All participants are currently in listen-only mode. Following the presentation, we will open the line for question and answer session for analysts. To ask a question, we would ask the analyst to click on the icon, Raise Your Hand. Before we begin, Pivotree would like to remind listeners that certain information discussed today may be forward-looking in nature.
Such forward-looking information reflects the company's current views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking statements.
For more information on the risks, uncertainties, and assumptions related to forward-looking statements, please refer to Pivotree's public filings, which are available on SEDAR. During the call, we will reference certain non-IFRS financial measures.
Although we believe these measures provide useful supplemental information about our financial performance, they're not recognized measures and do not have standardized meanings under IFRS.
Please see our MD&A for additional information regarding our non-IFRS financial measures, including for reconciliations to the nearest IFRS measures. Now, I'd like to turn the call over to Pivotree CEO, Bill DiNardo.
Thank you, Dennis. Good morning, everyone. Thank you for joining us on our fourth quarter and year-end 2021 conference call. With me today is Mo Ashour, our Chief Financial Officer. 2021 was a significant year of investment, and fourth quarter was a great example of how our business looks as the strategy starts to come together across our three major categories of commerce, data management, and supply chain.
We exited the year as planned with the end-to-end capabilities that will position us as a leader in frictionless commerce moving forward. I'm pleased to report continuing improvement in all of our key metrics. Our Q4 results had record revenue and record total bookings, included a full quarter of contribution from Bridge Solutions, which was our supply chain entry, and two months of Codifyd, which expanded and extended our data management business.
Right out of the gate, we're excited about how these two businesses are performing. We're winning new logos, landing expansions with existing customers. We saw even opportunities where we had been in as independent groups, bringing together these two companies, Codifyd and Pivotree, as an example.
We were able to close both professional service as well as managed service on the back of it. We're really starting to see some of the benefits of what we had projected. The new project activity continues to be very strong, and total revenue improved by almost 40%, from the third quarter, so we're up to CAD 22 million now. Recurring revenue has shown two quarters of sequential improvement now, with ARR improving by 9% from the third quarter.
With CAD 16 million in bookings in the fourth quarter, we're set up really nicely heading into 2022. We're obviously seeing a new standard and a new level for our quarterly bookings, we are confident we'll see that continue. We had record ARR bookings at CAD 3.6 million, which is one of the positive indications of our MRR opportunities building.
The CAD 11.2 million of Q4 MRR is the strongest it's been since we IPO'd. It's important to note that traditionally, Q4 is a strong MRR quarter due to the seasonal nature of many of our largest clients. Our clients all had very strong Q4s, with many of our largest clients reaching new records, and our systems delivering peak performance throughout.
While I'm pleased with the early signals of the MRR growth, we're still in the early periods of commercializing our new MRR services and solutions. It will take time for these, new MRR products and services to reach a consistent and predictable scale. I don't expect this to be a straight line up and to the right in 2022, but we continue to lay strong foundations in each of the business units.
I'll continue to remind everyone that our strong revenue growth was offset by the continued migration of Oracle Commerce clients onto other platforms. Again, we did all of this great growth, including the strong organic growth, with the continued Oracle transformation and transition. We helped a number of clients actually move in 2021, and we expect that shift to continue in 2022.
We expect to see a combination of churn, which is actual fully lost customers, and melt, where we retain the customers, but with lower or different revenue than the Oracle business. Again, we're seeing that today.
We have multiple customers now that buy in multiple categories from us, especially the Oracle Commerce customers. We're expecting and planning for lower churn, but we will see melt. One of the things I'm gonna point out as well is we have also seen some early indications of planned departures getting delayed.
Many will recall last year, we had a surprise quarter with some early exits. Right now, we're experiencing a little bit of the reverse, known transitions and transformations that are delayed because it's. We're into the very complex customers that are migrating.
Again, I wanna reinforce, these are simply delays. These clients will eventually migrate their platforms, so we're being prudent about our growth expectations for 2022 with this in mind. Now, through the acquisitions of Bridge and Codifyd, we have significantly diversified our business.
There really is the benefit of you're getting a focused frictionless commerce, but within frictionless commerce, we've got a diversity of products and services that balance each other out. In the fourth quarter, data management accounted for nearly half of the total bookings, and we had both record organic bookings in data management practice, plus the two months of contribution from Codifyd. Supply chain was also a very strong contributor as a new category, and digital commerce was steady.
