Q2 2024 Kinaxis Inc Earnings Call

Operator: You may own one of their well-known printers or sewing machines or other electronics.

Centers are selling machines or other electronics.

Operator: Kyoksia, a leading provider of flash memory products, and they don't, an agricultural machinery manufacturer.

<unk>, a leading provider of flash memory products and.

Speaker Change: In Daytona and our agricultural machinery manufacturer.

Operator: We won Italian mid-market pharmaceutical company Zambon, which manages the production of drugs for Parkinson's, cystic fibrosis, and other challenging diseases.

Zen bone: We won Italian mid market pharmaceutical company Zen bone.

Speaker Change: Which manages the production of drugs for Parkinson's cystic fibrosis and other challenging diseases.

Operator: Kim Ray, a US-based manufacturer of valves and controllers for oil and gas companies, joined the customer base also.

Speaker Change: Kim Ray a U S based manufacturer of valves and controllers for oil and gas companies joined the customer base also.

John Sicard: We added our core, an enterprise-class maker of consumer food products, agro-industrial products, and packaging. All these successes and more have been earned in an environment where buying decisions, particularly for the largest enterprise opportunities, continue to be subject to elevated levels of scrutiny. I'm pleased to announce that we've started executing on the go-to-market reinvestment plans we talked about last quarter, for example. We just finalized a new strategic relationship with one of our largest and longest-standing consultancy partners. Together, we will co-invest towards significantly expanding our joint go-to-market opportunities in key verticals and create new deployment capacity and expertise for delivering our solutions.

Zen bone: We added our core and enterprise class maker of consumer food products agro industrial products and packaging.

Speaker Change: All of these successes and more have been earned in an environment, where buying decisions, particularly for the largest enterprise opportunities continue to be subject to elevated levels of scrutiny.

John Ernest Sicard: And they don't, an agricultural machinery manufacturer. We won Italian mid-market pharmaceutical company Zambone. I'm pleased to announce that we've started executing on the go-to-market reinvestment plans we talked about last quarter. We just finalized a new strategic relationship with one of our largest and longest-standing consulting partners. Together, we will co-invest towards significantly expanding our joint go-to-market opportunities in key verticals and create new deployment capacity and expertise for delivering our solutions. Details will come soon. Stay tuned as we expect to formalize and publicly promote these very, very soon. Let me do slide six.

Speaker Change: I am pleased to announce that we've started executing on the go to market reinvestment plans, we talked about last quarter.

John Sicard: Details will come soon. We see this strategic partnership and other similar relationships we're exploring as potential game changers for our market reach and sales capacity. Stay tuned as we expect to formalize and publicly promote these very, very soon.

John Sicard: Let me just slide six.

John Sicard: Gardner's Supply Chain Top 25 was released in May, and we are extremely proud that the top three have chosen Can Access as their supply chain orchestration partner, as did half of the top 10.

John Sicard: Gardner also reserves an even higher level category called supply chain masters for companies that have maintained top five scores for at least seven of the preceding 10 years. It's an absolute honor that Can Access serves two of those prestigious companies as well.

John Sicard: In short, being the leader in an inability to execute is leading us to becoming the trusted choice for supply chain leaders globally. Over the last three years, we've more than doubled the customer base, growing it at a fast paced 28% cumulative average rate. This simple fact positions us extremely well for the long term, as we increase our emphasis on expansion sales to a rapidly expanding base.

John Ernest Sicard: In short, being the leader in ability to execute is leading us to become the trusted choice for supply chain leaders globally, with a rapidly expanding base. Once again, we experienced record attendance with over 730 attendees, including a healthy number of prospective customers and some major announcements. One of these major announcements was our AI-infused supply chain orchestration platform that provides full real-time transparency and agility across the entire supply chain, fusing together planning and execution and managing everything from multi-year planning horizons to down to the second factory execution and last mile delivery. Just as we broke down silos in the supply chain planning function.

John Sicard: On to slide seven.

John Sicard: Connections, our amazing annual community conference held this past June, is another excellent reflection of both our long-term opportunity and the strength of our current demand. Once again, we experienced a record attendance with over 730 attendees, including a healthy number of prospective customers. They made their way to Miami for a jam-packed three days of thought-provoking leadership, networking, and some major announcements.

John Sicard: This year, our big announcement at Connections was the introduction of Maestro, the evolution of our flagship product Rapid Response. Maestro is our AI-infused supply chain orchestration platform that provides full real-time transparency and agility across the entire supply chain, fusing together planning and execution, and managing everything from multi-year planning horizons to down to the second factory execution and last mile delivery. Just as we broke down silos in supply chain and planning functions, with Maestro we will break down silos across the full supply chain end-to-end. Maestro will be the conductor taking in data from the full supply chain ecosystem, ultimately including functions like network design, procurement, production, planning, finance, risk management, sustainability, fulfillment, and other areas, and serving the full supply chain community concurrently throughout, as only can access can.

John Ernest Sicard: With Maestro, we'll break down silos across the full supply chain end-to-end. Maestro will be the conductor, taking in data from the full supply chain ecosystem, ultimately including functions like network design, procurement, production, planning, finance, risk management, sustainability, fulfillment, and other areas, and serving the full supply chain community concurrently throughout, as only Kinaxis can, and orchestrated in total harm through a fully integrated AI engine. We will automate the obvious action; sense issues and opportunities as they arise, and proactively suggest the optimum course correction.

John Sicard: So that manufacturers have one real-time view of their supply chain network at any moment in time. This is what it takes for a supply chain to be in tune, on time, and orchestrated in total harmony.

John Sicard: Through fully opportunities as they arrive, proactively suggest optimum course corrections, and democratize access to the machine learning power behind Maestro to even the most high level of users.

John Ernest Sicard: And democratize access to the machine learning power behind Maestro to even the highest level of users. A recent IDC study sponsored by Kinaxis revealed that 97% of global supply chain leaders agreed that better orchestration would have a positive impact on supply chain performance. So we're thrilled to be leading the industry towards that future. I'll now turn the call over to Blaine to review the financials for the quarter and discuss our updated outlook in detail. I'll conclude with a few remarks after that. Blaine? Thank you.

John Sicard: A recent IDC study sponsored by CanAxis revealed that 97% of global supply chain leaders agreed that better orchestration would have a positive impact on supply chain performance. So we're thrilled to be leading the industry towards that future.

John Sicard: I'll now turn the call over to Blaine to review the financials for the quarter and discuss our updated outlook in detail.

Blaine Fitzgerald: I'll conclude with a few remarks after that. Blaine.

Blaine Fitzgerald: Thank you, John, and good morning. As a reminder, unless noted otherwise, all figures reported on today's call are in U.S. dollars under IFRS, effective Friday. I'm pleased to report solid Q2 financial results, which included strong profitability and free cash flow. ARR growth was dominated by new customer wins, including some large enterprises, while we continue to see exceptionally strong growth in our RPO balance. All despite some foreign exchange headwinds, restructuring charters, and ongoing elevated scrutiny in the buying environment.

Blaine Fitzgerald: Thank you, John, and good morning. As a reminder, unless noted otherwise, all figures reported on today's call are in US dollars under IFRS. Starting on Friday, I'm pleased to report solid Q2 financial results, which include strong profitability and free cash flow. A ARR growth was dominated by new customer wins, including some large enterprises, while we continue to see exceptionally strong growth in our RPO ballot balance. All, despite some foreign exchange headwinds, restructuring chargers, and ongoing elevated scrutiny in the buying environment. Total revenue in the quarter was up 12 percent to $118.3 million, reflecting a normal low in the subscription term. Our SaaS revenue grew 18% to $75.4 million and would have been a percent higher without the foreign exchange headwind in the quarter, particularly around Japanese yen.

Blaine Fitzgerald: Total revenue in the first quarter was up 12% to $118.3 million, reflecting a normal low in the subscription term license renewal cycle, which is in line with the outlook we provided at the outset of the year. Subscription term licenses largely follow the normal cadence of renewals among our small group of on-premise customers.

