Q3 2024 OneStream Inc Earnings Call
[inaudible]
https://www.kenhub.com
www.unc.org.au
Good day and thank you for standing by.
From time to time, including our quarterly report on Form 10-Q for the quarter ended September 32024, and we undertake no obligation to update any forward looking statements, whether as a result of new information future events or otherwise except as required by law.
During our call today, we will also reference certain non-GAAP financial measures there are limitations to our non-GAAP measures and they may not be comparable to similarly titled measures with any other company.
The non-GAAP measures referenced in today's call should not be considered in isolation from or a substitute for the most directly comparable GAAP measures.
Our management believes that our non-GAAP measures provide meaningful supplemental information regarding our performance and liquidity.
Excluding certain expenses that may not be indicative of our ongoing core operating performance.
Reconciliations of our non-GAAP measures to the most directly comparable GAAP measures can be found in the factories press release and the earnings highlights presentation posted on our Investor Relations website.
Tom: Now I'll turn it over to Tom.
Tom: Thank you Amy and thank you all for joining US this afternoon to review our third quarter financial results were.
Tom: We're pleased to report another solid performance.
Tom: The team once again showed strong execution against the vision, we outlined for you during our IPO.
Tom: With one consolidated platform one frame eliminating complexity for the offer the CFO by combining a unified view of financial and operational data.
Analytical and performance management capabilities to take finance further.
We grew subscription revenue, 39% year over year in the third quarter and were once again.
Tom: Cash flow positive.
Tom: We also hosted our second successful user conference of the year Splash EMEA in Copenhagen, where.
Tom: Where we expanded on the slate of new innovations, we've introduced thus far this year among.
Tom: Among other achievements.
Tom: All of this progress reflects our continued investments to drive durable growth.
Tom: While the macroeconomic and geopolitical state of affairs continues to grab headlines at one street, we saw consistent market environment relative to last quarter.
Tom: We believe the need to invest in modernizing the finance function to improve visibility and allows the CFO to become a strategic driver of the business.
Tom: To become a core requirement to effectively compete regardless of industry or economic environment.
Tom: This trend was echoed in the findings of our finance 23, 2035 initiatives launched this quarter, which I will touch upon shortly.
Tom: The three factors that drove us to create a cloud native CPM solution are still the core trends driving the market today.
Speaker Change: Quickly review.
Speaker Change: Finance has begun to digitally transform but because it started the process so far behind many other operational areas.
Speaker Change: It is still very early in this transformation.
Speaker Change: More and more cfos recognize the need for a cloud based platform to provide a single view into financial and operational data across the enterprise.
Speaker Change: Finance departments have begun to accept and even demand and operating system that unifies, a multitude of financial functions, providing an exceptional level of insight and analysis.
Speaker Change: Second <unk>.
Speaker Change: <unk> are being asked to do more transitioning from just reporting on past performance.
Speaker Change: Gearing the business towards the future.
Speaker Change: With all of the uncertainty businesses face today from geopolitical to macroeconomic financial and regulatory <unk> platform enables CFO to manage these factors and start driving real strategic value for the business.
Speaker Change: Finally.
Speaker Change: AI and ml are increasing the value of knowledge workers and business performance.
Speaker Change: But once room platform unifies financial and operational data and processes on one common data model.
Using embedded AI to make more informed decisions and plan better and faster.
Speaker Change: Our success in addressing these three trends has always centered on our extensible platform.
Speaker Change: And our ability to consistently expand its functionality both through rapid and innovative product development and successfully bringing these new technologies to market.
Speaker Change: And our slash Amira user conference in September we introduced three new innovations, bringing our total this year to 15 capping what I believe has been one of the most innovative periods in the company's history.
Speaker Change: These include one we introduced navigation center, which builds upon our advanced narrative reporting capabilities to streamline access to reports bookmarks and critical audit and narrative documents in one place.
Speaker Change: We expanded our applied finance AI offerings to include AI powered anomaly detection, a pre packaged AI method that helps finance leaders detect anomalies for data cleansing consolidation and reporting.
Speaker Change: This was part of Windstream sensible AI portfolio, which includes sensible machine learning sensible Gen AI and sensible AI Library, which includes a growing collection of pre packaged AI routines, including once we're forecasting and scenario planning.
Speaker Change: Three.
Speaker Change: As further evidence of continued innovation on the wondering platform, we showcased expanded solutions exchange offerings to support tax pillar two regulatory reporting.
Speaker Change: <unk> announced the availability of pillar two tax criteria solutions from both BDO and moving and AMCOL all built atop the one stream platform at all leveraging the unified data inherent within it.
Speaker Change: With these new offerings, we now have 100 solutions on solution exchange, demonstrating our ongoing support for the evolving needs of global organizations, and our commitment to continually adding value and utility to our customers one stream investments.
Speaker Change: In the coming year, you can expect us to focus primarily on driving these many innovations into our installed base.
Speaker Change: Even as we continue investing to further our technology leadership.
Speaker Change: Now, let me turn to our customers.
Speaker Change: One of the great and unique things about our flash user conference is that we let our customers do the talking for.
Speaker Change: From asking questions to sharing experiences with peers on how they are leveraging one stream to drive productivity and analytics to working with our team to inspire the next innovation.
Speaker Change: For those of you who weren't able to join us in Copenhagen, Let me share a couple of quick examples of what we heard.