We showed this chart last quarter, and it speaks to the shift we see in how large enterprises are investing in their commerce infrastructure. We saw the big lift in online sales from the chart on the left when the pandemic hit.
Over the past three quarters, we've been in a post-pandemic phase, where there's still growth, and the industry is much larger, but the investments to spool up capacity in the digital commerce front-end piece is normalized. As we talked about, a lot of the discoveries through the pandemic were more about the supply chain hits. Modifying and being more agile with supply chain requires systems investments.
That's where we've seen a lot of the improvement on our end is back-end systems, supply chain, and data management. We know the supply chain remains challenged and it's gonna continue to be challenged. We think there'll be continued investments and data management is proving again to underpin everything.
We're excited about the prospects of these additions to our business. Improving data management in particular is about driving efficiencies in the business. It is the foundation for creating better frictionless experiences and long-term reducing costs.
We're again very optimistic that we've got the right mix that's gonna drive long-term transformation with our customers. We are seeing the platform discussions shifting. While we are talking about front end, we are seeing a lot of conversations around shifting those back-end and data systems.
Now we can help our customers across multiple fronts, and I'm actually really pleased with our advisory business growth this past year. We're seeing customers want more of a journey map and a real understanding of where the friction is in their system and which projects to do in which order.
Again, we're really focusing on capacity across all of the different components. The wins in the fourth quarter continue to tell that story of how we're helping our customers go frictionless. In commerce, we're helping our existing Oracle customers extend the life of their platforms and migrate to the new, whether it's moving from their current environments to the AWS cloud or to newer platforms like Shopify Plus, which we did for Lorex ahead of the holiday season. CAE has been a tremendous success story for us.
As a new customer we added by partnering with VTEX earlier in 2021, they're now one of our larger customers with four digital storefronts recently launched on their B2B marketplace. As I said earlier, we've had record activity in data management, and this is a category that really lends itself to managed services longer term.
We did complete a data management cross sell to one of our long-term commerce customers, and we signed a significant content as a service agreement with one of North America's largest distributors of industrial components. This is a really interesting solution. It's got significant upside for our customers. It's got a real theme around frictionless lowering costs, increasing agility. We think this category is going to grow and be an exceptional one for both us and our customers.
I think it's worth pointing out that a lot of business we're winning is in B2B, which as a whole represents a GMV that's four times larger than that of the B2C market. In supply chain, Bridge brought expertise in both the older legacy Sterling OMS systems and the new Fluent, and we're winning business in both.
Each of these BUs are providing solid, positive contribution margin to the overall business, and we are reinvesting these dollars in areas like Pivotree's Digital Solutions. Pivotree Digital Solutions represents the investments we're making in new MRR products. We categorize them into compiled solutions and proprietary solutions built on our own IP.
Again, compiled solutions are where we package up multiple different market available products and services and deliver them as a complete solution to solve a business problem, and the proprietary solutions are the ones that we build using our own developers and our own IP. We have a number of packaged products available and soon to be available.
There's Yantra, which we're moving to a SaaS microservice architecture, DIVE, which we have been actively selling as part of our data management, our Cybersecurity Watch package, and content as a service, which landed a big customer in the fourth quarter and a number of new ones coming, that we'll be announcing shortly.
Today, each of our main BUs are flowing positive EBITDA into the business, and over time, we expect digital solutions to be a great source of leverage and margin enhancement to what we're doing in the BUs. The use of those funds, as I was just explaining really here, is corporate spend as well as our investments in R&D.
Each of the business units is contributing in a profitable way to the corporate Pivotree, and that money's being reinvested in accelerating growth and new products and services. I spoke last quarter about some of the metrics that matter, and I've written about it in my CEO letter as well, and that's revenue per share being a key measure of success and our ability to drive non-dilutive growth.
Post-IPO, we were hovering around CAD 2.60 per share, and I was confident we would deliver closer to 3.50, so it shouldn't be a surprise to anyone we hit 3.51. Given the limited equity we've been offering with recent deals, I expect this number to keep climbing in 2022. I would also offer up that our gross profit is likely our best indication of future profitability.
As a result, gross profit per share should also tell us how we're tracking to longer term profitability. With the recent pullback in revenue multiples for tech stocks, we're seeing more value investors emphasizing bottom-line results or trajectory. We've been tracking close to CAD 1 per share in GP this last quarter, coming in closer to CAD 1.50 recently, 42% increase over Q3, and 17% increase versus Q4 of 2020.
