Q4 2024 OneStream Inc Earnings Call
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Speaker Change: Welcome to the OneStream's 4th Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. If you'd like to ask a question during this session,
Speaker Change: Please press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Annie Leschin.
Vice President of Investor Alliance
Strategic Finance. Please go ahead, ma'am.
Speaker Change: Thank you, Operator. Good afternoon, everyone. Welcome to OneStream's fourth quarter and full year 2024 earnings conference call.
Speaker Change: Joining me on the call today is our co-founder and CEO, Tom Shea, and our CFO, Bill Koefoed.
Speaker Change: The press release announcing our fourth quarter and full year 2024 results issued earlier today is posted on our Investor Relations website at investor.onestream.com, along with an earned presentation.
Speaker Change: Now let me remind everyone that some of the statements on today's call are forward-looking, including statements related to guidance for the first quarter ending March 31st, 2025, and the year ending December 31st, 2025.
Speaker Change: Forward-looking statements are subject to known and unknown risks, uncertainties, assumptions, and other factors.
Speaker Change: Some of these risks are described in greater detail in the documents we file with the SEC from time to time, including our quarterly report on Form 10-Q for the quarter ended September 30, 2024, which we filed with the SEC on November 7, 2024.
Speaker Change: 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.
Speaker Change: During our call today, we will also reference certain non-GAAP financial measures.
Speaker Change: These are limitations to our non-GAAP measures, and they may not be comparable to similarly titled measures of other companies. The non-GAAP measures referenced on today's call should not be considered an isolation from, or a substitute for, their most directly comparable GAAP measures.
Speaker Change: Our management believes that our non-GAAP measures provide meaningful, supplemental information regarding our performance and liquidity by excluding certain expenses that may not be indicative of our ongoing core operating performance.
Speaker Change: Reconciliations of our non-GAP measures to the most directly comparable GAP measures can be found in this afternoon's press release and in the earnings presentation posted on the Investor Relations website.
Speaker Change: Before I turn it over to Tom, we just wanted to let you know that we will be attending Morgan Stanley's Technology, Media, and Telecom Conference on March 4th, 2025. A live stream and replay of our presentation at the conference will be made available on our Investor Relations website. Now I'll turn it over to Tom.
Tom Shea: Welcome, everyone, and thank you for joining us today. I'm going to touch on our results, what we're seeing in the market, and provide our outlook for 2025.
Tom Shea: 2024 was a milestone year that ended with a solid fourth quarter performance with 29% year-over-year revenue growth and strong cash flow.
Tom Shea: This was a testament to the strength of the OneStream platform and our incredible innovation engine, including our Finance AI portfolio, reflecting the significant business value we provide to our customers.
Tom Shea: Our solid finish once again demonstrates resilience in a year that presented new opportunities and challenges.
Tom Shea: A combination of events, including the U.S. election, the ongoing geopolitical climate,
and the Sudden Strength of the U.S. Dollar.
affected our business at year-end?
Tom Shea: First, macrouncertainty around tariffs, regulations, and reporting requirements impacted two of our primary markets.
large multinational companies, and the public sector.
Tom Shea: This caused additional deal scrutiny and pushed some deals into the new year, the vast majority of which have closed, including a significant public sector deal.
Thank you.
Second.
Tom Shea: The significant change in foreign exchange rates also impacted some of our financial metrics in the quarter, as Bill will talk about shortly.
Tom Shea: And third, even with this, we reported solid results and are excited about the momentum of two important areas of focus.
The Commercial Sector and Finance AI.
Tom Shea: Overall, despite some near-term headwinds, demand for one trim remains strong, and we are optimistic heading into the year and remain confident in our long-term opportunity.
Tom Shea: Now let me give you some highlights from 2024, which was one of the most transformative years in OneStream's history.
Tom Shea: We grew total revenue 31% year-over-year, driven primarily by strong subscription revenue growth of 41% year-over-year.
Tom Shea: We were free cash flow positive in 2024, generating $59 million during the year.
while also achieving non-GAAP operating profitability.
We once again reported 98% gross retention this year.
Tom Shea: reinforcing the value and stickiness of our platform, which is the bedrock of our company.
Tom Shea: Yet, our strong financial results were only part of the story. We introduced 12 new innovations at our US Splash User Conference in May, and another three at our European Splash User Conference in September.
Tom Shea: Unlocking additional utility and value for customers, creating more on-ramps to the OneStream platform and providing more expansion opportunities in the installed base.
Tom Shea: More recently, at sales kickoff in January, we rolled out our solution-based packaging that is aligned to how the market wants to buy,
Tom Shea: supporting the value the customers derive from our offerings and simplifying initial expansion sales for OneStream and our partner ecosystem.
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Tom Shea: We quadruple bookings and the number of customers using our Finance AI solution, including Sensible Machine Learning.
Tom Shea: For the third consecutive year, we were recognized as a leader in Gartner's Magic Quadrant for Financial Planning Software, and a leader in IDC's worldwide Office of the CFO Record to Report vendor assessment.
Tom Shea: And just last month, OneStream was named the leader in business planning by ISG, formerly Ventana Research.
Tom Shea: illustrating the power of our platform to support more operational processes in need.
Tom Shea: And finally, we completed a successful IPO and secondary offering in the second half of the year.
Tom Shea: All of this speaks to the market trends that are driving the need to modernize finance.
Tom Shea: Three trends underpin our business and further reinforce the confidence we have in OneStream's long-term opportunity.
Tom Shea: Number one, the digital transformation of finance. The CFO has recognized the need for a unified cloud-based platform to provide a single view of financial and operational data across the enterprise.
