TeamViewer AG

XETRA:TMV

Earnings Call Transcript 2021-Q3

[Operator]

Ladies and gentlemen, thank you for holding. I would now like to turn the conference over to Daniel Fard-Yazdani, Head of Investor Relations. Please go ahead.

[Daniel Fard-Yazdani]

Hi. Good afternoon, everyone, and thank you for joining this call on such a short notice. As you have all seen, we have released our preliminary Q3 results this morning and, on the back of this, have also adjusted our guidance. We wanted to be available as soon as possible and, therefore, offer this conference call. It's still early days after the end of the quarter. And therefore, let me ask you already for your understanding that we won't be able to answer all of your questions today. At latest, we should be able to do so on November 3 when we released the regular Q3 results. And let me also flag that we will be hosting a Capital Markets Day on November 10.Before I hand over to Oliver, our CEO; and Stefan, our CFO, I would like to remind you of the note on forward-looking statements that you find on Page 2 of the presentation. And let me also reiterate that all figures in the release and slide decks are unaudited and preliminary.And with that, let me hand over to Oliver.

[Oliver Steil, Chairman of the Management Board & CEO]

Thank you, Daniel. Good afternoon, good morning to all. Thanks for joining. Yes, clearly, very bad quarterly results, which we published today, very disappointing. As you can imagine, not the least for us, we really had a high ambition that we were putting a lot of effort after Q1 and Q2 into this third quarter to make sure that we deliver on our expectations in the guidance. So clearly, Stefan and I, the management team, we do regret that this didn't work out.It shouldn't be the case. And that's, hence, quite a bad moment, I have to say, to be here. But still, of course, wanted to take the time as early as possible to explain as much as we can explain, give you more details and also show you how we think about the business going forward.So of course, first thing is that Q3, as such, is far away from the expectations that we had put out. And I think more importantly, as we said, Q3 was the first, so to say, normal COVID-unaffected quarter or unaffected by COVID. So this was a very important quarter, as we said, especially towards the back of the quarter, together with the fourth quarter, to deliver and contribute to deliver the full year guidance. So basically, with the very bad results in Q3, this took away the chance to meet our full year guidance and, hence, the adjustment of the guidance that we will explain in a moment. Clearly, there were also some positive elements in this quarter if we compare to Q2, but then Q2 was below expectations and not strong. So therefore, there's not a big improvement, but still, we will go through that.Looking at the weight of the release, I think in combination with a more negative news flow recently, it was clear to Stefan and myself that we want to give this context and have really ample time after this short presentation to answer all the questions that you very likely will have. We also want to use the opportunity to really highlight why we think that with this release, we are ending the negative news flow. So we've really taken some efforts to rethink our guidance and have a proper base from whereon we should be able to deliver on our targets again as we had done in the first 1.5 years post-IPO. I think -- for those of you who have been around for a long while, I think you -- I hope you know us as people who want to put out numbers and deliver the numbers and be reliable partners in this. And therefore, it's very unpleasant to haven't been able to achieve this.So with this, if we go through the Q3, if we go to Page 3, clearly, we did see many metrics improving compared to the second quarter. But the growth overall is much slower than we had anticipated. So we are up 18% in constant currency and also on reported, which is an improvement from Q2, which was at 15% reported, 18% constant currency. So we see better metrics but, of course, far away from where it would have needed to be.Also improvement on the churn. As we said, the COVID cohorts in Q1 and Q2 were particularly affected. Subscriber churn -- last 12-month subscriber churn in Q3 was 14.6%, so some improvement versus the 15.5% that we've seen in the second quarter.And also, we had said that the NRR should improve again after the big hit we took in Q2, where it was at 88%. We did see good recovery now as expected, and NRR is now nearly 100% again. So LTM now at 96% or 99% constant currency.Subscriber growth, 11% at quarter end at 628,000 subscribers. So not a strong growth, clearly.Also enterprise. We said that especially the enterprise acceleration will be very important on the way towards the full year guidance. And I would say we did solid improvement, very clearly, especially towards the end of the quarter, as you would expect at the end of the summer quarter that there is enterprise acceleration. We had expected much more. We had a very strong pipeline. Some of the deals didn't come through. Some came in smaller. Some flipped to the next quarter. I would say, growth -- solid LTM growth in enterprise, 60%, not a bad result, but we would have needed significantly more to be able to stay on a track or even close track to the full year guidance.We closed the largest augmented reality deal. That was a good one, more than EUR 7,000 (sic) [ EUR 700,000 ], actually, in the United States, which I think is also positive. We come to that later. So there are positive bits and pieces here and there, but that didn't help, of course.On the margin side, we are at 34% adjusted EBITDA, which is significantly down. Most of this clearly driven by the lack of billings, which, of course, fell through the EBITDA. Of course, we also had a ramp in our cost base. The marketing partnership but also a significant staffing in many areas, sales, marketing, R&D, Stefan will talk about it later. And of course, if we -- if you have that -- if you see those 3 investments and then significantly miss the billings, then there's nothing -- not much you can do about it in the short term. Of course, we will address this margin topic. I think we will look at the structural cost in the business. We need to see where we have maybe overinvested too quickly and course correct. But of course, and I was sorry, there was no way to react to this in the very short time frame.Clearly, we know that some of you have been skeptical about our ambition level for the second half of the year for a while now. And I think today, we have to concede that you are right. We have been too ambitious on a number of the factors, and it's clear that we can't compensate for this in the remainder of this year anymore and, hence, the guidance change. We will address this in more detail and also explain how we see the profile of the company going forward in a moment. But before we go there, maybe I'll give you -- quickly give you an update also on overview on the regional split on the next slide.If we go to the next slide. First of all, currency exchange rate effects almost played no role anymore in this quarter. So very clear numbers. As you can see, EMEA showed a solid performance, 25% growth in Q3; followed by the Americas with 17%. I would say EMEA, certainly solid. Americas, with strong finish after slower summer months. And the big disappointment was, again, I should say, the APAC region, where after an already quite slow growth in Q1 and Q2, actually growth stalled in Q3 and only reached the level of Q3 2020 billings. Mixed picture, very different pictures by country. Probably don't need to go in every single country by detail. But frankly speaking, totally unacceptable, and we are working very intensively to bring the region back on track. This is certainly not where we should be in our growth region, and we need to take action there, and we will take action there.So let me hand over to Stefan to explain then why and how we decided to change the midterm guidance and the new guidance overall. And then I will come back later for some comments.

