OneStream, Inc.

Good day and thank you for standing by. Welcome to OneStream's third quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Annie Leshen, VP Investor Relations and Strategic Finance. Please go ahead.

Thank you, Operator. Good afternoon, everyone.

Welcome to OneTune's third quarter 2024 earnings conference call. Joining me on the call today are our co-founder and CEO, Tom Shea, and our CFO, Bill Kofeld. Press release announcing our third quarter results issued earlier today is posted on our investor relations website at investor.onestream.com along with an earnings highlight presentation. Now let me remind everyone that some of the statements on today's call are forward-looking, including statements related to guidance for the fourth quarter and year ending December 31, 2024. Forward-looking statements are subject to known and unknown risks, uncertainty, assumptions, and other factors. Some of these risks are described in greater detail in the documents we file with the SEC from time to time, including our quarterly report on Form 10-Q for the quarter ending September 30, 2024, and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During our call today, We will also reference certain non-GAAP financial measures. There are limitations to our non-GAAP measures, and they may not be comparable to similarly tailored measures with any other company. The non-GAAP measures referenced on today's call should not be considered in isolation from or a substitute for the most directly comparable GAAP measures. Our management believes that our non-GAAP measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses that may not be indicative of our ongoing core operating performance. Reconciliations of our non-GAAP measures to the most directly comparable GAAP measures can be found in this afternoon's press release and the earnings highlights presentation posted on our investor relations website. Now I'll turn it over to Tom. Tom?