This trend was reinforced by our Finance 2035 Initiative Study.
Tom Shea: which found that more than three quarters of CEOs and CFOs are prioritizing the need for a unified single source of truth for corporate data as essential for future business success.
Tom Shea: Number two, the expanding scope of the CFO, transitioning from reporting on past business results.
Tom Shea: to driving real strategic value and becoming an embedded partner to the business.
Tom Shea: And number three, the growing need for applied AI and ML solutions to advance finance's impact and ability to plan faster, forecast with greater accuracy, and empower every employee to make quicker, more informed decisions.
Thank you.
Tom Shea: These trends continue to drive our platform development and inform our new product roadmap.
Tom Shea: The breadth and depth of our platform is truly comprehensive and unique in the industry.
Tom Shea: enabling customers to unify financial and operational data and reporting on one common data model.
Tom Shea: Accelerate and improve planning, forecasting, and decision-making with AI solutions purpose-built for finance.
Tom Shea: and extend the platform to address new use cases as their needs evolve without adding technical debt.
Tom Shea: OneStream has a real competitive advantage, allowing us to meet the data, analytics, and processing needs of even the most complex environments at scale.
Tom Shea: I'm really excited about the progress that we made in 2024, which I believe was the most innovative year in our history.
Tom Shea: Our new offerings include centralized report assembly and data gathering with advanced narrative reporting.
Tom Shea: Delivering rich financial data to a broader set of users with our certified Microsoft Power BI Connector.
Improvement in implementation time and project success with CPM Express.
Tom Shea: providing customers with the ability to do ESG reporting on the OneStream platform.
Tom Shea: Elevating and empowering sales planning with a fully integrated sales performance management solution built on top of the OneStream platform.
Tom Shea: And overarching all of this is our industry-leading finance AI solutions, purpose-built for the Office of the CFO.
Tom Shea: We had a positive initial reception in the market for these new offerings, which combined with our updated pricing and packaging, reflect the incredible value we are delivering to customers.
Tom Shea: Let me provide some details on a couple of these important new initiatives.
Tom Shea: CPM Express is a pre-packaged version of our core CPM capabilities that enable significantly faster implementation and time to value. This solution comes with pre-built functionalities
predefined reports, and guided configuration.
Tom Shea: It simplifies core activities and speeds up processes across finance, with customers fully up and running on core financial planning, reporting, and close, in six to eight weeks.
Tom Shea: all for a predictable cost. We expect CPM Express to drive new core platform customer growth globally going forward.
Another area of innovation we've talked about is ESG.
Tom Shea: This has become a critical need for multinational organizations, particularly in Europe.
These companies must account not only for their own operations,
or for their entire value chains.
Tom Shea: To do this, they need accurate and complete information to align ESG reporting with the rest of their reporting and planning.
Given OneStream's role as the core book of record,
Tom Shea: We are well positioned to help CFOs meet ESG reporting requirements.
Tom Shea: Additionally, we plan to enhance this offering to be even more robust by launching new elements in 2025.
According to our Finance AI portfolio,
Speaker Change: You've heard us talk a lot about our Sensible Machine Learning product.
otherwise known as AI-Driven Forecasting.
Speaker Change: In 2024, SML offered customers the potential to revolutionize planning and forecasting.
Speaker Change: delivering significant value to early adopters ranging from Fortune 500 manufacturers, retailers, and banks to mid-sized services firms.
Speaker Change: By harnessing the power of SML, customers, on average, have reported initial forecast accuracy improvements of over 20% while speeding forecast cycles by more than 80%.
Speaker Change: This allows customers to fundamentally rethink their planning approach, enabling them to plan at higher frequency, with higher accuracy, and adapt to changing market dynamics to maximize profits.
Speaker Change: Customers have reported that these outcomes have consistently outperformed custom data science projects.
Speaker Change: crediting our applied finance AI approach and the ability to leverage our proprietary financial formulas and platform capabilities.
Speaker Change: SML's ability to adapt to dynamic business conditions and macroeconomic factors, while providing insights into their impact, has established it as a transformative solution for businesses.
Speaker Change: OneStream's AI accelerates time-to-value, enhances forecast accuracy, and improves efficiency, while offering the transparency and explainability needed for end-user trust and adoption.
Speaker Change: We believe our combined enhancements are poised to further strengthen our competitive edge and drive growth in 2025.
Speaker Change: We had a number of important wins in the fourth quarter with enterprise and commercial customers across a wide array of geographies and verticals.
Speaker Change: We added three new major banks, including the leading investment bank and financial services company.
Speaker Change: We landed our first customer in Brazil, a global, multi-billion dollar consumer products company.
Speaker Change: We had another takeaway at one of the largest legacy installations in Sweden.
which is transitioning to OneStream to support its FP&A.
Speaker Change: Tax Pillar 2, and ESG Reporting for its multi-billion dollar global business.
Speaker Change: We currently have over 40 customers leveraging the OneStream platform for their ESG reporting.
Speaker Change: And we have additional product enhancements coming in 2025 to offer even more value to customers.
Speaker Change: And we saw continued growth in our public sector and education business.
Speaker Change: including a win with a well-known higher education institution in the southeast.
Speaker Change: Speaking of the public sector, I'm thrilled to announce that effective January 25th, the OneStream platform has received FedRAMP High Authorization.
The highest level of security standards by the federal government.
Speaker Change: This significant milestone, in addition to our Department of Defense IMPACT Level 5 certification, enables us to work with all levels of state, local, and federal agencies.
