Good day, ladies and gentlemen, and a warm welcome to today's earnings call of the Exasol AG, following the publication of the first half-year figures of 2024. I'm delighted to welcome the CEO, Joerg Tewes, as well as CFO, Jan- Dirk Henrich. So the gentlemen will speak shortly and guide us through the presentation and the results. Afterwards, we will move over to our Q&A session, in which you will be allowed to place your questions directly to the management and Mr. Tewes. Having said this, I hand over to you.
Thank you, Sarah. Good afternoon. Thank you for joining our quarterly earnings call, in which we speak about the figures for the first half of 2024. I'm here today, so my name is Joerg Tewes. I'm the CEO of Exasol, and with me is also Jan- Dirk Henrich, who is our Chief Financial Officer.
Good day from me, too. Welcome to our call.
Thanks, JD. So I will start the presentation by providing a few high-level updates on our business results for the first half of 2024, and then JD is gonna take you through the detailed financial results. So, Sarah or JD, if you go back one slide, let's just pause a moment on our disclaimer slide. Just go back two slides. So, take a quick look at our disclaimer around forward-looking statements. Thank you. Okay, so let's speak about the key metrics and key figures of the business for the first half of 2024. As we have shared in our investor press release, we have accomplished a very important milestone for Exasol.
For the first time since our IPO in 2020, we achieved a positive EBITDA in the first half of 2024. Our positive trend continued in Q2, 2024. Combined, now we have had an EBITDA of EUR 700,000 plus. So like I said, those were the first two consecutive quarters that the company has been not losing EBITDA euros. We're proud of this achievement. I think that was one of the important elements of our turnaround that we've been through with for the company, and we will also share some updates. This will continue for the remainder of this year. Our.
As a consequence of the positive EBITDA trend, we have also increased our liquid funds, supported by the cash inflow of EUR 6.4 million in the first six months. So the liquid funds are now close to EUR 20 million, and they were at EUR 19.7 million at the end of June. Sorry. Our ARR was up 12% on a year-over-year basis. So, and our revenue was up 9% versus the prior year. The gross new ARR in the first half of this year is slightly above prior years' level. We did announce previously some expected churn, so that churn materialized.
There was one larger customer that we lost in H1, so that was a headwind that we had on the ARR business. That customer loss was in the range of EUR 1.2 million. With seasonal increase in new business, so traditionally we have more new ARR in the second half of the year, and a growing momentum in our new logo generation. We expect the ARR to rise again in the second half. Basically, we're confirming the outlook for 2024, and let me quickly recap what that was. So we guided at the beginning of the year that we will have ARR growth up to 10%, so that remains unchanged.
Our overall revenue growth will be in the range of 10%-15%. We expect or continue to expect improved EBITDA, so the outlook that we shared, that we will end the year in positive territory remains. And we also confirm that our liquid funds will stay actually safely well above EUR 10 million by the end of the year. Okay, next slide. So, let's speak about some of the momentum that we have. So we won nine new logos in the first half of 2024, over six new logos in the same period last year, and our gross new ARR slightly increased from EUR 2.2 million-EUR 2.3 million in that timeframe.
As you can see here on the right side of the screen, we actually got some good traction, some key new logos in Europe. Actually two banks in the German-speaking countries, Germany and Austria. We were able to close a U.S. financial service provider, bring that on as a new logo. And then we had some additional wins in other areas, but we're specifically proud of those wins in the banking sector. It should also be noted that those banks that we won predominantly run on our Exasol engine that runs on-premise. Next slide. This is just to recap what we've been sharing previously on our product and product offerings.
So, as we shared in previous calls, we have a trifecta of products that we have a different go-to-market motion for. So there's Espresso for those customers who need support on accelerating an existing data analytics stack, mainly those customers who are on a what we call legacy stack. So they run in their own data center or on cloud, where we help customers to accelerate their data analytics use case. Then, the Espresso Plus product, which helps customers combine different data sources for analytics purposes, and then, the Exasol Data Warehouse, where we are the main central storage for all analytics purposes at our customer. So these are the three products, and we continue to refine and sharpen the go-to-market motion for all three products. Next slide.
