Q3 2024 Freshworks Inc Earnings Call

November 6, 2024

Okay.

Speaker Change: Good day, and thank you for standing by and welcome to fresh walks third quarter 2024 earnings Conference call.

This time, all participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.

We'll then hear an automated message advising your hand is raised towards the draw. Your question. Please press star one one again.

Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Joon Huh head of Investor Relations. Please go ahead.

Joon Huh: Thank you good afternoon, and welcome to <unk> third quarter 2024 earnings Conference call. Joining me today are Dennis Woodside Fresh works, Chief Executive Officer, and President and Tyler Sloat freshwater Chief operating officer, and Chief Financial Officer.

Speaker Change: The primary purpose of todays call is to provide you with information regarding our third quarter 2024 performance and our financial outlook for our fourth quarter and full year 2024, as well as our preliminary outlook for full year 2025.

Speaker Change: Some of our discussion and responses to your questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 to 95. These forward looking statements are based on <unk> current expectations and estimates about business and industry, including our financial outlook macroeconomic uncertainties managements beliefs, the timing and amount of.

Speaker Change: Future repurchases of our class a common stock the anticipated benefits costs and the timing of our workplace realignment and associated reduction in head count and certain other assumptions made by the company all of which are subject to change. These statements are subject to risks uncertainties and assumptions that could cause actual results to differ materially.

Speaker Change: From those projected in our forward looking statements such risks include but are not limited to our ability to sustain our growth to innovate to reach our long term revenue goals to meet customer demand and to control costs and improve operating efficiency.

Speaker Change: A discussion of additional material risks and other important factors that could affect our results. Please refer to today's earnings release, our most recently filed Form 10-K, and our other periodic filings with the SEC.

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

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

Speaker Change: I encourage you to visit our Investor Relations site to access our earnings release supplemental earnings slide periodic SEC reports, a replay of today's call or to learn more about pressures and with that let me turn it over to Dennis.

Dennis Woodside: Thanks, Jim and thank you everyone for joining us today on the call.

Dennis Woodside: I am pleased to report that we had a strong third quarter.

Dennis Woodside: We outperformed across all our key metrics and exceeded our previously provided estimates for growth and profitability.

Dennis Woodside: Our Q3 results reflect our focus on product innovation operational discipline and our strategic imperatives.

Dennis Woodside: Revenue grew 22% year over year to $186 $6 million and we generated free cash flow of $40 1 million.

Dennis Woodside: Resulting in a free cash flow margin of 21% for the quarter.

Dennis Woodside: We nearly doubled our free cash flow compared to last year, representing a margin improvement of more than 700 basis points year over year.

Dennis Woodside: Adding our revenue growth and free cash flow margin for Q3, we exceeded the rule of 40 in the quarter.

Dennis Woodside: We're proud of the operational efficiencies, we're creating while scaling our business.

Dennis Woodside: We ended the quarter with more than 69600 total customers with a net add of more than 800 customers.

Dennis Woodside: This represents the highest organic net adds for customers in the last four quarters.

Dennis Woodside: We welcomed notable customers onto the <unk> platform, including Republic Airways.

Dennis Woodside: The University of Oxford Champion X the city of Bellevue.

Dennis Woodside: Fair Bank, one and textile fashion group to name a few.

Speaker Change: Last quarter, we outlined our three key strategic imperatives to drive durable profitable growth as we scale the business.

Dennis Woodside: Okay.

Dennis Woodside: The first imperative is that we invest in our largest fastest growing employee experience business.

Dennis Woodside: This includes <unk> TSM Tam operations any SM.

Dennis Woodside: Our second imperative is to continue delivering AI capabilities across our platform to increase productivity for our customers and employee experience and in customer experience.

Dennis Woodside: Our third imperative is to accelerate growth for our customer experience solutions, which include our customer service and sales and marketing products.

Dennis Woodside: Today I'll share proof that our strategy is working.

Dennis Woodside: I'll start with our first pillar <unk>.

Dennis Woodside: Our <unk> business is strong with over $390 million in <unk>.

Dennis Woodside: And a year over year growth rate of over 40% in Q3.

Dennis Woodside: Today more than 17800 customers are using our <unk> solutions to deliver exceptional.

Dennis Woodside: An employee service management.