[Stefan Markus Gaiser, CFO & Member of the Management Board]

Thanks, Oliver. And good afternoon from my side. I can only repeat all of that, really personally very disappointed and deeply regret that we have not met our communicated target being in a situation we want to be in. You know what, you can be sure we fought intensively very much until the end of the quarter, but it just was not good enough to turn around in the third quarter. I think it's already said, some of those points which we are going to discuss are part of the discussions as we always do in the past couple of quarters.So let me recap the headwinds we faced. Some of them we clearly underestimated on our side, and we want to provide a full detail given the magnitude of the change. I think we have certainly been too bullish and too invested on some of them. We are clearly now want to adopt a more coursed approach in our thinking and forecasting. It's really all the learning for us. We want to be in a situation where we put an end to the negative financial news flow and where it's easier to see upside rather than continuous downside. And also, again, as a sense, changes are so material that we want to provide more context in the full picture on the situation.So what are the topics? A couple of key points here. Innovation speed in terms of product portfolio, I think many of us, we talk in great detail about our solution portfolio. And I think we have clearly a great fundament. But at the same time, we also said we need to make the company more robust, reduce the reliance on our core use cases and really forcefully enter new markets and, therefore, increase our sales. We take this twofold. We did smaller M&A in strategic areas, mostly in the enterprise segment. And at the same time, we also significantly increased our R&D headcount and opened new R&D hubs, so really trying to accelerate innovation and operate at the company.I think we are on the right track, and we see great potential in those acquisitions and the new product releases, evidenced by some of the customers Oliver explained. The largest deal, EUR 700,000 with augmented reality, so great win. But we hope for more, and we factored in a fast acceleration of the new products. Clearly, it's more enterprise in longer sales cycles. But we had thought after our defense side in the first 6 months that we actually turned the corner in the third quarter and convert better. That did not happen. So the impact so far is that those investments are currently not as growth accretive as we thought they should be. And hence, given the cost base, which we acquired, they are more than a different margin and we thought that they will ramp up faster.Secondly, as you all know, we had a great start into the enterprise segment. This business is now gaining weight. As Oliver said, 60% growth, nearly [indiscernible] 40% of [indiscernible] contribution, which is quite nice, very attractive segment. And I think, initially, we were able to absorb all of those investments very well within our financial model and the scale effects we had in other areas. And based on the successes we have seen in '19 and '20, we have significantly accelerated our investments and increased the sales capacity.The pipeline is there, as Oliver mentioned as well, also still including significant 7-digit deals, which we talked about. And we filled up lots of retention focus in the first 2 quarters that now is showtime and we should be able to convert those deals. And we did some, but we closed them at lower ASPs. 700,000 fantastic deals, but some of those deals could have fallen or could have been significantly larger, but they have been cut back due to regional rollout less product need initially and whatnot.So pipeline there, but to be honest, we've been overly optimistic on how we convert them. So clearly not happy with our sales productivity, and we need to fix the issues because, really, the billings growth in the business in the enterprise segment is attractive. But we have invested significantly more and we wanted to see the benefits of this in -- of those investments in the third quarter.Moving on to COVID. Clearly, as you all know and remember, in 2020, we had significantly benefited from the COVID environment, especially for working-from-home solutions. And again, clearly, in the first 6 months, lots of focus on retention of those new customers. And then we expected an uptick of trading in the third quarter, better customer wins across all segments lots of defense work. And yes, some of that we've materialized but not to the extent expected. So I think now we have to conclude some of the extra demand, which we've seen in 2020, was probably also include a certain amount of pull-forward element, because otherwise, our pickup in the velocity business should have been better.And we also started with the retention of those newly won customers. I think we explained it a few times. We had down-sell rightsizing of some of the customers which we won last year, probably also a little bit lower loyalty from some of those customers. And clearly, that's something which we underestimated. We felt pretty confident about retaining them as a larger volume, but that did not happen. So we thought we manage better.Then moving on to APAC. We talked about that region a lot. We failed, and we still feel strongly about the growth potential in that region. That's, frankly, why we invested substantially over the last 2 years. And yes, we have experienced quite some success early on in China and very significantly in Japan in 2020. As you might remember, we're doubling the business there.And also, the same situation here in H1 or in the first 6 months, growth wasn't there, but we consider this temporary and really related to COVID-retention efforts where we haven't performed strongly, to be frank. We mentioned it already at the time of the Q2 results, and Q3 should have been showtime. But in markets like China and Japan, they were not able to reverse the trends on which we relied.So now if you take a step back, EMEA and Americas, they have consistently outgrown the APAC region. However, we relied actually on APAC being growth-accretive and turning the corner in Q3, but that did not happen. Nearly disappointing performance in Japan and China, and it's not where it ought to be given our investments and the market potential, but it's something where we need to course correct.And finally, there is more low-end competition, more competitors for easy working-from-home solutions for the SMB segment, smaller office environments. And I think, therefore, we need to fight harder to revamp and revitalize the free user base and reuse the ecosystem. And for the moment, our monetization potential has been reduced. We also did run some campaigns in the third quarter. And yes, they contribute a little bit, but we thought they can contribute more and that was not the case. I think for the time being, we have to accept that there is a smaller amount of free-to-paid monetization going forward.Overall, usually, many of those topics, on their own, we can compensate by some outperforming areas, and we frankly consider most of this of a more temporary nature, especially after our focus on H1 customer retention. I think now after Q3, we need to acknowledge that some of those effort -- effects are more persistent and are not only temporary. And therefore, the overall cumulative effect of those changes mean that we can't achieve our previously issued guidance and that we also need to probably change our midterm guidance. Clearly, this has resulted in significantly revised guidance, which I will explain now.So moving on to the next slide, we see our updated 2021 guidance and also our updated midterm view. For the current year, we are now expecting billings in the range of between EUR 535 million and EUR 555 million. You all know that in anticipation of a significantly stronger recovery in Q3, we have still targeted the lower end of the range, which was previously at EUR 585 million. Clearly, the miss in Q3 and now the following adjustments of our billings expectations leads to a lower outlook for revenues. We have changed that to a range from EUR 495 million to EUR 505 million.And as Oliver mentioned, that shortfall in billings has a direct impact on adjusted EBITDA. And therefore, we also revise or downward revise our margin target for this year to 45 -- 44% to 46%. Clearly given our high GP margin, it's not possible to adapt the cost structure in such a short time frame to compensate, but rest assured that we are looking into our capital allocation.So given what I summarized here before, we have also decided and concluded to not consider the current growth trajectory as temporary. But really that the longer-term trends are also not supporting the previously issued midterm growth guidance. And therefore, we assume that we will continue to see billings growth in the high-teens percentage range only. It's, therefore, also clear that we will reach EUR 1 billion billings milestone later than in 2023. We will update you on those milestones at CMD, which is early November.In terms of profitability, we clearly expect that this year's margin represents the bottom. We clearly need to focus on capital allocation and investment areas. And our billings and cost growth need to be realigned again. This will be a key focus for us [ as a mainstream ]. And frankly, we want to become a faster and more efficient company again after significant growth over the last couple of years.So that's the revised guidance. Now clearly, a very bad picture today in terms of current performance. But I think at the same time, we also want to reiterate that we believe that we've done many good things for the company and that the company is, to a certain extent, in a better position than it was a couple of years ago. We completely understand that today's release confirms some of the skeptical viewpoints, absolutely understandable. And as I said, we really regret that we haven't met our communicated targets and that many of you will be more than annoyed today.Hindsight always wise. And to be clear, with the benefit of the hindsight, it would have been better to pursue a more conservative outlook. As many of you have pointed out, I think we understood that message and have, therefore, also changed our approach here and want to really make sure that all of the negative news now are out of the way, so to say.And if we may and before we open up to Q&A, let us just briefly explain why we believe TeamViewer is still a great company even on such delay. Just recapping all of the investments, which I explained just a few minutes ago, we clearly have tangible and existing pillars in place to support our long-term growth targets.Firstly, I mentioned the investments into R&D and M&A. I think we have now a significantly broadened product and solution portfolio, again, along the entire value chain, quite fundamentally different compared to where we've been a few years ago. We have Frontline and Upskill in the AR space, TeamViewer Engage. We just launched Classroom and also other innovative offerings. Again, they need to bear fruit, and we grow accretive and need to contribute in billings to the extent we expected, but I think we have the potential there.Secondly, we are already working today with key strategic partners. As you know, we've just announced a strategic partnership with SAP, a very important example. And we can confidently say there will be more forthcoming. I think we are working there on the right step to increase our footprint in the software ecosystem and working more intensively together with strategic partners. That should really drive the enterprise business, which is going nicely, but again, short of our expectation.Clearly, enterprise business is coming along with higher annual contract values as you all know. And I think, generally speaking, moving to enterprise means more sticky customer base, more reliable and higher net retention rate. So generally speaking, just a better quality business going forward.Let me now hand it over to Oliver for the rest of the slide.

