Q1 2024 ZoomInfo Technologies Inc Earnings Call
Good day, and thank you for standing by and welcome to the zoom in for first quarter 2024 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session will need to press star one on your telephone you all didn't hear an automated message box in your hand as race to withdraw your question. Please.
Speaker Change: For Starwood and when again please be advised today's conference is being recorded I would now like.
Turn the call over to your speaker today Joseph Citigroup. Please go ahead.
Joseph Daniel Meares: Thank you, Kevin and welcome to <unk> financial results Conference call for the first quarter of 2024 with me on the call today are Henry shock founder and CEO of human forward camera Hiser our CFO.
Speaker Change: After their remarks, we will open the call to Q&A.
Speaker Change: During this call any forward looking statements are made pursuant to the safe Harbor provisions of U S securities laws expressions of future goals, including business outlook expectations for future financial performance and similar items, including without limitation.
Speaker Change: <unk> is using the terminology may will expect anticipate believe and expressions, which reflect something other than historical facts are intended to identify forward looking statements forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our SEC filings actual results may differ materially from any forward looking statements.
Speaker Change: The company undertakes no obligation to revise or update any forward looking statements in order to reflect events that may arise. After this conference call, except as required by law for more information. Please refer to the forward looking statements in the slides posted to our Investor Relations website at IR docs humans, So dot com.
Speaker Change: All metrics on this call are non-GAAP unless otherwise noted.
Speaker Change: Reconciliation can be found in the financial results press release or in the slides posted to our IR website with that I'll turn the call over to Henry.
Henry L. Schuck: Thank you Jeremy and welcome everyone.
Henry: For the fourth first quarter was $310 million and adjusted operating income was $119 million a margin of 39% we delivered another quarter of better than expected profitability as we remain committed to profitable growth.
Henry: Our board approved another $500 million share repurchase authorization and we continue to aggressively buyback shares you meant though at attractive share prices.
Henry: Zoom info co pilot development efforts are well underway beta cut the merger since significant ROI and the feedback has been extremely positive we feel confident that we have a differentiated solution and we look forward to releasing that new version of our platform shortly.
Henry: We continue to navigate through a difficult operating environment, one that had not improved over the last few months. We had expected this quarter would be challenging and it was but we're starting to see signs of stabilization.
Henry: As it relates to net revenue retention in the quarter, our F&B business continued to be challenged and performed the worst in prior periods and while down in Q1, given the higher mix of those businesses coming up for renewal companywide NR was better than expected at 85%.
Henry: Mid market retention was similar to Q4 and Q1 was the second quarter in a row of sequential renewal rate improvement, reflecting sustained stabilization. We saw enterprise retention stabilize and we saw renewal rate there improved year over year for the first time since 2022.
Henry: Software retention also stayed flat sequentially for the first time since Q1 of 'twenty two.
Henry: Stabilization trends have continued into Q2 and our promising signs that suggest we have reached a bottom, which we view as a precursor to a potential inflection to growth.
Henry: We also had a number we also had another quarter of strong wind back performance customers continue to come back in record numbers. After trying low cost low quality providers. In Q1, we again saw hundreds of customers come back to you meant though maintaining the record levels from Q4 and Q3 2023.
Henry: One software vendor, who loves human throw in December 2023 for a lower cost competitor on the promise of even better data for a fraction of the cost has already returned to us they're frustrated account executive and business development manager Miss demand Gen and quota targets and their leadership team was self aware not to correct them.
Henry: Stake by cheap by twice.
Henry: In the quarter, we recorded our largest increase in the million dollar customer cohort since Q1 of 2023 as we continue to drive traction in the enterprise a C V from our million dollar customer cohort is up 16% year over year.
Henry: And our marketing solutions, we continue to see strength with improving retention and increasing AD spend on the platform and operations was the fastest growing area of the platform up 18% year over year as companies are increasingly using zoom and power to solve the data challenges within their CRM system and using our data.
Henry: And insights to power their AI strategies.
Henry: During the quarter, we closed transactions with companies of all sizes and in all industries, including Walgreens Kirkland, and Ellis Marsh Mclennan Universal robots spring help MSG entertainment carat fertility O W logistics and Gulf rates.
Henry: A multinational stopping company ran an RFP for a vendor to clean up their CRM data to improve their modeling and predictive analytics on candidates and a competitive deal where high quality accurate data with Paramount we fix their existing data problems future proof their data strategy and provided a foundation for them to run predictive analytics and <unk>.
Henry: Expanding their use of AI. This.
Henry: This resulted in an up sell representing $925000 in annual contract value, which over the life of the contract will be worth $2 $7 million of total contract value.
Henry: We also expanded with the mid market data query in deep learning software company as they were.
Henry: Looking to save money reduced vendors and consolidate on a single platform like many of our mid market Tech customers. They came into our renewal conversations with the mandate to reduce spend by 20% across all vendors. We turned out initial mandate into a 60% increase in ACB by replacing multiple vendors and consolidating.
Henry: On the human for sales operation and marketing solutions, all while providing a better user experience at a better price point.
Henry: We were also named a leader enforcers marketing and sales data providers wave and want to Google Cloud technology partner of the year Award.
Henry: Google Cloud partner, the most effectively help customers enhance their analytics and AI initiatives through prebuilt data solution and datasets.
Henry: Last quarter I introduced what we believe is one of the most impactful and innovative products for go to market teams zoom.
Henry: Zoom in telco pilots Blumenthal co pilot is the first AI powered go to market solution that uses a trusted data foundation to automatically prioritizes do when and how to engage buyers from first signal to content creation and engagement.
Henry: Modern sales as becoming a science and we built co pilot to enable our customers to make every seller their best seller today sellers need to know which companies to contact who the right person is that those companies and exactly when to reach out to them critic.
Henry: Critically they must also know what problems those companies are facing and how they solve those problems today trying to gather and triangulate the data necessary to know these answers today is incredibly challenging.
Henry: Surface and these often buried insights is what we built them zoom info co pilot to do and in doing that co pilot turns and input from a lookup tool to a platform that surfaces. The key inside sellers need to take action against each day.
Henry: A unique strategic advantage of our co pilot platform is that it's built on top of our world class proprietary data or data covers the universe of companies that you may sell to tens of thousands of attributes on those companies hundreds of millions of people who work at those companies and the most robust set of signals and insights that we can.
Henry: Constantly validate and update with zoom and felt copilot apart from any other solution in the market is that it's sitting on top of our AI ready trusted data foundation that drives decisions personalization and confidence.
