze another one in quickly, just, can you provide maybe a little bit of color on the overall pipeline? You've talked about the record backlog and the strength you're seeing in water globalization, transportation, oil, and gas. Is there any way you can break out maybe this backlog between the more core markets, any growing contribution from these emerging markets, or how should we think about that?

Speaker Change: And all of that for sure as exciting if I could squeeze another one in quickly.

Paul Sakrzewski: Can you provide maybe a little bit color on the overall pipeline you've talked about record backlog.

Paul Sakrzewski: And the strength youre seeing in water globalization transportation oil and gas is there any way you can break out maybe this backlog between the more core markets and a growing contribution from these emerging markets or how should we think about that.

Paul Sakrzewski: I look every time we break into a new sector, it opens up a huge amount of new pipeline, and you know, we're increasing our sales coverage all the time. We're a little bit careful about bringing on new pipeline, you know; we don't want things just sitting in the pipeline for the sake of it or pipeline expansion for the sake of it; we need to bring new pipeline in when we've got the resources to execute on it in the geography where it exists.

Paul Sakrzewski: Oh look every time, we break into a new sector. It opens up a huge amount of new pipeline and where we are increasing our sales coverage all the time.

Paul Sakrzewski: We're a little bit careful about bringing on new pipeline. We don't one thing just sitting in the pipeline for the sake of it to a pipeline expansion for the sake of it we need to bring new pipeline in when we've got the resources to execute on it and the geography, where it exists.

Paul Sakrzewski: So, you know, the TAM is huge. We were, we published at the time of the IPO what we thought was a quite realistic $12 billion TAM. We're still a relatively small company. It's all white space.

Paul Sakrzewski: So.

Paul Sakrzewski: The Tam is huge.

Paul Sakrzewski: We published at the time of the IPO quite what we thought was a quite realistic $12 billion Tam we're still a relatively small company. It's all white space. So we need to be fairly programmatic that bring your pipeline on but the pipeline grows all the time as we get as we embed our geographic footprint and get more industries and strained so.

Paul Sakrzewski: So we need to be fairly programmatic about bringing pipeline on, but the pipeline grows all the time, you know, as we get as we embed our geographic footprint and get more industries in. I don't know that it's meaningful to break it out in terms of the pipeline associated with core industries and emerging industries. We are careful about, you know, well, our near-term pipeline, just to make it a bit more nuanced, is more heavily weighted towards our core industries, but we're careful about making sure that we've got the future pipeline balanced across those emerging industries so that we can continue to generate rapid growth. So we're being quite careful about what the near-term and the long-term pipeline looks like.

Paul Sakrzewski: I don't know that it's meaningful to break it out in terms of the pipeline associated with core industries.

Paul Sakrzewski: Emerging industry.

Paul Sakrzewski: Careful about.

Paul Sakrzewski: Well.

Paul Sakrzewski: Near term pipeline just to make it a bit more nuanced is more heavily weighted towards our core industries, but we're careful about making sure that we've got the future pipeline balanced across those emerging industry. So that we can to continue to generate rapid growth.

Paul Sakrzewski: So we're being quite plan full about about what the what the near term and the long term pipeline looks like.

Paul Sakrzewski: That's cool. Thanks for the call. That's it for me, guys.

Speaker Change: Well that's cool thanks for the color that's it for me guys.

Speaker Change: Okay. Thanks.

Operator: [inaudible] Your next question comes from John Cho from National Bank. John, please go ahead.

Paul Sakrzewski: Your next question comes from John <unk> from National Bank. Please go ahead.

John Cho: Yes, thanks for taking my question and congrats on the strong quarter. Regarding the new verticals, such as transportation and upstream oil and gas, once you get into those verticals, how long does it usually take to scale your presence there? Any timeline we may think about?

John Cho: Yes, Thanks for taking my question and congrats on a strong quarter regarding the new verticals, such as transportation upstream oil and gas and once you get to get into those verticals. How long does it usually take to scale. Your process. There any time line when we think about.

Paul Sakrzewski: Yeah, that's kind of what I was getting to before. It's hard to say exactly how long that is.

Speaker Change: Yeah, that's that's kind of what I was I was getting to the core.

