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Good afternoon, and welcome to Copperleaf First Quarter 2023 Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, May 10, 2023. Your host today are Paul Sakrzewski, Chief Executive Officer of Copperleaf and Chris Allen, the company's Chief Financial Officer. Before we begin, I am required to provide the following statement respected forward-looking information. During the call today, the company will make forward-looking statements that are based on assumptions and, therefore, subject to risks and uncertainties that could cause actual results to differ materially from those projected. The company undertakes no obligation to update these statements, except as required by law. You can read about these risks and uncertainties in regulatory filings that were filed earlier today. Also, the commentary today will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliation between the 2 can be found in the company's regulatory documents, which are available on sedar.com or on our website. In addition, commentary today will include key performance indicators that help evaluate the business, measure performance, identify trends affecting the business, formulate business plans and make strategic decisions. SECI performance indicators may be calculated in a manner different than similar key performance indicators used by other companies. And with that, I'd like to turn the call over to Paul Sakrzewski.
Thank you. Good afternoon, everyone. Thanks for joining us to discuss Copperleaf's first quarter performance. I'm excited to share an update of our progress in 2023 and some of our future direction. On today's call, I'll make opening remarks before passing it over to Chris to provide a detailed review of the financial results. Following our prepared remarks, we'll open the call to questions. Copperleaf's first quarter results demonstrated continued momentum with material year-over-year growth across multiple sectors and geographies. During the first quarter, we delivered 28% year-over-year revenue growth and 29% growth in annual recurring revenue. We delivered these strong results while continuing to navigate uncertain economic conditions with temporary associated headwinds like increased client signatory requirements and limited client resources. Copperleaf's first quarter 2023 results reflect the team's commitment to prosecuting our pipeline, converting deals into backlog, ARR and revenue. We ended the quarter with $110.5 million backlog and the largest pipeline of opportunities in our company's history, giving us confidence in our bookings in 2023 and into 2024. In the years that I've been part of the Copperleaf journey, I've had the privilege of seeing firsthand how Copperleaf solutions deliver value for clients as they roll out our value-based decision-making methodology and software across their businesses. Now as CEO, I'm focused on driving increased adoption and penetration of our solutions globally to ensure everyone has access to our products and the value they generate. Over the past few years, Copperleaf has been focused on strengthening our market-leading solution and driving scalable growth. Today, we're a leading provider of AI-powered enterprise decision analytics software solutions, trusted by organizations in the electricity, natural gas, water, oil and gas, pharmaceutical and transportation industries across the globe to guide their investment decisions. As a direct result of our planful approach to introducing the new market sectors, we've successfully expanded into the ports industry with our first win in the Middle East as well as into upstream oil and gas here at home in North America. We recently announced the Teréga selected Copperleaf portfolio for asset investment planning. Our first client in France. Teréga is at the forefront of the energy transition, lighting the path to carbon neutrality through the development of innovative solutions and the commitment to establishing and meeting environmental, social and governance targets. The organization is focused on improving the reliability of its asset base to provide customers with a safe, high-performance grid and accelerate the adoption of new technologies and energy sources. Copperleaf's portfolio will allow Teréga to optimize asset investment planning to ensure the organization can maximize the value of every investment they make. During the quarter, we also welcomed Scottish Water as our ninth U.K.-based water client and signed Sydney Water, our first Australian water client, underscoring the global applicability of our solution. This highlights the competitive advantage of using the Copperleaf's value model library to rapidly enable these new clients to align decision-making with strategic goals and maximize the value of their capital investment programs, operational activities while proactively managing risk across their asset base is using tried and tested models. Water utilities are facing unprecedented headwinds making it increasingly challenging to meet service level targets and minimize disruptions. Copperleaf provides water companies with proven tools to assess these complex challenges, providing a comprehensive understanding of asset risk. With an established position in the U.K. water market, our first win in Australia and a strong pipeline of opportunities, we're well positioned to drive adoption globally in water utilities. Our