Q1 2023 Yext Inc Earnings Call
[music].
Good day and welcome to the extra Inc. First quarter fiscal 2023 financial results Conference call.
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Now I'd like to turn the conference over to General Counsel. Please go ahead.
Thank you Sarah and good afternoon, everyone welcome to the <unk> fiscal first quarter 2023 conference call with me today, our CEO , Mike Wallrath, CLO, and President Mark Tarantino and CFO Darryl button.
Before we begin I'd like to remind everyone that this call may contain forward looking statements, including statements about expectations regarding growth of our business, our management and governance plans forward looking guidance and estimates of financial and operating metrics capital expenditures and other non historical statements as further described.
In our press release.
These forward looking statements are subject to certain risks uncertainties and assumptions, including those related to ex growth.
Evolution of our industry, our product development and success, our management performance and general economic and business conditions, such as the impact of the COVID-19 pandemic.
We undertake no obligation to revise any statements to reflect changes that occur after this call.
Descriptions of these and other risks that could cause actual results to have a material difference from these forward looking statements are discussed in our reports filed with the SEC, including our most recent quarterly and annual report and our press release that was issued this afternoon.
During the call. We also refer to non-GAAP financial measures reconciliations with the most comparable GAAP measures are also available in the press release, which is available at investors <unk> com.
Please note that Darryl is dealing with the case of laryngitis. So Mike will also be delivering Darryl prepared remarks, but Daryl will do his best to participate in the Q&A with that I will turn the call over to Mike.
Thanks, Joe and thanks, everybody for joining us today.
We're making progress on our efforts to streamline the business improve operating efficiency and re architect our go Mark go to market strategy.
We've installed a lot of change in the last 90 days.
I'm encouraged by the changes, we're making to further improve our operating results in the future and particularly by the responsiveness of our team to a different set of operating principles.
We have an amazing group of talented people across this company and I'm really excited to work with them as we build the future of <unk>.
We are early in our transformation to become a more nimble and efficient company, but I'm pleased with the progress we've made so far and look forward to continued improvement.
First quarter revenue was $98 8 million, one and a half a million above the high end of our guidance, while non-GAAP net loss per share was six cents, a penny better than the high end of our guidance range.
We took actions to create operating efficiencies during the quarter and we expect to realize these operating efficiencies in future periods as our full year guidance suggests we.
We are confident in our ability to continue to make the core business more efficient even as we face economic uncertainty inflation and FX headwinds.
We will continue to attack inefficiencies in our business as we find them. This process is iterative and it's becoming a core culture principles, we aligned around our highest priorities customer satisfaction operational efficiency and product innovation.
We have renewed our commitment to putting customer satisfaction at the center of all we do.
Our go to market reboot will take time to execute long term customer satisfaction is at the core of our ongoing efforts on this front.
We experienced increased customer churn and contract downgrades in recent periods, which have had an.
In effect on our revenue retention.
Certain customer sets had been more affected by these trends and others and it stands out that listings only customers have been particularly effective. It is in this customers that where we've seen the most challenges with support and services, which has led to more competitive pressure.
We're seeing this trend means focusing on initiatives that include better client success interaction highlighting product innovation across the platform and focusing on customer adoption.
Our core belief is that happy customers drive adoption upsell and ultimately will lead to higher net retention rates.
We believe our efforts in this area will also serve to further improve satisfaction with most most of our customers who are very happy with the value of our products are delivering.
We're taking a long term view of the customer journey, and we'll prioritize the future opportunity over a near term revenue.
Today, we also announced that David Rooney Minsky currently C. R O leading the North American sales organization will be leaving guest David joined <unk> in 2017 and helps build the enterprise sales team here.
We wish him well and appreciate all the contributions he has made to our sales organization.
We have already started the search for a global CRO and Dave will assist in transitioning his role until September 30th Bryan just a Burger <unk> co founder and currently see or are responsible for the international and partner sales organizations.
We will assume his responsibilities in the interim and is helping us to identify the right leader to take on the global CRO role.
We will continue to focus on operational efficiency. We spent most of the quarter reorganizing the business, resulting in a flatter organization. We worked on consolidating duplicate functions, increasing our leader's span of control and creating more accountability to improve operating efficiency.
