Q4 2024 Zuora Inc Earnings Call
Participants
Luana Wolk; IR; Zuora, Inc.
Tien Tzuo; Founder &CEO; Zuora, Inc.
Todd McElhatton; CFO; Zuora, Inc.
Robbie Traube; President & Chief Revenue Officer; Zuora, Inc.
Adam Hodgkinson; Analyst; Goldman Sachs
Chad Bennett; Analyst; Craig-Hallum Capital Group
Patrick Shields; Analyst; Baird
Joseph Vafi; Analyst; Canaccord Genuity
Eylon Liani; Analyst; Jefferies
Presentation
Operator
Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Xora Fourth Quarter Fiscal Year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star one. Thank you. Luana Wolk, Vice President Investor Relations. You may begin your conference. Thank you.
Luana Wolk
Good afternoon and welcome to Dorel's Fourth Quarter Fiscal 2024 earnings conference call. On the call, we have seen dual source, Founder and Chief Executive Officer, and Todd Emeka, hidden Ford's Chief Financial Officer. Robbie Traube, President and Chief Revenue Officer, will be joining us for the Q&A session.
During today's call, we will make statements that represent our expectations and beliefs concerning future events that may be considered forward-looking under federal securities law. These statements reflect our view only as of today and should not be relied upon as representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to several risks and uncertainties that could cause actual results to differ materially from expectation for further discussion of the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC. And finally, unless otherwise noted, all numbers except revenue mentioned today are non-GAAP. You can find the reconciliation from GAAP to non-GAAP results for both the current and the prior year. In today's press release, our press release and a replay of today's call can be found on the Investor Relations website, investor dot fluor.com.
Now I'll turn the call over to Tina.
Tien Tzuo
Thank you, Towanda, and thank you everyone for joining Dorel's fourth quarter of fiscal 2024 earnings call. I'd imagine there are quite a few questions based on the information we shared in our filing a few weeks ago, you all saw that our Q4 ARR growth fell short of where we were trying to land will go through the details of the quarter. But the bottom line is this in an uncertain year, we strengthened our position in the marketplace by focusing a lot within our control, namely salivating new logo acquisition, continuing to innovate our market leading multiproduct portfolio investing in the success of our customers and delivering balanced growth and profitability.
For the full fiscal 2024 subscription revenue was within the high end of guidance at $383.4 million, up 13% year over year. Arr grew 10.4%, falling short of we were hoping to land and the trailing 12 months DVRR. ticked two points lower, primarily from one large churn, which I'll talk about later on the call. At the same time, non-GAAP operating income improved by over $44 million year over year, exceeding the high range of our guidance by nearly $3 million.
A big big highlight for the year in our adjusted free cash flow improved $72 million year over year, allowing us to generate over $44 million of cash in a year in Q4. We also saw the biggest year-over-year increase in new logos that we've seen in eight quarters. And in the quarter, nearly 60% of our customers who renewed in Q4 actually increased their spend with us.
To put all this in context, let's go back to the start of the fiscal year, like many other companies, one year ago, we were seeing signs of a general slowdown in IT spending. Many expressed that the office of the CFO was an area that could be affected. And there's a general consensus that there was going to be a slowdown in the digital transformation projects that have driven technology spending over the previous few years. And so we adjusted specifically, we said we would do two things. First, as we've been highlighting in the last few earnings calls, we shifted to doing faster lands at a lower ACV. So of course, still focus on what we believe is the sweet spot of the market, large enterprises in fast growing disruptors. In other words, the leaders of today and of tomorrow.
Secondly, we said we would strike a good balance between growth in profitability. We committed to making progress towards the Rule of 40 framework as it turns out. This was the right approach as the year progressed. We did indeed see a pause in digital transformation projects. In FY24, we saw fewer seven digit ACV new logo deals. And in Q4, we did see these deals continue to push. However, our strategy of pursuing smaller, faster lands allowed us to sign almost 30% more new logos in fiscal '24 as compared to the previous year. In fact, if you just look at Q4, we signed on over 40% new logos compared to Q4 of last year. And this is with some fantastic companies, including Sony Network Communications, who will be bringing on approximately 1.5 million subscribers,
For a global leader in business cloud software for industry specific markets with over $3 billion in annual revenue for one of Europe's largest airlines. They selected Zohr to scale their exclusive travel program with new strategic offerings. We're one of the leading brands of private member clubs in hotels with over 70 locations around the world. We're even a leading marketing SaaS platform used by 80% of the Fortune 1,000 fantastic companies all amounts.
