Q4 2024 Docebo Inc Earnings Call
Speaker Change: Good morning, everyone, and welcome to the Dotaebo Q4 2024 earnings call. All participants are currently in a listen-only mode. We'll open up the line for a question and answer session momentarily. Analysts can ask questions by pressing star followed by one on their telephone keypad.
Speaker Change: During the call we will reference certain non financial FRS measures. Although we believe these measures provide useful supplemental information about our financial performance. They are not recognized measures and do not have standardized meanings under IRS. Please see our MD&A for additional information regarding our non <unk> financial measures, including.
Brandon Farmer: <unk> to the nearest Rs measures. Please note that unless otherwise stated all references to any financial figures are in U S. Dollars now I would like to turn the call over to achieve our CEO, what's your tuple, our interim CFO Brandon farmer.
Speaker Change: Operator, we're ready to take questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star followed by one on your telephone keypad and we ask that you. Please limit yourself to two questions and we're trying to fill the queue for any additional questions.
Operator: Our first question comes from Robert Young from Canaccord Genuity. Please go ahead. Your line is open.
Robert Young: Great Good morning.
Robert Young: You said in the release that you had a.
Robert Young: An improvement in your competitive position.
Robert Young: A bunch of new product releases that inspire.
Robert Young: And in the back half of the year and so can you talk about adoption with existing customers and maybe the recent new wins are these new.
Robert Young: New products been influencing that.
Robert Young: And good morning, everyone.
Robert Young: We are.
Robert Young: I'm very satisfied with the impact with the early impact over the three new products modules that we've recently released the name Leanne.
Robert Young: Ill put in their community and analytics component there be meaningful contributors to our quarter and we have greater expectations for this year and the years to come.
Robert Young: But.
Robert Young: Let me take the opportunity to even do a question too.
Robert Young: To level set where we are today at the table strategically from a product standpoint, and where we're going in the future.
Robert Young: First I'd like to underscore to where do we are today.
Robert Young: Today and just as a reminder, we are a D.
Robert Young: The single most depreciated enterprises and unmatched in the market addressing both in enterprise and customer experience needs, Okay and as we do that currently we serve over 40 million users worldwide and this number is already set to grow we expect is to reach about 100 million users.
Robert Young: Over the next five years, and that's a pretty conservative estimate.
Robert Young:
Robert Young: So you know but.
Speaker Change: What does the channel today ultimately enable for our customers.
Speaker Change: And today as you all understand very well.
Speaker Change: We've essentially support them.
Speaker Change: The link and re skilling strategy this scale and time.
Speaker Change: And as our as our users grow and continue to grow what we've been doing with these new products. These new modules. We've continued to add capabilities in engine AI and AI are helping us accelerate that now.
Speaker Change: That is the table today.
Speaker Change: But what is changing the workforce is changing there is water hauling transformation occurring over the next five years.
Speaker Change: About 40% of the workforce.
Speaker Change: And their skills are going to change dramatically.
Speaker Change: And even more organizations.
Speaker Change: In most instances.
Speaker Change: And the tools and the knowledge to understand their current skill gaps okay.
Speaker Change: So we are effectively anticipating this transformation in the market.
Speaker Change: We are going to execute aggressively now road map to transform at work. It is the channel today, the LMS what enterprises to an AI first.
Speaker Change: <unk> plus hormone and their address is a broader set of learning needs. Okay. What does that mean in shortly.
Speaker Change: <unk> learning needs addressing primarily passive use cases combined with the classroom of virtual classroom at best.
Speaker Change: But the future of learning of the transformation that is undergoing.
Speaker Change: Why does a different approach that is either personalized learning automated highly experiential hands on and effectively measurable. Okay. So that is our vision.
Speaker Change: Our vision is to transform the table from the strongest enterprise the lemass into an AI first that learning platform and ecosystem that adapts to any disease.
Speaker Change: And finally.
Speaker Change: The way, we're going to do that is to leverage and Jenny I in a really significant way and we're going to leverage it techniques like in gentex to augment and accelerate things like platform with administration and business process management.
Speaker Change: But I can't sit here at all because the timberlands bodies are coming in April.
To see many of you there and I will be sharing a lot more insights pertaining to this strategy in conclusion I am so happy with the recent update.
Speaker Change: Our product in a new modules.
Speaker Change: But an equally thrilled and incredibly excited about our strategy and vision for the future.
Speaker Change: Okay. Thank you and for my second question, just could you give us a quick update on fed ramp there.
Speaker Change: They are all the activities, we're attraction is and whether there's any impact from those.