Speaker Change: including those who handle the most sensitive, mission-critical, and highly classified data. There's a long road to these certifications requiring considerable investment, engineering, and operating cycles, as well as close coordination with government agencies and officials.
Speaker Change: We continue to land many great customers, each with unique needs and drivers, both immediate and long-term.
Speaker Change: Let me just dive into a bit more detail on a few that stood out in the fourth quarter.
Speaker Change: We added a leading investment bank and financial services company to our customer list.
Speaker Change: Not unlike other banks, they have separate financial systems for each division, severely limiting the view of their overall financials.
Speaker Change: They plan to use OneStream for consolidation of their multiple businesses in order to have a single, unified, and more accurate view of the entire organization.
Speaker Change: This will unify their data across various queues and relational data storage for more accurate reporting, planning, and analysis on operational and financial data at every level of the organization.
Thank you.
Speaker Change: We also had the first sale of our sales performance management product.
Speaker Change: that was built on the OneStream platform by Infinity SPM, an independent software vendor.
Speaker Change: An existing OneStream customer, Generac, is a large, acquisitive company using OneStream for consolidation, planning, profitability, and account reconciliations.
Speaker Change: Thank you for tuning in. I'm your host, Steve Scully. I'll see you next time.
Speaker Change: The quality and visibility of the data on our single unified platform with a robust dashboard has been game-changing for Generac, saving as much as two and a half weeks for each forecast.
Thank you.
Speaker Change: This helps create a seamless process that allows them to do dynamic forecasting, compare scenarios, and make decisions. Thank you.
and have better visibility into how the business is doing.
Speaker Change: This success played a pivotal role in their decision to adopt and deploy Infinity's integrated SPM.
as a natural extension of the platform.
Speaker Change: With SPM, they are now able to have consistent sales territory management.
Speaker Change: and improve the efficiency of their incentive compensation and dispute resolution processes.
Thank you. Thank you.
Speaker Change: We signed a multi-year deal with a large multinational manufacturer specializing in display, environmental, and other technologies.
Speaker Change: Several years in the making, this customer was a long-time legacy system user that had been migrating to a global footprint.
Thank you for joining us. Thank you.
Speaker Change: In need of a modern CPM system, the company was impressed by the depth of OneStream's capabilities and the fact that we do so much on a single platform, including multiple solutions for tax reporting, ESG, SML, and account reconciliations.
Speaker Change: This was crucial in their ability to see the value of our platform, while simultaneously reducing their technical debt.
Speaker Change: Beginning with nearly 900 users and replacing two large systems, phase one will focus on consolidations, account reconciliations, and financial reporting.
Speaker Change: From there, Phase 2 looks to move on to planning and forecasting.
Speaker Change: Finally, I'd like to share how OneStream's SML solution is transforming forecasting for a global leader in technology distribution.
Speaker Change: This customer operates across multiple countries and business lines, providing their customers with cutting-edge technologies from cloud providers and device manufacturers.
Their prior forecasting process was complex, time-consuming, and often biased.
Speaker Change: They first used the OneStream platform for consolidation, close, and planning.
Speaker Change: They elected to expand with FML to ensure higher accuracy in their forecasting and to reduce their cost to serve.
Speaker Change: We help this customer harness the power of their internal data while incorporating external drivers and leading indicators to produce a 52-week revenue forecast.
Speaker Change: With SML, they achieved over 90% forecast accuracy, which is a 15% reduction in forecast error.
Speaker Change: They reduced their effort in producing this forecast by over 75%.
Speaker Change: The data-driven precision of the SML forecast removed bias at the country level and gave management the confidence to make faster, smarter decisions across each line of business.
Speaker Change: What sets SML apart is its ability to seamlessly integrate machine learning into financial processes without introducing technical complexity.
Speaker Change: It empowers finance teams to focus on insights and decision-making to steer the business, rather than spending countless hours wrestling with data to develop suboptimal forecasts.
Speaker Change: What I know from experience is what resonates with customers. Our 98% growth retention is at the heart of OneStream's continued success and a key component of our growth.
We enter 2025 excited about our multiproduct strategy.
Speaker Change: We are bringing to market our 15 new innovations announced last year, along with our new pricing and packaging, to enable customers to derive the greatest value from our platform.
Speaker Change: We're excited about the early demand we've seen for CPM Express.
and our infinitely extensible Solution Exchange with applications like SPM.
Speaker Change: In addition, we continue to differentiate our finance AI portfolio and build out new products including our AI library and GenAI.
Speaker Change: By adding these multiple levers of growth, we are effectively executing against our strategy to become the operating system for modern finance.
Thank you. Thank you. Thank you.
Speaker Change: And finally, I want to send a heartfelt thank you to our dedicated, hardworking employees around the world for their tireless efforts in making all of this possible.
Bill Koefoed: Now let me turn the call over to Bill for the financials.
Bill Koefoed: Thanks Tom. Good afternoon everyone and thank you for joining today's call.
Bill Koefoed: As Tom mentioned, we had a solid Q4 with both strong revenue growth and free cash flow, capping an impressive year.
Bill Koefoed: I'd like to start today with some commentary on our 2024 results and then dive into Q4 and end with our guidance for Q1 and 2025.
Bill Koefoed: Before I begin, it is important to note that 32% of our business is international and we fill most of our international customers annually in local currency and convert to U.S. dollar for revenue recognition.
Bill Koefoed: The sudden strengthening of the U.S. dollar by roughly 6 percent from September 30th to December 31st negatively impacted some of our financial growth metrics by approximately 2 percent. These include ARR, RPO, and Q4 billings.
Let's start with some key 2024 accomplishments.