continued ability to deliver tangible return on investment and retain our clients has driven 111% net revenue retention rate in the quarter, which demonstrates the stickiness of our client base and the growing need for the solutions that we provide. Going forward, we intend to strategically approach new market sectors where we are able to apply the required resources where it's clear that the scope for growth is material and where we know we can provide substantial value to the largest clients in those sectors. In January of 2023, we established a global growth office to ensure that we have an efficient coordinated approach to bringing together specific expertise in market sectors, products and partners, together with value engineering to support our go-to-market activities. With dedicated Copperleaf partner managers in place in each region, we are focused on expanding our reach and establishing the tools, partner ecosystem and structure needed to efficiently scale the business. The alliance ecosystem continued to gain traction during the quarter as our partners invested in expanding their Copperleaf practice areas. In Q1, Copperleaf signed an endorsed apps agreement with SAP, signaling SAP's recognition of Copperleaf's industry-leading technology and the value that the combined solutions can deliver to organizations globally. Cooperation between SAP and Copperleaf will provide our mutual clients with best-in-class capabilities to further unlock value in their business and achieve their strategic goals. During Q1, Copperleaf released version 23.1 of its product suite, which introduced numerous new features, including a configurable performance management dashboard, enabling flexible and powerful visualization and adaptation of plans and improved support for multipart or dependent projects, coupled with an intuitive graphical user interface, which will drive better outcomes and further improved optimization results. Copperleaf is executing on the plan we put in place prior to our IRPO. 2022 was a planned investment year to Copperleaf with a focus on hiring talent, increasing capacity and laying the framework necessary to drive future growth. With the right people and strategies now in place and a refreshed operating model, our focus is squarely on execution to drive continued growth. 2023 is a year focused on execution and ensuring that those investments are generating value. Our retention will remain on holding headcount flat, managing our costs carefully and delivering deals and bookings, which will lead to strong ARR and backlog growth in the second half of the year. For the remainder of 2023, we expect our growth to be driven by sustained industry tailwinds, such as the increasing needs of our client to practically manage ESG requirements and generally improve capital efficiency, acceleration of our ability to bring innovation to market in the form of new products and enhanced services, delivering our investments in sales and marketing, which are leveraging our investments in sales and marketing, sorry, which are demonstrating early positive results with some examples of accelerated deal velocity and increased lead generation and pipeline creation. And lastly, expansion of our alliance ecosystem, which includes new partners like SAP. With that backdrop, I firmly believe that Copperleaf is well positioned for the next phase of growth, enabling us to make substantial progress in 2024 on our path back to profitability. I look forward to building on the solid foundation we've established as we continue to transform how the world sees value. I'll now turn the call over to Chris to review our financial results in more detail.
Excellent. Thanks, Paul, and good afternoon, everyone. We're pleased to report that our first quarter 2023 results continued to deliver growth across our key financial metrics. Revenue for the quarter ended March 31, 2023, was $20 million, an increase of 28% from $15.6 million in the comparative period, driven by the delivery of new clients and expansion within existing clients. Subscription revenue for the first quarter was $11.3 million, an increase of 24% from the prior year, representing 56% of our Q1 revenue. The trend in subscription revenue growth was masked sequentially as a result of client negotiations in 2022, where we took a conservative revenue recognition approach. Those negotiations were finalized in Q4 2022 and resulted in revenue from prior periods to be recognized or caught up in Q4 2022. For reference, without the catch-up, subscription revenue in Q4 2022 would have been $10.9 million. Professional services revenue for the first quarter was $6.9 million compared to $6 million in the prior year and this segment represented 35% of our Q1 2023 revenue. Perpetual and term license revenue for the first quarter was $1.8 million compared to $0.5 million in the prior year, and this segment represented 9% of Q1 2023 revenue. Our annual recurring revenue at March 31, 2023, was $49.1 million, a 29% increase compared to $38 million at March 31, 2022. As of March 31, 2023, our net revenue retention rate was 111% reflecting expansion within our client base and our strong renewal history. This percentage will vary period-to-period due to the timing of large expansion contracts within our existing client base and the mix between perpetual and SaaS expansion deals. Revenue backlog was $110.5 million at March 31, 2023, a 