Speaker Change: Those on the current customer base around the engagement you have gotten around fed ramp.
Speaker Change: How that might be changing your expectations for the near term and I'll hop back in the queue exciting updates and I pass it to brand a farmer.
Brandon Farmer: Yes, Rob I'll take that question. So let me take a step back.
Brandon Farmer: So first of all during the quarter, we got listed on the Fab ran marketplace with the sponsor and agency.
Brandon Farmer: Subsequent to year end in January we started the audit process with the fed ramp PMO office, and it's going very well, we're two months into that process and with the visibility we have today, we expect to achieve.
Brandon Farmer: They're starting to operate which is considered eto status by the end of Q3 at that point, we can start <unk>.
Brandon Farmer: Contracts.
Brandon Farmer: With regard to indulge if you actually look at the White House press release, the Dodgers mandate section four cents is required or is it going to look at modernizing federal technology in Salford to maximize efficiency productivity that plays directly into our cables head. If you think about HCM software in the government.
Brandon Farmer: Space, We may roughly 60% remains on Prem. This is clunky old software that was likely built 10 to 15 years ago.
If you think about how much money they have to spend on maintaining in this this is managed service provider a consultant spend or large bloated internal IP that are maintaining this system that is just not best in breed. There's no doubt in my mind that would be more efficient.
Brandon Farmer: They spend less money moving from on Prem to the cloud with a much better experience.
Brandon Farmer: Secondly, we've been tracking rfps in the market and we've noticed a trend where certain of our competitors out in one contract and the RFP States. We awarded this contract because they are the only vendor that responded to the RFP.
Rob: Rob if you think about price discovery.
Speaker Change: Billy just figure out what is the actual market price or a cost per user you can't do that by having one vendor.
Speaker Change: If I was on the Domo Jaguar many software providers that Ram compliant as possible have a judiciary vendors respond to rfps that you can actually figure out what is the fair market value for this learning software.
Speaker Change: Needless to say we are just excited about the veteran of opportunity today as we were 12 months ago.
Speaker Change: Alright, thanks for the color I'll hop back in the queue.
George Sutton: Our next question comes from George Sutton from Craig Hallum. Please go ahead. Your line is open.
George Sutton: Thank you Alexia I wondered if you could give.
Give us a little bit more of a sense on the Egencia AI offering.
George Sutton: Within the learning is this really within the learning ecosystem I'm just curious.
George Sutton: Enhanced engagement with this.
George Sutton: Give me as a user.
George Sutton: Versus how it might have engaged before.
Speaker Change: Great question, and it's Super exciting.
George Sutton: I would say agenda.
<unk> is.
George Sutton: A relatively.
George Sutton: New trend, that's certainly as Guardian and media attention over the past several months, but.
George Sutton: But at the table, we've been thinking about the underlying problem that <unk> addresses and put in a really long time the underlying.
George Sutton: Probably one of the main the key issues that an agenda throughout the <unk> addresses is the need for a software and to be easier to use for automation to be increased and for time to value to be accelerated.
<unk> is a responsive to those needs and we've seen over the past several months across to the board of them several startups and operate a genetic marketplaces and grow very fast.
George Sutton: Particularly capitalizing on the need them to integrate the multiple technologies, whether they are LMS is the ore erp's or CRM in basic task management, there are time consuming consuming tedious and repetitive.
George Sutton: There are short term and midterm and long term wins that we're thinking about in this regard them, we're very pragmatic and understanding that our customers in this era today and in the future once and then the mess that he is the easier to manager so that their energies and their skills that can be put to use.
George Sutton: In more qualitative parts of other work.
George Sutton: And so what we want to accomplish is then a strategy. They blaze the twofold number one we wanted to introduce the agents that we enable our customers to execute that simple to very complex tasks within the digital platform that can be something as.
George Sutton: Simple overrunning, our reported or something more complex.
George Sutton: Workflow within the system and that requires this decision making ability because <unk> doesn't just mean going from Fisher ACO feature B, but also introduces the level over.
George Sutton: Decision, making that agent intelligently are granted to do to do this we've built our own proprietary AI platform as a service.
Speaker Change: This has been our worker for the past couple of years that since we have acquired agile go and move where they started and that my predecessor, a cloud deal and he is now bearing fruits and it's essentially our backbone and for anything it's AI acceleration.
Speaker Change: Finally, we're going to use that Jamie secrets to dominate the market. How are we going to do that we're going to extend the agents that not only to automating that Walter will lead features within the table Martin It will become a place where LNG professionals that can improve not only the shambles liza but tasks across.