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Bill Koefoed: Thank you for watching. Please subscribe to my channel. Thank you for watching.
We grew revenue 31% year-over-year to $489 million.
Bill Koefoed: Subscription revenue 41% to $428 million, and international revenue 38% to $155 million.
Thank you very much.
We increased RPO to greater than $1 billion.
We achieved non-gap operating profitability.
Bill Koefoed: And we generated $59 million of free cash flow, which represents 12% free cash flow margin.
For more information visit www.fema.gov
Bill Koefoed: Turning to the fourth quarter, we grew total revenue 29% year-over-year to $132 million.
Subscription revenue increased 35% year-over-year to $119 million.
Bill Koefoed: And license revenue came in at $7 million for the Corps.
Bill Koefoed: We continue to see strong conversions from term licenses to SAS in the quarter, and we expect that trend to continue into 2025 as we progress toward a 100% SAS business model.
Bill Koefoed: Professional Services and Other Revenue was $7 million for the quarter.
Bill Koefoed: As we continue to transition more implementations of OneStream software to our partners, we expect professional services to remain at a similar run rate going forward.
This quarter, international revenue grew 49% year-over-year to $46 million.
Bill Koefoed: We're thrilled with the progress we've made with our international business, representing 32% of our total revenue in 2024.
Bill Koefoed: For the year, we saw over 60% of our business come from new customers, and we ended the year with 1,601 total customers, up 15% year-over-year.
Bill Koefoed: We continue to retain and expand our base of existing customers with 98% gross retention and 113% net dollar retention.
Thank you. Thank you. Thank you.
Bill Koefoed: Billings grew to a record $167 million in the fourth quarter, up 18% year-over-year and 24% on a trailing 12-month basis.
Bill Koefoed: Our 12-month CRPO was up 36% year-over-year, and our total RPO increased 23% year-over-year to $1.1 billion.
Bill Koefoed: As noted, Q4 Billings, CRPO, and RPO were negatively impacted by FX.
Thank you.
Bill Koefoed: Our Q4 non-GAAP gross margin was 70%, consistent with last year, and non-GAAP software gross margin was 76%, compared with 78% last year due to license mix versus the prior year.
Bill Koefoed: We continue to work to optimize our infrastructure costs and expect margin improvement over the long term.
Bill Koefoed: Fourth quarter non-gap operating expenses increased 19% year-over-year, primarily due to higher R&D spending, as we continue innovating on our core platform and finance AI solutions for the opportunities we see ahead.
Bill Koefoed: Non-cap operating income was $9 million or 7% operating margin in the quarter.
For the full year, non-GAAP operating income was $1 million.
Bill Koefoed: We were non-GAAP profitable for the quarter with net income of $12 million and non-GAAP earnings per share were $0.07.
Bill Koefoed: For the full year, non-GAAP net income was $14 million, and non-GAAP earnings per share were $0.14.
Thank you for watching.
Bill Koefoed: For the fourth quarter, we generated $25 million of free cash flow, bringing our fiscal year 2024 free cash flow to $59 million.
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Bill Koefoed: We ended the year with $544 million in cash and cash equivalents.
Bill Koefoed: In summary, we delivered on our key objectives for 2024, achieving strong top and bottom line results, while continuing to invest for the future.
Bill Koefoed: Customers continue to choose the OneStream platform to provide a unified view of financial and operational data with analytical, AI, and performance management capabilities.
Bill Koefoed: Now let me move on to guidance and review the key factors driving our outlook.
Bill Koefoed: We remain enthusiastic about our market opportunity and expect strong subscription revenue growth while launching new products to the market and generating robust cash flow.
Bill Koefoed: Importantly, our strong 98% gross retention continues to drive compounding growth, highlighting our continued investment in customer success.
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Bill Koefoed: As we discussed last quarter, we continue to see strong SAS conversion rates in the fourth quarter.
Bill Koefoed: While this is a near-term headwind for the license component of Total Revenue, it is a focus for the long-term success of our company.
Bill Koefoed: Also as a reminder, we expect our professional services revenue to be roughly flat going into 2025.
We expect subscription revenue growth to outpace total revenue growth.
Bill Koefoed: The continued strength of the U.S. dollar, 6% higher than Q3, coupled with roughly 32% of revenue coming from our international business, which is transacted predominantly in foreign currency, is impacting our outlook for 2025.
Thank you. Thank you.
With that, our guidance for fiscal year 2025 is
Bill Koefoed: Total revenue is expected to be between $583 million to $587 million.
Bill Koefoed: Non-GAAP operating margin is expected to be minus one percent to plus one percent.
Bill Koefoed: Non-GAAP earnings per share is expected to be between one cent
to 9¢.
Equity-based compensation will be approximately $125 to $135 million.
Guidance for Q1 2025 is as follows.
Thank you. Thank you.
Bill Koefoed: Total revenue for Q1 is expected to be between $130 million to $132 million.
Bill Koefoed: Non-GAAP operating margin is expected to be minus 9% to minus 7%.
Bill Koefoed: Non-GAAP earnings per share is expected to be between minus 4 cents to minus 2 cents.
Equity-based compensation is expected to be between $45 million
to $50 million.
Bill Koefoed: In closing, the strength of our core CPM business and new innovations, wrapped in a more streamlined pricing and packaging, is driving new on-ramps to the OneStream platform and enabling our ability to drive efficient growth.
Bill Koefoed: We are pleased with our 2024 results and excited about the opportunities ahead in 2025.
Now let's turn it over to the operator.
Speaker Change: Certainly. And, ladies and gentlemen, we'd like to ask that you please limit yourselves to one question each. You may get back in queue as time allows. Our first question comes from the line of John DiFucci from Guggenheim Securities. Your question, please.