[Oliver Steil, Chairman of the Management Board & CEO]

Yes. Thank you, Stefan. So also from my side, I think it is a company which is on the basis of strong global mega trends. I think we are -- we have positioned the company well despite the fact that far away from where we wanted to be, as Stefan said, clearly, and I said before.I think the fourth point, the fourth pillar is really, if you remember, at the time of the IPO, we were discussing and also afterwards, the opportunity that we have in the Americas. And we have been delivering very well against that, not this year, but in previous periods and really seen significant growth. But we also talked -- when we were covering Americas, we talked about the channel business, the partner business, whether we shouldn't do more; the enterprise traction in the Americas; and also the difference between the kind of go-to-market model that in EMEA. We started to see some OT tractions, operational technology, connectivity, and in Americas, we didn't see that.I think what we see now, which is very positive, is that the Americas investment program that we put in place over the last years is really boosting, so to say, the Pillars 1, 2, 3 that Stefan just mentioned, because in the Americas, we do have a much stronger focus on enterprise now. Our new President, Americas, Patty Nagle, she is an enterprise person. At the same time, she is used to work with large strategic partners, channel partners like systems integrators, SAP and so forth. And she is also embracing the operations technology, AR, Upskill, Frontline solutions in a much better way than before.So we now have a full coverage of the country. We have offices in Clearwater, our old office. We have Atlanta. We have Austin, Texas. We have Vienna and Washington. Patty has rebuilt the enterprise sales force as a, I think, quite a good proof point is the EUR 7,000 automotive augmented reality deal. So we do see traction in OT. So I think going forward, the Americas will be a good contributor to our overall growth because it is actually the place where the solutions across the value chain, the partner focus and the enterprise focus all come together in a very good way. That's not to say that's not also the case in Europe, of course, but I think the Americas is representing a large opportunity here.Fifth point is we will see, over time, a significant improvement of our brand. I think we're really working on large-scale brand building, as you know. And there has been and still a lot of skepticism around these partnerships. However, we do believe that they are very valuable and will be very valuable for us. We will elaborate much more on this on the Capital Market Day to show you what we do and also talk about some of the measurements around it and how we're going to track it going forward.The key point is we have 2 very, very big platforms. Manchester United, clearly with global reach now with the additional extra acceleration after the Ronaldo contract signing, which is huge activation potential globally. I'm very excited about different use cases, and we're starting to work on those.Same is true for Mercedes Formula 1. This is the season with record viewership. We have the star driver, Lewis Hamilton, who has prolonged the contract for 2 more years. We have more races in the -- going forward in the Americas, so a strong focus there. Big excitement around it. We will have a very meaningful augmented reality-focused customer event around the Austin, Texas race, so -- because, again, Americas is embracing that potential very nicely. So we see that over time as very supportive of our brand, of the global tech brand, which can then -- through which we can then sell different solutions in different industries.And what is important is that all of the costs for these partnerships is included in the margin profile. So the guidance -- midterm guidance that Stefan has put out is including those highly attractive 5-year deals on both ends.And lastly, last but not least, I think also a word on the relative resilience of the SMB core business. There's, of course, lots of discussion around it. And there was -- and its pressure on down-sell, and there is low-end competition. And there's free versions out there in different parts of the market. This is all right and true, and we deal with it every single day. But at the same time, coming out of Q2, we see that the churn has improved a bit as we had promised. We have also focused on customer satisfaction more and more. We have been less active in free-to-paid monetization that has an immediate impact on free user satisfaction and low-end customer satisfaction. I see that, for example, in the ratings that we see in Trustpilot and G2. G2 was always strong. Trustpilot has now improved very significantly because we have put a focus on this also to improve our operations and our policies.And if we take our most mature market that is mostly impacted or should be mostly impacted by low-end competition like, for example, any debt that is mentioned in many reports, then this region is growing 25% year-over-year, which is still not far away from where it should be. But I think it shows that even in more mature markets, we are quite or more resilient than people think.And if we take these pillars together, the solution portfolio that we have invested in now; the partnerships, which are attractive and promising; the enterprise weight; the Americas; the brand; and the resilience in the core, we believe that the company is well positioned, is valuable, can deliver high-teens billings growth at very attractive margins. This is not an excuse and not what we wanted to achieve very clearly. But I think it's still a company that, in many aspects, has a traction as investments.And I think with this, probably the best if we now take your questions.