Speaker Change: So the cable and other platforms, whether they are the other elements is either skills management platforms. Our goal is to create a new UI for LNG execution in LNG professionals and agents.
Speaker Change: And allow this.
Speaker Change: Agents are the new integration framework agents in the future will be the new U S.
Speaker Change: And we're all over it.
Speaker Change: That answers.
Speaker Change: Super I look forward to seeing rather than inspire so one other question you had multiple key leadership changes over the past several months I'm just I think it would be helpful. If we can get an update on our other group of small chain together any sort of changes to the go to market plans.
Speaker Change: Just a general update there I think would be helpful.
Speaker Change: Suddenly so.
Speaker Change: Since becoming.
Speaker Change: Feel even starting from the interim phase.
Speaker Change: And then the permanent dissolve a few months ago I've always thought that it is imperative that we keep equip ourselves with the skills needed them.
Speaker Change: Do we know the market over the next five years.
Speaker Change: So the changes that have occurred to add that.
Speaker Change: Our priority in that objective.
Speaker Change: We have brought onboard that recently.
Speaker Change: Three talented individuals.
In in their respective categories.
Speaker Change: <unk> Brandon Carson for example, an undisputed leader in learning strategies that has operated with some of the best companies in the world.
Speaker Change: I named Lauren natural beyond our new Chief Chief people Officer, and there is operated.
Speaker Change: At a high growth and ice scale companies in very in setting up very modern a people centric strategies.
Speaker Change: These people are going to be at the center of our transformation as a company that as I described before and will require new skills. In these new AI era now with that said I also want to knowledge and.
Speaker Change: That.
Speaker Change: Talented individuals like Takotna meta hour.
Speaker Change: Soon to be format our CFO.
Speaker Change: Or are leaving the company and listen to car and there is not only a friend about the one of the most talented people have met key.
Speaker Change: Found an opportunity that was very exciting for his life.
Speaker Change: But the part that I am more excited about is that we took the time to develop internally our successor and the you know Brandon farther in our in our interim CFO.
Speaker Change: Nominal leader and the stable has this strategy in mind that these couple of B building leaders from within that I'm Super proud of it shapes, our culture. So I believe that combining new strong leader says wait.
Speaker Change: And then the existing.
Speaker Change: Growth of leaders from within the preserve the existing culture of the company is the right formula to win in the long run.
Speaker Change: Great stuff. Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from Joshua Baer from Morgan Stanley. Please go ahead. Your line is open.
Speaker Change: Thank you for the question.
Joshua Baer: Was hoping you could give an update on where you are as far as these larger ACB lands.
Joshua Baer: Or are you landing wall to wall as companies are choosing you for your core LMS on you're ripping and replacing legacy systems or how much is the focus.
Joshua Baer: On landing in a single department or for a specific use case and then expanding from there.
Joshua Baer: We are not necessarily focused Josh on men, a all lean weanling wall to wall from day, one our goal is to.
Joshua Baer: And the it organization so and.
Joshua Baer: And leverage the fact that when we enter a company we have our services and success organization that enabled us to gain trust credibility and value very quickly.
Joshua Baer: The example that.
Joshua Baer: We have published them in this release of Lululemon, whereas the sign with the chairwoman <unk> 2021 and recently expanded.
A customer experience related.
Joshua Baer: Use case is I would say a premier example of our strategy with regards to what we call internally as whale deals.
Joshua Baer: Organizations that however reach out to the chain was part of their RFP process for a more wall to wall or end to end use case.
Joshua Baer: Those deals are.
Joshua Baer: Our complex in nature they are not.
Joshua Baer: It's really easy to pin down to the existing months of signing and as a result, they are not easy to forecast exactly in the right quarter procurement strategies remain very.
Joshua Baer: Conservative as such.
Not always that are able to forecast that with exact precision in any given quarter, but the good news is those deals will continue to augment both in our pipeline and is reflected in our average <unk> that has been growing significantly in quarter. Four as you can see from 70 to 83000.
Joshua Baer: Dollars per new customer I'm very excited about our progress in enterprise and I believe there is a lot of more work to do at the end of the day, what a company that it's 120 or so million dollars of the Aurora as a lot of steps to the acre to improving our execution and efficiency, but we don't drive trajectory and we ended the product strategy that we have in <unk>.
Joshua Baer: Mind combined with a customer obsessed the mentality that we have in our DNA I believe that these deals will become not only more and more but we will be able to even forecast them better in the future to come.
Joshua Baer: Thank you and one for Brendan on on margins, the sales and marketing and R&D as a percentage of revenue was up slightly.