We also saw sales cycles shorten. In fact, when I look at new logo deals between $100,000, $500,000 and ACV. These deals close to 25% faster as compared to FY23. Now, while this new logo strategy meant lower top line growth, we also executed on our commitment to deliver balanced growth and profitability, and we did it by rapidly expanding our bottom line. In fact, we ended the year at [$24 million] against the rule of 40 metric, which exceeded what we initially set out to do.
When you net down the year, we executed on the strategy we set out at the start of the year. We were agile and able to quickly adapt to market conditions. We focused well on the things that were in our control, specifically profitability, free cash flow. And as such, we now enter FY25 in a stronger position.
Now what enabled the strategy, of course, is our differentiated technology and our amazing customer base. First, our products are built on a differentiated cloud architecture, one that I call loosely coupled, but tightly integrated, meaning our customers can start with any of our products. But then as we add additional products and modules over time, everything just works together. So you can start with revenue, which start with building or Zephyr or payments and then expand within our portfolio to just two examples from Q4.
And the first one is toast, a leading restaurant technology management software company used by approximately 106,000 restaurant locations with over $3.9 billion in annual revenue, at Coast with a Zuora Revenue customer. And in Q4, I'm proud to say that they added Zuora Billing.
Toast needed an enterprise-grade monetization platform that can keep up with their rapid growth in a flexible solution capable of managing their dynamic business models. Second example is the Globe and Mail, Canada's leading national news brand with over 6 million monthly users. After going live with your building in Q4, they added Zephyr to help them accelerate the growth of their digital subscription to greater pricing and bundling flexibility.
Second, we put a lot of work this year to shortening our deployment times to get our customers live on our monetization technology even faster. For example, you might remember early in the year, we announced a new deal with Telus Corporation, Canada's second largest communications technology company with more than $20 billion of annual revenue. And in Q4, they went live in just around 90 days, which is pretty amazing for the Associated Press independent global news organization that reaches 4 billion people every day in Q4. They went live on Zephyr with its new donations capability as they continue to grow their direct to consumer offering.
Third, our product is sticky and allows our customers to grow with us. This past year, we had the best retention rates since we went public. We are at the core of what our customers do and once we are live, we become an important part of their DNA. And we've seen that when we sign on a new customer, they become a long-term growth engine. As we look at our cohorts, even after five years and beyond. These companies continue to show consistent growth with us. And this is why we describe ourselves as a long-term durable business. In fact, we saw it in Q4 with a leading CRM platform revenue with lower billings. And over time as our customers, they have increased their billing volume by over eight times or after a long-time customer. Bridgestone, the world's largest Tire & Rubber Company, acquired the Zagat fleet management platform expanded work with us in Q4. Ziggo went live on Zoro to power its software solutions and Bridgestone progresses towards their goal to drive 20% of their revenue from recurring services by 2025.
Finally, we have a proven committed field organization, which in my biased view is the best in the industry to help ensure our customer base continues to benefit from our technology. And here's how we saw this come to life last year, our customers with multiple products as well as our highest ARR accounts. They have the highest level of customer satisfaction. Our customers see our platform is flexible and powerful, but still easy to use the fact one of our top 10 customers recently awarded us as a top innovation partner, recognizing our data, our innovation enabled them to introduce new licensing metrics that drove greater impact on their business.
So now let's look forward to FY25. The headline is we remain committed through our strategy of faster lighter lands in adding great new logos to our installed base. This is the right strategy and over the long run, it makes us a stronger company. Let me highlight three areas that we are focused on have improvements and one potential area of opportunity for us. Unfortunately, there are two large insurers that are affecting our revenue growth for this upcoming fiscal year. It's important to call out that we do not believe these indicate a broader trend across our business. But I believe it's important to highlight to you all the first instance we saw in Q4 with a large customer you experienced macro headwinds in their industry and they faced digital transformation budget cuts.
It's important to note that this customer was not yet live. That being said, as we reflect on what we could have done better. We do believe that faster go-lives will continue to reduce the likelihood of these events. And so you will see us continue to focus on this area. Second one is the churn that we are going to see in Q1, and this is factored into our guide. This is a company that signed on a number of years ago, and they had a digital transformation vision that unfortunately has not yet become a reality and their processes are still very much traditional one-off transactions. These anomalies do not change the strategy we have in place, but they do highlight the continued need for us, not only to close the right type of customer, but also continue to focus on reducing time to go-live.