We talked about this also in previous calls, where I shared our vision that our customers, in one form or the other, are all moving or adding AI, artificial intelligence, to their overall analytics needs. So, we have actually made some progress here that I wanted to share. So on the next slide, Jenny. A few examples where AI and ML, so machine learning, are being used by our existing customers. So we're very excited about one large U.S. enterprise account that we have, that we're working closely with, who's actually beginning an implementation on our AI solutions that we have, the Espresso AI, where they are gonna leverage AI for large-scale forecasts. Go back. Sorry, Jenny. Okay, stay on this slide.
where they are leveraging AI for large-scale forecasting use cases across tens of thousands of service points. So they're already using Exasol in production here, but they're going to add basically AI support for that, and this broadens the solution that we have. This is also exciting for us since we're partnering on that product, but on that project with both Accenture and AWS, so that we can also expand and drive further down that use case. So that's important because it's an important customer validation, and it will also help us in other accounts. A key German enterprise account is leveraging AI in production as the data layer to power their machine learning-driven predictive maintenance.
So that's also a very strong use case in a complex and larger machine learning platform, where we provide the critical scale and performance capabilities. And then we've been continuing our conversations with accounts both in the U.S. and in Europe, where and how we can basically provide benefits, Exasol, together with large language model endpoints to drive chatbot and text analysis use cases. So that API integration is seamless and is really well supported by our architecture. So what we basically see here is our ability to work with some of our existing key customers on their journey into an AI-driven world. So most customers are getting started, so they are not fully on board on deep and AI use cases.
But, I think what, what we're doing together with these customers, we're basically helping them on their first steps right now, and that should also then enable us in the future, to have a broader AI strategy and footprint. So please go to the next slide. So, here's a quick summary of our AI product roadmap and some of the key milestones. So, as just described, we're going through the initial learnings and the initial product development activities with existing customers. So, and this is gonna turn into a product that we plan to launch in Q1 2025, which is basically a GenAI LLM-based powered data extraction and insight engine.
So that product will help people to extract insights from both unstructured and semi-structured data by transforming it into organized data store. So the important data point here is that about 80% of all data currently available in enterprises is unstructured or only semi-structured. So using AI and helping companies on leveraging that data and adding it into their data analytics environment is one of the key elements of that, that product and that strategy. So, as I said, we have strong positive feedback from early customers, and we're going through prototyping and further validating, that approach with, customers and also with our partners.
In parallel, we continue to work on some key engineering initiatives inside Exasol, which is to support vector capabilities in our core database engine, which will then help customers build and unlock more cutting-edge AI use cases. Sorry for the technical terms here, but I think it's important for the market that including basically customization of large language model for specific business needs. So, we have multiple of our key customers requesting that functionality, so we're in the process of building that out.
Then, more for the long run, we also continue to invest in our capabilities to run on graphics processing units, GPUs, such as NVIDIA GPUs, that will increase performance specifically around AI and BI workloads substantially. So, yeah, that's an update on our current roadmap activity. And with that, I would hand over to JD, who will walk you through the details of our financial results. And at the end of the call, obviously, we'll be happy to take questions. Thank you.
Thank you, Joerg. Let me take you now through the first half year financial results in detail. As Joerg mentioned initially, those were pretty much in line with what we expected at the beginning of the year and on the trajectory that we predicted would lead up to our guidance, including the facets that he mentioned. But I'll go through that in more detail. Let's start, as usual, with our top-line results. So on this chart, you see the quarter-by-quarter development of new business since beginning of last year. You can see that on a 12-month basis, we have seen 12% growth, or a total of EUR 4.2 million net new compared to end of Q2 last year.
The first half of this year, particularly Q2, was marked by a decline in ARR, mostly due to the churn of one major customer in the U.K. And this factor, in combination with the seasonality in our new business, led to a slightly declining ARR in the first half of the year. As you can see, in the previous year development, and also if I would depict here the seasonality of the previous years, our new business generation is traditionally extremely second half year heavy or even Q4 heavy. You can see that we've done almost 2/3 of our net new business in Q4 last year.