Speaker Change: I guess I was just wondering is there more room for operating leverage in these areas like is that where the head count reduction comes in if you could talk a little bit about the different expense categories in 2025, and what we should expect.
Josh: Yeah Josh.
Josh: Regarding the head count reductions I would say it wasn't really.
Josh: It was broad brush some we didn't look at a specific department waiver and motorists Pacific region. It was broad brush across the company.
Josh: Regarding sales and marketing is there ability for efficiencies the answer is yes.
Josh: We truly believe that is the response first everything on the permit roughly 12 months ago. We started on this journey of implementing not only INR product, but utilizing AI internally.
Josh: <unk> achieved significant efficiencies from pipeline generation sales operations customer support R&D and were really just in phase one of that so part of this part of this head count reduction per this efficiencies you're going to see going forward is a wrong. It was just the result of us being able to do more with less.
Josh:
Josh: Yep.
Josh: Yes.
Josh: That's helpful. Thanks.
Speaker Change: Our next question comes from Ryan Macdonald from Needham. Please go ahead. Your line is open.
Ryan Macdonald: Alright, Thanks for taking my questions, Nick first to start with.
Speaker Change: Noticeable are the sort of increased our commentary around customer wins.
Ryan Macdonald: Through our Si partners in the quarter.
Speaker Change: Just curious as to sort of the magnitude of ramp up that you're continuing to see with your Si partners and as we think about how this translate into 25 can you talk about the sort of.
Speaker Change: Percentage say pipeline that is partner driven at this point versus direct and how is that informing your.
Speaker Change: That incremental investments in sales head count.
Speaker Change: For 25 thanks.
Speaker Change: Relative to our size in the first thing I would like to say is we have built.
Speaker Change: Several months ago, we have revamped and revealed and grown our strategic partnerships group under the leadership of a phenomenal leader a named the Travis Bergen. He has built a team there together with our revenue organization has been able to grow.
Speaker Change: Our system integrators, if you will.
Speaker Change: Relationships.
Speaker Change: In a very significant way so much of the work that we much of the outcomes. We're seeing of the Bronco with strategy. They began then.
Speaker Change: With these investments and under this leadership with that in mind.
Speaker Change: The primarily today too.
Speaker Change: As I answer that contributed to more than 50% and really more than 70% over the Sci related.
Speaker Change: Yields on.
Speaker Change: Meaning deals that are influenced or originated by your size.
Speaker Change: As far as it is.
Speaker Change: The growth of these deals and as far as how this will continue to progress we expected of course them there and it will be natural that our success.
Speaker Change: Aimed at federal space. Once Ato is achieved them will be tied and supported.
Speaker Change: By the strategic Alliance that we formed several months ago and announced with Deloitte, where the very significant practice in depth in the government business as a whole also public sector, but certainly will be helpful to accelerate our penetration.
Speaker Change: In the federal space that there is no doubt about that but with regards to the non government book of business and what we're seeing is the following trends we're seeing in a situation in region Rfps happen were selected as size that are already inside your calendar and.
Speaker Change: Facilitate are shortlisting, because they have trust and knowledge of the chipmos capabilities. Okay.
Speaker Change: Or a situation in which Jim and I saw it may not be yet in your account. However, we have co selling strategies and entering any fortune 1000 company or any large company in isolation, meaning.
Speaker Change: Standalone efforts as opposed to combine efforts with companies like Accenture Deloitte a of course as.
Speaker Change: It's meaningful.
Speaker Change: Go to market, our emotion and has a strong impact on win rates.
So we have a lot of work to do more on our sites, but we're very satisfied and as far as the percentage of deals.
Speaker Change: Deals awareness size attached pipeline, while we don't disclose that number directly I can say is very meaningful and trending up.
Brian: Yes, Brian I'll just add.
Brian: Part of that plays into our revenue guidance, while all because professional service revenue, we do expect to be relatively flat year over year and that is a direct contribution to the success, we're having with our large strategic sites, where they're taking 100% of the professional service revenues, we're taking 100% of the high margin accretive.
Brian: Subscription revenues and from a head count perspective, which you mentioned as well where it really becomes more efficient that we require less people professional services because they are the ones doing the implementation.
Brian: Helpful color there I appreciate it maybe as a follow up just generally.
Speaker Change: Curious about the generative AI dynamics that youre seeing in the market.
Speaker Change: Particularly as you look at a number of companies. They're table included as you've talked about or sort of undergoing this evolution and really shift in focus to integrate generative AI more within their it.
Speaker Change: Within your your infrastructure and you're taking a strategic initiative to sort of reduce staff as a part of that.