Dennis Woodside: By prioritizing investments in Es, we are moving upmarket and winning more mid market and enterprise deals.

Dennis Woodside: We won 16, new and expansion deals over 100000.

Dennis Woodside: And <unk>, including several against our largest competitor in Q3.

Dennis Woodside: Mid market and large companies, who rely on enterprise grade software to compete at a global scale are choosing us over the competition.

Dennis Woodside: These companies operate in every sector, including public and private enterprises.

Dennis Woodside: They choose fresh works to do what our competitors cannot armed them with powerful yet affordable software that is easy to implement as it is to use.

Dennis Woodside: This is our winning formula.

Dennis Woodside: They tell us that they are tired of being forced into oversized solutions that are hard to implement and operate.

Dennis Woodside: Our expanded capabilities have earned us the right to compete in larger deals and we're winning many of them.

Dennis Woodside: Leading innovators across industries are using our AI powered <unk> software to deliver exceptional employee experiences.

Dennis Woodside: In education, Georgetown University of Pennsylvania, Pitzer University of Aberdeen, Brunel University, and many more are using fresh service.

Dennis Woodside: For example, the University of Oxford chose press service and Freddie Copilot for its simplicity and ability to scale with the universities TSM needs across <unk>.

Dennis Woodside: Finance and HR teams.

Dennis Woodside: Professional sports teams, including Premier League Football clubs Major League baseball teams NFL franchises in Formula One racing teams are choosing our software.

Dennis Woodside: And retail customers like car for Belgium, Paul Smith, and textile fashion group have chosen fresh works to overhaul their <unk> solutions.

Dennis Woodside: We're also creating more value from the device 42 acquisition by cross selling advanced ITM capabilities to existing fresh service customers.

Dennis Woodside: We're expanding our ability to win deals in a broader group of large mature companies.

Dennis Woodside: One example is Republic Airways.

Dennis Woodside: Large regional airlines that also contracts with major airlines, such as American Delta and United.

Dennis Woodside: We won this deal against our largest competitor in it.

Dennis Woodside: This customer needed better visibility and control over their it assets and configurations.

Dennis Woodside: Using fresh service and device 42 Republic Airways now has a consolidated view of its numerous IP and hardware assets, which allows it to meet FAA compliance and resolve incidents more efficiently.

Dennis Woodside: In line with our strategy, we are prioritizing more R&D investment for <unk> to fuel our high growth business.

Dennis Woodside: In Q3, we shifted over 200 technical resources from other areas to our <unk> product and engineering teams.

Dennis Woodside: These resources are now accelerating our product development of TSM and ESL capabilities, including New change management features.

Dennis Woodside: Enterprise grade access and control functionality.

Dennis Woodside: And new Freddie AI capabilities.

Dennis Woodside: By adding these resources to Es, we have significantly pulled forward our product roadmap in some cases up to four quarters.

Dennis Woodside: We are winning <unk> and we're excited about our business momentum.

Dennis Woodside: Our AI products are gaining significant adoption and usage and we are seeing.

Dennis Woodside: Monetization momentum quarter over quarter.

Dennis Woodside: As a reminder, we offered to AI products that are generally available today.

Dennis Woodside: Freddie self service to deflect frontline questions and Freddie copilot to assist agents.

Dennis Woodside: We monetize Freddie self service on a per session basis, and monetize co pilot through a per seat add on of $29 per month.

Dennis Woodside: In Q3 paid co pilot adoption grew more than 35% over the previous quarter to over 1700 paying customers.

Dennis Woodside: These customers can achieve more than 30% reduction in resolution time with co pilot, while improving customer satisfaction.

Dennis Woodside: We increased attach rates for our co pilot in new deals over $30000 in IRR to more than 50%.

Dennis Woodside: And SMB customers continue to attach at double digit rates.

Dennis Woodside: <unk> from co pilot grew meaningfully quarter over quarter with a slight majority coming from the <unk> business.

Dennis Woodside: We're still early on but we continue to monetize copilot ahead of our initial expectations.

Dennis Woodside: One example of a customer finding great value with co pilot is razer pay a leading payment gateway services company in India with over 5 million customers.

Dennis Woodside: They needed an AI solutions to scale their customer support without compromising quality.

Dennis Woodside: By implementing Freddie co pilot they achieved remarkable results automating, 70% of routine quarries and reducing resolution times by 30%.