Our strong margins positively benefited from the exceptional contribution in the acquired Codifyd business, but were offset by continued investments into new application areas and the decline in the Oracle business.
We're confident that gross margins will improve in the back half of 2022, and the additional flow through margins will begin to fall to the bottom line. Again, the businesses we acquired are very much solution-based selling.
They're not hourly rate-based selling, and we find as a result that the gross margins are on the higher end and again, we'll be pulling up our overall margins in the coming quarters. I get a lot of questions about when we will complete our next acquisition. We invested a lot of energy last year building out a scalable M&A approach.
I'm confident the process will continue to yield good opportunities that meet our strategic requirements, fit culturally, and are economically sound. I do really emphasize process in the sense that we're building something that should continue to build pipeline, and should yield good results.
What I can't predict is when counterparties will agree to sign off on the valuations. I won't tell you when, I won't tell you exactly what the deals are gonna look like, but I'm quite confident that our process is the right process.
You know that we work very hard not to compromise on any of the value drivers. Strategic is one, but it's not the only one. Cultural fit, and I think as evidenced by the two recent acquisitions and how quickly they become part of Pivotree, is critical. Of course, economically sound.
You've had a chance to review and see the economics around the deals we completed at the end of the year, and I think they are great benchmarks for the kind of deals we wanna do going forward. Our program of outreach over the last four months has hit over 1,000 prospects.
If there's any questions about whether there's enough deals out there, enough companies to acquire, the short answer is yes, there's more than enough. More than enough for a whole number of folks to be able to participate. Just in four months, we've reached out and had some kind of dialogue with 1,000 prospects. We have over 150 prospects in the actual pipeline at various stages.
Our commerce team added the most new opportunities this quarter, and we have 3-5 deals that are currently expected to move to some later stage. I would not say that, you know, being in this stage is a good indication of ability to close, just say if we're interested, you know, the early valuation indications are sufficient to continue dialogue, but there's still many steps, you know, before you get to the finish line.
We are still seeing a bid-ask spread in the private to public comparables, and I think that will be one of those headwinds that will make the acquisitions a challenge to close this year. It may require another quarter for the privates to see what exactly has occurred in the public markets of late, and to catch up. I do think it will catch up.
I do think it will create more buying opportunities at more realistic valuations, but we still have some, you know, small subscale businesses that are primarily professional services that think that they're four and five-time revenue valuations, and we disagree. This is again, you know, a continued story, and a continued process that I think will eventually bear fruit.
Now, I do expect Q2 will give us more clarity on these deals as to whether there's enough common ground to move forward, and we should be in a better position to tell you how things are shaping up at our Q2 report. I wanna again remind everyone we still have a very strong balance sheet, and a strong cash balance after our recent acquisitions.
We have an unused acquisition line of credit that will enable us to close the deals we find motivating moving forward. This won't be about capacity. Again, with our current stock price where it is, it is unlikely to include much in the way of equity issued by us, as we did at the end of the year.
We actually pulled back on equity offers and limited everything to cash. We have enough cash. We're quite confident there. If we start to see movement on our stock, we'll also have some additional leverage from being able to issue equity. With that, I'll turn it over to Mo to speak more about our financials.
Great. Thanks, Bill. As usual, I'll start with the top line. We've seen revenue base stabilize and grow from Q2 levels, and it grew organically 5% from the third to the fourth quarter, and 39% with the contribution of Bridge and Codifyd. A lot of the growth has been from product revenues, but recurring revenues also improved from CAD 10.3 million in the third quarter to CAD 11.2 million.
The scale we added to the business is giving us a lot more flexibility in how we invest in growth and also diversifies our sources of revenue as we pushed into positive EBITDA territory. The graph here showing the trend from last year Q4 to our more recent results and showing both revenue in the bars and the margin and profit improvements at the bottom.
Gross profit for the fourth quarter increased by CAD 1.6 million or 20% year-over-year, driven primarily by the growth in both organic and inorganic professional services revenue from the two acquisitions.
Codifyd acquisition was a strong contributor, as Bill described, both in terms of gross profit dollars and in terms of gross margin percentage. Bridge also contributed to both revenue and gross profit growth.
Offsetting this was foreign exchange, some of the Oracle and legacy churn we've seen on a year-on-year basis and a bonus accrual true up at the end of the year. Move to the next slide to look at the quarter-over-quarter change, sequential change in revenue and gross margins.