15% increase from $96 million as at March 31, 2022. Gross profit was $13.7 million, representing a gross margin of 68%, a 22% increase from $11.2 million and a gross margin of 72% in Q1 2022. Gross margin has decreased temporarily due to a combination of increased partner subcontracting costs in the quarter, plus the increased headcount, travel cost and product support related to our growing client base. As a result of our planned investments to capitalize on the inflection in the decision analytics market, we had an adjusted EBITDA loss of $10 million for the quarter compared to an adjusted EBITDA loss of $9 million in the prior year. Net loss for the quarter ended March 31, 2023, was $11.8 million or a loss of $0.17 per share compared to a net loss of $10.9 million or a loss of $0.16 per share in the prior year. We finished the quarter with $145.9 million in cash compared to $149.5 million in cash at the end of fiscal 2022, which places us in a strong financial position to build on our advantage and further penetrate the investment planning and decision analytics market. With our strong unit economics, we remain focused on making thoughtful long-term investments that will drive accelerated growth in 2023 and beyond. As we continue to expand our reach, we're confident that our focus on operational excellence will drive best-in-class margins, expand our leadership position in the growing decision analytics market and accelerate our path to profitability. That concludes our prepared remarks. I'll now hand the call back over to the operator and open it up for questions.
Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. [Operator Instructions] Your first question comes from Maxim Marski with RBC Capital Markets.
I just wanted to touch on the pipeline. In terms of the pipeline for 2023, is it still too early to have indications of how bookings will progress into the back half of '23? Or do you have a decent sense now in terms of visibility from the conversations that you have ongoing right now in terms of how kind of the Q3 and Q4 bookings will progress?
I mean we've got a good pipeline. It's distributed globally, and we see it growing across all the different market sectors and within the core sectors that we're penetrating and also some new sectors that we're introducing. We are going to be back end heavy as usual, which is in line with our clients' buying patterns generally speaking, Q3 and Q4 heavy again this year. But the pipeline is well and truly enough to cover what we're calling for the year, and we think that it represents substantial growth on last year.
Got it. I'm just wondering if you could touch on the recent wins and the kind of the go-to-market strategy with clients in the newer industries like ports and oil sands. Are you having success there because of the consulting partners? Or is this more of a result of the sales and marketing investments you've already made in being able to establish more direct relationships?
It's a combination of both. We've certainly seen partner activity increase, and I think that we're more coordinated with our partners now. We've had good opportunistic success with partners over the years, but it feels like we're more coordinated and we're taking a joint approach to most of the markets where we are. But obviously, global coverage is something as well. The deal in the Middle East is a direct deal, and it's largely due to the fact that we have people on the ground. And if the project has kicked off and the client is happy, engagement looks good. I'm actually in Abu Dhabi at the moment and talking to the client. So I've got first-hand knowledge from today. The coverage is good and the partners are ramping.
And just final one for me. I just wanted to touch on pricing and how we should think about the potential for that to move higher. You obviously have close relationships with your customers. So I'm wondering how you balance the customer satisfaction side of it with the measurable value add of the software is providing customers? And is it easier to have those conversations with existing customers on renewal? Or do you just try to set appropriate pricing with new logos right away?
Yes, Alex, we are constantly reviewing our pricing. We introduced new products and the different parts of the suite generate different value. Like I said, we introduced a global growth office. And one of the benefits of the Copperleaf solution is that it does demonstrate material value almost from the day that you switch it on. We're getting better at articulating that value, which obviously has a knock-on effect of the price that we can command in the market. And it's a focus area for us to make sure that we're doing post-implementation value audit so that the clients in the install bet and we lined up on just how much value that the product is delivering. And of course, the more references we have that will speak well of the ROI of the solution, the better we're placed to command better prices in the market. So we're constantly reviewing that, and we're putting concentrated at into making sure that we can articulate value to new clients in ways that they can understand in terms of their business. So it's an ongoing effort to make sure that we're fully priced in the market. And that's a balance between how much we can command in each deal and how quickly we want to go.
Your next question comes from Thanos Moschopoulos with BMO Capital.