Henry: For our users copilot surfaces, the burst and differentiated signals attributes and activities that already exist in our proprietary data asset and our partner ecosystem, which we continue to expand with some of the most trusted vendors in the market, including most recently with with trust radius and technology advice.
Henry: Copilot take signals like website visitor spikes in job postings earnings call transcripts contract renewal dates and expert calls that indicate spending or competitive threats that he uses advanced entity resolution and matching to combine them with customers first party data.
Henry: It then applies AI technology to model and inform users immediately about which companies are in the market for their product and how and why you should engage with them.
Henry: You can think of this similarly to financial trading understanding of companies sector and closing price. It doesn't tell you much about what the stock will do tomorrow, you need indicators around training trading volumes technical indicators investor sentiment financial news expert called and many other signals in order to create alpha similar.
Henry: Similarly for our customers understanding Burma graphics alone is not sufficient to understand whether or not your next buyer is about to be in market for your product. It's only when you surround that core data with signals that you were able to predict who your next customer should be.
Henry: Other Jenny I or co pilot products from classic software vendor space a significant problem. They are all layered on top of static CRM data.
Henry: This data limits the value that can be gleaned from any AI tool for three reasons first it's limited in scope to what salespeople have manually entered historically.
Henry: It's outdated stale and likely inaccurate and third and lacks the outside signals and insights that drive modern go to market motions.
Henry: Zoom info copilot delivers the full picture built on the foundation of the worlds most accurate and up to date business data publishes real time insights and turned that into personalized and relevant content.
Henry: More than 20000 beta users have had access to our co pilot data throughout the quarter their results and feedback has been overwhelmingly positive highlights include that on average copilot beta users will reduce their time spent on account research and manual tasks by 10 hours per week, giving them back almost.
Henry: Quarter of their time to spend on more value added activities co.
Henry: Copilot beta users identified signals.
Henry: Oh, I'm, sorry identified signals were responsible for 45% of total opportunities created proving that co pilot help sellers get to buyers faster and co pilot users created nearly twice as many opportunities compared to non users and the same roles.
Henry: At the same companies.
Henry: I can confidently say that co pilot is one of the best pieces of software, we belted zoom info across ease of use and the and understanding of our customers' pain points and product market fit.
Henry: We have had leading AI models in production for years, but with co pilot our product and engineering teams have shown how to put our data and AI differentiation into one of the first real go to market AI products that actually delivers value at scale.
Henry: At the same time, our go to market team has spent the last quarter using co pilot dialing in talk tracks sales collateral testing and more to be prepared to bring zoom info copilot to market, we expect to monetize co pilot and we'll roll it out in a thoughtful way focusing first on the customers who are most likely to get significant value out of.
Henry: The advanced platform.
Henry: Our go to market teams are excited to bring this to their customers and I have a lot of conviction around the upgrade paths and our customer base I look forward to sharing more details about this motion and our learnings in the back half of the year and.
Henry: In conclusion.
Henry: We continue to make progress toward Reaccelerate, our business and our our was better than expected, we're driving traction in the enterprise and we're seeing promising signs that suggest stabilization in trends, we have a strong and differentiated data foundation and we're excited to bring human fell copilot to market. Shortly we are committed to profitable growth.
Henry: And we continue to repurchase shares with zoom menthol with that I'll turn the call over to Cameron.
Cameron: Thanks, Henry and Q1, we delivered revenue of $310 million up 3% year over year.
Cameron: Annualized revenue based on days of revenue recognition was 1.25 billion.
Cameron: Revenue came in slightly ahead of our guidance and our focus on efficiency and enabled us to deliver adjusted operating income of $119 million, representing a margin of 39% which was above expectations.
Cameron: GAAP net income was $15 million, yielding four cents per share and non-GAAP EPS was <unk> 26 per share.
Cameron: Retention, among our enterprise and mid market customers has stabilized with signs of potential improvement as we look ahead to explorations in Q2 and Q3, while our small business customers were more challenged in Q1 than we anticipated.
Cameron: We continue to take a prudent view of the environment and trends among different customer cohorts as we consider the remainder of the year.
Cameron: As a result, we are narrowing and adjusting our range of guidance for the full year.
Cameron: As we reduced shares outstanding through share repurchases. This results in increasing our guidance on a per share basis.
Cameron: In Q1 net revenue retention was 85%.
Cameron: With an outsized small business renewal pool in the first quarter, we anticipated in our or to decrease and are pleased to see early signs of stabilization.
Cameron: As we move through 2024, we believe there are opportunities to drive improvements and to net retention and as a reminder, our guidance for 2024 assumes that net revenue retention does not improve.
Cameron: In the enterprise, we saw success with our largest clients million dollar plus clients now contribute more than 10% of overall HCV.
Henry: Average revenue for 100, K plus customers continued to grow largely offsetting the decline in the number of those customers are smaller customers continued to experience downward pressure with some falling below the 100 K well.
Henry: Advanced functionality remained at approximately a third of our overall HCV with operations and marketing continuing to gain traction with customers in both growing double digits, while some of our other functionality was more challenged.
Henry: From an industry perspective, the fastest growing industries, this quarter, where retail manufacturing and transportation logistics, while software and tech continue to experience downside pressure, particularly for smaller customers.
Henry: Write offs were lower than we experienced during the past two quarters, but continued to impact us in Q1, we are focused on reducing this headwind by being more selective in deals leveraging our product led growth motion at the lower end of the market.
Henry: We are now requiring the majority of smaller and more risky clients to pay via credit card or a C. H, a checkout, which should help drive an improvement in write offs and allow us to capture the low end of the market more effectively.
Henry: As we indicated in our 8-K filing in February we entered into a settlement agreement that addresses both existing and potential class action lawsuits related to right of publicity statutes in four states.
Henry: We have accrued $30 million in the quarter related to these settlements, which is reflected in G&A expense, we expect to make more make cash outlays related to this settlement later this year.
Henry: We are as committed as ever to driving growth and profit profitability.
Henry: As such aim to maintain head count at current levels, while allocating more resources to support our AI co pilot initiatives as well as augment sales and marketing capacity.
Henry: Based on these hiring needs, we are exploring options to optimize our real estate portfolio relative to a number of leases that we signed in 2021 in early 2022 and to which we will gain access in 2024.
Henry: We anticipate incurring restructuring charges related to potential negotiations <unk> sub leasing arrangements are.
Henry: Our focus remains on maximizing operational efficiency and driving profitable growth in the evolving market landscape.