Paul Sakrzewski: It's hard to say exactly how long that is but I think the directionally. We're getting faster is going from the first reference that we bring into a new vertical in the second and third and that is because we have dedicated resources in a process associated with it we have our global growth team part of the global growth team is in industries team.

Paul Sakrzewski: But I think the direction in which we're getting faster is going from the first reference that we bring into a new vertical and the second and third. And that is because we have dedicated resources and a process associated with it. We have our global growth team; part of the global growth team is an industries team. They are largely responsible for breaking us into new industries and then packaging up the way we break into those new industries and patching packaging up the stories into good reference cases that we can use to, you know, execute on the rest of the pipeline that comes behind those first one and two. So planfully and directionally, we're getting better and faster at it. That's what I would say. And And I think that it will continue to accelerate. OK.

Paul Sakrzewski: They are largely responsible for breaking out into new industry, and then packaging up the way we broke into the new industries and patchy packaging up the stories into good reference cases that we can use to execute on the rest of the pipeline that comes behind those two just wanted two references.

Paul Sakrzewski: Plan fully and direct Directionally, we're getting better and faster at it.

Paul Sakrzewski:

Paul Sakrzewski: What I would say.

Paul Sakrzewski: And I think that it will continue to accelerate.

Christopher F. Allen: Okay, thanks for the colors. And the PS revenue is quite strong this quarter. When I think about the relationship between PS and SS, so how much is the PS revenue leading Ikeda for the rest of the business?

Speaker Change: Okay. Thanks for the colors and the P. S revenues quite strongest quarter, when I think about the relationship between PFS and SaaS. So how much is the P. S revenue leading indicator for the rest of the business.

John Cho: So I'd say, I know, I'm not sure that it would necessarily be a leading indicator, but basically, you know, the vast majority of our professional services are implementation services. And effectively, you know, our contracts start generating revenues on day one of the license transfer. So I don't know how much you can necessarily read into that as much as, you know, looking at the backlog at the end of the year and just the next 12 months, kind of looking at it that way.

Speaker Change: So I'd say I don't I'm not sure that it would necessarily be a leading indicator basically.

John Cho: The vast majority of our professional services or implementation services and effectively.

John Cho: Our contract start generating revenue.

John Cho: On day, one of the license transfer so I don't know how much you can necessarily read into that as much as.

John Cho: You know looking at the backlog at the end of the year and just the next 12 months.

John Cho: Kind of looking at it that way.

Christopher F. Allen: Okay, I got it. I'll pop the line.

Speaker Change: Okay got it I'll pass along.

Speaker Change: Thanks, John.

Operator: Your next question call comes from Paul Treiber from RBC Capital Markets. Paul, please go ahead.

Speaker Change: Your next question calls comes from pulse.

Paul Michael Treiber: <unk> <unk> from RBC capital markets. Paul. Please go ahead.

Paul Michael Treiber: Yeah, thanks very much. Good afternoon. Just when you look at AR, AR growth, obviously quite strong this quarter, net new AR, I think it's the second highest level in the last three years or so. Very good momentum coming off a strong quarter last quarter. Was there anything unusual about this quarter that maybe helped that may not continue? Or does it just reflect the strength in the overall business coming through this quarter?

Paul Michael Treiber: Okay. Thanks, very much and good afternoon, just when you look at our growth obviously quite strong this quarter net new air our second highest level in the last three years or so.

Paul Michael Treiber: Very good momentum.

Paul Michael Treiber: Coming off a strong quarter last quarter was there anything unusual about this quarter that maybe hoped.

Paul Michael Treiber: That may not continue or does it just.

Paul Michael Treiber: Quite the strength in the overall business coming through this quarter.

Paul Sakrzewski: Yeah, thanks, Paul. I mean, I couldn't point to any specific thing that necessarily made this quarter anomalous. I think, you know, we are getting better at executing on the opportunity in front of us. We're well organized. We've got the resources that we need to maintain sustained attention on all of those accounts. We've been careful about focusing on executing pipeline, you know, just making sure that we have enough pipeline, but it's at the right quality.