Thank you, Annie, and thank you all for joining us this afternoon to review our third quarter financial results. We're pleased to report another solid performance. The team once again showed strong execution against the vision we outlined for you during our IPO. With one consolidated platform, OneStream is eliminating complexity for the Office of the CFO by combining a unified view of financial and operational data with analytical and performance management capabilities to take finance further. We grew subscription revenue 39% year over year in the third quarter and were once again free cash flow positive. We also hosted our second successful user conference of the year, Splash EMEA in Copenhagen, where we expanded on the slate of new innovations we've introduced thus far this year. Among other achievements, all of this progress reflects our continued investment to drive durable growth. While the macroeconomic and geopolitical state of affairs continues to grab headlines, at OneStream we saw a consistent market environment relative to last quarter. We believe the need to invest in modernizing the finance function to improve visibility and allow the CFO to become a strategic driver of the business has become a core requirement to effectively compete regardless of industry or economic environment. This trend was echoed in the findings of our finance 2035 initiative launched this quarter, which I will touch upon shortly. The three factors that drove us to create a cloud-native CPM solution are still the core trends driving the market today. To quickly review, first, finance has begun to digitally transform, but because it started the process so far behind many other operational areas, it is still very early in this transformation. More and more CFOs recognize the need for a cloud-based platform to provide a single view into financial and operational data across the enterprise. Finance departments have begun to accept and even demand an operating system that unifies a multitude of financial functions, providing an exceptional level of insight and analysis. Second, CFOs are being asked to do more, transitioning from just reporting on past performance to steering the business toward the future. With all of the uncertainty businesses face today, from geopolitical to macroeconomic, financial and regulatory, OneStream's platform enables CFOs to manage these factors and start driving real strategic value for the business. Finally, AI and ML are increasing the value of knowledge workers and business performance. The OneStream platform unifies financial and operational data and processes on one common data model, using embedded AI to make more informed decisions and plan better and faster. Our success in addressing these three trends has always centered on our extensible platform and our ability to consistently expand its functionality both through rapid and innovative product development and successfully bringing these new technologies to market. At our SlashMEA user conference in September, we introduced three new innovations, bringing our total this year to 15, capping what I believe has been one of the most innovative periods in the company's history. These include, one, we introduced Navigation Center, which builds upon our advanced narrative reporting capabilities to streamline access to reports, bookmarks, and critical audit and narrative documents in one place. We expanded our applied finance AI offerings to include AI-powered anomaly detection, a prepackaged AI method that helps finance leaders detect anomalies for data cleansing, consolidation, and reporting. This is part of OneStream's Sensible AI portfolio, which includes Sensible Machine Learning, Sensible Gen AI, and Sensible AI Library, which includes a growing collection of prepackaged AI routines, including ones for forecasting and scenario planning. Three, as further evidence of continued innovation on the OneStream platform, we showcase expanded solutions exchange offerings to support tax Pillar 2 regulatory reporting. OneStream announced the availability of Pillar 2 tax criteria solutions from both BDO and NUMMI and AMCO, all built atop the OneStream platform and all leveraging the unified data inherent within it. With these new offerings, we now have 100 solutions on Solution Exchange, demonstrating our ongoing support for the evolving needs of global organizations and our commitment to continually adding value and utility to our customers' OneStream investments. In the coming years, you can expect us to focus primarily on driving these many innovations into our install base, even as we continue investing to further our technology leadership. Now let me turn to our customers. One of the great and unique things about our Splash User Conference is that we let our customers do the talking. From asking questions to sharing experiences with peers on how they are leveraging OneStream to drive productivity and analytics to working with our team to inspire the next innovation. For those of you who weren't able to join us in Copenhagen, let me share a couple of the quick examples of what we heard. Let me begin with the 10-year partnership that we have developed with a large shipping logistics company. Their presentation during the Splash keynote demonstrated their enthusiasm for OneStream and how they have continued to expand their use of our platform. Building upon their use of OneStream's unified financial consolidation and reporting and forecasting applications, they recently added our Pillar 2 tax solution, along with our ESG and intercompany transaction matching solutions. Today, they are using OneStream to support over 1,000 legal entities globally, and there is plenty of room to grow. Continuing to expand use and value with long-standing customers is at the core of our durable growth strategy. Another customer on stage was one of the largest retailers in Europe with over 1,300 locations and 8,500 employees. Their success turns on the accuracy of their forecasting, ensuring the right product, in the right quantity, in the right location. Today, they are using OneStream's financial planning and consolidation, and following a successful proof of value, they have begun deploying SensibleML to advance their forecasting journey, and we're excited to see what they do next. These are just a few examples of customers that joined us in Copenhagen to share their excitement, satisfaction, and successful journeys thus far with OneStream. We had 52 new customers join OneStream this quarter, bringing our total customer count to over 1500. Let me highlight a couple of wins that demonstrate just how important our platform is becoming to companies and governments worldwide. I'll start with a few wins among government agencies, which are always important in Q3. This quarter, we added a large government agency in Washington, D.C., which was looking to replace multiple legacy siloed applications. The organization picked OneStream as a single source of truth for reporting, planning, and monitoring. We will be replacing two legacy point solutions used for their budget formulation and execution. These manual, error-prone, older solutions implemented more than a decade ago did not provide the enterprise-wide level of detail needed to effectively manage this agency. OneStream will consolidate their budget and financial processes and significantly upgrade their reporting as well. Users will now utilize OneStream for all their budget requests, staff planning, execution plans, and execution results. The Defense Logistics Agency was another government agency that selected OneStream this quarter in a multi-million dollar deal. With over 25,000 employees, the Defense Logistics Agency is the largest combat support agency, providing logistics to the DOD, civilian agencies, and foreign countries. This is a very important agency that, among other things, has provided meals, fuel, and supplies to FEMA after hurricanes. For more than a decade, the DLA has been using an expensive combination of contractor support with a SAS license for financial statement preparation and budget formulation. Utilizing OneStream's core CPM, the DLA will now be able to automate everything from the DOD planning programming to providing a complete and accurate budget, creating and performing automated reconciliations, preparing federal financial statements and producing consolidated annual financial report, all while simultaneously lowering its costs. We also enjoyed a solid quarter in EMEA. Continuing to build on our position in France as a natural successor to Legacy Finance Solutions, we added JC Decaux, the world leader in outdoor advertising. Facing the obsolescence of its current legacy consolidation reporting tool, the company took the opportunity to rethink the scope of its current data model and processes in light of the changing market standards, regulatory, and financial statement requirements. The implementation of OneStream's performance management tool will not only improve consolidation reporting and disclosure, but also provide them with a flexible solution to adapt and support future needs such as ESG and changing regulatory requirements. Similar to the Group BPCE deal discussed last quarter, the JCDecaux win is a foundational win, replacing a significant legacy system and solidifying our credibility in the region. One last customer I want to highlight is a Fortune 500 equipment manufacturer, which is utilizing our sensible ML in a meaningful way. Having implemented SML to forecast both revenue and inventory, they improved their accuracy by more than 10%. Not unlike other companies, their forecasting process required inputs from roughly 80 different finance stakeholders over a 10-day period. With SML, the company now has a process that generates more accurate forecasts in less than half an hour, all while providing explanations of leading indicators and their impact on the forecast. This kind of transparency is building confidence and driving adoption from across their teams. Encouraged by these results, the company is now deploying SML across multiple business segments to enhance decision-making speed and drive business performance. The bigger message here from my vantage point is the growing recognition by the market that OneStream's applied finance AI solution creates more value than many of what I call custom science experiments currently in the market. This also reinforces our view that the productization of our applied approach is the best and most scalable way to derive value from AI. Part of our strategy has and will continue to be educating the market as we build our product acceptance one customer at a time, as we've always done. Finally, we continue to benefit from our investment and emphasis on building out our marketing function. Earlier this month, we announced the launch of our Finance 2035 initiative. This is a partnership with academia, economists, and finance and business leaders to foster a fact-based dialogue on the rapidly evolving role and strategic importance of the Office of the CFO. Our initial research examines what the next 10 years hold for businesses at large and how external forces are both elevating and impacting the critical role played by CFOs in shaping that future. Based on a survey of 2,000 CFOs, CEOs, line of business executives, and investors, the study found that the next decade will likely be defined by more regulatory convergence and technology-powered gains, where CFOs will be expected to take on a broader role in driving business strategy and growth. The research also reaffirmed what you all know too well. that the investment community puts a premium on the strategic confidence of a company CFO in making their investment decisions. The study also validated our view on what it will likely take for the office of the CFO to become a strategic driver of business strategy and growth. CFOs and CEOs surveyed prioritize modernizing their legacy finance stack, harnessing new technologies, especially AI, and making these investments with a sense of urgency to remain competitive. We are using this research as a foundation for a global series of roundtable discussions with CFOs, CAOs, and other finance leaders. We look forward to Finance 2035 fostering dialogue amongst senior executives, raising OneStream's visibility in the business community as we take additional steps to put our platform at the forefront of the conversation. Before I turn the call over to Bill, let me just thank our employees for their innovative ideas, hard work, and dedication to customer success. Our partners for sharing that commitment and helping our customers achieve incredible results and our investors for their confidence in OneStream.