Blaine Fitzgerald: Our subscription term license revenue was $1.4 million, which is in line with the outlook we provided at the outset of the year. Subscription term licenses largely follow the normal cadence of renewals among our small group of on-premise customers, are those that have the option to move their on-premise. Professional services activity resulted in $36.5 million in revenue, for 22% growth over Q2 2023, a reflection of strong customer additions and expansions in recent periods. Maintenance and support revenue for the quarter was up 9% to $5 million. First quarter growth profit increased 10% to $70.2 million, and gross margin in the quarter was 59%, down slightly from 60% in the comparative period.

Blaine Fitzgerald: Maintenance and support revenue for the quarter was up 9% to $5 million. Adjusted EBITDA was $21.9 million, up 44% from $15.2 million, and representing a strong 19% margin compared to 14% in the second quarter last year. The higher margin reflects our heightened focus on profitability and relates to very successful initiatives aimed at gaining operating leverage as we scale. Our profit in the quarter was $3.4 million, or $0.12 per diluted share, compared to a loss of $2.5 million, or $0.09 per share, in Q2 last year.

Blaine Fitzgerald: The lower gross margin is attributable to the decline in high margin subscription term license revenue in the period, and a lower software gross margin reflects our ongoing transition to a public cloud-first hosting model. This is partially offset by a very strong 27% professional services gross margin. Adjust the EBITDA with $21.9 million, up 44% from $15.2 million, and representing a strong 19% margin compared to 14% in the second quarter last year. The higher margin reflects our heightened focus on profitability and relates to very successful initiatives aimed at gaining operating leverage as we scale. Our profit in the quarter was $3.4 million, or $0.12 cents per diluted share, compared to a loss of $2.5 million, or $0.09 cents per share in Q2 last year.

Speaker Change: It reflects our ongoing transition to a public cloud first hosting model.

Speaker Change: This is partially offset by a very strong 27% professional services gross margin.

Speaker Change: Adjusted EBITDA was $21 $9 million up 44% from $15 2 million and representing a strong 19% margin compared to 14% in the second quarter last year.

Speaker Change: The higher margin reflects our heightened focus on profitability and relates to very successful initiatives aimed at gaining operating leverage as we scale.

Speaker Change: Okay.

Speaker Change: Our profit in the quarter was $3 4 million.

Speaker Change: Or <unk> 12 per diluted share compared to a loss of $2 8 million or <unk> <unk> per share in Q2 last year.

Blaine Fitzgerald: Profit this quarter includes $5.5 million related to the restructuring initiative we previously announced, so the improvement would otherwise have been much more significant. Cash flow from operating activities was $13.1 million compared to $13.9 million in Q2 2023. Cash equivalents and short term investments were $282.3 million, compared to $293 million at the end of 2023.

Blaine Fitzgerald: The profit this quarter includes $5.5 million related to the restructuring initiative we previously announced, so the improvement would otherwise have been much more significant. Cash, cash equivalents, and short-term investments were $282.3 million compared to $293 million at the end of 2023. Moving on to slide nine.

Blaine Fitzgerald: Moving on to slide 9. Given the nature of our business, free cash flow margin tends to vary considerably, period to period, based on billing and collection cycles, capital investments, and other factors. As a result, I focus on the trend of our last 12 months free cash flow compared to our last 12 months revenue rather than just current period results. As you can see, on this basis, our free cash flow margin is at 15.1% and has been improving nicely since 2022 and reflects our heightened focus on profitability. Our cash flow from operating activities and our cash balances would have been even stronger this period without the restructuring charges, and in the case of our cash balances, our very active share buyback program too.

Blaine Fitzgerald: Given the nature of our business, free cash flow margin tends to vary considerably from period to period based on billing and collection cycles. As you can see, on this basis, our free cash flow margin is at 15.1% and has been improving nicely since 2022 and reflects our heightened focus on profitability. Our cash flow from operating activities and our cash balances, and in the case of our cash balances, our very active share buyback program, too. On slide 10.

Blaine Fitzgerald: On slide 10, our annual recurring revenue, or ARR, grew to $330 million. A increase of 15% from Q2 2023. Thanks to winning a record number of new accounts for Q2, we observed that over 75% of the incremental ARR generated during the quarter came from new customers. I would also like to note that the ARR balance was impacted by just under 1% by foreign exchange fluctuations. We are delighted to have secured some large enterprise customers this quarter. With these accounts, we continue to observe phase deals, which start with a smaller initial subscription amount and include increases in both value and project scope in later years of the contract term.

Blaine Fitzgerald: Our annual recurring revenue, or ARR, grew to $330 million, an increase of 15% from Q2 2023. Thanks to winning a record number of new accounts in Q2, we observed that over 75% of the incremental ARR generated during the quarter came from new customers. We are delighted to have secured some large enterprise customers this quarter. With these accounts, we continue to observe phased deals, which start with a smaller initial subscription amount and include increases in both value and project scope in later years of the contract term.

Blaine Fitzgerald: As a result, the incremental average annual contract value, or ACV, of all deals we won in the first half of 2024 outpaced the incremental ARR that we recognize by a factor of 1.18, the highest we have seen yet. To illustrate, if a three-year phase contract starts with $1 million subscription in year one and increased to $2 million and then $3 million in years two and three, the ACV is $2 million, but we would pick up only $1 million in ARR. We look forward to adding the free ARR relates to these phase deals in future periods.

Blaine Fitzgerald: To illustrate, if a three-year phased contract starts with a $1 million subscription in year one, and increases to $2 million and then $3 million in years 2 and 3, the ACV is $2 million, but we would pick up only $1 million in ARR. We look forward to adding the free ARR related to these phased deals in future periods. Jumping to slide 11, at quarter end, our total RPO and SaaS RPO remained extremely healthy at $748 million and $705 million and grew 28% and 30%, respectively, year over year. One reason that RPO is growing faster than ARR is the phased deal phenomenon I just mentioned, as RPO includes the fully ramped contract value.

Blaine Fitzgerald: To sum up the slide 11, at quarter end, our total RPO and SAS RPO remained extremely healthy at $748 million and $7 or $5 million and grew 28% and 30% respectively year-to-year. One reason that RPO is growing faster than ARR is the phase deal phenomenon. I just mentioned as RPO includes the fully ramped contract values. The three-year cager for both our total RPO and our SAS RPO is 25%. I encourage you to focus on these excellent longer-term results as quarterly RPO conflicts significantly with normal customer renewal cycles. Further details on our RPO can be found in the revenue note to our financials.

Blaine Fitzgerald: On slide 12, while Q2 new customer wins were robust and RPO growth remained strong, we needed more large enterprise deals at higher average amounts to preserve SAS guidance for the year. can access in many of our peers have recently talked about longer sales cycles and smaller initial deal sizes, with large enterprise prospects in several recent peers and we haven't seen the environment change yet. As a result, we now expect SAS revenue growth of 15 to 17%. We are maintaining our total revenue guidance, though we fully expect the result to be at the lower end of the range.

Blaine Fitzgerald: Kinaxis and many of our peers have recently talked about longer sales cycles and smaller initial deal sizes with large enterprise prospects and several recent peers, and we haven't seen the environment change yet. As a result, we now expect SAS revenue growth of 15 to 17 percent. We are maintaining our total revenue guidance. They'll fully expect the result to be at the lower end of the range.

Blaine Fitzgerald: Subscribe from term license guidance is unchanged, and we still expect to recognize roughly 15% of the full-year amount in Q3 and a similar amount in Q4. For SAS growth through accelerate meaningfully in 2025, the large enterprise buying environment needs to return to normal conditions by the end of this year and persist. A steadier foreign exchange environment would also be beneficial. We fully expect the reinvestments we're making in go-to-market, including the recently signed strategic partnership with one of our major solution integration partners. I'm very pleased to raise our 2024 adjusted EBITDA margin guidance for the second consecutive quarter.

Blaine Fitzgerald: For SaaS growth to accelerate meaningfully in 2025, the large enterprise buying environment needs to return to normal conditions by the end of this year and persist to have a positive impact, but more substantially in 2026 and beyond. I'm very pleased to raise our 2024 Adjusted EBITDA Margin Guidance for the second consecutive quarter. Finally, on slide 13, we repurchased over 529,000 shares in the first half of 2024, representing an investment of $57.4 million. We're very happy with our investment. I'll now turn the call back to John. Thank you, Blaine.

Blaine Fitzgerald: We now expect to achieve a margin of 19 to 21% for the year. It is gratifying to see our heightened focus on profitability translate to results. Our remain confident in our goal of consistently delivering 25% adjusted EBITDA margin in the midterm. Normalize only for expected subscript from term license variability and expect to take another step towards that next year to.

