Ladies and gentlemen, thank you for standing by. Welcome, thank you for joining the TeamViewer AG Q4 and Fiscal Year 2022 results call and webcast. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Ursula Radeke-Piest, Head of Investor Relations. Please go ahead.
Thank you, operator. Good morning, everyone, and welcome to TeamViewer's Q4 and Fiscal Year 2022 earnings call. My name is Ursula Radeke-Piest, and I'm pleased to host today's earnings call. I am joined by our CEO, Oliver Steil, and our CFO, Michael Wilkens. Oliver will kick off the presentation by updating you on the specific business and financial highlights in the fourth quarter and the full year 2022. He will also give a quick update on our product offering and strategic direction. Michael will go through our financials in detail and will finish on our financial guidance and our capital allocation framework. As always, the presentation will be followed by a Q&A session. Before we start, I would like to draw your attention to our updated important notice and APM disclosure.
As you already know, starting in 2023, TeamViewer's financial performance will be reflected in an updated KPI framework, whereby billings change from a primary into a secondary KPI and revenue moves more into focus. This means that the definition of adjusted EBITDA will change from a billings to a revenue perspective, which will be particularly relevant for our full year 2023 guidance that we disclosed on IFRS revenue and the corresponding adjusted revenue EBITDA margin. All our KPI definitions are included in the APM glossary on pages two and three of this presentation. With that, I hand it over to our CEO, Oliver Steil.
Thank you for the introduction, Ursula. Good morning, everyone. Thank you for joining our Q4 and Fiscal Year 2022 earnings call. Let me start with a look at our fourth quarter 2022 on the next slide. Overall, we achieved a very successful year and finish with a strong momentum in Q4. Of course, the overall macroeconomic environment remained challenging, but TeamViewer once again displayed strong resilience amidst these circumstances, and our entire team was really leaning in. I would like to point out a few highlights of the fourth quarter. Firstly, strong development of our billings. Total billings came in at EUR 191 million in Q4, which is a plus of 24% reported and 20% plus on a constant currency basis compared to last year's fourth quarter. In addition, our profitability was again very convincing.
For Q4 2022, we reported an adjusted EBITDA margin based on billings of 51%. Compared to previous year's Q4, this is an improvement of seven percentage points. Michael will give you a few more details on this later. Thirdly, we continue to focus on targeted sales campaigns. We created additional value by upselling customers into significantly higher value tiers, but also by attracting new customers and thus actually enlarging our global customer base. In addition, we once again proved the stickiness of our business model as we were also able to successfully implement price adjustments, which we had announced in Q3. Fourth, if you look at our regional split, in the fourth quarter, billings growth was particularly driven by the strong performances of our EMEA and APAC regions. Our largest region, EMEA, grew by 28% year-over-year.
With an increase of 32%, we also saw clear acceleration in Asia Pacific, clearly driven by the new management and their team. I think this quarter proves once again that our regional diversification is really paying off. Look at our customers. Our enterprise business retained its growth momentum, showing 47% billings growth year-over-year. The ever-growing ticket sizes prove our continued shift from SMB to enterprise and the relevance and value add of our products for large businesses. Last but not least, also our large original core business keeps growing. In the fourth quarter, SMB billings were up 18% year-over-year. The increase stems not only from larger ticket sizes and higher pricings with existing subscribers.
Actually, our SMB subscriber base also grew slightly, again by 8,000 in the last three months of the year, to a total of 622,000. If we sum it up, we are actually very satisfied with our year-end finish. I think our solutions are highly relevant for our customers. Even in those times, we help them to securely manage remote operations, increase efficiency and sustainability to overcome also labor shortage. This is particularly visible in our steadily growing ticket sizes. I would like to take a closer look at this on the next page. Let us look at SMB and enterprise billing split.
I think with an overall shift towards higher ACV buckets, we again successfully increased the quality of our customer base. When we look at SMB on the left, the LTM billings in 2022 increased by 11% on a year-on-year basis and amounted to EUR 503 million. This was driven by our very successful cross and upselling efforts, resulting in the higher bucket actually growing stronger. In 2022, our highest SMB bucket between 1,500 and EUR 10,000 significantly increased by 27% and amounted to strong EUR 225 million. In addition, we saw again a net upsell from SMB to enterprise, this time of EUR 20.5 million. This was largely driven by shifting larger SMB clients to our Tensor license for enterprise connectivity.
This clearly shows the continued intent of success for larger customers who are looking for more efficient and highly secure solutions as the right answer actually in these challenging times. Total 2022 LTM billings in our enterprise segment increased by 42% year-over-year, which is then EUR 132 million. This growth originated across all ACV buckets, as you can see on the chart on the right. We go to the next slide, please. I just mentioned the growth among all the ACV buckets of our enterprise business. As usual, let me give you two examples of recent large enterprise deals with TeamViewer Tensor, our enterprise connectivity platform, just to give you an idea on what's happening on the enterprise side. First, let us look at German multinational corporation, Henkel.
Their IT team uses TeamViewer to streamline their global IT support for around 60,000 IT devices running on different operating systems with Tensor. Our solution, in that case, replaced several others that they were using before, making their workflows simpler and faster. It goes without saying that Tensor meets all the strict security and compliance standards that were mandatory for Henkel. It's also worth mentioning that Tensor seamlessly integrated in Henkel's IT infrastructure, consisting of obviously many other software products from vendors like ServiceNow or Microsoft. This flexibility of our solution is highly appreciated by IT decision-makers in global corporations. Another example, very different, of large Tensor deal that we closed in 2022 was the German global broadcast station, Deutsche Welle.