On a sequential basis, gross profits improved by CAD 2.6 million from the third quarter of 2021 and declined 50 basis points as a percentage of revenue. While we drove organic contributions, Codifyd was the biggest contributor to both revenue and gross profit and margin percentage.
Moving on to the OpEx waterfall and change over prior year spend. Total operating expense of CAD 11.2 million, a decrease of CAD 12.9 million in the prior year period. The increase in OpEx was primarily driven by the additional OpEx from the acquired companies and the increase in sales and marketing that you've seen this year. These additions were more than offset by the IPO-related stock compensation expense and the reduced interest expense in 2020. Now in more detail, it's Q4 P&L.
Larger scale of our business with both Codifyd and Bridge now included has helped get the overall business to adjusted EBITDA positive in Q4. This is compared to negative CAD 1 million in the third quarter of this year. Adjusted free cash flow was close to breakeven as well at CAD 0.4 million, CAD 1 million better than our most recent quarter being Q3 of 2021.
We will continue to look and invest in growth opportunities that may take us slightly negative early in 2022, but we expect to be EBITDA positive as we exit the year. We will continue to look for opportunities to invest in strong gross margin generating solutions where we see a potential and opportunity to solve our clients' biggest challenges. Now, lastly, turning to our balance sheet.
Cash at the end of the quarter was CAD 25 million after closing the two acquisitions in 2021. With our cash balance, our credit facility, we're positioned to drive accretion in the business through a few more acquisitions at the valuations we've been getting. I'm going to turn it back to Bill now for a closing summary.
Thanks, Mo. The priorities for 2022 we discussed last quarter continue to be in focus. We are very focused on integration and ingestion of the two acquisitions to drive revenue synergies and be able to offer our customers a true end-to-end frictionless commerce platform.
We have a digital solutions group focused on new products that will drive greater leverage in the business. In an inflationary and competitive labor market, we think it's critical that we leverage the software and the solutions we're building to increase the efficiency of our own employees as well as our customers' employees.
That group really is working on removing friction across our own business and our clients'. Our corporate development team continues to push our pipeline forward, and we're in a good position to find deals in 2022 that are similar to the ones we did in 2021.
We recently made two important additions to our senior leadership team, welcoming Todd Jurkuta as our president and Edgar Aranha as our Chief People and Culture Officer. You are also about to hear shortly that we have hired a new GM of commerce, and we're very excited, as you will see with the announcement, of the history and industry leading experience that this gentleman brings to our commerce business.
As Mo said, we're gonna work to deliver greater operating leverage in the business. You can see this quarter that we're turning on that adjusted EBITDA generation. Again, I'm expecting our flow through margins that are starting to climb on gross profit will start to fall to the bottom line.
As Mo said, we're gonna continue to invest in it for growth, continue to invest in it for greater efficiencies and more leverage in the future, but we have a clear path to EBITDA. Again, for us, if we're going to win long term, you all know that we're in this for the next decade or 15 years. We're aiming to be the leader in frictionless commerce, a market that we're helping to define that is not a quarter-over-quarter progression.
That is going to be, you know, the next 10 years of hard work, and we're focused on the end goal, to be a global leader. I think we're making all the right moves and investments today to do that. Yes, there'll be some lumpy periods like our Q4, where we're adjusting a number of things and it again accelerates our business.
I will not pretend this will be, you know, smooth, straight line. I think when you're innovating and you're trying to drive the kind of change we're driving, it's motivating and exciting for our team and our people, and I think we're really on the right track. Lastly, as a parting thought, like last quarter, I released a shareholder letter that I hope you find useful.
I really try to bring this into plain English, avoid the technical jargon or an overly capital market orientation. This should be easy for anyone interested in the frictionless commerce space to consume. Now, I've committed to continue writing this quarterly letter for the intermediate period, for the rest of this year. Really, again, with the goal to help people better understand the business and our performance.
I will eventually move to an annual letter, so I can make the focus of the discussion more strategic, with a longer time period to track the progress of our initiatives. I don't find things change quite as much quarter over quarter. I hope by the end of the year, there will be a solid foundation for people to understand our business, and we can then revert back to more of a strategic outlook in that dialogue. I'm gonna leave it at that for today. Again, I hope our numbers do a lot of the talking, and I'm happy to take questions from our analyst friends.