Speaker Change: Normalized only for expected subscription term license variability and expect to take another step towards that next year or two.

Speaker Change: Okay.

Blaine Fitzgerald: Finally, on slide of 13, we have continued to be very active on our normal course issue of it, which allows us to purchase up to 5% of our stock or approximately 1.4 million shares by November 5th of this year. We've repurchased over 529,000 shares in the first half of 2024, representing an investment of $57.4 million. Since inception, we have repurchased approximately 858,000 and of roughly 567,000 shares still available for purchase under the program. We're very happy with our investments. Overall, I am very pleased with our longer term trajectory. We've made many important strategic changes in recent periods that will have a positive impact on results ahead.

Speaker Change: Finally on slide 13.

Speaker Change: We have continued to be very active on a normal course issuer bid, which allows us to purchase up to 5% of our stock or approximately one 4 million shares by November <unk> of this year.

Speaker Change: Okay.

Speaker Change: We repurchased over 529000 shares in the first half of 2024, representing an investment of $57 4 million.

Speaker Change: Since inception, we have repurchased approximately 858000 and of roughly 567000 shares still available for purchase under the program.

Speaker Change: We're very happy with our investments.

Speaker Change: Overall, I am very pleased with our longer term trajectory.

Blaine Fitzgerald: We look forward to a more typical buying environment that will allow the full potential of our new strategies to be realized.

John Sicard: I'll now turn the call back to John. Thank you, Blaine.

John Sicard: Hopefully, you all saw our recent announcement in June that Jose Alberto Duarte has joined the Can Access board. Jose lives in Portugal. He has worked in France, the Netherlands, and the U.S. and comes to us with over 30 years of senior leadership experience, including as CEO for three separate companies. He's held multiple leadership roles at SAP, including President of AMIA and India and President of Latin America. Among his board positions, Jose currently serves as chair at Pro Alpha. I can access as a global company, and I look forward to seeing Jose bring his unique global experience and perspectives to bear in his new role as director.

John Ernest Sicard: Among his board positions, José currently serves as chairperson of ProAlpha. Kinaxis is a global company, and I look forward to seeing Jose bring his unique global experience and perspectives to bear in his new role as director. This success is reflected in a committed backlog of business that has grown at a 25% three-year CAGR. We've launched a ground-breaking, AI-infused platform that is leading the market towards a much-needed end-to-end orchestration of their supply chain. In short, we remain very excited about the excellent growth opportunities ahead and seeing our strategies come to full fruition.

John Sicard: Despite the large enterprise deal delays that we're experiencing alongside many SaaS peers, we remain focused on our excellent long-term opportunities and are making important progress. We're winning customers at a record pace, including marquee names like Eli Lilly. And when we win a customer, we keep them for a very long time. This success is reflected in a committed backlog of business that has grown at a 25% three year CAGR.

Speaker Change: Backlog of business that has grown at a 25% three year CAGR.

John Sicard: We've started to reinvest in targeted go-to-market initiatives, including the first of multiple major new partnerships with global SI partners that we anticipate will greatly expand our joint opportunities and significantly expand our selling capacity.

Speaker Change: We are starting to reinvest in targeted go to market initiatives, including the first of multiple major new partnerships with global Si partners that we anticipate will greatly expand our joint opportunities and significantly expand our selling capacity.

John Sicard: Our heightened focus on profitability is translated to steadily improving free cash flow and a second raise in our annual adjusted EBITDA guidance.

Speaker Change: Our heightened focus on profitability is translated to steadily improving free cash flow and in our second raise in our annual adjusted EBITDA guidance.

John Sicard: We've launched a groundbreaking AI-infused platform that is leading the market towards a much needed end-to-end orchestration of their supply chains. And we're still only in the early days of the digital transformation of supply chains.

Speaker Change: We've launched a groundbreaking AI infused platform that is leading the market towards a much needed end to end orchestration of their supply chain.

Speaker Change: And we're still only in the early days of the digital transformation of supply chain.

John Sicard: In short, we remain very excited about the excellent growth opportunities ahead and seeing our strategies come to full fruition. As always, thank you for your ongoing interest and support in the company.

Speaker Change: In short we remain very excited about the excellent growth opportunities ahead, and seeing our strategies come to full fruition.

Operator: I welcome your questions, and we'll turn the line over to the operator to start the Q&A session.

Operator: At this time, I would like to remind everyone that in order to ask questions, press star and then number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Paul Treiber: Your first question comes from the line of fall traders from RBC Capital Markets. Oh, thanks so much, and good morning.

Unnamed Participant: Oh, thanks so much. And good morning. I was just hoping

Unnamed Participant: I was just hoping, could you elaborate further on the delayed large enterprise deals? Typically, how many do you see per quarter that are delayed or take longer than you expect? And then how long are the delays on average? And then have you seen any of the delays turn into deals just being lost and never materialized?

John Sicard: I was just hoping, could you elaborate further on the delayed large enterprise deals? Typically, how many do you see per core that are delayed or take longer than you expect? And then how long are the delays on average? And then, have you seen any of the delays turn into deals just being lost and never materialized?

John Sicard: That's a great question, Paul. And first, we started seeing these; I'd say in 2023, and they persisted in 2024. I would say that the timing between being sort of vendor of choice and getting ink dry on paper, I'd say, has elongated by roughly twice. We see sort of a 2x delay in getting those deals signed. I wouldn't categorize it as losing opportunities, as much as I would categorize it as scrutiny on the signing process, often requiring board level approval for things that, quite frankly, we didn't see in 2022 or prior to 2022. We're thrilled, obviously, with Eli Lilly and the magnitude of that opportunity.

John Ernest Sicard: I'd say in 2023, and they've persisted in 2024. [inaudible] You know, I would say that the timing between being sort of the vendor of choice. We're thrilled, obviously, with Eli Lilly and the magnitude of that opportunity. That's a classic representation of an extremely large enterprise deal, a phenomenal win for us, very long, I'd say longer than normal contractual terms, and a pretty steep ramp. So we're pretty thrilled with that going forward. There are multiple large enterprise opportunities ahead of us for the remainder of the year, and obviously, we're tracking the timing of those very, very closely.

Speaker Change: Acquiring a board level approval for things that.

Speaker Change: Quite frankly, we didn't see.

Speaker Change: In 2022 or prior to 2022.

Speaker Change: We're thrilled obviously with Eli Lilly.

Speaker Change: And the magnitude of that opportunity.

John Sicard: That's a classic representation of an extremely large enterprise deal. A phenomenal win for us, very long. It's a longer than normal contractual terms and a pretty steep ramp. So we're pretty thrilled with that. Going forward, there are multiple enterprise, large enterprise opportunities ahead of us for the remainder of the year. And obviously, we're tracking those and the timing of those very, very closely. And I think that the change in 24 SAS revenue guidance is obviously in light of those delays, but you mentioned 25; there could also be some impact. The question really is, if these are delays in closing and also phase deals, it's a timing issue.

Speaker Change: That's a classic representation of an extremely large enterprise deal phenomenal phenomenal win for us very very long, it's a longer than normal.

Speaker Change: Contractual terms.

Speaker Change: And a pretty steep ramp.

Speaker Change: So we're pretty thrilled with that.

Speaker Change: Going forward there are multiple enterprise large enterprise opportunities ahead of us for.

Speaker Change: For the remainder of the year.

Speaker Change: And obviously, we're tracking those and the timing of those very very closely.

Unnamed Participant: And I think that the change in 24 SaaS revenue guidance is obvious in light of those delays. But Blaine, you mentioned 25.

Unnamed Participant: There could also be some impact. The question really is, if these are delays in closing and also phased deals, it's a timing issue. So why wouldn't, at a certain point, the growth normalize, even if it just takes longer for the deals to close into rent?

John Sicard: So why wouldn't, at a certain point, the growth normalize, even if it just takes longer for the deals to close. Yeah, what you're what we're seeing is we're looking for a stabilization of that sales cycle at this stage and indicators that that things will go back to normal from what we've seen before. We haven't seen those indicators as of this age, and so we're continuing on the path based on our best assumptions, and obviously what we're building in 2024 will have the biggest impact on what we do in 2025. And so regardless if 2025 pick up, which we do have some beliefs that that will happen based on a lot of early discussions and also the the maestro discussions that we've been able to communicate to the to our prospect base.