Second, another area we are working on is what I'll call consumption billing. So we've got consumption billing since day one. Of course, we cannot rest on our laurels. In fact, we believe as more technology companies adopt AI, artificial intelligence, they will need to shift more of their pricing model to consumption-based pricing models. So you're going to see this is an area that we will double down on. And I'm pleased to announce that since the launch of advanced consumption back in June, we've had over 40 customers purchased the product, including seven go-lives.
Third, the fiscal '25, you are also going to see us continue to focus on improving our go-to-market efficiency. You're going to see us leaning into higher quality demand generation and efficient pipeline capabilities, and we've made changes in our marketing and alliances leadership to drive this. We will continue to invest in our partnerships with leading system integrators to help us down this journey.
Last thing is the potential opportunity and it's around the office of the CFO. When you look at the horizontal application stack, almost every application area has gone into the cloud with one big exception, and that is a company's core ERP systems. Now most people will say that at some point in the future, a trend has to kick in to move ERP into the cloud. It's obviously when that happens, we believe this is something that will benefit us now. We're not saying it's going to happen this year, and we're not going to build that into our plan. What we are going to do is continue to focus on signing on some great new logos with the confidence that this will only make us stronger if and when the market for ERP projects reflect.
To summarize, as I look back on fiscal year '24, the strategy we put in place at the start of the year has put us in a good position for fiscal year '25. We will continue to add new logos at a faster pace. We will continue to invest in our market-leading multiproduct portfolio that has been proven over and over again to be critical for driving success with recurring revenue models. We will continue to invest in amazing customer success and we will continue to commit to delivering balanced growth and profitability.
Finally, I want to thank all of our ZEO.s that contributed to our success in FY 24. We would not be who we are today without your vision and your commitments.
With that, I will pass the call over to Todd to review our financials.
Todd McElhatton
Thank you Tien, and thanks for joining our call in Q4, we met our guidance on subscription revenue and total revenue while exceeding the high end range for non-GAAP operating income and full year adjusted free cash flow. In fact, our focus on efficiency yielded a significant $72 million improvement on our full year adjusted free cash flow compared to last year.
At the close of the quarter, we announced a workforce reduction and our preliminary expectations for ARR growth and DBRR. for Q4 for fiscal 2020 for the revised expectations were driven by the macroeconomic pressures we talked about as well as an unexpected customer churn we experienced We significantly improved our bottom line and accelerated our new logo growth and White of slower top line growth. We're focused on driving profitability as we make progress towards a rule of 30 by Q4 of fiscal 2025.
Subscription revenue in Q4 was $100.2 million growing 12% year over year in both constant currency and as reported. For the full year, subscription revenue was $383.4 million, representing 13% growth year over year as reported and 15% in constant currency as we continue to expand our partnerships with SIs.
Our professional services revenue decreased by 22% year over year. And in Q4 at $10.5 million and represented 9.5% of total revenue. For the full year, professional services revenue was $48.3 million, a year-over-year decline of 16%. Total revenue for Q4 was $110.7 million, up 7% year over year and for the full year was $431.7 million, up 9%.
Non-GAAP subscription gross margin in Q4 was 82%, an improvement of over 280 basis points year over year. For the full year, our non-GAAP subscription gross margin was 82%, which represented an improvement of over 230 basis points throughout the fiscal year. We realized continued margin performance from optimizing our hyperscalers and increasing efficiency.
Non-GAAP professional services gross margin for Q4 was negative 10%, a decline of 215 basis points year over year. This was driven by our continued investment in our customers. For the full year, our non-GAAP professional services gross margin was negative 4%. Looking ahead in Q1, we expect margins to be consistent with Q4 with sequential improvements throughout fiscal 2025.
Our Q4 non-GAAP blended gross margin was 74%, an increase of over 550 basis points year over year. Our full year non-GAAP blended gross margin was 72%, an increase of over 460 basis points. In Q4, non-gaap operating income exceeded the high end of our guidance by nearly $3 million coming in at $15.9 million compared to $2.2 million in the prior year and representing a non-GAAP operating margin of 14% for the quarter.
For the full year, our non-GAAP operating income was $47.5 million, resulting in operating margin of 11% or a 10 point improvement compared to last year. The operating margin improvements for Q4 and the full year are the result of disciplined spending as we remain committed to improving our bottom line. Despite the top line headwinds, we have laid a path to achieve a rule of 30 exiting fiscal 2025.