Thank you, Bill. We'll now take questions from the analysts. As a reminder, please click on the icon to raise your hand. If you could limit yourself to two questions and then return to the queue, that'd be appreciated. Our first question comes from Daniel Rosenberg from Paradigm Capital. Daniel.
Good morning, Bill, Mo. Congrats on the improvement that we saw this quarter. One area that stood out to me was the bookings in terms of ARR bookings. I was curious to hear from you which products? How would you categorize those bookings in terms of which products are seeing the most traction? How do you view those bookings flowing into the income statement as revenue? Is it mid-year or late year? Any color there would be appreciated.
I'll let Mo answer the timing of it. I think the one positive thing I really wanna highlight, and you will start to get more of this visibility from us at the end of the year, as we really start to break out more of our business unit performance. We're not doing it yet, but this will become more obvious by end of year. It is across all of our businesses.
We even had some new Oracle Commerce business come into it. And so as much as there's a long tail of that transitioning, there's also still some folks that expect to be on it for a while, and we're seeing recurring revenue still in there. What excites me though is some of the new deals.
They're very large deals, but they're in other business units and selling other and newer products and services. That content as a service deal that we recently announced was sizable, and there's more coming on the heels of it.
We're seeing a distribution of the new MRR that is again across all BUs. I'm very, very optimistic about what that means to the business long term. Mo, maybe you can help answer the question around timing of hitting a P&L.
Yeah. Some of these, I mean, there's a good portion that was new and that's probably gonna take a few months for it to actually start converting. Expect it. I'm talking about the sizable ones within the pool. It will take probably two to three months for it to actually start showing up in our revenues. Some of this was upsell, and some of it was renewals with an increased size of environment as well. It's still, I mean, we still see strong Oracle sales come through within that as well.
That is continuing to kind of show that to some of our customers while, you know, they're thinking and planning for a, you know, their next platform destination, they're still increasing size, still renewing with Oracle as well with increased environment. Some of those will flip a bit quicker. One of the larger ones that we've had in there will take probably two-three months, I would say, for it to start to convert. I would say probably half others will be a bit quicker to start converting.
Thanks for that. You mentioned a new Oracle customer. I was just curious about your thinking around you know, churn and melt. You did call out about CAD 1 million or so in the quarter as it relates to kind of technology changes around customer preferences using Oracle over other platforms. You know, how much exposure do you have? How do you think about that unwinding over the course of time?
Yeah. Just to make sure you caught my. I think the. Yeah, I mean, earlier this year in 2021, we did have new Oracle customers, and that's probably a fair comment. I just wanna say Q4 was all upsell and renewals on existing customers with a higher net run rate. Just wanna make sure I clarify that point.
I think overall, I think we've shared in the past, I think we're still like. Over the next 12 months, we still see kind of the mid-single digits, I would say, in the range of 5%-10%, perhaps maybe even 7%, 8% as potential, right? It's something that we're keeping an eye on, keeping a pulse on.
It's Oracle customers similar to what we've had before, where they're talking to us about helping them get to their destination or their next platform. I would say it's in kind of the mid-single digit range of our current portfolio.
Yeah. Lastly for me, so you established an M&A program. It sounds like you're quite active. I was curious if you could kind of give some color on the size of deals. Has your thinking changed in terms of what is possible compared to what you've done in the past?
No, I don't think anything's changed materially, Daniel, in that, the size of deals you've seen us do are deals we're comfortable doing. We can add value to them. They're again, mostly focused on skill management, so trying to fill gaps of areas that we've identified as core to long-term growth.
The supply chain in particular, I just wanna get that to a bit more scale. It's doing well. It's growing organically, but it would be a more efficient business unit, you know, north of CAD 20 million-CAD 25 million.
So we wanna get some scale into that business unit and round out some of the platform capabilities. Data management is constantly active. They're shifting more of their attention right now, I would say, to software enablement.
A number of the things we're describing today really lend themselves to higher degrees of automation and people efficiencies. A number of the deals we're looking at really are focused on what software they bring with them.
That doesn't have to mean that they're selling software as a service to the end customer, but they're software enabling their businesses for higher degrees of automation. I would say same themes.
You know, there's combinations of recurring and project-based revenues, managing skill gaps for us or on strategy to things we've declared are important, and they're probably in that, you know, CAD 10 million-CAD 15 million revenue range, maybe as small as CAD 5 million. We have looked at a couple of really small tuck-ins.