We are already seeing the results of our work and our improved full year EPS guidance reflects the work we've done in the early part of our fiscal year.
We expect to continue to make progress on this front as we streamline the organization and focus on making sure. Our efforts are in the highest value areas. We view. These operational efficiencies is directly linked to driving increased customer satisfaction. The complexity and size of our organization was getting in the way and a leaner more focused organization will better serve our.
<unk> needs and grow those relationships over time.
Product innovation remains a top priority across our entire platform Mark will address our progress and priorities as well as some of the customer wins from the quarter.
We are also working to make our product platform easier to understand by rolling out refreshed brand positioning and our business easier to understand by doing a better job of describing describing our revenue categories and dynamics Mark will provide more color on the brand positioning work that isn't in process.
Going forward, we will be providing air are broken out by two categories direct which includes our enterprise mid market and small business customers and our third party reseller customers separately.
Daryl will provide a more detailed look at the metrics by category well I guess I will provide a more detailed look in barrels remarks.
And how we will report them going forward at a high level. We think are our provides insight into the performance of our recurring revenue business model, while mitigating fluctuations and billing and contract terms.
AOR growth in the direct business reflects product adoption.
And indicates that we are landing new customers and renewing and upselling existing customers a good indication that our customers value our products and our value proposition is intact in spite of challenging execution over the last few quarters and our go to market.
Third party reseller revenue is less predictable and less indicative of the robustness of the overall portfolio as resellers are currently limited to selling certain products. However, we do see resellers as an opportunity for future growth as we enable them to sell additional products and solutions.
We also want to highlight that more than 95% of our revenue in the quarter was recurring in nature, and we expect that to continue.
Finally, one time services are essential for our more complex customers, but only represented about 2% of total revenue in the first quarter and we anticipate them to remain a small percentage of our overall revenue as we continue to build out our Si community.
We are orienting the company around these metrics of the entire team is focused on building a company with a best in class SaaS profile with strong recurring revenue and healthy margins.
90 days into my tenure as CEO a few things are clear we have a lot of hard work ahead of us and we expect economic uncertainty will persist at least for the near term.
I believe disciplined execution stands out in more difficult economic environment.
Our product platform is robust and provides tremendous value to our customers the market opportunity is large and growing.
We will continue to focus on operational efficiency and making the right long term decisions across the business to show tremendous customer value, which is the heart and soul of our growth opportunity.
We remain confident in our ability to operate efficiently and believe our stock is a great investment.
This is reflected in our share repurchases in Q1, and our ongoing plan to continue to repurchase shares.
We maintain a very strong balance sheet, our business getting healthier by the day and an amazing team that will focus on the large opportunity in front of us.
I'd now like to introduce mark to discuss customer and product updates.
Yes.
Thanks, Mike first I would like to say that I am happy to be here I've been with the X since 2015, and I believe we have the most innovative products in the market and we have significant growth potential our products are exceptional and solve real business issues for our customers.
Proving our go to market is my immediate focus and I believe we've made progress this quarter.
I'll start with our brand looking back our pivot to answers our branding of our search offering as answers created confusion both inside the company as well as with customers cleaning up our brand envision has been priority one for Mike and me.
The concept of answers has been fundamental to our business since we launched listings in 2010, the very first answers product was listings.
Listings allows the business to control their answers across the largest network of publishers in the world.
Our reviews product allows the business to manage crowdsourced answers about their products and services our pages product allows our customers to deliver answers B U S. C O optimize web pages.
With the recent addition of our search products our customers can now answer questions right on their website internet or anywhere in the company.
All of this sits on top of our knowledge graph product, which collects organizes all of the answers across the business into a next generation content management system built for AI very simply we want to help businesses answer every question from their customers employees partners anytime anywhere.
This vision goes way beyond marketing it takes us into support E Commerce and workplace use cases every CEO has an answers problem, having accurate real time answers to the most pressing questions about the company's results and the most robust.
[laughter], resulting in more robust top of the funnel better customer conversion on the website a reduction in support cost and more productive employees.
We will be rolling out this improved consistent branding and positioning that aligns with what we actually do going forward you will hear us describe our core set of products listings reviews pages search and knowledge graph all as the answers platform Yexed is and always has been the answers company and each of our products solve that.