Speaker Change: Yes, Thanks, Paul I mean, I couldn't point to any specific thing that that necessarily made this quarter.

Speaker Change: Normal is.

Speaker Change: I think we are.

Paul Sakrzewski: Getting better at executing on the opportunity in front of us where we are well organized.

Paul Sakrzewski: We've got the resources that we need to to maintain sustained attention on all of those accounts.

Paul Sakrzewski: And it's progressing with the right kind of velocity so that things can become a little bit more predictable. But, but I wouldn't point to any macroeconomic factor or any one deal or anything like that, that would make you an anomaly.

Paul Sakrzewski: Been careful about focusing on executing pipeline.

Paul Sakrzewski: Just making sure that we have enough pipeline, but it's at the right quality and it's it's progressing with the right kind of velocity.

Paul Sakrzewski: But things can become a little bit more predictable, but but I wouldn't point to any macroeconomic factor or any one deal or anything like that that would make Q1 anomaly.

Paul Michael Treiber: And you called out the operating model refreshes, as you know, you're seeing the returns on that AR growth has accelerated. When you look at the operating model refresh, can you point to the biggest factors that are really driving the improved either conversion of pipeline or just the ability to close deals here?

Paul Sakrzewski: And you called out like the operating model refreshes.

Paul Michael Treiber: You're seeing seeing the returns on that our growth has accelerated.

Paul Michael Treiber: When you look at the operating model refresh.

Paul Michael Treiber: Can you point to the biggest factors that are really driving the improved either conversion of pipeline or just the ability to close deals here.

Paul Sakrzewski: No, I think that's actually the key to it, Paul. It's not any one thing. It's the whole model, working in concert and just making sure that you're focused on the right things and you've got dedicated resources focused on those highest-value things to do. And making sure that everything kind of works in concert. I really couldn't call that any one particular thing, I think.

Speaker Change: No I don't think it's I think that's actually the key to it Paul it's not any one thing.

Paul Sakrzewski: It's the whole model working in concert and just making sure that you're focused on the right things and you've got dedicated resources focused on on those those those highest value things to do.

Paul Sakrzewski: And make sure that everything everything kind of works in concert.

Paul Sakrzewski: I really couldnt coal at any any one particular thing I think.

Paul Michael Treiber: You know, aside from the operating model refresh, I think part of it is tenure as well. You know, we've got people now who've been in place for some time. We've been able to get out and have some face-to-face meetings with them. We're face-to-face with clients again. So, you know, some of that is just naturally going to accelerate things. But I think the field team is doing well, and they're clear about what they're doing, and their pipeline is high quality. And the velocity is good,

Paul Sakrzewski: Aside from the operating model refresh I think part of it is tenure as well we've got.

Paul Michael Treiber: People know who had been in place for some time, we've been able to get out and have some face to face meetings within with face to face with clients again so.

Paul Michael Treiber: Some of that is just naturally going to accelerate things, but I think the field team is is doing well and the clearer about what theyre doing in their pipeline has high high quality in.

Paul Sakrzewski: I think the global growth office is doing a good job, and value engineering is clearly having an impact. Industry specialists are having an impact. I think we're getting good at positioning our product. The partner network is working well. I think, again, just going back to the operating model, for those who've been following closely, we formalized the global field services organization last year. And at the beginning of the year, we executed this year, instead of a sales kickoff meeting, we had a field kickoff meeting where we brought the entire field, including professional services, into Vancouver and got everybody together so that we could talk together about how we seamlessly go from discovery of new opportunities through the sales process straight into execution and then into future phases.

Paul Michael Treiber: And the velocity is good I think the growth global growth office is doing a good job.

Paul Sakrzewski: Engineering is clearly having an impact industry specialists to having an impact I think we're getting good at positioning our products.

Paul Sakrzewski: The partner network as is working well.

Paul Sakrzewski: I think.

Paul Sakrzewski: Again, just going back to the operating model.

Paul Sakrzewski: For those who've been following closely we formalized the global field services organization last year.

Paul Sakrzewski: And in the beginning of the year, we executed this year instead of a sales kickoff meeting we had a field kickoff meeting where we brought the entire field, including professional services into Vancouver, and got everybody together.

