Operator: And our next question coming from the line of Pat Walravens with Citizens JMP.
Pat Walravens : Therese, can we talk more about the solution pillars? So do you mind just going through, what they are again and how the role of the person who’s in charge is going to work? In particular, are they on the hook for hitting the number and how does that work?
Therese Tucker: So the solution pillars, there are four today. And obviously, the first one is our financial close, which is typically been our bread and butter over the years. The second is intercompany financial management. The third is invoice-to-cash and the fourth is financial reporting analytics and consolidation, okay, one of our newer products. Now, the four solution pillar leaders are basically veterans in each of their respective areas and they have deep, deep market and product expertise. And yes, they are indeed, Pat, responsible for a number for their particular product line. They are also motivated in their comp packages to collaborate with one another. And so we’ve seen where that’s a very powerful combination where the combination of certain products are much more effective in terms of win rates in certain segments of the market.
So they have the role of basically bringing the voice of the customer into our product and tech organization because they are spending a lot of time with the go-to-market team to really understand directionally where the market is going, what our customers and our prospects are looking for. So they get to be on the both at the tip of the spear as well as bringing that knowledge back to the product and tech group where they have great influence on the roadmaps. And yes, to put teeth behind it, they all have their own numbers as well. Does that help?
Operator: Next question in the queue coming from the line of Koji Ikeda with Bank of America.
Koji Ikeda: I wanted to kind of revisit the medium-term growth target, the 20% to 25% revenue growth target. Could you maybe help us understand, just thinking about with net revenue retention, what looks like to be stabilizing here to 106%? What are the components? How to think about the components there between new and expand and upsell and cross-sell to get to that 20% to 25% growth target?
Mark Partin: Thanks, Koji. I think I’ll start with the original algorithm for the mid-term targets and that begins with account expansion. We laid out $1 billion plus resident market opportunity in our existing customers, both large enterprise and mid-market. Based on the tools that we’ve either acquired, built, and are putting together, we’ve got a real opportunity through digital transformation to drive greater share of wallet inside the Office of the CFO. We’re reaching higher and wider with our products and with our solutions and messaging. So the big opportunity for us is a focus on the account ownership and the customer success, we laid it out earlier in our comments to really expand inside and use those trusted relationships that we have with over 4,000 customers.
The second and that in addition will drive our retention rate higher, our renewal rate higher and we believe that’s the big focus of our algorithm. Now, the components of that include the strategic product upsell of course and then some of the things that we’ve talked to you about over the last year. The second component is the new logo acquisition. We still firmly believe that this is, in most of the markets where we operate today, still an untapped market potential. Whether it’s in Europe or in Japan or even here in North America, there are, we believe that the financial close and I2C, invoice-to-cash and intercompany are still emerging opportunities with potential. And so the return to 20% to 25% is built on account expansion and continued market share growth and competing in the market to get new logos in the new markets and territories.
That’s where the strategy and the operating model are built to attack that algorithm.
Operator: Thank you. And our next question coming from the line of Pinjalim Bora with JPMorgan. Your line is open.
Pinjalim Bora: Great. Thank you for taking the question. Mark, I just wanted to ask you about the retention rates. Maybe if you can unpack, it seems like the gross retention is stabilizing a bit. Is it possible to unpack the gross retention between mid-market and enterprise? And trying to understand what needs to be done to move that retention back to where it was? What are you — how are you thinking that trajectory to be? Is that going to be over the next 12 months or is it going to take time?
Mark Partin: Thanks for the question, Pinjalim. I think that the beginning for us really is the renewal rate and really focusing on keeping and optimizing the customers we have. It’s down at 94%. You are right. It has settled at that rate, that’s high 80s in the mid-market and that’s mid-90s in the enterprise, and we’re accustomed to seeing those rates a lot higher. We believe that not only is this a period issue, but that so much of our attention is now focused on driving that number higher. We spend a lot of time, money and attention to get customers. We’ve got the best solution in the market. We believe it’s a lot about execution through some of these macro headwinds and some of the noise that’s in the market today. That’s the beginning of driving the retention rate.