[Operator]

[Operator Instructions] The first question is from the line of George Webb from Morgan Stanley.

[George W Webb, Equity Analyst]

I've got a few if that's okay. First of all, just starting with the forward growth targets for 2022 and beyond to grow the high -- in the high-teens level by billings basis. Can you just talk through the kind of building blocks that you see underpinning that in terms of your net retention rate and then what you expect to see on the new subscription billings growth? And also, you touched on wanting to rebase expectations at a platform to grow off. I mean how much conservatism or margins era do you feel like you've put into this new set of targets out there? That would be the first question.And secondly, just on the new subscription billing side again for the third quarter. It looks like that was an element that dropped off quite sharply versus what you've run out in the past. Roughly, it looks like, so far, year-to-date, you've done about EUR 70 million to EUR 75 million of new subscription billings. Can you give us a feel for the mix of that between enterprise and SMB?And then just finally, I think you mentioned, Oliver, that perhaps you overinvested in some areas in the recent past, and you might look to right size some of that cost. In which areas would you say that is most applicable?

[Stefan Markus Gaiser, CFO & Member of the Management Board]

Thanks, George. Let me start with the building blocks of our growth going forward. Clearly, subscriber growth has slowed down. I think the key building block for us will be an improvement in net retention rate. I think that's a key building block for me, I have to say. I think we have a very attractive customer basis, 628,000 subscribers. Many of them clearly have the potential where we can sell our new products into. So for me, this is clearly should be driven more by ASP increase versus new customer wins. I think that's what we are focusing on, frankly. That's one area.In terms of how much safety that we build in from a margin perspective, clearly, we have now factored in all of the investments we made, the entire extent of the marketing partnerships, all M&A and whatnot. So that's all reflected in our margin profile.

[Oliver Steil, Chairman of the Management Board & CEO]

Margins around the billing also.

[Stefan Markus Gaiser, CFO & Member of the Management Board]

And margin, yes, clearly, with the low end of the range, EUR 535 million, that means a 10% growth for Q4. So that means quite a cushion there. But again, reflecting on what we experienced so far and Q4 being a big renewal quarter, we clearly feel very comfortable with that we want to change that approach to our guidance. So there is cushion in there, absolutely.In terms of margin profile, same here. I think that's all been priced, and clearly, our cost growth has outpaced the billings growth, unfortunately. So we will slow that down. Yes, in next year, H1, there will still be the ramp of the marketing partnerships, right, but all other areas, we will significantly slow down and reallocate investment funds from certain pockets into other pockets. But that's now an ongoing exercise.

[Oliver Steil, Chairman of the Management Board & CEO]

Yes. I think if you -- the areas, I would say, we have been -- we had a very explicit growth plan on APAC. I think we have put a decent local team in place in the core strategic markets. That's probably, in some places, a bit too rich given the business development that we're seeing in the space. So that doesn't mean that we do a restructuring, but we're talking more about the freeze. We have done upfront investments, and I think it's time to get the return on this investment versus have an extra investment, for example, in headcount and spend there.And that pretty much goes through the whole global operations, I would say, the whole go-to-market area. And in some places, we have just been a bit too fast in taking people in and extra management layers, corporate functions, which we all need to scale from here, I would say, with certain adjustments.I think on the -- maybe the last piece, billings, midterm billings margin for error on this one. I think we have clearly understood that we should have a conservative approach to our guidance and how we set targets for the short term and the midterm, and we affected that in here. So I would say, on this one, we feel very comfortable.

[George W Webb, Equity Analyst]

That's helpful. So just a follow-up on the split of new subs billings at the moment. What's the rough contribution that comes from SMB versus enterprise?

[Stefan Markus Gaiser, CFO & Member of the Management Board]

Sorry, I would -- again, we're running the numbers here and finalizing that, but I would say roughly maybe 20% of the new ACV is coming from enterprise, maybe 25%, so pretty much the same as in the past, I would say.

[Operator]

The next question is from the line of James Goodman from Barclays.

[James Arthur Goodman, Research Analyst]

Yes. So I mean, a little bit just relate -- a couple of follow-ups, I guess, that are related. Just in terms of the actual subscriber number, I may be wrong, but I think you added 5,000 sequential, I mean, normally significantly more than that. I guess it's looking at the same thing in a different way. But the fact that the net renewal was so much better than Q2, but the growth rate was -- remained sort of at that disappointing level suggests that the number of new customers that you added in the quarter really dropped off significantly, needs to pick up materially in Q4. So I'm just wondering if there's anything you can sort of further out there in terms of the bridge around the customer additions.And maybe in terms of the Q4 point. Just why do you still have a EUR 20 million range into Q4? I mean from a visibility perspective, I would have thought you could narrow that a little bit given where we are in the year.And then maybe stepping away a little bit just from the detail. I just wanted to ask you about the sort of perception from a use case. So if we think about the growth last year coming a lot from the remote access through COVID, a lot of the historic business being around remote IT support, I know that your product is used for many different use cases, but when you step back from that, do you sort of -- can you give us a sense of how the revenue is really breaking down by those core use cases and the outlook for those? Because I think it's those end markets that people want to map the sort of sustainability of the organic growth to.

[Stefan Markus Gaiser, CFO & Member of the Management Board]

So maybe I start with customer additions in Q3. Yes, your math is correct, it was only around 5,000, nearly lower than in the past, a couple of effects here. We did run, as I mentioned, less free-to-paid campaigns, and they also have been less effective than we thought pointing towards a worsened ecosystem. Clearly, also a little bit of a base effect, right? At one point in time, it will be tougher to grow our customer base with a run rate of 15,000, 20,000 each quarter, given that we have a certain amount of churn. But clearly was below our expectations, those customer additions largely in Q3 and we run some campaigns or we did 1 campaign after 6 months of closing them during the COVID-pandemic outbreak. This year, we did run some of them but not as effective.Good questions regarding the range of billings. We discussed it as well. Also shows a little bit -- the range of outcomes is also -- is possible in Q3. Again, we are working on very large transactions. Some of them should have been closed. Some of them have been closed but have been closed at a lower ASP or ACV than we thought because it's only regional rollout, et cetera, or at a slower pace at the beginning. But there is upside in our pipeline. But we cannot counter that. I think we learned that we've been overly optimistic, but there's also still some upside in the pipeline. The pipeline is robust, and I think we want to convert them. But yes, that's certainly something which we want to factor in.