They managed all devices of their correspondents in 140 countries with TeamViewer and chose our solution because they need a secure and stable connection to work reliably in breaking news situations. I think what's interesting notably, that we won this contract via a European-wide public tender, as the Deutsche Welle is a public state or broadcast station bound to the EU's public tender regulations. Next slide, please, where I want to touch upon the financial highlights on a full year perspective. To begin with, we continued our top-line growth. Billings and revenue increased by 16% and 13% respectively.
With total billings of EUR 635 million and revenues of EUR 566 million, we fully achieved our guidance for the full year 2022, and the share of enterprise business increased by four percentage points year-on-year. Our products are highly attractive for a wide range of customers from various verticals or industries. We continue to establish TeamViewer as the go-to partner for high-impact strategic investments in digital transformation across various industries. At the same time, we help our customers to increase short-term automation and efficiency. Clearly, this is key in the current economic environment. All these factors made us achieve a strong net retention rate of 107% on group level. Compared to 2021, we improved net retention rate by nine percentage points. In addition, TeamViewer is again growing very profitably.
Our adjusted billings EBITDA grew by 16% to almost EUR 300 million, and our adjusted billings EBITDA margin was stable at 47%. That's actually the upper end of our guided range from 45%-47%. This is also a result of our effectiveness and execution, and in turn, we raised our basic earnings per share to EUR 0.37, which represents a 46% growth year-on-year. This was driven by the strong increase in our net income, obviously, as well as our accretive share buyback program of last year. Michael will elaborate more on the drivers of our net profit in his part of the presentation. In total, we are well positioned to continue our strong performance in the current economic environment as well in 2023 and beyond. We believe the fundamental demand for TeamViewer solution remains strong.
With that, let's have a closer look at our regional performance on the next slide. Here you can see that in 2022, EMEA has proven to be very robust as it delivered the strongest growth of all regions, followed by an accelerating APAC performance. With a billings growth of 28% to EUR 109 million in the fourth quarter, EMEA significantly improved its already strong performance, which we've seen in Q3. On a full year basis, EMEA billings grew by 15% to 340 million EUR. We actually accelerated our sales momentum and further penetrated our well-developed base of satisfied customers.
Our business in the Americas achieved billings growth of 16% in Q4 to EUR 64 million and 18% to EUR 223 million in the full year. Clearly, if you look at performance at constant currency, it was weaker than we had hoped for, but we remain quite confident in our resilient product offering and the further growing IT spend for digitalization in the Americas. Looking at our current market share in the US, we believe there is still significant room to grow. APAC further accelerated its growth with a new organizational structure settling in and achieved a 32% billings increase in the fourth quarter. On a full year basis, APAC billings were up 14%.
This growth reflects two very different half years, and resulted in APAC billings of EUR 72 million for the entire year. Not so strong first half, but very strong second half of the year, and good acceleration there. The easing COVID restrictions toward the year-end, they also allowed for more customer interaction, translating into strong pipeline build and enterprise momentum. I think as you can see from the slides, TeamViewer is well-positioned for the future. Our global footprint is growing, our products are highly relevant for our strong and loyal customer base, and we address major customer needs. Next slide, please. Let me now explain our strategic focus area to reach our business goals and growth targets in 2023 and beyond. As you can see from the slide, we are focused on four main segments.
First one is, it is our objective to defend our leading position in the remote access and support market. We are currently preparing a major upgrade of our core connectivity product. The new release will come with a new modern user interface to improve usability and overall experience, and we will introduce new security and also many other features. We are confident that this will further increase the attractiveness of our product for our core target audiences across SMB and also private users. Second, within remote access and support, we will offer additional features like remote monitoring and management of devices or ticketing functionalities. With these features, we can add significant value to larger SMB customers and also managed service providers.
When it comes to enterprise connectivity, the third area, we will focus on remote access and control of operation technologies, in short, OT devices, such as industrial equipment, machines, and other smart and IoT devices. A good example of this are the, for example, coffee machines of the Italian vendor La Cimbali. I think we've talked about that use case already in one of our previous calls. This is exactly the type of remote connectivity, so-called embedded devices, that becomes more relevant as companies aim to streamline and digitalize support on maintenance processes. Once rolled out to hundreds of thousands of those devices, this becomes very sticky and attractive for us. The fourth area is our frontline platform for digital workflows with step-by-step instructions and frontline work assistance.
I think with those we have established ourselves as a key player in the so-called industrial metaverse. That means the digital transformation of frontline work processes in, for example, logistics, manufacturing, or after sales, using augmented reality on glasses or handheld devices. Going forward, our augmented reality offering should be further supported by mega trends like shortage of skilled labor and the need for digital onboarding, training, and more efficient frontline processes. As you can see, we are targeting IT and OT use cases in companies of all sizes to leverage the full potential of our solutions. Next slide, please. This is a reminder, you can see our product portfolio, that matches the strategic focus areas that I just explained. We offer three main product lines. TeamViewer Remote is our core connectivity product for SMB customers and private users.