Speaker Change: Let me begin with a 10 year partnership that we've developed with our large shipping logistics company.
Speaker Change: Their presentation during the splash Piedmont demonstrated their enthusiasm for one stream and how they have continued to expand their use of our platform.
Speaker Change: Building upon their use of <unk> unified financial consolidation and reporting and forecasting application.
Speaker Change: <unk> recently added our pillar two tax solution, along with our ESG and intercompany transaction matching solutions.
Speaker Change: Today, they are using <unk> to support over 1000 legal entities globally, and there is plenty of room to grow.
Speaker Change: Continuing to expand use in value with long standing customers is at the core of our durable growth strategy.
Speaker Change: Another customer on stage with one of the largest retailers in Europe with over 1300 locations and 8500 employees.
Speaker Change: Their success turns on the accuracy of their forecasting ensuring the right product and the right quantity in the right location.
Speaker Change: Today, they are using one streams financial planning and consolidation and following a successful proof of value. They have begun deploying sensible ml to advance their forecasting journey and we're excited to see what they do next.
Speaker Change: These are just a few examples of customers that joined us in Copenhagen to share their excitement satisfaction and successful journey, thus far with one stream.
Speaker Change: We had 52, new customers joined one stream this quarter, bringing our total customer count to over 500.
Let me highlight a couple of wins that demonstrate just how important our platform is becoming the companies and governments worldwide.
Speaker Change: I'll start with a few wins among government agencies, which are always important in Q3.
Speaker Change: This quarter, we added a large government agency in Washington, D C, which was looking to replace multiple legacy Siloed applications.
Speaker Change: The organization picked one stream as a single source of truth for reporting planning and monitoring.
Speaker Change: We will be replacing two legacy point solutions used for their budget formulation in execution.
Speaker Change: These manual error prone older solutions implemented more than a decade ago did not provide the enterprise wide level of detailed needed to effectively manage this agency.
Once again, we will consolidate their budget and financial processes and significantly upgrade the reporting as well.
Speaker Change: Users will now utilize one stream for all their budget request staff planning execution plans and execution results.
Speaker Change: The defense Logistics agency was another government agency that selected one stream this quarter and a multimillion dollar deal.
Speaker Change: With over 25000 employees. The defense Logistics agency is the largest combat support agency, providing logistics to the Dod and civilian agencies and foreign countries.
Speaker Change: This is a very important agency that among other things has provided meals fuel and supply to FEMA after hurricanes.
Speaker Change: For more than a decade, the DLA has been using inexpensive combination of contractor support with a SaaS license for our financial statement preparation and budget formulation.
Speaker Change: Utilizing <unk> core CPM, the DLA will now be able to automate everything from the Dod planning programming to providing a complete and accurate budget <unk>.
Speaker Change: Creating and performing automated reconciliations preparing federal financial statements and producing consolidated annual financial report.
Speaker Change: All while simultaneously lowering its cost.
Speaker Change: Yes.
We also enjoyed a solid quarter in EMEA.
Speaker Change: Continuing to build on our position in France as a natural successor to legacy Finance solutions, we added JC Decaux the world leader in outdoor advertising.
Speaker Change: Facing the obsolescence of its current legacy consolidation reporting tool. The company took the opportunity to rethink the scope of its current data model and processes in light of the changing market standards regulatory and financial statement requirements.
Speaker Change: The implementation of one stream performance management tool will not only improve consolidation reporting and disclosure, but also provide them with a flexible solution to adapt and support future needs such as ESG and changing regulatory requirements.
Speaker Change: Similar to the group <unk> deal discussed last quarter, the JC Decaux wind as a foundational win replacing a significant legacy system and solidifying our credibility in the region.
Speaker Change: One last customer I want to highlight is a fortune 500 equipment manufacturer, which is utilizing our sensible ml in a meaningful way.
Speaker Change: Having implemented <unk> forecast, both revenue and inventory they improve their accuracy by more than 10%.
Speaker Change: Not unlike other companies they are forecasting process required inputs from roughly 80 different finance stakeholders over a 10 day period.
Speaker Change: With that somehow the company now has a process that generates more accurate forecast and less than half an hour all while providing explanations of leading indicators and their impact on the forecast.
Speaker Change: This kind of transparency is building confidence in driving adoption from across their teams.
Speaker Change: Encouraged by these results. The company is now deploying <unk> across multiple business segments to enhance decision, making speed and drive business performance.
Speaker Change: The bigger message here from my Vantage point is the growing recognition by the market that <unk> applied finance AI solution creates more value than many of what I call custom science experiments currently in the market.
Speaker Change: This also reinforces our view that the priority or the product position of our applied approach is the best and most scalable way to derive value from AI.
Speaker Change: Part of our strategy has and will continue to be educating the market as we build our product acceptance one customer at a time as we've always done.
Speaker Change: Finally, we continue to benefit from our investment and emphasis on building out our marketing function.
Speaker Change: Earlier this month, we announced the launch of our finance 2035 initiatives.
Speaker Change: This is a partnership with academia economists and finance and business leaders to Foster a fact based dialogue on a rapidly evolving role in strategic importance of the office of the CFO.
Speaker Change: Our initial research examined what the next 10 years old for businesses at large.
Speaker Change: And how external forces our bowl elevating and impacting the critical role played by CFO and shaping that future.
