Q2 2025 Kinaxis Inc Earnings Call
Speaker #3: Good morning and welcome to the Kinaxis Inc Fiscal 2025 2nd Quarter Results Conference call. Currently, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session and instructions will be provided at that time for you to queue up to questions.
Speaker #3: I'd like to remind everyone that this call is being recorded today, Thursday, August 7th, 2025. And I will now turn the call over to Rick Wadsworth, Vice President of Investor Relations at Kinaxis.
Speaker #3: Please go ahead, Mr. Wadsworth.
Speaker #4: Thanks, operator. Good morning and welcome to Kinaxis earnings call. Today, we will be discussing our second quarter results, which we issued after closing markets yesterday.
Speaker #4: With me on the call are Bob Courteau, interim CEO and Chair, and Blaine Fitzgerald, our Chief Financial Officer. Some of the information discussed in this call is based on information as of today, August 7th, 2025, and contains forward-looking statements that involve risks and uncertainties.
Speaker #4: Actual results may differ materially from those set forth in such statements. For discussion of these risks and uncertainties, you uld review the forward-looking statements disclosure in the earnings press release as well as in Kinaxis Cedar Plus filings, excuse me.
Speaker #4: During this call, we'll discuss IFRS results and non-IFRS financial measures, including adjusted EBITDA, a reconciliation between adjusted EBITDA and the corresponding IFRS result, is available in our earnings press release and in DNA.
Speaker #4: Both of which can be found on the Investor Relations section of our website, kinaxis.com, and on Cedar Plus. The webcast is live and being recorded for playback purposes.
Speaker #4: An archive of the webcast will be made available on the Investor Relations section of our site. Neither this call nor the webcast may be re-recorded or otherwise reproduced or distributed without prior written permission from Kinaxis.
Speaker #4: To begin our , Bob will discuss the highlights of our quarter and recent business developments followed by Blaine, who will review our financial results and outlook and open the line for questions.
Speaker #4: We have a presentation to accompany today's call, which can be downloaded from the Investor Relations homepage of our website. We'll let you know when to change slides.
Speaker #4: Over to you, Bob.
Speaker #5: Thanks, Rick. Good morning and thank you for joining us today. I'm so pleased with second quarter results and would like to highlight a few items.
Speaker #5: First, very encouraged by how much new business we won. It was the highest amount ever for a Q2 and the second highest ever outside of a fourth quarter.
Speaker #5: Our ARR grew 15% as reported and 13% in constant currency. Second, we grew SaaS revenue 17%, a strong result. We're 14% in constant currency.
Speaker #5: Third, thanks to strong growth and thoughtful management of the business, profit hit record levels as Blaine will explain. Our adjusted EBITDA margin was 25%, which helped us achieve our fourth consecutive quarter of rule of 40 performance.
Speaker #5: We highly value consistency around this metric. So we're very happy the result. Look, I'm thrilled with our performance in the second quarter. It's allowed us to increase our fiscal 2025 guidance for SaaS revenue growth.
Speaker #5: Which is the engine that drives our business. Blaine is going to speak about all the elements of guidance shortly. As always, we added several new customers in the quarter.
Speaker #5: Enterprise-class companies continue to be the highest cohort. And we're pleased to have won a uple of large enterprise accounts. Consumer products represented the biggest vertical market.
Speaker #5: And overall, we continue to be encouraged by our strong win rate. We're fortunate to be able to name just a sample of our new customers today.
Speaker #5: Representing multiple vertical markets, and our wide name geographic coverage and consumer products. First, La Palace, based in France, with 2024 revenue over $30 billion euros, is the world's leading dairy group producing cheese, milk, yogurt, butter, cream, and much more.
Speaker #5: La Palace is in 50 countries, has nearly 270 dairies, and employs over 85,000 people. McKee Foods, America's largest family bakery, and its fourth-generation of family ownership offers brands like the famous Little Debbie, Drake's Cakes, and Sun Belt Bakery.
Speaker #5: P&L Development is a premier manufacturer packager and distributor of over-the-counter pharmaceutical products and consumer health goods. In life science, we won Swedish, Orphan, BioVitram, or Sobi.
Speaker #5: A global biopharma company unlocking the potential of breakthrough innovations to transform the lives of people living with rare diseases. Sobi has approximately 1,900 employees around the world.
