Q1 2021 Freshworks Inc Earnings Call

Good afternoon, and welcome to the fresh works third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question answer session and instructions will follow at that time, if you would like to ask a question. Please press. The Star then the one key on your Touchtone.

Telephone if you wish to remove yourself from the queue. Please press the pound key if anyone should require operator assistance. Please press Star then zero on your Touchtone telephone as a reminder, this call is being recorded I would now like to introduce your host for today's conference John Huh, Vice President of Investor Relations.

They proceed.

Okay.

Thank you good afternoon, and welcome to <unk> third quarter 2021 earnings Conference call. Joining me today argue rich multiple with the fresh works Chief Executive Officer, and Tyler Sloat freshwater Chief Financial Officer. The primary purpose of todays call is to provide you with information regarding our third quarter 2021 performance and our.

The outlook for our fourth quarter and full year 2021.

Some of our discussion and responses to your questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

These forward looking statements are based on fresh works current expectations and estimates about its business and industry managements beliefs and certain assumptions made by the company as of the date hereof, all of which are subject to change. These statements are subject to risks uncertainties and assumptions that could cause actual results to differ materially.

From those projected in the forward looking statements for a discussion of material risks and other important factors that could affect our results. Please refer to today's earnings release, our final prospectus related to our initial public offering filed with the SEC.

On September 21, 2021, and our other periodic filings with the Securities and Exchange Commission fresh.

<unk> assumes no obligation to update any forward looking statements in order to reflect events or circumstances that may arise. After the date of this presentation, except as required by law.

During the course of today's call, we will refer to certain non-GAAP financial measures reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, which is available on our Investor Relations website at IR Dot fresh works Dot com.

I encourage you to visit our Investor Relations site to access our earnings release periodic SEC reports, a replay of today's call or to learn more about fresh works and with that let me turn the call over to Girish.

Thank you June and good afternoon, everyone.

Welcome to our first earnings call as a public company.

We met many of you during our road show, but for those of you that are new to the fresh looks Tony I would like to start by sharing our mission.

Today Schwab makes it fast and easy for every business to delight their customers and their employees.

Do that by offering modern and intuitive customer engagement and employee engagement software.

<unk> is a global software company with customers in over 120 countries and more than 4400 employees, who will operate out of studying offices globally.

We have three main product lines.

Chris desk for Omnichannel customer experience Chris.

Chris Service for it service management and employee engagement Crystal suite for sales and marketing automation.

All of our products utilize services from our new platform.

Each provide shared services for rapid innovation.

We design our products to deliver delight to the frontline users of our software.

Additionally, they are designed for rapid Onboarding quick time to value and offer a lower total cost of ownership.

<unk> approach to business software is what got us to where we are and what will continue to differentiate us in.

Three large established market with it.

Addressable market.

$120 billion.

So let me quickly summarize our first quarter as a public company.

<unk> had another good quarter of growth in Q3.

Total revenue for the quarter was $96 6 million growing 46% year over year.

We now have over 14000 paying customers.

Paying us more than $5000 in annual recurring revenue and driving the vast majority of our business.

We saw strong expansion activity from our existing customers and made real improvement on gross retention, resulting in a net dollar retention rate of 117%.

For Tyler Sloat will offer more details on that shortly.

Our product led growth strategy continues to be the biggest driver of new business for us.

This is augmented by an outbound sales team and our partner network to serve our customers from SMB to large enterprises.

We define our SMB market as companies with up to 250 employees anything greater we defined as Midmarket and enterprise.

<unk> continues to grow and attract larger customers and today, we have a majority of our business coming from mid market and above.

In Q3.

Added more than 50, New channel partners globally. In addition to extending our ISP partnerships.

We are very pleased with the positive customer response to our products and are proud of the continued industry validation we are receiving.

In Q3, <unk> was recognized by Gartner as a challenger in the 2021 magic quadrant for it service management tools.

This follows that earlier recognition of fresh foods as a virginity in the 2021 magic quadrant for the CRM customer engagement center.

Additionally trust radius recognized us for top asset management and <unk> in 2021.

This quarter, our modern intuitive and easy to use products continue to make their way into companies of all sizes, gaining recognition and delivering value our businesses across many industries.

We welcomed fortune 500 companies like Phillips and Toyota connected India, what are using for service to enable it service management.

Fast growing tech companies like Ford truck Lucid works and Smash Burger restaurant chain headquartered in Denver implemented for service to connect their global employees with <unk> support.

Scotch and soda a global fashion retailer.

So using for service to enable <unk> functions.

Then it's 1500 team members.

Today every business is looking to engage with customers online.

This product continues to see greater adoption.

For example, the world's largest international beauty the tailored Watson's <unk>.

Implemented fresh desk to help support their online buyers, while Hunter College in New York the late on fresh desk to help current and prospective students during the admissions and registration process.

We will be highlighting many of our customers next week at our refreshed conference on November 11th.

Hope you can join us online to learn about our latest product innovations and hear from customers on how <unk> promise of delight made easy helps their businesses.

Last month.

Dr. Pushing if you could travel to India and spent two weeks in our office in Shanghai.

It was energizing to be back for the first time since 2020.

I was able to meet new employees and work side by side with many of our product and engineering leaders.

It was great to hear that many of our employees are excited to come back to the office, which is why I am happy to announce that as of today, we have <unk>.

Fully reopened our offices in Chennai.

Our other global offices to follow shortly.

In Q3, we continued to invest in the strong teams we have in place welcoming hundreds of new employees.

We promoted pumps or <unk> to chief legal officer for <unk> further adding to the breadth of our executive team.

Strengthened our board by adding two industry veterans Zach Nelson former CEO of net suite and Jenifer Taylor Chief product officer at cloud flat as independent directors.

In closing I want to thank our employees customers and partners are helping us get to where we ought to.

We believe we have huge opportunities to keep growing and delighting more customers every quarter I will now turn it over to Tyler to share more on our financial results.

Thanks Chi and a warm welcome to all of you joining us on the webcast.

We enjoyed meeting many of you our shareholders and analysts over the last few months as we went through the IPO process and look forward to our public company journey together in the coming years.

For our initial call as a public company, let me cover a few different areas today.

First our.

A review of our business model and provide a financial framework for how we think about managing fresh works.

Next I'll cover the highlights from our third quarter, including key operating metrics and financial results and finally.

I'll close with our views on our journey ahead in our guidance for Q4 and full year 2021.

As Jim mentioned earlier, we offer three main product lines, two of which are at scale fresh.

<unk> for the customer support market first service with service management market.

We're in the early stages and continuing to scale. Our third main product line for sales and we are optimistic about the long term opportunity in that sales and marketing automation space.

With these three product lines. We also have three go to market motions, starting with a highly efficient inbound product led growth motion as companies find our products through digital channels and online search.

Couple of the <unk> motion with our outbound motion, which includes field sales reps to help serve our larger customers in the mid market and above.

The third leg of our go to market motion is our partner ecosystem around the world that helps extend our reach to serve our customers where they are located.

Our business model supported by an efficient financial framework that allows us to continue investing for growth.

While making incremental improvements to drive operating leverage in the business.

This provides us the flexibility to invest and double down on key areas of our business, while maintaining a healthy market structure.

Starting with cost of revenue and gross margins were running at really healthy levels. Our non-GAAP gross margins have averaged around 80% over the last several quarters and they improved to over 82% in Q3 I'll cover more on that later.

Looking at our operating expenses, we manage our sales and marketing spend through a number of internal efficiency metrics comparing ourselves in marketing costs to our incremental revenue.

We regularly benchmark our efficiency metrics versus our peers.

We're also making R&D investments to continue driving our product development and technical innovation cycles, because we are able to.

Technical talent in areas like Chennai, we can invest in a meaningful yet efficient manner.

For G&A costs were increasing investments this year as we have a number of public company costs, some of which will be ongoing.

More importantly, we expect to gain operating leverage over time as we scale the business.

With our broad product offerings across three big markets, we have a huge market opportunity. So we will continue investing to drive long term growth for fresh works.

Turning to our Q3 results.

We delivered another solid quarter of growth in our first quarter as a public company as a reminder.

Most of my discussion around our non-GAAP numbers for our Q3 results. These non-GAAP numbers exclude the impact of stock based compensation and related expenses amortization of acquired intangibles historical acquisition related expenses and other adjustments.

In Q3, we delivered healthy revenue growth of 46% year over year, resulting in $96 6 million for the quarter.

While the revenue growth rate is lower relative to Q2. This was very much expected as our Q2 growth benefited meaningfully from a favorable favorable comparison arising from a COVID-19 impacted quarter last year.

As I mentioned earlier, our non-GAAP gross margins increased to over 82%. This was primarily driven by more efficient spend on certain service provider agreements and ongoing improvements for infrastructure spend in the quarter.

While we're pleased with the improvement in the quarter, we generally target target our non-GAAP gross margins in the 80% range as we manage the business.

Our non-GAAP operating expenses increased by $28 $5 million versus the prior period prior year to $81 4 million.

This was mainly driven by increased investments in our teams for R&D sales and marketing and G&A as we meaningfully added to our fresh looks family over the past 12 months.

More specific to marketing, we increased our advertising branding PR and event costs by $5 5 million compared to last year as we created more awareness for our products in the marketplace.

In G&A, we made important investments in personnel and infrastructure to prepare for operations as a public company.

All of this led to a non-GAAP operating loss of $1 5 million for Q3, as we improved our non-GAAP operating margin by four 5% quarter over quarter.

Looking at our GAAP operating expenses are so.

We had a large impact from stock based compensation and related expenses of $138 million. In Q3. This is related to our IPO, which resulted in a significant <unk> vesting event and a large catch up expense for SBC.

Going forward, we expect SBC to be more normalized to be up more or more normalized levels of approximately $45 million per quarter.