Dennis Woodside: Our AI products enabled them to handle 20% more customer interactions, while simultaneously improving first contact resolution and boosting customer satisfaction scores.

Dennis Woodside: Pretty self service continues to show positive momentum.

Dennis Woodside: We have more than 1100 paying customers that are using Freddie self service for customer support.

Dennis Woodside: The number of paying customers has doubled since the beginning of the year as many are realizing deflection rates of more than 40% to 50%.

Dennis Woodside: <unk> from self service grew nearly 10% quarter over quarter in Q3.

Dennis Woodside: Customers are turning to us because they are looking for a robust platform of support solutions with leading AI capabilities that can help them scale.

Speaker Change: Springer nature is a global publishing company with more than 10000 employees across 50 countries.

Dennis Woodside: Their customer agents were manually fielding a high number of <unk> from around the globe. So they needed an automated solution to help them address the high volume of <unk> inquiries.

Dennis Woodside: With the adoption of self service they were able to deflect the low level support quarries, while achieving a <unk> score of 90%.

Dennis Woodside: Finally, we recently announced the public beta of Freddie AI agent.

Dennis Woodside: This marks a new generation of autonomous frontline agents powered by Freddie AI.

Dennis Woodside: Our Freddie AI agent provides users with always on trustworthy and conversational service that can resolve service issues quickly efficiently and without human intervention.

Dennis Woodside: While automation capabilities have been available to our CX customers for years, Freddie AI agent represents the new generation of self service capabilities and is now available for both our CX and <unk> customers.

Dennis Woodside: A key differentiator is that customers can setup, Freddie AI agent in minutes by simply pointing it to their knowledge base public Urls support facts or policy documents.

Dennis Woodside: Our AI agents don't require proscriptive button like flows that are time consuming to load and rigid and user experience.

Dennis Woodside: Instead, Freddie AI agents engaged in a personalized human like conversation with memory and advanced reasoning to clarify worries retain context and have multi term conversations.

Dennis Woodside: For more complex issues, the AIA agents can intelligently triage and seamlessly pass these to a human agent.

Dennis Woodside: Following months of testing in our own environment and with select customers. We have received valuable feedback and seen impressive business outcomes.

Dennis Woodside: For example, the large U K based retailer hobby craft users Freddie AI agent to accurately respond to the wide and complex range of customer product questions.

Dennis Woodside: With minimal training they went live and created instant customer support outside of normal business hours and across geographies.

Dennis Woodside: Another customer B checks deployed their autonomous agents within 20 minutes.

Dennis Woodside: We will directly monetize usage of the CX version of Freddie AI agent as soon as it moves from public data to general availability, which is expected in Q1 of 2025.

Dennis Woodside: The next version of Freddie AI agent will be included exclusively in the enterprise plan for fresh service.

Dennis Woodside: We will indirectly monetize this via higher win rates and mix shift towards the enterprise plan.

Dennis Woodside: Turning to our CX business I'm happy to say that growth improved in Q3.

Dennis Woodside: Our CX business finished with over $360 million in <unk>.

Dennis Woodside: Growing nearly 10% year over year.

Dennis Woodside: We also improved.

Dennis Woodside: Proved our net customer adds in CX doubling our net adds from the prior quarter.

Dennis Woodside: The most significant gains were from our international regions, driven by reduced churn and improved conversion of free to paid agents.

Dennis Woodside: In fact, Q3 was the lowest churn quarter ever for our customer support products.

Dennis Woodside: Our goal is to continue improving customer retention through product improvements and targeted outreach aimed at reducing churn.

Dennis Woodside: We ended the quarter with over 56100 CX customers.

Dennis Woodside: We are seeing several opportunities to cross sell CX, two <unk> customers and vice versa.

Dennis Woodside: We saw this with the city of Bellevue in Washington State.

Dennis Woodside: The city provides essential municipal services and has over 600 employees.

Dennis Woodside: Initially they chose fresh service to monitor is there service management operations and now they've added fresh desk omni to create tailored workflows for external service requests.

Dennis Woodside: Another example of a cross sell is travel counselors, which has over 2000 employees in six countries.

Dennis Woodside: After seeing productivity gains with fresh desk, they adopted fresh service and are now actively using fresh works AI powered solutions across their customer and employee experiences.