Speaker #5: Shimatsu, founded in Japan almost 150 years ago, it's a global leader in developing and manufacturing precision instruments, and equipment. Their ts include analytical and measuring instruments, industrial machinery, aircraft equipment, and products and equipment used in healthcare for diagnosis, treatment, or measuring health.
Speaker #5: And to support the development of new drugs. In industrial manufacturing, we want Gabara and Griller Cabo Workay, or GG Group, an Austria-based global family-owned business that produces technically advanced high-quality wires and harnesses for automotive and industrial application.
Speaker #5: And a nice one in logistics, we won Seiko Logistics, based in the over 150 offices in more than 60 countries. US, with Seiko is an end-to-end partner from shipper to consumer, they deliver tech-driven shipping solutions, that turn supply chains into a competitive differentiator.
Speaker #5: Obviously, we're pleased to win leading innovative companies like these. In fact, three of Gardner's four masters of supply chain for 2025 - their highest ranking are Kinaxis customers.
Speaker #5: So overall, they're still 14,000 prospects remaining in the vertical and geographic markets we target. And we have never been in a better position to win them.
Speaker #5: While adding new customers will be a major part of the Kinaxis story for many years to come, I'm also very pleased with our ongoing momentum and expansion business.
Speaker #5: Have a half of gross addition state ARR came from expansions. In particular, it's encouraging to see for the fifth quarter, in a row, applications and scenarios comprised together over half of the expansion amount.
Speaker #5: A very rare achievement previously. This reflects both the value of recent investments in new product R&D, and the incredible edge that our long-standing proprietary scenario analysis capabilities delivered to our customers.
Speaker #5: There is strong demand for Kinaxis products because increasingly, the best companies recognize that supply chains are a key differentiator to their success. Old, siloed methods are collapsing.
Speaker #5: And so they turn to Kinaxis for the market's leading AI-first real-time scalable, agile supply chain orchestration platform. From a product perspective, we're excited to see ongoing demand for some of our newer planning solutions, like enterprise scheduling, and supply.ai.
Speaker #5: Which we now call Supply Optimization. The richness and breadth of our core planning algorithms developed through decades of industry experience and the unique proprietary day-to-day generate will remain a massive differentiator for Kinaxis even as AI becomes more ubiquitous amongst existing players and even new entrants.
Speaker #5: This is especially relevant in supply chain where complex logic modeled via tools such as heuristics, optimization, and predictive AI is critical for optimizing the design and execution of the supply chain to meet business objectives.
Speaker #5: We'll continue to use our unmatched domain expertise to widen that moat with new planning solutions, and enhancements we create or acquire. On top of that, Maestro's new generative and agentic AI capabilities supercharge our existing product differentiation and represent a step towards more autonomous supply chains that boost productivity, democratize access to data, and generate better customer outcomes.
Speaker #5: While automation has played a key role across the supply chain for a long time, AI agents will dramatically expand its scope and intelligence. And our AI agents will be able to monitor, predict, and take action in real time to handle use cases across the supply chain like supply and demand disruptions, inventory management, and so many others.
Speaker #5: To extend our value even further and to more users, we will also build connectors from Maestro to work in real time with agents from other supply chain management applications.
Speaker #5: And with a growing ecosystem of third-party agentic systems such as Google Agent Space and others. As you know, real-time concurrent orchestration with a much broader range of planning and execution partners and capabilities with data is fundamental to our growth strategy.
Speaker #5: To ake our ambitious orchestration vision real, and seamless, we are actively augmenting our industry-leading platform by building an agentic AI framework enabling multi-agent communication and developing our new supply chain data fabric in partnership with Databricks, who have been terrific.
Speaker #5: We now have major early innovator customers working our initial commercial generative and agentic AI capabilities and will we will be adding more very soon.
Speaker #5: We'll continue launching these new capabilities into the market. Through rest of '25, and into 2026. Along with a new Maestro pricing model, that we'll be discussing over time.
Speaker #5: We couldn't be more excited about how AI will transfer the ount of value we offer customers and the opportunities it represents to Kinaxis. So overall, we're very pleased with our momentum in the final half of 2025.
Speaker #5: And very excited about the future. The talent that we've added is helping to deliver quarters consistently, and we're in full-scale mode at Kinaxis. Our product is a leader in the market and our AI enhancements will only add and build on top of that.