Core problem for our customers perfect answers everywhere, we will continue to build industry specific solutions atop the answers platform the growth opportunities here are significant.
Our updated brand messaging is the foundation upon upon which we're building our go to market plan I'll walk you through some of the other key focus areas for this year as we remodel our go to market motion.
We're focusing heavily on customer success and customer education, we have new programs launching to help our customers adopt our products to the fullest driving the highest value the highest level of value from their purchase our customers look to us to be experts in our field and we want to be seen as such.
We have consolidated all of the data insights functions under one go to market insights team to create one view of the customer. We're also reorganizing the marketing team to work more cross functionally and increase their focus on our areas of growth specifically our offerings in marketing support health care and financial services.
Due to development in our platform over the last year, we feel like we are ready to really engage the si ecosystem and a much bigger way than we have in the past and I expect that to be a big focus as we go forward.
On the product front this quarter, we launched our spring 'twenty two release, which includes several new features.
We are making the platform easier to integrate to internal systems in order to collect more answers from across the business. We have made enhancements to our search product, including our search merchandiser as.
As part of this release, we've made major enhancements to our flagship listings product, which once again shows our commitment to the product line our approach to product development aligns with our brand and go to market approach Yexed is one platform with a mission to empower every business in the world to collect organize deliver an answers anytime anywhere.
<unk>.
Now I would like to talk about some highlights from our first quarter.
We were led by strength in health care, followed by financial services and food services with customers like Cardinal Health Unitedhealthcare ally financials, and El Pollo Loco, we have a very strong solution said for health care, which includes not just locations, but also provided listings and reviews provider pages and are finding.
<unk> offering had been good follow on purchases.
All of these solutions really build on each other and creating clean up sell path that provides an additive value for the customer.
The same thing exists in financial services, where we start with loan officers insurance agents or wealth advisor listings, and then move to reputation and pages and then once all the data is in the knowledge graph, we create a straightforward upsell to search or guided search since all of the necessary data is already in the system from the previous solutions. This may.
The deployment of the additional solutions, a very light lift for the customer.
Listings and reviews continues to make up a large portion of our new business and up so we're able to land one of our one of our largest location listings new logos for the quarter with DHL Express in EMEA.
We also signed shake shack, which represents a lot of room for growth across the platform. This shows you that our core franchise is still very much intact and with the renewed energy, we're putting into the product and service it will continue that momentum.
We have continued to innovate our flagship listings and reviews products as we always have in our effort right now is educating the market on these innovations alongside all of the other innovations across the platform.
One deal that I am very excited about for what it says about how far our search offering has come in just a few years was with a large global appliance company.
The team did a thorough assessment of the market speaking with most of our competitors and looking for a search partner, who can handle support search and E. Commerce search they ran a competitive process and ultimately we were selected with the additional features in our winter and spring releases. We can now match every player in the market and security while our AI search features continue to Devry.
Differentiate us from the pack.
We've had some recent success against the longtime incumbent and replacing them as the search platform for the company with the winter 222 release and the addition of the security features that were necessary to deploy search for internal use cases, Vmware is a great example of a competitive win that replaced an entrenched competitor for the global business their current.
<unk> had a keyword based front end and lack of analytics is forward looking team chose the X for our MLP robust analytics and tableau integration. We believe this current win represents a small portion of a much larger opportunity to expand globally.
Now I will turn the call over to Mike.
Thanks, Mark I always wanted to do the numbers.
Hi.
Our first quarter revenue grew 7% year over year to $98 8 million unearned.
Unearned revenue increased 5% year over year to 196 million in annual recurring revenue or <unk> was $387 million at the end of Q1 up 5% year over year.
As a result of the stronger dollar relative to countries, where we transact in local currencies Q1 revenue experienced an approximate 1% negative impact from FX and <unk> at the end of Q1.
And there are at the end of Q1 experienced an approximate 2% negative impact from FX.
Our trailing 12 month net dollar based retention, which excludes our small business customers was 99%.
And our trailing 12 month net dollar based retention for direct which also excludes small business customers as well as our third party reseller customers it was 100%.
Our customer count, which excludes small business customers and third party reseller customers increased 11% year over year to 28 30.
Further customers with air are over 100, K was 613 at the end of Q1 up 8% year over year and also excludes small business customers and third party resellers.
