Q4 2024 Upland Software Inc Earnings Call

Speaker Change: [music].

Thanks for watching!

Unknown Attendee: Thank you for standing by and welcome to the Upland Software fourth quarter 2024 earnings call. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session and instructions for that will be given at that time.

Thank you for standing by and welcome to the Upland software fourth quarter 'twenty 'twenty four earnings call. At this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions for that will be given at that time.

Unknown Attendee: The conference call will be recorded and simultaneously webcast at investor.uplandsoftware.com and a replay will be available there for 12 months.

Conference call will be recorded and simultaneously webcast at investors Dot upland software dotcom and a replay will be available there for 12 months.

Unknown Attendee: By now, everyone should have access to the fourth quarter 2024 earnings release, which was distributed today at 905 AM Eastern time.

Speaker Change: By now everyone should have access to the fourth quarter 'twenty 'twenty four earnings release, which was distributed today at 905 a M. Eastern time, if you have not received the release it's available on <unk> website I would now like to turn the call over to Jack Mcdonald, Chairman and CEO of upland software.

Unknown Attendee: If you have not received the release, it's available on Upland's website.

Jack McDonald: I would now like to turn the call over to Jack McDonald, Chairman and CEO of Upland Software. Please go ahead.

Please go ahead Sir.

Jack McDonald: All right, well, thank you and welcome to our Q4 2024 earnings call.

Speaker Change: Alright, well, thank you and welcome to our Q4 2024 earnings call I'm joined today by Mike Hill, Our CFO I'll start the call with some.

Jack McDonald: I'm joined today by Mike Hill, our CFO, I'll start the call with some review of Q4, and Mike's going to provide some additional detail on those numbers. And he'll also go through our guidance for Q1 and for the full year 2025.

Speaker Change: Review of Q4, and Mike's going to provide some additional detail on those numbers and.

Speaker Change: He'll also go through our guidance for Q1 and for the full year of 2025 after that we'll open the call up for Q&A, but before we get started Mike will read the safe Harbor statement.

Michael Hill: After that, we'll open the call up for Q&A, but before we get started, Mike, we'll read the safe harbor. All right, thank you, Jack. During today's call, we will include statements that, based on our views and assumptions as of today, that are considered forward-looking within the meanings of the securities laws. A detailed discussion of risks and uncertainties associated with such statements is contained in our periodic reports filed with the SEC.

Mike Hill: Thank you Jack during today's call. We will include statements that based on our views and assumptions as of today that are considered forward looking within the meaning of the securities laws, a detailed discussion of risks and uncertainties associated with such statements is contained in our periodic reports filed with the SEC, we do not intend or undertake any duty to.

Michael Hill: We do not intend or undertake any duty to release publicly any updates or revisions to any forward-looking statement.

Your release publicly any updates or revisions to any forward looking statements on this call upland will refer to non-GAAP financial measures. Please see our earnings release for information on the non-GAAP financial measures that we will discuss on this call.

Michael Hill: On this call, Upland will refer to non-GAAP financial measures. Please see our earnings release for information on the non-GAAP financial measures that we will discuss on this call. Our earnings release also contains reconciliations of these non-GAAP measures to their most comparable GAAP financial measures, except for any forward-looking non-GAAP financial measures, because the information needed to complete a reconciliation is unavailable at this time without unreasonable effort.

Mike Hill: Our earnings release also contains reconciliations of these non-GAAP measures to their most comparable GAAP financial measures, except for any forward looking non-GAAP financial measures because the information needed to complete a reconciliation is unavailable at this time without unreasonable effort with that I'll turn the call back over to Jack Alright. Thanks, Mike So the headlines we had.

Jack McDonald: With that, I'll turn the call back over to Jack. All right. Thanks, Mike. So the headlines, we had a good Q4. We beat on recurring revenue, and we met our adjusted EBITDA guidance mid- Our core organic growth in Q4 was flat. But we are seeing some positive growth momentum, and we are guiding to 2.5% core organic growth here in 2025. In addition to that, adjusted EBITDA margins are increasing in 2025 by 400 basis points. So we're seeing some progress, both in terms of growth and in terms of margins. Our net dollar retention rate was 96% at the end of 2024, an improvement from 95% in the prior year, and we're targeting continued improvement for 2025.