Speaker Change: Based on a survey of 2000 and Cfos Ceos line of business executives and investors. The study found that the next decade will likely be defined by more regulatory convergence in technology powered gains.
Speaker Change: Our CFO, who will be expected to take on a broader role in driving business strategy and growth.
Speaker Change: The research also reaffirmed what you all know too well that the investment community puts a premium on the strategic confidence of a CFO of a company CFO and making their investment decisions.
Speaker Change: The study also validated our view on what it will likely take for the office of the CFO to become a strategic driver of business strategy and growth.
Speaker Change: Cfos and Ceos surveyed.
Speaker Change: <unk> modernizing their legacy finance stack, harnessing, new technologies, especially AI and making these investments with a sense of urgency to remain competitive.
Speaker Change: We are using this research as a foundation for a global series of Roundtable discussions with CFO CIO is in other finance leaders.
Speaker Change: We look forward to finance 2035, fostering dialogue amongst senior executives raising one streams visibility in the business community as we take additional steps to put our platform at the forefront of the conversation.
Speaker Change: Before I turn the call over to Bill Let me just thank our employees for their innovative ideas.
Speaker Change: Hard work and dedication to customer success.
Speaker Change: Our partners for sharing that commitment and helping our customers achieve incredible results and our investors for their confidence and one stream now let me turn the call over to Bill.
Bill: Thanks, Tom Good afternoon, everyone and thank you for joining today's call as Tom mentioned, we had a solid Q3 with both strong subscription growth and positive free cash flow.
Bill: If we turn to free cash flow positive in 2023 and over the past four quarters, we have generated over $60 million in free cash flow.
Bill: We're pleased with our ability to drive both revenue growth and free cash flow in this environment.
Bill: Overall total revenue grew 21% year over year to $129 million in Q3 our.
Bill: Our subscription business model continued to show impressive growth at scale as subscription revenue increased 39% year over year to $111 million and.
Bill: Increased more than 30% year over year.
Bill: License revenue came in at $12 million in Q3, compared with $19 million last year.
Bill: We also continued to see a number of conversions from term licenses to SaaS this quarter, including three significant ones with a greater than $500000. We.
Bill: We expect that trend to continue in Q4 and 2025 as we progress toward a 100% SaaS business model for.
Bill: Professional services and other revenue came in at $6 $7 million compared with $8 1 million last year professional.
Bill: Professional services revenue was lower than expected due to the continued success of our partners as we strategically transition more implementations of one stream software to them.
Bill: As such you should expect a similar professional services revenue run rate going forward.
Bill: International revenue continues to represent roughly 30% of total revenue, reflecting our continued focus on growing our global business.
Bill: More than 60% of our business came from new customers in Q3.
Bill: We ended the quarter with 534 total customers up 18% year over year.
Bill: Billings increased 25% year over year to a record $149 million as a reminder, due to a variety of factors, including timing. We encourage you to look at billings on a trailing 12 month basis, where billings grew 27%.
Bill: Our 12 month, <unk> was up 41% year over year.
Bill: Total remaining performance obligations grew 35% year over year to $997 million.
Bill: Our Q3, non-GAAP gross margin was 71% compared to 72% due to the strong license revenue last year offset by efficiency improvements, we continue to work to optimize our infrastructure and expect margin improvement over the long term.
Bill: Third quarter non-GAAP operating expenses increased 25% year over year due in part to IPO related expenses R&D spending increased 48% year over year as we continued to strategically invest in new products to drive the durable growth of our business.
Bill: Total equity based compensation expense for the third quarter was $260 million of which $204 million was a one time charge that we recognized in connection with our IPO discharge was lower than expected due to the effective timing of modifications, we made to outstanding options.
Bill: As part of the IPO.
Bill: non-GAAP operating income was $5 million or 4% operating margin in the quarter non-GAAP net income was $11 3 million.
Bill: For the third quarter, we generated $1 million of free cash flow, bringing our trailing 12 months free cash flow to over $60 million, we ended the quarter with $495 million in cash and cash equivalents.
Bill: Now turning to guidance our fourth quarter is an important one for us as is traditionally our largest seasonal bookings quarter.
Bill: Our guidance for Q4 2024 is as follows.
Bill: Total revenue for Q4 is expected to be $127 million to.
Bill: $129 million.
Bill: non-GAAP operating margin is expected to be breakeven to positive 2%.
Bill: non-GAAP net income per share is expected to be between one to.
Bill: <unk>.
Bill: Stock based compensation will be approximately $50 million to $55 million.
Bill: We are also raising our full year guidance for both revenue and profitability.
Bill: Total revenue for 2024 is expected to be $484 million to $486 million.
Bill: non-GAAP operating margin is expected to be negative 2% to negative 1%.
Bill: non-GAAP net income per share is expected to be between <unk> <unk> to.
<unk>.
Bill: Stock based compensation will be approximately $315 million to $320 million.
Bill: And finally, while we aren't providing 2025 guidance this quarter the combination of our strategy to transition the majority of implementations to partners.
Bill: Gather with our accelerated SaaS conversion rates leaves us comfortable with current wall Street consensus for full year 2025.
Tom: Now, let's turn it back to Tom.
Tom: Thanks Bill.
Tom: The message you will hear from me every quarter is the importance of the long term view, we are taking and building the one stream business and brand.
Tom: B and advancing our product roadmap to expand our platform or increasing our marketing efforts to grow our brand and pipeline.