Henry: Operating cash flow in Q1 was $116 million, which included approximately $18 million of interest payments Unlevered free cash flow for the quarter was $123 million, representing 103% conversion of adjusted operating income.
Henry: We ended the quarter with $440 million in cash cash equivalents and short term investments and we carried approximately 1.24 billion in gross debt. The vast majority of which is fixed or hedged interest rates.
Henry: During the quarter, we repurchased approximately 10 million shares of zoom infest stock for $153 million over the past four quarters. We've retired more than 31 million shares of zoom info nearly 8% of total shares outstanding.
Henry: We are confident that these repurchases will drive meaningful economic return for our shareholders and we will continue to aggressively repurchase shares as we take advantage of disconnects between our share price and the intrinsic value of our growing cash flow generative business.
Henry: Our net leverage ratio is one five times trailing 12 months adjusted EBITDA and one five times trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements.
Henry: With respect to liabilities and future performance obligations.
Henry: Unearned revenue at the end of Q1 was $444 million and remaining performance obligations or RP O or 1.13 billion of which 838 are expected to be delivered in the next 12 months.
Speaker Change: With that let me turn to guidance for Q2.
Henry: We expect revenue in the range of $360 million to $309 million adjusted operating income in the range of $114 million to $116 million and non-GAAP net income in the range of $23 24 per share.
Henry: For the full year 2024, we now expect revenue in the range of one point to five five to one point to $7 billion.
Henry: And adjusted operating income in the range of $488 million to $495 million.
Henry: We expect non-GAAP net income in the range of $1 to $1 <unk> per share based on 394 million weighted average diluted shares outstanding we.
Henry: We expect Unlevered free cash flow in the range of $440 to $455 million.
Henry: Our full year guidance implies 2% revenue growth from 39% adjusted operating margin at the midpoint of our guidance range.
Speaker Change: With that let me turn it over to the operator to open the call for questions.
Speaker Change: Thank you ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered you were seeing with yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.
Speaker Change: Our first question comes from Koji Ikeda with Bank of America. Your line is open.
Koji Ikeda: Yeah, Hey, guys. Thanks for taking the questions a couple from me here.
Koji Ikeda: On the revenue side.
Koji Ikeda: The positive commentary on the prepared remarks, especially on net revenue retention.
Koji Ikeda: But you did lower the guide a bit.
Koji Ikeda: Did get worse I know you guys called out SMB weakness, but is there anything else in the guide that we should be thinking about.
Speaker Change: So certainly the SMB weakness is something that.
Speaker Change: Impacted us, particularly in Q1 as we had a higher.
Speaker Change: Or a larger pool of renewals coming in in Q1.
Speaker Change: We also saw new business, a little behind where we wanted it to be also based on there being.
Speaker Change: A fair amount of SMB weakness.
Speaker Change: <unk> concentration with a new business as well as the.
Speaker Change: Our shift to be more selective in the deals that we're pulling in so <unk>.
Speaker Change: <unk>.
Speaker Change: That should help us remove some of the headwinds around write offs as we get further into the second half of the year.
Speaker Change: Got it thanks, Ken and.
Speaker Change: Okay.
Speaker Change: I recall in prior calls you've talked about 10% of PCB that needs to renew still and a lot of those were attached to some of the larger software vendors or tech vendors out there that had big contracts three year contracts that are renewing sometime in the second quarter. So is there any way you could provide an update there.
Speaker Change: Anything we should be thinking about within that cohort that studied sterne. Thanks guys.
Speaker Change: Yeah, so not all of that 10% will renew in the second quarter I think it's a few percentage points for a few quarters to come still but certainly those larger clients that we're seeing we're seeing.
Speaker Change: Solid utilization and.
Speaker Change: Feel good about that.
Speaker Change: The renewal rates and customers that are coming up in Q2 and Q3.
Speaker Change: Particularly in those larger among larger customers.
Speaker Change: Thanks, guys. Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Elizabeth, Florida with Morgan Stanley. Your line is open.
Elizabeth: Great. Thanks, so much I wanted to ask on the co pilot product.
Elizabeth: Sounds like a lot of interesting features going on there.
Elizabeth: Give us some more clarity on how you expect to monetize is this something that comes upon renewal and take some time to get phased in even it's going Gi in the back half of the year and.
Elizabeth: Is this more of a fee based model and kind of how do you look to kind of raise prices in a tougher environment. There. Thank you.
Elizabeth:
Elizabeth: I think the.
Elizabeth: First.
Elizabeth: Our plans are.
Elizabeth: Our go to market plan is to make sure we phased that out to the customers, who we believe we will see the highest value from co pilot first and so we built a model that looks at usage integrations.
Elizabeth: Theyre ICP and so we're going after first the customers who are most likely to see the highest value in them and most likely to upsell into co pilot I think ultimately on monetization it is around.
Elizabeth: Monetizing additional value per seat and we think it's going to be an upsell relative to where our customers would have ended up.
Elizabeth: Whether that's an increase in certain renewals or in certain renewals, where they have fewer users that might be a flat renewal, where historically it would have been down sell.
Elizabeth: And new business, we think that Ah.
Elizabeth: We're gonna increased win rates and conversion rates because of co pilot, but we think we have the biggest opportunity within the customer base to drive monetization.
Speaker Change: Got it and certainly we have.
Speaker Change: Uh huh.
Elizabeth: Elizabeth I was just going to say we've.
Elizabeth: We've typically run these.
Speaker Change: Migration motions over a couple of years in the past. So we don't expect it to all come now, but as we get further on in the year. It's still early now it hasn't even gone to GAA, but we'll have a better view on the potential uplift from across our customer base and we intend to host an analyst day in the in the fourth quarter to dig.
Speaker Change: More into those.
Speaker Change: <unk> as well as provide a view into the longer term model based on that.
Speaker Change: Got it. Thank you very much and as a quick follow up I believe last quarter, you talked to some shortening sales cycles in Q4 or is that something that continued into Q1, you highlighted a lot of other green.
Speaker Change: Green, Jason Martin mid market enterprise, but just curious on an update for the sales cycle period. Thank you.
Speaker Change: We didn't have any change in sales cycles length in the quarter I stayed consistent.
Speaker Change: Got it thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from DJ Hynes with Canaccord Genuity. Your line is open.
David E. Hynes: Hey, Thanks, guys.
David E. Hynes: Kevin maybe a couple for you I, just I want to focus on that.
David E. Hynes: The thoughts ACB cohort I mean I appreciate your commentary on.