Paul Sakrzewski: We're talking together about how we seamlessly go from discovery of new opportunities through the sales process straight into <unk>.

Paul Sakrzewski: That end-to-end process, I think, is improving as well. So, you know, I think it's a suite of different things. I'd hate to point to any one specific thing and say that's the solution.

Paul Sakrzewski: Execution, and then enter into future phases, so that into wind.

Paul Sakrzewski: This I think is improving as well.

Paul Sakrzewski: So I think it's a suite of different things I'd hate to point to any one specific thing and say that's the solution.

Paul Michael Treiber: helpful, good to hear the Just lastly, for me, you know, it does sound like there's more confidence on the path to profitability this year. How do we think about that? Like, is it greater confidence on the revenue line? Driving? Operating Leverage, or are you seeing more visibility to cost in the near term? Yeah, look at

Speaker Change: That's helpful and good to hear and just lastly for me you know it does sound like there is more confidence on that on the path to profitability. This year.

Paul Michael Treiber: Do we how do we think about that like is it is it greater confidence on the revenue line.

Paul Michael Treiber: Driving.

Paul Michael Treiber: Operating leverage or.

Paul Michael Treiber: Are you seeing more visibility to costs in the near term.

Paul Sakrzewski: Yeah, look, it's always a combination of both. But when you say we're, it feels a bit funny to me to hear you say that we're more confident in our path back towards profitability. We've always been confident in getting back to profitability. You know, it's easy to forget that prior to the IPO, we grew 50% CAGR off our balance sheet for nearly a decade at break even or slightly on the other side of it. So our unit economics of our deals is still what they were in those days. But we invested ahead of the curve to grow some capacity and put in place our global footprint.

Speaker Change: Yes look it's always a combination of both but when you say.

Paul Sakrzewski: It feels a bit funny to me to hear you say that we're more confident in our path back towards profitability, we have always been confident in getting back to profitability.

Paul Sakrzewski: It's easy to forget that prior to the IPO, we grew 50% CAGR off that balance sheet for nearly a decade with breakeven or slightly one side or the other of it. So our unit economics of that deal is still what they were in those days.

Paul Sakrzewski: We invested ahead of the curve to grow some capacity and put in place a global footprint.

Paul Sakrzewski: We knew we were going to run some losses in a couple of years, and we forecast that. And now we're on our way back to profitability, riding the good deal economics back to where we always used to live. So we've always been confident in getting there. It's just a matter of timing. Macroeconomic conditions probably pushed us back just a little bit. But in the end, it's always a top and bottom.

Paul Sakrzewski: You were going to run some losses in a couple of years and we forecast that and now we're on our way back to profitability riding those good deal economics back to back to where we were we always used to live. So we've always made confident in getting there. It's just a matter of timing.

Paul Sakrzewski: Macroeconomic condition, probably pushed it back just a little bit but in the end, it's always a top and bottom mix, it's growing the revenue containing the costs.

Paul Sakrzewski: It's growing revenue and containing costs. And yeah, I mean, let's remember that we're a growth business. We're not going to save our way to success here. We've got a huge TAM in front of us, and we should be growing at good rates. And that's what will lead us to profitability.

Paul Sakrzewski: I mean, let's let's remember that we're a growth business, we're not going to say it that way to success here, we've got a huge tam in front of us and we should be growing it.

Paul Sakrzewski: Rates and and that's what that's what leads us to profitability.

Speaker Change: Okay. Thanks for taking the questions.

Speaker Change: Thanks, Matt.

Operator: Your next question comes from Todd Copeland from CIBC. Todd, please go ahead. Okay.

Paul Sakrzewski: Your next question comes from Todd Copeland from CIBC Todd. Please go ahead.

Todd Adair Coupland: Great, thanks. Good evening, everyone.

Todd Adair Coupland: Great. Thanks, good evening everyone.

Todd Adair Coupland: I had a couple of questions. The first one following on the.

Todd Adair Coupland: I had a couple questions. The first one, following on the electrical grid question, there's been a lot of discussion in the U.S. about not having the capacity to support hyperscaler growth and generative AI demands, and what are the utilities going to do about that? Is that impacting your pipeline and business, and possibilities in that market? Just talk about that a little bit.