As a reminder, we define the rule of 30 as a sum of year-over-year subscription revenue growth plus non-GAAP operating margin. Our fully diluted share count as of the end of the quarter was approximately $180.2 million shares using both the treasury stock and if converted method, let's look into some of the metrics for the quarter and the year. As we disclosed in our SEC filing several weeks ago, dollar-based retention ended at 106%, down two percentage points both quarter over quarter and year over year.
As Tim noted, our DBR. this quarter was impacted by an unexpected churn from a large customer that had yet to go live. In fact, this customer faced large budget cuts for the year, given the impact of the macro environment on their business this abnormal customer-specific churn created a one point headwind in both ARR growth and EDRR. It's worth noting that this year we reached record levels of overall gross retention we remain confident in our customer retention and product stickiness as we have a differentiated product portfolio that is mission critical for our customers.
Our total RPO ended the year at $594 million, growing 19% year over year. Noncurrent RPO grew 31% year over year to $271 million. These strong RPO figures were driven by a number of large multiyear renewals in Q4. We ended the quarter with 461 customers with a contract size at or above $250,000 and average contract value. This was up eight sequentially and up 30 year over year. This cohort represents 84% of our business as we further expand into the enterprise space.
This quarter, we closed four deals with an ACV of $500,000 or more down from $600,000 last year. This includes one deal over $1 million down from two last year. In the current environment, we continue to see less of large transformational deals and more of a lighter land that will allow for future expansion. In fiscal 2024, we processed $139.9 billion of billing transactions and payment volume, a growth of 10% year over year. In addition, we processed $212.8 billion of revenue volume, a growth of 12% year over year.
As a reminder, we provide these metrics on an annual basis as quarterly volumes add and flow. ARR landed at $403.1 million at the end of Q4 and grew 10.4%. Adjusted free cash flow was $14.6 million in the quarter, a significant improvement of nearly $32 million over Q4 of last year. Adjusted free cash flow for the full year exceeded our guidance by over $7 million at $44.3 million, representing a $72 million increase over the prior fiscal year.
Turning to the balance sheet, we ended the quarter with $514.2 million in cash and cash equivalents, a sequential increase of $20 million. Total CapEx for the quarter was $3.1 million and $10 million for the full year.
Before turning to guidance, I want to provide a bit more context regarding our recent organizational changes. In late January, we made the difficult decision to reduce our workforce by roughly 8% as we drive efficiency and optimization throughout the organization. In connection with this reduction, we incurred approximately $7 million of restructuring charges in Q4. We also expect to occur approximately $1 million in the first half of fiscal 2025. These charges workers, which were excluded from our non-GAAP results, consisted primarily of cash expenditures related to severance payments, healthcare costs and job placement benefits for the impacted employees. These actions are part of our enhanced efforts in driving efficient and profitable growth.
Now turning to guidance. Enterprises continue to scrutinize their investments. We anticipate this trend will continue in the office of the CFO throughout fiscal 2025 and as such are being judicious with our guidance. In addition, our professional services business will continue to be a smaller portion of our total revenue mix as we support our partners in leading customer implementations, which is consistent with the trends we've seen this past year.
Now turning to guidance, I want to remind you that Q1 has two fewer days in Q4. For Q1, we currently expect subscription revenue of $98 million to $99 million. Professional services revenue of $9.8 million to $10.8 million. Total revenue of $107.8 million to $109.8 million. Non-GAAP operating income of $14 million to $16 million and non-GAAP net income per share of $0.06 to $0.07, assuming a weighted average shares outstanding of approximately $146.9 million.
For the full fiscal year 2025, we expect subscription revenue of $410 million to $414 million. Professional services revenue of $41 million to $45 million, total revenue of $451 million to $459 million, non-GAAP operating income of $79 million to $81 million, and non-GAAP net income per share of $0.40 to $0.42, assuming a weighted average shares outstanding of approximately $151.5 million.
We also expect to be at an annual share dilution of approximately 4% for fiscal '25. For this purpose, dilution as calculated by the number of equity awards granted net of forfeitures during the fiscal year divided by the total shares outstanding at the end of the fiscal year. For the year, we expect DBRR of 104% to 106% and ADR growth of between 8% and 10%.
As Tiem noted, these metrics reflect the headwinds we saw in Q4 and early Q1 due to churn activity by two customer specific instances, we have made tremendous progress with our bottom line, and as I stated in prior quarters, we will continue to balance growth and profitability. We remain committed to our goal of exiting fiscal '25 at a rule of 30 run rate. We expect our adjusted free cash flow to be $80 million for the full year. This represents a $35 million improvement year over year.