Regarding the spend in climate and sales cycles, is it sort of status quo? Or have you gotten any better or worse over the last 90 days?
I don't think it's changed much. We've come into a new year, and I think there was a reasonable amount of optimism coming into the new year. But we've seen a little bit of financial in security with a couple of banks in North America, and it's different per region. But it's hard to really pick a trend. I think people are still cautious about deploying capital. They're still cautious about taking on new digitization projects. We don't see a material difference in the last 90 days from an ease of closing point of view. But we're certainly hopeful that things will free up a little bit more as we go into the end of the year. But no huge difference that we can see.
Okay. Looking at the R&D expense. R&D expense in Q1 was quite a step-up from Q4. What drove that increase?
You're just talking about the expense on R&D. And as we mentioned in the Q4 call, much of the expense that you saw there, that reduction from Q3 was effectively a reversal of accrued incentive compensation. So I think the Q1 results that we see here with regard to both COGS and our operating expenses are pretty good indications of run rate that we'll see through the rest of the year.
Okay. I remember that dynamic, but I thought it was more on the sales and marketing line, I can't remember this R&D. And just on gross margins. So just going back to that. So with Q1's gross margin level, if we adjust for licenses and the license mix in any given quarter, would that be kind of an indicative run rate for the next while?
So I think we saw some unique partner subcontracting costs in Q1 and will likely in Q2 as well. I still think that through the rest of the year, it will taper off a bit. So we still expect to be in and around the 70s for the rest of the year.
Your next question comes from Gavin Fairweather with Cormark .
So just to close the loop on gross profit, it sounds like the subcontractor piece is maybe more transitory where is the component tied to kind of headcount, travel, product support is maybe kind of permanent costs that you'll just kind of leverage with growth. Is that the way to think about it?
That's correct. Yes. I mean, as we said last quarter, we didn't necessarily end with -- in 2022 with all of the backlog that we expected. So that does have an impact on services revenue coming into Q1 as well as utilization to a degree, and that was further exacerbated just with, again, this unique kind of temporary partner subcontracting costs that we saw in the first quarter.
Okay. Great. And then net dollar retention has been kind of ticking up for a few quarters but maybe still below kind of your targeted range. Maybe you can just touch on kind of the pipeline for expansions, whether those are materially easier than new logos to get across the line? And if you have any kind of visibility on that number trending back towards your targeted range?
Yes. I mean we see it trending back and we continue to introduce new solutions that can be utilized by the installed base. There's still a substantial opportunity among the clients that are currently using the system for more software and services. So -- but it is lumpy. We have introductions of substantial new LOBs in some of the clients and where that happens, the number ticks up, where it doesn't happen, it's flatter, but we're also putting some concentrated efforts through customer success managers into ensuring that we have pipeline road maps in place with each of the installed base clients, and we get a little bit more visibility on what they're going to be needing and what the timing is on those new phases. So rather than having that be more opportunistic and spotty, we are getting that to a position where it's more programmatic.
Great. And then just lastly, I guess it's been kind of since the start of the year since you implemented this global growth office model. Do you have any kind of early feedback or kind of data points that you can share in terms of kind of the impact on that on the satellite offices and how they're able to move deals forward?
Yes, it's a good question. We've introduced -- like I said, it's got 4 pieces to it. effectively. It's people who carry the responsibility for ensuring that our product lines are being taken up by our clients and being included in new deals so that we've got good penetration and good coverage with our products across the heat map on the installed base but also in new product, new client pursuits. There are people focused now on industries. The industry's piece is key, and it's not something that we want to proliferate globally. We're not a company yet that can afford to have industry specialists in every market. So making sure that we've got good people centrally that can be leveraged by the whole global go-to-market team is important. And you're going to see a lot more coming out of the partner side of the business, which is the third plant. SAP is an early one. There are more partners in the pipeline that will be signing formal agreements with and having joint marketing agreements with as we progress into the year. And then value engineering is the fourth plank and just making sure that for those strategic deals, we're building much more robust ROI statements and value statements for the clients to make sure that as we go...
Your next question comes from Koji Ikeda with Bank of America.