We will expect a similar pattern again this year, and that, in combination with the fact that we see churn impacts from our customers, typically in the beginning of the year, leads to this development in this year. Overall, when we look at the gross business generation, as Jörg has already pointed out on his chart, the gross new business generation was slightly above last year. And in terms of pure new customer gains, we were also to gain some momentum. And with those seasonalities playing out in the second half of the year, we also expect a return to a net growth in the next two quarters.
Looking at the last 12 months view, a little bit in more detail and along the classical subscription metrics, so these are the 12% year-on-year growth, broken down in a little bit more detail. You can see that the dominant driver of our growth continued to be upselling, whereas the new customer growth is not yet showing in ARR terms the impact of our repositioning as Espresso, although we can start to see the additional momentum in customer gains. If you look at the subscription metrics, you can see that our net revenue retention, so the amount of net new business that we were able to generate with the customers that we already had 12 months ago, has actually been rather stable compared to the same level as last year.
It was around 110%. But our gross upsell rate, so the additional business we were able to do, actually increased from 117 to 124, which was, however, eaten up by the increased churn rate. So on a net basis, the increased gross upselling rate and the increased churn rate canceled each other out. If we look at the last twelve months ARR in a bit more detail by region, that adds further nuances to the sources of growth. So you can see over the past twelve months, our EMEA region grew by EUR 2.8 million or 10%, whereas the North America region grew by EUR 1.4 million or 24%.
So America contributed roughly one third of the net growth of the past 12 months. And if you look at the metrics, the subscription metrics, which are shown in the boxes below, you can see that the gross upsell rate performance is actually quite comparable. But the elevated churn rate has particularly hit the EMEA region, which is not surprising in a sense. First of all, our installed customer base there is much higher, but also, the churn rate is at least partly affected by the overall economic situation that we've seen over the past 2 years, with about a couple of insolvencies as well in the customer base, and we saw those effects significantly more in our DACH customer base or German customer base than the U.S. customer base.
So the US churn was actually at quite a normal 7% rate, and as a consequence, although gross upsell rates were very comparable in both regions, net retention was significantly higher in the U.S. than in EMEA, due to the higher churn rates there. Now, given this elevated churn rate, it's worthwhile to take a look at the churn a little bit over time and also in a market context. So this chart illustrates the development of last 12-month lost business since beginning of 2022. So what you can see is that, throughout 2022, we had very, very low churn rates, at around about 4%.
And then what we started seeing, with a little bit of a delayed impact after the start of the interest rate changes and the Ukraine crisis, in 2022, we started seeing effects in our churn rates, in 2023. So due to the nature of our contracts, these impacts are seen with a little bit of a delay. And so what you can start seeing here throughout 2023 is this rising trend, which is right now at 15%, which we also expect to be the peak, which was aggravated by this one bigger customer that we lost, which accounted for around 2-3 percentage points, in this view. Now, and to put this into a little bit more context, we've looked at some benchmark data as well.
So what you can see on the right-hand side, we started using a benchmarking database called OPEX Engine, which is run by Bain. It's one of the largest database for performance metrics for SaaS and software companies in general. And when looking at a peer group of companies with a similar business model and size, you can see that the churn rates we're currently seeing are not quite unusual in the sector. That doesn't make it any more pleasant, or desirable, and obviously doesn't change our efforts to reduce the churn again, but it's also something that currently is a dynamic seen in the industry. I think what's also worthwhile pointing out, particularly in the churn rates that you see in 2023, also played a role that we shut down all our activities in Russia.
They weren't overly substantial, but still, it makes out a couple of percentage points in churn in such a view here, which is obviously kind of a one-time effect. We've now completely exited that market, and so this factor will no longer affect our churn rates moving forward, and as a consequence, we expect this to normalize back to 10% or below in the course of the next 12 months, in 2025. Moving away from top line and looking at how all this has affected our bottom line, I think as Joerg has already pointed out, we are very happy that we were able to confirm the profitability achieved in Q1 and even further improve it. So, in first quarter, profitability was EUR 300,000.