Blaine Fitzgerald: Yeah, what we're seeing is we're looking for a stabilization of that sales cycle at this stage and indicators that things will go back to normal from what we've seen before. We haven't seen those indicators at this stage, and so we're continuing on based on our best assumptions.

Blaine Fitzgerald: And obviously, what we're building in 2024 will have the biggest impact on what we do in 2025. And so regardless if 2025 picks up, which we do have some belief that that will happen based on a lot of early discussions and also the maestro discussions that we've been able to communicate to our prospect base. We do think that, based on what we've built on ARR right now, what we see is a slightly depressed 2025 unless there are some indicators that, you know, the Q4 numbers are much higher than we would have anticipated at the beginning of the year.

John Sicard: We do think that it's based on what we've built on ARR right now. What we see is a slightly depressed 2025 unless there's some indicators that you know 20 the Q4 numbers are much higher than we would have anticipated at the beginning of the year. And just a quick follow-up, this is slightly depressed relative to the your longer-term outlook that you previously gave for sasco.

John Sicard: Well, so we don't have a longer-term outlook right now. We obviously continue to look at our next 12 months in 2024; is the guidance we provided. We do think that there is an opportunity to grow from where we're at right now, and I think that's something that we're continuing to look at in terms of our prospect discussions that we're having. However, I think 2025 is going to be contingent upon how ARR does this year, and right now, from what we see on ARR. We want to make sure that we're not getting too far in front of our skis.

Speaker Change: Yes.

Speaker Change: An opportunity to grow from where we're at right now and I think that's something that we're continuing to look at.

Speaker Change: In terms of our prospect discussions that we're having.

Speaker Change: However, there is.

Speaker Change: 2025 is.

Speaker Change: Going to be contingent upon how <unk>.

Speaker Change: Does this year and right now from what we see on a R.

Speaker Change: We want to make sure that we're not getting too far in front of our skis. We do see that there is a good opportunity, but wanted to make sure that we we use the metrics and the data in front of US right now and let me just add to that.

John Sicard: We do see that there is a good opportunity but want to make sure that we use the metrics in the data in front of us right now.

John Sicard: Let me just add to that you know we've been extremely pleased with the wind rates that we're experiencing and the customer ads. With we had multiple large enterprise deals. Closed in the first half of this year, the other thing that we're seeing alongside scrutiny for signing authorities and things of that nature. Just like Eli Lilly, they started much smaller than perhaps we would have seen them start two or three years ago, and so the ramps tend to be a little steeper. So there's two sides to this large enterprise phenomenon: one is the elongation of signing, you know, signing contracts, and two, starting with smaller footprints and ramping steeper, you know, along the way, which is why we've been, you know, focusing also on our PO growth because the RPO number has the full amount in it.

John Ernest Sicard: I'm extremely pleased with the win rates that we're experiencing and the customer ads. We had multiple large enterprise deals close in the first half of this year. The other thing that we're seeing, alongside scrutiny for signing authorities and things of that nature, just like Eli Lilly, they started much smaller than perhaps we would have seen them start two or three years ago. And so the ramps tend to be a little steeper.

John Ernest Sicard: So there are two sides to this large enterprise phenomenon. One is the elongation of signing contracts. And two, starting with smaller footprints and ramping steeper along the way, which is why we've been focusing on RPO growth as well. Because the RPO number has the full amount.

Thanos Moschopoulos: Thank you, and your next question comes from the line of fantasmas couples from the capital markets. Please go ahead.

Thanos Moschopoulos: Thank you. And your next question comes from the line of Thanos Moschopoulos from BMO Capital Markets.

Blaine Fitzgerald: Hi, good morning. The RPO growth was obviously very strong. Just wondering, was there a renewal tailwind for the quarter that was more pronounced than perhaps we saw in the March quarter, or was that not the case?

Blaine Fitzgerald: That's a good question, Thanos. Obviously, renewals would help an RPO quarter; a strong quarter. We didn't have a strong or a big renewals quarter in Q2. It was one of our lower renewal quarters in the last year. So this is more related to the strong TCV growth or total contract value that we got from the new logos that we brought in the door.

Speaker Change: Related to.

Speaker Change: The strong <unk> growth or a total contract value that we got from the new logos that we brought in the door.

Blaine Fitzgerald: Okay.

Speaker Change: Okay, and you don't disclose an RR, but qualitatively.

Blaine Fitzgerald: And you don't disclose an RRR, but qualitatively, can you speak to whether that's increasing?

Speaker Change: Can you speak to whether that's increasing just given the investments you've made in customer success and perhaps with some of those year two ramps starting to kick in.

Blaine Fitzgerald: Just given the investments you've made in customer success and perhaps some of those year two ramps starting to kick in?

Blaine Fitzgerald: Are you sure to see an RR pickup or not yet? Yeah, right now it's pretty consistent with what we've seen historically. I think that I mentioned in the scripture in the discussion that 75% of our ARR came from new logos. We are continuing to hit the gas on bringing as many new logos as possible. And that expansion and upsell muscle is something that we are continuing to strengthen. And that strategic partnership that I mentioned, which I think is going to be extremely important, has identified a number of opportunities on the upsell and cross-sell. Obviously, that impacts our expansion, the ARR in the future.

Speaker Change: And our pick up or not yet.

John Ernest Sicard: Yeah, right now, it's pretty consistent with what we've seen historically. I think that, you know, I mentioned in the script or in the discussion that 75% of our ARR came from new logos. We are continuing to hit the gas on bringing in as many new logos as possible, and that expansion and upsell muscle is something that we are continuing to strengthen. And that strategic partnership that I mentioned, which I think is going to be extremely important, has identified a number of opportunities on the upsell and cross-sell, obviously, that impacts our expansion ARR in the future. So we think that piece is kind of our back pocket trump card that we're getting ready to use.

Speaker Change: Yeah, right now, it's pretty consistent with what we've seen historically.

Speaker Change: I think that.

Speaker Change: You know I mentioned in the script or in the discussion that.

Speaker Change: 75% of our AAR came from new logos, we are continuing to hit the gas on bringing in as many new logos as possible.

Blaine Fitzgerald: So we think that piece is kind of our back pocket trump card that we're getting ready to use.

Blaine Fitzgerald: Great.

John Sicard: Finally, John, just to be clear, you obviously had a bunch of mid-market wins. And so would you say that mid-market remains a lot more resilient relative to the macro condition? Or with the macro dynamic mad segments? Yeah, it's a great question. I'd say, you know, first we categorize mid-market separate from what we would categorize. And I'd say roughly 50% of the quarter came from Enterprise. And 50% came from mid-market or the SMB kind of space. And so, you know, more importantly. And obviously, some of the wins came from large enterprise, as well as we just announced the Elylilian.

John Sicard: And there were others. In any case, you know, it's the win rates that we continue to focus our attention on, as Blaine said. And fueling future expansion opportunities. That's really the primary focus. I'd say that, you know, to apply a little bit of color onto Q2. You know, slightly less contribution than we had had in the previous quarters from our bar initiative, which is more of the S of the SMB. So it was primarily, I'd say, mid-market and an enterprise. Great. That's fine.

John Ernest Sicard: In any case, it's the win rates that we continue to focus our attention on, as Blaine said, and fueling future expansion opportunities. That's really the primary focus. I'd say that to apply a little bit of color on Q2, slightly less contribution than we have had in the previous quarters from our VAR initiative, which is more of the S of the SMB. It was primarily, I'd say, mid-market and enterprise.

Blaine: As Blaine said.

Blaine: And fueling future expansion opportunities, that's really the primary focus I'd say that to apply a little bit of color on Q2.

Blaine: Slightly less contribution than we had in the previous quarters from our bar initiative, which is more of the ASP of the SMB.

Blaine: So it was primarily I would say mid market.

Speaker Change: And in enterprise.

Blaine: Okay.

Speaker Change: Okay.

Sean: Great. Thanks, Sean.

John Sicard: Thanks, Sean.

Douglas Taylor: And your next question comes from the line off dog tailor from Catacore 10V. Peace. Yeah, thank you.

Douglas Taylor: And your next question comes from the line of Doug Taylor from Canaccord Gen V. Please go ahead.