Tom: The investments we are making today are laying the foundation for a global growth in the years to come.
Speaker Change: As a reminder to ask a question.
Speaker Change: Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Your question. Please press star one again.
Speaker Change: In the interest of time, we ask that you.
Speaker Change: Please limit yourself to one question.
Speaker Change: These standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from Chris <unk> with Morgan Stanley. Your line is open.
Speaker Change: Hey, Tom Hey, Bill Congrats on the solid quarter here.
Speaker Change: It's asking for SCE.
Speaker Change: Placement opportunity as you go through this upcoming ERP Super cycle, we've done a lot of work on this topic and it seems like there is going to be an acceleration in migrations over the coming years. So.
Speaker Change: Curious to hear your thoughts as it relates to what kind of ERP royalty. Thank you will play out with the company, having multiple ERP have already standardized on one and then potentially single ERP World do you think like Shanghai population can still resonate in that type of scenario.
Chris: Thanks, Chris.
Speaker Change: We think about this a lot and we are really really comfortable and the value proposition that we're offering to customers no matter. If they have one ERP or two or what that kind of super cycle looks like because we are the flight.
Chris: Sure.
Chris: To manage their business.
Chris: If you think about what's going on in the <unk>.
Chris: <unk> World Youre really talking about the recording of what's happening in our business that is oriented around physical view of the business and sulfur are critical layer that allows you to model our humanity manage and run your businesses so that applies to Europe.
Single ERP, you need that flexibility murkier multiple ERP as you need not only the standardization bump flexibility. So we're really comfortable with how we help customers amplify the value they get from their ERP investment.
Speaker Change: Thank you. Our next question comes from Mark Murphy with Jpmorgan. Your line is open.
Mark Murphy: Thank you and I'll add my congrats.
Speaker Change: Not everyone is performing quite so it definitely in the office of finance at the moment.
Speaker Change: We do hear from some of your peers that.
Speaker Change: They are finding somebody SAP and Oracle business is tough to dislodge as they get into this cloud migration with it feels like one stream is.
Speaker Change: Having a very different experience I'm wondering if your.
Speaker Change: Sensing a tipping point, where it's just common knowledge.
Speaker Change: This should be talked into one stream or.
Speaker Change: Are they viewing you.
Speaker Change: Little more future proof because of the platform capabilities or the architecture.
Speaker Change: Do you have with sensible ml and maybe that's making a difference just why do you think that you're.
Speaker Change: We're kind of having better success.
Speaker Change: Thanks Mark.
Speaker Change: Great question really thinking about this.
Speaker Change: We are offering an opportunity for companies to be as transformative as possible. So when you think about having a platform like one stream.
Speaker Change: For a company that's got a lot of different financial solutions, and plywood, which happens to be the case with a lot of them.
Speaker Change: Sure.
Speaker Change: Okay solutions that maybe they surround it with.
Speaker Change: Additional points.
Speaker Change: The message that <unk> been.
Speaker Change: We're able to bring to that customer is that we can help you become very efficient at delivering your core financial requirements. So that you can participate.
Speaker Change: Revolution, you can participate in having financed become more and more optimal and I think that's really resonating with customers in that market in general.
Thank you and our next question comes from Koji Ikeda with Bank of America. Your line is open.
Speaker Change: Hey, Tom Hey, Bill.
Speaker Change: For taking the question I wanted to ask one here on the competitive environment.
Speaker Change: And maybe how it feels like today versus a year ago, specifically against Hyperion may.
Speaker Change: Maybe digging a little bit deeper specifically on high periods cloud offering.
Speaker Change: Totally get the competitive advantage versus on Prem, but what about the cloud.
Speaker Change: I ask this question because we've been hearing from more than one partner.
Speaker Change: Purion cloud has gotten.
Speaker Change: Over the past year, so it just.
Speaker Change: It makes me begin to wonder what that Hyperion replacement cycle could look like.
Speaker Change: Over the next 12 months to 24 months. So is there anything you could share about kind of this one stream versus hybrid cloud <unk> P. M.
Speaker Change: <unk>, that's giving you the confidence.
Speaker Change: Takeaways will continue.
Speaker Change: Sure. So as we look at this we're seeing a lot of consistency and in those win rates and certainly competition is always there and we were one of those countries I feel like that makes us better and we keep trying to react to make sure we keep our competitive advantage.
Speaker Change: We really are leaning on the fact that we're a single platform and Thats really hard thats something that that happens from the very first line of code.
Speaker Change: And it's something that is not easy to replicate.
Speaker Change: You see that even with the sort of a siloed cloud approaches so even as other companies are starting to adapt their methodology, our improved particular functionality and product. We still have this high ground that's fortified by our platform based approach and so and we're continuously endeavoring to make sure that we're innovating and being that that.
Speaker Change: Functional lead as well so we so all in all we take again not at all broad brushing anywhere always very very focused on what our competitors are doing and making sure that we're innovating at a pace that keeps up ahead.
Speaker Change: Thank you. Our next question comes from Steve Enders with Citi. Your line is open.
Steve Enders: Okay, great. Thanks for taking my questions here.
To ask on the principal amount and the AI opportunity that youre.
Steve Enders: You are seeing.
Steve Enders: Wondering.
Speaker Change: How widespread or how deep the conversation that you go ahead across the current customer base and maybe what some of the new uptake in pipeline is looking like today.