[Oliver Steil, Chairman of the Management Board & CEO]

Yes. I should also -- I think we're still -- also, at the end of Q2, we said that a lot in this year depends on effectively 4 months of the year, the September as the last month of Q3 as an important enterprise month. And then also important Q4 with a large renewal base, where we see good net retention rate development now but also Q4 is the main enterprise quarter, and enterprise is a growing part of the business. So now if you are in our position with what we are experiencing now or have experienced and what we need to communicate, I think it's wise to have a wider range because honestly, I can't tell you how the enterprise conversion will work and how much of that will -- how that will then contribute to the overall growth. So therefore, we better give it a wider range or keep a wider range. But we were discussing that internally as well. But I think it goes back to the question or comment by George, that how much margin for error. So we've been cautious there.Maybe on the perception of the use cases, I think this is certainly a topic where in the Capital Market Day will help a lot to go into much more detail. I mean look at the market development, the growth by segment, our customer base, bear with us, so we will come with a lot of details on this one.I think the fundamental -- what I would say the fundamental logic is that we have remote access and remote support as the key use cases in our velocity SMB lower-end subscriber base where we see, depending on the region, depending on the quarter, still good growth from up-selling in a few new subscribers, but it's, of course, not the massive growth engine, which we have in other places.If we look at the enterprise, which is growing very solidly, this is the place where we have the Tensor connectivity platform where we're using -- where customers use Tensor to do a little bit of IT support maybe and work-from-home remote access, but mostly full connectivity into different devices. So that looks very strong on the Tensor side. And then, of course, the totally new area, augmented reality OT, where we now had a very big deal, which we had in the Americas, and there is some very large installations where a customer has been repeat by us, and this is growing from an installed base.So the -- as I say, the contribution of these use cases is increasing together with the enterprise. We have now made an effort to also have more cross-sell use cases for the SMB base, notably endpoint management with the partnership with [indiscernible], the TeamViewer Engage solution that we have now available for inside sales. So we were also working on this place, but I think you see a gradual shift into newer use cases and the kind of exact dynamics as far as we can tell and segment it with the market backdrop will come through at the Capital Markets Day.

[Operator]

The next question is from the line of Mohammed Moawalla from Goldman Sachs.

[Mohammed Essaji Moawalla, Equity Analyst]

I have a couple of questions as well. So firstly, when we just think of your enterprise, your kind of medium-term target, I know previously, in the EUR 1 billion of billings you anticipated, you had roughly about 1/3 of that coming from enterprise. Can you just help us understand the kind of components on this sort of teens guidance, high-teens guidance? How much of -- what the growth rate of enterprise is expected to be versus that sort of SMB business?And then secondly, just on the enterprise business, is there -- I know you talked about sort of realigning some investments you're making, and you need to really step up the pace of spending again further to sort of drive the growth. And I know it's been very lumpy because of some of the sort of larger deals. Is there any other kind of changes in the kind of go-to-market that need to be made?And then secondly, coming back on the subscriptions, I mean, I guess, there's been quite a deceleration in the -- in this sort of subscriber growth. But this quarter, it's kind of now below the sort of the churn rate that you had. So just trying to understand going forward to bridge the gap to get to that sort of teens guidance, what are you -- what's the growth are you assuming for the SMB business? And is this kind of more the normalized level of growth with enterprise growing kind of substantially ahead of [ the curve ]?

[Oliver Steil, Chairman of the Management Board & CEO]

Maybe I'll start. So obviously, I mean, we need to -- this is a short-term kind of ad hoc communication quickly. So we need to run more numbers and how this all translates into the longer-term outlook. But what is clear is that the enterprise growth and the new use growth has been not where we wanted it to be, but it has proven to be a good driver. It's still very decent growth, LTM 60% or so. So this thing is moving absolutely in the right direction.And I think as a few of you have alluded to, the velocity business subscriber growth is not where it should be, and the up-sell, cross-sell in this space could be better. So naturally, by reducing the midterm outlook to the high-teens growth, that implies that a larger portion of that will be actually carried by enterprise, has to be the case. So we were talking about the 1/3 when we were looking at EUR 1 billion. And that should naturally be higher if we go there, if we do it to lower numbers because we are really over-pivoting to this.Step-up investments needed in enterprise. Actually, we think we have put a significant amount of enterprise account managers in place. We are very attractive with our new use cases for partners, as you can see from SAP but also others. There's very good discussions going on based on the solution portfolio that we have. And I think it's time to -- it's really time to materialize on that. I don't think we need significant step-up investments there.On the contrary, I think in some places, we should probably cut back a little bit because we have maybe brought the wrong people onboard or focus them on the wrong topics. So this is something where I wouldn't see any extra investments from here. I honestly think we can freeze the rollout or the hiring there for quite some time and still deliver the growth that we need to because there's quite some people around. The same is true for APAC, for example, might more be kind of exchange of people than extra investment. With the exception maybe of better leadership for APAC and maybe a bit of solution delivery, presales engineering for APAC to get an enterprise pivot there, but that is not a big investment.In subscription, subscriber growth, below churn rate, yes, in Q3, that was the case. I think it's a combination of stronger focus on enterprise in this quarter. Summer months where we were not very active in free-to-paid campaigning to get new subscribers in. As you know, this is a source of subscribers. We have not done that much because we had run campaigns at the beginning of the year and wanted to pause there on the ecosystem. So that's, I would say, a situation which is probably too negative, if you take a future view.We always said that we can probably add, I don't know, 20,000 subscribers next per quarter or so that will come down. We said it in the -- Stefan said it on his slide, there is competition on the low end. So we want the free ecosystem and the free users to be around. We don't want to overdo it to defend our position there, which is visible in, for example, Trustpilot score, if we are more cautious there.So this is all coming into play. Again, we need to run detailed numbers there. But as Stefan said before, the main growth driver is NRR improvement, ASP improvement, cross-sell improvement. We have more than 620,000 subscribers now, and we should work with them and, of course, make sure churn rates are lower, and we don't lose -- we net -- we add net subscribers and don't lose. So that should be an exceptional quarter in that respect.

[Mohammed Essaji Moawalla, Equity Analyst]

Got it. Can I ask 1 follow-up just on the churn? So obviously, churn levels have gone up since when you sort of disclosed at the time of IPO. And I noticed a slight improvement, obviously, in Q3. I mean is this the trough in you view? Or is there a risk that the churn could still kind of be more volatile, at least over the next couple of years? And I'm curious what's kind of the assumption you've made in your kind of new or updated midterm guidance.