Speaker #5: The board and I remain focused and patient on finding new proven CEO with the experience and credentials to be a creative in our exciting direction and momentum.
Speaker #5: And with that, I'll turn it over to you, Blaine. Thank you, Bob. And good ning. As a reminder, unless noted otherwise, all stickers reported on today's call are in US dollars under IFRS.
Speaker #5: To move to slide seven, 'm very pleased that Q2 was another strong quarter for Kinaxis. To emphasize some of what Bob mentioned, it was our best second quarter ever assigning new business, and the second best ever outside of a Q4.
Speaker #5: This is a great accomplishment in such an unpredictable global trade environment. And testimony to a more scalable go-to-market organization and our ongoing product leadership.
Speaker #5: Our strong performance in the first half of the year allows us to increase our SaaS revenue guidance for fiscal 2025. On both an as-reported and constant currency basis.
Speaker #5: Our gross margin and profitability metrics were strong, including new records for profit earnings per share and adjusted EBITDA. Our trailing 12-month free cash flow margin remains on a great trajectory.
Speaker #5: Briefly, for the second quarter, and compared to Q2 2024 results, total revenue was $136.4 million, up 15% or 13% in constant currency. SaaS revenue was $88.4 million, up 17% or 14% in constant currency.
Speaker #5: 14.5% to be more precise. Our subscription term license revenue was $5.1 million. Up $270%. Professional services revenue was $37.4 million, up 2%. While utilization across our internal team remains strong, the modest growth reflects market dynamics that are driving lower than expected billable rates.
Speaker #5: Largely due to a more competitive environment and a broader shift toward partner-led delivery. The latter reflects an intentional trade-off as we reshape our professional services model to enable scale and efficiency.
Speaker #5: At the center of this transformation is a clear focus on ensuring successful customer deployments. Whether delivered by Kinaxis directly or through our system integration partners, today's this year, partners have led or jointly delivered more than 70% of new customer implementations one through our direct sales team.
Speaker #5: These engagements are strengthening our ecosystem, accelerating knowledge transfer, and expanding capacity to serve more customers at scale with consistent quality. Looking ahead, we're continuing to invest in high-skill consulting talent.
Speaker #5: New offerings in AI and data integration, and product enhancements that reduce the cost and complexity of deploying Maestro. While we expect professional services to become a smaller percentage of total revenue over time, it remains a critical enabler of SaaS growth.
Speaker #5: We're pleased with the role it plays in delivering strong outcomes and faster time to value for our customers. Following maintenance and support, revenue was $5.5 million.
Speaker #5: Up 10%. Now, our gross profit was strong, up 25% to $87.5 million. Or a 64% gross margin compared to 59% in the same quarter last year.
Speaker #5: I am encouraged that for the second consecutive quarter, our software margin hits 80%. Up from 74% in Q2 last year. This was due in part to higher subscription term license revenue, more efficient operations, and lower amortization.
Speaker #5: Professional services gross margin was down to 23% from 27%, consistent with my comments around current market conditions for these services. Adjusted EBITDA was extremely strong, up an impressive 54% to 33.7 million dollars, a record level.
Speaker #5: The margin was 25% versus 19% in Q2 last year. This reflects numerous factors. Including our revenue growth, higher gross margin, and lower operating expenses as a percentage of revenue.
Speaker #5: We continue to focus on profitability and getting operating leverage as we scale. Our growth and profitability resulted in rule of 40 performance for the fourth consecutive quarter.
Speaker #5: Calculated by adding SaaS revenue growth and adjusted EBITDA margin, our usual approach. We are proud of staying at this elite level and continue to target it for full year results no later than 2026.
Speaker #5: Our profit in the quarter was up $437% to $18.4 million, or 64 cents per diluted share, both record levels, and versus a profit of $3.4 million, or 12 cents per diluted share a year ago.
Speaker #5: Profit benefited largely from the same factors that supported our adjusted EBITDA performance. Cash flow from operating activities was $22.6 million, up 72% over 13.1 million dollars in Q2 2024.
Speaker #5: Cash equivalent and short-term investments were $329.4 million, up over $30 million from $298.5 million, at the end of 2024, despite being active with our NCIB program.