David E. Hynes: Improving retention dynamics I think you said was the second straight quarter was a little surprise in light of that to see the.
Speaker Change: The absolute number of customers declined by as much as it did so question one is.
Speaker Change: You see that bottoming I know, it's a hard question to answer and then question two would be.
David E. Hynes: Sounds like the ACB in that cohort grew nicely I think you said, 60% just talk a little bit about what's driving that is it new persona is I know you said operations hub is growing nicely is that advanced functionality any color with the puts and takes that would be super helpful.
Speaker Change: Sure. So the HCV for the cohort that grew 816% where the larger customers the million dollar plus customers and obviously, that's a subset of the 100 K plus what we really see there is that.
Speaker Change: Larger enterprises.
David E. Hynes: Customers that have really leaned into the system are growing and growing nicely, but there are a number of mid market. Some cases, even smaller customers that are just over the 100 K level.
David E. Hynes: And still experiencing.
David E. Hynes: Downhole pressure, whether that's they've laid people off over the last.
David E. Hynes: 12, or 18 months.
David E. Hynes: Relative to their exploration or that they're continuing to face.
David E. Hynes: Serious budget pressure and those are the customers that we continue to see falling out of that cohort. There are still a number of those but we are to a large extent we have lapped we think of as peak negativity with respect to layoffs and so forth. So we feel that that pressure going forward won't be.
David E. Hynes: As significant as we've seen.
David E. Hynes: Over the last three or four quarters.
Speaker Change: Okay got it thank you guys.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Mark Murphy with Jpmorgan. Your line is open.
Mark Murphy: Thank you very much Sir Henry Yeah, we've definitely been noticing for many months that.
Mark Murphy: Software companies, they're simply not hiring like do you see a real demand recovery out there and so very commonly the head count growth now is is way below that.
Speaker Change: The revenue growth in the software industry and it's extremely unusual.
Speaker Change: I'm, just wondering and I think we hear a lot of different.
Speaker Change: Conjecture on why that might be.
Speaker Change: Would you explain that.
Speaker Change: Phenomenon, because I would assume if reps are seeing theyre, reaching put attainment it.
Speaker Change: Software companies would kind of lean in on the hiring so I'm. Just wondering if you think it's that simple or something else is going on and you have a quick follow up.
Speaker Change: I think the world out there and go to market is all about productivity today and so.
Speaker Change: People are looking across their account executive account management teams and instead of asking the question of if I added 10 additional people could I drive more revenue growth they are saying.
Speaker Change: Can I do this with 10 less people are.
Speaker Change: Are they at full capacity can I get them more leads and generate the same amount can I drive productivity within my team and so there is just a fundamental shift in the way people are thinking about the unit economics of their businesses and so they want to do more with less.
Speaker Change: And one of the things and where that is happening in our customer base I mentioned this on the last question.
Speaker Change: Where that's happening in our customer base.
Speaker Change: We're not going to expand by number of seats, but copilot gives us a real opportunity to expand ACB.
Speaker Change: Through that functionality without having to expand through seat count.
Speaker Change: And so.
Speaker Change: In organizations, where it might've been flat, we think theres an opportunity to expand ACB in organizations, where there would have been down sell because there are just less people.
Speaker Change: To hold licenses.
Speaker Change: There are opportunities to keep that flat.
Speaker Change: And so we're going to use that as a.
Speaker Change: A real opportunity in the customer base, but I think there is a focus on productivity.
Speaker Change: Yeah, Okay, and then Henry that's very well said, thank you for that.
Speaker Change: I did want to ask you because co pilot we've heard very good feedback.
Henry L. Schuck: And it is intriguing to turn a week seller interest strong seller.
Henry L. Schuck: But then the flip side is we just haven't seen much generative AI monetization at the application layer across all software and we think it's been very very minimal.
Henry L. Schuck: I just wanted to.
Henry L. Schuck: I just want to understand based on you gave a very compelling assessment of some differences do you think that Simeon so there's going to be an outlier.
Henry L. Schuck: There's also a lot of companies.
Henry L. Schuck: It sounds like it's going to take a while before their gen. AI application is drive is like giving them like a 1% tailwind for instance.
Speaker Change: Yeah look do you want.
Speaker Change: Think that question has a time element baked into it do I think zoom info will be an outlier in our ability to generate and moderate to monetize through our AI solutions, Yes, do I think it is going to be in the back half of 2024, where it shows up that way no I do think it's going to take longer than that I have a lot of confidence because I personally pitched this product across.
Speaker Change: Dozens of our customers across all segments and all industries and this is exactly from a product market fit I don't think we've been ever so close to that as we have been with co pilot outside of the core company and contact data and so I have a tremendous amount of confidence.
Speaker Change: We're going to be able to turn that enthusiasm and the monetization, but I also expect it to happen over time.
Speaker Change: Understood. Thank you very much.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Jackson Ader with Keybanc. Your line is open.
Jackson Ader: Hey, great. Thanks for taking my questions.
Jackson Ader: The first one is on the down market cohort I'm just curious is that.
Jackson Ader: <unk> weakness does that have more to do maybe with.
Jackson Ader: Macro environment pressures or is there something happening competitively down market, where people think they can go somewhere else rather than cyclical.
Speaker Change: Yes. Thank you for the question. It is fundamentally a down market, we're seeing much more of a macro effect than a competitive impact specifically as it relates to competition, we've not seen a material change in the competitive landscape or an increased impact to our business from competitors.
Speaker Change: Our new business win rates haven't seen any increased pressure either overall or particularly in the SMB are.
Speaker Change: Where our competition is most concentrated and then we had another quarter of just about record win back performance. So we feel really good about how we lineup competitively and we really we.
Speaker Change: Feel especially good about how we show up with co pilot as we roll it out this quarter.
Speaker Change: Okay, Great and then just a quick follow up either I guess for you Andrea.
Speaker Change: For Cameron how much can you give us a sense for how much of the.
Speaker Change: Revenue mix actually comes from what you would consider SMB today.
Andrea: Yes, so our enterprise businesses right at 40% of the.
Andrea: Of the business SMB is still.
Andrea: Around a third and then mid market.
Andrea: It was a little below 30%, making up.
Andrea: The rest of that.
Speaker Change: Got it got it got it alright, great. Thank you.
Speaker Change: One moment for our next question.
Andrea: Okay.
Andrea: Our next question comes from Alex Zukin with Wolfe Wolfe Research Your line is open.
Aleksandr J. Zukin: Yeah, Hey, guys. Thanks for taking the question I guess, maybe just going onto the back of that question.