Speaker Change: And your next question comes from the line of Doug Taylor from Canaccord Genuity.

Speaker Change: Please go ahead.

Doug Taylor: Yes. Thank you good morning.

Blaine Fitzgerald: Good morning. Blaine, I'll ask perhaps you to clarify on an earlier line of questioning. I think it was Paul's. When you speak to 2025 potentially being also exhibiting some depressed traits due to lower, slower large deal signings, I just want to be crystal clear. You're referring to growth below maybe your longer term growth aspirations and not necessarily lower relative to the performance we're expecting here in 2020. Yeah, now I think that's absolutely right. We're looking at the enterprise. The particular impact that we have for 2025 happens on how we grow error in 2024. And as of right now, we're seeing large enterprises coming in on a longer sales cycle.

Blaine Fitzgerald: Blaine, I'll ask you perhaps to clarify on an earlier line of questioning, I think it was Paul's, when you speak to 2025 potentially being also exhibiting some depressed traits due to slower large deal signings, I just want to be crystal clear: you're referring to, you know, growth below maybe your longer-term growth aspirations and not necessarily lower relative to the performance we're expecting here in 2024?

Speaker Change: Yes.

Speaker Change: I'll ask perhaps you to clarify on an earlier line of questioning I think was pause when you speak to 2025 potentially being also.

Blaine Fitzgerald: Yeah, no, I think that's absolutely right. We're looking at enterprise. The particular impact that we have for 2025 depends on how we grow ARR in 2024. And as of right now, we're seeing large enterprises coming in on a longer sales cycle. We do expect to benefit from the go-to-market reinvestment that we've just been going through. That's a big contributor to where we think ARR can re-accelerate in 2025. But I want to make sure that everyone understands that there is a strong correlation between our short-term results and the ARR that happens in a particular period. The long-term RPO that we have, it obviously points to a direction that we do expect to have a lot of committed opportunity that's in front of us because that's growing quite quickly right now.

Blaine Fitzgerald: We do expect to benefit from the go to market reinvestment that we've just been going through. That's a big contributor to where we think AR can reaccelerate in 2025. But I want to make sure that everyone understands that there is a strong correlation to our short term based on the AR that happens in a particular period. The long term RPO that we have, it obviously points to a direction that we do expect to have a lot of committed opportunity that's in front of us because that's growing absolutely quite quickly right now. I mean, in fact, I'll just go back to that new logo comment.

Blaine Fitzgerald: The new logo, TCV or ACV or AR in commercial area that whatever you want to use, is one of the highest we've ever seen. In fact, I think it's in the top two of what we've ever seen in the particular quarter.

Blaine Fitzgerald: So we're building that group to be able to grow in the future. That committed backlog is inner inner forecast right now. But we still want to make sure we better understand that AR drives the short term, RPO drives the long term, and we have a good future in front of us.

Blaine Fitzgerald: And so just as we step back and look at that phenomenon, you mentioned with the staged deployments. We've seen over the last couple of quarters or a year.

Blaine Fitzgerald: You know, I just want to again ask maybe a different way about the question of when we should expect, you know, that to normalize. I mean, if you're talking about three to five year contracts, I mean, would it take through, you know, a total of three years for that to completely wash its way through the model. And you're picking up as much revenue from previously signed contracts as you might be having held back from new contracts. Is that a fair way to think about that in the 2627? We should be, you know, this should have completely washed its way through the model, or could it happen sooner?

Blaine Fitzgerald: 3- to 5-year contracts. I mean, would it take a total of three years for that to completely wash its way through the model, and you're picking up as much revenue from previously signed contracts as you might be having held back from new contracts? Is that a fair way to think about that, and that 26, 27, we should be, you know, this should have completely washed its way through the model, or could it happen sooner?

Speaker Change: Through the model or could it happen sooner.

Speaker Change: Okay.

Blaine Fitzgerald: I think a 2627 is a fair assumption of when the majority will wash its way through, but as we keep adding, obviously that extends over time. I think, obviously, we don't try and ramp our deals at the very, very end of the contract. We want to make sure that our users and are able to get the benefits of using additional modules or having more users and how that before before they come up for a new. So, yeah, I think it's a good assumption that the ramp impact will happen generally in the first half of a month.

Speaker Change: I think.

Blaine Fitzgerald: Twenty-six, twenty-seven is a fair assumption of when the majority will wash its way through. But as we keep adding, obviously, that extends over time. I think, obviously, we don't try and ramp up our deals at the very, very end of the contract. We want to make sure that our users are able to. Get the benefits of using additional modules or having more users and how that before they come up for renewal. So, yeah, I think it's a good assumption that the ramp impact will happen generally in the first half of a contract.

Speaker Change: 'twenty six 'twenty seven is it fair assumption of when the majority will wash its way through but as we keep adding obviously that extends over time I think.

Speaker Change: Obviously, we don't try and ramp of our deals at the very very end of the contract.

Speaker Change: We want to make sure that our users are able to.

Speaker Change: Get the benefits of using additional modules or having more users.

Speaker Change: And how that before before they come up for renewal. So yeah, I think it's a good assumption that the ramp impact will happen generally in the first half of the contract.

Speaker Change: That's helpful. Thank you our last question for me I, just wanted to clarify I mean EBITDA guidance once again raise.

Blaine Fitzgerald: That's helpful. Thank you.

Blaine Fitzgerald: Last question for me, I just wanted to clarify. I mean, Neba Doug guidance once again raise. I just wanted to ask, I mean, is that to any degree a positive benefit on the bottom line from currency? Is that a factor at all, or, you know, maybe you can expand on where you're finding savings if that's not the case? Yeah, currency is, you know, we have one of those weird phenomena that the top line is getting depressed because of the weakness against USD. So, Japanese yen and euro are the two culprits on that side. Canadian dollars is benefiting, but right now what we're seeing is a complete offset because of the revenue side.

Speaker Change: I just wanted to ask is.

Blaine Fitzgerald: You know, we have one of those. What we're actually seeing is a lot of efficiency as a result of the restructuring that we've just gone through. We think that we've found some areas where we're able to manage the costs a little bit better based on changes in where our workforce will be dispersed throughout the geography, as well as the fact that we've had some inefficiencies that we've rectified as a result of the restructuring.

Blaine Fitzgerald: What we're actually seeing is a lot of efficiencies as a result of the restructuring that we've just gone through. We think that we've found some areas that we're able to manage the costs a little bit better based on like changes in where our workforce will be dispersed throughout the geography, as well as the fact that we've had some inefficiencies that we've rectified as a result of the restructuring.

Blaine Fitzgerald: Thanks for clarifying.

Operator: I'll pass line.

Christian Sgro: Your next question comes from the line of Black and Brown from Redburn Atlantic. Please go ahead.

Lachlan Brown: Your next question comes from the line of Lachlan Brown from Redburn Atlantic. Please go ahead.

John Sicard: Hi, John Blank.

John Sicard: Thanks for the question. I just want to just in terms of bookings, it seems like it was quite a healthy quarter with several large from your customer lens, but obviously it's called out of soft buying environment going forward. What in particular has changed from what seems to be a good buying environment this quarter as to expectations will be soft in the second half. Yeah, the biggest thing to point to here is large enterprise, and obviously when we look at the results and record record number of logos for a Q2 in the history of our company, second largest in the history of our company across any quarter.

Speaker Change: Yeah.

Speaker Change: Yeah the biggest.

Speaker Change: Thing to point to here is large enterprise.

Speaker Change: And obviously when we look at the results and.

Speaker Change: Record record number of logos for our Q2 in the history of our company second largest in the history of our company across any quarter.

John Sicard: To me, I see that as a healthy side of the market. There, you know, there are certainly a lot of companies out there that are recognizing the need to transform, and people have asked me this before. What's the likelihood that people are going to move away from this cascaded waterfall, lethargic kind of a model towards one that is fully concurrent and fully connected. I answer the same way every time there's a 100% chance that people are going to move there.

Speaker Change: To me I see that as a healthy sign of the market. There. There is certainly a lot of companies out there that are recognizing the need to transform and people have asked me. This before what's the likelihood that people are going to move away from this cascade waterfall lethargic.

Speaker Change: Kind of a.