As I noted earlier, beginning this quarter and moving forward, we will provide a more detailed look at Ara across our direct customers and third party reseller customers. We believe <unk> is a strong measure of our future opportunity as well as progress across new customer adoption renewals and upsells.
Direct customers represent 80% of total air or.
Direct IRR at Q1 totaled $310 million, representing 7% year over year growth.
The direct sales team is primarily focused on enterprise and mid market accounts in the era of growth is a good measure of adoption and satisfaction across these customers.
Third party resellers represent 20% of total error.
Third party reseller <unk> totaled $77 million at Q1, representing a decline of 3% over the prior year.
Our third party reseller customers vary widely in terms of their size and their customer base. So we expect third we expect revenue from third party resellers to be less predictable than revenue from direct.
Yeah.
Turning to non-GAAP results, which are reconciled to GAAP in our press release Q1 gross margin was 76, 4% compared to $77 eight in the year ago quarter, and we continue to be in the range of our long term non-GAAP gross margin target of 75 to 80.
Q1, operating expenses were $82 9 million or 84% of revenue compared to $74 2 million or 81% in the year ago quarter.
Primary drivers of our operating expense increase were employee related costs and various sales and marketing events. Many of our events for the first half of the year had already been committed however, as we look at the second half of the year, we expect to realize efficiencies within sales and marketing expense.
Our Q1 net loss was $7 8 million compared to a net loss of $3 million in the year ago quarter.
Our Q1 net loss per share was <unk>, <unk>, which was better than our guidance range net.
Net loss was <unk> <unk> per share in the first quarter last year.
Cash and cash equivalents were $248 million at the end of Q1 compared to $261 million at the end of fiscal year 'twenty two.
During the quarter, we authorized a $100 million share repurchase program of our common stock.
We repurchased $31 million through the end of the quarter and subsequently repurchased an additional $24 million we intend.
To continue to maintain a strong balance sheet and cash position going forward and will remain open to buying stock at attractive prices.
Net cash flow from operations for Q1 was $17 9 million compared to $35 1 million in the year ago quarter.
We expect to continue generating annually generating annual positive operating cash flow in fiscal 'twenty, three and going forward.
Capex was $1 6 million in the first quarter compared to $7 5 million in the quarter ended April 2020. One as we have returned to a normalized annual Capex run rate following the completion of our real estate expansion.
Turning to our outlook, we expect Q2 revenue to be between $99 million and $100 million.
Our Q2 guidance includes the negative impact of $1 8 million as a result of FX. We expect Q2, non-GAAP net loss per share between five and six inch since assuming a weighted average basic share count of approximately $124 6 million shares.
For the full year fiscal 'twenty three we expect revenue of $399 3 million to $403 3 million. Our guidance includes the negative impact of 6 million as a result of FX.
Our non-GAAP loss per share is expected to be between 12 10 to 12.
<unk> improvement from the midpoint of our previous guidance as we expect continued improvement across operating expenses, particularly sales and marketing.
Full year EPS assumes a basic weighted average share count of approximately $127 1 million shares.
Operator, we are ready to open it up for Q&A.
Thank you.
We will now begin the question and answer session.
Yeah question you May Press Star then one on your telephone keypad.
Youre using a speakerphone please pick up your handset before pressing.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Yeah.
Our first question comes from Robert <unk> with <unk> Securities. Please go ahead.
Yeah. Thanks, a lot a couple of questions from me.
So Mike.
In your commentary you talked about some.
Some impact from customer downgrades.
And maybe some increased churn.
Can you give us some more color in terms of what's going on sort of under the covers here. So are you seeing these losses on the on boarding of third party customers or more on the direct customers and also.
These customers are downgrading, let's say churning off what's the primary reason for that matter I'll be going to the other.
Or sort of new products on the market that might be might have led to increased competition.
Yeah. Thanks for the question I'm happy to talk about those dynamics, a little bit so well one of the things. We saw in Q1 was that we saw our gross retention slip into the low Eighty's AR, which was down sequentially from Q3 and Q4.
Hum.
The good news is that it's our smallest up for renewal quarter. So the relative impact is fairly small.
And really it was driven by a single a single churn and it is a great example of where we have to do a better job with the customer so.