Jack McDonald: Good Q4, we beat on recurring revenue and we met our adjusted EBITDA guidance midpoint, our core organic growth in Q4 was flat.

Jack: But we are seeing some positive growth momentum and we are guiding to 2.5% core organic growth here.

Jack McDonald: In 2025.

Jack McDonald: In addition to that adjusted EBITDA margins are increasing in 2025 by 400 basis points. So we're seeing some progress both in terms of growth and in terms of margins. Our net dollar retention rate was 96% at the end of 2024, an improvement from <unk>.

Jack McDonald: 95% in the prior year and we're targeting continued improvement for 2025 Q4, adjusted EBITDA was $14 9 million, which was up sequentially from Q3 and continued our growth in each quarter in.

Jack McDonald: Q4 adjusted EBITDA was $14.9 million, which was up sequentially from Q3 and continued our growth in each quarter in 2025. Q4 free cash flow came in stronger than expected at $9 million, which brought our full year 2024 free cash flow to $23.4 million. We welcomed 110 new customers to Upland in Q4, which includes 21 new major customers, and we expanded relationships with 291 existing customers, including 42 major expansions. On the product front in Q4, I'd note that we earned 76 badges in the G2 Winter 2025 market reports, which was up from the prior year. Right Answers and Panviva continued to earn many badges.

Jack McDonald: In 2024.

Jack McDonald: Q4 free cash flow came in stronger than expected at $9 million, which brought our full year 2020 for free cash flow to $23 4 million.

Jack McDonald: We welcomed 110, new customers to upland in Q4, which includes 21, new major customers and we expanded relationships with 291 existing customers, including 42 major expansions on the product front in Q4.

Jack McDonald: I'd note that we earned 76 batches in the G. Two winter 2025 market reports, which was up from the prior year right answers and Pan Veeva continue to earn many badges P. A inside and <unk> also received notable recognition along with other upland AI power.

Jack McDonald: BA Insight and Qubidian also received notable recognitions, along with other Upland AI-powered solutions. Upland Interfax has expanded its partnership with Konica Minolta Business Solutions, which is a global leader in workplace technology, and this strengthened partnership positions Interfax as a go-to cloud fax solution for Konica Minolta's extensive multi-channel customer base across North America. Upland was also recognized in the IDC Marketscape Worldwide Digital Facts 2024 Vendor Assessment, and also was named in the IDC Market Glance Knowledge Management Report in the fourth quarter. Upland is dedicated to delivering AI enabled solutions to improve knowledge sharing and improve business outcomes.

Jack McDonald: <unk> solutions are.

Jack McDonald: Plenty of Interfax has expanded its partnership with Konica Minolta business solutions, which is a global leader in workplace technology and a strengthened partnership positions interfax as a go to cloud fax solution for Konica Minolta is extensive multichannel customer base across North America.

Speaker Change: Upland was also recognized in the IDC market scape worldwide digital fax 2024 vendor assessment and also was named in the IDC market glance knowledge management report in the fourth quarter up and is dedicated to delivering AI enabled solutions to improve knowledge sharing.

Jack McDonald: And improve business outcomes.

Jack McDonald: Subsequent to year end, we divested two non-strategic underperforming product lines. Those divestitures lowered our 2025 revenue guide by about $18 million, but had no adjusted EBITDA impact. So these were not products that were generating margin for us. These divestitures further simplify and focus our business on our best growth products. They reduce our execution risk and improve our core organic growth rate. With the proceeds from those sales, as well as free cash flow and cash on hand, we've paid down debt by $33 million to date here in 2025. Now that's in addition to $189 million in debt paydowns that we made in 2024.

Jack McDonald: Subsequent to year end, we divested two non strategic underperforming product lines those divestitures lowered our 2025 revenue guide by about $18 million, but had no adjusted EBITDA impact. So these were not products that we're generating.

Jack McDonald: <unk> margin for us these divestitures further simplify and focus our business on our best growth products, they reduce our execution risk.

Jack McDonald: And improve our core organic growth rate with the proceeds from those sales as well as free cash flow and cash on hand, we paid down debt.

Jack McDonald: By $33 million to date here in 2025 now that's in addition to a 189 million and debt Paydowns that we made in 2024.