[Stefan Markus Gaiser, CFO & Member of the Management Board]

Look, I don't want to be -- in what we experienced, I want to be cautious here, frankly. Churn has been stable, slightly improving, as you pointed out, despite the retention efforts going into retaining all the cost of the COVID cohort. So I think that's actually, in my perspective, a good result. I think we always said that churn in the long run should actually come down because our customer base gets more mature, right? I mean we have less free-to-paid subscribers percentage-wise, more mature customers, [ adhering ] customers and, therefore, churn ultimately should go down.And to a certain extent, that's part of our planning but not to -- not factored in a significant increase here. But I think fundamentally, net retention rates going up, churn should go slightly down. That's what I would expect. And that's what we see -- what we've been experiencing, right? I think churn was also always more biased towards the low end of the segment free-to-paid subscribers, which then churn away the next year that will not -- these will not churn anymore in the next few years.So I think you said -- I think it's a bit too early to count on lower churn, but I do think structurally, the churn should come down in our business. Now with the broadened solution portfolio more cross and up-sell as we are currently seeing, churn item, it should come down to a certain extent. But it's too early to quantify that I think -- especially after these 3 quarters.

[Operator]

The next question is from the line of Stacy Pollard from JPMorgan.

[Stacy Elizabeth Pollard, Head of Software and IT Equity Research]

Two questions for me. Can you tell us what your FY '21 guidance implies from an organic billings growth point of view? And then secondly, the reduction to high-teens growth for billings in '22 in midterm, was that because you think the overall market growth has slowed? Or is it more your relative positioning or market share within that, which is perhaps weaker due to higher competition? And maybe just dig in a little bit on that competitive environment, if you don't mind, both for the low end and the enterprise OT and AR side, who you're seeing move into that base.

[Stefan Markus Gaiser, CFO & Member of the Management Board]

So with regards to 2021 guidance, most of that is organic growth contribution. Acquisitions contribute probably 2 percentage points overall, maybe. I mean, as you know, Ubimax is a large acquisition. We already consolidated last year during Q2. So there's a little aggregate impact from them. And the remaining acquisitions, which we have done, were fairly smaller overall. So most of that growth is actually organic.With regards to the reduction of the overall guidance and competitive environment, I would actually say the reason why we reduced the midterm guidance is, well, manyfold. Yes, I think we are clearly well positioned in the enterprise segment, and it did grow very nicely since Oliver mentioned. We did hope for more, and we invested for more growth there, to be honest. But that's still a nicely growing business. However, where we struggle a little bit is clearly free-to-paid monetization, velocity business, and also, enterprise would have grown faster. APAC didn't perform as expected. Should have been growth accretive, it wasn't. And basically, we discounted a variety of our growth initiatives to come to picture, and that picture is like high-teens growth only. Yes, there's not 1 single impact. It's really the variety of those factors, as I explained earlier on.From my perspective on competitive environment, Oliver can chime in as well. I think as probably most changed in the working from home, remote access space, I would say, I think our competitive positioning in the OT environment enterprise space is as strong as it was before, frankly, probably even stronger because, again, we have a broader solution portfolio. We haven't seen last year to move to competitors. By and large, it was only optimistic assessment in the pipeline, deals closed at a lower deal size, regional rollout towards global rollouts, et cetera, but it's not that I see significant negative trends in the OT enterprise segment. Again, we didn't meet the growth, which we wanted to, but this was not a result of competitive pressure. This is more a competitive pressure that's probably more taking place, as I said, in the remote access, working-from-home environment.

[Operator]

The next question is from the line of Gianmarco Conti from Deutsche Bank.

[Gianmarco Paolo Conti, Research Analyst]

So I actually have a few, a few already answered. One is around perhaps the scope to revisit some of those sales and marketing initiatives to perhaps reduce the ongoing burden on margins. Are you planning on doing some level of restructuring? And if so, where?The second question is around -- could you perhaps elaborate on the reasoning for which you've seen a slowing free user growth? Like I know Stacy asked a question around, obviously, whether it's more of a competitive thing or not. But I'm just curious to see if you modeled a worst-case scenario in the FY '22 and beyond targets. And if so, if you could elaborate what this would be exactly, i.e., do you have a specific plan on tackling competition and potential market loss?And the third question is actually a point that you've made on your presentation earlier. I was looking through the Trustpilot reviews, and I've seen that there's a fair few reviews that are seeing people have been charged even after they've canceled for years on the negative side. And how exactly are you targeting this? And could that be an issue going forward on your free-to-paid campaign conversions?

[Oliver Steil, Chairman of the Management Board & CEO]

Yes. Maybe I'll start. So scope to revisit kind of the cost and sales, I think -- as I said before, I think we have put significant headcount in account managers, channel managers, business development, presales, solution engineering in most of the regions. And I think that should -- with this staffing, we should be able to significantly drive outcomes, good outcomes over the next quarters. And that's what we saw, not to the extent we wanted, but there is -- there's good business intake in this one. And hence, the scope is to take out a few people here and there to just trim the organization a little bit. But more importantly, there is no need to grow the cost base as we have grown it in the past.And if you go back, we had quite often a cost increase, which was in line with the billings growth. Now of course, due to the underperformance this year, this has reverted. Costs have increased faster than billings growth, and that should then revert again going forward now. So -- and you can expect that we will be very, very diligent on our cost management from here on and also on performance management.Second question, slowing free user growth, there's various elements to it. One is, of course, I think the whole COVID piece has brought significantly more attention to work-from-home requirements. Work from home can either be organized by a company, and then it's a paid license, and customers or workers from home are part of an enterprise license agreement. We've been very successful in this. But on the flip side, of course, it has brought also more companies caring about this, like Microsoft, very forcefully, and others. And of course, many of the users at home were looking for free solutions because they were trying to achieve something without paying for a license. And we have given them a license for free, and then over time, we try to monetize. And there's more competition in this space, for sure. I mean there's no doubt thing around that.We focus on users, which need a quality product, mostly team size, not so much 1 individual user for remote access, at least that was our focus. We've also been more forceful on account validation in some markets that drive or has driven in the past a massive free user base. For example, China, Latin America would be more forceful in these markets because it's -- we've learned that the monetization of these free users is actually quite difficult and there's also more scamming risk and more fraud risk, which we didn't want to have. So that we have -- it was an active decision. And then there's more free products out there that we need to compete with.So in that sense, we have been less active on free to paid. We generated some subscribers from this, which is good, but not as many as in the past. And it will be a declining proportion going forward.I think with the new outlook, we've given us room to also react in some places where we need to in terms of pricing maybe and be more aggressive on campaigning, if we need to. But all in all, if you look at the EMEA growth number where we have lots of velocity business, this is still very robust, and it will be selective activities.To your specific question on Trustpilot, we have been much, much better in the process of handling the free-to-paid conversion and also the patterning for free users. I think if you look at -- if you were to look at the commentary a year ago, significantly worse than it is now processed better, straight through times better, more forgiving, less campaigning, and that is reflected in the Trustpilot development. So I think within the last, I don't know, 4 months or so, 5 months, we moved from a 1.5-star rating, which was heavily influenced by basically almost only the comments around free to paid. That was always the problem with Trustpilot that we said those users who are paying and are using it for free are very happy users. But people who have been free users and were asked to pay, they don't like that, and they give us a negative rating.And what you see now is these users are significantly less. And the happy users are more vocal because we've changed some processes. People are happier. And that has brought us from 1.5 stars to 4 stars or so in a very short time frame by asking customers also to rate us and work on the feedback. So I think that's the dynamic we're seeing there at the moment.