This particular customer had had numerous disruptions to their to the service that we're providing them numerous team changes.
And frankly, I think we weren't responsive enough to to there.
To their needs and for that you know Unfortunately that was a that was a logo churn.
Very much what we're focused on here is oh.
Addressing these customer satisfaction.
Challenges before they happen because when they do happen and they create an opening for for competitors, who can't match us from a functionality or service standpoint.
But but we're certainly exposed when our customers aren't aren't happy and so.
The focus internally is absolutely on on logo retention, even if even if a that certain customers comes at a at some level of a downgrade churn I would much rather see that than logo churn than customer churn because we have amazing upsell opportunities with these customers and so that's what I'm talking about when I'm talking.
Starting with customer satisfaction, and starting with with the with happier customers. We take we take the competitive opportunity very much off the table when our customers are happy which most of them. The vast majority of them are.
Got it but maybe just sort of so just maybe digging a little bit deeper into there. So.
Coming out of Covid.
All right.
We are now.
What kind of seemed to us that the demand would improve maybe you would see more licenses as motor locations open or you know just a more upsells.
Are you starting to see any of that even in a.
In the month.
We just ended or any any kind of color or commentary would be helpful. There.
Yeah.
I think from a it's Mike again, I think from my point of view.
I think I would agree that we at the moment seem to be through the COVID-19 headwinds and it feels like business as usual.
You know the.
When you hear Mark talk about the the.
The platform and the opportunity across the entire product set.
We're encouraged to see our breath of types of deals coming through.
We're probably not at the volume of deals that we want to see yet, but with the amount of disruption that that you know we we created with the reorganization in the beginning of this re architecture of the go to market machine, that's not particularly surprising.
So no I mean, we're excited about those opportunities I think mark might want to talk a little bit about you know.
Some of the dynamics with the improvements we made to the listing platform and also how that relates to our reseller customers where there is.
Substantial opportunity not only in the listing side, but also on new products expansion there.
Yeah. So on the listing side, we really.
We were kind of.
We've been innovating on our listings product is really at a similar pace over the last few years, but I think one of the areas that we have not done as good a job almost was really articulating the value and the additional innovation on that listings product and Thats part of which is a pretty easy thing to fix on our side, which we are what that does is it increases the utility.
By adding this functionality increases the utility of listings product, making it more valuable making it something that is more core to the business of our customer base within the third party reseller channel you know that was a channel that we only were able to sell listings and reviews.
To and where we're looking really to hopefully add a few new products potentially in the future to that channel and see if we can we can drive additional value there.
Understood second question I had is just on the sales and marketing.
So.
In terms of the head count reduction and the impact on the P&L.
Is that more.
Kind of loaded towards the back half how should we think about the.
This expense line as we move through the year.
Hey, David it's Darryl.
Yes, that's a great question you know as we look at the EPS guidance that we put together obviously it suggests some big improvements in the back half of the year.
The changes that we've made and in terms of quota carrying reps that we talked about on the.
The last quarter call. You know are sort of you know is kind of roughly where we're at we ended last quarter at 190. This quarter, we're ending at about 180 sales reps. So we feel pretty good about where we're at with respect.
To those numbers there.
And so just in terms of the dollar impact Ah why aren't we seeing that.
Sequentially between Q4 and Q1.
Got it got it even more so.
So I think it's just it's a matter of scope and magnitude right like the sales and marketing line is much bigger than just our quota carrying reps there is support theres some other functions around our.
Customer success in there and so forth so as all all of the efficiency work in the reorganizations and the streamlining and the removing of silos as that comes to fruition. The benefits will start to realize in the back half of the year. If you think about the timeline.
Mike really only took over midway through March by the time, we got through all of the reworks, it's kind of difficult to impact the numbers within the quarter, but we expect to see the improvements going forward and you see that from our EPS guidance in Q2 shows some improvement over Q1, but we expect further improvement in the back half of the year.
Understood. Thank you.
Do you feel better there.
You're doing all right.
Yes.
Our next question comes from Ryan Macdonald with Needham. Please go ahead.
Alright, Thanks for taking my question, maybe first starting on on the customer success motion I know from discussions earlier in the quarter that we know theres a big focus here on on sort of standardizing that customer success motion across the organization and trying to drive some improvements around quarterly business reviews can you just talk about some of the success or the <unk>.