With different license tiers and add-on features, we target different use cases and different company sizes. In the middle, for larger companies and critical infrastructure, we offer our enterprise connectivity platform, Tensor, that provides relevant security features and can be deployed really at scale. It also includes capabilities to connect to the OT, so operations technology and embedded devices that I just spoke about on the previous slide. The third product line is Frontline, our AR-based enterprise productivity platform that enables digital workflows and assistance for smart frontline operations. The platform includes cutting-edge capabilities based on mixed reality, but also artificial intelligence to run frontline operations even smarter. With this, summing on the product, I'd like to hand over to Michael for the financial highlights.
Thank you, Oliver. Good morning and a warm welcome to all of you. I am very happy to guide you through our financials for the full year 2022 and into fourth in particular. Q4 was my first quarter as the CFO of this exciting company. You heard Oliver's remarks on our operational focus areas for 2023. Later in my presentation, I will explain to you how we think about 2023 from a financial point of view. I will dive deeper into the different elements of our guidance, which you already read about in our press release this morning. Next slide, please. I presented this group overview for the first time in Q3. Back then, I already mentioned the growing relevance of revenue for our business. From Q1 onwards, you will see quarterly revenue and the adjusted revenue EBITDA on top of this slide.
Today, I start with billings and the excellent billings growth rate of 24% in Q4 2022. With this strong year-end finish, we delivered on our guidance, and this despite the discontinuation of our Russia and Belarus business and despite the difficult market environment. On a full year basis, billings increased by 16% or 11% on a constant currency base to EUR 635 million. At this point, let me say thank you to a great and highly motivated sales team here in Germany and all over the world. The strong billings performance in Q4 led to a high adjusted billings EBITDA margin of 51% in Q4 and 47% for the full year, which was at the upper end of our guidance. Let's move to the revenue perspectives.
On the lower left-hand side, you can see that revenue follows billings development in a delayed way with more balanced growth rates. Revenue grew by 14% in Q4 and 13% for the full year. With the full year amount of EUR 566 million, we also met our revenue guidance for 2022. Given the numerator/denominator effect and applying the exact same operating cost base to revenue, the adjusted revenue EBITDA margin amounted to 41% for the full year compared to the adjusted billings EBITDA margin of 47%. This adjusted revenue EBITDA margin is best in class compared to our wider software peers. It is from now on the profitability reference for our guidance. With this, let's move to the next slide, please, where I will focus on SMB, which accounted in Q4 for around 79% of our total billing.
Q4 saw a very strong SMB billings improvement, a proof point of our pricing power. Why is that? Part of the growth rate of 18% is the result of the targeted sales campaign, including upsell and our pricing campaign. Free to paid played a minor role in Q4. The USD exchange rate tailwinds made up four percentage points of the Q4 growth. With this strong fourth quarter, full year SMB billings were 11% higher at EUR 503 million. On a constant currency basis, the growth rate was 6%. On the top right-hand side of this slide, you can see our pricing power translating into constantly increasing average selling prices. In Q4, one SMB customer paid EUR 804 on the average per year. Talking about subscribers.
At a stable subscriber churn rate, we were able to increase our customer base by 8,000 subscribers year-on-year. At the end of Q4 2022, we counted 622,000 subscribers in our SMB business without customers from Russia and Belarus. This large subscriber base still holds significant upgrade potential, as Oliver outlined before. Next slide, please. Let's take a more detailed look into our enterprise segment, which in Q4 accounted for around 21% of TeamViewer's total billings. Despite the uncertain macro environment, enterprise billings growth remained at a high growth level of 47% in Q4. This development was particularly driven by the EMEA region and improved pipeline conversion and customers committing to growing ticket sizes. This is also reflected in the high enterprise net retention rate, which increased to 116% in Q4 2022.
As there has been an ongoing debate around multi-year deals since our Q3 call, let me tell you, yes, part of these growing ticket sizes are due to multi-year deals. The fact that customers accept or rather ask for this type of contracts proves how much they like our products, and that they are happy to commit themselves for more than a year. By the way, our multi-year deals are paid up front and will convert to revenue over time. The full year 2022 enterprise billings amounted to EUR 132 million, corresponding to an increase of 42% or 35% on a constant currency basis. The average selling price increased from EUR 34,000 in Q4 2021 to EUR 36,000 in Q4 2022, while fueling the enterprise bucket with strong SMB upsell.
This also had a positive impact on the number of enterprise customers. Compared to the end of 2021, the enterprise customer base increased by almost 1,000, amounting to roughly 3,700 customers at the end of 2022. Combined with the large SMB customer base, this brings us to a total of around 626,000 subscribers at the end of last year. Next slide, please. As mentioned before, this large and loyal customer base is in need of high-class remote connectivity and frontline workflow solutions. Our products in this category offer simplification and efficiency in times of increasing complexity and labor shortage.
Our increasing net retention rate is proof of this increasing demand and high customer satisfaction. As per year-end 2022, our net retention rate was at 107%, four percentage points higher than in Q3 and seven percentage points higher than the year before. This was driven by successful net upselling of our retained customer base, including the increased migration from SMB to enterprise. Oliver mentioned already the Q4 ATM net upsells from SMB to enterprise in the amount of EUR 20.5 million, a further increase over the already very strong EUR 18.4 million in Q3. Additional building blocks of the growing NRR were the favorable US dollar/euro development, our targeted sales campaigns, and upfront paid multi-year deals. Let's turn to the next slide now, where I want to introduce you to our new KPI, ARR.