Speaker #5: On slide eight, our trailing 12-month free cash flow margin remains strong, at 19.7% and on a positive longer-term trajectory. The one-time payments we made in Q1 2025 relating to tax planning and a litigation settlement reduced the results by 5.5% points.
Speaker #5: So the normalized result is 25.2%. On slide nine, our annual recurring revenue, or ARR, grew by 15% year over year, to $391 million. Or 13% in constant currency.
Speaker #5: An increase of $19 million from last quarter. The highest amount ever. The split of gross additions to ARR was 50/50 between new name accounts and expansion business.
Speaker #5: We remain very pleased with this healthy mix and the recent improvements in our expansion business under our new go-to-market structure. As Bob pointed , this is the fifth quarter in a row where applications and scenarios combined totaled over half of expansion orders.
Speaker #5: A positive new trend in the . This reflects the breadth and value of Maestro's unique capabilities and will also contribute to better margins over time.
Speaker #5: On slide 10, our SaaS and total RPO balances remain very strong, growing to $793 million and $834 million respectively. With three-year CAGRs of 20% and 19%.
Speaker #5: This metric continues to highlight growth in our scription business and our strong gross customer retention. More details on our RPO can be found in the revenue note to our cials.
Speaker #5: On slide 11, I am pleased to update our 2025 guidance. We're maintaining total revenue guidance of $535 to $550 million. We're moving the constant currency outlook to the same range.
Speaker #5: Due to the factors relating to professional services that I discussed earlier. We're increasing our SaaS growth guidance in both as-reported and constant currency terms.
Speaker #5: We now expect SaaS revenue growth of 13 to 15% and the same range in constant currency. We remain confident with our pipeline for the rest of the year and are encouraged by strong competitive win rates.
Speaker #5: And higher pipeline conversion rates under our new go-to-market structure. We're maintaining our subscription term license revenue guidance of 16 to 18 million. Note that in the second half of the year, some new customers could land as term license and other existing term license customers could convert to SaaS, but this is our best estimate for now and we'll update if necessary as we go.
Speaker #5: The remaining amount of subscription term license revenue for the year will be weighted slightly in favor of Q3. We continue to expect a strong adjusted EBITDA margin between 23 and 25%.
Speaker #5: On slide 12, we have continued to be active in our normal course issuer bid. In the first half of 2025, we repurchased 283,297 shares and at an average of US dollar price of $125.85.
Speaker #5: For an investment of roughly $35.7 million. Our NCIB goes through November 5th, 2025. Overall, I am very pleased with where the business is at.
Speaker #5: A number of key business metrics are hitting record levels and we're just at the beginning of a go-to-market transition and the coming AI transformation.
Speaker #5: I'm excited to see where the business can go from here. As always, thank you for our ongoing Kinaxis and support to date. I will now turn the line over to the operator to start the Q&A session.
Speaker #6: Thank ou. Ladies and gentlemen, you would like to ask a question for today, it is star followed by the number one on your touchstone phone.
Speaker #6: Once again, that is star followed the number one. We'll take questions as much as we have time for here today. Our first question is from the line of Richard C with National Bank Financial.
Speaker #6: Your line is live.
Speaker #7: Yes. Thank ou. Bob, I was wondering if you could maybe talk about the selling environment today? You know, it seems like things have improved a bit, but I'd like to sort of maybe get some commentary.
Speaker #7: So has the sales cycles improved? Softened? Stayed the same since let's say the beginning of this year?
Speaker #5: I think the demand curve is similar to what it's been in the past. A couple of years. However, saying that our win rate is, you ow, much improved.
Speaker #5: Our execution through the cycle is stronger. And we're ing with a larger pipeline overall. So I ink for us, when you put those three things together, you know, it really leads to the kind of success we're having.
Speaker #5: In the quarter, but also when we look forward, you know, into 2026, the interest some of it driven by tariffs, but in general, I ink people understand more and more the importance of having a strong supply chain planning and orchestration strategy.
Speaker #5: And that's probably the biggest change that's occurred. You know, some of it, in, driven by tariffs, but because of that, we're seeing, you know, heightened interest in the company.
Speaker #5: And that's all, you know, quite positive. For sure, our execution around deals is much improved and, you know, thus the win rate factor.