Speaker Change: Hi, thanks for taking my question. So I actually have one for Tom. Did he say limit yourself to one question and one follow up? I want to be respectful to you guys, or just one question. He said one. We said one question. Okay, okay.
Speaker Change: Okay, I'm going to ask Tom a question. Bill, I can ask you this later if no one asks it. So, Tom, Tom, listen, thanks for those examples with customers. Our field work this quarter, we do a lot of it, we picked up on improving demand
Bill Koefoed: back office applications more broadly that don't seem to be high on many enterprise customers' priority list when you talk to global SIs.
Speaker Change: Thanks, John. So I'll start off by just providing a little bit of a foundation. I'll answer this question, you know, and with three main points. And first to cover off is
Bill Koefoed: Our core solution, you know, we're at the heart of providing the capabilities that every finance team needs. You know, every time you are on a call talking to a company, they have to produce that company has to manufacture financial statements with confidence. And so we're at the heart of that, of that discussion.
Thank you.
Bill Koefoed: However, at the same time when I talk to this, these are transformative decision-making processes.
Executive, William Koefoed, Annie Leschin, Thomas Shea
Speaker Change: There's been a realization that you can't keep kicking the can down the road. You have to keep working to
Speaker Change: simplify your, you know, your ecosystem as a CFO and make sure that you have reliable data.
Speaker Change: And so all in all, for us, we look at that core and are really focused on it. That's been the foundation of our business. And again, as we talk about.
forming that bedrock that
Speaker Change: And when I really think about that growth model by by having that foundation, and then being able to show up to those customers, and I think this gets at the heart of the question that you're asking is
Speaker Change: Once we've established and helped them do the hard work that they have to do, we have the ability to leverage that durable and expanding customer base. And really, if you think about it, we're talking about lifetime value type of customers. We're forming relationships that exceed 10 years in many cases.
Speaker Change: So we're really, really focused on being that partner, but also showing them that we can adapt with our marketplace and with our solution exchange, and also with our evolving pricing and packaging structure to make sure that we give them more on-ramps and faster on-ramps to get more value out of the platform.
So that is really, really
Speaker Change: you know, an important message and foundation, and then ultimately saying, showing up with
Speaker Change: We have an AI portfolio and an AI solution. We actually have a journey for these customers. And that's the focus. But as I was saying, these are large, transformative projects that we're involved in. And we talk about CPM Express and some of the other examples that we gave. That's about creating faster on-ramps for those customers.
Speaker Change: The one thing that I would like to say to complete this, the third thing is that if you think about
Speaker Change: What I just what I just mentioned 98% gross retention plus these long-term relationships
Speaker Change: They really equal a massive opportunity for us going forward. That's what underpins my optimism and continuing optimism about the future for OneStream. But another piece that I don't think that we've talked about enough is the amount of raw data and very important information that we are holding for these customers and that we're keeping.
excuse me, curating and developing for these customers.
Speaker Change: So this financial information is very important. And if we play this out and we think about all the talk and chatter around AI, what's this gonna look like in five years? Customers have to have a unified platform to get the most value out of.
Speaker Change: out of their investments and out of AI and to actually have the ability to take advantage of it. And so we really feel that, you know, we're building an asset that will help power CFOs' AI-driven applications.
Speaker Change: Thanks, John. Operator, let's move to the next question. Certainly, and our next question comes from the line of Adam Hotchkiss from Goldman Sachs. Your question, please.
Adam Hotchkiss: Great, thanks so much for the question. Bill, you talked a little bit about your term headwinds and I know you mentioned FX a number of times, so could you maybe delineate how much of that comment was meant?
Adam Hotchkiss: as an FX comment versus some of these other non-currency headwinds we hear from software companies today like deal closings and sales cycle elongations. Just want to understand those comments adjusting for some of the currency pieces. Thanks so much.
Adam Hotchkiss: Yeah, no, thank you. You know, about 32% of our business is international.
and NFX, as you know, between September and December 31st.
Adam Hotchkiss: The dollar strengthened about 6%. Candidly, it strengthened a little bit more as you probably know, into January. But the FX impact, and I mentioned some of our financial metrics, roughly impacted that by about 2%.
Operator, let's go to the next question.
Speaker Change: Certainly, and our next question comes from the line of Chris Quintero.
from Morgan Stanley. Your question, please.
Chris Quintero: Hey Tom, hey Bill, thanks for taking the questions here. I wanted to follow up on your comments around the packaging changes. Just curious kind of more details there, what specific changes you're making and was that any impact to NRR in the quarter and any expectations of what that can mean for NRR on a go-forward basis?
Speaker Change: Thanks Chris. So the reason we wanted to bring pricing and packaging and really in delivery because you hear us talking about
Speaker Change: CPM Express is that we've really embarked on a multi-solution, multi-product strategy. As you've heard us, we've introduced sensible machine learning.
Speaker Change: Sales Performance Management, ESG. We've alluded to this and talked about it throughout 2024, and it really is an evolution in our pricing. This isn't a reset or a complete redo. It's about how do we have this
Speaker Change: durable, understandable package that allows customers to buy these new offerings in a reliable way.
And so it's just all geared towards.
Speaker Change: And we launched this at our sales kickoff already this year. It's geared towards having an efficient mechanism that allows us to bring to market the new innovations that we've been working on. And so in 2024, I talked a lot about how strong of an innovation year that is, and we were pressure testing, if you will, or.
Speaker Change: market testing some of those new products such as CPM Express, SPM, and now those are being operationalized into this pricing and packaging structure for 2025. So it's been part of a long-term strategy that we've been working towards for a number of years.