Speaker Change: Model towards one that is fully concurrent and fully connected I answer the same way every time theres, a 100% chance that people are going to move there. The question is timing.

John Sicard: The question is timing. It's kind of like when, you know, when the internet was born and people could send emails. There were still some people looking stamps that eventually people realized that maybe emails are a better way to go. So we feel the same way about supply chain. So, to your question, I'd say it's still a very healthy buying environment. We have some wonderful logos in the pipeline right now in the large enterprise space that we're working on. And the enterprise and mid market and SMB space are necessarily suffering. I'd say the same level of scrutiny that we're seeing in the, you know, the extra large deals that we have on the table.

Speaker Change: It's kind of like when when the Internet was born and people could extend E. Mails. There were still some people looking stamps that eventually people realize that maybe emails a better way to go and so we feel the same way about supply chain.

John Sicard: So that's how I would, I would, you know, color the circumstance that we're in. And, you know, as Blaine said, we're constantly monitoring this, you know, to see a more normalized approach into the future. We do think that this may persist through the remainder of this calendar year at least, but we'll monitor things as we go. So it's not affecting our wind rates; our wind rates are north at 60% across all our cohort, say competitors. All of that's very, very healthy. So I really, it's a large enterprise where we're seeing this particular phenomenon.

John Sicard: That's very clear. Do you feel like the uncertainty around the U.S. Presidential election is having an impact on the calming of these large deals? Yeah, I'm not sure whether it's having an impact on the scrutiny of spend. It may.

John Sicard: I feel somewhat unqualified to link the two, quite frankly, but it very well may in the U.S. as monetary policy and fiscal policy are being evaluated depending on who is in power. Quite frankly, I have not specifically experienced that as the underlying phenomenon.

Speaker Change: Evaluated depending on who is in power.

Speaker Change: Quite frankly I.

Speaker Change: I would not say specifically experienced that as the as the underlying phenomenon.

Speaker Change: Yes.

John Sicard: Yes, thanks for that.

Speaker Change: And last question.

John Sicard: And last question. We on the yesterday made a comment in its release that customer investments and response to COVID-19 supply chain disruptions are showing signs of leveling off. I'm just curious, in your view, are you seeing this in the market or is it just the self-buying environment purely attributed to the macro delayed signing?

Speaker Change: Liana yesterday made a comment and it relates to that customer investments seem like with response to COVID-19 supply chain disruptions are.

Speaker Change: Showing signs of leveling off I'm just curious in your view are you, saying this in the market or it's just the self buying a bond and purely attributed to the macro and delight tiny.

John Sicard: It's the latter for us. I, you know, like I said, we, you know, we have a healthy, you know, we have a healthy pipeline. We have healthy prospects across the spectrum. In multiple geographies, we're thrilled with the Asia Pacific contribution and all-time record from that region. Again, with some phenomenal names, some were allowed obviously to mention; others, not, so we're thrilled with, you know, with the activity there. And again, we keep looking at this saying, well, you know, we're gaining market share. There's, there's a healthy market and healthy demand. And so if we scrutinize where the challenges are, they tend to be in that large enterprise area.

John Ernest Sicard: It's the latter for us. I, you know, like I said, we have a healthy pipeline, we have healthy prospects across the spectrum in multiple geographies. We're thrilled with the Asia-Pacific contribution, an all-time record from that region with some phenomenal names. Some we're allowed, obviously, to mention, others not.

Speaker Change: Oh, its the ladder for us I, you know like I said we.

Speaker Change: We have a healthy.

Speaker Change: We have a healthy pipeline we have.

Speaker Change: Healthy prospects across the spectrum.

Speaker Change: And in multiple geographies, we're thrilled with the Asia Pacific contribution and all time record from that region with some phenomenal name somewhere allowed obviously to mention others not.

John Ernest Sicard: So we're thrilled with the activity there. And again, we keep looking at this, saying, well, we're gaining market share. There's a healthy market and healthy demand. And so if we look at where the challenges are, they tend to be in that large enterprise area. And again, we continue to be very successful in large enterprise. We had, obviously, more than Eli Lilly in the quarter, but this one, we're thrilled to be able to announce.

Speaker Change: So we're thrilled with.

Speaker Change: With the activity, there and and again, we keep looking at the same well.

John Sicard: And again, we continue to be very successful in large enterprise. You know, we had, we had obviously more than Eli Lilly in the quarter, but this one we're thrilled to be able to announce. And we have others in the second half that we're working on and look really, really good for us in the quarter.

John Ernest Sicard: And we have others in the second half that we're working on and look really, really good for us in the quarter. I'll give you this: it's sometimes a surprise to the executives that we're working with that the grants of authority have changed magically during the process, and we find out very late in the stages of signing a contract that it has to go to the board.

John Sicard: It's always, you know, I'd say, I'll give you this. Yes, it's sometimes a surprise to the executives that we're working with that the grants of authority have changed magically during the process. And we find out very late in the stages of signing a contract that it has to go to the board. And so that's, that's how I would describe or answer the answer to your question.

John Sicard: Oh, that's right.

John Sicard: Thank you, Tom.

John Sicard: Thank you.

Christian Sgro: Your next question comes from a line of future check from National Bank Financial Markets. Please go ahead. Yes, thank you. So I'm going to serve sort of continue on the large enterprise side. If we just step back a bit and you sort of look at the growth in the large enterprise pipeline, what does that look like today versus what it's been in the past? You know, I'd say it hasn't really changed all that much, notwithstanding the sale cycle, you know, the sale cycle. And even in the sale cycle, within the sale cycle, the distance between vendor of choice, VOC, what we call VOC.

Unnamed Participant: Yes, thank you. So I'm going to sort of continue on the large enterprise side. If we just step back a bit and you sort of look at the growth in the large enterprise pipeline, what does that look like today versus what it has been in the past?

Unnamed Participant: Yes, thank you.

John Ernest Sicard: Um, you know, I'd say it hasn't really changed all that much, notwithstanding the sales cycle, you know, the sales cycle. And even in the sales cycle, within the sales cycle, the distance between the vendor of choice, VOC, what we call VOC, and negotiations begin and having signed contracts is roughly 2x. And in some cases, longer than 2X, and transforming their supply chain. That is not the case whatsoever. Okay

John Sicard: And negotiations begin, and having signed contracts is roughly 2X. And in some cases longer than 2X. Max, is really what we're seeing.

John Sicard: I don't see it; I'd say a difference where a large enterprise is no longer interested in transforming their supply chain. That is not the case whatsoever.

Blaine Fitzgerald: Okay, and then, you know, appreciate you being really upfront about the mechanics of how our scales, but you've got all these sort of initiatives here, you're investing in the growth, go to market, you've got the strategy, partnership, you've got these sort of delays right now, deals are starting out smaller. Is it fair to say that when that market normalizes here, that your SaaS growth rate is going to be potentially even north of the former peaks? I will say that we, we do have models in that direction. I think what we would have talked about earlier on is, we do see, I think that there is an inflection point with ARR, and we see that coming in, in 2025, where that momentum starts to push.

John Ernest Sicard: I will say that we do have models in that direction. I think what we talked about earlier on is, So everything we've been talking about in terms of normalized conditions and large enterprises, that sales cycle starting to temper down a little bit, we think is going to start pushing us in the right direction for, again, increased momentum. We're obviously seeing some momentum right now, but I want to see even more momentum on the AIR front.

Blaine Fitzgerald: And when that momentum changes, we will see the follow-on effect, which comes from, comes into SaaS revenue. So everything we've been talking about in terms of the normalized conditions and the large enterprises that sales cycle, starting to temper down a little bit, we think it's going to start pushing us in the right direction for, again, increased momentum. We're obviously seeing a little momentum right now, but I want to see even more momentum on the ARR front. And right now, based on the pipeline and the opportunities we see in our pipeline and the reinvestment we're making.

Blaine Fitzgerald: We think that 2025, and then 2026, when you get into the strategic partnership that we have, and it's a three-year deal that ramps over time, where we have targets that we've allocated to both our side and our strategic partner. We see some very big opportunities that will help with the acceleration on the growth right now. And, you know, this, this, this partner that we've dealt with, they've, they've been around the block enough times and they, they're, they're big enough that we have a lot of confidence that they can help us get to that next level.