Yes, maybe that you're making in this area.
Yeah, I mean, I'll I'll take the for the the first part and Mark May have examples that he wants to talk about.
Or anecdotes.
It starts with understanding what what's not working and I think were you know we we've begun to understand where were those breakdowns come in we've seen tremendous turnover with our within our customer organizations and that's I think that's a challenge because when when people move around inside the customers, we often have.
To restart.
<unk>.
Retrain adoption and things like that that are really important from a client success standpoint.
And yeah. It's it's you know it's an it's an operational challenge we as I've talked about a lot on the last call. We had numerous different groups touching the customer.
We will all contribute to that customer success and they were the you know those efforts were.
We're less coordinated than then they they should've been and so we we've made a lot of change in the quarter.
In order to unify those and make sure that our coordination and touch points with the customers are more consistent.
It's also a big part of our decision to seek a global Chief revenue officer, who would be focused across.
Not just the sales organization, but the customer success organization.
In order to make sure that we're building upon our efforts to a to upper a better operationalize the entire go to market machine.
Just to add to what Mike said.
Our product in many ways as a sort of straightforward cause and effect the more adoption.
The more usage of the product the more value you get it is it is actually pretty straightforward in that regard and so one of the things that we're doing and one of the things that we're focused on is really driving adoption inside of our customer base being customer focused.
Having that be you know really the driving force the driving consistency behind our customer success experienced now in years past there there wasn't a clear set of metrics for us to operate against and what we spent the last quarter on is really metering much of that product experience much of their consumer experience are all driving towards.
Eventually being able to hopefully in this next quarter being able to at least measure.
Adoption across a very very large customer base that we have.
That will then lead to higher levels of our systems and processes and automation that will be able to deliver a what that really means for us. It means for the customer is a much more consistent customer experience, whether you're a single location pizza place or you are our largest customer.
That we're delivering that consistent experience and we're doing it at scale and we're doing it efficiently and so that's something that we're really excited about to watch that unfold over the next few quarters and our customers will definitely feel that that benefit of that that innovation.
That's helpful and Mark maybe as a follow up to that you talked you said something.
Along the lines of more usage you know obviously you.
Leads to stick to your customers more success over time, and you talked about customer education, there is a way to drive that better usage.
As you continue to sort of drive that customer education are driving usage do you feel like that the route there is more accomplished through better self service and making it simple to use or by being able to be more consultative and the services that you provide to customers to help them in their usage.
But because of our are our very large diverse customer set we have to start with self serve that really is the foundation so through our community sites of our hitchhiker site.
Really being a place where customers go to educate themselves on the latest and greatest in the industry being a place where they go to understand best practices and how to optimize and maximize the value of the product. They have but then that's not where we stop our for hire for larger customers are ones that specifically in the enterprise the upper enterprise.
And then also having a customer success folks who are who are going in and sort of taking the self serve information and really helping those large customers implement it themselves or make sure that they are implementing it. That's that's a really big piece of it and when we talk about adoption you know one of the interesting parts of our platform is that you know for us the adoption is really about content.
How much content is someone adding to the platform is it quality content is a content that ultimately helps them show up in search and helps them really drive top of the funnel performance and that's something that is also something that we can help both from a self serve standpoint, but also we can provide consultative experience for our some of our largest customers.
Excellent and then maybe last one for me Mike.
And you talked about I think one of the previous questions about.
Q1 is a relatively light renewal quarter for you and then so despite having some churn it was a relatively small impact can you give us a sense of as you look out through the remainder of the year or at least in the second quarter, what you know.
That renewal cycle looks like and and you know what you're kind of doing right now to try to prove.
Any incremental churn and perhaps what assumptions are built into the guidance currently for any incremental churn at these levels.
Sure. So yes, so Q1 as you know the the every quarter it gets a little bit bigger when it comes to what's up for renewal as we go through the year and so you know my.
My point of view is that.
I think we learned some hard lessons over the last few quarters about what happens when you don't provide the level of customer experience that we expect to provide.
And you know our focus is very much on.
On reversing those trends thankfully, we've got some time to work on that and we know we know we know the values there.
But we have to do a better job of providing that kind of a unified experience.