Jack McDonald: Mike will talk about this in more detail with the guidance, but our 2025 outlook at the midpoint equates to approximately 2.5% core organic growth, and we are targeting higher, looking to exit 2025, closer to mid-single digits core organic growth. It's a good turnaround, the 2.5% is, from our 2024 average quarterly growth rate of negative 1%. So 350 basis point improvement, and as I mentioned earlier, our adjusted EBITDA margins are also moving up in 2025. So they'll be going from 20% adjusted EBITDA margins in 2024 to 24% adjusted EBITDA margins in 2025. So we've made an important turn in the business, core organic growth rate turning positive, retention rates improving, adjusted EBITDA and adjusted EBITDA margins are growing.

Jack McDonald: Mike will talk about this in more detail with the guidance, but our 2025 outlook at the midpoint equates to approximately two 5% core organic growth and we are targeting higher looking to exit 2025 closer to mid single digit core organic growth. It's a good turnaround.

The two 5% is.

Jack McDonald: From our 2020 for average quarterly growth rate of negative, 1%, So 350 basis point improvement and as I mentioned earlier, our adjusted EBITDA margins are also moving up in 2025, so there'll be going from 20% adjusted EBITDA margins in 2024.

224% adjusted EBITDA margins in 2025, so we've made an important turn in the business core organic growth rate turning positive retention rates, improving adjusted EBITDA and adjusted EBITDA margins are growing.

Michael Hill: So with that, let me turn the call back over. Thank you, Jack.

Mike Hill: So with that let me turn the call back over to Mike well. Thank you Jack.

Michael Hill: I think Jack covered most of the points on the financials in the quarter, so I'll just make a few points, additional comments here. for the Q4 income statement, revenues were generally as expected and growth margins stayed constant for the quarter. Adjusted EBITDA margin improved to 22% in Q4, up from 19% in Q4 of 2023. As you can see, Adjusted EBITDA grew sequentially across 2024, starting with $13.1 million in Q1, $13.6 million in Q2, $14 million in Q3, and as Jack said, $14.9 million in Q4. For the fourth quarter of 2024, GAAP operating cash flow was $9.3 million and free cash flow was $9 million, bringing our full year 2024 free cash flow to $23.4 million.

Mike Hill: I think Jack covered most of the points on the financials in the quarter. So I'll just make a few points additional comments here.

Mike Hill: For the Q4 income statement revenues were generally as expected and gross margin stayed constant for the quarter adjusted EBITDA margin improved to 22% in Q4 up from 19% in Q4 of 2023.

Mike Hill: As you can see adjusted EBITDA grew sequentially across 2024, starting with $13 1 million in Q1 $13. Six in Q2 14 million in Q3, and as Jack said $14 9 million in Q4.

Mike Hill: For the fourth quarter of 2024, GAAP operating cash flow was $9 3 million and free cash flow was $9 million, bringing our full year 2020 for free cash flow to $23 4 million now as a reminder, our GAAP operating cash flow and free cash flow in the prior year 2023 was benefited by the $20.

Michael Hill: Now, as a reminder, our GAAP operating cash flow and free cash flow in the prior year, 2023, was benefited by the $20.5 million one-time cash gain from the sale of half of our interest rate swap. Now, also note that we are targeting full year 2025 free cash flow in the range of 20 to 25 million. On the balance sheet, after about $33 million of additional paydowns year-to-date in 2025, our gross debt currently sits at about $261 million, almost all of which is hedged to effectively lock the interest rate at 5.4%. Cash flow permitting, we plan to continue paying down debt by up to $2 million per month.

Mike Hill: $5 million onetime cash gain from the sale of half of our interest rate swaps.

Mike Hill: Now I'll also note that we are targeting full year 2025 free cash flow in the range of $20 million to $25 million.

Mike Hill: On the balance sheet after about $33 million of additional pay downs a year to date in 2025, our gross debt currently sits at about $261 million almost all of which is hedged to effectively lock the interest rate at five 4%.

Mike Hill: Cash flow permitting we plan to continue paying down debt by up to $2 million per month.

Michael Hill: As we discussed on past calls, our outlook for 2025 continues to reflect the previously announced runoff of Sunset Asset Revenue, causing our top line to continue to decline. That said, our core organic revenue growth outlook is projected to improve to approximately 2.5% growth in 2025.