In second quarter, we were now at EUR 400,000, bringing us to a total of EUR 700,000 positive EBITDA, compared to minus EUR 3.4 million in the first half of 2023. If we break this down a little bit on the P&L line items, you can see that, in particular, recurring revenue has increased, so total revenues have gone up, but particularly recurring revenues have increased by EUR 2.5 million compared to first half last year. This was partly dampened by the fact that we did not have any non-recurring revenues or one-off revenues in the first half of this year, whereas we had some projects that generated such revenues in the first half of last year. Now, this one-off business is only pursued by us very opportunistically.
It's basically occasional consulting projects for customers, helping them installing the software, but it's not a regular part of our business model, so the important indicative number is the development of recurring revenue, which developed by 15% year-over-year, first half last year to first half this year. As a consequence, gross profit also increased by a similar amount. This was additionally affected by something we've talked about in previous calls already. So last year, we applied for research subsidies with the Ministry of Finance for some of our research and development projects that we're running. There are support funds by the German government and European Union to drive data-driven businesses, and we've applied for such. And in the first half of last year, we already had a positive effect in the size of EUR 900,000 in those numbers.
This year, it is EUR 1 million. So in a way, those numbers are comparable again, because the one-off effect contained in gross profit is the same. And on that level, gross profit improved from by EUR 2.3 million. On the cost side, by and large, we made further improvements to our cost base. Our personnel expenses decreased from EUR 14.9 million to EUR 13.7 million. Both personnel expense numbers, so both the one in 2022 and 2023, contained provisions for reorganization expenses in roughly the same height. So last year it was EUR 600,000, this year it's EUR 800,000. And these provisions will be used to bring required talent into the company, particularly in our product and technology fields, where we would like to upgrade our competencies, particularly in the fields like AI and cloud.
There we have to do upskilling of the organization, which will incur some one-off cost, which we provided for. So what you can see is what we're doing is we're using the one-off effects that we have from the research grants to finance the necessary one-off investments to ensure the continued competitiveness of the organization. As a consequence, you can look at the EBITDA results at the very bottom as the core performance of the business, which are largely unaffected by those one-off effects. Yeah. In terms of the other cost items, marketing costs be further streamlined, which is also partly due to the fact that the first half of 2023 still contains some remaining costs from our sports marketing activities, which we completely exited by now.
The only costs which are slightly rising, compared to first half of 2023, are our IT infrastructure cost, which is driven by higher cloud costs, as we continue to develop the product for different cloud platforms, as well as necessary investments in renewing our internal IT server infrastructure. So taking a look at how these profitability developments impacted cash flow, cash and liquid funds have increased substantially in the first half of 2024, which on the one side, reflects the typical cash effects from upfront payments of our business. So, a good chunk of our customer contracts are paid annually upfront, and this happens at the beginning of the year. So traditionally, we see a very large influx of cash in the first quarter.
Nevertheless, on that scale, this is quite unprecedented, as I will show you in one of the next charts. So we had a significant boost of liquid funds. As you can also see in this chart, in the bridge between EBITDA and free cash flow, that is the dominant. So these deferred revenue and working capital effects are really the dominating and almost exclusive factor in what drives the difference between EBITDA and adjusted cash flow, free cash flow. We do not have any meaningful CapEx, which is also due to the fact that we do not capitalize R&D expenses anymore. For our own IT infrastructure, we rely on leasing financing, which is therefore fully included in EBITDA. There are no notable other effects, or they largely cancel each other out.
So, this is the main driver. We had some remaining [XO] effects of EUR 400,000 related to the pre-IPO stock programs. Some of you who are following us for a longer time, I've talked about this many times, in the context of the IPO, there were some bonuses granted to employees who were with the company at the time of the IPO, who had a payout schedule over three or four years. And these EUR 400,000 are the last and remaining payout to those employees who are still around. But with this payment, these programs are now all settled, which means that future liquid funds and EBITDA will be unaffected by those.