Aleksandr J. Zukin: The SMB versus enterprise versus mid market can you, maybe just walk through the difference in growth rates in those three businesses.
Aleksandr J. Zukin: They currently stand for the year and when does the kind of the negative anchor.
Aleksandr J. Zukin: You have kind of fully roll through or is there.
Aleksandr J. Zukin: Actual spiral wherever each renewal cohort for instance in the SMB get worse.
Aleksandr J. Zukin: And then just mechanically I appreciate your comments on win rates and.
Aleksandr J. Zukin: And win backs, but what about pricing specifically are you having to discount more aggressively.
Aleksandr J. Zukin: Either win new business or retain business.
Aleksandr J. Zukin: And Thats something youre seeing in the marketplace.
Speaker Change: So Alex I'll start with the.
Speaker Change: With the growth rates between the different cohorts.
Speaker Change: Realistically enterprise has been.
Speaker Change: Pretty solid.
Speaker Change: Say as we went through early on in 2023, and as we're going through the quarters I think it was challenged but it was the first group for us too.
Speaker Change: Kind of see stability with.
Speaker Change: We did see continued down sell pressure through 23 in the mid market world and that was particularly.
Speaker Change: Particularly acute on the software side, where we saw.
Speaker Change: Customers really taking out seats, either due to layoffs that they've done are over buying that they've done historically as we came through the end of the year.
Speaker Change: In Q4, and Q1, we have started to see that stabilize but mid market was certainly down.
Speaker Change: On an absolute basis across that period.
Speaker Change: SMB actually held in.
Speaker Change: Reasonably well as we went through 2023, but really in Q1.
Speaker Change: We've seen a change in that trend.
Speaker Change: It does feel like.
Speaker Change: The SMB cohort is.
Speaker Change: More sensitive to the.
Speaker Change: To the.
Speaker Change: Higher rates for a longer discussion that we've seen over the last few months I think a lot of those companies were kind of hoping for a light at the end of the tunnel and as Thats changed they are more sensitive to.
Speaker Change: The environment we've seen.
Speaker Change: Real pressure, so I think thats a change that we saw in Q1 more than more than anything else.
Speaker Change: Henry address the pricing question.
Henry L. Schuck: Yes, one thing Alex that we have not seen from our competitor Downmarket upmarket anywhere is that.
Henry L. Schuck: They haven't innovated on data and they have an innovated on product and they haven't innovated on software Theres been no innovation.
Henry L. Schuck: It's just lower cost and.
Henry L. Schuck: The one place that they have innovated around their go to market motion, where they built.
Henry L. Schuck: P L G motions that can attract.
Henry L. Schuck: A large segment of low end SMB buyers.
Henry L. Schuck: And we were behind on that and over the last year. We've spent a lot a lot of time building up our <unk> motion.
Henry L. Schuck: Inevitably what happens with the <unk> motion is that are we.
Henry L. Schuck: We sell at a lower price point for much smaller customers and then we look to grow them as they come into the customer base and so where there has been a pricing difference this quarter versus historically, it's been in that <unk> cohort that comes in at a lower price and then grows with us over time.
Speaker Change: Okay perfect. Thank you guys.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Michael <unk> with Wells Fargo Securities. Your line is open.
Speaker Change: Hey, This is Michael Berg on for Michael <unk>. Thanks for taking the question really appreciate the color on NR earlier in the call here.
Michael Berg: It's been a lot of questions asked on this.
Speaker Change: Want to take is different.
Speaker Change: Current angle on this.
Michael Berg: As you look towards the rest of the year in particular second half of the year. How can we think about the key drivers to potentially improve the NRI is it.
Michael Berg: Enterprise strength SMB weakness rolling off new products Rolling out just maybe help us understand.
Michael Berg: What does improve from here.
Speaker Change: I think that there are a couple of things that improve then prevent IRR from here I think one as we rollout.
Speaker Change: When you think about NR or it's about renewal rate and then it's about our ability to upsell.
Speaker Change: Products that we're innovating or new users into the customer base.
Speaker Change: And so from a renewal rate perspective, we are seeing that stabilization and mid market, we're seeing an improvement in renewal rate in our enterprise cohorts that we feel like.
Speaker Change: We've seen those trends continue into Q2, so we think that that's a trend that can continue through the back half of the year and so renewal rates.
Speaker Change: Continues to stay stable and continues to improve that drives up NRI, we have the new product with co pilot that will take them to the customer base that should drive up and <unk>.
Speaker Change: <unk> is well I think between renewal rate and an improved products that we can sell into the customer base those two things make a big impact.
Speaker Change: Also as Cameron mentioned, there is an element of exploration.
Speaker Change: Coming up and multiyear contracts that have that increase last year that will.
Speaker Change: Be a tailwind to us this year as well.
Speaker Change: Got it helpful. And then one quick follow up as you talk about SMB cohort and be more selective there in terms of the deals you you take on.
Speaker Change: Can you think of it benefiting free cash flow conversion.
Speaker Change: Over time like can we think about this going from low ninety's to mid or even high.
Speaker Change: <unk> is in the back about 100 over time as the quality of the customer base improves.
Speaker Change: And certainly our goal and taking more upfront payments for those lower quality or smaller customers is largely to lower the kind of write offs. So certainly in a world where we have fewer write offs.
Speaker Change: That should improve the.
Speaker Change: The cash flow.
Speaker Change: And frankly help us be more efficient in terms of where we are.
Speaker Change: Dedicating our time.
Speaker Change: But realistically I think that that's probably.
Speaker Change: Something that happens around the edges the bigger driver of.
Speaker Change: Cash flow conversion will be.
Speaker Change: Ultimately us re accelerating growth and so where we're able to reaccelerate growth and get growth back into.
Speaker Change: Double digit world.
Speaker Change: That would ultimately.
Speaker Change: Push that cash flow conversion higher into the mid nineties are even higher just based on the fact that a bigger proportion of our revenue is coming it upfront.
Speaker Change: Just on that.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from Brad Zelnick with Deutsche Bank. Your line is open.
Brad Alan Zelnick: Great. Thanks, so much for taking the questions Cameron I think to your prepared remarks, and a lot of the questions that have already been asked.
Brad Alan Zelnick: I feel like I have a pretty good sense.
Brad Alan Zelnick: How to bridge from the.
Brad Alan Zelnick: Prior guidance for the full year and the updated guide, but maybe if you could any any help because it.
Brad Alan Zelnick: It sounds like.