Speaker Change: Operator, next question please. Certainly, our next question comes from the line of Mark Murphy from JP Morgan. Your question please.
Thank you.
Thank you. Thank you.
Speaker Change: Thank you very much. I'm curious, what is the rough dollar value of the business that you referenced, Tom, that was forecasted to close but pushed out of Q4? And should we be thinking something like $15 or $20 million?
Speaker Change: dollars there, and as well, just as a Part B on the same question, if the tariffs were one of the headwinds to those deals...
Speaker Change: and caused them to push. Why are they closing? I think you said a vast majority of those have closed.
Speaker Change: in January. So why would that be? I mean, what is giving these organizations a feeling that there's clarity now around tariffs to come in and close the business?
Speaker Change: I'll start and then I'll let Bill, you know, follow up on that. So if you think about the pushes that we saw or the headwinds, you know, I think we alluded after the last earnings call.
said, look, we're cautiously optimistic about what's happening in the
Speaker Change: you know, in the market or in the geopolitical spectrum and just in general, in terms of macroeconomic conditions. So we're not specifically alluding to tariffs, but we're talking about multinational businesses that see a great deal of uncertainty and governments.
Speaker Change: which is another significant market that have uncertainty in spend. And so when you think about that, Mark, those are definite headwinds. And so again, if you're looking at deltas in an ARR, as you're alluding to changes in that revenue, you're really talking about
Bill Koefoed: And I'll let Bill dive into this in a bit more depth, is you're really looking at the difference between, you know, there were a strong 2023 Q3, and then a, I'm sorry, a weak 2023 Q3, and a strong 24,
Bill Koefoed: 23. Sorry. There was a weak 23. Weak 23. Q3 and a strong 23. Q4. Exactly. You take those two together, you're going to bring that delta a lot closer, and you're going to see that it aligns to
Bill Koefoed: you know, the numbers that the movement that we have. So we had
Bill Koefoed: you know, again, we have the inverse of that in this quarter, or in this year. And so as you look at that, these are legitimate headwinds. Again, we're selling large transformational deals. And evidence of that is our million dollar deals were up 35% this year.
Bill Koefoed: We're selling. We're still seeing demand. We're very excited about the prospect of the business, but there are certainly economic headwinds that, you know, we hope clear up.
Speaker Change: Yeah, I would just add that, as Tom mentioned, it wasn't it wasn't one thing specific to tariffs, just general uncertainty. And generally, Mark, what we saw was.
Speaker Change: just required an additional signature. It just required, you know, there wasn't kind of the urgency to get deals kind of signed by our customers, in some cases with some of these large customers, particularly in Q4. And, you know, thankfully we got them done in January and actually the first week of February, including that public sector deal that
Speaker Change: that Tom referenced. So, you know, thanks for the question and appreciate the clarification that we were able to offer. Operator, next question, please. Certainly. Our next question comes from the line of Koji Akita from Bank of America. Your question, please.
Koji Akita: Hey guys, thanks for taking the question. I wanted to ask...
Koji Akita: Hey guys, on the growth potential for 2025 and so when I look at
Koji Akita: you know kind of your key growth items here like subs revs and ARR and to an extent total revenue too. I really want to focus on subscription revenue and ARR.
Koji Akita: And when I look at the deck, I think you could extrapolate that SAS, AOR, that component grew 40%.
Koji Akita: in 2024 and is 80% of total ARR. So really trying to understand some of the puts and takes here for ARR growth, total ARR growth to accelerate.
Koji Akita: in 2025 off the, looks like 23% growth for 2024 and subscription revenue to grow high 20s, if not 30% at the end of the day for 2025. Thank you.
For more information visit www.fema.gov
Speaker Change: Hey Koji, no thanks for that. You know, look, I would, I'm going to start by saying, you know, we offered you guidance, you know, on total revenue, on op margin, etc. at the
Speaker Change: I would say, you know, on the ARR side, a great degree of what we've been working on obviously is growing net new ARR, which I think you appropriately referenced, but some of the
Some of the SAS revenue growth was conversions.
Speaker Change: and you know as I mentioned we've been we've been really working hard on that so as I mentioned on my as I mentioned in my remarks we do expect subscription revenue to grow faster than total revenue but you know we don't offer specific guidance on on that number and
Speaker Change: We're obviously working really hard to grow subscription revenue as fast as we can. So thanks for that.
Operator, next question please.
Speaker Change: Certainly, our next question comes to the line, Scott Burke from Needham & Company. Your question please.
Speaker Change: Hi, this is Ian Blackjohn for Scott Berg. How are you guys looking at the federal government opportunity this year, given both spending pressure and the FedRAMP high authorization?
Speaker Change: Thanks, Scott. So we really look at FedRAMP as, you know,
Speaker Change: as a big opportunity still for us, right? We've invested long-term for our FedRAMP, you know, moderate for quite some time and then recently achieving high.
Speaker Change: And because we're an efficiency play, you know, we really feel that we have a strong offering and right to win and continue to offer more value to the government. So, you know, there's certainly headwinds out there, but that does not change at all our long-term strategy and investment and the potential that we see in that market.
Speaker Change: Thank you. Operator, next question please. Certainly, our next question comes from the line of Alex Zukin from Wolf Research. Your question please.
Speaker Change: Hey guys, this is Ivan here for Alex. Thanks for taking my question. Maybe just in context of the backdrop that you've given around, you know, geopolitical uncertainty and the macro, can you calibrate a little bit more on the buying environment and more importantly, help us understand how has that been taken into account, how much conservatism has been embedded in the guidance? Thank you guys.