[Gianmarco Paolo Conti, Research Analyst]

Okay. Can I just ask the question around if you've modeled the worst-case scenario in those FY '22 and beyond targets? I'm just curious to know if the -- indeed, the free users kind of decelerate substantially and you're not able to grow as much as you hoped for with the enterprise space, if there is some substantial margin of error in those targets. I think it's just like there's a little bit of an understanding that these targets should be as holistic as possible.

[Oliver Steil, Chairman of the Management Board & CEO]

Yes. So I'd say a good question, sorry. I think the -- if you look at what we have done now in terms of guidance adjustment and then the midterm view, that is kind of taking effectively what I was mentioning as a -- or which was more mentioned, a negative quarter where we had more subscriber outflow than inflow. Basically, looking at that, taking a stance on the full year until now and then assessing how much should we factor in from free-to-paid conversion as a subscriber addition and billings contribution.And I think the view -- you can be sure the view we've taken on this has been a very, very negative one now because we actually -- we didn't see much happening in Q3. And we're also very, very cautious regarding this development for Q4 and thereafter because we also see that in conjunction with, on the one hand, the rating for customers, the satisfaction and that Trustpilot is just one, but also the big branding partnerships, which we have now with Manchester United and so forth, we want to have -- that to be a positive impact globally. We want sports fans, the clubs, the partners talk positively about us. And we probably need to provide more leeway on free usage in order to deliver on this and have a positive sentiment for occasional and free users and, hence, very, very conservative planning.And if you remember what we've put out in the past, we said free to paid will, over time, reduce in importance. I think the last range we always talked about was like 15 million to 20 million. I don't think we will get there this year, and for the years to come, it will be significantly smaller even. And that's what -- that's 1 of the drivers on -- as Stefan has presented and also why we were taking a very significant cut in the midterm growth rate because we don't want to be dependent on any big moves there.

[Operator]

The next question is from the line of Gustav Froberg from Berenberg.

[Gustav Froberg, Analyst]

I have 2, please. Firstly, just on the organization and teams as it stands right now, do you anticipate the need to do any organizational restructuring? Just following on from today, what are you thinking about when it comes to the organization as it stands? And then a second question, just on APAC. It sounds to me like you're still committed to the region. Could you talk a little bit more about why you remain committed to APAC given the growth it has delivered so far for you?

[Oliver Steil, Chairman of the Management Board & CEO]

Yes. Thanks for the questions, Gustav. So organizational restructuring, we will do, I would say, proper, sizeable performance management across the whole company. And that will reduce sort of reduce -- or freeze, I would say freeze, the headcount across the whole company. I wouldn't call it a restructuring, but it is a proper cleaning, proper cleaning. Remember, we have -- by the way, we hear you typing. You may...

[Gustav Froberg, Analyst]

Oh, sorry.

[Oliver Steil, Chairman of the Management Board & CEO]

Yes. Thanks. The -- look, one of the things probably in hindsight, we have been continuing to hire people through the whole COVID period. I think we had like 17 or 18 virtual onboarding sessions on a monthly basis. And that was probably -- or it was not probably, it was too aggressive. Not all the people have landed well here know the products well enough. So we need to do a shakeout there. And thereby, I think the organization will be leaner, more agile, and we will cut back in some areas. That will still mean that our headcount next year will probably be the same or a bit more than this year, but very, very different from the kind of growth rate in headcount that we had in the past year. So that's how I would describe it. Again, probably more to share then at the Capital Markets Day when we have further on this one.APAC, why do we remain committed? That's a very good question. I think we have markets where we see strong development. If we look at APAC -- sorry, if you look at Australia and New Zealand, mature market for us, good growth. Japan, last year, a digitalization backlog in this country, which we benefited from. So now this year, the opposite development. People are down-selling in wait-and-see mode a little bit. But I think there's still very strong potential, especially with our OT solutions, augmented reality, very industrial -- strong industrial footprint. So there is room to grow.India as a strategic market systems integrator being based in India, global systems integrators, there is potential. Clearly, sometimes it's the cross-regional deal where we work with a system integrator from India to serve American customers. So that's also valuable to have that connection there. And I think the big unknown, honestly speaking, is China, really. It's incredibly complicated. And of course, China alone, at the time of the IPO, we felt can be a game-changer. Now it turns out not to be. It's complicated, and we need to see.When we talk about committed to the region, it should deliver. There is potential in the different markets. We have more solutions. But we will revisit the level of upfront investment in the different countries. And I think we have been entrepreneurial. We have been bold. We have put full organizations in place in the countries. And that has to be good enough now for a while or in some places, even we have to cut back a little bit and be more modest and refocus our efforts. And I think this has come through in the presentation on the Americas and all the big partnerships that we can work with.

[Operator]

The next question is from the line of Hannes Leitner from UBS.

[Hannes Leitner, Equity Research Analyst of Software]

I have also a couple of questions regarding, for example, the enterprise business. Maybe you can talk there a little bit, break it or drill down into the different parts of the business, how the performance is of augmented reality and how much was the drag in the quarter from -- in the kind of pandemic where people just downgraded below the EUR 10,000 threshold. And then maybe how you can bridge that in future outlook, future growth, that would be helpful.And then in terms of the investment, I mean, in regards to your -- seems like cost control seems to be on top of the agenda. Will this be enough to come -- what is your confidence level there that you don't need to invest? Particularly on the enterprise side, it seems like that there will be investments needed.And the third question is in terms of the growth rate, is this a purely -- so Stacy asked for this in terms of organic growth rate. But then going forward, the growth rate, is this an organic one? And then also, in terms of the margin recovery, because if you do in the enterprise acquisitions, it will be difficult to keep improving the margins from here.