Cameron: Mall business down ticks it sounds like there's some green shoots stabilization that you see ahead, perhaps even some upside in enterprise.
Cameron: When you ask.
Cameron: Actually unpack and came up with the guide can you give us any helpless.
Brad Alan Zelnick: To think about where it's coming from specifically.
Speaker Change: Yes, certainly.
Brad Alan Zelnick: During Q1, we saw a continuation of trend in the enterprise and mid market.
Brad Alan Zelnick: Yes. It was stabilizing yes, I think that was somewhat as expected but.
Brad Alan Zelnick: No.
Brad Alan Zelnick: We are.
Brad Alan Zelnick: Expecting that to stay on trend.
Brad Alan Zelnick: The real change in trend was in the small business cohort and obviously because that was a big cohort of explorations in Q1.
Brad Alan Zelnick: And came in at.
Brad Alan Zelnick: Level it was.
Brad Alan Zelnick: Much worse than we've seen historically that obviously impacts just the run rate coming out of Q1, and then obviously, we're adjusting our assumptions going forward. So while it's a big pool of explorations and in Q1 for small businesses. That's not the only explorations that we have during the course of the year. So as we adjust our assumptions and <unk>.
Brad Alan Zelnick: Of small businesses going forward, we're assuming that that pressure continues.
Brad Alan Zelnick: Through the year and I think that that the combination of the big cohort that underperformed in Q1 as well as the.
Brad Alan Zelnick: Assumption of that going forward.
Brad Alan Zelnick: Certainly.
Brad Alan Zelnick: Reflects.
Brad Alan Zelnick: A tougher environment than then.
Brad Alan Zelnick: What we had set our guidance under.
Brad Alan Zelnick: Many of the year.
Speaker Change: Thanks for confirming that's helpful color and maybe just for <unk> for you Henry as we think about that segment of the market.
Henry L. Schuck: Obviously, you've got different characteristics.
Speaker Change: Higher churn for every.
Brad Alan Zelnick: Software company, that's selling into the segment is there anything that you could do once we get past the cyclicality in the environment.
Brad Alan Zelnick: Anything that you can do to help offset.
Brad Alan Zelnick: What we naturally know about smbs, whether it's.
Brad Alan Zelnick: Integrations go to market partnerships like what can you do structurally to really help to ensure that you.
Brad Alan Zelnick: As higher priority for Smbs as you, possibly can be and that youre going to dominate competitively in that segment anything structurally that you could do to really improve your chances in that theater. Thanks.
Speaker Change: Yeah look I think number one we.
Brad Alan Zelnick: We self far more from a new business perspective, and renew far more from a new business perspective.
Brad Alan Zelnick: I am pretty sure every competitor combined in the space.
Brad Alan Zelnick: And so.
Speaker Change: We're not losing share here I think the thing that I think about from a churn perspective is.
Brad Alan Zelnick: Zoom info have as a platform.
Brad Alan Zelnick: <unk> been one that you go pull information out up and.
Brad Alan Zelnick: Our SMB customers.
Brad Alan Zelnick: Our busy theyre running small businesses they are tackling a number of initiatives and.
Brad Alan Zelnick: A platform that is not.
Brad Alan Zelnick: Simple is hard to extract value out of it.
Brad Alan Zelnick: One of the lenses that we built co pilot west was to make sure that we made the move zoom info from a pull platform to a push platform one that with AI understands the customer base understands what they will care about zoom info looks at their CRM data to understand the customers that they sell to.
Brad Alan Zelnick: To understand their ICP, and then starts delivering them.
Brad Alan Zelnick: Their next best customers without them, having to learn a complex system or.
Brad Alan Zelnick: Our integrate their software or define who they are buyer committee as our choose the intent topics that they did.
Brad Alan Zelnick: But they would be most interested in the system auto configured for them and then starts immediately delivering them value around their next best customers and so we think that significantly improves.
Brad Alan Zelnick: Actually we've seen that significantly improved utilization and engagement for our customers, who are who are copilot beta customers and as that utilization and engagement increases in the SMB that's directly correlated with our.
Brad Alan Zelnick: Renewal rates.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Brent <unk> with Piper Sandler Your line is open.
Brent: Thank you.
Brent: I get F&B is weak it's been weak for a while getting weaker it seems like that seems to be a broader industry trend I wanted to go back to the enterprise business, which did actually grow double digits year over year can you double click into the durability of essentially of that enterprise growth I can't imagine.
Brent: Seats are expanding much in this environment and so it wasn't just all mix shift to das was it tied.
Brent: Tied to vendor consolidation walk me through.
Brent: Enterprise ACB growth and the durability of that thanks.
Brent: And certainly you mentioned das as being a.
Speaker Change: A good fit their das is largely an enterprise product or at least enterprise in the higher end of mid market that is a place where we are seeing real traction.
Speaker Change: Yes.
Speaker Change: Becoming a more and more material mix of the business and certainly I think the Henry's point before of customers looking to optimize their spend like SaaS is a big part of that Das is people building tools to make their sales teams more efficient and building those tools based on.
Speaker Change: On high quality data insights about the customers that they're that they're going after and so I do think that this is a lot of enterprises that are they are investing in AI or investing in automation and recognize that they need high quality data as an input into those projects in order to make them successful.
Speaker Change: So that's certainly part of it the other part of it frankly is that in the enterprise, we're still fairly underpenetrated in terms of the total seats available so.
Speaker Change: I don't think that there are a lot of enterprise that are piling on the number of seats. In fact, you see a lot of companies still laying people off.
Speaker Change: Got it.
Speaker Change: In a place where we are helping to make teams more effective and efficient.
Speaker Change: When they're getting rid of people in certain places they are still looking for.
Speaker Change: We're still looking for other pockets within those enterprises in order to drive.
Speaker Change: Additional value and frankly drive additional efficiency for those teams.
Speaker Change: Helpful color, there and then Henry for you.
Speaker Change: I wanted to go back to this the sales optimization narrative. It is a very different environment. We've had this kind of overhang on the business relative to tech layoffs and software layoffs for two years now.
Speaker Change: Get co pilot could be a huge next level productivity uplift, but.
Speaker Change: Why won't we a year from now be in the same environment.
Speaker Change: We're co pilot indirectly drives more efficiency.
Speaker Change: Above what you can monetize.
Speaker Change: Or is there a plan to move more away from <unk>.
Speaker Change: <unk> based pricing move towards platform fees drive higher das attach rates and monetize copilot on top of Das just trying to think through.
Speaker Change: This changing environment and sentiment that youre seeing out there and it's just not clear to me if copilot extra can provide an uplift or not.