Dennis Woodside: Furthermore, we are seeing signs that AI is a net tailwind to our CX business.

Dennis Woodside: The vast majority of companies are looking to their trusted software partner like fresh works to provide the latest AI capabilities.

Dennis Woodside: This is demonstrated by the increasing customer adoption each quarter and the growing attach rates for both copilot and self service.

Dennis Woodside: The vast majority of companies, we hear from our not planning to build their own internal AI solutions or plugging in small improvement vendors to deliver the latest AI capabilities.

Dennis Woodside: Our AI capabilities are already helping us win new deals and creating more expansion opportunities.

Dennis Woodside: In fact, CX customers represent a large portion of our co pilot customers and all of our Freddie self service revenue today, including many BDC customers.

Dennis Woodside: At the same time, our total agent count continues to grow.

Dennis Woodside: We are laser focused on building our business to deliver AI innovations and accelerate monetization both through a consumption model like Freddie self serve box and a per seat model with Freddie co pilot.

Dennis Woodside: We believe this will position us to be an AI winner in the future.

Dennis Woodside: In line with our strategy, we combined our customer service and sales and marketing units into a single CX team across product management engineering and marketing in Q3.

Dennis Woodside: In addition, we are focused on simplifying our core fresh desk product experience to improve the ease of implementation and maintenance and there by increase the time to value.

Dennis Woodside: As part of our efforts we are building on our core ticketing foundation to create a more seamless experience forces fourteens.

Dennis Woodside: We also introduced new collaborator features to improve response times and see sat scores.

Dennis Woodside: We're excited about all the progress we have made in executing on our strategy this past quarter.

Dennis Woodside: We're confident in our ability to deliver sustained long term growth and we're bullish about our future.

Dennis Woodside: To reaffirm our confidence in the company's strategy, we announced earlier today the board authorization for a share repurchase program of up to $400 million.

Dennis Woodside: We have a strong balance sheet with over $1 billion in cash.

Dennis Woodside: We are streamlining the business and we expect to generate substantially higher cash flows in the coming years.

Speaker Change: We view this as a great investment opportunity to buy fresh works shares at today's levels.

Speaker Change: Even after the share repurchase activity.

Dennis Woodside: We will maintain a very healthy balance sheet with well over $600 million in cash.

Dennis Woodside: Which gives us plenty of capital to invest organically in the business or through strategic acquisitions.

Speaker Change: Now, let me turn it over to Tyler to cover the financial details.

Tyler Sloat: Thanks, Dennis and thanks, everyone for joining on the call and via webcast today.

Tyler Sloat: We're pleased to report that we have exceeded our revenue non-GAAP operating income and free cash flow estimates this quarter showcasing the strong financial discipline in our business model as we execute on our strategic imperatives.

Dennis Woodside: Our commitment to driving growth, while maintaining a vigilant focus on operational efficiency has allowed us to further expand our non-GAAP operating margin to 13% increasing.

Dennis Woodside: Increasing more than 500 basis points quarter over quarter.

Dennis Woodside: In Q3, we grew free cash flow of 82% compared to last year to $40 $1 million, resulting in free cash flow margin of 21%.

Dennis Woodside: We are committed to making operational improvements that will position the business for profitable growth and sustained long term success.

Dennis Woodside: For our call today I will cover the Q3 2024 financial results provide background on our key metrics.

Dennis Woodside: Our forward looking commentary and expectations for Q4, and the full year 2024, and close with our preliminary outlook for 2025.

Dennis Woodside: I'll include constant currency comparisons for certain metrics to provide a better view of our business trends as a reminder, <unk>.

Dennis Woodside: Our discussion will be focused on non-GAAP financial results, which exclude the impact of stock based compensation expenses and other adjustments.

Dennis Woodside: Starting with the income statement total revenue in Q3 increased to $186 6 million growing 22% for both as reported and on a constant currency basis.

Dennis Woodside: <unk> services revenue contributed $2 2 million in the quarter as we continue to ship services revenue to our growing partner network.

Dennis Woodside: Device 42 revenue contribution was approximately $8 8 million for the quarter.

Dennis Woodside: Our es business, which includes TSM ESN and device 42 continues to be the main contributor of our growth.

Speaker Change: As Dennis mentioned, the Es business <unk> grew 40% year over year with approximately 10 percentage points being contributed from device 42.