So as a consequence, you will also see us basically stopping to report an adjusted EBITDA figure, but just report regular EBITDA, because that was the only significant adjustment we made. These developments then also clearly reflect the development in the balance sheet. Our total assets rose to EUR 26.6 million, which is almost solely driven by the increase in current assets and working capital. You can see that the current assets rose by EUR 7.6 million. Fixed assets decreased by EUR 0.9 million, which is driven by the ongoing depreciation of legacy capitalized R&D expenses. So we still have we capitalized R&D expenses up until the end of 2021. And obviously, when we stopped doing it, there were still capitalized projects that continue to be depreciated.
But since there is no new capitalization, we expect this depreciation to come to an end within the next one-two years, so the intangible assets will gradually erode to zero over the next one-two years. On the liability side, the rise in deferred income mirrors the increase in current assets, and net income decreased slightly as the positive EBITDA of EUR 700,000 was turned into a net income of minus EUR 300,000 through the depreciation that I just talked about.
But again, this effect will go away and, by means of, counter effects going in the other direction, as we now have a stable cash position and are not net cash burning anymore, that puts us in a situation to invest some of our cash balances, with the current interest rates being on a more attractive level than in the past. So we will start seeing some financial income, from our cash balances by the end of the year. So just summarizing, the total development, I just wanted to share with you again, kind of a little bit the long time, quarter-on-quarter development of our financials. Especially what you can see on the right-hand side is our successful journey to profitability. Basically since.
So I haven't included 2021 here, but since the peak cash losses that we experienced at the end of 2021, where we had almost EUR 8 million of yearly losses in one quarter, we have steadily and almost continuously improved that number to now two consecutive profitable quarters, which we are very happy about because it puts us in a position to address the challenges and of the future from an adequate position of cash and profit. And as you can see in the middle, also the cash inflow, you can see we already had a positive cash inflow quarter last year, but this has significantly gone up again with the major influx of funds at the beginning of this year.
So we're in a good spot to go the path moving forward and pursue a route of profitable growth. Which naturally, as Joerg already did, leads me to confirming our outlook for this year. So in terms of ARR growth, we continue to expect up to 10% growth depending on how some of the bigger upsell projects that we work on will land. Those of you who followed us last year know that we had a major upsell deal with one of our financial industry customers, which drove the Q4 results.
We have a similar project in the pipeline, which we hope to close, and depending on the outcome of that project, will determine whether we end at the towards the upper end of that guidance or towards the lower end of that guidance, or in the middle, in the middle ground of the guidance. In terms of revenue growth, we expect 10%-15%. EBITDA, as you can see, clearly positive, with two additional positive quarters. And then with liquid funds, we are confident to keep those very stable above our minimum threshold in our cash management of EUR 10 million, given the results that you see above. And with that, I conclude my financial update.
We will look forward to meeting and interacting with you through our different channels, either through our roadshows, through the Equity Forum in November in Frankfurt, or taking a little bit of a sneak peek to next year, we'll also be present again at the Hamburg Investor Days and then at the Spring Forum. So we hope to see many of you there, but obviously, for now, we are very happy to take your questions. Thank you very much.
Thank you so much for your presentation, Mr. Henrich and Mr. Tewes. We will now move over to our Q&A session. For a dynamic conversation, we appreciate it if you would ask your questions in person via audio line. If you would like to submit your question via audio line, you can raise up your virtual hand, or if you are not able to speak freely today, you can also submit your questions in our chat box, and we will read them out for you. We already received the first hand from Robert, so you should be able to speak now. Sorry, Robert, unfortunately, we cannot hear you.
Can you hear me now?
Yes.
Ah, perfect.
Yes.
Thanks, thanks for taking my question. It took me a time to find the right button. So, I have two questions, basically. The one is on one of your products from the AI roadmap, especially the capability to get insights from unstructured data. I think in the past, as I understood, especially for, you know, the high.
Performance cases that you're really good at, you're usually looking at, you know, structured data and already customers advanced in their own, you know, database management. So I was just curious what the idea is. Is it, is it customer-driven, or are you trying to also address maybe new use cases with new customers, first of all? And the second question is. Oh, and also, you know, is this also within your usual R&D budget, or should we expect an increase in the R&D spending specifically focused on AI, and given that these are like product developments? I would just be curious to hear from JD, how he's, you know, thinking about activating own work going forward, because this is a bit different than, you know, continuously working on your engine, I would suppose.