The other thing I mentioned and I'll say it again, because I think it's really important is that sometimes especially for multi product platform company that like like we are sometimes you you you have to.
Do do things for clients that are you know that that may not be in.
Have the best impact from a very near term revenue standpoint, but they create the fertile ground for the bigger opportunity in.
You know I I'll I'll I'll speak about this going forward. Those are those are considerations that we're going to take very seriously and we're going to make sure that we're setting the table for future growth and our decisions around.
How we how we.
Address potentially are the minority of our customers who may have experienced some of the service disruption.
That said I, you know I feel like you asked about guidance.
From my point of view I think our guidance is.
For the for the rest of the year.
We're we're obviously a little bit cautious about the macro environment and we are in.
In the process of a of a.
I have a lot of change here and that's it.
Obviously not style isn't entirely complete.
And so you know I think were being cautious on that front.
Great I'll hop back in the queue.
Thanks.
Okay.
To ask a question please press star.
Our next question comes from Oregon.
Yeah.
Please go ahead.
Hi. Thank you this is Chris on for origin.
So the first question I wanted to touch on was.
So in terms of go to market I think last quarter, we talked about I think you are head count coming down, but also wanting to kind of build out some of the supporting cast around the sales rep. So where do we stand kind of today in that process in terms of adding pieces and sales enablement.
And those kinds of things.
Yeah. So let me start and I think Mark May have some comments on this too so.
As we've gotten deeper into this one of the thing that's become clear is that a a better customer experience and increased operational efficiencies. They they go together so so.
I think I think as we've as we've gotten deeper here.
It's less clear that we have not enough resources.
And it's very clear that those resources are.
Have been less coordinated than they should be or potentially miss allocated and in some cases and so.
You know as we as we move forward.
We want to make sure that we're using the resources that we have in the business and reallocating resources as we need to to create the efficiency, which it.
It has a direct positive effect on the customer impact because it means less redundancy in their touch points less disk coordination and those are the primary drivers that we've seen of.
Historical customer dissatisfaction.
I mean, the only thing I'd add to that as I mentioned this a second ago, just consistency is really at the heart of the <unk>.
We want to deliver we have we have obviously, we're a different size company. So we have lots of we do have happy customers.
There's definitely some inconsistency across the customer experience right now which for us is not necessarily.
It isn't solved by more resources it solved by automation it solved by process. It solved by data it solved by systems design.
All of these things ultimately trying to keep a consistent experience across every customer across every size.
In every geo and so as Mike said, the sort of realization that we had was that it was warmer and allocation of resources and keeping consistent allocation of resources across the organization and.
Unless so about really adding additional ones.
Got it it makes a lot of form. Thank you that's very helpful.
So zooming out.
In an ideal world I'm not asking for guidance here, but you know if we're to dream the dream.
Yeah.
Where is your next two three years from now so what are the kind of the key Domino, there's about half the fall in terms of product and go to market that kind of gets you from here to where you wanted to be and I know we've talked about.
Some of the.
The table stakes things like kind of improving the customer experience.
Near term focus but is it continue to expand our product portfolio.
Add new.
Opportunities to go to market, how should we think about that.
So I'll give you some general ways I think you can think about this that that'll be helpful.
The I would say this I'd say the product portfolio that we have today is incredibly robust and we've we talked about the listings pages reviews search product lines.
And you know what.
What we also have our countless industry specific solutions that sit on top of that and Mark and his team have been architected to delivering those solutions for for years. So we don't feel limited by the product opportunity and Mark may want to expand on that.
On the you know.
On the Big picture.
I think one of the shifts that that is in flight right now is the idea that.
Growth and efficiency have to be disconnected in some way we do not we do we are not subscribing to that point of view here and as I mentioned in our last call every every business I've ever built has been.
A growth business.
Led by.
Bye bye efficiency and so.
When we look into our EPS guidance for the back half of the year as you as you can see it's we're effectively guiding around breakeven for the back half of the year.
I think that is a significant change from <unk>.
Given especially some of the headwinds that we're seeing in FX and the macro environment. So.
We feel like the opportunity is to get organized and to get lean in to get nimble and that's going to make us better.
With the go to market.