This is George McGean on for Koji. I just wanted to ask in terms of sales and marketing productivity and how you've kind of ran head count over the last couple of years and now kind of getting a chance to keep that flat this year. I was going to ask if you could kind of maybe provide some color on how sales and marketing productivity is ramping, how headcount productivity is ramping there and how that's kind of tracking in relation to your own internal expectations, if you could?
I can start on that. Basically, effectively, we did a good job, I think, of executing on the plan last year, which was to build the headcount, the sales and marketing team, round that out, and we've done that. And really, as far as the productivity goes, the early green shoots as we've said even in the last conference call, we can really point to the pipeline, which we've seen increase. As we said on this press release. We've got the biggest pipeline in the history of the company. So we continue to see those new sales resources starting to build pipeline. And as well, in fact, some of those new ads have already closed deals. So as we've mentioned in prior conference call, there is quite wide variability on each one of our deals. They can range from as short as several months to close a deal to many months and years to close deals. And we've seen, yes, some of our new hires, even closing new lines or new logos basically in that time frame. So overall, we're happy with the ramp-up. We think that we've got a great team in place, and we're very encouraged again with that pipeline that we can show good bookings, good AR through the rest of this year, and we'll have an excellent start on next year.
Your next question comes from Todd Coupland with CIBC.
I wanted to circle back to sales cycle. I know you said -- you gave an answer to an earlier question, you didn't think there had been a change since last year. What you observed that the banking crisis and a focus on digital budgets, I guess, not loosening up was still an issue. So I guess in that context, has that banking crisis extended sales cycles? I don't know if we're reading too much into that observation, but just curious how that specifically is impacting clients' views of your products?
I mean I want to avoid commenting on growth like an amateur economist. It's really just an indication of an ongoing instability in the market. I don't think we're seeing a boom back economy at the moment globally, or just a little bit cautious. The point around the client is as much capital preservation and cash preservation as it is capacity. We're still seeing companies constrained the capacity at the -- coming out of COVID, and some of that is that they might have some reduced capacity or reduce tenure in their businesses, particularly in the deployment of new digitization projects. But also there's a trend globally towards migrating to the cloud away from on-prem solutions, particularly the big ERP companies. And we're seeing that that's taking up a lot of bandwidth as well. So it's a mixed bag. We don't see it any worse. We don't see it necessarily improving, but we'll certainly call it out as we see changes.
And just on that trend of the cloud, so that's away from you. That's -- so it's effectively enterprises making choices on where those dollars are going. Is that the point you're making?
Yes. Well, dollars and almost more than that resources. The IT functions, particularly the ones who are tasked point task with implementing new software solutions and new programs are focused very much on migrating HANA upgrades and things like that. So it's a resource thing as much as it is the budgetary issue.
And then whenever the market starts to turn or close rates improve, can you just talk to the current state of the go-to-market? I know you made that observation on the global growth office. But do you have all the pieces in place now with the exception of the partners that you referenced. So it is now blocking and tackling and then dealing with these market dynamics. Is there anything else to put in place on the go-to-market?
No, not really. I mean I think the key functions are in place. Obviously, we'll add capacity as we start to see growth improve. For the time being, we've got the capacity that we need to prosecute the pipeline that we have. The introduction of the Global Growth Office and also some introduction of sales operations resources to improve our processes, like forecasting, sales training so that we can bring account executives up to speed quicker. Those things are all in place at the moment, and it's a matter of then of adding capacity as we see growth. And I think we can do that not too far ahead of the curve going forward. We do have a critical mass of coverage globally now. So there's a big difference between just increasing your footprint to try and get coverage globally and adding capacity in those places. So I think that the days of adding capacity well ahead of the curve are behind us, and we can add capacity pretty tight to the growth that we see emerging.
And I know you're very much a Q4 quarter. You called that out again this time. When do you feel you'll have a better visibility on Q4? Is it not until you're into the quarter or a little earlier in the second half of the year? Any observations to make on that would be helpful.