Speaker Change: I think one really interesting thing that I've seen across the upper end of the mid market and the enterprise is that when you show them co pilot you start hearing things like Oh, we've been trying to build out here for the last five years that would be exactly what we would need to build oh, we've been talking about wanting to build something like that.
Speaker Change: And so we have a real opportunity to deliver what every upper mid market and enterprise business what throw.
Speaker Change: Dozens of developer that.
Speaker Change: For years to try to accomplish and so I think we can monetize the value that we're driving both in terms of productivity uplift, but also.
Speaker Change: But also from.
Speaker Change: From the avoidance of having to build that type of software internally and probably build it pretty poorly.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Brian Peterson with Raymond James Your line is open.
Speaker Change: Hi, This is Rob welcome to carry on for Brian. Thanks for taking the question. So.
Rob: How would you characterize the demand environment in the non software verticals I know you guys have kind of spoken about previously.
Rob: More specifically to the India auctions, there sort of mirror, what we're seeing in the broader business or is there more strength in the new cycle, how would you characterize the mountain software verticals.
Rob: And certainly as we.
Speaker Change: Look at the last 12 months software and technology have been under significant pressure you see them.
Speaker Change: Down on an absolute dollar basis year over year.
Speaker Change: Net retention level thats well below.
Speaker Change: The overall net retention that we have obviously that means that those non software businesses.
Speaker Change: Technology businesses have grown more significantly most of the.
Speaker Change: Most of the.
Speaker Change: Segments within that are growing kind of mid teens.
Speaker Change: Or in some cases, even more than that if you look at like retail or transportation and logistics.
Speaker Change: And obviously.
Speaker Change: Just the math would tell you that the.
Speaker Change: Net retention for those businesses is also.
Speaker Change: Well above the overall company average as well.
Speaker Change: So I think that we've gone through our year ending at the end of March here, where software businesses. Our software customers have been digesting a lot of the.
Speaker Change: Call it re platforming or operational.
Speaker Change: Operating model changes that they've they put through throughout.
Speaker Change: 2022, and the beginning of 2023.
Speaker Change: Our subscription model is now digesting all of that and so do you think that theres the opportunity, particularly among those.
Speaker Change: Larger and mid market software companies to stabilize a little bit more.
Speaker Change: But the rest of the business.
Speaker Change: Is effectively better because they didn't have the same dynamics, particularly around driving more profitability that you see in the software businesses that have decelerated in a significant amount.
Speaker Change: Okay. Thank you.
Speaker Change: One of them before our next question.
Speaker Change: Our next question comes from Tyler Radke with Citi. Your line is open.
Tyler Maverick Radke: Hey, good afternoon. Thanks for taking the question Kevin as I look at the guidance for the full year, obviously, it's come down a little bit, but it still implies that sequential growth has to pick up in the second half of the year can you just remind us what's driving that sequential.
Tyler Maverick Radke: Celebration and I guess on the SMB environment.
Kevin: How have you seen the first month or so trend in the second quarter relative to what you saw in Q1.
Kevin: Yes, so certainly the.
Kevin: The acceleration in the second half of the year is largely based on the fact that our explorations that we're going to see in Q2 and Q3 are.
Kevin: Much smaller than they were in Q1, and frankly Q4 before that so a lower number of explorations obviously.
Kevin: <unk>.
Kevin: Provides less opportunity for downhole, among our customers and therefore, the upsells and the new business that we're continuing to drive will have a bigger impact on the revenue number as we go through.
Kevin: And so that's kind of true across the board and as we look at the.
Kevin: Retention mix.
Kevin: We see that frankly April.
Kevin: Very much.
Kevin: Was on trend for those comments, so we feel that the.
Kevin: The smaller exploration and the success that we continue to see with Upselling New sales is already on course for that.
Speaker Change: Thank you.
Speaker Change: Go ahead Sir.
Speaker Change: Oh I was just going to sneak in a follow up for you Cameron. Thank you.
Speaker Change: We look at the trajectory for the rest of the year can you also just remind us how youre thinking about the 100 K customer adds to that.
Speaker Change: Bottom and start to grow again at a certain point and similar question on <unk>.
Speaker Change: When do we expect to see the bottom there.
Speaker Change: Yes so.
Speaker Change: I think from the 100 K perspective.
Speaker Change: The real pressure that we feel in terms of the number of customers are among smaller customers. So.
Speaker Change: Mid market customers and maybe even some small businesses that are spending just above the 100 K level and have down sell pressure, whether that's internal budget pressure or.
Speaker Change: Layoffs or changes in their operating model.
Speaker Change: Yes.
Speaker Change: That continues to be there we haven't kind of.
Speaker Change: We haven't fully gotten through all of those customers will certainly we've gotten through.
Speaker Change: Some very big cohorts that had.
Speaker Change: Peaked in terms of layoffs.
Speaker Change: Call It early 2023.
Kevin: So we do think that there's the opportunity for that too.
Kevin: To eventually grow or at least.
Kevin: But not go down by as much but certainly overall in that cohort, we actually see the ACB levels being pretty stable because the larger customers continue to grow more significantly and make up for.
Kevin: Losing some of those smaller customers.
Kevin: From a retention perspective, we very much see retention among the enterprise and mid market stabilizing and certainly as we see a little bit of a mix shift that also helps the overall numbers.
Kevin: So it does feel like that's a place where we can build off of as we move forward into the second half of the year and frankly, the multiyear customers also continue to grow which is obviously helpful for retention as well, which is a reflection of the fact that we are shifting the mix towards larger customers and those.
Kevin: Larger customers do tend to be.
Kevin: Multiyear customers as well.
Kevin: So.
Kevin: Our guidance assumes that retention does not.
Kevin: Improve but we do see a number of trends underlying where we think that that opportunity for improvement is there.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Kevin: Our next question comes from Joshua Reilly with Needham <unk> Company. Your line is open.
Joshua Christopher Reilly: Yeah. Thanks for sneaking in I got two quick questions here.
Joshua Christopher Reilly: <unk> talked about the <unk> motion I was curious how broadly is this now rolled out <unk>.
Joshua Christopher Reilly: Both new and existing customers I know that was the point of discussion before and then just quick on sales and marketing.
Kevin: That was above my estimate by a healthy amount for the quarter here, while R&D was below curious how youre thinking about sales and marketing spend for the balance of the year relative to the updated operating income guidance. Thanks guys.
Speaker Change: The <unk>, one and then Cameron.