Mike Hill: As we discussed on past calls our outlook for 2025 continues to reflect the previously announced runoff of sunset asset revenue, causing our topline to continue to decline.

Mike Hill: That said our core organic revenue growth outlook is projected to improve to approximately two 5% growth in 2025 as mentioned subsequent to year end, we divested two small non strategic product lines. These divestitures lowered our 2024 guide by approximately $18 million, but.

Michael Hill: As mentioned, subsequent to year-end, we divested two small non-strategic product lines. These divestitures lowered our 2024 guide by approximately $18 million, but are projected to have no material impact on our 2025 adjusted EBITDA. For the quarter ending March 31st, 2025, we expect reported total revenue to be between $59 and $65 million, including subscription and support revenue between $56.4 and $61.4 million, for a decline in total revenue of 12% at the midpoint from the quarter ended March 31st, 2024. First quarter 2025 adjusted EBITDA is expected to be between 11.2 and 14.2 million for an adjusted EBITDA margin of 20% at the midpoint.

Mike Hill: Our projected to have no material impact on our 25.

Mike Hill: 2025 adjusted EBITDA.

Mike Hill: For the quarter ending March 31, 2025, we expect reported total revenue to be between 59 and $65 million, including subscription and support revenue between 56, 4% and $61 4 million for a decline in total revenue of 12% at the midpoint from the quarter ended March 31 2000.

Mike Hill: <unk> 24.

Mike Hill: First quarter 2025, adjusted EBITDA is expected to be between 11, 2% and $14 2 million for an adjusted EBITDA margin of 20% at the midpoint.

Michael Hill: This adjusted EBITDA guidance at the midpoint is a decrease of 3% from the quarter ended March 31st, 2024.

Mike Hill: This adjusted EBITDA guidance at the midpoint is a decrease of 3% from the quarter ended March 31, 2024, and I will note that the first calendar quarter of the year is always more heavily burdened by U S payroll taxes compared to quarters later in the calendar year as well as this first quarter of 2025 was burdened. Additionally.

Michael Hill: Now, I will note that the first calendar quarter of the year is always more heavily burdened by U.S. payroll taxes compared to quarters later in the calendar year, as well as this first quarter of 2025 was burdened additionally by continued costs related to those divested assets, where those costs would have been removed earlier had we not divested. For the full year ending December 31st, 2025, we expect reported total revenue to be between $231.5 and $255.5 million, including subscription and support revenue between $218 and $238 million, for a decline in total revenue of 11% at the midpoint for the year ended December 31st, 2024.

Mike Hill: <unk> by continued costs related to those divested assets, where those costs would have been removed earlier had we not divest them.

Mike Hill: For the full year ending December 31, 2025, we expect reported total revenue to be between 231, five and $255 5 million, including subscription and support revenue between 218 in $238 million for a decline in total in total revenue of 11% at the midpoint for the year.

Mike Hill: Ended December 31 2024.

Michael Hill: This guidance at the midpoint reflects core organic revenue growth of 2.5% for 2025. Full year 2025 adjusted EBITDA is expected to be between 53.5 and 65.5 million for an adjusted EBITDA margin of 24% of the midpoint. The adjusted EBITDA guide at the midpoint is an increase of 7% from the year ended December 31st, 2024.

Mike Hill: This guidance at the midpoint reflects core organic revenue growth of two 5% for 2025.

Mike Hill: Full year 2025, adjusted EBITDA is expected to be between 53, 5% and $65 5 million for an adjusted EBITDA margin of 24% at the midpoint. The adjusted EBITDA Guide at the midpoint is an increase of 7% from the year ended December 31, 2024, and with that I'll turn the call back over to Jack Alright. Thanks, Mike.

Jack McDonald: And with that, I'll turn the call back over to Jack. All right, thanks, Mike.

Unknown Attendee: We are now ready to open the call up for Q&A. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Again, to ask a question, press star followed by the number one on your telephone keypad.

Jack: We are now ready to open the call up for Q&A.

Speaker Change: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad again to ask a question press star followed by the number one on your telephone keypad and if you would like to withdraw your question Press Star one again, thank you.

Unknown Attendee: And if you would like to withdraw your question, press star one again. Thank you.

Unknown Attendee: We will pause for just a moment to compile the Q&A box.

Jack: We will pause for just a moment to compile the Q&A roster.

D.J. Hynes: Your first question comes from the line of D.J.