The second component of it is digital transformation. We inspire that as part of our strategic objective. Digital transformation means that, as we have landed with our financial closed solutions and then build out up from there, with our strategic product solutions. We have been and are comfortable at 110 to 111. We are down to 105, 106, much this is the macro headwinds and some of these renewal rate issues that we’ve highlighted. And we think that through a more targeted account upsell program for our strategic portfolio through these dedicated pillar solution leaders that we can get that retention rate higher, particularly in the enterprise accounts. That’s where our sort of strategy in 2024 plan is for 2024 and beyond.
Operator: And our next question coming from the line of Adam Hotchkiss with Goldman Sachs. Your line is open.
Adam Hotchkiss: Great. Thanks for taking the question. I just wanted to touch quickly on FRA. I think you have called out that, that was a key part of some of the wins this quarter. Just curious if you see that opening up your market opportunities in the mid-market a bit more than you might have expected and how you marry some of the success there with some of your comments around being more targeted?
Therese Tucker: We have seen some very good success in the mid-market. It is a differentiator for us. Most mid-market sized companies that are out there now end up doing their financial reporting inside of Excel. And so offering them a tool that gives them sort of the control and the end-to-end visibility has been a very powerful motivator and differentiator in that market. I’m sorry, what was the second part of your question? I got all excited because you asked about FRA.
Adam Hotchkiss: I was just curious how you marry some of that commentary around the success in the mid-market, with being more targeted? It just seems like if that’s being successful, it seems like that might be opening up your market opportunity. They’re a bit more than you might have expected. So just curious how you pull those two comments together.
Owen Ryan: I think, Adam, the important piece of this again is it’s all about customer, client selection. And so, I think the thing that we’re trying to do is make sure we have these very thoughtful conversations with the prospective customer through the sales cycle, about what’s their vision, what are they trying to accomplish as an organization, where are they going, are they all in on sort of thinking about the blueprints and success plans that we can help them to create to drive what they’re looking to do? And what you find is the mid-market is a very wide marketplace, right? And so this is all about finding those customers that best fit what we believe is an ideal customer profile for what we’re trying to drive versus just chasing every organization that’s out there.
And so, again, I can’t applaud my BDR team enough and what the sales and AMO teams are doing right now for really being very thoughtful, very strategic in the conversations that they’re having because ultimately what you want to do, what we want to do is drive success for our customers. And again, part of that upfront is knowing that we’re right for them and they’re right for us as we move forward. And so I don’t think that those statements are in conflict with one another. In fact, I think they’re perfectly aligned, again, with helping us be more effective, efficient, and successful in helping our customers.
Operator: And our next question coming from the line of Brent Bracelin with Piper Sandler.
Brent Bracelin: One of the big questions that we have across the broader software group, where we’ve seen growth flow for the last couple of years is trying to assess when growth rates start to trough. And if I think about your business, RPO here has slowed for two years. It’s at 9% I think in Q4 here. Mark, what’s your best guess when we start to trough? Is there any sort of silver lining in the pipeline that might suggest a bigger pipeline? Again, close rates have been the big issue, but walk us through your best guess on when RPO growth could start to bottom here after a couple of years of slowdown across the broader group?
Mark Partin: It’s probably getting me to opine on a trough for the entire SaaS group. I might not answer it directly. Don’t be surprised. I would say though, all kidding aside, that some of the green shoots, we’ve talked about our execution, which certainly makes things feel a little better in a macro headwind, but we saw some green shoots in Q4 at the higher end of the funnel, larger deals that we were able to pull across, particularly in the account growth. That was a lot of extra heavy lifting and effort from the team. So seeing those things start to emerge are certainly positive signs, but we can’t call that that’s a new and sustainable motion that we see, especially so early in the year for us where a lot of our larger deal and digital transformations that are tied to either SAP, SolEx or to longer sales cycles.