Speaker Change: Sure happy to share that so we were really thrilled at sort of the momentum build that we're getting not only from our current successes that we're having with us but also our ability to showcase those successes and have customer share those at our at our.
Speaker Change: User conferences, so we're starting to see more and more interest in.
Speaker Change: And as I alluded to in my in my statements.
Speaker Change: A very large education process that needs to take place and we see ourselves at the forefront of educating our customers and just how important the AI technology.
Speaker Change: But more importantly, how.
Speaker Change: How much of an advantage they can offer so again that sort of a bill when you think about making a market. If you think about helping customers try to achieve something different such as a touchless forecast you really have to invest in that education process and help them move along that spectrum and so we're really comfortable that it is.
Speaker Change: An outsized opportunity we're in the early innings, and we continue to prove ourselves and help educate our customers.
Speaker Change: Thank you. Our next question comes from John Di Fucci with Guggenheim Securities. Your line is open.
Speaker Change: Thank you.
Speaker Change: My question is for Tom and it's sort of a follow up to Chris' <unk> questions and then Tom the one platform topic that you talked about I think a lot of people and a lot of people, we speak to as far as investors associate the growth and momentum that youre seeing in the market with a legacy replacement for consolidation close including.
Speaker Change: We sort of looked at that first two and we're seeing some benefit and you are but the more conversations we have with people in the field.
Speaker Change: Sure we've understood the traction independent of that.
Speaker Change: The financial and operational planning is getting right now for you that's <unk>.
Speaker Change: We're actually a little surprised at how much traction that independent financial close is getting.
Speaker Change: And it looks like it's set up for the future too can you talk more about that sort of success, you're seeing in planning today and maybe how the core principles for financial consolidation and close have given you a leg up in the planning market you even seen one of your.
Speaker Change: One of your major competitors actually just buy clothes company that was traditionally a planning company.
Speaker Change: Maybe talk about that that'd be great.
Speaker Change: Sure. Thanks, John It's a great question and I am excited to talk about this one actually because it's something that's near and Dear to my own time in corporate finance and that is we really set out to make sure that we can help as you alluded to solve the core finance problems at every business that has.
Speaker Change: Evolving complexity or is already globally complicated we need to help them do the thing what we call core the financial consolidation planning.
Speaker Change: Account reconciliation things you have to do when you have to do correctly, but we all know when I go out on sales calls and I'm speaking with customers. They want to talk about how they can be more strategic and when I say customers. The also the CFO.
Speaker Change: Chief Accounting officer, the head of financial planning, how can they be more strategic and help drive the business and Thats why youre hearing that because once we help them become a sufficient at the core which every business has to do they start to be able to get leverage on the investments they've made and one stream to drive more value and actually become a real partner to the company and learned that analytics.
Speaker Change: <unk> the information, that's being created and supplement what's happening operationally and ultimately what you are getting and why there is so much interest and why I feel like this is the outsized opportunity. It really is the new definition and the future of CPM is this idea that you can make sure that you are efficient at your core but then you can take your operational.
Speaker Change: <unk>.
Speaker Change: Plans and optimizations and link them to these financial objectives, and metrics and manage them Holistically and really drive the business forward.
Speaker Change: Thank you. Our next question comes from Brian <unk>.
Speaker Change: With Piper Sandler your line is open.
Speaker Change: Thank you and good afternoon, great to see the momentum build here, Tom I wanted to double click into the government opportunity I think you've disclosed I think 15% logo penetration in the Fortune 500, you talked about a new large government agency kind of leaning in with you guys.
Speaker Change: This year.
Speaker Change: What is the penetration your best guess penetration in government.
Speaker Change: And can you maybe.
Speaker Change: Yes.
Speaker Change: Size the scope of the opportunity as you think about.
No.
Speaker Change: Whole government agency, replacing kind of legacy solutions, what does that opportunity for the firm.
Thank you yes.
Speaker Change: It's a very sizable opportunity and we're reaching the point as a business, where we've proven ourselves across multiple agencies and most multiple sectors within within the public sector in terms of.
Speaker Change: Defense and making sure that we have the right.
Speaker Change: Product aligned with the right security posture and aligned with the right way of thinking that you actually you have differences in processes and planning. When you are when you are an agency versus a revenue generating business. So it's early innings, but we've been building momentum.
Speaker Change: As a company by landing more and more of these significant mark key types of agencies and so.
Speaker Change: Without trying to quantify it exactly we feel very well positioned.
Speaker Change: Based on the success that we're having in our commitment to continuing to grow and we feel that it's a continuing important segment of our business that will be focusing on.
Thank you. Our next question comes from Alex Zukin with Wolfe Research. Your line is open.
Speaker Change: Hey, guys. Thanks for taking the question.
Speaker Change: Maybe just.
Speaker Change: Comment on the demand environment.
Speaker Change: In general what Youre seeing now is arguably we get past the.
Speaker Change: The election into the end of the year or are you kind of seen customers <unk> companies start.
Speaker Change: Making plans that maybe are a little bit more.
Speaker Change: Transformational than in previous quarters and periods, given kind of the change in velocity of their businesses. The power of AI kind of what are you seeing there.
Speaker Change: In any verticals that stand out to you as being particularly interesting.
Speaker Change: And then any comments bill just about net retention how that trended in linearity in the quarter.