Speaker Change: Your first question comes from the line of D J Hynes with Canaccord.

Jack McDonald: Hynes with Canaccord. Please go ahead. Hey, guys. Nice to see the improving organic growth outlook. Good work there. Jack, it looks like the two products where you're getting the most accolades are right answers and BA insights. You know, obviously, knowledge management and enterprise search are pretty foundational to any AI strategy, which makes me think there may be an underappreciated AI story at Upland. Can you just talk a little bit about that and maybe highlight some of the key use cases you're seeing? Thank you.

Jack: Please go ahead.

Speaker Change: Hey, guys nice to see the improving organic growth outlook. Good work there Jack it looks like the two products, where you're getting the most accolades are right answers and insights obviously knowledge management and enterprise search are pretty foundational to any AI strategy, which makes me think there may be an underappreciated AI story at upland.

Speaker Change: Can you just talk a little bit about that and maybe highlight some of the key use cases, you're seeing.

Jack McDonald: Yeah, absolutely. So over the past couple of years, we invested in building a center of excellence in India. And we have used that development capacity as well as, you know, the rest of our both domestic and international teams to make a significant investment in products. And we have AI enabled 80% of our core content and knowledge management product portfolio. So.

Speaker Change: Yeah, absolutely so over the past couple of years.

Speaker Change: We invested in building.

Speaker Change: Our center of excellence in India.

Speaker Change: And we have used that development capacity as well as the rest of our book domestic and international teams to make a significant investment in products and we have AI enabled 80% of our core content and knowledge management.

Speaker Change: <unk> portfolio so.

Jack McDonald: You know, if you look at products like BA Insight, we see a very attractive, there's always been a strong enterprise search use case for BA Insight, which is now AI enabled, but BA Insight itself is an AI enablement platform that connects enterprise LLMs to proprietary enterprise data sources, because that platform, BAI, has over 90 enterprise connectors that solve the last mile problem for enterprises that are looking to implement enterprise AI strategies. So a lot of excitement there around AI. Panviva, we recently announced Panviva Sidekick, which is an AI-driven agent assistant, which helps contact center agents deliver real-time contextual knowledge to customer service reporters.

If you look at products like be a insight we see a very attractive there's always been a strong enterprise search use case for VA insight.

Speaker Change: <unk> is now AI enabled but inside itself is an AI enablement platform that connects enterprise Llm's two proprietary enterprise data sources, because that platform be AI has over 90 enterprise connectors that solve the last.

Speaker Change: Mile problem for enterprises that are looking to implement.

Speaker Change: Enterprise AI strategy, so a lot of excitement there.

Speaker Change: AI.

Speaker Change: Pan Veeva, we recently announced Pan Veeva side kick, which is an AI driven agent assistant which helps contact center agents deliver real time contextual knowledge to customer service reps.

Speaker Change: <unk>.

Jack McDonald: We have rolled out AI Assist, which is an AI-powered tool for automating RFP and proposal responses, and that integrates with both OpenAI and with IBM Watson. And we're starting to see, you know, as you look at it, some pretty substantial sales opportunities around, you know, those products. So in Q4, for example, for Qvidian, for that AI assist product, we had a $500,000 ARR sale to a major technology company, rolling that out as their of record knowledge management and RFP proposal automation platform. So really starting to see some traction there. And of course, right answers as well with our integration with OpenAI's chat GPT to enhance search and automate content creation and streamline customer content.

Speaker Change: We have rolled out AI assist which is an AI powered tool for automating RSP and proposal responses and that integrates with both open AI and with IBM Watson and we're starting to see as you look at it.

Speaker Change: Some pretty substantial.

Speaker Change: Sales opportunities are.

Speaker Change: Around.

Speaker Change: Those products so.

Speaker Change: In Q4 for example.

Speaker Change: For Covidien for that AI assist product.

Speaker Change: We had a $500000.

Speaker Change: <unk> sale to a major technology company.

Speaker Change: Rolling that out.

Speaker Change: Is there.

Speaker Change: Of record knowledge management and.

Speaker Change: RFP proposal automation platform.

Platform, so really starting to see.

Speaker Change: Some traction there.

Speaker Change: And of course, right answers as well with our integration with.

Speaker Change: With open AI chat GPT that to enhance search and automate content creation and streamline customer content. So.