We're doing a few things right now, cleaning up our own house with some contractors that we're gonna roll in, but I wouldn't call them, you know, our typical acquisitions, and so we don't really refer to them that way. I would say more of what you've been seeing from us.
Great. Thanks for taking my questions. I'll pass the line.
Always a pleasure.
Thank you.
Dennis, who are we going to next?
I know Dennis was having connectivity issues, but I do see Jesse, John, and Par. Oh, there he is.
Why don't we go to Jesse?
Hey, good morning, guys.
Morning, Jesse.
Just you know, coming back to the acquisitions you completed in 2021, wondering if you could maybe just speak to how many cross-sell initiatives have been progressing since the deals have closed.
Obviously, it's still pretty early days, but I think just any commentary you could provide would be helpful. Or even if you have any targets you could maybe share on how much greater spend you could potentially capture from your existing core clients from cross-sell would be helpful.
Look, what I can tell you, Jesse, it's obviously many layers to the discussion, but the oversimplified response is record levels. We're seeing more cross-sell opportunities and more sell with opportunities. We're getting brought into conversations now where we're not selling one business unit at a time.
We're being asked to present a roadmap that encompasses multiple business units. We did have a couple of really quick easy wins. You know, as you know, we don't tend to name the names of our customers. Some of that anonymity makes securing them a little easier. You know, one of them is a great example where the project was getting closed. They were now looking to manage services.
We were bidding on that, you know, with others in the marketplace, and Codifyd had already won the professional service part of it. It was a quick, easy win to be able to tuck in that managed service and recurring right after we closed.
There's been a number of those types of conversations that just accelerate because they're now dealing with one company that can do all of it. We're seeing great collaboration between the business units.
Again, we're seeing more customers requesting combined solutions. We should be able to give a little bit more numerical clarity by the end of the quarter. I'd say quite a number of the deals in our pipeline right now are multi-business unit selling.
Okay, that's great. You know, in your prepared remarks, you talked about commercializing new MRR products throughout this year. Presumably, this is in the digital solutions business and, you know, if that's the case, can you talk about how large do you plan to kind of grow this business over the next, call it, three-five years?
Yeah, it's a great question, and thank you, Jesse, because I think this is really representative of that group. Five years from now will represent frictionless commerce. They're the bridge between all of the groups, the connective tissue.
They support each of the frictionless initiatives that these groups are doing inside, you know, commerce, data, and supply chain. We're really trying to build all of those solutions on a single platform.
Five years from now, our expectation is it is the majority of our business, the way we would represent it. The recurring revenues, the platforms that they're running on will be products that we've been building and assembling.
you know, I think as part of our evolution, we will be flipping the units on their sides, and we will be leading with frictionless commerce, and that will mean that digital group is really central to that conversation.
Okay, great. Then if I could just squeak in one last question, just on the labor environment, and I know you kind of briefly touched on this. Can you just maybe speak to any specific challenges that you could be facing and then what mechanisms, maybe aside from M&A, that you could have to address any labor challenges that you're facing?
Yeah. I don't think it's exclusive to us, Jesse. I think anybody who relies on highly skilled technical talent is facing global pressure. You can't go anywhere in the world where there's talented technical people and not find labor inflation. In fact, in some of the what I'll call the traditional arbitrage labor markets, they're experiencing hyperinflation.
We saw it in South America. We continue to see it in India. The reality is, at least in North America, our observation, folks are going wherever the talent is. They are selling those services at North American rates, and increasingly they're seeing, you know, margin compression, but still good margins. Our philosophy continues to be and always has been that the more we automate, the greater our revenue per employee is, the more we're demonstrating leverage on that talent.
That's really why we're investing in more automation, more IP, 'cause we don't think this trend is gonna slow down. Talented technical people are gonna continue to be in high demand, and the pandemic has shown they can work from anywhere, which means you don't have to go anywhere to save money.
You will go around the world just to find the talent to fill the need. That's where we're not counting on, you know, long-term regional arbitrages to manage our margin. We're counting on leverage and automation to do that.
Understood. Thanks. I'll pass the line.
Thanks, Jesse.
Thank you. Our next question is from John Shao at National Bank. Apologies, I'm trying to connect John to the line here.