Now let me turn the call over to Bill. Thanks, Tom. Good afternoon, everyone, and thank you for joining today's call. As Tom mentioned, we had a solid Q3 with both strong subscription growth and positive free cash flow. We turned free cash flow positive in 2023, and over the past four quarters, we have generated over $60 million in free cash flow. We're pleased with our ability to drive both revenue growth and free cash flow in this environment. Overall total revenue grew 21% year over year to $129 million in Q3. Our subscription business model continued to show impressive growth at scale as subscription revenue increased 39% year over year to $111 million and ARR increased more than 30% year over year. License revenue came in at $12 million in Q3 compared with $19 million last year. We also continued to see a number of conversions from term licenses to SAS this quarter, including three significant ones with ARR greater than $500,000. We expect that trend to continue in Q4 and 2025 as we progress toward 100% SAS business model. Professional services and other revenue came in at $6.7 million compared with $8.1 million last year. Professional services revenue was lower than expected due to the continued success of our partners as we strategically transition more implementations of OneStream software to them. As such, you should expect a similar professional services revenue run rate going forward. International revenue continues to represent roughly 30% of total revenue, reflecting our continued focus on growing our global business. More than 60% of our business came from new customers in Q3. We ended the quarter with 1,534 total customers, up 18% year-over-year. Billings increased 25% year-over-year to a record $149 million. As a reminder, due to a variety of factors, including timing, we encourage you to look at billings on a trailing 12-month basis where billings grew 27%. Our 12-month CRPO was up 41% year-over-year. Total remaining performance obligations grew 35% year-over-year to $997 million. Our Q3 non-GAAP gross margin was 71% compared to 72% due to the strong license revenue last year, offset by efficiency improvements. We continue to work to optimize our infrastructure and expect margin improvement over the long term. Third quarter non-GAAP operating expenses increased 25% year-over-year due in part to IPO-related expenses. R&D spending increased 48% year-over-year as we continued to strategically invest in new products to drive the durable growth of our business. Total equity-based compensation expense for the third quarter was $260 million, of which $204 million was a one-time charge that we recognized in connection with our IPO. Discharge was lower than expected due to the effective timing and modifications we made to outstanding options as part of the IPO. Non-GAAP operating income was $5 million, or 4% operating margin in the quarter. Non-GAAP net income was $11.3 million. For the third quarter, we generated $1 million of free cash flow, bringing our trailing 12-month free cash flow to over $60 million. We ended the quarter with $495 million in cash and cash equivalents. Now turning to guidance. Our fourth quarter is an important one for us as it's traditionally our largest seasonal bookings quarter. Our guidance for Q4 2024 is as follows. Total revenue for Q4 is expected to be $127 million to $129 million. Non-GAAP operating margin is expected to be break even to positive 2%. Non-GAAP net income per share is expected to be between one cent to three cents. Stock-based compensation will be approximately 50 to 55 million dollars. We are also raising our full year guidance for both revenue and profitability. Total revenue for 2024 is expected to be $484 million to $486 million. Non-GAAP operating margin is expected to be negative 2% to negative 1%. Non-GAAP net income per share is expected to be between 6 cents to 8 cents. Stock-based compensation will be approximately 315 to $320 million. And finally, while we aren't providing 2025 guidance this quarter, the combination of our strategy to transition the majority of implementations to partners, together with our accelerated SAS conversion rates, leaves us comfortable with current Wall Street consensus for full year 2025. Now let's turn it back to Tom.