Speaker Change: I'll start and then let.
Bill: Bill respond there in terms of we're seeing a consistent demand environment, obviously very new.
Speaker Change: The election, just being 24 hours old.
Speaker Change: Got our eye on that like I think every other CEO.
Speaker Change: Management team sort of wondering.
Speaker Change: Everyone. I think is helpful for this being in a positive but maybe this will be a relief valve at some point.
Speaker Change: People some of this uncertainty clears and we know what life looks like right now.
<unk> and kind of going into the quarter, leading up to what we were seeing a consistent demand environment definitely.
Speaker Change: From my personal interactions.
Speaker Change: Baldwin and sales cycles.
Speaker Change: I would say that I am seeing an appetite for a transformational most cfos are looking to be transformational and you hear that word it's a little bit more of an aspirational.
Speaker Change: Seen in the past, it's not just more of the same so that's an exciting.
Speaker Change: No trend that we see especially as I see more and more forward leaning CFO very interested in machine learning. There is it's still very early days there, but the.
Speaker Change: The early adopter types of CFO see this as a significant opportunity to inflect.
Speaker Change: That they get information from a planning perspective, especially and then also the inferencing that they can get with some of the generative AI on top of it. So we're excited about that and yes, we are seeing that but I would still say its early days trending.
Speaker Change: And Alex to answer the second half of your question.
Speaker Change: I mentioned in my comment that bookings were roughly.
Speaker Change: Roughly 60%, new and 40% upsell, which has been the trend for the past couple of years at least.
Speaker Change: And while we're not going to get <unk> on a quarterly basis, it's kind of in the same ZIP code as we told you during the during the Roadshow.
Speaker Change: Thank you. Our next question comes from Brian Peterson with Raymond James Your line is open.
Brian Peterson: Congrats on the quarter and thanks for taking my question. So I wanted to hit on some of your marketing investments I know Thats stepped up this year I'm curious what you can say on the top of the funnel. Our early stage pipeline any successes from those investments would love to get some color there. Thanks guys.
Speaker Change: Yes, I'll take that one.
Speaker Change: Early days, we did just start.
Speaker Change: I think you saw the brand campaign that we launched earlier this spring around take finance further obviously, you've seen us kind of revitalize our logo and you've seen us.
Speaker Change: Increasing some of our specific demand Gen environment.
Speaker Change: Demand Gen investment I'd say, we have a we have a reasonably long sales cycle. So certainly the pipeline is.
Speaker Change: It is doing.
Speaker Change: What we had hoped but.
Speaker Change: But again, it's still early days I would also say and I think some people commented on it last quarter that we're really focusing also on our pricing and packaging.
Speaker Change: He is also in its early days, but we we.
Speaker Change: See some.
Speaker Change: Significant opportunity there that again will kind of manifest itself over time.
Speaker Change: Thank you. Our next question comes from Mark Scheffel with loop capital. Your line is open.
Mark Scheffel: Hi, Thank you for taking my question I have a question on CPM Express I was wondering if you could just help us out with how you are thinking about the near term opportunity around the pipeline.
Mark Scheffel: The relatively new product.
Mark Scheffel: Sure.
Mark Scheffel: I'm really really excited about CPM express and really our ability to focus on that commercial segment of the business and sort of meet them, where they are add on their journey. So we're still in the process.
Mark Scheffel: Ill call it.
Mark Scheffel: Market testing, if you will where we've been working with several customers that fit within that segment and I'm, even more encouraged that that product or configuration of our product is really what it is the right match for that segment. It's again very early days, but we are focused on <unk>.
Mark Scheffel: Wrapping that over the coming year, and really making sure that we're not in a great position to address these more.
Mark Scheffel: Companies that are becoming are seeking to become more mature in their financial processes and capabilities by offering them. The CPM express sort of best practices configuration that we've been able to take away from the large enterprise and share with them.
Mark Scheffel: What the what the core of that offering being choice for that customer, it's an opportunity to use the same software as the biggest companies in the world, but do it in an efficient way that can get them on boarded and onto this.
Mark Scheffel: Better analytics platform that opens up a lot of capability. So I'm really excited about that again early days in the journey, but I really feel that it's a unique offering because it's not a separate product if not it's the same code base. It's an on ramp that you don't have to get off.
Speaker Change: Thank you. Our next question comes from Nick Altmann with Scotiabank. Your line is open.
Speaker Change: Awesome. Thank you Tom you talked about Splash EMEA I wanted to ask about the wave developer conference next week can you just outline where developers fit into the platform and just the overall picture what the focus will be for the conference and then.
Speaker Change: You guys alluded to the growth durability.
Speaker Change: A one stream and thats kind of a core focus over the medium term.
Speaker Change: Developers kind of fit into the picture and how to developers sort of help shape, a more durable growth profile here. Thanks.
Speaker Change: Sure.
Speaker Change: As one of my favorite things to ask I know Rick talked about technology.
Speaker Change: Technology. So we really look at again, we built the platform and what's unique to that foundation is the whole idea that theres a development environment in the product, meaning that it is infinitely extensible.
Speaker Change: So a customer is never going to run out of software with one stream, we can adapt to their to their needs. So the developers come in really three flavors sort of a citizen developer.
Speaker Change: The kind of person that has a lot of domain knowledge, that's looking to make sure that they can flex one stream two to solve their company specific problems to be more.