The annual recurring revenue stands between billings and revenue, and gives a realistic impression of the annual subscription value of our customer base at a given point in time. Multi-year deals do not distort this metric as they are only accounted for with their annual value. Since we have seen an increasing demand for multi-year deals in 2022, it is now a good time for TeamViewer to implement the ARR as the new metric. In total, we built multi-year deals with full upfront payments of EUR 45.6 million in 2022. While billings increased by 60% in 2022, the ARR increased by 13%. Revenue also increased by 13%, with a revenue to billings ratio of 89% in 2022. Next slide, please.
Let's now start to move from the top line to the bottom line and take a look at our recurring cost base. On a full year basis, recurring costs consisting of cost of sales and total OpEx increased by 16%. This was in line with billings growth but higher than revenue growth. The adjusted billings EBITDA margin remained stable at 47%, and the adjusted revenue EBITDA margin resulted in 41%. Let's have a look at some of the 2022 operating cost items in more detail. Main reason for the increase in sales costs were the extension of the enterprise sales force, higher bonus payments, and currency effects. The growth in marketing costs was due to the first time full consideration of sports sponsorships in 2022.
As you know, this cost item will be significantly reduced once Manchester United exercises the option to buy back the rights to the club's shirt front sponsorship. The increase in marketing costs was partly compensated by scaling effects in G&A costs. The full year R&D costs increased in line with billings. The main R&D focus was in enriching our digital workflow offering and enhancing our core technology platform to be able to launch the major remote connectivity upgrade that Oliver mentioned within the next months. Lastly, the strong decrease of other operating costs was mainly driven by lower bad debt expenses due to a higher share of the enterprise business with better payment behavior. Next slide, please. The table on slide 19 dives deeper into our different profitability metrics.
On the top of the table, you can see the difference between our old adjusted billings EBITDA definition and our new adjusted revenue EBITDA definition, consists of the change in deferred revenue. In 2022, the deferred revenue increased, driven by strong billings development, especially in Q4. Deducting the non-recurring items from the adjusted revenue EBITDA brings us then to the unadjusted EBITDA, which was 17% higher year-on-year at EUR 197.5 million in 2022. Non-recurring items decreased in 2022, mainly due to the positive valuation of US dollar hedges, which partly offset charges for the legal case I already mentioned in Q3. With only slightly increased G&A expenses of 6%, our EBIT increased even by 22% to EUR 143.7 million in 2022.
The net income increased by 35% year-over-year to EUR 67.6 million, mainly due to our strong operating performance and an improved financial result. Our earnings per share increased even stronger by 46% year-on-year from EUR 0.25- EUR 0.37, which reflects the accretive effect of our 300 million share buyback in 2022. For the first time, we also display the adjusted EPS, which increased by 25% in a full year comparison. We are adjusting here for share-based compensation, PPA amortization, and other non-recurring and related tax effects. With this KPI, we give you a less volatile perspective on the EPS growth going forward. Next slide, please. On this slide, you can see that the IFRS pre-tax operating cash flow was up by 6% in 2022, despite the first-time full year sponsorship payment.
Let's go through the items which reside in the 2022 free cash flow. First, cash tax, which increased by 7% to EUR 46.4 million. Second, CapEx. As most of TeamViewer's investment in innovation and partnerships so far are directly expensed in the operating expenses, capital expenditures were relatively low in 2022 and went further down by 42% to EUR 8.8 million due to the finalization of a new application landscape in 2021. The lease payments were driven by additional office space and IT infrastructure amounting to EUR 9.5 million in 2022, up 37% year-on-year, which results in an unlevered free cash flow of EUR 186 million and a high cash conversion in relation to the adjusted revenue EBITDA of 81%.
The levered free cash flow, which also takes into account interest paid, amounted to EUR 171.8 million in 2022. The respective cash conversion rate was 75% and therefore stable year-on-year. Worth mentioning that we managed to keep the interest paid stable at around EUR 40 million despite a more challenging debt and interest environment. Next slide, please. As the waterfall on this slide shows, cash and cash equivalents at the end of 2022 amounted to EUR 161 million. The reduction compared to end of 2021 was mainly due to our EUR 300 million share buyback program and net debt repayment of EUR 286 million, offset by net cash inflows.
On the back of these measures, our net financial liabilities amounted to EUR 472 million as of December 31st, resulting in a net leverage ratio of 1.6 on adjusting billings EBITDA and 2.1 on adjusted revenue EBITDA. With this, we delivered on our capital allocation target of around 1.5 leverage. We significantly strengthened our financial profile through the repayment of debt and by balancing out our debt maturities. We created value for our shareholders by returning cash for share buybacks. I will come to the new share buyback, which we announced yesterday, later in the outlook section. If you want to take a closer look at the development of our share count, you can find the respective slide in the appendix.
Before I come to the outlook, let me conclude my financial overview section with a summary of the most important takeaways. First, we delivered a strong 13% growth on our new primary revenue KPI. This reflects the strong billings performance in earlier periods. With the continued mix shift towards higher-value customers in SMB and enterprise, as well as higher demand for multiyear deals, we increased the predictability of our business. High customer retention rates prove the stickiness of our customer base. Third, despite an inflationary environment, continued investment into our business and the first full year consideration of the sports sponsorships, we recorded a sustainable high margin. Fourth, paired with a continued strong cash flow generation. Fifth, we see significant margin upside following a potential early exit by Manchester United from the shirt front partnership, despite some reinvestments into our marketing efforts.