Speaker Change: Moving to margins, we maintained a strong non-GAAP gross margin of nearly 86% improving from Q2.

Speaker Change: As we remain diligent and efficiently scaling the business.

Dennis Woodside: This represents an improvement of approximately 170 basis points compared to the prior year.

Dennis Woodside: Our non-GAAP operating income came in at $24 million.

Dennis Woodside: Representing a non-GAAP operating margin of approximately 13% and ahead of prior expectations.

Dennis Woodside: This outperformance was due to higher revenue growth and lower personnel related costs as well as continuous improvements in our sales and marketing spend.

Dennis Woodside: Moving to operating metrics.

Dennis Woodside: Our two key business metrics, our net dollar retention in customers contributing more than $5000 in IRR.

Dennis Woodside: As we observed in the first half of the year gross expansion trends continue to be pressured in the current market environment.

Dennis Woodside: At the same time, we saw a slight improvement in our overall churn rate this quarter.

Dennis Woodside: Net dollar retention for Q3 was 107%, which includes a two percentage point benefit from FX.

Dennis Woodside: Looking forward to Q4, we estimate our net dollar retention of approximately 106% as reported and 104% constant currency as we expect to see similar pressures on expansion for the rest of the year.

Dennis Woodside: For our second key business metric of the number of customers contributing more than $5000 in the IRR.

Dennis Woodside: This metric grew 14% year over year to 22359 customers, representing representing a quarterly net adds of 615 customers.

Dennis Woodside: This customer cohort represents 90% of our era.

Dennis Woodside: For our larger customer cohort contributing more than $50000 in the IRR. This cohort grew 33% year over year to 3008 customers representing a quarterly net adds of 169.

Dennis Woodside: This cohort represents 50% of our era.

Dennis Woodside: For total customers, we added approximately 800 net customers in the quarter and ended with over 69600 customers.

Dennis Woodside: Now, let's turn to calculated billings balance sheet and cash items.

Dennis Woodside: Our calculated billings grew approximately 19% or 18% on a constant currency basis to $196 3 million in Q3.

Dennis Woodside: Excluding the impact of device 42.

Dennis Woodside: Billings grew approximately 13, 5%.

Dennis Woodside: One item to note for billings.

Dennis Woodside: Our calculated billings includes the reported revenue plus the change in total deferred revenue in the quarter.

Dennis Woodside: With the increase in longer term deals, especially from device 40 to the changes in long term deferred revenue balances are starting to have an impact on the billings calculation.

Dennis Woodside: Since these amounts are included in other liabilities, we've added disclosures in our 10-Q filing to the amounts that.

Dennis Woodside: The difference in the long term deferred revenue balance was an increase of $1 3 million in the quarter and this is included in our calculated billings number.

Dennis Woodside: Looking ahead to Q4 2020 for our initial estimate for calculated billings growth of 16% to 17%.

Dennis Woodside: For the full year 2024, we expect calculated billings growth to be approximately 16% to 17% with approximately 2% to three percentage points coming from the impact of device 42.

Dennis Woodside: Moving to our cash items, we generated $40 1 million in free cash flow for Q3.

Dennis Woodside: Performing our estimates thanks to the operational improvements we have implemented earlier this year.

Dennis Woodside: Given our strong cash flow performance again this quarter.

Dennis Woodside: We are increasing our full year 2020 for estimates for adjusted free cash flow, which will exclude certain cash payments I will discuss later.

Dennis Woodside: Two $150 million.

Dennis Woodside: We continue to manage and offset share count dilution by net suddenly invested equity amounts by using approximately $12 million during the quarter.

Dennis Woodside: This activity is reflected in our financing activities and is excluded from our free cash flow.

Dennis Woodside: We plan to continue net settling invested equity amounts going forward, resulting in expected Q4 cash usage of approximately $10 million at current stock price levels for.

Dennis Woodside: For the year, we expect to use approximately $60 million to net settle vested equity amounts.

Dennis Woodside: We ended the quarter with cash cash equivalents in marketable securities of $1 5 billion.

Dennis Woodside: Turning to our share count for Q3, we had approximately 331 million shares outstanding on a fully diluted basis as of September 32024.

Dennis Woodside: The fully diluted calculation consists of approximately 303 million shares outstanding $25 million related to Unvested rsum, Prs use and nearly 3 million shares related to outstanding options.