In closing, while the macro backdrop continues to impact us in the near term, we are focused on showing disciplined bottom line leverage. We continue to focus on accelerating new logos with our strategy to land lighter and to expand alongside our customers. This will bring us runway for accelerated growth in the second half of the year. We will keep our retention rate strong while improving profitability margins and increasing free cash flow generation.
With that team, Robby and I will take your questions and I'll turn it over to the operator.
Question and Answer Session
Operator
Adam Hodgkinson, Goldman Sachs.
Adam Hodgkinson
Great. Thanks for taking my questions. I guess to start on the new logo side, and you mentioned Sony and Infor and the increase in total new logos net adds on a near and a year over year basis.
Just any more commentary on the types of customers you're adding besides the ones you mentioned what from a product perspective, what typical lighter land looks like and how we should think about it landing contract values versus the eight net adds that you noted on the 250,000 plus side? Just any incremental color there would be helpful.
Tien Tzuo
Yes, absolutely. So we in addition to Sony and for I think we noted three were customers, you can see it's a fairly diverse mix. Actually, there was an airline that I mentioned senior. There was a on a membership club Cray with 70 locations, and there was definitely a traditional SaaS company. I would not say the mix has changed too much. I would say that we continue to focus on technology companies to SaaS companies continue to do well, especially as they gear up for perhaps to churn the IPO markets, at least the private ones. And we still continue to see healthy growth in our media segments as well but.
In terms of the type of deals on you'd obviously it's an arbitrary number, but we thought that $100,000 to $500,000 is a good indication, but the deal is not too small, not too big. And that's really where you're like. I said, we saw a pretty dramatic decrease in sales cycle time. So I'd say that's harder think about the business.
Adam Hodgkinson
Okay. That's really helpful. Thanks. And then, Todd, I think you mentioned previously that ARR growth for the past fiscal year would be a good indicator of growth for fiscal '25, and it looks like there is a little bit of deceleration now baked into the guidance. So just curious how much of that is the two logo churns you mentioned versus maybe some incremental conservatism now that you're getting more more of a view on the macro? Just any incremental color on that dispersion their views?
Todd McElhatton
Hey, thanks a lot, Adam. So as you said, we had a one turn or one customer in Q4. That was a pretty significant churn. That's going to give us a point of DVR headwind and same thing on the ARR as we move into next year, when we took a look at just some of the larger deals, those deals continue to elongate and cycle, and we took a look at one of some of the things that will continue to push out into the future. We've got another point there. And then the last one was there is a large customer.
And both of these turns that we've talked about, these are non they're not in our core verticals and so not standard if one was not live. The other was an old company actually out they do Porto parties. And yes, I was trying to make it digital transformation didn't happen. And so that's giving us another point. So if I take those three things together, those are the three points that we're seeing. And as we're just seeing elongated sales cycles, I think we were going to be really judicious and not assume that we're going to have some of the larger deals that we had because that's really put a lot of headwind on us this year. So we're going to assume for all next year that we're landing lighter. And then we had those two churns that obviously bring through the entire year from an ARR growth. And that's really what we've seen from a headwind perspective.
Adam Hodgkinson
Okay.
That's all really helpful. Thanks, Tim.
Thanks, Todd.
Operator
So your next question comes from the line of Chad Bennett from Craig-Hallum. Your line is open.
Chad Bennett
Great. Thanks for taking my questions. Just curious on kind of the math behind the narrative on our best retention rate since going public, considering the churn. Is that I guess does that a gross retention number, just kind of how do we how do we think about that considering the churn, Chad, that absolutely is a gross retention rate.
Todd McElhatton
And like I said, we are we were running well below where we thought we'd be. We actually ended up landing right on plan for the full year. We had that unexpected churn out large company really facing some big macro headwinds. Maybe just give you a little bit more color was a company that had not gone live, not in our core vertical right up until before. At churn. They were actually talking to us. They were looking to expand and brings our revenue on. And then literally on a dime, it's like not only are we not going to do the revenue thing, forecasting the whole project, and we're canceling all of our IT projects that aren't live. So that was something that was a surprise to us. So that's really what we're driving on it.
And again, next year, you know, we've got a timing issue. Linearity seems to be moved forward. Well, we take a look at the full year that is what's driving it. And again, our customers are really sticky. And once they go live, we tend to keep them for a long time. And our top 100 customers only five customers haven't gone live yet.