Lastly, let me conclude this chapter also with a personal note. I think it is remarkable how well we performed in 2022 despite the current environment. Our business demonstrated strong resilience with the right product portfolio and the right market positioning. Next slide, please. Let's now focus what is in front of us. What you see here is a confident view on our 2023 business development. We are operating in an exciting growth market, and our performance is underpinned by a highly recurring and resilient business model. On the back of this, like in 2022, we see double-digit revenue growth in 2023. In absolute terms, this means that we guide for interest revenues in the range between EUR 620 million and EUR 645 million.
We also aim for stable profitability reflected in the adjusted revenue EBITDA margin, which is expected at around 40% for the full year 2023. This margin forecast takes into account continued investments into our future. I will come to that in more detail on the next slide. The revenue guidance you see on this slide translates into an expected billings growth of 6%-11% in our old guidance KPI world. This growth is based on last year's average US dollar FX rate of 1.05. Let me remind you that we achieved a constant currency billings growth of 11% also in 2022. This corresponds to the upper end of the billings growth rate we expect also for 2023. However, we have to see how the macro environment works out.
The broader growth range between 6%-11%, resulting in absolute billings range between EUR 675 million and EUR 705 million. The guided adjusted revenue EBITDA margin translates into an adjusted billings EBITDA margin of around 45%, which also takes into account short-term cost effects. We think these are best-in-class margins, which carry significant upside beyond 2023 following a potential early exit by Manchester United from the shirt front partnership. Before I turn to the next slide, let me remind you that our official guidance relates on our new KPIs, revenue and adjusted revenue EBITDA margin. Next slide, please. The guidance I just outlined and the ambition to achieve stable high margins come with a diligent cost management across all dimensions. We already told you on several occasions that we want to strengthen our high quality product offering through additional R&D investments.
More specifically, we want to reinforce TeamViewer's leading position in remote access and support with the major upgrade of our connectivity platform. At the same time, we want to underline our status as the key player in the industrial metaverse by extending the Frontline platform. This will also require respective infrastructure upgrades and hence additional invest. Besides these investments into our future growth, certain macroeconomic impacts like currency effects on our sponsorships and more general inflationary cost pressures will increase our recurring cost base. In order to compensate for these impacts and save costs, we have taken several actions. For example, we work with our suppliers in partnership to minimize inflationary cost increases. With our attractive RSU program, we not only increase employee loyalty and strengthen their shareholder perspectives, but we can also partly compensate for cash salary increases.
Last but not least, we will apply a cautious hiring approach and an efficient people management. With the combination of these investments and savings, we are very confident to reach our margin guidance. This brings me to my last slide. On the back of the outlook I just presented, TeamViewer will remain highly cash generative and deliver in continued strong cash flow conversion. This allows us to reiterate our existing capital allocation strategy and confirm our target leverage ratio of around 1.5 times adjusted billings EBITDA. This leverage target provides the company with sufficient flexibility to support organic growth and to pursue tuck-in M&A to extend competencies if needed. With our high confidence in the 2023 outlook, we will return excess cash to our shareholders by way of a new share buyback program, and thus remain committed to our capital allocation framework.
This program has a volume of up to EUR 150 million and will be executed in 2 tranches. We plan to start with the first tranche of up to EUR 75 million by latest mid-February. I now hand over to Oliver to close it up.
Thank you, Michael. Let me summarize today's earnings call. Bottom line is we are very satisfied with our performance in 2022. We achieved our goals and delivered on our targets. We see prominent customer wins across industries and geographies, we have successfully implemented pricing measures, and also campaigns on cross-sell and up-sell over the last year. This shows that we are able to steer our business actively and in a very targeted manner. As Michael just explained in 2022, our financial profile remained very attractive. Our strong profitability and high cash generation are important levers for shareholder value creation, which we're able to deliver with a 46% earnings per share increase. Creating value for shareholders will also remain a top priority for us in 2023, this is why we announced a new share buyback program.
Beyond that, we are also looking at 2023 with great confidence. We want to further capitalize on global mega trends in the modern workplace. Our solutions are more relevant than ever for our customers in the current challenging macroeconomic environment. In light of this, we are confident of generating double-digit revenue growth as outlined by Michael. With that, we would like to end the presentation. Thank you all very much for your attention, and we look now forward to your questions. Operator, over to you, please.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first questions, please. If you would like to ask a question, this is star and one. One moment for the first question, please. The first question is from the line of George Webb with Morgan Stanley. Your question please.
Hi, morning, Oliver and Michael. Thanks for taking my questions. I'll kick off with three. Firstly, just on the margin outlook, you flagged some of the elements, including careful control of cost base, cautious approach to hiring. Can you give us a sense of how you are set up now with respect to sales and support of the enterprise business segment? How much room is there to increase utilization of those sales staff, and how much incremental investment is going to go into that area in 2023? Secondly, on the guidance on growth, you're expecting billings to grow at a more moderate rate this year compared to revenues. Can you talk through what you're expecting in terms of multi-year deals growth in 2023? Just lastly, on the enterprise business, 35% constant currency year-over-year growth in 2022.
If you were to clean that figure up for the multi-year deals impacts or to look at it through more of an ARR lens, what was the great-rate of growth you saw there? Thank you.