Jack McDonald: So seeing it across the board, we believe it's going to be the foundation for our growth. Obviously, the two and a half percent is a beginning. We're looking to go a lot higher than that through time. But I think you're spot on. Our AI strategy is going to be central to getting our growth rate up over the next couple three years. Yeah, perfect. That's helpful color.

Speaker Change: Seeing it across the board, we believe it's going to be the foundation for our growth obviously, the two five percentage of beginning we're.

Speaker Change: We're looking to go a lot higher than that through time, but I think youre spot on our AI strategy is going to be central to getting our growth rate up over the next couple of three years.

Speaker Change: Yes, perfect. That's helpful color, Mike maybe a follow up for you.

Michael Hill: Mike, maybe a follow up for you. Just where are we in the asset unwind strategy? Like how much recurring revenue do you think there still is left to come out of the model? And then maybe a follow up to that, like the $18 million that was divested this year? Like what were the net proceeds to Upland for those businesses? Yeah, the the sale prices were about 10 million. And as far as the decline in the sunset asset revenues, we went from about 32 million last year in 2024. It'll be about 14 million this year in 2025.

Speaker Change: Just where are we in the asset unwind strategy like how much recurring revenue do you think there still is left to come out of the model and then maybe a follow up to that like the $18 million that was divested this year like what were the net proceeds to upland for those businesses.

Speaker Change: Yes.

Speaker Change: Sale prices were about $10 million.

Speaker Change: And as far as the decline in the Sunset asset revenues.

Speaker Change: We went from about $32 million last year in 2024, it'll be about $14 million. This year in 2025, and then looking at 2026, its probably down to around $6 million or so.

Michael Hill: And then looking at 2026, it's probably down to around 6 million or so. Okay. All right. Perfect. Awesome. All right.

Speaker Change: Okay, Alright, perfect Awesome, all right I'll hop back in the queue. Thank you guys.

D.J. Hynes: I'll hop back in the queue. Thank you, guys. Thank you.

Thank you.

Jeff Van Ree: Your next question comes from the line of Jeff Van Ree with Craig Hallam. Please go ahead. Great. Thanks.

Speaker Change: Your next question comes from the line of Jack Henry with Craig Hallum. Please go ahead.

Speaker Change: Great. Thanks, Hey, guys. A couple from me Mike just to follow up on that last one just to be clear you said $10 million for the businesses is 10 in total not temper.

Jeff Van Ree: Hey guys, a couple for me, Mike, just to follow up on that last one, just to be clear, you said 10 million for the businesses, that's 10 in total, not 10 per. Unknown Speaker Okay, got it.

Speaker Change: Correct, Okay got it.

Jeff Van Ree: So, so high level, just maybe Jack on the, you know, the HGGC 150 million convert that preferred that they did in July of 22. You know, a lot of the skill sets that they were bringing were around sales. I know you focused a lot on that. Obviously, your guide is suggesting you're getting some traction.

Jack: So high level, just maybe Jack on the <unk> do you see.

Jack: 50 million convert that preferred that they did in July.

Jack: July of 'twenty two.

A lot of the skill sets that they were bringing were around sales I know you focused a lot on that obviously your guide is suggesting youre getting some traction just love maybe a brief fly by very brief history lesson on what's going on with go to market, where we were where we are what you think we're going to do this year.

Jack McDonald: Just love maybe a brief flyby, very brief history lesson on what's going on with go market, where we were, where we are, what you think we're going to do this year.

Jack McDonald: Yeah, so. Right, I think the finger roll on that would be, you know, what have we done since the HGDC investment? So, you know, one, we've sold and or sunset non-core products, right, to further focus our product portfolio. As I mentioned a minute ago, we've built out that Efficient India based software development function, and we have made a significant investment in products, both in terms of performance capabilities and cloud ops, as well as, as I mentioned, incorporating AI into 80% of our content and knowledge management products, 60% of our digital marketing products. Significantly, we've built a modern demand gen, a modern digital marketing function to generate demand and build sales pipeline.

Jack: Yeah. So.

Speaker Change: Ryan the finger roll on that would be what have we done since the HD EDC investment so.

Speaker Change: One we sold our sunset noncore products right to further focus our product portfolio as I mentioned a minute ago, we've built out that efficient India.