John Ernest Sicard: We think that 2025 and then 2026, when you get into the strategic partnership that we have, and it's a three-year deal that ramps up over time, where we have targets that we've allocated to both our side and our strategic partner, we see some very big opportunities that will help with the acceleration of growth right now. And, you know, this partner that we've dealt with, they've been around the block enough times, and they're big enough that we have a lot of confidence that they can help us get to that next level. And we're very, actually, honored that they've chosen us as the right partner for supply chain orchestration. Yeah, we're one of a kind.

John Sicard: And we're very, actually honored that they've chosen us as the right partner for supply chain orchestration. Yeah, we're one of a literally less than a handful. And, and so we're thrilled with that announcement. I, you know, hopefully the tone of the earlier commentary, and, you know, the primary focus of this strategic relationship is to augment our selling engine quite significantly. It's really the motive behind it, early days, and we will be announcing in very short order, at least this one and perhaps another.

Speaker Change: We've chosen us as the the right partner for supply chain orchestration yeah.

Speaker Change: One of them.

Speaker Change: Literally less than a handful.

Speaker Change: And so we're thrilled with that.

Unnamed Participant: That announcement, I, you know, hopefully the

Speaker Change: That announcement.

Speaker Change: Hopefully the the tone of.

Speaker Change: The earlier commentary.

Speaker Change: And.

Speaker Change: The primary focus of this strategic relationship is to augment.

Speaker Change: Our selling engine quite significantly.

Speaker Change: It's really the motive behind it.

Speaker Change: Early days and we will be announcing in very short order.

Speaker Change: At least this one and perhaps another.

John Ernest Sicard: Okay, just one last quick one for me. You're obviously incredibly successful in the pharma market. In the case of Eli Lilly and perhaps the other wins that you've had, what's really the main thing that you're offering in this market that the incumbents are not able to do? Well, there are a few things that

Speaker Change: Okay. Just one last quick one from me.

John Sicard: Okay, just one last quick one for me. You're obviously incredibly successful in the farmer market. In the case of Eli Lilly and perhaps the other sort of wins that you've had, what's really the main thing that you're offering in this market that the incumbents are not able to do?

Speaker Change: Obviously incredibly successful in the pharma market in the case of Eli Lilly and perhaps the others or wins that you've had what's really the main thing that you're offering in this market that the incumbents are not able to do.

John Sicard: Well, there's a few things that matter in that space that are unique. To Pharma industry, notwithstanding, I'd say, it starts at its foundation with a belief that end-to-end orchestration is the way of the future, right? This cascaded, lethargic, functional way of doing supply chain of the past isn't going to survive what's required in the future. So it starts with our foundational belief that concurrency end-to-end orchestration is the way of the future.

Speaker Change: Well, there's a few things that matter in that space that.

Speaker Change: That are unique to them.

John Sicard: Beyond that, there are specific areas like jurisdictional control. For example, where the same product being manufactured in two identical factories in the world, those two products can't necessarily be sold exactly to the same country, right? So there's areas like that. There's expiry, expiry type, I'd say, analytics associated with that space that is very unique, stop cell dates, very unique to that industry, that you end up leveraging when you sell to a life science customer.

John Sicard: Now, above and beyond that, you know, we speak their language. You know, with the success that we've had in life science, when we walk through the door, what we're offering, because we, unlike many of our competitors who do a lot of custom code, we leverage the combined intellect of all others. In one connected platform, and so when you, when we walk into an Eli Lilly, they know that is the sum of the collective intellect of all of their peers that has been infused in our platform, and they get to leverage that. It's not like you walk in and say, "What would you like me to code for you?"

John Ernest Sicard: We leverage the combined intellect of all others in one connected platform. And so when you, when we walk into an Eli Lilly store, they know.

John Ernest Sicard: That is the sum of the collective intellect of all of their peers that has been infused into our platform, and they get to leverage that. It's not like you walk in and say, "What would you like me to code for you, like so many other competitors do." I think that's really, really the anchor as to why we've been successful.

Speaker Change: Of all of their peers that has been infused in our platform and they get to leverage that it's not like you walk in and say what would you like me to code for you like so many other competitors do.

John Sicard: Like so many other competitors do. I think that's really, really the anchors to why we've been successful. Okay, great. Thank you.

Speaker Change: I think that's really really the anchors to why we've been successful.

Speaker Change: Okay, great. Thank you.

Stephanie Price: And your next question comes from a line of Stephanie Price from CIBC. Please go ahead. Good morning. We've been hearing from some other software peers that they're experiencing some implementation delays or longer implementation cycles as customers undergo large strategic projects, such as migrating ERP systems, preparing for AI investments. Is that something that you've been seeing in the context of implementation cycles around rapid response? We haven't seen that necessarily. No, I'd say, you know, once we win a customer, it's quite the opposite. They're exceptionally eager to get us live, to get them live, and we've been leveraging, obviously, our partner ecosystem to support that.

Stephanie Doris Price: And your next question comes from the line of Stephanie Price from CIBC. Please go ahead.

Speaker Change: And your next question comes from the line of Stephanie price from CIBC. Please go ahead.

Stephanie Price: Good morning.

Stephanie Price: We've been hearing from some other software peers that their experience some implementation delays or longer implementation cycles as customers undergo large strategic projects such as migrating ERP systems preparing for AI investments is that something that you've been seeing in the context of implementation cycles around rapid response.

Speaker Change: Yes.

John Ernest Sicard: We haven't seen that necessarily, no. Partially, you know, and again, partially.

Speaker Change: We haven't seen that necessarily know.

Speaker Change: Yeah.

Speaker Change: Once we win.

Speaker Change: Our customer is quite the opposite there.

Speaker Change: Exceptionally eager to get us live to get them live.

Speaker Change: And we've been leveraging obviously our partner ecosystem to support that.

John Sicard: In general, we are seeing customers start with a smaller footprint. Partially, you know, and again, partially, it is to get live faster, right, rather than attempting to boil the ocean and, you know, do too much inside of the first year. They focus on what's urgent to them. And focus on getting live as quickly as possible. So we haven't seen that friction; frankly, we just haven't seen that.

Speaker Change: General.

Speaker Change: We are seeing.

Speaker Change: Customers start with a smaller footprint.

Speaker Change: Marshall.

Blaine Fitzgerald: How does that end, Steph? What John's head is actually is very accurate in terms of like the implementation of our software. Once we get going, it is hopping at record levels, and we're extremely happy with the fact that we invested in Rapid certain number of years ago and are able to templatize our way into deploying our product at a much more efficient manner than most of our competitors. I think what you might be referring to, though, is another element of the longer sales cycles. We are seeing, in particular, around SAP's S-for-HANA migration. What we're seeing is that because those transformations are so big, obviously you need to have a certain amount of resources to build to deploy your products and to balance the migration of their ERP system as well as implementing a supply chain planning solution or orchestration solution.

John Ernest Sicard: What we're seeing is that because those transformations are so big, obviously, you need to have a certain amount of resources to be able to deploy your products and balance the migration of their ERP system, as well as implement a supply chain planning solution or orchestration solution. And so that is part of the reason why we've seen the elongated sales cycle. But once we get in the door, generally, the first thing they say is, can this be done tomorrow? And we're very lucky to have a very rapid deployment that we were able to leverage.

Stephanie Price: And so that is part of the reason why we're seeing the elongated sales cycle. But once we get in the door, generally the first thing they say is, "Can this be done tomorrow?" And we're very lucky to have a very rapid deployment that we're able to leverage off of. And that makes sense. Great.

Blaine Fitzgerald: Thank you. And then Glenn just met one for you as well.

Blaine Fitzgerald: Made on Capital allocation. It looks like share buybacks. You're pretty active in the quarter to curious how you think about capital allocation here. We're really happy with our usage of capital on the buyback. We're going to continue that exercise. I did mention it. November 5th is when the end of that period comes up. And I don't mind saying that we'll probably renew for something in the future. We think it's a good government to continue to do this. And otherwise, I mean, we obviously keep our eyes open for M&A opportunities. As of this stage, we haven't seen anything that makes any sense for our current midterm productions.

Blaine Fitzgerald: November 5th is when the end of that period comes up, and I don't mind saying that we'll probably renew for something in the future. We think it's good governance to continue to do this. And otherwise, I mean, obviously, we keep our eyes open for M&A opportunities. As of this stage, we haven't seen anything that makes any sense for our current midterm projections, but we do keep our eyes open, and we're active in that market.