Turning to our key operating metrics, we continue to see good business momentum in the quarter.

Saw robust expansion activity as our net dollar retention rate was 117% for Q3 up eight percentage points compared to the prior year.

Our customer teams are making good improvements to our gross retention rate and we have benefited from an FX tailwind of 1% year over year.

As a reminder, we calculate net dollar retention rate on a trailing 12 month basis, comparing our customers beginning and ending <unk>.

Given the customer segments, we operate in including SMB, We believe our business model supports 110% plus net dollar retention rate longer term.

Our second key operating metric customers contributing more than $5000 in the <unk>.

<unk> grew to 14079 or 31% year over year, which reflects a net add of over 3300 customers.

These customers consistently drive the vast majority of our business and represent 84% of our IRR similar to our Q2 results.

When we look at larger customers those that contribute more than $50000 in IRR. This number grew 73% to $12 63.

Flex a net add of over 525 customers represented 39% of our era.

We're pleased to see that are easy to use products continue to resonate with customers and organizations of all sizes around the globe.

Moving to our balance sheet and cash flow items are calculated billings, which is the sum of our revenue and change in deferred revenue in the quarter was $193 million in Q3 growing 41% year over year.

Similar to the revenue growth dynamic, we expected calculated billings growth for Q3 to be lower than Q2 due to the favorable comparison for Q2 last year.

While our billings duration mix had minimal impact on the growth rate in Q3, we had a headwind of a few percentage points in growth related to reserves and commissions.

In terms of cash we ended the quarter with more than $1 3 billion in cash and cash equivalents.

This includes the net proceeds from the IPO of 1.07 billion free cash flow of negative $4 2 million and an additional $24 million in proceeds from the sale of an early investment in a private company today.

Today, we have a strong balance sheet to support the growth of our business.

We've had really healthy growth throughout the year and we continue to support that with an efficient financial model.

Even with growth investments and increased public company expenses in Q4, we expect to be roughly free cash flow breakeven for the quarter.

Lastly, our diluted share count as of the end of the quarter September 32021 was approximately 323 million shares.

Some final thoughts before I turn to our financial outlook.

We have a huge opportunity in front of us we're playing in large established markets of customer support TSM and sales and marketing.

We're seeing good momentum in our product adoption and gaining more market recognition.

We're adding both new and larger customers and seen robust expansion across our customer base.

We're investing to fuel our growth as we go after this massive opportunity 2021 continues to be a big investment year for us, we're adding to our go to market teams around the world around the world to expand our market presence, we're investing in the ongoing innovation of our easy to use products and we're creating the infrastructure to operate efficiently.

And deliver value as a public company.

Looking ahead to Q4.

This includes an increase in our expense base, resulting from ongoing investments in our personnel higher infrastructure and insurance insurance costs as a public company and increased marketing and events cost us travel opens up.

Now, let me turn to our estimates for the fourth quarter and full year 2021.

For the fourth quarter of 2021, we expect revenue to be in the range of $99 million to $101 million non.

Non-GAAP loss from operations to be in the range of $13 5 million to $11 5 million and non-GAAP net loss per share to be in the range of seven to five assuming weighted average shares outstanding of approximately $269 1 million.

For the full year 2021, we expect revenue to be in the range of $364 5 million to $366 $5 million.

Non-GAAP loss from operations to be in the range of 21 million to $19 million.

And non-GAAP net loss per share to the range of 22 to 20 <unk>.

Assuming weighted average shares outstanding of approximately $134 million.

Let me close by saying that we're excited about a great journey ahead and look forward to partnering with our shareholders.

And with that let's take your questions.

Later.

Okay.

Thank you if you'd like to ask a question. Please press Star then the one key on your Touchtone telephone.

If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Our first question will come from the line of Brad <unk> from bank of <unk>.

Bank of America Securities you may begin.

Oh, great. Thanks, guys. Congratulations on nice results to your first quarter as a public company.

I wanted to ask about the enterprise activity that you saw in the quarter. It sounds like you're seeing some traction there.

With some of the larger accounts can you remind us kind of where the focus is in the upmarket business, where do you draw the line and where is the opportunity for the company from.

From here.

Hi, Brad Thanks for the question.

So.

We continue to focus across three go to market motions. So we have our product led inbound growth motion, which the majority of the customers that are SMB customers, which is companies with less than 250 employees, but having said that we also get teams from larger it.

Prices come inbound.

And they are 100 off toward mid market sales teams. So we have our mid market teams our field teams in region and U S. Europe predominantly they go after.

Larger accounts. So if you look at the split it still is.

Around I would say 60 40 mid market SMB approximately so.

And we are seeing if you look at.

Q3, specifically I think customers, who betas more than 50 KAR.

That number grew at 73% year over year.

Yes.

That's great to hear thank you so much and then one more if I may please just on.

With the deal platform I know there is a.

Aggressive roadmap to build out more modules within the stack that you have.

And then in other categories like sales, which you've mentioned is early.

Where is the focus in the near term and are there. Some deliverables that we should be kind of keeping an eye out for.

The product extensions and add going forward. Thank you.

Yeah. So our vision for Neo platform is to continue to execute on three major <unk>.

<unk>.

Benefit drivers one for our customers.

We want to offer a unified product experience so whatever services that we offer in terms of single sign on.

At 360 degree view of the customer across sales and marketing and eventually support custom objects and a bunch of other services.

Neo platform allows customers to have a better unified experience for developers NSA partners. Neil platform offers a marketplace, where they can build apps and today, we have more than <unk>.

700, public apps and customers can build.

I have built those into a private apps to extend the power of official expect pumps. So that is also an area, where we continue to invest in the capabilities of what can be accomplished in an app, so and you will.

Also see some exciting announcements and other fresh conference next.

Next week.

And the third is for our own developers internal developers there.

We have what is known as foundational services that all of our products can use.

Services like E mail processing at scale, our chat messages listening to chat all of that as part of new platform, which gives us product velocity and innovation. So so across all of these three areas. We continued to execute on the duplex.

That's great to hear thanks, thanks, so much paresh.

Thank you Brian Thanks, Brian Thanks, Brad.

And our next question comes from the line of Stanislawski from Morgan Stanley You may begin.

Perfect. Thank you so much guys and congratulations on your first public quarter.

Very well done.

Maybe just following up a little bit more detail on Brad's question.

As you look into the Big Q4, what are you seeing your pipeline as far as the demand for the upmarket.

Portion of your business.

All the all the different products that you have and then I have a quick follow up for <unk>.

A financial question.

So.

Thanks, Dan I think we are always looking at ways to improve our pipeline and so we have a mix of programs across our different go to market motions.

No.

Our marketing teams and sales teams are kind of investing in events together increasing load of molecules.

Bringing up some new campaigns to take the Omnichannel customer service or even.

Engagement employee engagement.

Post pandemic world. So we have multiple targets for new and expansion. So I think.

We don't have a specific number to give out of our pipeline, but that has a ton of activity that we're doing to see how we can improve it.

Across both inbound and.

Mid market.

Got it but just maybe more broadly what are you seeing as far as your customers budgets as you go into Q4.

Are you seeing any weakness or is it just.

Steady steady momentum in versus what you've seen through Q2 and Q3 now.

Hey, Stan this is Tyler no we're seeing steady momentum I mean, we have some seasonality in our business specifically in the Midmarket and enterprise business and from that that's where we do track pipe, obviously and it's solid globally right now, but you know our presence is mainly in North America, and Europe, and that's where we're we have our field reps out there.

As a reminder, we also have this product led growth inbound motion and that's not really something you considered pipe. It's more about how many customers are in trial in those trials typically convert less than 30 days and so we're tracking both obviously to be able to get a sense of it and and growth is good it's solid.

Okay, perfect very helpful and Tyler sincerity.

Net revenue retention, obviously stayed elevated very impressive on June 17 in the quarter and you talked about the 110 level and a more normalized but how should we think about the path from this 117 to a more normalized 110 or alternatively is there a possibility that this can.

And this would continue to stay elevated for quite some time as you continue to sell.

So this really broad portfolio of products you have there.

As well as just the trailing 12 month nature of the metric.

Yes, no and we had talked during the road show as you remember that we do expect to be more of this 110, plus kind of low teens net dollar retention, we do expect.

Declines are to get to that kind of longer term number that being said, we're super pleased with the quarter and the performance I think the the investments we've made.

Obviously in the product, but also in customer success and the way we're engaging with our customers has helped us on the on the gross retention and we said we'd been making improvements on that incrementally and then our expansion motion is doing really well as well that is primarily agents right. That's a very organic.

<unk>, but also cross sells.

Perfect. Thanks, guys.

Thanks, Dave.

Our next question will come from the line of Mark Murphy from Jpmorgan. Your line is open.

Yes, Thank you I'll add my congrats.

Are there any products that you're incubating better outside of the three or four main products usually referred to.

Which are.

Particularly exciting in terms of market potential.

I think we see some of them are alluded to from time to time fresh team refresh paying press release fresh color Theres, a bunch of others.

That are a little less in the spotlight and I'm just wondering how.

How you feel about some of those incubating products.

Yes, thanks Mark.

So let me first say that we have plenty of opportunity in the three main product categories.

Which we're playing a really large market.

But as a company that's focused on innovation, we'd always like to bring more innovation to the market and primarily.

If you look at <unk>.

That is an incubation product.

Very large market, which is H autonomous, but it's still very early days for us and so we have.

Not really it let's call it back it's still an incubation batesville.

And I think if you mentioned fresh being in press release, they have more like premium products, which act as lead Gen machine for us, where we are bringing the right set of customers.

People, who are monitoring websites folks who could later be up sold to service. So that's the.

Primary reason for fishing and fresh.

Status press release is more of a project management tool that's integrated into service.

As part of fresh service.

As a unified.

SM.

Product with project management, So <unk> is really the information product.