Hey, good morning, guys. Bill, so you mentioned the planned departure of some of your clients from Oracle Commerce. Is there a timeline we can expect what's potentially gonna happen? Is it gonna be, like, first year, first half of 2020 or second half? How should we estimate the size of the melt, the potential melt and churn, especially compared to the one we saw last year?
Yeah. I'll let Mo get more detailed on it, but I think the message, John, is it's built into our growth plan. I think where we had previously been surprised, and we've talked about this, you know, out in the analyst community, public markets don't like surprises, so we've been very prudent in the way we're forecasting.
I think, you know, what you're gonna see in Q1 is good news in that in our own forecast and budgets, we had assumed some of the indications we were getting, they were built in as churn and melt. The reality is they won't. Q1 is probably a little bit stronger than we originally might have forecasted. I think it is built into kind of the guidance we've been giving.
We won't be breaking it out any more than we do now, but you will see that, you know, it's gonna come off this year, but it's being well offset by all the other great initiatives that are going on in the business.
I think the challenges we faced in the past were, it was such a significant portion of our revenue, it was much more obvious when something happened like that. As it continues to shrink in overall importance, you know, the churn and melt won't have the same impact on stalling our growth. Mo, I don't know if you wanna be a little bit more specific.
You know, I think similar. I think I gave Daniel's time the range. I think over the next 12 months, we've got visibility to kind of the mid-single digit range in terms of how much of our kind of current portfolio. We did CAD 22 million in Q4. I'd say in the mid-single digit range in terms of what we're again keeping our eye on with potentially.
You know, they are looking at other platforms and making decisions within that timeframe. That's kind of the scale and magnitude that we're keeping our eye on and obviously partnering with them, just like we have in the past, to see whether if we can be the ones that partner with them and help them get to their end platform or their destination.
Okay, thanks. My other question is, bookings are really strong this quarter, and I'm more curious about what you hear from the customer end regarding their demand in 2022. How is that gonna be different compared to 2021, especially as we consider the reopenings? Any colors on that front would be appreciated.
Yeah. I think, John, the reality for us is, we've got many of the same customers coming back to us. We now have twice as many, 3x as many things that we can sell them, and they happen to be in the right sweet spot of things these customers need. We're finding the demand shifts and moves between these categories now.
If they were done and settled down on a commerce project, they are probably talking to us about a digital or a data or a supply chain opportunity. Plus, with these two acquisitions, we've picked up a number of new customers that are now asking to learn more about the portfolio of things that we do. We're not seeing any slowing of demand.
I think you saw a new standard, you know, CAD 16 million of bookings. Previously, I think we, you know, were doing 6s and 7s. I think 16 is definitely a great way to think about our new floor, and we're not seeing that let up at all. You know, we are absolutely seeing great demand brewing in our target customers. Again, I think it's shifting between different services and different offerings, so we've got a diversity that I think lends itself to this continued pipeline build.
Thanks for the color. I'll pass along.
Thanks, John.
Thanks. Our next question is from Par Shah at Canaccord Genuity. Please go ahead.
Go ahead. Hello, this is Robert Young.
Hey, Par.
Hello?
Hello.
Hi, this is Rob. Sorry, I had a technical problem, so I had to switch devices.
Oh. Hi, Rob.
I missed the call because of that. The Codifyd contribution is one thing.
I think we're struggling to hear you.
Yeah, you're cutting out.
Can you hear me better now?
Yes.
Much better.
The Codifyd business was a little stronger than we expected, and I'm curious if there's some seasonality that we should be thinking of that's introduced by, you know, Bridge and Codifyd that might shift things even more into the Q4 period that we should be modeling. I guess Codifyd was quite a bit better contribution than we wanted, yeah.
Yeah. I think it's a fair question across the board of the seasonal impact. Q4 was a good seasonal peak for us, as is often the case. We tend to have good performance in Q4, recurring revenue. We've talked about this in the past too, and I wanna remind everyone that the MRR bookings we don't include in our bookings number either, right?
So you see the benefits of MRR that go beyond the bookings that we report in Q4. You would expect normally some of that would drop off in Q1, probably not as aggressively this year as in previous years. We're just seeing increased demand across the board.
What I will tell you is, you know, that there was certain degrees of motivation inside Codifyd to get their projects delivered and drive the revenue for the quarter. I wouldn't call it a continuous seasonal peak, but I would, you know, suggest some of that really strong performance was the result of their earn-out period, you know, was ended at the end, December 31.