So these already were two questions, but I have a third one on the guidance. Looking at the guidance right now, I mean, this already appears conservative. It does with the positive EBITDA and the liquid funds, but also the ARR. If I look at last year, in the second half of the year, you actually increased your ARR by EUR 5.5 million, and I was just curious how the situation now compares to last year, and if there are any reasons to suspect that the second half of the year should be significantly weaker than last year. So these were my questions. Thanks.
Joerg, do you want to take the AI piece, and I jump on the numbers?
Okay.
Okay.
Yes.
Thanks, Robert, for your questions. So let's answer your first question. It's actually a combination of, talking to existing customers, understanding their needs, what they want, what they require, and also answering ourself the question: Where does Exasol really fit in, in, into the overall picture? You're absolutely right. Exasol is basically a, an engine that is centered, a relational engine that's centered around structured data. Now, with the rise of AI solutions, more and more customers are trying to get their unstructured data, and that is different from domain or vertical. So if you look at, for example, the medical space, there's a lot of, let's say, clinical trial data. There's reports, there's emails, there's PDF files, and companies have more and more interest on converting these unstructured data into structured data.
So basically, getting that data out of the unstructured world into a system like Exasol, where then they can run analytics on that unstructured data. And we feel that there's an opportunity for us, based on conversations with customers and also a proactive outreach that we have, to help customers on that journey. So, it's not like we're writing our own LLMs. That obviously is not our core business, so that would be super expensive. It is more enabling customers to leverage existing LLMs in certain context. And Exasol is extremely well-suited for that 'cause we run on-premise, we run in their. O ur customer's own cloud accounts.
So customers can use us in a very secure environment to basically perform that transition and just basically get better insights, faster insights on the core enterprise data. So it's not so much a departure of what we are, it's playing up to our strengths, which is ultimately to be a a an engine a database that runs specifically well in the on-premise and private environments. So I would say that's the first piece, and maybe also to talk about the investment level. We specifically are looking at, I mean, you saw my my slide where we had this one, two, three basically on that.
So our objective was, or the question we were basically asking us: What can we do today with maybe what we currently already have, plus some addition, that actually fit our budget, to provide meaningful value for our customers in that journey into their AI-driven world? That's basically what we've defined here as step number one, is to do exactly that, to help customers on that, basically getting access to more data, to their enterprise data, in a faster and a better way. I would say step number one, resource impact, budget impact is within our current budget in 2024. We are working on the strategy in more detail for 2025, 2026. We believe it is crucial for the company to continue to invest, obviously, in technology.
The impact of any investment we're gonna make in that space is yet to be determined, so we haven't really finalized our planning for 2025. But I just wanna say that it's, it is, or it will become a part of our overall strategy for a future product. Maybe JD, over to you.
Yeah, I think building on that, as Joerg pointed out, we're in the process of building our plan and budget for next year. I think directionally, though, I think what we can safely say is that we continue to grow, and as a consequence, we finally, for the first time, start generating profit headrooms. And I would say our sales, marketing budgets, and also the back office budgets, you will not see scaling radically, if at all, because we still see a lot of room for productivity increases. I think one area which indicatively you will start seeing invest in on a net basis is product and tech. Yeah, but as we're in the process of building that out, that all that within the boundary constraint of a, staying profitable, and also gradually increasing our profit margins.
Yeah. But fact is, we are now in a phase where any additional net growth will generate headrooms for us, and our focus will be to use that headroom in parts to ensure we stay competitive for the technological landscape out there. So that would be on the invest side. You asked me in addition on the ARR side, and you referenced last year's growth. I think it's worthwhile looking at what has driven the growth last year. Last year we had a gross new business before churn of EUR 9.5 million in the whole year. We had the biggest notable success in this was the very large upsell with one of our financial industry customers. We also had, across a range of customers last year, upsell effects from the remaining migration to subscription.