Speaker Change: Can take the second part.
Speaker Change: On P L G.
Speaker Change: It is.
Speaker Change: It depends on how you define <unk>, if we think about <unk> as purely self service I come in I get a free trial I turn into a customer that part of <unk> is limited to a cohort.
Speaker Change: Leads that come through our website. So it's not it's not open to any user.
Speaker Change: We're talking about it as the ability to.
Speaker Change: Manage your invoices paper upgraded user to add AD spend and marketing no ads.
Speaker Change: Paper, a renewal that has that capability is available to all of our customers.
Speaker Change: And then from a operating expense perspective.
Speaker Change: Sales and marketing we are continuing to invest in sales and marketing there are also some.
Speaker Change: Sure.
Speaker Change: Kind of one off things around payroll taxes and.
Speaker Change: Howard we pay taxes on stock comp.
Speaker Change: <unk> created a little bit of a blip in Q1 related to sales and marketing that wont necessarily recur as we go forward, but certainly we're going to be really focused on.
Speaker Change: Marketing around and selling co pilot as we move into the second half of the year. So that'll be something that we want to continue to invest in.
Speaker Change: R&D.
Speaker Change: We have been really focusing the R&D team on the co pilot initiative and based on the new functionality that's being developed there is.
Speaker Change: Bit more capitalization that happens there. So I think that capitalization probably may not have been incur.
Speaker Change: Incorporated in everyone's model if.
Speaker Change: If youre just looking at the prior trends.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Raimo <unk> with Barclays. Your line is open.
Raimo: Okay. Thank you thanks for squeezing me in.
Raimo: Sometimes at the back of the coal maybe more like a high level question.
Speaker Change: The.
Raimo: Henry if you look like obviously, what's happening to you guys at the moment.
Raimo: Nothing.
Raimo: Specific it's kind of like where the market is that the momentum.
Raimo: Customers are so that's kind of impacting you, but it is impacting the whole industry that you're playing in what do you see in terms of how do you think that you.
Raimo: The industry will be emerge b cruise a lot of your competitors are private so.
Raimo: So youre kind of vital funded very highly profitable. So how do you think thats.
Raimo: Playing out and what do you see in competitive situations. They already have that started already thank you.
Raimo: And look I think.
Speaker Change: I think first of all we're taking a very.
Speaker Change: Durable approach to our future and the products that we're building today and bringing to market.
Speaker Change: We believe build a foundation on top of which we can continue to build on as copilot going to be the last AI product rebuild now it's going to be the first and it is going to build a great foundation for the future I think if I look around this space.
Speaker Change:
Speaker Change: It's much easier to look at the core of our solution and.
Speaker Change: I understand why it's important to every go to market team.
Speaker Change: And five years from now and 10 years from now and it's a lot easier to look at our solution and understand why and degenerative AI world.
Speaker Change: Our data our insights our proprietary data asset becomes more and more valuable Wow.
Raimo: Application layer software becomes less and less important.
Raimo: Because it'll be much easier to build with AI in the future but that are.
Raimo: <unk> data asset and what we're building around it becomes core to every generative AI.
Raimo: Go to market use case in the future.
Raimo: And so I think in that respect.
Raimo: You can I can see a universe, where.
Raimo: The software layer the application providers are much more easily disrupted by AI than the core data providers, who built flywheels and networks to gather the data and have incredibly high quality data.
Raimo: Every company can build a generative AI solution on top of and so we have a lot of confidence around what we're building and the future there.
Raimo: And thank the application layer.
Raimo: It's more disruptive.
Speaker Change: Okay. Okay perfect. Thank you.
Speaker Change: One moment for our next question.
Raimo: Our next question comes from Rishi <unk> with RBC capital markets. Your line is open.
Rishi: Wonderful good afternoon. Thanks, so much for squeezing me in I'll keep it to one just given that we're past time Henry I wanted to follow back on the conversation around the plc motion I guess help us understand number one how is traction and in this case I'm talking purely the self service customers, where someone can become a paying customer as they menthol without having to engage with the salesperson.
Raimo: <unk>.
Raimo: I guess help me understand a how is that motion going hasnt being received and I guess b why not go even deeper down.
Raimo: That path, especially given that at least in a lot of conversations. We've had there is a certain amount of friction to adoption zoom info that isn't necessarily there at some of your competitors and I'd have to imagine without dedicated sales resources kind of in that very very high contribution margin, maybe you could help us bridge that that'd be that'd be great. Thank you.
Raimo: The increase.
Raimo: The number of customers and accounts that have access that we bring in from a <unk> motion now. We also believe that we built an incredible sales led motion at zoom info that is far more efficient than just about anything you would see out there and the broader software marketplace.
Raimo: And so when there are leads that we think are most optimized to come through a sales led motion we're going to push that to the sales led motion. When we think there are lead that will be best served through the <unk> motion, we're going to push those leads through the <unk> motion and so I think we're always going to have.
Raimo: Two ways that we go to market from a new business perspective.
Raimo: And we're going to leverage each where we think.
Raimo: Where our internal models actually tell us that.
Raimo: We're going to get more if one goes to <unk> or were going to be better optimized I believe goes into our sales led motion but over time.
Raimo: What we've seen internally and what will continue to deliver on as more and more going into the <unk> motion.
Speaker Change: Alright, thank you so much.
Speaker Change #106: One moment for our next question.
Speaker Change: Our next question comes from patent Wall Ravens with citizens JMP. Your line is open.
Speaker Change #107: Okay, great. Thank you.
Speaker Change: Shifting to other note then F&B. So Henry is delighted to see you settled the Ryder public the class actions.
Speaker Change: Kudos to Anthony in your legal team two questions.
Patrick D. Walravens: Resolves the claims in four states are there any others in other states or is that it.
Patrick D. Walravens: And then the second question is are you are you, making any changes to the community addition, or the directory pages as a result and does any of that.
Patrick D. Walravens: Impact your plans for sort of new plc motions for SMB.
Speaker Change: Yep. Thank you Pat.
Speaker Change: And these are all these will handle all of the states where there are claims so we feel really good about putting that behind us.
Speaker Change #104: There are minor changes to our community pages in those in those states, but we don't anticipate those causing any issues for us from a community perspective.
Speaker Change: From a plc perspective either.
Speaker Change #102: Awesome. Thank you.
Speaker Change #105: And I'm not showing any further questions at this time and this does also concludes today's conference.
Speaker Change #101: Thank you for your participation you may now disconnect and have a wonderful day.
Speaker Change #101: Okay.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.