Isn't hits, our space could be.

Ill, let big in future, but right now it's an incubation.

Okay got it thank you.

And then Tyler as a quick follow up what was the effect that I think you said created a few points of headwind on the.

On the billings result.

Just didn't didn't quite hear that description and then do you happen to have the RP O numbers or is can we do we wait until the 10-Q is released for this.

Yes so.

Hey, Mark let me start with the second piece of <unk>. It will be in the 10-Q, it's $199 million.

For the quarter again, RPM is not super meaningful for us because we're not seeing a ton of contracts that are greater than one year.

But is is higher than deferred revenue so that numbers out there in terms of our calculated billings were $109 3 million and that said, Hey, we had a little bit of headwinds on.

On kind of reserves.

And things like that would that what that is is last year in Q2, which was COVID-19 impacted we had to reserve out a ton of stuff and then in Q3, a lot of that got reversed.

So then when you look at the compare now we're kind of running more than our normal run rate, but it actually is is not as much of a benefit as we got last year. So that gives you a few points of <unk>.

When there, which I think will come out of in general, we expect billings to kind of track with revenue growth.

Understood. Thank you.

Our next question will come from the line of Brent Thill from Jefferies. You may begin.

Hi, this is non soda on for Brent Thill.

Congrats on a great first quarter.

Wanted to first ask a question to Greece.

Could we just maybe talk a little bit about that expansion opportunities specifically.

The larger customers.

And perhaps isn't that you add the 73% growth.

Could you talk a little bit about what products they were adopting.

Is there an opportunity there to sell them multiple products within the suite that you have.

Sure. Thanks.

So.

Okay. There are two parts, let me first talk about the enterprise the larger customers. So predominantly we land larger customers with either fresh desk offer service. So if you look at most of the top large customers for.

Fresh look they are.

All fresh desk omnichannel customers, who.

Usually think of them as that scale would be to see companies led the agent volumes are high and automation needs are high and the support through digital channels also.

Increasing because of.

Digital transformation.

And first service being more mid market, we also see.

That segment play into typically larger customers. So we land.

Most of the.

Mid market and about deal today, they are fresh desk Omnichannel arbitrate service.

Now in terms of expansion.

The primary expansion motion for both these products as additional agents.

And also these two products, it's worth understanding that theyre complimentary products and there is no natural cross sell motion between these two but moving forward like what we expect to see is and we are already seeing some signs of that as our fresh sales product that is new we are able to actually sell fresh sales into an existing customer bad debt.

Well to buy fresh disk and flash sales are sometimes prestige.

Fresh market along with freshness. So that is the cross sell motion that we think will continue to happen as a fresh sales product matures and gets more.

Sure.

Got it that's very helpful.

And maybe one for Tyler I wanted to.

Again, a little bit.

Understand question earlier around net dollar retention.

As we had.

Into 2022.

Should we be expecting this elevated level to continue.

Especially as you see the improvement on gross retention.

Could you maybe talk a little bit around that.

Yes, Thanks Love No. We do expect longer term to be kind of this 110 to low teens net dollar retention business.

Obviously, we're going to make every effort possible to continue to delight, our existing customers and also get them to adopt.

More of our products and use the products that they have and right now I think we're doing a good job at that but we would expect that number to come down.

Got it thank you.

Our next question will come from the line of Scott Berg from Needham you may begin.

Hydration Tyler congrats on a good question and.

Excuse me congrats on the good quarter and thanks for taking my questions.

I guess two here Krish I wanted to talk about the apartment impacting the quarter you mentioned signing more than 50, new partners in the third quarter, but how would you characterize the overall impact of.

Youre kind of.

Other partners on the on the new sales in the quarter.

Okay.

So I think Scott if you look at the partnered impact on our.

Overall business I would say that.

Partners contribute to approximately 15% of our business that number has been there.

Really moved much from what we docked during the road show So I think.

Inbound PSG.

And.

About 55% of new business for us that outbound is around 30% and then partners contributed 15%.

But we are constantly adding partners and again.

We have a ton of App developer partners, but here, we are calling out the channel partners, who actually these are.

Product.

Got it helpful. Thank you and then.

Tyler on the billings in the quarter any sense on what the mix looks like between monthly billings and annual billings did it shifts significantly in the quarter versus what we've seen the last couple of quarters.

Scott No there wasn't really any shift.

And kind of.

The tenure of the billings mix I think we've broken that out in the past at 60 something percent is annual and that's about the same as it was in the quarter.

Awesome, that's all I have congrats on a good quarter. Thanks, everyone. Thanks Scott.

Yes.

Our next question will come from Raimo <unk> from Barclays You may begin.

Thank you and congrats from me as well.

Can you talk a little bit about customer growth and what we're expecting there.

In terms of.

Obviously things are getting better out there how do you think about that growth trajectory, maybe it's more a question for Tyler.

Then I have one follow up.

Yes, we are.

We're pleased with customer growth, obviously, raimo we're focused on.

On all segments of the business. So we've got this long tail.

Smbs that were closing and we think we figured out how to do that really efficiently.

And then we have our kind of our field presence that we're closing larger organizations in the Midmarket and low enterprise in the partner segment.

When you look at our growth on the greater than five Cayenne and the growth of greater than 50, K, you're seeing solid growth now the the other thing though to mention is that our revenue growth is not just coming from the customer growth, we've actually done a pretty good job at increasing ARPA.

Cross our customer base. So then our growth vectors are really bringing in new customers, but also getting the customers that we have.

To buy more and we've been doing we've been doing well on both fronts.

Perfect. Thank you and then.

Curious more for you like if you think.

You have a real innovation engine out there because you can see what applications on the enterprise are working and you can kind of to some degree you got to think about whats needed in the SMB and mirror that.

Can you talk a little bit about like.

The opportunity there to add more functionality.

Talked already earlier about some of the.

Yes.

Product incubation et cetera, but like how do you see that kind of opportunity in the long run. Thank you.

Yes.

So I think broadly if you look at where the industry is moving so that like if you look at the world of customer service.

So we are looking at a consolidation of customer service channels like Omnichannel customer service, where companies are trying to blend in traditional channels of support with modern digital channels and bringing in automation in those channels. So that is definitely a trend if you look at DSM.

Awesome and the Forest service market. So clearly you can see modern employee engagement, especially when employees are working from home. How do you like enabled them to get what they want from the business and keep <unk> workflows running so that's a trend but the most the biggest opportunity intend that we see is the breaking down the silos between.

Sales and marketing and support.

360 degree product, which and then you can see large enterprises buying a customer data platform and trying to.

Integrated their sales cloud and the marketing cloud and their service cloud to kind of build a customer 360 profile. So we think that customer 360 will become a product category on its own and more and more businesses will start to like want to understand their customers better and one of the product experience for that that that's what we see as.

A big opportunity and that allows us to sell more to customers because today the buying centers are still buying for sales our marketing our support but we will be able to offer them a more complete solution and the good news is we had architected to plug and play where customers can start where they want but then add on more so I think that is where the industry is going.

Perfect. Thank you it sounds exciting.

Thanks very much thank you.

Our next question will come from the line of Brian Schwartz from Oppenheimer you may begin.

Yes, hi, thanks for taking my questions. Congratulations on your first quarter I had a follow up on the resellers that you added in the quarter I was just wondering if there's a specific geography or specific market segments that these new channel partners are focused on.

I think there is no splits.

Specific geography that is worth calling out so regionally.

Kind of focus on adding partners across the globe, but that tends to be like.

In non English speaking markets as well.

Tend to add more partners because it helps us reach and service their customers better, but if you look at our revenue mix today.

We are like.

Like what would traditionally be called international by a company they like everything outside of North America. So that is close to I would say.

Like put us North America, 42% of revenue Europe, Middle East and Asia.

40%, plus approximately and rest of world of <unk>. So so we are still heavily internationally. So.

Close to approximately 50, 860% international.

Thank you and the one follow up question I had was also just related to the two markets that you are focused on what is there any divergence in what you saw in terms of the bookings between the business in North America versus the business in Europe and Asia.

Hey, Brian This is Tyler no. It was really consistent we didn't see any kind of movement in one area versus another.

This quarter I think if.

If anything we've got our inbound motion, which is completely global REIT that is just accessing.

You can imagine almost every single country out there and then our field presence is really Europe.

In North America, primarily with.

With with smaller presence in areas like Australia.

And so just in terms of our bookings we would expect from the from the mid market and enterprise more of it to come from North America, and Europe, which it does.

Thank you for taking my questions you bet Brian.

Our next question comes from the line of Brent Larson from Piper Sandler you may begin.

Good afternoon, and happy Diwali.

Rich there is a clear talent shortage in the U S. This has emerged as a new risk factor for a lot of growth companies.

I'd be curious to hear if you're seeing a similar talent shortage scenario and shai.

Looking in it seems like having a large engineering footprint, India could be an advantage, but I'd just love to hear your thoughts on the talent your ability to hire particularly given your footprint there in Chennai.

Happy Diwali to Youtube Brent.

So I think.

Globally every company understands that.

Talent is soup.

Critical right and I think.

We are seeing.

We really think that otter tail.

Location advantage with having access to high quality talent in India is a strategic advantage quotas, we have like all of our R&D there and so we are able to kind of attract so we are the most.

Preferred.

Startup to work for in Indiana, and definitely the best one in Chennai. So I think those are what I would call it advantageous for us, but if you look at.

The startup activity, that's happening et cetera. So I think every company and also the post pandemic world like that is always the demand for talent in.

Okay.

I think we are probably better off than most companies thanks to our <unk>.

Advantage of being based in Shanghai.

Helpful color, there I guess Tyler follow up for you here I know fresh desk and press service or the product starz here, but I'd be curious around the momentum youre seeing I know, it's early with fresh sales but.