Todd Adair Coupland: Electrical grid question Theres been a lot of discussion in the U S about not having the capacity to support hyperscale or growth in generative AI demands and what are the utilities going to do about that.

Todd Adair Coupland: Is that impacting your pipeline in business and possibilities in that market just talk about that a little bit.

Paul Sakrzewski: Yeah, I'm sure. Hi, Todd.

Speaker Change: Yeah, sure Hi, Hi, Todd I'm sure it is.

Paul Sakrzewski: But it's just part of the overall demand situation, that's placing such pressure on the electric grid.

Paul Sakrzewski: I'm sure it is, but it's just part of the overall demand situation that's placing such pressure on the electric companies. And it's a double flip with a twist, right? They have to maintain their reliability. Nobody wants the lights to go out.

Speaker Change: And it.

Speaker Change: It's a double.

Speaker Change: Double flip with a twist right.

Paul Sakrzewski: To maintain the their reliability nobody wants to life to go out.

Paul Sakrzewski: They have to 3 or 4x, in some cases, their capacity, and they have to decarbonize all at the same time and in a rapid, rapid period. Some of the increased demand is definitely coming out of those data centers. Generative AI has a huge requirement for electric energy. But it's just one of the things, the electrification of transport. And when that gets to road transportation in terms of transportation of goods and trucking, that will put another element on top of that and on top of the general sort of passenger transport electrification.

Paul Sakrzewski: They have two three or four rigs in some cases their capacity.

Paul Sakrzewski: And they have to Decarbonize all at the same time and in a rapid rapid.

Paul Sakrzewski: Period so.

Paul Sakrzewski: Some of the increased demand is definitely coming out of.

Paul Sakrzewski: The data centers generative AI is.

Paul Sakrzewski: As you know has a huge requirement for a familiar for electric energy, but its just one of the things you know the electrification.

Paul Sakrzewski: Transport and when that gets too.

Paul Sakrzewski: To road transportation intensive in terms of the transportation of goods and trucking that will put another.

Paul Sakrzewski: Element on top of that and on top of the general sort of passenger transport electrification.

Paul Sakrzewski: And, you know, it's worth remembering that downstream of that one's battery, when Energy Density gets to the right level, we'll be seeing aviation take the same path. So this is a path that will not... flow down, it's just going to accelerate. And, you know, the requirements around generative AI and data centers and hyperscalers are just a part of it.

Paul Sakrzewski: It's worth remembering that downstream of that once battery.

Paul Sakrzewski: Energy density get to the right level, we'll be seeing aviation take the same path. So this is a.

Paul Sakrzewski: A path that will not.

Paul Sakrzewski: Slow down, it's just going to accelerate and the.

Paul Sakrzewski: The requirements around generative AI and data centers and Hyperscale isn't just a part of it.

Todd Adair Coupland: Yeah, I get that. I understand it.

Speaker Change: Yeah, I get that I understand it it's one of the one of the one of the levers do you.

Paul Sakrzewski: It's, you know, one of the one of the levers. Do you see any existing customers responding to it in the short term? In the US, could this yield, you know, an uptick? Is it significant enough to where it could yield upticks in your net dollar retention? Or is it, is it, is it in the long run? Yeah, we all...

Todd Adair Coupland: Do you see any.

Todd Adair Coupland: Existing customers respond to it in the short term meaning.

Paul Sakrzewski: In the U S could this.

Paul Sakrzewski: Yield uptick is it significant enough to where it could yield upticks in your net dollar retention.

Paul Sakrzewski: Or is it is it is it a lot.

Paul Sakrzewski: Yeah, well, we definitely I'm not sure it's a it's an NRR thing. I think it's it's across the install base, but also, you know, it's very, very difficult for electric utilities to map out with the constrained resources they've got, whether that be financial, or, you know, the supply of the materials and componentry in the network, whatever their capacity is, it's very difficult for them to navigate their way through all of those different choices and permutations, to play their cards in the right order within the constrained resources that they have without software.

Paul Sakrzewski: Issue, Yes, we definitely I'm not sure. It's a it's an NRI thing I think.