Speaker #7: Okay. And just my sort of second question is kind related to that. There's no doubt you've made some fairly notable changes on the sales and marketing side to get to this point.
Speaker #7: Do you see the business going back to kind of, let's , the 20% growth rates you've in the past? And under a sort of at kind of conditions or variables would be required to get to you there?
Speaker #5: Yeah. I think what we've said is that we we have a company now that should be operating at a rule of 40 performance. And as we go forward, and as we deliver our AI products and the data that we produce becomes more important to the organization, we see some interesting growth opportunities.
Speaker #5: That allow us to imagine that we could go faster. But we're not going to get over our skis here. We absolutely as Blaine, I can't remember exactly the words he used to say we're a company that is going to invest in the right areas in a very conscious fashion.
Speaker #5: With a view that you know we're going to make sure we deliver that over 40 performance. I ink that fact that we have a company that is in the sweet spot that should be sustained around really understanding your supply chain data, and what it means to things like guidance, treasury, and all parts of the organization.
Speaker #5: That we have an unlock opportunity with AI that's incremental. That would allow us to imagine that, you know, we could find ways to grow the more.
Speaker #5: And if we see those opportunities, we're going to take them.
Speaker #7: Okay. Great. Thanks.
Speaker #6: Thank you for your questions. Our next question is from the line of Thanos Maschopoulos with BMO Capital Markets. Your line is live.
Speaker #8: Hi. Good morning. Bob, be just circling back on the spending environment. You said the demand has been relatively consistent in, you know, just given the tariffs and operation data, I would have thought that there'd be maybe more of an impact on your .
Speaker #8: Are there underlying themes in terms of maybe just the nature of organizations that are engaging with you that has changed post the tariff discussion or in terms the timeframes or top of funnel?
Speaker #8: Is it that maybe some verticals seeing accelerated decision-making, but others are seeing delayed ision-making as a result? Just any additional color on the next layer of that would be good.
Speaker #8: Thanks.
Speaker #5: Yeah. The execution that we talked about at the back end is something that is, I think, pretty well understood. But when you look at the mix of customers, we're doing super well in markets like Japan, Asia, Europe has been pretty strong.
Speaker #5: We look our forward demand in the US looks good. So I think the one story is that we've added - I don't know - 40-plus people into our go-to-market capacity.
Speaker #5: Where we've really brought a lot of talent in the organization. And we're winning in all markets. So that's one ing you have to understand.
Speaker #5: So you're working off of bigger pipeline. Secondly, our t execution and our when you are in the throes of a deal with some of the most important companies in the world, they're looking at it today, they're looking at what you've done in terms of references for other customers.
Speaker #5: And they're betting on the future. And in all three areas, we deliver projects on time. Customers get value. We're entiated on the core product with Maestro.
Speaker #5: And we have the best story on AI. And so we're presenting that to customers. They get it. And it's causing us to not only win in the core industries where we have the biggest and most important customers on our platform.
Speaker #5: But if you look at the quarter, the world's largest dairy is a company that might have been in the past something that maybe one of our competitors will win.
Speaker #5: So we're ning in chemical. We're winning in fluids. Because we have a really, ally, you know, obviously a strong product. But when you start, as I said in my comments, when you start thinking democratizing data, using that data in more strategic ways, using it to manage your overall plans for the company, we got a great story for the future as well.
Speaker #5: So we love our position. We've got a better team. Building on what was already a very strong team. And we're in, you know, we're in virtually all of the opportunities that are available in the market.
Speaker #5: And we're winning.
Speaker #6: Great. And then just one for Blaine. Blaine, can you remind us in terms of how much runway may be remaining on normalized software margins as you further progress with the loud transition?
Speaker #5: Yeah. You know, the software margins, the last time that I think we got the report, 80% subscription margin of software margins, I ink was back in Q4 of 2022.
Speaker #5: And we were helped out a little bit by term license that quarter. So obviously, we're very proud. We're getting to some of the levels we're at a little earlier than we expected.
Speaker #5: There definitely is some runway. And I'm excited to say that our cloud services team is hitting out of the park. Not only with making sure that we have the right agreements with our two key cloud providers being GCP, so Google, and Microsoft Azure, but also like performing at a high level with a team that hasn't been growing that at the same rate that our customer base has been growing.