It starts to emerge in Q2 and Q3. The nature of our long sales cycle. You do start to get visibility on how solid in the deals whether they're on a closing path several months in advance. So we'll -- as you go through the year, it solidifies. Copperleaf is not unique in this situation. I've been living with dream at different enterprise software companies for the last couple of decades. So the back end of the year is always the big quarter and the back end of that quarter is always the big last 6 weeks. So it's always like that, and I think that we're getting better and more predictable at prosecuting those pipelines.
[Operator Instructions] Your next question comes from Robert Young with Canaccord Genuity.
Maybe add on to one of Todd's questions there on the capacity. I understand there's some of the commentary in the release around maybe capacity on deployment being constrained as you said limited client resources, maybe subcontracting on your partners. And so I'm just trying to get a sense of whether you have the deployment to sort of prosecute the bottom of the funnel as you see it now? Or is that a challenge?
It's not a challenge internally for us. We've got good capacity in the CX function across the 3 regions. And so it's not a problem for us internally, and that PX capacity has good tenure now as well. So we've got very experienced people in each one of the regions. And again, just to call out a point I made a little while ago, there's a big difference between putting the first few people in and adding capacity under those people. We tend to be able to ramp people much more quickly because we have experienced people in the region so we can add capacity faster than we used to be able to. What I was referring to is really more at the client level. Copperleaf tends to be fairly light on client requirements. So there's an element here of the fear of introducing a Copperleaf deal and a Copperleaf project to the mix, being much more than the actual reality of it. Our implementations tend to be fairly light on requirements of the client, but they do line us up with other enterprise software companies. So just making sure that we articulate that to our clients and just make sure that they understand that it's not as heavy a lift to implement a Copperleaf solution as it is, say, an Oracle or an SAP or an IBM solution for the most part, is important to us. We need to make sure that clients are feeling comfortable about that. But it's more at the client level than internally with Copperleaf.
And then maybe just a little bit of the partnership with SAP. Have you seen any uptick on that? I guess that's a big profile announcement. And then I think you said that you're going to hit the SAP store in Q2. And so is that something that we should think of as an inflection? Or is that just a milestone that you're looking forward to? Or maybe give us a little bit of an update there?
Yes. So SAP on the store in Q2 is still where we're at. There's been a lot of engagement between the teams globally. I've personally met with a lot of the SAP sales leaders across the 3 regions. And there's a lot of excitement about the combination of Copperleaf and SAP. And there's a lot of conversations going on around us forming joint pursuits with specific clients. So you're seeing a lot of specific activity to occur. It will really kick off in earnest when we are actually up and running on the store. But I think that we're well ahead of the curve and the comment from SAP is that they've never seen anybody as side down the path of getting ready for go-to-market planning ahead of actually being up on the store than we are in our situation. So things are looking good. I don't want to put an overemphasis only on SAP. We have a portfolio of different partners coming through, both SI partners and technology partners. So we need to put that in context and make sure that we're not talking too much about the SAP relationship, which is incredibly important to us. But we're not 100% reliant on that but seeing the uptick. The partner in the ecosystem is a huge part of our future. It is the key to our scaling on a global basis. And we're seeing really good progress in all of those different categories of partners. And a lot of that is due to just focused execution on that. And a bit of coming of age from a Copperleaf point of view. We're at the point where the critical mass is sufficient that people start to build practices around what we do. So it's the timing, it's good.
Very nice. And then last question would be on the Sydney Water win. Seeing quite a lot of tailwind in water. That's a pretty big place to start in Australia. And so I'm curious why would the largest water facility pick Copperleaf? Is that a good reference for Australia? What has implied the ability to sort of move quicker in Australia than in the U.K.? And I know you've said in the past that water is very advanced in the United Kingdom. And so is that -- are you seeing some of the benefit of starting in the U.K. and then now bleeding out into other areas?