Are you seeing that expand the land footprint for new customers or are you seeing that being kind of cross sold in the installed base any sort of early color around fresh sales.

The early kind of wins you have there is there any sort of like cohort.

Our pattern developing on the type of customers that are embracing fresh sales would be helpful. Thanks.

Hey, Brent we're actually so it's all of the above we have customers who are coming in at pretty large scale and choosing fresh sales as their CRM of choice.

One of our active motions is looking at our fresh desk customers and really having them take the advantage of having fresh sales in fresh marker. So they have this unified view of their customer, which we're seeing really good initial feedback on.

And then obviously for customers in the SMB all the way up it's a very attractive solution because it's so easy to onboard and really really use.

Quickly and so to answer your question I think the larger motions are probably going to be on the SMB to mid market, but there is definitely some larger companies that we are winning there as well it's early though I'd like to say.

Yes, definitely definitely appreciate the feedback there and I appreciate its early but color color there sort of a super helpful. Thank you.

You bet.

And our next question will come from the line of Brian Peterson from Raymond James You May begin.

Thanks for taking my question and congrats on a really strong quarter. Just one for me. If you think about the SMB opportunity out there Im curious what youre seeing in terms of customers potentially looking at this customer 360 vision and are they at the point, where theyre looking to buy multiple products at the same time or are we still in an environment.

Where it's kind of starting with one seeing the vision and adding on.

Obviously.

Some sort of an evolution, but I am curious when you see that potentially changing for the smaller customers out there. Thank you.

Yes.

Thanks, Brian I think.

Customers are like.

Even if they are buying from three different vendors theyre buying three products like a good example.

Would be like.

SMB DTC brand, that's trying to sell online right. So that when they are trying to support customers on digital channels. So they are buying a support solution and then they may want to buy a marketing solution to run marketing campaigns on.

Like digital channels, like Whatsapp, or Instagram or text messaging based on which part of the world and they also have a box in automation for.

Self service of customers. So they are buying like two or three different products. So if we have like what we offer.

Suite strategy for customers to be able to buy.

Like a combined solution, they're not just calling at 360. These SMB customers. So but they are looking at how can we engage with customers and have one platform to engage with customers. So so I think it's happening as we speak.

Great. Thank you.

Our next question will come from the line of DJ Hynes from Canaccord you may begin.

Hey, guys. Thanks for taking the questions.

Greg I'm not sure if the traction upmarket, who would you say is a pull versus push motion today and I guess it would be if you think about the go to market investments that you're making is there an emphasis on any one of the three sales channels that you've highlighted.

So I think.

It's kind of both.

A lot of it is.

The poll will happen through our product led growth motion as I already mentioned, 55% of our.

New business comes through our inbound chat.

Chatham, but.

Not all of that is SMB right. So some of it is teams from larger companies. So that is part of <unk>, but we also have a mid market team, which is growing outbound running events and campaigns generating leads so so it is.

Like we have investments in GBM to go after.

Larger customers. We also have product led motion contributing to that so it's a mix of both.

Okay got it and then.

Hello, you've got a handful of questions on billings and <unk>.

Given you are still new to the public markets. Maybe you could just talk about like the usefulness of billings as a leading indicator on growth I mean, some companies say like yes, that's pretty good if you look at it on a rolling four quarter basis. Other companies say no don't pay any attention like where do you guys stand on that.

I think in general and thanks for the question Vijay I think in general Billings will track.

Our revenue growth in the longer term.

For us what we had said in our roadshow, if we saw any extreme anomalies in billings, we call them out our calculated billings were 41%.

And I did say already so we called out the anomalies that we saw that create some headwinds in the billings number but in general we were.

We're pleased really pleased with the results.

For us if we see a meaningful change in our in our billings mix, meaning that the way customers are paying us whether it's annual or monthly because unlike a lot of enterprise software companies, who have mainly annual or even sometimes multiyear payments upfront. We have a mix of customer right. We have this long tail of SMB in a lot of those customers are paying us.

Monthly and so if we see a change in that that would cause some anomalies in the billings number we will call it out on the calls.

Perfect makes sense and congrats on getting the first one out there. Thanks guys. Thanks, a lot. Thank you.

Our next question will come from the line of Pat <unk> from JMP Securities you may begin.

Oh, great. Thank you.

Sure.

One for each of you if that's okay. So I love that you went with that Nelson as a board member.

Yes.

I'm sure most people on this call know, but anyway doesn't he ran net suite for 15 years before it was sold to Oracle and I'm sure you had your choice.

People to put it in that seat and I would just love to hear what the factors were that caused you to pick.

It picks up.

No first of all exactly.

Fantastic leader with Great Public company experience has seen scale, taking net suite to like $1 billion of revenue and beyond and even.

Post the acquisition from article he was leading it.

It really adds to our broad capability in terms of having.

That good public company experience and adding to our government. So I think.

Most importantly, <unk> is not unlike.

Five or six board like you have the time to spend.

Interest in this.

This suite if you think most of original first Alex SaaS companies selling too.

A lot of SMB mid market customers, so that experience.

And the domain experience all of that it was super hard EBIT glad to exactly what's available for Us Tonight.

So I think.

It is an incredible mentor.

Yes, great.

Tyler just sort of quick ones for you first of all.

Not guiding to it specifically, but any comments.

Can make about how investors should think about growth next year I think would be generally appreciate it and then also.

Just any any.

Sort of quick summary on the early lock up release.

Top of People's minds.

Okay, Yeah for sure Thanks Pat.

We're not commenting on next year right now obviously I think we'll do that as we enter Q4.

But for in terms of the early lock up we put out a press release on Friday. This was something that was part of the S. One and negotiated as far as going public.

20% unlock across our employee base that will come on Thursday, but whats.

Important to note that's across the entire.

Base.

Prior shareholders, which clearly that's not all going to hit the market on Thursday.

One the one thing that we know we will hit the market is just the.

The soda covers for tax purposes of Rcs.

That should be executed.

Great. Thank you very much.

Thanks Pat.

Thank you and our next question will come from the line of Rob Oliver from Baird you may begin.

Great. Thanks, guys for taking my question. Thanks, Chris Thanks Tyler.

Just one and then a quick follow up obviously a lot of mid market strength here from you guys and I know Craig services, where you guys have traditionally Randy but just wondering on a couple fronts, whether youre noticing you are noticing any share on.

On that land with the fresh desk.

Product being so strong and heavily in demand as.

Companies try to digitally transform.

<unk>.

And kind of how those relative pipelines look.

Headed into Q4, and then just had a quick follow up thanks.

Yes, I think both products operate in.

In large markets and we are seeing healthy growth across both so.

In terms of comparison I think for service probably.

<unk> is growing a little bit faster than fresh debt because of the smaller base.

So breakfast being our largest.

But we see continued demand because these are two completely different set of buyers.

Dynamics, so I think.

Interest service market I think we are the best alternative to service now and we are seeing a lot of demand.

Demand from the mid market that we are getting pulled into those deals.

First desk side, I think it's a little bit more fragmented, but we have got companies are customers of all sizes from smbs to.

The really large companies coming to us and so it's a more diverse set of customer base.

Got it got it helpful. And then I know you mentioned at the outset that you guys have a user conference next week and probably for a lot of investors that'll be public market investors that'll be the first one they've tended to just curious Greg from your perspective or color because everything you guys wanted to point to I know there was a question earlier about New York.

A little early to get a lot there, but just was curious from a product evolution perspective.

For perspective, if theres anything we should keep our eyes out for next week in Vegas. Thanks, guys.

Yes, I think I would like to invite.

All of you to join virtually and so we have some exciting.

Announcements customer stories and platform announcements to make so and so.

So I'd say its mostly virtual we're limiting physical presence due to COVID-19, but.

I would like to invite you to attend.

Great. Thanks again thanks.

Thanks, Rob.

Thank you.

We have Alex Zukin, Alex Zukin from Wolfe Research has our next question. Your line is open.

Yeah, Hi, this is Joshua Tilton on for Alex Thanks for taking my questions.

First I was hoping could you just comment on what Youre seeing from a demand perspective, and if you could just maybe compare and contrast that relative to pre pandemic levels.

Hey, Joshua this is Tyler I'll take the demand is strong I mean.

Pre pandemic it was strong we're growing faster than all our historical numbers are there and I think we're still growing at an incredible pace.

The.

We saw clearly we saw in the SMB side as we went through Covid, there was customers who experienced pain specific to some verticals.

Hospitality travel things like that.

But as we talked about the growth rates and how last quarter benefited from a strong or weak prior year.

We also talked about how we came out of it in Q3 of last year and a lot of our customers came out of it and then we saw.

Acceleration, even from digital transformation, which is just kind of core to what we do.

Specifically, because our products are so easy to use and get onboard. So we saw a lot of customers take advantage of that and I think thats still continuing today.

And maybe just as a quick follow up any comments on the competitive landscape.

Could you just mentioned which of your competitors are you seeing your win rates go up against across your three product areas.

Okay.

So I think if you really look at our.

Three product areas and looking at across the primarily two go to market motions. So in the product led.

<unk> like.

Predominantly in fresh desk, we compete against than.

And then desk or re compete against service cloud on the enterprise side, our legacy players like Oracle or SAP.

So on the inbound side, we don't track a lot of.

Win rates because customers come online in.

It's more or less just did buying rather than consultative selling so we see wins across and in mid markets, particularly we track all of these vendors, but we see.

Deals that we win against an desk.

And Chris desk in for service, we actually win against Atlassian, Our service now, meaning we go into bake offs.

Telus now so we have won against them. So we don't have any.

Linzess to disclose per se, because it's still tracking it at different levels.

But I can talk to you about who are the competition that we see in each one of these markets.

Thank you.

Thank you I'm not showing any further questions in the queue.

Thank you for participating in today's conference. This concludes today's program you may all.

