1) The growing divergence between the subscription and PS revenues strongly imply that a "land & expand" model is prevelant (2018 1.9x, 2019 2.3x, 2020 2.95x) where they are able to push subscriptions up 21-28% post-deployment.
2) PS margins were 9%-10% in 2018 and 2019, and then dropped to 5.4% in 2020. Good to know that management continues to view PS as a sales enabler that pays for itself (i.e. break even or at least single-digit margin) executing their primary mission to drive high-margin subscriptions.
Valid points. Land and expand is a great moat to have. Couple of other interesting points
Their contracts are non-cancellable 3 to 5 year contracts. So retention is almost guaranteed and in banks, beyond 5 years no one bothers to change the status quo. So this is a significant factor when it comes to predicting future revenue potential and profit potential.
On the costs front, hey have to pay a part of the subscription revenue to Salesforce. However, this cost grows linearly in proportion to revenue. The ratio has remained same throughout 3:1 (almost)
1) The growing divergence between the subscription and PS revenues strongly imply that a "land & expand" model is prevelant (2018 1.9x, 2019 2.3x, 2020 2.95x) where they are able to push subscriptions up 21-28% post-deployment.
2) PS margins were 9%-10% in 2018 and 2019, and then dropped to 5.4% in 2020. Good to know that management continues to view PS as a sales enabler that pays for itself (i.e. break even or at least single-digit margin) executing their primary mission to drive high-margin subscriptions.