Speaker #5: I do think that that 80% I guess target that we've had for a while is something that we're going to play around with for the near term.
Speaker #5: But I think we have at least a couple of percentage points, if not a little bit more, on the subscription side. That we'll see as we go forward.
Speaker #5: Now, the one other caveat to all of this is that or asterisk is that I think there's one of reasons why we're doing so well in the subscription margin is because of the fact we're doing much better on expansion part of our business.
Speaker #5: We're obviously getting much higher margins on that expansion business. So every single time that myself or Bob get to talk about the fact we're moving that balance from new winning new logos to winning even more expansion business, I ow that it's helping my bottom line.
Speaker #5: And that's a testament to some strong work that the o-to-market team has been doing lately.
Speaker #6: Great. I'll pass along. Thank you.
Speaker #7: Thank you for your questions. Our xt question is from the line of Paul Treiber with RBC Capital Markets. Your line is live.
Speaker #9: Yeah. Thanks for the good ning. It's been a couple of months since you've unced the new AI features as part of Maestro. You know, what's been the feedback from customers and then the pipeline build related to AI?
Speaker #9: And then how are customers thinking about ROI on those AI features and and also related to that, the potential pricing for AI?
Speaker #5: Yeah. I think the really the way we're thinking about it, Paul, is that if you look at Maestro, in some crazy way, you can think about it as a super agent.
Speaker #5: The things that we do in creating scenarios are all based on a real investment in machine learning to really be le to do the computation and calculations that allow us to create these scenarios.
Speaker #5: While we're doing now with products like Enterprise Scheduling, Supply.ai, Demand.ai is extending that from that Maestro platform. And that's part of the reason that we're seeing, you know, better win rates.
Speaker #5: Because we do the core better than everyone else. We've extended the functionality back into, you're supplier networks, we're starting to create tools that allow you to get a ter handle on demand and forecasting.
Speaker #5: And with some of the most important and biggest companies in the world, they can actually calculate their improvements in on-time delivery. And so that's a huge advantage.
Speaker #5: What the agentic AI and Gen AI provide is a roadmap now to democratize that data through your organization and make company better overall. I think that's huge.
Speaker #5: And what we're doing right now, the way we've decided to approach the market instead , you know, a mass release of our new agentic AI products, is to pick very carefully some of the most important companies in the world with to partner with them on solving problems that are most critical to that company.
Speaker #5: And that's a real focus in Q3. And as we go into Q4, to stand those up as an extension to the Maestro capability. And why I like all of this, if you decode it, is that, ou know, our core business is in really good shape and growing with a strong win rates.
Speaker #5: And new functionality. And what we do in AI, particularly with Gen AI and agentic AI, is incremental to that opportunity.
Speaker #6: Yeah. That's helpful to stand. And secondly, just on the CEO search, I mean, viously no news there. Can you provide an update and expectations just going forward here?
Speaker #5: I think that the board, we've been really, really happy with the performance of the company. And you know, we once we got into this and we hired Mark Morgan, you ow, the game changed in terms of where we really believe that we have to take the company and set a higher bar.
Speaker #5: You know, we've seen, you know, super strong candidates that you would consider traditionally good software leaders, people that can run a software company. And as we've nuanced our expectations, we're itely looking for somebody that is going to be able to take advantage of that second part of the story that I described around AI and creating new business models.
Speaker #5: And even about thinking about the different ways that we're ing to set up partnerships. So the bar got higher. We're seeing great candidates. We're not holding it up.
Speaker #5: We'll take action at a time that makes sense. But we don't want to set a fixed timeline.
Speaker #6: Great. Thanks for those comments.
Speaker #7: Thank you your questions. Our next question is from the line of Lachlan Brown with Rothschild. Your line is live.
Speaker #10: Hi, Bob. Blaine, Rick. Thanks for the estions. Performance obligations for 2026 had a pretty good delivery. Sorry. In the quarter. They represent a greater share of the IPO than this time last year.
Speaker #10: Could you talk to the nature and the timing of the deals that you secured in the quarter? And I guess if you ok back over the last 12 to 18 months, we did see a more of a skew towards those out-year bookings.
Speaker #10: As deals got pushed out, so are we now seeing a pivot away from that to customers moving quickly, more quicker on Kinaxis rollouts?
Speaker #5: Do ou want to go?