Thanks, Bill. The message you will hear from me every quarter is the importance of the long-term view we are taking in building the OneStream business and brand. Be it advancing our product roadmap to expand our platform or increasing our marketing efforts to grow our brand and pipeline, the investments we are making today are laying the foundation for our durable growth in the years to come.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from Chris Quintero with Morgan Stanley. Your line is open.

Hey, Tom. Hey, Bill. Congrats on the solid quarter here.

I wanted to ask about the report. replacement opportunity as we go through this upcoming ERP super cycle. We've done a lot of work on this topic and it seems like there's going to be an acceleration in migrations over the coming years. So curious to hear your thoughts as it relates to what kind of ERP world you think it will play out. Will it be companies still having multiple ERPs or will they standardize on one? And in a potentially single ERP world, do you think one-chain value proposition can still resonate in that type of scenario?

Thanks, Chris. So we think about this a lot and we are really, really comfortable in the value proposition that we're offering to customers, no matter if they have one ERP or two or what that kind of super cycle looks like, because we're the flexible layer that they use to manage their business. So if you think about what's going on in the ERP world, you're really talking about the recording of what's happening in a business that is oriented around the physical view of the business. And so for us, we're that critical layer that allows you to model how you manage and run your business. So that applies if you're a single ERP, you need that flexibility, or if you're multiple ERPs, you need not only the standardization, but the flexibility. So we're really comfortable that we help customers amplify the value they get from their ERP investment.

Thank you. Our next question comes from Mark Murphy with JP Morgan. Your line is open.

Thank you, and I'll add my congrats. So, Tom, not everyone is performing quite so adeptly in the Office of Finance at the moment, and we do hear from some of your peers that they are finding some of the SAP and Oracle businesses is tough to dislodge as they get into these cloud migration ways. It feels like OneStream is having a very different experience. I'm wondering if you're sensing a tipping point where it's just common knowledge that they should be talking to OneStream or are they viewing you as a little more future proof because of the platform capabilities or the architecture you have with SensibleML and maybe that's making a difference. Why do you think that you're kind of having better success?

Thanks, Mark. That's a great question. Really thinking about this as we are offering an opportunity for companies to be as transformative as possible. So when you think about having a platform like OneStream, If you're a company that's got a lot of different financial solutions in play, which happens to be the case with a lot of the larger legacy-based solutions that maybe they've surrounded with additional point solutions over the years, the message that OneStream is able to bring to that customer is that we can help you become very efficient at delivering your core financial requirements so that you can participate in this AI revolution. You can participate in having finance become more and more optimal. And I think that's really resonating with customers and with the market in general.

Thank you. And our next question comes from Koji Ikeda with Bank of America. Your line is open.

Hey, Tom. Hey, Bill. Thanks for taking the question. I wanted to ask one here on the competitive environment and maybe how it feels like today versus a year ago, specifically against Hyperion and maybe digging a little bit deeper specifically on Hyperion's cloud offerings. I totally get the competitive advantage versus on-prem, but what about cloud? And I ask this question because we've been hearing from more than one partner that Hyperion Cloud has gotten better over the past year. So it just makes me begin to wonder what that Hyperion replacement cycle could look like over the next 12 to 24 months. So is there anything you could share about kind of this one stream versus Hyperion Cloud EPM differentiation that's giving you the confidence your strong pace of takeaways will continue?

Sure. So as we look at this, we're seeing a lot of consistency in those win rates. And certainly competition is always there. And we're one of those companies that feel like that makes us better. And we keep trying to react and make sure we keep our competitive advantage. But we really are leaning on the fact that we're a single platform. And that's really hard. That's something that happens from the very first line of code. And it's something that is not easy to replicate. And you see that even with the sort of the siloed cloud approaches. So even as other companies are starting to adapt their methodology or improve particular functionality and product, we still have this high ground that's fortified by our platform-based approach. And we're continuously endeavoring to make sure that we're innovating and being that functional lead as well. So all in all, we take... Again, not at all broad brushing. We're always very, very focused on what our competitors are doing and making sure that we're innovating at a pace that keeps us ahead.