Speaker Change: So, I'll start off and if Bill wants to add any commentary he can. When we think about the general buying, I think Bill said it well for Q4.
Speaker Change: We didn't see any abrupt halt, but we saw a little bit what I would consider, you know, in large multinationals and in government, a lack of urgency is maybe the way to think. So I think it reflects.
Speaker Change: You know, around trade and around what their own cost profile might look like. And I think you see, we sell to, we sell, remember to the CFO, who is a pretty sensitive buyer. And so if you're coming into a CFO in particular and if there's a growing sense of uncertainty in their own business, you know, we're probably going to feel it a little bit first.
Speaker Change: all the innovations and the products and the things that we have lined up to bring and deliver to the market this year. So ultimately, we're just gonna focus on our strategy and execution, but also offer some prudent guidance for the things that we can't control.
Speaker Change: Thank you. Operator, next question please. Certainly, our next question comes from the line of Terry Tillman from Truth Security. Is your question please?
Speaker Change: Yeah, thanks, Tom, Bill, and Annie. So my question relates to go-to-market, primarily the Microsoft relationship, both technologically and then go-to-market, and anybody else you could talk about from a go-to-market standpoint that seems like they're at an inflection point in helping the business. Thank you.
Speaker Change: Thanks, Terry. I'll take that. So we continue, obviously, to be a really big Microsoft customer and partner, and we're really thrilled about that relationship and our ability to, as you see,
Speaker Change: We brought our certified Power BI connector to market. At the same time, we are seeing that combination as we expand from the core financial and we're looking to sell.
Speaker Change: and will present a broader solution set in our AI and operational analytics. The Microsoft relationship becomes increasingly important and opportunistic for us there as well, in the sense that you can bring in that CIO connectivity as well. So, we have multiple initiatives.
Speaker Change: jointly from a marketing perspective, and in that partnership, not only marketing, but technical. And so we're really leaning into that. And we're thrilled that Microsoft is as well. And so I would say that's an important foundational relationship we're looking to use as a...
Speaker Change: Channel Multiplier if you will, and then we're always investing in our core
Speaker Change: in terms of the GFIs, in terms of what I always refer to as our artisan partners. Those are the product experts that are CPM experts historically. They're leaning in, as you can see, the partners that have developed solutions on our solutions exchange like Infinity SPM, who was also an implementation partner prior to that as well. So you're seeing.
Speaker Change: More and more, as again, I alluded to this at the beginning, but I think it's really worthwhile noting.
Speaker Change: As we continue to increase this asset of successful customers, and I say asset in the sense that it's an asset to us and our customers, that we're delivering value to them.
Speaker Change: and their remaining customer and giving up that 98% gross retention.
Speaker Change: That's very attractive. That's what powers the ecosystem and powers opportunity for all of us. So we're investing in facilitating and leaning in on all of those fronts.
Thanks, Terry. Operator, next question, please.
Speaker Change: Certainly our next question comes to the line, Steve Enders from Citi. Your question please.
Steve Enders: Okay, great. Thanks for taking the questions here. I guess I wanted to ask on the margin
Steve Enders: side of it. It looks like that's maybe coming in a little bit lower as well for
Steve Enders: for the year. So can you just maybe help us think through maybe where incremental investments are coming from or maybe what's being accounted for on the margin outlook?
Speaker Change: Thanks Steve, I'll take that one. So, a couple things. One is, from a technology perspective, we've been migrating people, migrating customers from prior versions of our software to version 8.
Speaker Change: which I think we announced a little bit under two years ago.
Speaker Change: which has driven performance improvements and some efficiency for our customer.
and Janet Yee.
for our customers.
One of the drivers that Tom talked about before...
Speaker Change: you know that we're working through is just the massive amount of data that our customers are seeking to store on the one-string platform. Which is both a huge yeah benefit asset you know as Tom talked about but does have some you know we and we think it's important obviously for the long-term success of the company.
But it does have some gross margin implications.
Speaker Change: You know, we're working through it. We think that, as I mentioned on my remarks, that there's opportunities to continue to be more efficient, but we want to take advantage of the assets that we think are driving long-term value for our customers and keeping that 98% gross retention that Tom talked about. So, you know, great question.
Operator, next question.
Speaker Change: Certainly our next question comes from the line of Brian Peterson from Raymond James. Your question please.
Brian Peterson: Hey guys, thanks for taking the question. So Bill, maybe you could update us on the conversion of the customer base. You know, I know that's going pretty well. Any sense for where we are in terms of customers that are still on older versions and how we should think about that migration through 2025? Thanks guys.
Bill Koefoed: Thanks for the question. I did, as you all had asked for last summer, I did in the slide deck, Brian, give you the number of customers by legacy.
OK. Thank you, Tun-In. Bye.
Bill Koefoed: In here, it's actually on annual ARR by contract type on page seven. So you can get a sense. There's 5% that are still on perpetual. There's 15% that are on term-based.
Bill Koefoed: licenses still. And I think one of the questions earlier was, you know, the percent that's on SAS. So we're happy that it's 80% on SAS, but, you know, we still have some work to do to get the conversion so that we're 100% and we're going to work on that over the next few years. So appreciate that. And hopefully you all appreciate the
Speaker Change: the responsiveness that we gave to your question from last summer. Operator, next question. Certainly our next question comes from the line of Brent Braceland from Piper Sandler. Your question please.