Speaker Change: Sort of what we would consider our exchange developer that wants to make something more of an application and expanding use cases as a partner for example, a partner companies producing.
Speaker Change: And our partner place.
So not not that full on computer scientist kind of individually.
Speaker Change: More of a more of a developer than just the average power user and then finally you have more of the integrated systems.
Speaker Change: Vendor sort of somebody in ISP somebody thats going to that maybe has created a software company is looking to re platform I'm wondering so what we're seeking to do at our conference like wave is addressed and define a journey for all of those different types of creators as we call them within one stream and helped them understand how they can.
Speaker Change: Get the most out of the one <unk> development platform get a head start.
Speaker Change: And maybe a technical problem that they're trying to solve for a customer or for their company.
Speaker Change: By leveraging the underlying technologies are the integrated set of engines that really make up our platform. So that really ultimately you can talk about durable growth. This gives us such an advantage because if we can bring our platform and the development capabilities closer to those people that understand the real business problems and we can turn those into reproducible products.
Speaker Change: Surface within our within our.
Speaker Change: Solution exchange that ultimately produces better value for one stream better value for the customer and for the contributor of that that intellectual property.
Scott Berg: Thank you. Our next question comes from Scott Berg with Needham <unk> Company. Your line is open.
Scott Berg: Hi, everyone really nice quarter, thanks for taking my questions.
Speaker Change: Tom Your subscription revenues are growing nearly 40%, which is an outlier in our SaaS coverage universe for most of us that covered the space you draw some really healthy profitability in the quarter can you spend more to grow faster do you think the demand environment could actually bear more investments or is this the right level to match.
Speaker Change: A business that in the short term.
Speaker Change: Okay, Great question, I'm going to tie that into the last two questions a little bit so as we've been really looking at one stream and shifting and responding to our customers' interest in helping them solve more operational problems or challenges in going deeper and helping them solve.
Speaker Change: The integration of finance and operations.
Speaker Change: When thinking about this more diverse product set and then the pricing and packaging of it and then the marketing spend that we can put behind it. So I really have been looking at that.
Speaker Change: 2023, 2024, as the starting evolution of this sort of greater expanded product journey and you can expect us to invest more into that try and trying to make sure that we are fueling that longer term growth.
Speaker Change: And also at the same time.
Speaker Change: Continuing to focus on R&D, you can expect us to continue to invest heavily.
Speaker Change: In our in our AI.
<unk> as well as the.
Speaker Change: The innovations that we're delivering on our core platform. So altogether, we really feel that were positioned well with this with this expanded vision of the way that I think I've mentioned this on the last call I really view the company as core and financial analytics, and AI and operational analytics and I think you put those pieces together there is an.
Speaker Change: <unk> for us to invest more in that side of the business. We just wanted to make sure that we have the framework and it's an efficient investment.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Derrick Wood.
Speaker Change: With TD Cowen Your line is open.
Speaker Change: Thanks, Bill you had an impressive billings growth considering it was a really tough comp and I think this was the strongest sequential billings growth. We've seen for Q3, so anything to call out in terms of outsized bookings performance or timing of renewals that would have driven this strength in the quarter and any directional.
Speaker Change: Factors, you would flag for us around billings heading into Q4.
Speaker Change: Yes, we were Super happy with our billings performance, we actually did a.
Speaker Change: A little bit better than we had expected.
Speaker Change: I would say and I would just say there was no change in duration there was no.
Speaker Change: There was nothing.
Speaker Change: That was extraneous there what I would say as we did.
Speaker Change: We did collect a bill and collect a little bit faster as you also saw some outperformance on free cash flow.
Speaker Change: That we that we demonstrated but.
Speaker Change: Sometimes at the end of a quarter, we'll have deals that will we will sign in the quarter, but they'll say hey, we don't want we don't.
Speaker Change: Wanted to become effective till the next quarter and I think you've seen that in quarters past.
Speaker Change: This quarter, we had a really strong.
Speaker Change: The desire for our customers to start right away and so that drove a bit of outperformance.
Speaker Change: And in Q3 for sure. So we're happy with it and thanks for calling it out.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from Terry Tillman with twists Securities. Your line is open.
Speaker Change: Yes, I'll echo the congratulations its a single question, but it might actually be two parts sorry about that.
Speaker Change: Firstly.
Speaker Change: On the partner side, I mean, what's your growth and scale and growing faster than really all your competitors. You are now public you've got this notoriety I want to know how our partners are responding what are the investments that we're making in what is what kind of new doors that are opening up and then the second part is related to the prior question for you Bill in terms of the free cash flow. It sounded like collections were strong but do you.
Speaker Change: Still see <unk> being seasonally the strongest quarter for free cash flow. Thank you.
Speaker Change: Thanks, Terry So partners are really an important part of our of our long term success and investing.
Speaker Change: Continuing to invest in that community.
Speaker Change: As something that really enable scale for us and also creates a very trusted.
Speaker Change: Our referral mechanism because these partners tend to have long term relationships with the customers the buyers and so overall.
Speaker Change: We continue on our constantly investing and thinking about that community how to grow it different ways to grow it as well as to support them in general we're seeing across the board not only interest in the projects as evidenced by the increase in the delivery that's being taken on by the partners, but also <unk>.
Speaker Change: Many partners investing we now have over 100.