Speaker Change: Are you seeing I think as you start to think about that and sort of other companies doing sort of similar approaches one thing we picked up in the HCM space is that this creates a potential risk of let's call it fewer seats or or sort of down cells because of just reduced staff as more companies invest in journey II is that a risk.
Speaker Change: For Dow Gebo, you know as you say.
Speaker Change: If you think about 25 and beyond of just sort of this reduction in head count sort of essentially having a potential impact to hurt the top line or are there ways that you're contracting to be able to insulate yourself from that thank you.
Speaker Change: We actually are taking.
Speaker Change: A view that the genii advance and capabilities of the webinar Rod Martin.
Speaker Change: The accretive them not only to our revenue by generating more.
Speaker Change: Opportunities for new streams of revenue relative to new product, we're going to be launching.
It also offered an opportunity to increase the stickiness of our base.
Speaker Change: That is a bit that is done by.
Speaker Change: Not only introducing a new journey I features of marine fusing them.
Speaker Change: <unk> in our existing product in a way that.
Our customers will be.
Speaker Change: Using our cloud for them to do even more things for example.
Speaker Change: <unk> content.
Speaker Change: Basically in the system, making multiple ways.
Speaker Change: We have not.
Speaker Change: Seen a trend where we expected this to necessarily having an impact on the on the seats.
Speaker Change: Asset, but we will monitor any future trends that I would just add to that is keep in mind <unk> is 65% of our IRR is hybrid and external.
Speaker Change: Customer experience. So when we think about <unk> when we think about head count reductions that era is relatively protected secondly, youll notice in the prepared remarks, we actually did an incredible job. This year signing long term contracts, we had about a 200% increase in contracts of five.
Speaker Change: Years or greater.
Speaker Change: That just shows the stickiness.
Speaker Change: And the willingness of the enterprise buyer to sign long term deals in their deals, whereas the head count the user base is locked in for a long period of time.
Speaker Change: I appreciate all the color. Thanks, again I'll hop back in the queue.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Suzanne Sue Kumar from Stifel. Please go ahead. Your line is open.
Speaker Change: Good morning Gents.
Speaker Change: First I wanted to.
Speaker Change: On the attach rates of 15% plus for the new products that you launched late last year. This is wrapping up.
Speaker Change: Pretty significantly I think to better than expected in my view.
Speaker Change: Which is pretty impressive can you speak a little bit about.
Speaker Change: What offerings are seeing the most demand and how much of an impact is the new pricing strategy playing here.
Speaker Change: Well I'll start off on the new pricing angle.
Speaker Change: Obviously, we reported very impressive new logo ACB of $83000, which was up 70% year over year. There's a number of puts and takes in that number and it's really haidar revpar how much does it related to your increase attachment rates and how much relates to the new pricing model from a new pricing model.
Speaker Change: Our perspective is gaining significant traction and it's really resonating with our customer base, we really do expect a benefit of higher <unk> on new logos and improved retention rates over time.
Speaker Change: When it comes to attachment rates. It was really broad based across the new products I would say you know one product was performing better than the other there are they are all sir.
Speaker Change: Solving important use cases in port problems.
Speaker Change: And achieving significant ROI for our customers.
Speaker Change: Okay, great. Thank you.
Speaker Change: I wanted to touch on touch on fed ramp it sounds like you have a little bit more visibility here on the timelines and the process you know you're calling for end of Q3.
Speaker Change: Is this final certification milestone something that you can press release, when it happens and will this still.
Speaker Change: Still come with a with a deal contract.
Speaker Change: In hand, and if so is that is that baked into guidance today.
Speaker Change: So.
Speaker Change: We expect to achieve ACO status at the end of Q3, which is when we start bidding and winning contracts. We do not have a material amount of U S. Federal government contracts in our guide today.
Speaker Change: You have a sponsor which means we have a contract.
Speaker Change: That contract has the ability to expand over time, but that's not in our guidance document.
Speaker Change: Got you okay great.
Speaker Change: Thanks, guys I'll pass along.
Speaker Change: Our next question comes from Richard <unk> from National Bank Financial. Please go ahead. Your line is open.
Richard: Yes. Thank you.
Speaker Change: With respect to the restructuring was wondering if you can maybe elaborate a little bit more I just wanted to be clear here that it's driven primarily by the increased automation and not because of the macro environment and then sort of related to the.
Richard: Automation piece.
Richard: Curious what functions as youre seeing replaced by AI.
Richard: Sure.
Richard: Hum.
Richard: As shared with the.