Disconnect everyone have a great day.

Okay.

[music].

[music].

[music].

Good afternoon, and welcome to the fresh works third quarter 2021 earnings conference call.

This time all participants are in a listen only mode. Later, we will conduct a question answer session and instructions will follow at that time, if you would like to ask a question. Please press. The Star then the one key on your Touchtone telephone if you wish to remove yourself from the queue. Please press the pound key if anyone should require operator assistance.

Please press Star then zero on your Touchtone telephone as a reminder, this call.

Is being recorded I would now like to introduce your host for today's conference John Huh, Vice President of Investor Relations You May proceed.

Yeah.

Thank you good afternoon, and welcome to fresh works third quarter 2021 earnings Conference call. Joining me today, arguing Martha put them fresh works, Chief Executive Officer, and Tyler Sloat Fresh works Chief Financial Officer. The primary purpose of todays call is to provide you with information regarding our third quarter 2021 performance and our financial outlook.

Our fourth quarter and full year 2021.

Some of our discussion and responses to your questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095. These forward looking statements are based on <unk> current expectations and estimates about its business and industry management's beliefs and certain assumptions made by the company as of the date hereof.

All of which are subject to change. These statements are subject to risks uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward looking statements for a discussion of material risks and other important factors that could affect our results. Please refer to today's earnings release, our final prospectus.

Related to our initial public offering filed with the SEC on September 21, 2021, and our other periodic filings with the Securities and Exchange Commission.

<unk> assumes no obligation to update any forward looking statements in order to reflect events or circumstances that may arise. After the date of this presentation, except as required by law during.

During the course of today's call, we will refer to certain non-GAAP financial measures reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, which is available on our Investor Relations website at IR Dot fresh works Dot com.

I encourage you to visit our Investor Relations site to access our earnings release periodic SEC reports, a replay of today's call or to learn more about fresh works and with that let me turn the call over to Girish.

Thank you June and good afternoon, everyone.

Welcome to our first earnings call as a public company.

We met many of you during our roadshow, but for those of you that are new to the fresh looks Tony I would like to start by sharing our mission.

<unk> makes it fast and easy for every business to delight their customers and their employees.

Do that by offering modern and intuitive customer engagement and employee engagement software.

Chris Brooks is a global software company with customers in over 120 countries and more than 4400 employees, who operate out of Dublin offices globally.

We have three main product lines.

For Omnichannel customer experience Chris.

Chris serviced for it service management and employee engagement Crystal suite for sales and marketing automation.

All of our products utilize services from our neo platform.

Can you provide shared services for rapid innovation.

We design our products to deliver the light to the frontline users of our software.

Additionally, they are designed for rapid Onboarding quick time to value and offer a lower total cost of ownership.

<unk> approach to business software is what got us to where we are and what will continue to differentiate us in.

Three large established market with a total addressable market.

$120 billion.

So let me quickly summarize our first quarter as a public company.

<unk> had another good quarter of growth in Q3.

Total revenue for the quarter was $96 6 million growing 46% year over year.

We now have over 14000 paying customers.

Paying us more than $5000 in annual recurring revenue and driving the vast majority of our business.

We saw strong expansion activity from our existing customers and made real improvements on gross retention, resulting in a net dollar retention rate of 117% our CFO Tyler Sloat will offer more details on that shortly.

Our product led growth strategy continues to be the biggest driver of new business for us.

This is augmented by an outbound sales team and our partner network to serve our customers from SMB to large enterprises.

We define our SMB market as companies with up to 250 employees anything greater we define as mid market and enterprise Chris.

<unk> continues to grow and attract larger customers and today, we have a majority of our business coming from mid market and about in.

In Q3, we added more than 50, New channel partners globally. In addition to extending our ISP partnerships.

We are very pleased with the positive customer response to our products and are proud of the continued industry validation we are receiving.

In Q3, <unk> was recognized by Gartner as a challenger in the 2021 magic quadrant for it service management tools.

This follows that earlier recognition of fresh foods as a virginity in the 2021 magic quadrant for the CRM customer engagement center.

Additionally trust radius recognized us for top <unk> asset management and <unk> in 2021.

This quarter, our modern intuitive and easy to use products continue to make their way into companies of all sizes, gaining recognition and delivering value our businesses across many industries.

We welcomed fortune 500 companies like Phillips and Toyota connected India. What are you using for service to enable it service management.

Fast growing tech companies like Ford truck lucid work and Smash Burger a restaurant chain headquartered in Denver implemented first service to connect their global employees with <unk> support.

<unk> soda a global fashion retailer is also using for service to enable <unk> functions, but more than 1500 team members.

Today as every business is looking to engage with customers online our fresh desk product continues to see greater adoption.

For example, the world's largest international beauty retailer Watson's implemented fresh desk to help support that online buyers, while Hunter College in New York The light on fresh desk to help current and prospective students during the admissions and registration process.

We will be highlighting many of our customers next week at our refreshed conference on November 11th We hope you can join US online to learn about our latest product innovations and hear from customers on how pressure its promise of delight made easy helps their businesses.

Last month.

I had the opportunity to travel to India and spent two weeks in our office in Shanghai It.

It was energizing to be back for the first time since 2020.

I was able to meet new employees and work side by side with many of our product and engineering leaders.

It was great to hear that many of our employees are excited to come back to the office, which is why I am happy to announce that as of yesterday, we are fully reopened our offices in Shanghai with our other global offices to follow shortly.

In Q3, we continued to invest in the strong teams we have in place welcoming hundreds of new employees.

We promoted pumps or <unk> to chief legal officer for <unk> further adding to the breadth of our executive team.

Strengthened our board by adding two industry veterans Zach Nelson former CEO of net suite and Jenifer Taylor Chief product officer at cloud flat as independent directors.

In closing I want to thank our employees customers and partners are helping us get to where we ought to be.

We believe we have huge opportunities to keep growing and delighting more customers every quarter.

I will now turn it over to Tyler to share more on our financial results.

Thanks, Jay and a warm welcome to all of you joining us on the webcast.

We enjoyed meeting many of you our shareholders and analysts over the last few months as we went through the IPO process and look forward to our public company journey together in the coming years.

For our initial call as a public company, let me cover a few different areas today.

First.

A review of our business model and provide a financial framework for how we think about managing fresh works.

Next I'll cover the highlights from our third quarter, including key operating metrics and financial results and finally.

I'll close with our views on our journey ahead in our guidance for Q4 and full year 2021.

As Jim mentioned earlier, we offer three main product lines, two of which are at scale fresh.

<unk> for the customer support market and fresh service with it service management market.

We're in the early stages and continuing to scale. Our third main product line for sales and we are optimistic about the long term opportunity in that sales and marketing automation space.

With these three product lines. We also have three go to market motions, starting with a highly efficient inbound product led growth motion as companies find our products through digital channels and online search.

We coupled <unk> motion with our outbound motion, which includes field sales reps to help serve our larger customers in the mid market and above.

The third leg of our go to market motion is our partner ecosystem around the world that helps extend our reach to serve our customers where they are located.

Our business model supported by an efficient financial framework that allows us to continue investing for growth, while making incremental improvements to drive operating leverage in the business.

This provides us the flexibility to invest and double down on key areas of our business, while maintaining a healthy margin structure.

Starting with cost of revenue and gross margins were running at really healthy levels. Our non-GAAP gross margins have averaged around 80% over the last several quarters and they improved to over 82% in Q3 I will cover more on that later.

Looking at our operating expenses, we manage ourselves in marketing spend through a number of internal efficiency metrics comparing ourselves in marketing costs to our incremental revenue.

We regularly benchmark our efficiency metrics versus our peers.

We're also making R&D investments to continue driving our product development and technical innovation cycles.

And because we're able to attract top technical talent in areas like Chennai, we can invest in a meaningful yet efficient manner.

For G&A costs were increasing investments this year as we have a number of public company costs, some of which will be ongoing.

More importantly, we expect to gain operating leverage over time as we scale the business.

Our broad product offerings across three big markets, we have a huge market opportunity. So we will continue investing to drive long term growth for fresh works.

Turning to our Q3 results.

We delivered another solid quarter of growth in our first quarter as a public company as a reminder.

Focus most of my discussion around our non-GAAP numbers for our Q3 results.

These non-GAAP numbers exclude the impact of stock based compensation and related expenses amortization of acquired intangibles historical acquisition related expenses and other adjustments.

In Q3, we delivered healthy revenue growth of 46% year over year, resulting in $96 6 million for the quarter.

The revenue growth rate is lower relative to Q2. This was very much expected as our Q2 growth benefited meaningfully from a favorable favorable comparison arising from a COVID-19 impacted quarter last year.

As I mentioned earlier, our non-GAAP gross margins increased to over 82%. This was primarily driven by a more efficient spend on certain service provider agreements and ongoing improvements for infrastructure spend in the quarter.

While we're pleased with the improvement in the quarter, we generally target target our non-GAAP gross margins in the 80% range as we manage the business.

Our non-GAAP operating expenses increased by $28 $5 million versus the prior period prior year to $81 4 million.

This was mainly driven by increased investments in our teams for R&D sales and marketing and G&A as we meaningfully added to our <unk> family over the past 12 months.

More specific to marketing, we increased our advertising branding PR and event costs by $5 $5 million compared to last year as we created more awareness for our products in the marketplace.

In G&A, we made important investments in personnel and infrastructure to prepare for operations as a public company.

All of this led to a non-GAAP operating loss of $1 5 million for Q3, as we improved our non-GAAP operating margin by four 5% quarter over quarter.

Looking at our GAAP operating expenses I should note that we had a large impact from stock based compensation and related expenses of $138 million. In Q3. This was related to our IPO, which resulted in a significant <unk> vesting event and a large catch up expense for SBC.