Blaine Fitzgerald: But we do keep our eyes open and we're active in that market.

Blaine Fitzgerald: Thank you.

Christian Sgro: Your next question comes from a line of Christians. Grow from eight capital. Please go ahead. Hi, good morning. Blaine, thanks for all the color around the phase deals and the mechanics and how they work through the model. And my question on that would be, is there a way you could maybe quantify or frame what the average increase, you know, year to year would be for these deals that are becoming more common? Yeah, I won't get into the specifics of the numbers. I'll give you always like giving examples of deals. I think I talked about last quarter; the largest deal that we had was a, they were growing two times in size.

Unnamed Participant: You know, year-to-year would be for these deals that are becoming more common.

Blaine Fitzgerald: I think I talked about last quarter. The largest deal that we had was a They were growing two times in size, and so the ARR that we had was going to grow at least two times on average, and then you can obviously imagine that over that time, there's an extra element of there being a peak amount, and as I said earlier in the call, that's generally going to happen in the first half of these contracts. For this current quarter and the first half of the year, we're sitting at a 1.18 times multiple for that ACV over the ARR. And so I think the biggest thing to kind of highlight is that it's been a big trend. We've gone from 1.04 a number of years ago up to 1.18. We are seeing a lot more phased deals.

Blaine Fitzgerald: And so that the error that we that we had was growing was going to get wrote to be at least two times in average. And then you can obviously imagine that over that time, there's an extra element of like, there's going to be a peak amount. And, as I said earlier on in the call, that's generally going to happen in the first half of these contracts. Now for, for this current quarter and the first half of the year, we're sitting at a 1.18 times multiple for that ACV over the ARR. And so we, I think the biggest thing to kind of highlight is that's been a big trend.

Marshall: And a big trend we've gone from 1.0 for a number of years ago up to $1. One eight we are seeing a lot more phase deals.

Blaine Fitzgerald: We've gone from 1.04 a number of years ago up to 1.18. We are seeing a lot more phase deals. Jack answered directly to your question. We don't talk about exactly when those deals will play out over time.

Speaker Change: But.

Speaker Change: To answer directly to your question, we don't talk about exactly when those deals will play out over time.

Blaine Fitzgerald: That's all a helpful color, and thank you from a follow on here.

Speaker Change: Alright, that's all helpful color and thank you for.

Speaker Change: From a follow on here.

Blaine Fitzgerald: Maybe I just asked about the duration of new contracts signed. Are you seeing, are there any shorter or longer than a historical trend for Knaxis? I guess tipping up a little bit. We do have some long deals that have already been signed this year. Obviously very happy with our reputation and the loyalty of our customers have shown its way through this by committing to long term deals. And that is part of the reason why our RPO is, you know, for status year of year growth at 30 percent, that CAGR at 25 percent in total RPO.

Speaker Change: Hey can I just ask about the duration of new contracts signed are you seeing.

Blaine Fitzgerald: Are there any shorter or longer than the historical trend for Kinaxis?

Speaker Change: Are there any shorter or longer than.

Speaker Change: And our historical trend for can assets.

Speaker Change: I guess tipping up a little bit.

Speaker Change: We did have some some long deals that have already been signed this year, obviously very happy with the.

Speaker Change: Our reputation and the loyalty of our customers.

Speaker Change: Have shown its way through this by by committing to long term deals.

Speaker Change: And that is part of the reason why our RP O us.

Blaine Fitzgerald: You know, for SAS, year-over-year growth of 30%, that CAGR at 25% in total RPO. A lot of that has to do with the fact that we have very committed and loyal customers that want to stay with us for the long term. Now, I will say that we don't include all of our contractual value in RPO because we don't include customers that come in with an option to terminate early, and so if they do, we are continuing to focus on that long-term projection.

Speaker Change: For SaaS year over year growth of 30%.

Speaker Change: CAGR at 25% and total <unk> a lot of that has to do with the fact that we.

Blaine Fitzgerald: A lot of that has to do with the fact that we have very committed and loyal customers that want to stay with us for the long term. Now, I will say that we don't include all of our contractual value in RPO because we don't include customers that come in with an option to terminate early. And so if they decide to do that, we won't include that in RPO. And so we do have some of that that is coming due, which will help us with our RPO even more.

Speaker Change: We are very committed and loyal customers that wanted to stay with us for the long term now I will say that we don't include all of our contractual value in RPM because we don't include.

Speaker Change: Customers that come in with a an option to terminate early and so if they decide to do that we won't include that in <unk> and so we do have some of that.

Speaker Change: That is coming due which will help us with our <unk> even more so.

Blaine Fitzgerald: So, as a right now, we are continuing to focus on that long term projection. RPO is a very big impact from phase deals, longer deals, and really strong renewals, which we have that gross retention of what we always talk about 95 to 100 percent, which is, I think, one of the phenomenon that we have.

Speaker Change: As of right now.

Speaker Change: We are continuing to focus on that long term projection.

Blaine Fitzgerald: RPO has a very big impact from phased deals, longer deals, and really strong renewals, which we have that gross retention of what we always talk about, 95% to 100%, which is, I think, one of the phenomena that we have.

Speaker Change: <unk> is.

Speaker Change: Is a very big impact from phase deals longer deals and really strong renewals, which we have that gross retention of what we always talk about 95% to 100%, which is I think one of the phenomenon that we have.

Blaine Fitzgerald: Thanks very much for taking my questions.

Unnamed Participant: Great. Thanks very much for taking my call.

Speaker Change: Great. Thanks, very much for taking my questions.

Rick Wadsworth: And your final question comes from the line of March Shapo from Loop Capital Markets. Please go ahead. Hi, thank you for taking my question. John, the sales team has a lot on its plate right now given the recent talent to rebalancing in the new head of sales that was announced last quarter.

Mike <unk>: And your final question comes from the line of Mike <unk> from loop capital.

Speaker Change: Please go ahead.

Mike <unk>: Alright, Thank you for taking my question.

John Sicard: I was wondering if you could just provide some additional details around some of the go-to-market changes that are being implemented at the company to drive the execution. Yeah, the most significant is this major partnership as part of our reinvestment strategy. And, as I commented, it's primarily, and I might say dramatically, increasing our sales engine capacity through that relationship. If we were honored to be included in that. And so, you know, we're full steam ahead on those reinvestment plans. And obviously that includes internal sales as well. So we're not letting putting the foot off the gas and again, coming off of a record Q2 new named logo, second largest in our history.

Rick Wadsworth: There's a lot going on. And you add to that this strategic partnership, which will announce shortly, and the motivations behind that strategic partner. This is not like a marketing kind of an agreement. And so, you know, there's already a very tight collaboration. And an expansion, I'd say, in the overall opportunity that we're going after together. And so that's the largest, I'd say, most exciting for Kinaxis opportunity ahead. Thank you.

Speaker Change: It's not like a marketing kind of.

Speaker Change: In agreement and so.

Speaker Change: There is already a very tight collaboration.

Mike <unk>: And an expansion I would say in the overall.

Speaker Change: The overall opportunity that we're that we're going after together and so that's the largest I'd say most exciting.

Speaker Change: For can access.

John Ernest Sicard: You know, opportunity is ahead of you. Thank you.

Speaker Change: Opportunity ahead.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you I will now turn the call back over to Vic Watchword for closing remarks.

Rick Wadsworth: I will now try to call back over to Rick Wadsworth for close remarks. Thanks Operator. And thank you, everyone, for participating on today's call. We appreciate your questions and your ongoing interest in supportive Kinaxis. We look forward to speaking with you again when we report quarter results. Thanks very much. Bye for now.

Speaker Change: Okay.

Vic Watchword: Thanks, operator, and thank you everyone for participating on today's call. We appreciate your questions and your ongoing interest and support of Codexis.

Operator: We look forward to speaking with you again when we report our third quarter results. Ladies and gentlemen, that concludes today's call. Thank you for joining us.

Speaker Change: Look forward to speaking with you again, when we report our third quarter results. Thanks, very much bye for now.

Operator: Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect. Please wait.

Speaker Change: Ladies and gentlemen that concludes.

Speaker Change: Today's call. Thank you appreciating you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

Operator: The conference will begin shortly.