Richard: I appreciate the answer.
Richard: This.
Richard: Activity was made from a position of strength as opposed from a position of Needham.
Richard:
Richard: Becoming game and I, an AI first company.
Richard: It does not only mean in building.
Richard: AI products for our customers.
Richard: It also means.
Richard: Leveraging AI internally and it's really part of the maturity model.
Richard: As a result of that.
Richard: Skills and the talent that we need for the Doc came over the next five years are evolving.
Richard: And our job more than ever is to add a culture that he is very skilled focuses on the modern needs them and with the strong performance management culture.
Richard: This is not about cost savings okay.
Richard: And yes, absolutely we will always run a well managed and a profitable business that is a priority.
Richard:
Richard: But the goal.
Richard: Is to invest back into the business a portion of these savings okay. So.
Richard: So that we can hire for those new skills and those new roles that are needed in the business to deliver on the mission and then invest a portion of these savings are in what we preach externally I E drinking our own Champagne, which is upscaling.
Richard: Our employees and funding initiatives.
Richard: Internally that accelerate them, our depth and knowledge of the of the new technology I E. We're gonna be launching for example, AR and AI Academy, where everyone in the company for their respective roles that are going to have a AI certification tied to their role.
Richard: And to the extent they need to learn how to which sector.
Richard: That's an example of how we plan to manage our people. So this initiative is not just some cost cutting in India of needed its actually proactive to prepare the company for the next five years of success.
Speaker Change: Okay. Thank you and my second question has to do with capital allocation. So you have $92 million or so of cash in the bank you clearly been executing well.
Speaker Change: But as it really sort of have been reflected in the stock price. What do you think about served from a capital allocation standpoint, the idea of maybe for buying back stock or any other measures at your disposal.
Oh sure buybacks are something that we are done in the past and continue to be.
Speaker Change: A strategy that we will pursue in the future.
Speaker Change: There are different ways of deploying capital and buybacks for sure one of the top ways, we intend to.
Speaker Change: To use the cash imbalance.
Other opportunity of course, although you haven't asked it but I understand it's part of the bigger picture is deploying this capital for strategic initiatives, such as M&A and we always continue to monitor opportunities also in that area in the pasta, we have blue to more of an opportunity is that we have.
Speaker Change: Defined as tuck ins.
Speaker Change: Some of those opportunities as being closer to the concept of off the Iota now we're more open to opportunities and there are going to broaden our impact in the overall, earning stock that combined.
Speaker Change: And that actually give us an edge to accelerated that AI learning platform growth that I mentioned before expanding on our current capabilities.
Speaker Change: Motivations than ever.
Speaker Change: You know come down in some instances they've been fluctuating gas and we monitor opportunities.
Speaker Change: With a greater level of attention. So those are the two primary I would say dimension and that we are.
Speaker Change: Considering for capital allocation and both of them are on the table every day.
Speaker Change: That's great. Thank you.
Stephanie Price: Our next question comes from Stephanie price from CIBC capital markets. Please go ahead. Your line is open.
Speaker Change: Hi, good morning.
Stephanie Price: Just curious if you could talk a little bit about what you're seeing in Q1 quarter to date. It doesn't like the Q1 guide, especially on the margin moves is maybe not following the typical season patterns here.
Speaker Change: Yes.
Speaker Change: For Q1, if you think about our revenue.
Speaker Change: Really baked for Q4 bookings.
Speaker Change: <unk> seasonality with bookings is very heavily loaded towards March.
Speaker Change: So most of the revenue that we actually see from our Q1 bookings flow into Q2.
Speaker Change: From an permanent adjusted EBITDA perspective, we are guiding 14, 5% to 15%, which is impacted by a couple of things first of all we recognized revenue on a daily basis Suez two less days in Q4, which is about a $1 $2 million that flow straight to the bottom line.
Speaker Change: Secondly, there are some seasonal aspects with cost suggested North America, where benefits start off the year high and then taper off throughout the year.
Speaker Change: That's helpful color and then just maybe more broadly have there been any changes to the demand environment and what are you seeing out there in terms of in terms of enterprise demand.
Speaker Change: Enterprise Good morning staffs first enterprise demand remains.
Speaker Change: Very healthy.
Speaker Change: I would extend that comment to I would say more broadly our target priority market, which is the middle enterprise and enterprise basin, particularly as I said before I mean, the question related to system integrators, we're seeing a stronger demand in deal.
Speaker Change: The above the 500 thousands of dollars in that AAR or ACD and those deals all day.
Speaker Change: They are in.
Speaker Change: Somewhat challenging to forecast given the complex procurement process.