Paul Sakrzewski: It's across the installed base, but also.

Paul Sakrzewski: It's very very difficult for electric utility to map out with the constrained resources, they've got whether it'd be financial.

Paul Sakrzewski: Or.

Paul Sakrzewski: The supply of the materials and componentry and the network whatever the capacity is it's very difficult for them to navigate their way through all of those different choices and permutations.

Paul Sakrzewski: To play their cards in the right order within the constrained resources that they have without software support.

Paul Sakrzewski: So the ones that have our software are using it for more and more use cases. The ones that don't have it almost have to adopt something like Copperleaf or, you know, either Copperleaf or something like us in order to navigate this transition. And that is just accelerating.

Paul Sakrzewski: The ones that have our software or using it for more and more use cases, the ones that don't have it.

Paul Sakrzewski: Almost half to adopt something like couple April.

Paul Sakrzewski: I had a couple of airports something like us.

Paul Sakrzewski: In order to navigate this transition and that is just accelerating.

Todd Adair Coupland: That's great. I appreciate that color. I forget which customer this was, but you referenced it in your prepared remarks where you went through a rigorous vendor selection process. Yeah. Is there a way for you to call out, like, who else you're seeing in the market and why you got selected?

Speaker Change: That's great I appreciate that color.

Todd Adair Coupland: I forget which customer this was but you've referenced it in your prepared remarks, where you went through a rigorous vendor selection process.

Todd Adair Coupland: Wait for you to call out like who else you're seeing in the market and why you've got selected.

Paul Sakrzewski: We're still largely, so when it's vendor assessment, some of these clients will cast a broad net, and we see unusual people sort of come in, and they're interested in the RFP response. Sometimes it's sort of tools that someone has built, and they're using that to support a consulting approach. Sometimes it's a combination of a couple of different things, but largely, what we still replace at the client is Excel. We're not seeing really competitive head-to-head competition yet.

Speaker Change: Uh huh.

Todd Adair Coupland: We're still we're still largely.

Paul Sakrzewski: When it's vendor assessment.

Paul Sakrzewski: Some of the clients, who will cast a broad net and we see unusual people sort of come in and they're interested in the in the RFP response.

Paul Sakrzewski: Sometimes its sort of tools that someone has built and they're using that to support our consulting approach, sometimes it's a combination of a couple of different things, but largely what we still replace at the at the client is excel.

Paul Sakrzewski: We're not seeing really competitive head to head competition yet.

Paul Sakrzewski: So it's really hard to identify one specific competitor that's showing up consistently in all of these bids across all of the global footprint that we occupy and say, you know, that's competition. It relies a little bit on what the RFP looks like and what the functional specs look like, depending, you know, it depends a little bit on those who show up. But it could be a combination of, you know, one of the ERP companies plus one of the consulting companies.

Paul Sakrzewski: So it's really hard to to identify one specific competitor that's.

Paul Sakrzewski: It's showing up consistently in all of these bids across all of the global footprint that we occupy.

Paul Sakrzewski: And say that.

Paul Sakrzewski: That's competition it relies a little bit on what the RFP looks like and what the functional specs look like dependent.

Paul Sakrzewski: It's a little bit on those who shows up.

Paul Sakrzewski: But it could be a combination of one of the ERP companies plus one of the consulting companies.

Paul Sakrzewski: And it's very dependent on which country the RFP comes out in. You know, a lot of the people that are approaching these RFPs are local vendors or they're local consulting companies. So it's hard to see a concerted sort of opposition to us globally in the way that we approach the market.

Paul Sakrzewski: And it's very dependent on which country the RFP comes out.

Paul Sakrzewski: A lot of the people that are approaching these rfps are local local local vendors or there are the local consulting company. So it's hard to see a concerted sort of opposition to us globally in the way that we approach the market.

Todd Adair Coupland: Do you feel just at that point? Do you feel your global sales effort partners is that unique in the market?

Speaker Change: Do you think do you feel just on that point do you feel your global sales effort partners is that is that unique in the market.