Going forward, we expect SBC to be more normalized to be at more of a more normalized levels of approximately $45 million per quarter.

Turning to our key operating metrics, we continue to see good business momentum in the quarter, we saw robust expansion activity as our net dollar retention rate was 117% for Q3 up eight percentage points compared to the prior year.

Our customer teams are making good improvements to our gross retention rate and we have benefited from an FX tailwind of 1% year over year.

As a reminder, we calculate net dollar retention rate on a trailing 12 month basis, comparing our customers beginning and ending era.

Given the customer segments, we operate in including SMB, We believe our business model supports 110% plus net dollar retention rate longer term.

Our second key operating metric customers contributing more than $5000 in IRR grew to $14 79, or 31% year over year, which reflects a net add of over 3300 customers.

These customers consistently drive the vast majority of our business and represent 84% of our <unk> similar to our Q2 results.

When we look at larger customers those that contribute more than $50000 and there are none.

<unk> grew 73% to $12 63, and reflects a net add of over 525 customers representing 39% of our era.

We're pleased to see that are easy to use products continued to resonate with customers and organizations of all sizes around the globe.

Moving to our balance sheet and cash flow items are calculated billings, which is the sum of our revenue and change in deferred revenue in the quarter was $109 3 million in Q3 growing 41% year over year.

Similar to the revenue growth dynamic, we expected calculated billings growth for Q3 to be lower than Q2 due to the favorable comparison for Q2 last year.

While our billings duration mix had minimal impact on the growth rate in Q3, we had a headwind of a few percentage points in growth related to reserves and commissions.

In terms of cash we ended the quarter with more than $1 3 billion in cash and cash equivalents. This.

This includes the net proceeds from the IPO of 107 billion free cash flow of negative $4 2 million and an additional $24 million in proceeds from the sale of an early investment in a private company today.

Today, we have a strong balance sheet to support the growth of our business.

We've had really healthy growth throughout the year and we continue to support that with an efficient financial model.

Even with growth investments and increased public company expenses in Q4, we expect to be roughly free cash flow breakeven for the quarter.

Lastly, our diluted share count as of the end of the quarter September 32021 was approximately 323 million shares.

Some final thoughts before I turn to our financial outlook.

We have a huge opportunity in front of us we're playing in large established markets of customer support TSM and sales and marketing.

We're seeing good momentum in our product adoption and gaining more market recognition.

We're adding both new and larger customers and seen robust expansion across our customer base.

We're investing to fuel our growth as we go after this massive opportunity 2021 continues to be a big investment year for us, we're adding to our go to market teams around the world around the world to expand our market presence, we're investing in the ongoing innovation of our easy to use products and we're creating the infrastructure to operate efficiently.

And deliver value as a public company.

Looking ahead to Q4.

This includes an increase in our expense base, resulting from ongoing investments in our personnel higher infrastructure and insurance insurance costs as a public company and increased marketing and events cost us travel opens up.

Now, let me turn to our estimates for the fourth quarter and full year 2021.

For the fourth quarter of 2021, we expect revenue to be in the range of $99 million to $101 million non-GAAP loss from operations to be in the range of $13 5 million to $11 5 million.

And non-GAAP net loss per share to be in the range of seven to five assuming.

Assuming weighted average shares outstanding of approximately $269 1 million.

For the full year 2021, we expect revenue to be in the range of $364 5 million to $366 5 million non.

Non-GAAP loss from operations to be in the range of 21 million to $19 million and non-GAAP net loss per share to be in the range of 22 to 20 <unk>.

Assuming weighted average shares outstanding of approximately $134 million.

Let me close by saying that we're excited about a great journey ahead and look forward to partnering with our shareholders.

And with that now let's take your questions operator.

Okay.

Thank you if you would like to ask a question. Please press star.

Then the one key on your Touchtone telephone.

If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Our first question will come from the line of Brad <unk> from Bank.

Bank of America Securities you may begin.

Oh, great. Thanks, guys. Congratulations on nice results to your first quarter as a public company.

I wanted to ask about the enterprise activity that you saw in the quarter. It sounds like you're seeing some traction there.

With some of the larger accounts can you remind us kind of where the focus is in the upmarket business, where do you draw the line and where is the opportunity for the company.

From here.

Hi, Brad Thanks for the question.

So.

We continue to focus across three go to market motions. So we have our product led inbound growth motion, which the majority of the customers that are SMB customers, which is companies with less than 250 employees, but having said that we also get teams from larger.

The prices come inbound and they are 100 off toward mid market sales teams. So we have our mid market teams our field teams in region and U S. Europe predominantly go after larger accounts. So if you look at the split it still is.

Around I would say 60 40 mid market SMB approximately so.

And we are seeing if you look at.

Q3, specifically I think customers, who paid us more than 50 KAR duct grew that number grew at 73% year over year.

Yes.

That's great to hear thank you so much and then one more if I may please just on.

With the deal platform I know there is a <unk>.

Crescive roadmap to build out more modules within the stack that you have.

And then in other categories like sales, which you've mentioned is early.

Where is the focus in the near term and are there. Some deliverables that we should be kind of keeping an eye out for.

Some product extensions and add going forward. Thank you.

Yeah. So our vision for Neo platform is to continue to execute on three major business benefited drivers one for our customers.

I want to offer a unified product experience so whatever services that we offer in terms of single sign on.

At 360 degree view of the customer across sales and marketing and eventually support custom objects and a bunch of other services.

Neo platform allows customers to have a better unified experience for developers NSA partners, Neil our platform offers a marketplace, where they can build apps and today, we have more than.

700, public apps and customers can build.

Thousands of private apps to extend the power of official expect pumps. So that is also an area where we continue to.

The capabilities of what can be accomplished in an app, so and you will.

I also see some exciting announcements and other fresh conference.

Next week.

And the third is for our own notable internal developers there.

We have what is known as foundational services.

That all of our products can use.

Services like E mail processing at scale, our chat messages listening to chat all of that as part of new platform, which gives us product velocity and innovation. So so across all of these three areas. We continue to execute on the duplex.

That's great to hear thanks, thanks, so much girish.

Thanks, Brian Thanks, Greg.

And our next question comes from the line of Stanislawski from Morgan Stanley You may begin.

Perfect. Thank you so much guys and congratulations on your first public quarter.

Very well done.

Maybe just following up a little bit more detail on Brad's question.

As you look into the big Q4.

Are you seeing your pipeline as far as the demand for the upmarket.

A portion of your business across all the all the different products that you have and then I have a quick follow up for <unk>.

A financial question.

Okay.

So.

I think we are always looking at ways to improve our pipeline and so we have a mix of programs across our different go to market motions.

Like our marketing teams and sales teams are kind of enlisting in events together increasing load of molecules.

Bringing up some new campaigns to take the Omnichannel customer service or even.

Engagement employee engagement.

Post pandemic world. So we have multiple targets for new and expansion. So I think.

We don't have a specific number to give out far pipeline, but that has a ton of activity that we are doing to see how we can improve it.

Across both inbound and.

Mid market.

Got it but just maybe more broadly what are you seeing as far as your customers budgets as you go into Q4.

Are you seeing any weakness or is it just.

Steady steady momentum in versus what you've seen us with Q2 and Q3 now.

Hey, Stan this is Tyler no we're seeing steady momentum I mean, we have some seasonality in our business specifically in the Midmarket and enterprise business and from that that's where we do track pipe, obviously and it's solid globally right now, but you know our presence is mainly in North America, and Europe, and that's where we're we have our field reps out there.

As a reminder, we also have this product led growth inbound motion and that's not really something you considered pipe. It's more about how many customers are in trial in those trials typically convert less than 30 days and so we're tracking both obviously to be able to get a sense of it and and growth is good it's solid.

Okay, perfect very helpful and Tyler sincerity Jan.

Net revenue retention, obviously stayed elevated very impressive on June 17 in the quarter and you talked about the 110 level and a more normalized but how should we think about the path from this 117 in a more normalized 110 or alternatively is there a possibility that this this would come.

<unk> to stay elevated for quite some time as you continue to sell.

So this really broad portfolio of products you have as well as just the trailing 12 month nature of the metric.

No and we had talked during the road shows you remember that we do expect to be more of this 110, plus kind of low teens net dollar retention, we do expect.

Declines are to get to that kind of a longer term number that being said, we're super pleased with the quarter and the performance I think the the investments we've made.

In the product, but also in customer success and the way we're engaging with our customers has helped us on the on the gross retention and we said we'd been making improvements on that incrementally and then our expansion motion is doing really well as well as that is primarily agents right. That's a very organic.

Motion, but also cross sells.

Perfect. Thanks, guys.

Thanks, Dan.

Our next question will come from the line of Mark Murphy from Jpmorgan. Your line is open.

Yes, Thank you I'll add my congrats.

Are there any products that you are incubating better outside of the three or four main products, usually referred to which.

Particularly exciting in terms of market potential.

I think we see some of them are alluded to from time to time fresh team refresh paying press release fresh color Theres, a bunch of others.

That are a little less in the spotlight and I'm just wondering.

How you feel about some of those incubated products.

Yes, thanks Mark.

So let me first say that we have plenty of opportunity in the three main product categories.

We're playing in three really large market.

But as a company that's focused on innovation, we'd always like to bring more innovation to the market and primarily.

If you look at <unk>. So that is an incubation product ended up.

Very large market, which is <unk>, but it's still very early days for US then so.

We are not really at let's call it take its still an incubation so.

And I think if you mentioned fresh being in press release, they have more like premium products, which act as lead Gen machines for us where we are bringing the right set of customers like.

People, who are monitoring website folks who could later be up sold to for service. So that's the primary reason for fishing and fresh.

Status press release, its more of a project management tool that's integrated into current service that's sold as part of fresh service.

The unified.

SM.

Product with project management, So <unk> is really the information product.

Isn't HR space could be.