So as you know, we've migrated our business model from selling licenses and charging a maintenance fee to annual subscriptions, which has generated some tailwind in upselling. This is over now, so we have basically migrated our full customer base over. As for the rest of this year, we do have additional upselling projects in discussions on a similar scale in the financial industry than last year. We hope to achieve them, given the fact that we do not have the migration tailwinds anymore, and also given the fact that we have the now reducing on a gradual basis, but still elevated churn rate, the net new business in the second half of the year is probably not necessarily again on a EUR 5 million-EUR 6 million basis.
So, and this is what gets me to my statements with respect to the guidance, and which also is the reason why we gave the guidance in the way we gave it in the first place. Yeah, so, if we are successful in closing those larger deals, I think we're solidly towards the upper end of the guidance. If those get delayed to beginning of next year, it's gonna be more in the middle, middle ground of the guidance.
Perfect. Thank you so much. That was very helpful.
Thank you so much for your questions, Robert. We will now move over with an attendee from Apus Capital. Please ask your questions and introduce yourself to us.
Yes, hello, this is Johannes Ries, Apus Capital. You can hear me?
Yes. Hello, Joerg.
Okay, good. Hello. Maybe some follow-on questions. First, only remind me now, why this large customer has been lost? Was it a special effect, any reason only to understand what happened? So you mentioned, maybe you explained it some time ago, but sorry, we meet so many companies, and it's fallen out of my head. And then, maybe what you're doing to bring maybe to hold churn rates low, how much you have maybe divided your sales in a hunter and farmer team? Because farming is very important if you have a SaaS model. So that may be the first two questions.
Yeah, maybe I can take this question. So first of all, on that customer, they actually decided to move to an. So they didn't actually move to a competitor.
Mm-hmm.
They decided to move to an open source solution and build the solution tailored to their specific needs. So they have, in turn... I mean, it's rather untypical situation, where a company, decides, to do their data analytics, basically with a, tailor-made developed solution with in-house developers. So, they, yeah, decided, that they have better control over their future by doing it for themselves. I would say that particular type of churn is uncommon, because usually when companies move to a different solution, they move to another commercial product. In that particular case, they basically just stopped using us, but they didn't, design in a, let's say, different, commercial product, but they developed it on their own. And I think the key reason was basically the fact that.
They wanted to have full control over their future, and they felt they're best served by just building their own engineering team.
It's not. It's a very shallow solution, but that shallow solution is targeted to just their specific needs, and it's less of a, let's say, broader product in the market.
Okay. Mm-hmm.
The general question, of course, is how do we prevent churn? And I think there are some scenarios where churn is unavoidable.
Mm.
But there are also scenarios where I think with, being close to customers can help prevent churn. So, I think that's the direction of your question.
Exactly.
And.
There's lots of farmers.
Exactly.
Yeah, yeah.
Yeah, so, I mean, we could probably talk about this at length that would go beyond this call. But as I previously shared, we have brought on a new sales leader, an experienced.
Mm-hmm.
Sales leader, who was the former head of Tableau, Central Europe.
Ah
Henrik, who now is our global sales leader, who is actually in the process of redefining the sales organization, both in terms of the how are we allocating account executives on hunting and farming, and we're also establishing a new customer success function in our organization, with exactly the goal to reduce churn and then also drive upsell or cross-sell and renew. So this is one of the topics that are really very high on our agenda.
Super great. Second, the third and fourth question, you showed here your three product segments. You are now maybe as defined a year or one and a half years ago, how important are they at the moment? I think in one sentence, you mentioned, given that you only have EUR 1 billion in new customers, maybe the Espresso strategy is still not maybe so happily to see in the figures, no? It needs some time, even with the partners you have said who really could come in the market. Is that the right implementation? So for, from the three products, how much is maybe if I break, break it down to the ARR also, is falling on the three types, roughly, not exactly, only have a feeling?
Yeah, I mean, it's, I mean, what we've done with our products, the separation, is basically we looked at customer use cases.
Mm.
What are customers actually doing with Exasol in the market? And there are certain types of customers that basically accelerate an existing environment, and then there are customers who are basically using us as the central data warehouse.
Mm-hmm.
I think the reason why we have this, let's say, articulation of the different products, is to make it easier to talk about these different use cases.