Thank you. Our next question comes from Steve Enders with Citi.

Your line is open. Okay, great. Thanks for taking the question, Peter.

I want to ask on the principal ML and the AI opportunity that you're seeing, wondering if you know, how widespread or, you know, how deep the conversations are going across the current customer base and maybe what some of the new uptake and pipeline is looking like today.

Sure. I'm happy to share that. So we were really thrilled at the sort of the momentum build that we're getting, not only from the current successes that we're having with SML, but also our ability to showcase those successes and have customers share those at our events. user conferences. So we're starting to see more and more interest. And as I alluded to in my, in my statements, there's a very large education process that needs to take place. And we see ourselves at the forefront of educating our customers and just how important these AI technologies are, but not, but more importantly, how, how much of an advantage they can offer. So again, that sort of a build when you think about making a market, if you think about helping customers try to achieve something different, such as a touchless forecast, you really have to invest in that education process and help them move along that spectrum. And so we're really comfortable that it's an outsized opportunity. We're in the early innings, and we continue to prove ourselves and help educate our customers.

Thank you. Our next question comes from John DeFucci with Guggenheim Securities. Your line is open.

Thank you. My question is for Tom, and it's sort of a follow-up to Chris and Koji's questions. And Tom, the one platform topic that you talked about, I think a lot of people and a lot of people that we speak to as far as investors associate the growth and momentum that you're seeing in the market with a legacy replacement for consolidation and close. I mean, we sort of looked at that first, too, and we're like, yeah, they're seeing some benefit, and you are. But the more conversations we have with people in the field, the more we've understood that traction independent of that, that financial and operational planning is getting right now for you. We're actually a little surprised at how much traction that independent of financial close is getting. And it looks like it's set up for the future, too. But can you talk more about that sort of success you're seeing in planning today and maybe how the core principles for financial success consolidation and close have given you a leg up in the planning market? You've even seen one of your major competitors actually just buy a clothes company that was traditionally a planning company. If you can maybe talk about that, that'd be great.

Sure. Thanks, John. It's a great question. And I'm excited to talk about this one, actually, because it's something that's near and dear to my own time in corporate finance. And And that is, you know, we really set out to make sure that we could help, as you alluded to, solve the core finance problems that every business that has, you know, evolving complexity or is already globally complicated. We need to help them do the thing, what we call core, you know, the financial consolidation planning, you know, account reconciliation, things you have to do and you have to do correctly. But we all know when I go out on sales calls and I'm speaking with customers, they want to talk about how they can be more strategic. And when I say customers, the office of the CFO, the chief accounting officer, the head of financial planning, how can they be more strategic and help drive the business? And that's why you're hearing that because once we help them become efficient at the core, which every business has to do, they start to be able to get leverage on the investment they've made in OneStream to drive more value and actually become a real partner to the company and lend that analytic capability, the information that's being created and supplement what's happening operationally and ultimately what you're getting and why there's so much interest and why I feel like this is the outsized opportunity and really is the new definition in the future of CPM is this idea that you can make sure that you're efficient at your core, but then you can take your operational plans and optimizations and link them to these financial objectives and metrics and manage them holistically and really drive the business forward.

Thank you. Our next question comes from Brent Braceland with Piper Sandler. Your line is open.

Thank you. Good afternoon. Great to see the momentum built here. Tom, I wanted to double click into the government opportunity. I think you've disclosed, I think, 15% logo penetration in the Fortune 500. You talked about a new large government agency kind of leaning in with you guys here. What is the penetration, your best guess, penetration in government? And can you maybe size the scope of the opportunity as you think about you know, a whole government agency replacing kind of legacy solutions. What does that opportunity mean for the firm? Thanks.

Thank you. Yes, it's a very sizable opportunity, and we're reaching the point, you know, as a business where we've proven ourselves across multiple agencies and multiple sectors within the public sector in terms of, you know, defense and making sure that we have the right resources product aligned with the right security posture and aligned with the right way of thinking that you actually, you have differences in processes and planning when you're an agency versus a revenue generating business. So it's early innings, but we've been building momentum as a company by landing more and more of these significant marquee types of agencies. And so without trying to quantify it exactly, we feel very well positioned based on the success that we're having and our commitment to continuing to grow as we feel that it's a continuing important segment of our business that we'll be focusing on.

Thank you. Our next question comes from Alex Zukin with Wolf Research. Your line is open.