Yes. Sydney Water is obviously a terrific progress for us in Australia. I mean it's starting at the top is a good place to be. People look to Sydney Water as a best practice company and they pride themselves on being a best practice company. And it's often the way that we work with clients who are most forward-looking most technology for it and looking for technological advancement and Sydney Water is certainly one of those companies. We've been working on that deal for quite a while. And we do find that the first win in a specific country takes a while. But once you get there, you can build off that. And we've seen how that works in the U.K. And there's a good pipeline of water behind that. And obviously, this is going to accelerate us. And the team has kicked off the project and the focus for us now at Sydney Water is to make sure that we're demonstrating value and that the project goes well. And they speak well of us. And they're a great reference for Australia that they're a great global reference as well. Water Management in Australia is an important topic. It's a pretty dry country and water conservation, circular economy, EST sustainability, all of those things are on the agenda there. So it's a pretty exciting project for us.
And is North America still greenfield from a water perspective? Do you have any -- is there a reason why North America is maybe a little bit slower?
Yes, it is greenfield. The -- there are some large water companies, and we're obviously talking to them, and there's a pipeline in North America, but it's one of the more fragmented markets. So that is one of the features of the U.K. and Australia. The water utilities tend to be quite big. And that gives them the affordability for innovative solutions like ours. But we are -- there's enough in North America in the big end of the water market for us to focus on, and we do expect that we'll deliver some U.K. water deals in the not too distant.
Your next question comes from Dylan Becker with William Blair.
Maybe not to continue on the sales efficiency side of the equation. But as you are seeing, again, you proved a lot of capacity there. I guess how are you interacting with clients? I know we've got the partnership channel that's coming into. Is it still much more of an evangelization of what the tools and functionality can actually really deliver? Or are you starting to have more indefinite grain customer conversations where were they know the value proposition and now it's more just aligned with the purchasing patterns of that actual business or line of business, I guess.
I mean I think it's a continuum. We are definitely walking into clients and having more discussions that progress quicker because I think this is a topic, AIP and is definitely a topic that's on people's minds. As their decision-making landscape gets more complicated, they really are looking for software solutions to ensure that they can incorporate all the different value drivers apply the constraints and do more accurate and more capital-efficient long-term planning. So this is a topic that's on people's minds and it engages quickly. Most of the clients that we work with are in the utility space. So our core of core is in utilities, they're pretty conservative, and they're certainly conservative in new markets, in new sectors. So getting those conversations to -- across the line, it's still an evangelization exercise. But again, just referencing the U.K. water market, where there is an established client base and there are already references, things move a lot quicker. The other part of the equation is really speaking the client's language. And I think having industry specialists who can really speak in the clients' language and just make sure that we're articulating. You talked about features and functions. Features and functions are a part of the discussion, but we also need to really focus on articulating value, as I've said a bunch of times before. And just that needs to be in the language of the client. And I think that we're getting better and more efficient at that. And it helps to short-circuit that evangelization process.
I guess, since you touched on, again, some of the AIP to coming up in nearly a discussion. How much like the ESG and sustainability piece. I know we talk a lot about this, but it seems like every month, there's some sort of new mandates, right? So I wonder how much that is helping fuel I think it was maybe, I don't know, 1/3 of new business activity last year. Were you seeing that pick up or accelerate?
Yes. I mean most of our discussions have got some element of ESG in the these days, and that's become a stronger and stronger trend over the past 24 months. And certainly, a lot of our value measures in the mobile library are ESG focused. So everybody is wrestling with that -- the ability to incorporate ESG value drivers into their decision-making. Some of these things are hard to measure, hard to quantify. And so being able to line up those value drivers next to the more traditional things of profitability and safety and reliability and have those things compare on an apples-to-apples basis is certainly on people's mind. And just about every discussion we have has got an ESG component to it. A lot of that is about decarbonization. So there's a lot of the E. But more and more, we're seeing people want to or companies want to include social justice overlays in their investment planning so that they're making sure that they're putting money into putting capital into underserved communities, and that's a key focus for us as well. And it's something that we can really achieve for clients. So that's certainly a tailwind that we see.
There are no further questions at this time. I will now turn the call over to Mr. Sakrzewski.
Okay. Thank you, everybody, for joining us today. We certainly appreciate the interest, and we're looking forward to a good 2023. Happy to take any further questions if anyone ask them. Otherwise, we'll close the call.
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