Let me take the first one and second one. For margin outlook, I think on the enterprise side, as we've said over the last years, we have significantly invested into our support structure and sales structure, so we have enterprise account managers across the world. We opened a few more offices to be closer to regional markets, particularly in APAC. So I would say that the sales force there is very well invested. Obviously, there's always churn in some markets and then replacements. We also have a solution delivery force which is globally distributed across all offices. So I would say that for the enterprise business, we're very well invested at the moment. Clearly, especially given the environment at the moment, we are not at full utilization of the current sales force.
I think we have to be right in pointing towards additional scaling potential because we do have people which joined relatively newly throughout this year are not at their full quota. They're still ramping, but the costs are already on board. Pretty fully invested sales and service force, but not fully utilized, as you say. Secondly, billings growth. I think the whole question on multi-year and also how that relates to ARR, quite frankly, I think it's a bit too early to project anything very concrete there for this year. Obviously, the more we go into enterprise, the more multi-year deals will play a role. Obviously, customers want to secure pricing.
It will continue to be a factor, but I think Michael can elaborate a little bit more on the split there and the growth composition going forward.
Yes. So on the multi-year deals, we see it in the vicinity between EUR 50 million and EUR 60 million. The multi-year deals become more and more a part of our normal business. This was, I think, one topic. The other one, when you said ARR, we disclosed the ARR in total, which is the 30% growth, we don't disclose this now on a segment basis or even on an NRR basis. We are very happy with our definition of NRR. We are happy to take currency discussions on ARR, I think we have to always disclose currency versus the NRR, not also on ARR.
That's clear. Thank you. Maybe just one follow-up. When you went to customers in Q4 knowing they had these price increases, to what extent were they coming to you and saying, "Can you give us some discounts and we'll sign up for a multi-year deal," to kind of counteract some of that price increase? Was that a phenomenon that you saw at all?
You weren't that clear to hear, but I think the question is around the buying and purchasing behavior in the fourth in the fourth quarter. Yeah, I mean, obviously, this is the nature of the game on enterprise, right? Customers want to commit for a longer period of time in order to secure certain price levels. In enterprise, this is one-by-one discussions, and I think we have all cases. We have customers that came aboard a year ago, and we haven't increased prices. Also, customers that have been with us for longer, and we extend the license count, the number of technicians, the number of seats. It's a new deal, and then we commit to certain prices. It's not necessarily a discounting game.
I think in the current environment, it's more a price stability, and visibility for them. Obviously we have the same when we talk to our suppliers. It's pretty clear that it's not a great time to talk discounts, but what you can achieve is have price stability. That's more the motion that was going on.
Very clear. Thank you very much.
The next question is from the line of Ben Castillo-Bernaus with BNP Paribas. Your question, please.
Good morning. Thanks very much. Taking my question, a couple from me, please. Just on the 2023 outlook, as we think about seasonality or phasing, particularly, I guess, on the top line, through, you know, through H1 and then into H2, what are you baking in to your guidance? Secondly, just looking back at the last quarter, could you give us an indication on how much impact did your price increases have in Q4 2022? What contribution did that have to growth? That would be helpful. Lastly, just on the new guidance framework, you're shifting away from billings to revenues. Will all KPIs shift to revenue and billings eventually be phased out? Your detail on things like enterprise versus SMB billings or billings by the ACV bucket, will they become revenue-based?
If so, will you restate that for us, to help us look at that on a more continued basis? Thanks.
Let me start with the first two. I have not heard or understood the third. Maybe we can follow up on that one separately. On the seasonality of 2023. First, from a billings perspective, the structure of the seasonality should be more or less the same like it was in the previous years. From a cost perspective, we don't guide quarterly, so please take this with a massive grain of salt. What we see is that the first quarter will be in, from a cost perspective, in the vicinity of Q4. The second quarter more or less also in the same vicinity like Q1 and Q4. Then we expect to see rising cost base businesses.
On the pricing perspective, this was the second question, we were actually seeing exactly in Q4 what we expected, with the Q3 call, so more or less, a high single-digit million number, and this played very well into our overall equation. The third one I have to.
That question is now that we're guiding with revenue instead of billings, whether we will change all KPIs that we're disclosing, enterprise, SMB splits and everything else on revenue numbers versus billing numbers.
Oh, that's the intent. Yes.
That will shift to revenues. Okay. Will you help us with restated from prior years, just so we can look at it on a look-through basis?
Yes, yes.
Great. Okay. Thanks very much.
The next question is from the line of Toby Ogg with J.P. Morgan. Your question please?
Yeah, hi. Thanks, thanks for taking the questions. A couple from me. Just firstly, just on the new billings development in Q4, looked like it was a little bit lower than the Q3 number. Could you just help us understand some of the drivers there around the new billings? Just how we should think about the mix between existing and new billings into 2023. Just how much of a pricing contribution you would expect to billings growth in 23. Just on the, on the cost saving side of the bridge, could you just give us a little bit more detail on the size of the RSU program that you've highlighted as a, as a source of cost saving? Thank you.
Yeah. I think new billings Q4 versus Q3, I think clearly the main sales motion that you have in enterprise software towards the end of the year is pipeline conversion with your largest opportunities. One of the, I think, big advantages of us is that we have this large number of existing customers with, I don't know, 622,000 subscribers or so. There's many companies in this subscriber base that actually qualify for larger deals, larger solutions, wider rollouts of Tensor, or rollout to embedded devices. As you can imagine, towards the end of the year, the sales force is fully focused on these larger opportunities. It happens that most of the larger deals that we've done towards the end of the year are actually with existing customers.