Brent Braceland: Thank you, good afternoon. Bill, I appreciate the boldest commentary on commercial
Brent Braceland: Finance AI products going into this year. But I wanted to double click on public sector. That seems to be an area a little more uncertainty. What portion of revenue comes from government public sector? Can you remind us that? And
Brent Braceland: and are you expecting that to grow, remain flat, or actually decline this year given the uncertainty? Thanks.
Thank you.
Brent Braceland: Yeah, no, thanks for the question. I mean, we're super bullish on the opportunity that we have ahead with being FedRAMP high.
Brent Braceland: Tom mentioned this is a multi-year, very significant investment that we made along with the government to get to be FedRAMP high. There's not that many companies that are actually FedRAMP high. And so we think this unlocks additional opportunity for us.
Brent Braceland: within the federal government. Obviously, back to our earlier commentary, there's uncertainty there, but we do think that OneStream offers efficiency.
and can really be effective at helping
Brent Braceland: You know support you support overall government efficiency there and so look we're
Brent Braceland: As Tom mentioned earlier, we had a public sector win here in early 2025, and we're going to continue to work hard to play off the advantages that we've
Brent Braceland: have with the software and the benefits that we have with our overall offering. But no thanks for that question.
Brent Braceland: Operator, next question. Certainly, our next question comes to the line to Mark Chappell from Loop Capital Markets. Your question please.
Mark Chappell: Hi, thank you for taking my question. Bill, I was wondering if you could just discuss the attach rate you are seeing for your sensible ML solutions. Directionally, is it increasing, staying the same?
Mark Chappell: I'm going to let Tom take that. He's excited to answer this one. Well, thank you for the question. I will say that as we look at this, we launched the product.
Mark Chappell: Over a year ago, and we were really pleased with the performance of the business of that, the progression of that business in 2024, as we continue to do market validation. And you can hear from the statistics that we're collecting part of 1Stream's
Mark Chappell: thesis as a business is that every customer has to be a reference and that the products that we bring to market have to do what they say they're going to do. So,
Mark Chappell: Eventually, as we look at this and continue to prove those use cases across multiple industries, we've got a good sample cycle, and we feel that every customer is going to, this is, that's why we refer to it as a transformative product.
Mark Chappell: Every customer is going to want to use this in some way, shape or form in the long term. So we'll keep working on that. And again, I want to just keep reiterating it. That's why we're so fanatical about the gross retention.
Mark Chappell: because if I delight these customers, they stay on our product and we keep innovating, we're going to have that opportunity to help them become better in their finance processes and actually more advanced. Once they get their core capabilities done, they ultimately want to be more advanced and use our AI products as well.
Mark Chappell: So, I'm excited about the potential of the attach rate for that product. Very excited.
Operator, let's go to our final question.
Speaker Change: Certainly, our final question for today then comes from the line of Derek Wood from TD Cowan. Your question, please.
Speaker Change: Hi, Tom and Bill. This is Jared Jundle and on for Derek Wood. On legacy displacement and Greenfield Dale activity, could you provide an update on any changes you're seeing in the market? Thank you.
Sorry, in terms of legacy replacement?
Speaker Change: displacing legacy vendors, and then on the Greenfield side as well. Thank you.
Speaker Change: So as we, as we, you know, look through this, again, you know, reiterating that the.
Speaker Change: We are not seeing any change in sort of that. That is a core market that we go after, and we're continuing to see lots of opportunity as businesses look to rationalize. And you can hear from the examples in my remarks of the number of multiple products that we're pulling out. And those include, in almost all cases, some shape or form of a legacy product that's being replaced.
Speaker Change: and then at the same time, as we talk about CPM Express,
Speaker Change: What that's aimed at is a lot of the new greenfields.
Speaker Change: It doesn't have as much to do with their size as a business as much as it has to do with their maturity as a finance team. And they're looking for us to be prescriptive to take what we've learned by working with some of the biggest businesses in the world and give them a faster on ramp with a package solution. What's really important about that
is the idea that
Speaker Change: It's a faster on-ramp to our platform, but you don't have to get off the platform. It's the same software that if you wanted to go all the way to Fortune 1.
So we're really excited. We're covering off on
Speaker Change: Continuing to innovate, in summary, we're continuing to innovate in a way that allows us to be as attractive as ever to the replacement, kind of legacy market, and show that value of being able to rationalize and be a single data model with low technical debt.
Speaker Change: And at the same time, provide an easier on-ramp for newer customers. When I say an easier on-ramp...
Speaker Change: It's to help those individuals, show them the best way to use a CPM product if they're new to CPM and get onto our platform. And all of that is part of our, it is and has been part of our long-term growth plan.
Thank you.
Speaker Change: So that's going to wrap up our call. I really appreciate everybody participating. We will be at the Moran Stanley Conference in early March, so please, we hope to see you there. Please obviously reach out to them.
Speaker Change: if you'd like to set up time with us. And we appreciate everybody's support of our company and hope you have a great rest of the week. Thank you.
Speaker Change: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Speaker Change: Thank you for watching. Please subscribe to my channel. I upload videos on a weekly basis. I hope to see you again soon.
Thank you. Thank you.
Thank you.
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Speaker Change: A special thanks to all those who helped begin the story. Every day brings a new beginning.
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Speaker Change: there will be a question and answer session. If you'd like to ask a question during this session,
Speaker Change: Please press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Annie Leschin.
Vice President of Investor Relations.
Strategic Finance. Please go ahead, ma'am.
Speaker Change: Thank you, Operator. Good afternoon, everyone. Welcome to OneStream's fourth quarter and full year 2024 earnings conference call.
Speaker Change: Joining me on the call today is our co-founder and CEO, Tom Shea, and our CFO, Bill Koefoed.