In future, but right now it's an incubation.

Okay got it thank you.

And then Tyler as a quick follow up what was the effect that I think you said created a few points of headwind on the.

The billings results.

Didn't didn't quite hear that description and then do you happen to have the RP O numbers or is.

Can we do we wait until the 10-Q is released for this.

Yes so.

Hey, Mark let me start with the second piece of <unk>. It will be in the 10-Q, it's $199 million.

For the quarter again, RPM is not super meaningful for us because we're not seeing a ton of contracts that are greater than one year.

But it is higher than deferred revenue so that numbers out there in terms of our calculated billings were $109 3 million and that said, Hey, we had a little bit of headwinds on.

On kind of our reserves.

And things like that where that what that is is last year in Q2, which was COVID-19 impacted we had to reserve out a ton of stuff and then in Q3 a lot of that.

Reversed and so.

So then when you look at the compare now we're kind of running more than our normal run rate, but it actually is is not as much of a benefit as we got last year. So that gives you a few points of headwind there, which I think will come out of in general we expect billings to kind of track with revenue growth.

Understood. Thank you.

Our next question will come from the line of Brent Thill from Jefferies. You may begin.

Hi, This is lance so darn good.

Brian too.

Congrats on a great first quarter.

Wanted to first ask a question.

Could you just maybe talk a little bit about that expansion opportunities specifically.

With the larger customers.

Perhaps isn't that you add the 73% growth.

Can you talk a little bit about what products they were adopting.

Is there an opportunity there to sell them multiple products within the suite that you have.

Sure. Thanks.

No.

Okay. There are two parts, let me first talk about the enterprise or the larger customers. So predominantly we land larger customers with either fresh desktop first service. So if you look at most of the top large customers for.

They are.

All fresh desk omnichannel customers, who.

Usually think of them as that scale would be to see companies led the agent volumes are high and automation needs are high and the support through retail channels also.

Increasing because of.

Digital transformation.

And first service being more mid market, we also see.

That segment play into typically larger customers. So we land.

Most of the.

Mid market and about deal today, the first desk omnichannel arbitrary seller.

Now in terms of expansion.

The primary expansion motion for both these products with addition of agents.

And also these two products, it's worth understanding that theyre complimentary products and there is no natural cross sell motion between these two but moving forward like what we expect to see is and we are already seeing some signs of that as our fresh sales product that is new we are able to actually sell fresh sales into an existing fish that customer that they are able.

To buy fresh disk and flash sales are sometimes per sales and fresh market along with <unk>. So that is the cross sell motion that we think will continue to happen as a fresh sales product matures and gets more adoption.

Got it that's very helpful.

And maybe one for Tyler I wanted to.

Digging a little bit understand.

Understand question earlier around net dollar retention.

As we had.

Into 2022.

Should should we be expecting this elevated level to continue.

Especially as you see the improvement on gross retention.

Could you maybe talk a little bit around that.

Yeah. Thanks Love No. We do expect longer term to be kind of this 110 to low teens net dollar retention business.

Obviously, we're going to make every effort possible to continue to delight, our existing customers and also get them to adopt.

More of our products and use the products that they have and right now I think we're doing a good job at that but we would expect that number to come down.

Got it thank you.

Our next question will come from the line of Scott Berg from Needham you may begin.

Hi, Tyler Congrats on a good question and excuse me congrats on the good quarter and thanks for taking my questions.

I guess two here Krish I wanted to talk about the impact in the quarter, you mentioned signing more than 50, new partners in the third quarter, but how would you characterize the overall impact of your kind of other partners on the on the new sales in the quarter.

Yes.

So I think Scott if you look at the partnered impact on our.

Overall business I would say that.

Partners contribute to approximately 15% of our business that number has been.

Really moved much from what we docked during the road show So I think.

Our inbound PSG.

And.

About 55% of new business for us that outbound is around 30% and then partners contributed 15%.

But we are constantly adding partners and again.

We have a ton of App developer partners, but here, we are calling out the channel partners, who actually these products.

Got it helpful. Thank you and then.

Tyler on the billings in the quarter any sense on what the mix looks like between monthly billings and annual billings does it shift significantly in the quarter versus what we've seen in the last couple of quarters.

Scott No there wasn't really any shift.

And kind of.

The tenure of the billings mix I think we've broken that out in the past at 60 something percent is annual and Thats about the same as it was in the quarter.

Awesome, that's all I have congrats on a good quarter. Thanks, everyone. Thanks Scott.

Our next question comes from Raimo <unk> from Barclays You may begin.

Thank you and congrats from me as well can.

Can you talk a little bit about customer growth and what we're expecting there.

In terms of.

Obviously things are getting better out there how do you think about that growth trajectory, maybe it's more a question for pilot.

And then I have one follow up.

Yes, we were pleased with customer growth, obviously raimo we're focused.

All segments of the business. So we've got this long tail.

Yeah.

Smbs that were closing and we think we figured out how to do that really efficiently.

We and then we have our kind of our field presence that we're closing larger organizations in the mid market and lower enterprise and in the partner segment.

When you look at our growth on the greater than five K and then the growth of greater than 50, K, you're seeing solid growth now.

Other thing, though to mention is that our revenue growth is not just coming from the customer growth, we've actually done a pretty good job at increasing ARPA.

Across our customer base. So then our growth vectors are really bringing in new customers, but also getting the customers that we have.

To buy more and we've been doing we've been doing well on both fronts.

Okay perfect. Thank you and then curious more for you like if you think.

You have a real innovation engine out there because you can see what applications on the enterprise are working and you can kind of to some degree you got to think about whats needed in the SMB and mirror that.

Can you talk a little bit about like.

The opportunity there to add more functionality, we talked already earlier about some of the.

The.

Product incubation et cetera, but like how do you see that kind of opportunity in the long run. Thank you.

Yeah.

So I think broadly if you look at where the industry is moving.

Like if you look at the world of customer service.

So we are looking at a consolidation of customer service channels like Omnichannel.

Or service, where companies are trying to blend in traditional channels of support with modern digital channels and bringing in automation in those channels. So that is definitely a trend if you look at <unk>.

And the first service market. So clearly you can see modern employee engagement, especially when employees are working from home. How do you like enabled them to get what they want from the business and keep <unk> workflows running so that's a trend but the most the biggest opportunity intent that we see is the breaking down the silos between.

Sales and marketing and support.

360 degree product, which and then you can see large enterprises buying a customer data platform and trying to.

Integrated their sales cloud marketing cloud and service cloud to kind of build a customer 360 profile. So we think that customer 360 will become a product category on its own and more and more businesses will start to like want to understand their customers better and one of the product experience for that that is what we see as.

A big opportunity and that allows us to sell more to customers because today the buying centers are still buying for sales our marketing our support but we will be able to offer them a more complete solution and the good news is we had architected to plug and play where customers can start where they want but then add on more so I think that is where the industry is going.

Perfect. Thank you it sounds exciting.

Thanks very much thank you.

Our next question will come from the line of Brian Schwartz from Oppenheimer you may begin.

Yes, hi, thanks for taking my questions. Congratulations on your first quarter I had a follow up on the resellers that you added in the quarter I was just wondering if there's a specific geography or specific market segments that these new channel partners that are focused on.

I think there is no.

Terrific geography that is worth calling OXXO regionally kind.

Kind of focus on adding partners across the globe, but that tends to be like.

In non English speaking markets as well.

Tend to add more partners because it helps us reach and service their customers better, but if you look at our revenue mix today.

We are.

Like what would traditionally be called international by a company like everything outside of North America. So that is close to I would say.

Like North America is 42% of revenue Europe, Middle East and Asia is out of the 40% plus approximately.

And rest of world of <unk>. So so we are still heavily internationally. So.

Close to approximately 50% 60% international.

Thank you and the one follow up question I had was also just related to the two markets that you're focused on one is there any divergence in what you saw in terms of the bookings between the business in North America versus the business in Europe and Asia. Thanks.

Brian This is Tyler I know it was really consistent we didn't see any kind of movement in one area versus another.

This quarter I think if.

If anything we've got our inbound motion, which is completely global REIT that is just accessing.

You can imagine almost every single country out there and then our field presence is really Europe and.

In North America, primarily with.

With with smaller presence in areas like Australia.

And so just in terms of our bookings we would expect from the from the mid market and enterprise more of it to come from North America, and Europe, which it does.

Thank you for taking my questions you bet Brian.

Our next question comes from the line of Brent Larson from Piper Sandler you may begin.

Good afternoon, and happy Diwali.

Rich there is a clear talent shortage in the U S. This has emerged as a new risk factor for a lot of growth companies.

I'd be curious to hear if you're seeing a similar talent shortage scenario and shai.

Looking in it seems like having a large engineering footprint, India could be an advantage, but I'd just love to hear your thoughts on the talent your ability to hire particularly given your footprint there in Shanghai.

Happy Diwali to Youtube Brent.

So I think.

<unk> globally every company understands that.

Talent is supercritical right and I think.

We are seeing.

We really think that otter tail.

Location advantage with having access to high quality talent in India is a strategic advantage for us.

Like all of our R&D there.

So we are able to kind of.

So we are the most.

Preferred.

Startup to work for in Indiana, and definitely the best one in Chennai. So I think those are what I would call is advantageous for us, but if you look at.

The startup activity, that's happening et cetera. So I think every company and also the post pandemic world like that is always a demand for talent in.

Yes.

I think we are probably better off than most companies thanks to our.

The advantage of being based in Shanghai.

Helpful color, there I guess Tyler follow up for you here I know fresh task and fresh service or the product stars here, but I'd be curious around the momentum youre seeing I know, it's early with fresh sales, but are you seeing that expand the land footprint for new customers or are you seeing.

That being kind of cross sold in the installed base any sort of early color around fresh sales in.