Hey, guys. Thanks for taking the question. Maybe just comment on the demand environment, In general, what you're seeing now as arguably we get past the election and to the end of the year, are you kind of seeing customers and companies start making plans that maybe are a little bit more transformational than in previous quarters and periods, given kind of the changing velocity of their businesses, the power of AI? What are you seeing there in any verticals that stand out to you as being particularly interesting? And then any comments, Bill, just about net retention, how that trended and linearity in the quarter?

I'll start and then let Bill respond there. In terms of we're seeing a consistent demand environment, obviously, you know, very new, you know, the election just being 24 hours old. We've got our eye on that. Like I think every other CEO and, you know, management team sort of wondering, you know, Everyone, I think, is hopeful for this being a positive, but maybe this will be a relief valve at some point as some of this uncertainty clears and we know what life looks like. Right now, so fresh and kind of going into the quarter and leading up to it, we were seeing a consistent demand environment. Definitely, from my personal interactions and involvement in sales cycles, I would say that I am seeing an appetite for transformational. Most CFOs are looking to be transformational, and you hear that word, it's a little bit more than aspirational than I've seen in the past. It's not just more of the same. So that's an exciting trend that we see, especially as I see more and more forward-leaning CFOs very interested in machine learning. It's still very early days there, but the early adopter types of CFOs see this as a significant opportunity to inflect the way that they get information from a planning perspective, especially, and then also the inferencing that they can get with some of the generative AI on top of it. So we're excited about that. And yes, we are seeing that. But I would still say it's early days trendings.

And Alex, to answer the second half of your question, I mentioned in my comment that bookings were roughly 60% new and 40% upsell, which has been the trend for the past couple years at least. And while we're not going to give NRR on a quarterly basis, it's kind of in the same zip code as we told you during the roadshow.

Thank you. Our next question comes from Brian Peterson with Raymond James. Your line is open.

Congrats on the quarter and thanks for taking the question. So I wanted to hit on some of your marketing investments. I know that's stepped up this year. I'm curious what you can say on the top of the funnel or early stage pipeline. Any successes from those investments? Would love to get some color there. Thanks, guys.

Yeah, I'll take that one. You know, it's still early days. We did just start, you know, I think you saw the brand campaign that we launched earlier this spring. around Take Finance further. Obviously, you've seen us kind of revitalize our logo, and you've seen us increasing some of our specific demand gen environment or demand gen investment. I'd say we have a reasonably long sales cycle, so certainly the pipeline is doing what we had hoped, but again, it's still early days. I would also say, and I think some people commented on it last quarter, that we're really focusing also on our pricing and packaging, which is also in its early days. But we see some significant opportunity there that, again, will kind of manifest itself over time.

Thank you. Our next question comes from Mark Schappel with Loop Capital. Your line is open.

Hi, thank you for taking my question. I have a question on CPM Express. I was wondering if you'd just help us out with how you're thinking about the near-term opportunity around the pipeline for the relatively new product.

Sure. So I'm really, really excited about CPM Express and really our ability to focus on that commercial segment of the business and sort of meet them where they're at on their journey. So we're still in the process of, I'll call it market fit testing, if you will, where we've been working with several customers that fit within that segment. And I'm even more encouraged that that product or configuration of our product is really what it is, is the right match for that segment. It's, again, very early days, but we're focused on, you know, ramping that over the coming year and really making sure that we're in a great position to address these more companies that are becoming or seeking to become more mature in their financial processes and capabilities by offering them this CPM Express sort of best practices configuration that we've been able to take away from the large enterprise and share with them. With the core of that offering being choice for that customer. It's an opportunity to use the same software as the biggest companies in the world. but do it in an efficient way that can get them onboarded and onto this better analytics platform that opens up a lot of capability. So I'm really excited about that. Again, early days in the journey, but I really feel that it's a unique offering because it's not a separate product. It's the same code base. It's an on-ramp that you don't have to get off of.

Thank you. Our next question comes from Nick Altman with Scotiabank. Your line is open.

Awesome. Thank you. Tom, you talked about Splash EMEA. I wanted to ask about the Wave Developer Conference next week. Can you just outline where developers fit into the platform and just the overall picture, what the focus will be for the conference? And then, you know, you guys alluded to the growth durability of OneStream, and that's kind of a core focus over the medium term. Where do developers kind of fit into the picture and how do developers sort of help shape a more durable growth profile here? Thanks.