Mm
To customers. What we're seeing is, I would say, more than 50% of our customers are either doing acceleration or data warehouse i n the on-premise environment. So that's where we're strong, and that's also where we're seeing upsell and new logo wins. Where we're still not where we want to be is in certain cloud environments. So I would say, to answer your question.
Mm-hmm
It's the Espresso messaging and how we get to customers on acceleration is very helpful to open doors with customers.
Mm.
Ultimately, it's understanding each customer's use case, and then we can basically have customers use us either as an accelerator or as the data warehouse.
Okay. So far, the strategy is flying, but maybe it gets more traction. At this point, AI, is that you can't say what maybe you expect for next year from this solution, but only a feeling, a tendency in two or three years could be, all the AI solutions you are offering a meaningful part of your new business?
Well, I think, I mean, my perspective.
Yeah
Is that AI and data analytics will basically merge together.
Yeah.
In two-three years from now, or in five years the latest, every company that tries to gain insights on their corporate data will use a combin.ation of existing data analytics solutions.
Such as Exasol plus AI. So I think, what we need to make, what we work on, and I think what every other or every data analytics company is working on, is identify how these, let's say, two technology trends come together, to, solve our customers' demands and requirements. So I would say, similar to what happened maybe 10 years ago when cloud came to the database or data analytics sector. Now AI entered that space, and in the latest five years from now, all data analytics will be, in one form or the other, AI supported. So I think for us, it's not a question: should we do AI, and is that a new line of business?
A must.
It's really how do we intelligently leverage in which timeframe to basically build a solution that customers will expect to see over the next two, three, and five years?
Great. Final question, partnerships. Now, you mentioned also that, AWS and Accenture are maybe in discussion to you on partnership on the AI solution. I know Tableau is a partner for the Espresso, so for maybe an update on your how you maybe make step forward with partnerships, how much come from partnerships on new businesses? Because like we discussed in former discussions, in my eyes, partnerships for a company of your size is really crucial for the success now.
Yeah, we absolutely agree. I mean, we have smaller partners. We have a really good partner in Austria, in Vienna, that we've working with successfully, who also helped us on closing some new logos.
Mm-hmm.
It's one of the key focus areas that Henrik, our, our new sales leader, is putting emphasis on. So a bsolutely. I mean, and I mean, for us, at the level that we are, I think we have three levels of partners. There are the, let's call it the local system integrators, where we probably have the closest relationship with. Then there are the global large ones, like the Accenture and Deloitte, and then there are the technology partners. Thanks, Johannes. I think we have Miro who raised his hand as well.
Yeah, it's clear. Yeah, yeah, we go on, and maybe at I can cover it up for him, especially in this partner commissions more in detail.
Happy to connect offline if you have some more.
Yeah, yeah. Thanks a lot, man.
Thank you.
Thank you so much, Mr. Ries. So now we will come back to Mr. Zuzak, so you should be able to speak now.
Yes. Hi, thank you for taking my question. I have to leave at three, I'm afraid, I have another call, but maybe just one in this case. You're down to 177 employees. What will be the low point, and when?
I don't think, JD, correct me here, we're not planning to further, to go substantially further down on, on the employee side.
No. I think next year's budget will be in the EUR 180-EUR 185 region. So the low point is now.
Good. Thank you. I save my questions for the roadshow.
Okay. Thank you very much.
Thank you. Bye-bye.
Thank you for your question. But so far, this was the last question, so if anyone would like to ask questions, just let us know by raising up your virtual hand or by placing your questions in the chat box. So we will wait a couple of seconds, or if should further questions arise at a later time, please feel free just to contact Christoph Marx from Investor Relations. But it seems everything is discussed and clear, so with this, we will come to the end of today's earnings call. So thank you, everyone, for joining and your shown interest in Exasol. And a big thank you also to you, Mr. Tewes and Mr. Henrich, for your time, for the presentation, and for answering all the questions.
I wish you all a lovely remaining day, and hand back for some final remarks, which concludes our call for today.
Yeah, just repeating, thank you very much for your attendance, and if there are any additional questions, we're gonna happy either in roadshows or respond to these questions offline. Thank you. Bye.
Thank you. Bye-bye.