Chad Bennett
Okay. And just curious just where are we recognizing subscription revenue from these two customers that didn't go a lot or have have not went live or are not going live and if so, for how long.
Robbie Traube
So I don't have the exact dates when they went live. But as soon as we sign a contract, we begin recognizing revenue as anybody in the SaaS organization does because we do stand up that environment, they need that environment as they are working in their internal processes. So I think if any SaaS company, no sooner, they signed the contract depending on how it ramps, that is part of our revenue. So that was part of our run rate and it was in the air.
Todd McElhatton
Our second company, just to be clear, is the they've been live for over five years. And so Tom, they have big ambitions for digital transformation projects. But if you look at their internal processes, I think we mentioned on the call, it's still very much one-off transactions, and they just never really, really transformed. And so the overhead of using our system ultimately is it wasn't a good fit, but I got it.
Chad Bennett
And then maybe just one last one, if I could. On just on the service line and the gross profit, there are clearly running at a negative gross profit. And I think the thought was going back a couple of years is we're going to kind of sacrifice service revenue to invest in the channel and offer them up that implementation revenue. And what we get back for that is obviously subscription revenue growth. That doesn't seem like it's transpiring and then the other avenue is, you know, we're investing in our customers direct and on our service revenue is going down materially year over year.
Should we be running this at a negative gross margin business at this point?
Robbie Traube
I think for the full year, our objective is to run it slightly below where we are from a standpoint of the loss from Q4 and just remind you that Q4 is always a little bit special for us. We have in the US, which is a big chunk of our business is, you know, 67%. We have the Thanksgiving week and then we have the end of the year shutdowns that a lot of companies have. And so when you take those, we just have a lot fewer billable days and that continues to put pressure on it.
From another standpoint, yes, we do invest in customers. We're also investing in partners. Those are some of the investments we continue to evaluate them. But at this point, we believe those are prudent and those do help us drive top line subscription growth. That has a very positive, you know, almost 83% margin on this company and I'm Chad datapoints, that is yes, we are on the first one that it is important.
Tien Tzuo
And we do see, I mean a full pipeline as an example, when our 1.5 times year over year through our partners.
Chad Bennett
Got it. Thank you for taking my questions.
Operator
Patrick Shields from Baird.
Patrick Shields
Yes, thanks for taking my question. Appreciate all the color you provided around guidance. Kind of curious if you could dig into some of the more recent buying patterns and deal closure rates you're seeing from customers that excluding those two large customers that churn of customers and incrementally more cautious with their budgets now compared to late '23? Just trying to get a better understanding of the buying environment that's embedded within guidance.
Tien Tzuo
So obviously to me, I'll chime in here on very that you can sort of see a Tale of Two Cities really, there's two spectrums, if you will, what we're seeing in the US. Overall customers have remained really interested recurring revenue model is really important. The shift to subscriptions is really born from the technology sector of anything. AI. is pushing more and more people to do either consumption-based billing models and so from a overall trend for what we do and the market need for what we do, we feel really, really good when it comes to specific deal cycles. We're seeing two ends of the spectrum right on the smaller deals in, let's call it or less than $500,000. We're actually seeing those deals close faster and we're seeing good good healthy demand. I think there's just simply more scrutiny. You talk about you $1 million, $1.5 million, $1.2 million ARR deal, multiply that by three or five sometimes, right? Because they really see us as a long-term investments.
You're talking about a sizable approval. Those things just have continued to have a lot of scrutiny on, you know, is there something out there that says do those start to loosen up perhaps. But but it's not something that we're going to count on. We're going to build into our model.
Robbie Traube
I think one other thing, Patrick, it's also really important to note is these aren't lost deals. Matter fact, when we look at our win rates, they're at record levels. And in fact, some of the companies that are doing bundling and giving away the subscription billing, we're seeing over 80% win rate against us. So it's real important to note, this is absolutely a macro phenomenon. This is not where we're not being successful against competitors. And in fact, I think another interesting thing is during the year, we actually took 17 deals away from our competitors, both high end and low end where they said they really needed an enterprise solution at scale and they came to Zoro because what they had wasn't doing what they needed.
Todd McElhatton
Yes. I mean that's absolutely. If you think about all the other customers that we mentioned on the call, I can think of at least three or four or five of those that are competitive win-backs where maybe they picked a competitor two to three years ago, realize it doesn't have the functionality they need and they want to come back to us.