[Stefan Markus Gaiser, CFO & Member of the Management Board]

Yes, let's me start, Hannes. So first of all, in AR [indiscernible] and the overall mix -- business mix in the enterprise space, clearly, it is becoming more OT bias, right? I mean we have significantly expanded our [ solution ] portfolio around augmented reality and mixed reality. Mixed reality is early days, frankly, yes. But augmented reality is already becoming a more mature business, right, with strong uptake in customer base. Again, the larger deal, which we [indiscernible] have more than [indiscernible] a pure subscription deal for our Frontline product. So very nice deal, yes, and it wasn't even a global rollout, yes. So there's more to come.And we see that this business carries increasingly more weight in our enterprise space, yes, sometimes in conjunction with the base connectivity layer, Tensor, which you provide. And then on top of that, we have the AR element, but this is becoming an increasingly important part, yes. It's hard to put that into different pockets, yes, but it's getting increasingly important for us.In terms of organic growth and our growth targets, that's all organic. And we clearly target acquisitions here and there, yes, that might help a little bit. But frankly, this is organic growth targets, which we put out there, and any major acquisitions would be to be on top of that.From an enterprise investment perspective, at the moment, yes, I know in 2021, this enterprise expansion has become more expensive for us. But look, what we see is we have enterprise sales resources who are very much capable and close those deals and convert their pipeline. So it's not a structural business in the enterprise business -- a structural issue in the enterprise business that we have under-invested. I think it's more like hiring the right talent and onboarding them efficiently. And frankly, that wasn't an easy one. And I think we started there.I think the overall level of investment in the enterprise business is where it ought to be. We have, per se, enough quota carriers. I don't necessarily see that we need to increase our spend in the enterprise business. And that's also what's coming back from our enterprise leaders range. It's that I think overall payroll is good enough. Let's make sure that we onboard them correctly and ramp them up efficiently and get the right talent onboard.

[Hannes Leitner, Equity Research Analyst of Software]

Just on the point...

[Stefan Markus Gaiser, CFO & Member of the Management Board]

Yes, sorry, go ahead.

[Hannes Leitner, Equity Research Analyst of Software]

I didn't mean in terms of the sales force. It seems always that your investments are very focused on the sales force. I mean Ubimax and all those, they are basically start-ups. They need investments also predominantly, I would say, in R&D. So I was rather speaking about investing in the product and the technology to stay ahead of the curve. So that's one thing.And then in terms of the enterprise, it sounds like all quite good. Just how does this square with your comments around slippage and not converting in this quarter? So where is that confidence going forward in the enterprise?

[Oliver Steil, Chairman of the Management Board & CEO]

Yes. So if you think about R&D, I mean, Ubimax is a start-up, but it's -- it has -- it's been around for years with a very mature product portfolio -- I mean, high-end product portfolio for different verticals. Same is true with Upskill and Xaleon. So we bought R&D capacity in a significant way. We also invested quite a bit in R&D over the last years for the different -- in different locations for different products.So I think on this one, we will always have continued R&D investment, but it's -- this is nothing which needs a step-change. It's just continued investments in people to keep the product up to date and continue to develop it. So on this one, I think we feel very confident that we're in a good place there because we have effectively brought development capacity on not -- didn't come with many -- as much billings and business, but sizable number of people. So Ubimax came, I think, with 100 people almost. And they know what they do and have been doing so for a while. So I think we -- the industry would recognize that we have surpassed the competition like, for example, PTC in AR with what we have to offer. So I feel very good about that and also on TeamViewer core.So -- and the other question was?

[Stefan Markus Gaiser, CFO & Member of the Management Board]

Was margin recovery. I think it was your last question, Hannes, if I'm correct...

[Hannes Leitner, Equity Research Analyst of Software]

Yes, correct.

[Stefan Markus Gaiser, CFO & Member of the Management Board]

[indiscernible] further investment need. I think as Oliver just explained, we don't see further investment need around those areas. I think we've started those growth areas substantially in the last 12 months, frankly. So there's no ramp-up needed, neither organically nor in the acquired companies from my perspective. So I think we should have seen the base now the low end, frankly, of our margin.

[Oliver Steil, Chairman of the Management Board & CEO]

Yes, not more than the billings growth. I mean that's the point. I mean, of course, we will always reinvest into our business system to make sure that we stay ahead of the curve, as you say. But the question is, do we need to grow out of proportion beyond our billings growth? That we clearly don't see. We have done a lot of that upfront investment. And they're good. They're bearing fruit. I mean we have great solutions. We get the traction. We get very good feedback on our AR solutions. We got the SAP partnership on the back of that. So -- and also other partnerships are specifically interested in our AR positioning. So I think that's working well.And then your other question, and maybe that's also linked to the one that we had before, the drag, pandemic, down-sell, why are we confident? Look, I think the key point is, which we were struggling with this year, 1 of the key points is Q4 -- Q1 and Q2, backward fighting, keeping customers, making sure they use their license, they stay with us, they keep the capacity as much as it's needed, whole organization focusing on that. At the same time, all work from home, only virtual onboarding and tough to manage the business after more than a year in pandemic, especially in a kind of culture like we are with high growth, many new people that all need to -- who all need to learn the new products.And I think the third quarter -- and that's why we were so unclear on how this all will play out, the third quarter was the first one where there was some normal kind of running the company again. And then July, August, summer, September, everybody is trying to kind of convert. Given all of that and the problems that we have with pandemic and onboarding, given all of that, I think what we've delivered in the third quarter in terms of enterprise is not bad, honestly speaking.I mean if you would have told us 2 years ago at IPO that we will be there at enterprise 2 years later, it's good, but it's far away from what we need it to be. And now we're getting -- kind of getting into the flow. We are just this week -- to give you an example, just this week, it's the first time all European enterprise people came together in 1 room to get a proper product training on all the new products which we have. I mean it didn't happen and couldn't happen before. So many things much better now. Every week we saw throughout the quarter, things got better, but not good enough to meet this year's guidance. That's why we had to restate it, and we're also much more cautious now going forward.Okay. From what we know, I think this is what's the -- all the questions. So again, thank you very much for joining. Thank you for your questions. Clearly, I appreciate this wasn't a good day with weak numbers and a lot to absorb and digest. And again, not helpful from our side, not where we want to be, and we will do our best to now take that as a flow, which we strongly believe is the flow. We've given ourselves margin forever now and the work we keep on going from here. So thank you.

[Stefan Markus Gaiser, CFO & Member of the Management Board]

Thank you.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thanks for joining, and have a pleasant day. Goodbye.