There's definitely some strength in those numbers that came from people working very hard to exit the year very strong. The good news is there's gonna be continued growth. I wouldn't necessarily model a Q4 peak going forward. There may be some of that, you know, drop off a little bit, as the earn-out period is now done, and we're gonna get to business as usual.
Okay, great. Thanks. The second question would be around the NRR metric that, you know, has been continuing to improve. Hello?
Yes.
Sorry.
We're-
Just on the NRR metric, it continues to improve and you've seen some of the expected drop off on some of these large Oracle managed services engagements that are gonna last longer than you expected. Should we expect NRR to sort of be above 100% here as we go through 2022? Or should we be thinking that it's maybe a steadier recovery back over 100%?
Yeah. I'd go a bit more on the steady, on this one. As Bill Di Nardo described, we've got some opportunities, we've got some strong bookings in Q4 that will help contribute to the growth. Some of them were with existing, some of them were new recurring as well, so won't get captured in our NRR number. It's a bit more steady. I think some of the new stuff won't show up in the NRR metric because it is new and not in the comparable. That's kind of where the expectation is set for this year.
Maybe last question. I mean, two more questions. Second to last would be around the gross margins. Thanks for those waterfall diagrams, they were really helpful. Managed services was a positive revenue contributor, but was a bit of a drag on gross margins. I didn't understand that.
That's one thing. Like, as you look forward into 2022, like, the gross margins in the business benefiting from managed services sort of recovery with professional services converting, hopefully. I mean, is that the type of dynamic that you expect and we should expect through 2022?
Yeah. Let me answer maybe the first question. I don't know how much rounding there is in there, but I think part of what we have is our MS business is typically been with kind of the whenever it's on the cloud, and it typically has been a bit lower than the average managed services margins that we've been yielding in the past.
That's probably one factor. There's a smaller factor, but I don't know how material it can be. There was some one-time costs in there related to prior periods that were just caught up, but I wouldn't say it's the major contributor here. Can you just repeat your second question? Make sure I heard that right, Rob.
Absolutely. I'm thinking of the managed services business, you know, benefiting from some of the professional services activities sort of converting, maybe cross-selling into longer term. The gross margin sort of recovering as that dynamic plays out.
You know, I was just trying to connect the headwind on gross margins here in Q4 versus, you know, my expectation that maybe the gross margins will recover or expand through 2022 as that conversion happens. Maybe you've already answered half of that question.
Yeah. I mean, I probably answered some of it. I think a lot of it is what Bill describes. We continue to invest in automation, and it's also looking to improve the margins that we've been generating in the past. That's part of what we're looking at.
We continue to look at our cost structure within our managed services business, and our team continues to find opportunity where we can get more efficient and support the same and more customers.
Those are some of the levers that we've got going on in managing just our cost base that supports the services. Also with growth, I think that will come. I think we've got some professional services opportunities, and some of the bookings that we've had were professional service clients converting over to managed service.
That will also contribute to the margin story as well. I think all of that will help net some of the Oracle churn that we've been flagging. That's why I'm kind of highlighting somewhat steady on the NRR front until we start kind of working through and growing beyond the Oracle churn because that continues to get smaller.
Okay. Last question just on the IP contribution, which acquisitions have been helping. Is that something that's increasing as a percentage of revenue? Is that a margin benefit? Then I'll pass along.
We have opportunities, but it's not something I think we're ready at this stage to declare and set some expectations where we'll come back, and people will ask us what happened on that. I mean, there's definitely opportunities.
It's a critical part of our story, our success, and our strategy around creating scalable and building solutions that close the gaps for our customers. It's there. We continue to work it, we're investing in it, but I wouldn't say it's something that we're ready to declare at this stage any scale and size or margin contribution.
Okay. Okay, that's fair. Thanks a lot, guys.
Our pleasure. Thanks, Rob. Rob slash Garth.
Thank you. It looks like there's no further questions, so I'm gonna turn it back to you, Bill, to close.
That's great. Thank you for attending. Thank you for all your great questions to the analysts. Again, I hope we've been able to, between our MD&A, the CEO letter, and today's presentation, give you enough guidance on where the business is going and how we're shaping up. Again, we thank you for your support and your continued attention to our business, and we'll look forward to seeing you again, I guess it's the end of May, Mo, with our Q1 results.
That's right. Yeah.
Thanks very much, everyone. Have a great spring.