Patrick Shields
Okay, thanks. That's very helpful. Appreciate the color there. And then maybe one quick follow-up, too, just on the go-to-market investments, you guys mentioned that's going to be a big focus for you guys. This is improving the go-to-market efficiency. Could you maybe talk about some of the investments you're making around this motion and how you're thinking about the partner channel investment for this year?
Thanks.
Todd McElhatton
So highest roaming. And we are making sure that as we go to market for keeping all of our cryo exactly flat, but focus very much on the marketing, the pipeline areas in terms of how we create more demand around those two areas and make that fast moving and assets.
Yes. Yes.
Robbie Traube
Maybe I'll add a little color on that on Think about it as how do we generate demand? And we generate demand primarily in two ways. We do it to ourselves and we do it through our partners. We really like the partner demand, those partners or even previous calls, we mentioned speed all those deals close at a higher close rate. They tend to be bigger.
Yes, you know what you get into the seven digit deals with our partners feel us to move into simply more scrutiny on those deals. But partners remain really, really important for us.
And on the pipeline side, how we do demand through what the industry calls SDRs or BDRs, I think is the transformation there. I think a human health and I think we're going to be a defined. Tom will be much much more productive in that group.
Todd McElhatton
Thanks, Patrick.
Operator
Your next question comes from the line of Joseph Vafi from Canaccord. Your line is open.
Joseph Vafi
Hey, guys, good afternoon. Thanks. For the questions. Just dumb, wondering, I guess does it sound like perhaps one of those two customers could come back at some point when they when when those two projects begin again. And then just kind of wanted to make sure there was really no competitive influence on those deals from a quick follow-up.
Tien Tzuo
Yes, there is a company that did not go live with those initial yield. That industry is definitely hitting some headwinds, if you will. And so absolutely the business that we're in in that company is subscriptions is recurring. Revenue is really important. That's why this did take us by surprise. And so I'm certainly optimistic that eventually we'll have another shot to work with them and make them successful.
Joseph Vafi
Okay, great. And then on the workforce reduction, could you maybe drill down a little bit? And was it broad-based across the company? Were there certain areas where there was a little bit more reduction and how do you see that reduction affecting the R & D and the go to market?
Todd McElhatton
Thanks a lot, Joe. So yes, this action was really focused on efficiency, a little smaller than what we had done last time, about 8% net, and we give us 15 million of savings for the year.
And so maybe I would put it into the following buckets.
The first bucket is what we did in product and technology. And when we think there is no as COVID started out, we did a lot of hiring, especially offshore and we did that. We hired a lot of generalists and we also let people kind of be scattered throughout wherever they were. And we found was this just wasn't really effective for us, we need especially these generalists and books to be where they're able to collaborate and get into an office, and we just weren't seeing productivity from them.
And so those were some reductions that we made the decision to make.
So from a standpoint of we were able to get more efficient there. We were seeing very little profitability. So we feel like there's not a loss of capacity there on the go-to-market side. I think Robert hit it as we're not divesting and capacity out in the field, but we're just getting a lot smarter on how we are generating pipeline, what we're doing through partners, what we're doing through marketing know how we're spending our outbound. We've just learned that certain things are really productive in areas, other areas that are and the last is we got really focused on G&A., there's a lot of areas we've invested in the last two years on process and technology that's just allowed us to get a lot more efficient and we're dropping those to the bottom line. So overall, I think we've got the right structure and we still have the investment that we need to deliver the leading product and go-to-market organizations.
Joseph Vafi
Great. Thanks for that color. And then just squeeze one more in. I know you were targeting rule of 30, and you're targeting it again here. But given kind of a couple of the moving parts on the top line and then the cost reductions, do you see yourself getting to the rule of 30 slightly differently than you were previously or the last time you provided that outlook. Thanks a lot, guys.
Tien Tzuo
So we've been really disciplined. We said beginning of the last year that we weren't sure exactly how things were going to go. If we didn't see the ability to put dollars on the top line that we continue to put through the bottom line, I said would be at the beginning of last year that we would do 6% plus profit.
We delivered 11. We're going to continue to do that. So obviously, if you take a look at where we've given the guidance, that's going to imply that were over a 20% operating margin at the end of the year, so yes, probably a little bit more on the bottom line, but we've certainly got opportunity to accelerate on the top line. So I feel like we've got a lot of different avenues and a lot of different function or a lot of different avenues for how we can get to that rule 30, regardless what the environment looks like.