Speaker Change: They continue to increase in quantity or units in our pipeline. Additionally, I would say that the demand for our products.
Speaker Change: Remains of high quality, what do I mean by quality.
Speaker Change: There are customers that enter the pipeline more and more consistently has more than one use case to address them. We like that because there is a direct correlation between multiple use cases and top quartile unit economics of customers at the table, we are focused essentially on creating them.
Speaker Change: Demand there is.
Speaker Change: Danny in line with our broader capabilities and strategy that is accretive to long term success.
Speaker Change: And that allows us to develop these customers over time and Brandon mentioned it before by adding an engine that produces long term contract for three five and recently even longer than that deals there.
Speaker Change: In terms of years.
Speaker Change: We believe that this.
Speaker Change: Secular opportunity that we have ahead of us in the years to come.
Speaker Change: He is incredible and we not only like today's demand there, but we believe we have even further opportunity to improve it.
Speaker Change: Thank you very much.
Speaker Change: Our next question comes from Kevin Krishna Rodney from Scotiabank. Please go ahead. Your line is open.
Speaker Change: Hey, there good morning, a question on the net retention that was down to 100% from 104% I'm, assuming some of that's impacted by the loss of the large customer in Q1, but are there any other considerations, we think about SMB churn.
Speaker Change: Any thoughts on on what happened with the net retention ratio.
Speaker Change: Thanks, Kevin.
Speaker Change: You know the first one on the large customer downgrade, we previously disclosed impact MBR by slightly over 1%.
Speaker Change: One aspect that impacted <unk> as well is that we are up 40% increase in contracts that were up for renewal in 2024 compared to 2023.
Speaker Change: If you think about door GMO historically ran on three year contracts. So all the customers that we acquired in 2021 were up for renewal in 2020 for either fundamentally different businesses. This is a different business environment. As you can imagine our logo retention rate remained consistent with prior year, but these customers are down.
Speaker Change: I think the right user tier and the right module at the end of the day is there going to be happier customers over the long run, which we're seeing through improved NPS scores.
Speaker Change: And going forward. These customers can grow from here. So ultimately 2024, it was a tough year from a net retention perspective.
Speaker Change: Q1, 2025, it is actually our largest contracts up for renewal quarter, but we do expect it to start reflecting from there.
Speaker Change: So can you clarify that Brennan, sorry, you said Q, which quarter is your largest contract in your quarter coming out this current quarter Q1 2025.
Speaker Change: Okay. Okay. Thanks for that great color. The second question is on the competition can you comment on win rate have those been trending.
Speaker Change: This year versus last year any specifics on differ.
Speaker Change: Different verticals, where you might be stronger than others, just would love to get an update there. Thanks.
Speaker Change: There have been no material changes to the landscape of competition.
Speaker Change: <unk>.
Speaker Change: Equally there have been no material changes to win rates.
Speaker Change: We.
Speaker Change: Our working very out of them and we believe that there is room to improve our win rate over the near future by Ey.
Speaker Change: On improving our execution in the field, which remains a evergreen objective and tomb Armenia, our field team members with the products that address the needs of customers at a rapid pace.
Speaker Change: In terms of competition.
Speaker Change: We continue to unsurprisingly substitute legacy players that.
Speaker Change: Don't meet the modern needs of workforce and customer experience at the at the customers that we are targeting this.
And certainly we're seeing in the.
Speaker Change: Down market, meaning in the SMB space, which is not to.
Speaker Change: For clarity a strategic market for the table a lot of pricing pressure a lot of cloud and what.
Speaker Change: What we call a race to the bottom.
Speaker Change: To achieve you know.
Speaker Change: Logo acquisition.
Speaker Change: But with.
Speaker Change: Oftentimes in negative margins and for this reason we have shifted the ears.
Speaker Change: So now our focus in the near the mid enterprise and strategic enterprise space, and that's where we're focused for the years to come.
Speaker Change: Good stuff. Thanks, a lot I'll pass the line.
Speaker Change: <unk>.
Speaker Change: For any additional questions. Please press star followed by the number one on your telephone keypad.
Speaker Change: Our next question comes from Karen <unk>.
Speaker Change: From TD Cowen. Please go ahead your line is open.
Speaker Change: Hey, good morning, guys. Thanks for taking my questions can you comment on the contribution to growth from your current customers versus new logos. Just looking ahead, how much of your guide VIX and new logo wins.
Speaker Change: Is this referring to 2024 and 2025.
Speaker Change: 25.
Speaker Change: So.
Speaker Change: We don't disclose for looking and here are.