Speaker Change: Based software development function and we have made a significant investment in products. Both in terms of performance capabilities in cloud ops as well as as I mentioned, incorporating AI into 80% of our content and knowledge management products, 60% of our digital marketing products.

<unk>.

Speaker Change: Significantly we've built a modern demand yet a modern digital marketing function to generate demand and build sales pipeline, we've upgraded our sales talent.

Jack McDonald: We've upgraded our sales talent. and particularly at the front line where it matters the most by hiring more domain expert account execs, important as we, you know, look to bring these new AI-enabled products to market.

And particularly at the frontline where it matters the most by hiring more domain expert account execs.

Speaker Change: Important as we are.

Speaker Change: Look to bring these new AI enabled products to market. So I would say those are the those are the headlines Jeff.

Jack McDonald: So I would say those are the headlines, Jeff. As a result of all that, as I say, core organic growth rate, net renewal rates are improving. We're seeing also some expansion in margins. And the other thing we've done, you know, with cash flow and the benefit of those, of that capital raise, is we've paid down $261 million of debt since the HDGC investment.

Speaker Change: As a result of all that as I say core organic growth rate net renewal rates are improving we're seeing also some expansion in margins.

Speaker Change: The other thing we've done with cash flow and the benefit of those of that capital raise.

Speaker Change: We've paid down $261 million of debt.

Speaker Change: Since the <unk> investment.

Jack McDonald: And on the debt, how do you think about timing? I mean, obviously, it sounds like you're going to chip away, I think you said, maybe up to $2 million a month. And then into, what, 26, latter 26, if I remember August, you've got the debt coming due. So, obviously, presumably, you end up with a higher rate, and maybe you delay the renewal. Just how do you think about the timing of taking out the existing debt? Yeah, I mean, you hit it. We've got a very attractive locked rate with our swaps under this facility. So we're not in a huge rush because we're enjoying that cash flow and using it to pay down principal.

Speaker Change: And on the on the debt how do you think about timing I mean, obviously it sounds like youre going to chip away I think you said, maybe up to $2 million a month.

Speaker Change: And then he did what 26 latter 'twenty six if I remember August you've got the debt coming due so obviously, presumably you end up with a higher rate maybe a delay of the renewal just how do you think about the timing of taking out the existing debt.

Speaker Change: Yes, you hit it we've got a very attractive locked rate with our swaps under this facility. So.

Speaker Change: We're not in a huge rush, because we're enjoying that cash flow and using it to pay down principal.

Jack McDonald: We'll look to get the debt refied towards the second half of this year, and rates will be a little bit higher, but we'll also be looking at a lower principal amount. So that'll be somewhat offset by the lower principal amount.

Speaker Change: We will look to get the debt refi.

Speaker Change: Or is the second half of this year and.

Speaker Change: And our rates will be a little bit higher but we'll also be looking at a lower principal amount so that will be somewhat offset by the lower principal amount yet.

Speaker Change: Got it and maybe one last in terms of the guide for Q1 50 96, five on the revenues, particularly wide range. Given this late in the quarter I mean, maybe maybe you have something to do the divestitures not sure just the width of the guidance and thoughts why so wide.

Jeff Van Ree: And maybe one last, in terms of the guide for Q1, 59 to 65 on the revenues, particularly wide range, given this late in the quarter, maybe you have something to do, the divestiture's not sure, just the width of the guide, and thoughts, why so wide? Yeah, Jeff, we've, you know, kept it fairly consistent on the width of the guidance range. And it's a little bit later in the quarter. But you know, we've still got perpetual license revenue and professional services revenue that's, you know, sometimes lumpy.

Speaker Change: Yes, Jeff.

Speaker Change: <unk> kept it fairly consistent on the width of the guidance range and it's a little bit later in the quarter, but we've still got that perpetual license revenue and professional services revenue.

Jeff Van Ree: So we're just we're just keeping it consistent with that, with that wider I think that's it for me.

Speaker Change: Sometimes lumpy. So we're just we're just keeping it consistent with that with that wider range.

Speaker Change: Okay.

Speaker Change: I think that's it for me appreciate it thanks guys.

Jeff Van Ree: Appreciate it.

Unknown Attendee: Thanks, guys.

Speaker Change: Thanks.