Sure. This is one of my favorite things to ask. I never get to talk about technology. So we really look at, you know, again, we built the platform and what's unique to that foundation is the whole idea that there's a development environment in the product, meaning that it's infinitely extensible. So a customer is never going to run out of software with OneStream. We can adapt to their needs. So the developers come in really three flavors. sort of a citizen's developer, you know, the kind of person that has a lot of domain knowledge that's looking to make sure that they can flex OneStream to solve their company-specific problems to the more sort of what we would consider our exchange developer that wants to make something more of an application and expanding use cases as a partner, for example, a partner company producing in our partner place. So not that full-on computer scientist kind of individual, but more of a developer than just the average power user. And then finally, you have more of the integrated systems vendor, sort of somebody in ISV, somebody that maybe has created a software company looking to replatform on OneStreet. So what we're seeking to do at our conference like Wave is address and define a journey for all of those different types of creators as we call them within OneStream and help them understand how they can get the most out of the OneStream development platform, get a head start on maybe a technical problem that they're trying to solve for a customer or for their company. By leveraging the underlying technologies or the integrated set of engines that really make up our platform. So that really, ultimately, you talk about durable growth. This gives us such an advantage because if we can bring our platform and development capability closer to those people that understand the real business problems, and we can turn those into reproducible products that surface within our industry, Solution exchange, that ultimately produces better value for OneStream, better value for the customer and for the contributor of that intellectual property.

Thank you. Our next question comes from Scott Berg with Needham & Company. Your line is open.

Hi, everyone. Really nice quarter. Thanks for taking my questions. Tom, your subscription revenues are growing nearly 40%, which is an outlier in our SaaS coverage universe for most of us that covered the space. You threw off some really healthy profitability in the quarter. Can you spend more to grow faster? Do you think the demand environment could actually bear more investments, or is this the right level to manage the business at in the short term?

I'm going to tie that into the last two questions a little bit. So as we've been really looking at OneStream and shifting and responding to our customers' interest in helping them solve more operational problems or challenges and going deeper and helping them solve the integration of finance and operations. we've been thinking about this more diverse product set and then the pricing and packaging of it, and then the marketing spend that we can put behind it. So I really have been looking at the, you know, 2023, 2024 as the starting evolution of this sort of greater expanded product journey. And you can expect us to invest more into that, trying to make sure that we are fueling that longer term growth. And also at the same time, continuing to focus on R&D. You can expect us to continue to invest heavily in our AI journey, as well as the innovations that we're delivering on the core platform. So altogether, we really feel that we're positioned well with this expanded vision of the way that I think I've mentioned this on the last call. I really view the company as core and financial. analytics and AI and operational analytics. And I think you put those pieces together. There is an opportunity for us to invest more in that side of the business. We just wanted to make sure that we have the framework and it's an efficient investment.

Thank you. Our next question comes from Derek Wood with TD Callen. Your line is open.

Thanks. Bill, you had an impressive billings growth considering it was a really tough comp. And I think this was the strongest sequential billings growth we've seen for a Q3. So anything to call out in terms of outsized bookings performance or timing of renewals that would have driven this strength in the quarter and any directional factors you would flag for us around billings heading into Q4?

Yeah, we were super happy with our billing performance. We actually did a little bit better than we had expected. What I would say, and I would just say there was no change in duration. There was no, there was nothing that was, you know, extraneous there. What I would say is we did, you know, we did collect or bill and collect a little bit faster. You also probably saw some outperformance on pre-cash flow. that we demonstrated, but sometimes at the end of a quarter we'll have deals that we'll sign in the quarter, but they'll say, hey, we don't want it to become effective until the next quarter, and I think you've seen that in quarters past. This quarter we had a really strong desire for our customers to start right away, and so that drove a bit of outperformance in Q3 for sure. So anyway, we're happy with it and thanks for calling it out.

Thank you. Our next question comes from Terry Tillman with Truist Securities. Your line is open.

Yeah, I'll echo the congratulations. It's a single question, but it might actually be two parts. Sorry about that. First, on the partner side, I mean, with your growth and scale and growing faster than, you know, really all your competitors, you're now public, you've got this notoriety. I want to know how our partners are responding. What are the investments they're making and what kind of new doors they're opening up? And then the second part is related to the prior question for you, Bill. In terms of the free cash flow, it sounded like collections were strong, but do you still see 4Q being seasonally the strongest quarter for free cash flow? Thank you. Thanks, Terry.