And the early kind of wins you have there is there any sort of like cohort or pattern developing on the type of customers that are embracing fresh sales would be helpful. Thanks.

Hey, Brian we actually so it's all of the above there we have customers who are coming in at pretty large scale and choosing fresh sales as their CRM of choice.

One of our active motions is looking at our fresh desk customers and really having them take the advantage of having fresh sales in fresh marker. So they have this unified view of their customer, which we're seeing really good initial feedback on.

And then obviously for our customers in the SMB all the way up it's a very attractive solution. So because it's so easy to onboard and really really use.

Quickly and so to answer your question I think the larger motions are probably going to be on the SMB to the mid market, but there's definitely some larger companies that we are winning there as well it's early though I'd like to say.

Yes, definitely definitely I appreciate the feedback there and I appreciate its early but Hello. This color there is terrific super helpful. Thank you.

You bet.

And our next question will come from the line of Brian Peterson from Raymond James You May begin.

Thanks for taking my question and congrats on a really strong quarter just one for me.

About the SMB opportunity out there Im curious what youre seeing in terms of customers potentially looking at this customer 360 vision and are they at the point, where theyre looking to buy multiple products at the same time or are we still in an environment, where it's kind of starting with one seeing the vision and adding on.

Yes.

Obviously that there would be some sort of an evolution, but I am curious when you see that potentially changing for the smaller customers out there. Thank you.

Yes.

Thanks, Brian I think.

Customers are like.

Even if they are buying from three different vendors. They are buying three products like a good example.

It would be like.

SMB DTC brand, that's trying to sell online right. So that when they're trying to support customers on digital channels. So they are buying a support solution and then they may want to buy a marketing solution to run marketing campaigns on.

Like digital channels, like Whatsapp, and Instagram, our text messaging based on which part of the world added and they also have.

Bots and automation for.

Self service of customers. So they are buying like two or three different products. So if we have like what we offer.

Suite strategy for customers to be able to buy.

Like a combined solution, they're not just calling at $3 60. These SMB customers. So but they are looking at how can we engage with customers and have one platform to engage with customers. So so I think it's happening as we speak.

Great. Thank you.

Our next question comes from the line of P.

DJ Hynes from Canaccord you may begin.

Hey, guys. Thanks for taking the questions.

Greg how much of the traction upmarket, who would you say is a pull versus push motion today and I guess it would be if you think about the go to market investments that you're making is there an emphasis on any one of the three sales channels that you've highlighted.

So I think.

It's kind of both.

It is.

The poll will happen through our product led growth most of that I'd say already mentioned 55% of our.

New business comes through our inbound chat.

China, but.

Not all of that is SMB right. So some of it is teams from larger companies. So that is part of it <unk>, but we also have a mid market team, which is growing outbound running events and campaigns generating leads so so it is.

Like we have investments in GBM to go after.

Larger customers. We also have product led motion contributing to that so it's a mix of both.

Okay got it and then.

Hello, you've got a handful of questions on billings and <unk>.

Given you are still new to the public markets. Maybe you could just talk about like the usefulness of billings as a leading indicator on growth I mean, some companies say like yes, that's pretty good if you look at it on a rolling four quarter basis. Other companies say no don't pay any attention like where do you guys stand on that.

I think in general and thanks for the question did you I think in general Billings will track.

Our revenue growth in the longer term.

For us what we had said in our roadshow, if we saw any extreme anomalies in billings, we called them out our calculated billings were 41%.

And they did say already so we called out the anomalies that we saw that create some headwinds in the billings number but in general we were.

Pleased really pleased with the results.

For us if we see a meaningful change in our in our billings mix, meaning that the way customers are paying us whether it's annual or monthly because unlike a lot of enterprise software companies, who have mainly annual or even sometimes multiyear payments upfront. We have a mix of customer right. We have this long tail of SMB in a lot of those customers are paying us.

Monthly and so if we see a change in that that would cause some anomalies in the billings number we will call it out on the calls.

Perfect makes sense and congrats on getting the first one out there. Thanks guys. Thanks a lot. Thank.

Thank you.

Our next question comes from the line of Pat Walraven from JMP Securities.

Begin.

Oh, great. Thank you.

A one for one for each of you. If that's okay. So I love that you went with that Nelson as a board member.

I'm sure most people on this call know, but anyway. It doesn't he ran net suite for 15 years before it was sold to Oracle and I am sure you had your choice.

People to put it in that seat and I would just love to hear what the factors were that caused you to pick.

It picked back up.

No first of all exact is a fantastic leader with great Public company experience has seen scale, taking net suite to like $1 billion of revenue and beyond and even.

Post the acquisition from article he was leading it real.

<unk> adds to our <unk>.

<unk> capability in terms of having.

That good public company experience and adding to our government. So I think.

More importantly, <unk> is not unlike.

Six board like you have the time to spend.

Mentors and Dayton. This suite, if you think most of the original the first SaaS.

SaaS companies selling too.

A lot of SMB mid market customers, so that experience.

The domain experience all of that it was super hard even flagged exactly what's available for us and so I think.

Okay.

It is an incredible mentor.

Yeah great.

And then Tyler just sort of quick ones for you first of all.

Youre not guiding to it specifically, but any comments.

<unk>.

Can make about how investors should think about growth next year I think would be generally appreciate it and then also.

Just any any.

A quick summary on the early lockup release, just so thats.

On top of People's lives.

Yeah for sure Thanks, Pat so.

We're not commenting on next year right now obviously I think we'll do that as we enter Q4.

But for in terms of the early lock up we put out a press release on Friday. This was something that was part of the S. One.

Negotiate it as far as going public we trigger a 20% unlock across our employee base that will come on Thursday, but whats.

Important to note that's across the entire.

Base.

Prior shareholders, which clearly that's not all going to hit the market on Thursday.

The one thing that we know will hit the market is just the <unk>.

Total covers for tax purposes of ours use.

That should be executed.

Great. Thank you very much.

Thanks Pat.

Thank you.

Next question will come from the line of Rob Oliver from Baird you may begin.

Great. Thanks, guys for taking my question. Thanks, Chris Thanks Tyler.

Just one and then a quick follow up obviously a lot of mid market strength here from you guys and I know Capex services, where you guys have traditionally Randy but just wondering on a couple fronts, whether youre noticing you are noticing any share on.

On that land with the fresh desk.

Being so strong and heavily in demand as.

Companies tried to digitally transform.

And.

And kind of how those relative pipelines look.

Heading into Q4, and then just had a quick follow up thanks.

Yes, I think both products like operate in.

In large markets and we are seeing healthy growth across both so.

In terms of comparison I think for service probably.

<unk> is growing a little bit faster than fresh debt because of the smaller base.

So breakfast being our largest.

But we see continued demand because these are two completely different set of buyers.

Dynamics, so I think.

Interest service market I think we are the best alternative to service now and we are seeing a lot of demand.

Demand from the mid market that we are getting pulled into those deals.

First desk side, I think it's a little bit more fragmented, but we have got companies are customers of all sizes late from Smbs to.

The really large companies coming to us and so.

More diverse set of customer base.

Got it that's helpful and then.

You mentioned at the outset that you guys have a user conference next week and probably for a lot of investors that will be public market investors that'll be the first one they've tended to just curious from your perspective or color because everything.

I just wanted to point to I know there was a question earlier about New York, maybe a little early to get a lot there, but just was curious from a product evolution perspective platform perspective, if theres anything we should keep our eyes out for next week in Vegas. Thanks, guys.

Yes, I think I would like to invite.

All of you to join virtually and so we have some exciting.

Announcements customer stories and platform announcements to make so.

And.

So I'd say, it's mostly virtual we're limiting physical presence due to COVID-19, but.

I would like to invite you to attend.

Great. Thanks, Scott Thanks.

Thanks, Rob.

Thank you.

We have Alex Zukin, Alex Zukin from Wolfe Research has our next question. Your line is open.

Yeah, Hi, this is Joshua Tilton on for Alex Thanks for taking my questions.

First I was hoping could you just comment on what Youre seeing from a demand perspective, and if you could just maybe compare and contrast, the relative to pre pandemic levels.

Hey, Joshua this is Tyler I'll take the demand is strong I mean.

Pre pandemic you have a strong we're growing faster than I mean, all our historical numbers are there and I think we're still growing at an incredible pace.

The.

We saw clearly we saw in the SMB side as we went through Covid, there was customers who experienced pain specific to some verticals.

Hospitality travel things like that.

But as we talked about the growth rates and how last quarter benefited from a strong or weak prior year.

We also talked about how we came out of it in Q3 of last year and a lot of our customers came out of it and then we saw.

Acceleration, even from digital transformation, which is just kind of core to what we do.

Specifically, because our products are so easy to use and get onboard. So we saw a lot of customers take advantage of that and I think thats still continuing today.

And maybe just as a quick follow up any comments on the competitive landscape. Maybe you can just mentioned which of your competitors are you seeing your win rates go up against across your three product areas.

Okay.

So I think if you.

Really look at our.

Three product areas and look at it across the primarily two go to market motions. So in the product led motion like.

Predominantly in fresh desk, we compete against than.

And desk or re compete against service cloud on the enterprise side, our legacy players like Oracle or SAP.

So on the inbound side, we don't track a lot of.

Win rates because customers come online in.

It's more or less just did buying rather than consultative selling so we see wins across and in mid markets, particularly we track all of these vendors, but WC.

Deals that we win against an desk or Chris desk in for.

For service, we actually win against Atlassian, our services, meaning to be go into bake offs that service now so we have one against them. So we don't have any <unk>.

Linzess to disclose per se, because it's still tracking it at different levels.

I can talk to you about who are the competition that we see in each one of these markets.

Thank you.

Thank you I'm not showing any further questions in the queue.

Thank you for participating in today's conference. This concludes today's program.

Disconnect everyone have a great day.