Speaker #11: Yeah, sure. Yeah. So great
Speaker #5: observation. I think we are seeing less of those I guess trailing deals or phased deals, as we call them. We I think part of the change in the go-to-market structure Mark and his team have been emphasizing trying to limit those type of deals.
Speaker #5: I think we're also in a different type of environment in terms of we were trying to a lot more deals over the line over the last two years.
Speaker #5: Where it was necessary to put phased deals in place. 're not seeing that same type of pressure at this stage, which is nice for us and nice the team not to have to put some gymnastics into the contracts.
Speaker #5: Overall, we're part the RPO issue that we have. And as a result of having the contracts that are anywhere between three and five years, we'll be kind limited in certain years when we have a low renewal cycle.
Speaker #5: This happens to be a medium renewal cycle that we have in place. So we've had a number of renewals. I was we had obviously a board meeting yesterday and the person who's in charge of our renewals would just say in the amount of activity they're seeing is it's super high numbers that he's seeing right now in terms of the renewal activity that the team is having to deal .
Speaker #5: Because these contracts are going through, and that will kind of fluctuate how you think about RPO. So this is why sometimes we like to make sure that people think of the three-year CAGR, which is getting closer and closer to adjusted EBITDA.
Speaker #5: But obviously still above. We're proud that it's at 20% for SaaS. The 19% for the total RPO is right in line with what our expectations were.
Speaker #5: And we have a loyal customer base. We have a lot of renewals that come through. We don't have that much churn or down sales.
Speaker #5: So we're in a great spot. But we always have to be cognizant of the act that renewal cycles can play a little bit of havoc with how the growth is in the short term.
Speaker #6: That's very clear. Thanks. And then maybe another RPO question. If we take the performance obligations for the remainder of 2025 with the SaaS revenue guide, I think it only applies you ed about 6 million bookings to achieve the midpoint.
Speaker #6: And 9 million at the top end. Which based on your previous performance doesn't seem too difficult to achieve. So I just want to arify that is this just conservatism within the guide or is there anything else that we should consider?
Speaker #5: You're like straight-eyed. You know what? We knew we had to increase our guidance to where we're right now. The company is executing extremely well.
Speaker #5: It's just like Bob said. I think 13 to 15% we're extremely confident that we're going to hit that. We are also hearing some other peers and/competitors having some issues out there.
Speaker #5: There's been some announcements that weren't great and just like we said last quarter, we're being prudent with our SaaS guidance. I ink there's we are looking at Q3 and Q4 and there's some nice things in front of us right now.
Speaker #5: But we don't want to get too far in front of our skis. So I will say I'm very confident with the 13 to 15 that we just raised.
the technologies that are available to enrich the experience for our customers things like, you know, um confidence in in the data, new data sets coming into Maestro, um, uh, create a big differentiation,
Uh, from our competitors like and that's part of the win rate, particularly when you start seeing, you know, as I described some of these new Industries and geographies when they understand that it maestro.
Um, it creates, um, an opportunity for us to continue to grow the business against some of the questions that playing just as.
So from that, um, that level of relevance of orchestration and planning inside, the company is only going to increase, um, and gen AI. Um, and uh, gentic AI allowed to move to a a much richer experience in terms of exploring. What if analysis throughout the company, um, and and what will come with that, which is really, I think a fairly, um, cool, is that in the agentic? AI experience. It's not simply canned products that produce, you know, uh, useful information on a consistent basis from customer to customer customer. It's the problems or opportunities that you're trying to develop through configured agents, that really give you Insight um, into the performance of the business when you marry that up with concurrent data inside Maestro. Um, This truly
And we can get, you know, paid for that through win rate, we can pay through uh, for that through expansion in our customer base. We we get paid for that in terms of a new Revenue stream and finally, you know, we we believe that we can create an open platform
That allows us to uh partner and integrate with other uh players.
Uh uh, you know, uh, software players in the marketplace to really create some opportunities. So it it's just look at it. It just really changes the Paradigm of the importance of our products.
And the expansion opportunities that come with it.
Thank you for that feedback.
Thank you.
Thank you.
Our next question is from the line of Stephanie Price with CI BC.
Your line is live.
Thank you.