Speaker Change: <unk> and our partner place section in the exchange, which is a direct investment of our partner community in creating intellectual property on our platform. So when I take all of those pieces I feel I feel good about it I also feel like we have a lot more that we can continue to do in terms of continuing to work more closely with the GSI than opening up more.
Speaker Change: More long term opportunity for us and for the community in general and just in terms of free cash flow.
Speaker Change: Generally Q1 will be our highest seasonal quarter, obviously Q4 is our biggest bookings quarter and and so well.
Speaker Change: I realize that last year in Q4, we had a nice free cash flow quarter, I think going forward and we do expect to be free cash flow positive this quarter.
Speaker Change: Going forward you should expect Q1 to generally be the highest seasonal.
Speaker Change: Cash flow quarter.
Speaker Change: Thank you. Our next question comes from Rob Oliver with Baird. Your line is open.
Rob Oliver: Great. Thank you good evening.
Rob Oliver: You guys called out a few large SaaS conversions in the quarter.
Rob Oliver: And.
Speaker Change: Tom I guess, given the commentary in your prepared remarks at the beginning about the more strategic nature of the CFO and how they are there is a growing awareness there I'd just be curious when you guys are in these discussions.
Speaker Change: B.
Speaker Change: It's painful move sometimes for the companies to consider doing this but when they do talk about what sort of opportunity youre seeing to talk more broadly about the one stream platform, whether it be what solutions exchange can offer a sensible ml or other opportunities to cross sell upsell windows conversions happen.
Speaker Change: Thank you very much.
Speaker Change: Thank you, yes, that's always a great opportunity once in a lot of ways.
Speaker Change: Some of our newer innovations and offerings are even driving those customers. For example, the sensible machine learning AI platform is only available if you are in.
Speaker Change: If you are in a SaaS based position with Austin, So that actually drove a few of those of those.
Speaker Change: Significant.
Speaker Change: Conversions this quarter and so that is definitely part of the conversation when someone is doing a.
Speaker Change: As interested in SaaS transition on top of just sensible machine learning, though is another example.
Speaker Change: Our first customer.
Speaker Change: First customer of one stream converted to SaaS. This.
Speaker Change: This quarter end.
Speaker Change: They actually went ahead and added power by on a significant power by connector on top of it at the point of conversion. So youre seeing as you would expect we take this as an opportunity to offer more and more value to our customers.
Speaker Change: And it really does change the conversation that we can have when they are in our SaaS platform, because we're no longer having to as we look to seek as we seek to add new use case, a new value, we're not having to get into conversations necessarily what the it department or talking about compute resources, because we control the entire.
Speaker Change: Equation, so it's overall.
Speaker Change: An opportunity that we seek to maximize.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Daniel Jester with BMO capital markets. Your line is open.
Speaker Change: Great. Thanks for taking my question I wanted to circle back to one earlier in the conversation about.
Speaker Change: Planning opportunity.
Speaker Change: Think about your customer base today, maybe how prevalent is that youre having.
Speaker Change: Customers have both.
Speaker Change: Capital planning sales planning people planning there are different percentages in the organization that might be using some of those tools and so I'm wondering.
Speaker Change: How often youre being able to sell multiple planning solutions inside to a customer and.
Speaker Change: And there is I think going forward how are you thinking about unlocking some of the silos to really harness the full planning opportunity. Thanks.
Speaker Change: Sure. So when we think about when we think about planning when you think about an opportunity within a customer there usually is.
Speaker Change: Sort of capability maturity model that our CFO our company has within their within their thinking and so we saw really you'll hear me use this word core and so core being both the financial consolidation and financial planning and then some of the other must pass when a company becomes proficient at those.
Speaker Change: They don't jump.
Speaker Change: Right to the operational side. They go to the next level some of the things that you meant that you mentioned, so youll start thinking about more granular planning around the line items, such as salary or hourly wages. So thats. When you will engage people planning that impact layers on another solution in more depth and more sophistication in your planning process than what will happen is they might go.
Speaker Change: Oh into capital our cash as you mentioned, but that's an evolution that a customer goes through so that's always and when we talk about replacing multiple solutions in the way that we've been able to really deliver a lot of value for our customers. It is having that journey defined for the customer and helping them achieve greater capability and then what we were talking about when we get into operational is.
Speaker Change: Beyond that what you do when you start getting into operational is monitoring the trends that are underlying your salaries wages. Your capital your cash and then predicting those trends with AI. That's the ultimate journey. So when we look at it the opportunity for us even many of the customers that have started we have a we have a very detailed.
Speaker Change: Our journey that we can take them on and that's really the value proposition that we're ultimately sharing with our customers and why we feel again very why we feel so.
Speaker Change: Excited about and committed to.
Speaker Change: The strong gross retention that we've been able to have because once we have that customer and we're demonstrating value. We know that we are a journey that can help them achieve a lot and we can help them rationalize how they can become a better finance organization that really strategic to them.
Speaker Change: To their business so.
Speaker Change: All in all I think that as you've described the planning opportunity really is.
Speaker Change: Something that we can continue to develop for our customers through the journey that we're defining with the platform.
Speaker Change: Thank you I'm showing no further questions at this time I would now like to turn it back to management for closing remarks.
Speaker Change: Thank you for joining us and we look forward to seeing you. All soon thank you very much.
Speaker Change: This concludes today's conference call.
Speaker Change: Thank you for participating you may now disconnect.
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