So partners are really an important part of our of our long-term success and investing, continuing to invest in that community is something that really enables scale for us. It also creates a very trusted referral mechanism because these partners tend to have long-term relationships with the customers, the buyers. And so overall, we continue and are constantly investing in thinking about that community, how to grow it, different ways to grow it, as well as to support them. In general, we're seeing across the board, not only interest in the projects, as evidenced by the increase in the delivery that's being taken on by the partners, but also many partners investing. We now have over 100 products in our partner place section in the exchange, which is a direct investment of our partner community in creating intellectual property on our platform. So when I take all those pieces, I feel good about it. I also feel like we have a lot more that we can continue to do in terms of continuing to work more closely with the GSIs and opening up more and more long-term opportunity for us and for the community in general.

And just in terms of free cash flow, generally Q1 will be our highest seasonal quarter. Obviously, Q4 is our biggest bookings quarter. And so while I realized that last year in Q4 we had a nice free cash flow quarter, I think going forward, and we do expect to be pre-cash flow positive this quarter. Going forward, you should expect Q1 to generally be the highest seasonal cash flow quarter.

Thank you. Our next question comes from Rob Oliver with Bayard. Your line is open.

Great. Thank you. Good evening. You guys called out a few large SaaS conversions in the quarter. And, Tom, I guess, given the commentary and your prepared remarks at the beginning about the more strategic nature of the CFO and how there's a growing awareness there, I'd just be curious, when you guys are in these discussions, these can obviously be... you know, it's a painful move sometimes for the companies to consider doing this, but when they do, talk about what sort of opportunity you're seeing to talk more broadly about the OneStream platform, whether it be what Solutions Exchange can offer, Sensible ML, or other opportunities to cross-sell and up-sell when those conversions happen. Thank you very much.

Thank you. Yeah, that's always a great opportunity. In a lot of ways, some of our newer... innovations and offerings are even driving those customers. For example, the Sensible Machine Learning AI platform is only available if you are in a SaaS-based position with us. And so that actually drove a few of those significant conversions this quarter. And so that is definitely part of the conversation when someone is interested in a SaaS transition. On top of just sensible machine learning, though, as another example, our first customer, very first customer of OneStream converted to SaaS this quarter, and they actually went ahead and added Power BI on, a significant Power BI connector on top of it at the point of conversion. So you're seeing, as you would expect, we take this as an opportunity to offer more and more value to our customers, and it really does change the conversation that we can have when they're in our SaaS platform because we're no longer having to, as we look to seek, as we seek to add new use case and new value, we're not having to get into conversations necessarily with the IT department or talking about compute resources because we control the entire equation. So it's overall an opportunity that we seek to maximize.

Thank you. Our next question comes from Daniel Chester with BMO Capital Markets. Your line is open.

Great. Thanks for taking my question. I wanted to circle back to one earlier in the conversation about planning opportunity. If you think about your customer base today, how prevalent is it that you're having customers have both capital planning, sales planning, people planning, You know, there are different personas in the organization that might be using some of those tools and some wondering, you know, how often you're being able to sell, you know, multiple planning solutions inside to a customer. And, you know, going forward, you know, how are you thinking about unlocking some of those silos to really harness the full planning opportunity? Thanks.

So when we think about planning, we think about an opportunity within a customer, there usually is a sort of capability maturity model that a CFO or a company has within their thinking. And so we sell really, you'll hear me use this word core. And so core being both the financial consolidation and financial planning, and then some of the other must-haves. When a company becomes proficient at those, they don't jump just right to the operational side. They go to the next level, some of the things that you mentioned. So you'll start thinking about more granular planning around the line items such as salary or hourly wages. So that's when you'll engage people planning. That layers on another solution and more depth and more sophistication in your planning process. then what'll happen is they might go into capital or cash, as you mentioned, but that's an evolution that a customer goes through. So that's always, and when we talk about replacing multiple solutions and the way that we've been able to really deliver a lot of value for our customers, it's having that journey defined for the customer and helping them achieve greater capability. And then what we were talking about when we get into operational is even beyond that. What you do when you start getting into operational is monitoring the trends that are underlying your salaries, your wages, your capital, your cash, and then predicting those trends with AI. That's the ultimate journey. So when we look at it, the opportunity for us, even many of the customers that have started, we have a very detailed journey that we can take them on. And that's really the value proposition that we're ultimately sharing with our customers and why we feel, again, very, why we feel so excited about and committed to the strong growth retention that we've been able to have because once we have that customer and we're demonstrating value, we know that we have a journey that can help them achieve a lot and we can help them rationalize how they can become a better finance organization and really strategic to their business. So all in all, I think that as you've described, the planning opportunity really is something that we can continue to develop for our customers through the journey that we're defining with the platform.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to management for closing remarks.

Thank you for joining us, and we look forward to seeing you all soon. Thank you very much.

This concludes today's conference call. Thank you for participating. You may now disconnect.