Speaker Change: I think you can take the.
Speaker Change: Color I gave previously where we do expect an ear to inflect. After Q1, 2020 fives, giving the fact that we did have a tough year with contracts senior skin contracts up for renewal customers right size into the rate.
Speaker Change: Value and the right user base and then we can start growing them from there.
Speaker Change: Okay. Thanks.
Speaker Change: Then you called out.
Speaker Change: Rentech opportunities is that baked into your current Tam calculation and how do you think you'll staff.
Speaker Change: On both sales and R&D as you start developing these products.
Speaker Change: Sure.
Speaker Change: And there is no doubt.
Speaker Change: That is the strategy.
Speaker Change: For many companies them, it's a net at a nascent stage at an early stage.
Speaker Change: We have acquired them capabilities them as I mentioned in the prior years ago with the acquisition of agile go to staff are.
Speaker Change: Attainment will the highly specialized capabilities and I do envision continuing to deploy.
Speaker Change: And investments in making investments are very targeted in the air in the area of the IV specialize the AIE engineering and product leaders to augment.
Speaker Change: Our current capabilities identical wherever is one of a few strategic initiatives that I spoke to that in detail a few minutes ago, but it doesn't stop there. Our goal is to try to become really the single one hub for an AI first learning experience that starts from creating com.
Speaker Change: <unk> invading ways, whether it's AI video AI audio podcast thing a hands on virtual labs that can go on and on through adjourn because in automation play. It really is a game changer for the industry and to do that we're going to staff the company with the brightest minds in the space.
Speaker Change: And.
Speaker Change: We're going to do that with a lot of conviction and we're going to focus on our five year plan.
Speaker Change: Thanks, guys.
Speaker Change: Our last question will come from Keith <unk> from Cantor Fitzgerald. Please go ahead. Your line is open.
Keith: Thank you for taking my questions and good morning, Alexia and Brandon.
Keith: My question is related to the Liza three new product offering that has legs and communities was whether you could give us some feedback and traction from customers so far.
Speaker Change: What's the customer journey life.
Speaker Change: And lastly is like with these pilots do you think has the most potential upside in the near term versus longer term and also have a follow up on the guidance with patented after this thanks I'll take the productivity guidance to Brenda and good morning back to you.
As I've said before the impact of these products from our early days of them has been very positive.
Speaker Change: I don't have the image Sierra to determine what the exact ore would be even though as you imagine that we do have plans expectations and.
Speaker Change: We are attacking those very carefully.
Speaker Change: I think part of your question was.
Speaker Change: Which one of these products as the highest potential and we believe that they all have a different degree of potential and the reason for that is.
Speaker Change: They all provide benefits them, depending on the use case.
Speaker Change: And Steve just that the companies at the time of the acquisition of the table that is going to be some companies indexing more on the need for analytics and other organizations that are point in time are going to.
Speaker Change: Index more on the power of collaboration community and others that they will see the benefits in advanced content creation I'd like to spend 10 seconds and maybe its not true it will be 30 seconds or a minute on the comfort of offering also ingot per se is a dated concept in the industry. There are.
Speaker Change: Many opening technologies in the market.
Speaker Change: I have been in this space for nearly 20 years and not that it is not a new award the heat existed back then.
Speaker Change: We are not aiming to replicating the success story of some of the more well known author and providers our strategy is very different actually.
Speaker Change: We believe that that the creation capability, we will need to be a pervasive capability across every single customer of the table I believe the creation capabilities are going to be embedded in every learning strategy of any company, whether they use the florida learning structured or knowledge discrimination.
Speaker Change: Creation of content is something that will be highly commoditized, we're thinking about that in a way AI is a game changer. In this context, we are going to enable customers with a click of a few buttons to creating M.
Speaker Change: A C E O highly personalized video email 10 different languages across the company in a matter of seconds, what are going to cut down costs by 1000% in certain.
Speaker Change: Use cases, we're going to be able to prove our ROI in minutes.
Speaker Change: So the new frontier all the learning platform is not anymore about the library content at IPO personalization at scale through a very sophisticated them learning creation engine, that's what we're building.
Speaker Change: We have no further questions I'll turn the call back over to Alicia for closing remarks.
Speaker Change: We are very thankful as every quarter for your continued support and for your questions for your participation in our story like I said in the call. We have a really deep conviction in our strategy and.
Speaker Change: Future, we are super excited about opportunity to add that we are really really looking forward to seeing you at inspire where some of the themes with teams today will add more color more detailed there and why not some demo I look forward to seeing you all and thank you for your time.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
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