Operator
And again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Joshua Reilly from Needham. Your line is open.
This is Michael on for Josh today. Thanks for taking my question. I just have two quick ones here.
First, what are you seeing in terms of invoice volume growth returning to maybe a more normalized level over time? And then could you help us understand the impact of lower invoice growth to the NRR?
Todd McElhatton
Thanks. Yes, I'll go ahead and feel that maybe Todd, you could jump in. But on local, I think we said invoice volume was 10% where the volume was 12%. You compare that to the growth of the GDP in the large countries, you can certainly see that our customer base continues to grow, continues to have a much healthier outsized growth compared to the general economy. So we're in the right part of the market. We're in the right part of the customer.
Understand right. How does that correlate to us? I think what you've seen us do, and we've been pretty public about it over the last three, four years to simply reduce our reliance on the invoice volume growth for our own growth. And so you've heard us talk about our multiple vectors of growth are multiproduct land-and-expand strategy.
Today, we can grow by certainly unit volume and revenue, the scheduled revenue revenue and volume growth in invoice volume, but we can also grow by additional cross-sold products, straight billing customers by revenue, vice versa. You heard us talk about that in the call or even within each of these products. We continue to launch new innovations, say, fraud detection in the billing product, SSP. and the revenue product and the like.
We can certainly sell additional modules and capabilities within a product that they already have. And so our goal is to give our sellers raise a broad toolbox, if you will, a tool bag to bring value to our customers. And as long as we continue to do that, you're going to see us ability to grow with our customers.
Tien Tzuo
Maybe, Michael, the only thing I would follow up with is we've talked in the past maybe 30% or so of our revenue is driven by a volume metric. Again, you can have we don't have a natural correlation for the 10% to 12% growth because as our customers get larger, they get big economies of scale. And that's one of the reasons that it is not an easy correlation for that 18 hit it right now.
That's certainly a driver for us. And as we've seen, especially the SaaS market, which is more than 50% of our business, as we've seen growth rates come down, that's been a headwind for us this year. We think, you know, we'll see this year that we get to the end of that headwind, but that certainly has caused a bit of a headwind for us. And as we accelerate that, it will be something that we'll be able to take advantage of. But we also have multiple other avenues of where we can grow and the fact that we have a $600 million opportunity within our installed base outside of volume and we think gives us a lot of ability to also grow within our installed base.
Awesome. Thanks so much. Appreciate it.
Operator
Brent Thill from Jefferies. Your line is open.
Eylon Liani
Well, thanks, for the question. This is Elan Liani on for Brent. So my first question is on most companies are telling us that the environment is improving. So other than the macro piece is there anything structural that we should be aware of?
And my second question is on the recent layoffs. How much of those and the cost savings from the layoffs are being reinvested versus flowed back through to margins? If you can help quantify that, that would be helpful. Thanks.
Tien Tzuo
Yes, let me field the first one, a lot type type field. The second one. Look, we all read the news just like you. All right. Is there a general sense that maybe is at the USB3 Dodge recession for a soft landing is a general sense that, hey, you know, maybe defense on will start to lower interest rates was going to be the start of the year with EBITDA of the year. I'd say we're picking up the same level of optimism in the air that other companies are. But then, you know, I don't know if you've obviously been following some of the announcements today. We certainly see other companies people more muted in their expectations of what revenue growth will look like this coming year.
So I think, you know, I think in this uncertain environment, it's going to be prudent. And that's why I like our strategy, right? I like our strategy of saying, look, regardless of what's going on in macro, we can continue to sign on new logos we might be doing in the smaller ACV, a smaller land we feel, but it leads to faster sales cycles that leads to more customers. We've got a proven engine that once we get the customers and we get them live, we can grow with them. You heard the stat about 60% of our customers who renew this year actually grew their spend with us. And so we feel good about the strategy that allows us to continue to set ourselves up for a great position for long-term durable growth. Regardless, what happens in the overall macro.
Robbie Traube
I'm the only thing I'd also add to what Tim said as you I probably talked with 20 plus CFOs in the most recent quarter. And when I talk about today, all of them, I think everyone's being very cautious in their outlook as they start thinking about this year. So I think the guidance that we've given is really prudent based on the macro from what we're seeing and hearing from our customers.
On your second question, as I as I noted on the last call was that there was about $15 million of that savings will go to the bottom line for the year.
So appreciate the question.
Operator
This concludes today's conference call. Thank you for your participation. You may now disconnect.