While in Q3, this motion is, I would say less pronounced. Therefore there was new billings, more new billings, new billings in the third quarter. I mean, on that discussion, because we had that before as well, I think it's important to understand that new billings in our definition mean a company is not having a single TeamViewer license anywhere in the world. Not even a EUR 350 business license. Only then we qualify as new. If a customer, and that's quite likely, or company quite likely, has a license somewhere in the world, it's called under retained.
As you can imagine, when you do enterprise move and you move customers from EUR 2,000- EUR 3,000 license count or EUR 20,000, EUR 30,000, EUR 100,000, EUR 150,000, this is a massive sales motion and a massive achievement, even though it's falling under the retained bucket. That's one of our key motions that we're having, I think very different from other much smaller enterprise software companies that need to actually always win new logos to be able to grow. I think that's important. I think for the pricing contribution and the RSU program impact, I hand over to Michael.
Yes. Let me start with the RSU program and how we think about it. First, by making the employees to shareholders, we are all sitting in one boat, which is creating shareholder value. This is so important for us. We launched this program therefore last year. Why we've mentioned it here as a element of contribution to cost savings is the following: We do the same program also in 2022 and 2023. We continue the program. We have a little bit of a shift between leaders to employees. Now everybody gets the same share of RSUs.
What is important is that we explain to the employees that, "Hey, we're in the same boat, and we win together and we lose together, and it's not inflationary rises, and we don't need to have more salary increases." We were able to, or we think we will be able to balance out expected salary increases with the RSU program. It's a win-win, and therefore it will also contribute to the overall success. Price increases was with regard to 2023? Can you repeat the question quickly?
Yeah. It was just.
Okay.
Just how much are you expecting the contribution to be from pricing in 2023?
Yeah.
For the earnings growth.
Yeah. It will be moderate. We start, as we did, by the way, in Q4, we start cautiously into the year. We did that already obviously in Q4, the first cohorts for the first quarter are already executed. We will continue very cautiously, in our base for the cohorts Q1 and Q2. Then we check it.
Okay. Thank you.
In total, a little bit less for the first quarters than in the Q4. It has to do also with the cohort size.
Can we go ahead with the next question?
I guess so, yeah.
The next question is from the line of Victor Cheng with BofA. Your question please.
Hi. Thanks for taking the questions. A couple if I may. On the SMB side, can you talk a bit about how the free base has trended in the last two quarters? Since you mentioned the free to pay conversion contribution was lower this quarter, from a billings perspective, I'm curious as to how much of that 6K net new SMB subscribers are from the free to pay conversion. Lastly, maybe can you give us some updated color on your partnership with SAP, Siemens, and Google? Are they more focused on augmented reality?
Victor, very difficult to hear you, but I touched base on the SMB growth in the context of free to pay campaign. As I said before, free to pay, we do this very moderately. This was a EUR mid-sized million amount in Q4, and this was part of the growth, but not all of the growth. Oliver mentioned basically all of the elements. Of course, there was a factor of currency embedded in it, but most of it came from all of the campaigns. From the free base, this is actually nicely developing now because we see de facto a more or less flattening out between Q3 and Q4 between the active devices, if you refer to this topic.
Free bases, free user base, kind of stable despite the fact that we are extracting a bit of subscriber growth, as you say. As he pointed out, this is a small additional subscriber number, mostly at entry level. I think we explained before also, even if we have a few thousand more subscribers on the entry level, that is significantly less relevant than a significant upsell in one existing subscriber to drive billings to the enterprise, the example I made before. That's the play that's happening here. Ecosystem largely stable while we're doing this. On your last question, partnerships, SAP, Siemens, Google, I would say mostly focusing on workflows. Part of it is augmented reality, yes, frontline, based on glasses for handhelds.
That can be part of it, but it's effectively a workflow partnership, workflow integration, SAP and Google specifically. Siemens, slightly different. Here we talk about integration into the product lifecycle software of Siemens, where we provide mixed reality visualization capabilities to generate digital twins of actual industrial equipment. Slightly different.
Yeah. Are there any changes to pipeline conversion and what you're seeing into the next few quarters?
On those partnerships or?
Yes, on those partnerships.
Yeah. Clearly the partnerships are now one year in, a bit more than one year in for SAP, Siemens a bit less, and Google, I think one year or so. We had some pipeline conversion in the fourth quarter. It was the first quarter where we saw meaningful deals coming in. One was with a nice, a nice deal with a Mexican retailer or logistics company, if I'm not mistaken. It was sizable, a nice six-digit deal. It's starting, it's starting to happen. Good pipeline for Q1 and beyond, and the organization working through and progressing. Obviously, these partnerships and these deals and these customer relationships are big.
The sales cycles there are significantly longer than what we would normally see in a classical sensor deal, which converts faster. It's smaller and converts faster. Looks good.
Yeah. For Siemens, we are not even done with the integration-
Yeah.
We need to be a little bit more patient. From the overall product lineup, it looks good.
Got it. Thank you.
The next question is from the line of James Goodman with Barclays. Your question, please.
Yes, morning. Thanks very much. Firstly, just on the sponsorship situation, wondered if you could help us a little bit there with how you're beginning to think about the margin opportunity versus reinvestment of that as we start to think about the business post the sponsorships moving away. I guess some of the current investments that you're putting in the business are clearly in the context of knowing that you have that tailwind coming through. Second question from me, just on the second sort of sizable buyback that you've announced today. Is this a fundamental shift in how we should think about the business, really, that you're now just prioritizing almost the complete payout of the free cash flow generation of the business?