Uh, just wanted to Circle back on the sales team and and just, in terms of the go to market changes that Mark Morgan has implemented since he's joined. Can you talk a little bit about how far along you are on those changes and, and how you think about these new sales reps versus the historical reps? You've you've hired, um, and maybe expectations and sales plan for the remainder of the Year, thank you.
Yeah, um we we have had a really good team here. Um, the
The we have some of the best sales people and I've had, you know, some really good maturity and experience.
Uh, throughout organization.
The.
The big thing that we're trying to do now.
Is to exploit our strengths in things like high tech, you know, the industry strengths that we have. So, a lot of the, you know, uh, different, uh, hiring that we're doing now is to double down on the expansion within within geography and Industry in a way that even gives us a greater strength on top of our historical product experience. Um, and then, and then,
I think that the price where we really, really done, well is and and second level management. Um, the regional guides are of people are strong Fabian, fill up and Jeff super leaders in the industry, Jeff, being new to the company probably of the 3. Um,
We've added a great talent in markets like Japan. Um, uh,
ah, it's Germany and
the like, uh, Europe, we brought in a new
They're out of sap actually that is focused on.
Um, uh, the customer base. Um, so so the the the big change
um has been in terms of bringing some people additive like incremental people in to uh, really prosecute against um,
The best practices that you would see in in software and then, um, it's all hands on deck. When you're going after some of the largest companies in the world, we've got our Executives engaged, we've got product engaged, we've got plain engaged in in these deals and and the level of scrutiny on these deals, which is a, you know, Hallmark of great software companies is is uh um really really, really tight.
Uh, and really understanding the competition and their gaps.
Is a big part of that. And and I, I would say that, um, you know, the, the the work that we do in terms of understanding how to build a Company, the company partnership and an executive level is is really evolved. Uh, and and and that's, you know, I mean like a
You know, as the interim CEO, I think I got a lot of experience in that respect, you know?
AP and with Mark Morgan and the team that we put around them.
Um,
we're a tough company to be right now.
Thank you very much.
Thank you for your question.
Uh, ladies and gentlemen. Once again, if you would like to ask a question, it is star followed by the number 1 on your telephone keypad. Our next question is from the line of Mark Chappelle with loop capital markets. Your line is live.
How you are working with a data bricks in that area?
Want to bear in.
building our data fabric Model, so that the place where data bricks is going to be super important is in the, um,
uh, is in the category of
Uh, building, uh, our data platform to be able to deliver data throughout an organization. But on top of that, um, uh, really looking at, uh, how we uh, have a platform that we can drive partners with um, as we go forward. Um, and and then as a um,
Company that is in the market.
Um,
Uh in the data Marketplace. Um it'll also allows us to think about how we change our pricing model and economics,
Data.
um, and why I like it, uh, right now is look, they're, they're pushing New Economic models in the market, and they're sharing and we are building
Um, a plan with Databricks that allows us to really go after this together. They, um, and then finally, um,
if you look at the,
AI. Um, Evolution. I really, but like we looked at the market to see what the different scenarios we could consider. We looked at data bricks as the company that could be the most Innovative, not only for today, but for what we're trying to do with our overall platform model, because the the evolution is defend mystro.
Modernize Maestro, extend maestro.
Build in, um, uh, a platform for our customers and, and our prospects that see how they can use that data inside their company, with the gentic AI and gen Ai, and then be a market, a wide Marketplace partner. And when you're in a wide, what Marketplace partner, that's where data bricks is going to make a difference for us as we think about the kind of Partnerships that we can create as we go forward and we're not just doing it with data bricks, we're talking to a few other companies.
Their strategy around, uh, Ai and how we could deploy, and, and create a better experience for our customer. But but the, the neat thing about data bricks, they're in there, they're adding resources, they're giving us ideas. They're, they're, we get to learn how they've created their economic models. These are ones that we can bring into our company and so, you know, we highlighted them a bit today. Um, and we're really, really happy about how they
Performed.
Thank you.
Thank you for your question and ladies and gentlemen, that will close our Q&A session for today. I'd like to turn it back over to Mr. Wadsworth for any closing comments.
Great. Thank you, everybody for participating. On today's call, we appreciate your questions as always and your ongoing interest in and supportive can access. We look forward to speaking with you. Again, when we report third quarter results, thanks and goodbye.
Please wait the conference will begin shortly.