By virtue of happier customers and a better upsell path I mean, one thing I can tell you is I've I've I've talked to every customer who will talk to me who's left Dx in the last in the recent history and the themes are very consistent they didn't I hear a lot. We didn't really want to go the service was not where we where we expected it to be.
And that tells US two things it tells us that eventually we think we can we can win those customers back in and tell us exactly where are we where we need to focus and as you know the other the other thing I heard consistently as you wanted to sell additional products, but youre not going to sell additional products and we're not happy and that is that is a key principle for us going forward is that.
We have a a you know when you think about the long term, we have a tremendous upsell cross sell path and in the.
Our search products and things like that have an enormous market, which we get to tap into when our customers are happy so I realize I'm a broken record on this but I don't feel like I can say it enough.
Yeah.
No.
Yes.
Yeah, just on the <unk>.
It all starts with customer success customer success is the engine that drives everything.
The happiest customers.
Buy more from us they want to do more with us they we become their trusted advisor in that relationship which is what's exciting and so we see the path. It equate. The question is how do we create that that more consistently across our entire base. So that's one part of it the foundation of what we do here is that we bring customers in usually with one product one of the products.
<unk> talked about we use that product to populate the knowledge graph or depopulate that AI content management system and then from there you know.
There is multiple expansion and upsell opportunities and so when you talk about the future you know two to three years from now we hope that we have a go to market machine that is sort of built in systematically built around that concept. The concept of landing with one solution and then expanding to many many more solutions now now beyond the marketing right now.
And to support and then into the future E com workplace and many other opportunities and so you can see there's a very consistent path going forward and we're pretty excited about it and you know.
The pace of innovation at our company is just.
Especially over the last few years, it's been absolutely incredible and I.
Can't possibly sort of stress how excited I am about our roadmap.
And this next set of things that were coming out, but I can't share those things because I would tell him you know he was the cause of that.
I was dilutive sharing forward looking statements, which I'm not going to but I can tell you that the roadmap is off the charts incredible and I'm Super excited about it.
Yeah.
Great that's all really encouraging to hear.
So one thing I want to touch on just a little bit more I know, we talked about here and there some of the macro impacts and you kind of baking that into guidance are there any areas. If we kind of double click on that potentially.
Essentially seeing a slowdown in demand.
Separate from some of that customer service issues that we've discussed and if we were to enter a recessionary period are there any product lines. In particular that you would expect that to have kind of an outsized impact on or is it.
You know going to be just kind of broadly felt across the customer base at all.
Yeah, I'll take that one it's Mike.
Thank you.
The biggest impact we're seeing is the FX impact and it's not something we havent and control over so.
We'll continue to update and update you on that is from a kind of a headwind.
I would say at this point, we're not seeing any any particular demand slowdown based on the macroeconomic environment and if we look at it historically.
I think software businesses tend to do do well through through recessionary or.
I don't know what were calling this environment, but.
You guys and the experts on that not me, but you know I think software businesses do do well because in those environments. Our customers are going to looking be looking for opportunity to drive drive costs down in digital digital transformation is an incredibly good way too.
Increase ROI on your.
Various activities and so.
We feel like we're in a great place to weather whatever might come economically and at this moment I wouldn't say, we're seeing any anything from a budgetary standpoint or demand standpoint, that's that's macro.
Okay, great and one more.
If I could slip it in.
So revenue came in a little bit ahead of guidance and despite some of the challenges eventually crush retention.
The large customer that trend.
How do we think about reconciling that with the sequential RPI decline. So is there any way you can kind of quantify how much of that might have been related to the customer the churn versus FX impacts was it all primarily FX I would assume.
Hey, it's Darryl.
At Apio is kind of a tough metric RPM looks at.
Contract duration contract terms in it we prefer to look at a R. R.
I noticed in the earnings release, we separated out.
Third party reseller IRR from our direct IRR, we think that sort of removes the impact of things like contract terms billing terms and timing.
If you think about multiyear deals that's going to impact your RP O numbers, particularly year over year. So that's that's what's really driving that it's not any.
Any one customer and the FX impacts we mentioned during the one 1% to 2% range for the metrics that called out.
Great. Thank you very much would feel better thank.
Thank you.
This concludes our question and answer session as well as our call for today. Thank you for attending today's presentation. You may now disconnect.