How do you balance that versus, you know, the ongoing leverage in a rising, you know, rate environment for you? Thank you.
Yeah. Let me start with the Manchester question on the margin. Well, we expect a clear high single-digit margin uptake once Manchester decides to take the options back. We also think that we will only reinvest a couple of margin points, so the major bite will flow down to the bottom end. This is why we think that we will see also going forward, whenever it happens, a strong margin increase based on this exit. The other one on the share buyback, this is not a change in structure. For us today, it's a reconfirmation of the existing capital allocation strategy. We love the share buyback, by the way, more than the dividend, because this is always a discussion, would we do a dividend policy, yes or no?
We think the share buyback offers both a shareholder value creation and gives, on the other hand, also a little bit more flexibility. With the share buyback amount of what we now announce, we still keep all optionalities in our hand. If there's a small, right tuck in M&A coming along the way, we can actually pursue both. Especially with our rethink wonderful refinancing structure with which we have in place, we have a wonderful basket for all and everybody, and we feel super strong about this.
Yeah, that's very clear. Thank you. Just on the ARR, which I think is a really helpful additional disclosure given the multi-year billings effect. Are you going to be disclosing that quarterly? Just wanted to check.
Do we disclose what quarterly?
The new-
Yeah. Yeah.
ARR metrics.
Yes. Yes. Oh, this is very important for us and for you in order to create more transparency and to get the distortion noise out of the multi-year system. We love the multi-year deals, but maybe not everybody, but ARR should close all discussions.
Can you say anything on ARR development in 2023? Any view how that should grow?
Yeah. James, this is a little bit too early. Give us a little bit more time. I think we gave a strong guidance today on many KPIs. Give us a little bit more time on AR. It's by the way, it's a brand new KPI also for us. We also learn and grow with this KPI.
Yeah, I think it's helpful. Thank you.
Ladies and gentlemen, as a final reminder, if you would like to ask a question, please press star followed by one at this time. The next question is from the line, and I'm sorry, I think I'm gonna put that wrong. Deepshikha Agarwal with Goldman Sachs. Your question please.
Yep. Thanks for taking my question. Like two questions, if I may. First of all, like on the top line, have you guided on a double-digit growth for revenue for FY 2023. Any color on the expectation around the various elements, which is basically SMB and enterprise and any, like, you know, any comments around the outlook around enterprise IT spending based on the customer conversations you're having? The second one is basically on margins. We're just trying to understand, you know, what kind of cost flex do you have. First of all, like on your guidance of 40% on adjusted EBITDA, what would be the variance like? Will it be around tens of bps or hundreds of bps?
Like how should we think about, you know, in terms of a slowdown or, you know, a better than expected performance? Like, you know, what cost flex do you have? Will, you know, any upside be reinvested back into the business? Those would be my two questions.
Okay. Let me start with the top line. I think generally what we see is enterprise IT spend, very regional development, clearly a bit longer sales cycles, and more cautiousness in the Americas. EMEA and APAC, we saw good development. I think from what we see out of Q4 movement into Q1, what we see first four weeks of the month, 30 days, seems to be relatively consistent. Clearly when you think about spend, everything which is related to automation, efficiency, remote work, less people, this works well in the current environment. Everything that requires additional investment and has a little bit of time, we can also push the decision out by six to nine months or so. Obviously, companies are trying to do that.
Therefore, I think we know the recipe on what to focus on. In the past, EMEA has always been very resilient through economic downturns because companies need to in these times, actually focus on efficiency even more. Generally speaking, on our top line growth guidance for 2023, it's clear that enterprise will significantly outgrow SMB and will gain share on the base of all the investments we have done, we've done in the past. The second question on margin range. I think your question was on that margin range, whether how narrow that range would be or how wide that range would be, or what was your question?
I think maybe let me repeat the question to see whether we got it correctly. You wanted to understand what is our cost flex in case something goes wrong, right?
Yes.
Okay.
Yeah.
Yes.
Cost flex as well as, like, you know, variance on the margin, like the 40%.
Yeah.
Around 40%. Yeah.
Yeah, yeah. The around 40% is for us then 39-41, obviously. Most importantly, when we talk about the 40, first of all, for us, it's important that we invest and do the right decisions to grow the business going forward. That is, for us, super important. The other topic is, this is what Pete, Oliver Steil, and I do, we steer the business super direct. In case something goes wrong, we of course have levers, we will pull the levers where we will then adjust so that we manage our cost base diligently. I think this was your question.
Also you should see when the margin development of last year we had at the end, we, when we were in Q3, we were talking about achieving year-end guidance, without Russia at Belarus business. Then we saw overperformance relative in Q4 closing. I think we all would agree that Q4 came out strong, and that is then a fall through to margin, and we saw the margin came out at the upper end. I think the way to think about the guidance for this year is we take a realistic cautious view on the billings development, and same so on margin. I think there is flex on the cost structure to work against adverse developments, but there's also flex to the upside if we would outperform on the billings.
Obviously there's a, or revenue, there's a fall through into margin. That's the way to think about it. It's actually quite narrow range that you can assume, yeah.
Okay. Thank you.
Ladies and gentlemen, there are no further questions. With this, we conclude today's conference. Thank you for joining, and have a pleasant day. You may disconnect now.
Thank you very much. Bye-bye.
Thank you.
Bye.