Alex Sklar: Your last question comes from the line of Alex Sklar with Raymond James. Please go ahead. Great, thank you.

Speaker Change: Your last question comes from the line of Alex.

Alex: <unk> with Raymond James Please go ahead.

Speaker Change: Great. Thank you <unk>.

Michael Hill: Michael, Jack, just wanted to go into some of the nice major account expansion that you had this quarter. So a couple questions here on on core net dollar retention improving, just some more color on what you saw on some of the different components that built up to that blended 96% number, how was gross retention versus expansion and, and then even with expansion, any help kind of between pricing versus some of the cross sell up. So Yeah, so the I think the key story on the net dollar retention rate improvement has been an improvement in gross dollar retention rate, which has really been driven by the investments we've made in product and the divestitures and focusing our product portfolio on our strongest products which have the best returns.

Speaker Change: I wanted to go into some of the nice major account expansion that you had this quarter. So a couple of questions here on core net dollar retention improving just some more color on what you saw in some of the different components that built up to that 1% to 96% number Howard gross retention versus expansion and then even with expansion any help kind of between pricing versus some of the key.

Speaker Change: Cross sell up sell.

Speaker Change: Yes, I said that.

Speaker Change: <unk>.

Speaker Change: I think the key story on the net dollar retention rate improvement has been an improvement in gross dollar retention rate, which has really been driven by the investments we've made in product and.

Speaker Change: The divestitures and focusing our product portfolio on our strongest products, which have the best renewal rates.

Michael Hill: Our goal as we look out into 2025 is to get that net dollar retention rate closer to 98%. as we exit. 2020. Okay, great.

Speaker Change: Our goal as we look out.

Speaker Change: Into 2025 is too.

Speaker Change: Get that net dollar retention rate closer to 98% as.

As we exited two.

Speaker Change: <unk> 2025.

Speaker Change: Okay great.

Michael Hill: And then, Mike, maybe one for you. were you going to add on there? I apologize. I was going to say in terms of the expansion amounts in there, you know, are our core Motion there is really pure expansion, you know, growing seats, growing users. But we are seeing now with the AI-enabled products like Qubiti and AI Assist, the opportunity to go back into a substantial customer base and upsell AI capabilities. So as we look into 2025, looking to see some additional upsell opportunities driven by AI.

Speaker Change: And then Mike maybe one for you.

Speaker Change: Well you can add on that I apologize.

Speaker Change: Was going to say in terms of the.

Speaker Change: Expansion.

Speaker Change: Amounts in there.

Speaker Change: Our our core.

Speaker Change: Motion there is is really pure expansion growing seats.

Speaker Change: Growing users.

Speaker Change: But we are seeing now with the AI enabled products like <unk> and AI assist the.

Speaker Change: The opportunity to go back and do a substantial customer base and upsell AI capabilities. So as we look into 2025 looking to see.

Speaker Change: Some additional upsell opportunities driven by AI.

Michael Hill: Okay, perfect. Mike, on FX, 30% of revenue outside the US, I know some of that's in the sunset asset, but that that two and a half percent core growth, is that a constant currency figure? Is that all in any help on kind of how much FX is impacting the outlook? Yeah, I don't think there's much of an FX impact there, Alex, so yeah.

Okay perfect.

Speaker Change: Mike FX, 30% of revenue outside the U S. I know some of that's in the Sunset asset, but that's two 5% core growth is that a constant currency figure is that all in and any help on kind of how much FX is impacting the outlook.

Speaker Change: Yes, I don't think theres much of an FX impact there Alex so yeah.

Michael Hill: Okay, great.

Speaker Change: Okay, great. Thank you both.

Unknown Attendee: Thank you both.

Unknown Attendee: Thank you.

Speaker Change: Thank you.

Unknown Attendee: That concludes our question and answer session.

Speaker Change: That concludes our question and answer session I will now turn the call back over to Jack Mcdonald for closing remarks. Please go ahead.

Jack McDonald: I will now turn the call back over to Jack McDonald for closing remarks. Please go ahead.

Unknown Attendee: Alright, thank you and we look forward to seeing you on our next Ladies and gentlemen, that concludes today's call. Thank you all for joining.

Speaker Change: Alright, Thank you and we look forward to seeing you on our next earnings call.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Unknown Attendee: You may now disconnect.

Speaker Change: Okay.

[music].

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].