Paul Sakrzewski: I'd say so. You know, I mean, we're the first mover; we're the best in class. I think it's, I think it's reasonable to say in the space as we define it. You know, we are absolutely humble about that and our heads on a swivel looking around for competition all the time and seeing whether we can see patterns in the type of competition that shows up in these RFPs. But we're just not seeing anybody with the consistency and the global footprint that we have in our space.

Speaker Change: I'd say so.

Todd Adair Coupland: I mean, we're first mover with best in class and I think it's I think it's reasonable to say in this space as we define it.

Paul Sakrzewski: We are absolutely humble in that in our heads on a swivel looking around the competition all the time and seeing whether we can see patents in the type of competition that show up in these rfps, but we're just not seeing anybody with the consistency and the global footprint that we have in our space.

Todd Adair Coupland: Thanks for that color. I had a couple of financial questions. So, you know, if I look at the revenue in the quarter, subscription revenue was, you know, kind of in line with FACTS that was a little bit stronger, and then professional services, and perpetual was a lot stronger than expected. And, you know, I heard the answer before on professional services, so that's going to ebb and flow, but this is a good run rate. But that perpetual line was quite a bit higher than I think what's in the FACTS set.

Speaker Change: Thanks for that color I had a couple of financial questions. So.

Todd Adair Coupland: If I look at the <unk>.

Todd Adair Coupland: Can you just comment on whether that is repeatable? Or is that, is that just going to land when it lands? Yeah. Yeah. Yeah.

Todd Adair Coupland: Revenue in the quarter.

Todd Adair Coupland: Subscription revenue was.

Todd Adair Coupland: In line with Factset little bit stronger and then professional services and perpetual what was a lot stronger than expected and I heard the answer performed professional services, so thats going to ebb and flow, but this is a good run rate, but that perpetual line was quite a bit higher than that I think what's the factset.

Todd Adair Coupland: Can you just comment on whether that is repeatable or is that it's not just going to land in Atlanta.

Todd Adair Coupland: Yeah.

Christopher F. Allen: Hey, Todd, this is Chris. Yeah, far from repeatable. As you know, that's kind of been the bane of our existence. And that's, you know, one of the big pushes for moving toward becoming a SaaS only company. So that was a pull forward, basically, of a large, you know, large client in Japan. And as we've said in the past, those are very, very difficult to predict. And we wouldn't; we don't foresee any more of those in the pipeline.

Todd Adair Coupland: Yeah.

Todd Adair Coupland: Hey, Todd this is Chris.

Christopher F. Allen: Far from repeatable as you know that's kind of been the Bane of our existence and that's one of the big pushes for moving towards becoming.

Christopher F. Allen: Becoming a SaaS company.

Christopher F. Allen: So that was a pull forward basically of a large.

Christopher F. Allen: Large clients in Japan, and as we've said in the past there was a very very difficult to predict and we wouldn't.

Christopher F. Allen: We don't foresee any more of those enough.

Christopher F. Allen: Given the pipeline.

Todd Adair Coupland: Great. I appreciate that, Culler. Thanks a lot, guys.

Speaker Change: Great appreciate that color. Thanks, a lot guys.

Todd Adair Coupland: Thank you.

Operator: Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star followed by 1. Okay, and I see we have no further questions. So Paul, I'll turn it back to you for closing remarks.

Todd Adair Coupland: Ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star followed by one.

Paul Sakrzewski: Okay, and I see we have no further questions. So I'll turn it back to you for closing remarks.

Paul Sakrzewski: Yeah, I will just close by thanking everybody for joining us today. You know, we look forward to reporting and our progress as we execute on the priorities that we have outlined, and it will be great to see everybody when we come back to report on our Q2 financial results. Thank you very much, everyone.

Operator: Yes.

Speaker Change: I will just close by thanking everybody for joining US today, we look forward to reporting on our progress as we execute on the priorities that we outlined and and group would be great to see everybody. When we come back to recorded in our Q2 financial results.

Paul Sakrzewski: Thank you very much everyone.

Paul Sakrzewski: Yeah.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Speaker Change: But just and gentlemen. This concludes your conference call for today, we thank you.

Speaker Change: Participating and ask that you. Please disconnect your lines.

Operator: Yeah.