Dennis Woodside: We have made great strides in improving our operating efficiency over the past two years as we inflected to generate non-GAAP operating income and deliver significant free cash flow.

Dennis Woodside: We also know that we have an opportunity and need to better focus our efforts around our key strategic imperatives.

Dennis Woodside: As Dennis mentioned earlier, we shifted a number of technical resources in Q3 to further invest in the <unk> business as part of the strategic review process.

Dennis Woodside: To add more focus on our <unk> AI and CX priorities.

Dennis Woodside: We are also realigning our global workforce, putting us on a path to have a bigger impact for our customers.

Dennis Woodside: This includes a difficult decision to reduce our global head count by approximately 13%.

Dennis Woodside: We believe this will help us accelerate our growth free up resources for reinvestment and simplify the way we work.

Dennis Woodside: So that we are running fresh works in a way that is efficient and scalable.

Dennis Woodside: As a result, we expect to incur a charge of approximately 11% to $13 million in our Q4 results.

Dennis Woodside: These charges will be excluded from our non-GAAP operating results going forward. Additionally.

Dennis Woodside: Additionally, we expect to use approximately $12 million to $14 million in cash that we would exclude from adjusted free cash flow amounts going forward to be clear. This onetime cash impact is not included in our full year 2024, adjusted free cash flow estimate of $150 million that I provided earlier.

Dennis Woodside: Now onto our forward looking estimates.

Dennis Woodside: For the fourth quarter of 2024, we expect revenue to be in the range of $187 8 million to $198 million growing 17% to 19% year over year. This includes approximately $4 million from device 42 for the quarter.

Dennis Woodside: non-GAAP income from operations to medium range of 22 million to $24 million.

Dennis Woodside: And non-GAAP net income per share to be in the range of nine to 10, assuming weighted average shares outstanding of approximately $302 1 million shares.

Dennis Woodside: For the full year 2024, we expect <unk>.

Dennis Woodside: Revenue to be in the range of $713 6 million to $716 6 million growing 20% year over year.

Dennis Woodside: This includes an estimate of approximately $15 $8 million from device 42 for the year.

Dennis Woodside: non-GAAP income from operations to be in the range of $80 8 million to $82 8 million.

Dennis Woodside: And non-GAAP net income per share to be in the range of 38 to 39, assuming weighted average shares outstanding of approximately $305 million.

Dennis Woodside: These non-GAAP estimates do not include the workforce actions, we announced today and are based on FX rates as of November one 2024.

Dennis Woodside: Any future currency moves are not factored in.

Dennis Woodside: Looking ahead were.

Dennis Woodside: Currently going through the planning process for 2025.

Dennis Woodside: We are layering in our growth objectives, and taking into consideration the market demand environment and recent changes to the business.

Dennis Woodside: Based on our current planning efforts the preliminary estimate for full year 2025 as revenue growth in the low to mid teens with meaningful expansion of our non-GAAP operating margin to above 16% and free cash flow margin to above 25%.

Dennis Woodside: As a reminder, we will be lapping the one year anniversary of the device 42 acquisition in June So we will see tougher year over year compares for revenue in the second half of 2025.

Dennis Woodside: We're taking a prudent approach with our preliminary estimates for next year to drive durable growth, while improving efficiencies.

Dennis Woodside: Q4 has historically been our largest quarter and an important indicator for us. So we'll have a more prescriptive view of 2025 on the next earnings call.

Speaker Change: As Dennis mentioned, given our strong financial position and improving cash profile, we have the opportunity to expand our capital allocation strategy.

Speaker Change: As such our board of directors has authorized a share repurchase program of up to $400 million.

Dennis Woodside: This is an arguable buyback program not only underscores the confidence we have in a durable and profitable growth of our business.

Dennis Woodside: But also reinforces our commitment to delivering long term shareholder returns.

Dennis Woodside: We look forward to executing this repurchase thoughtfully as we advance our growth strategy.

Speaker Change: Let me now turn the call back to Dennis for closing comments.

Dennis Woodside: Thank you Tyler.

Dennis Woodside: As I reflect on our progress from Q3. The results are a clear indication that our strategy is working.

Dennis Woodside: I am heartened by our product innovation operational discipline, and strategic focus that positioned us to drive durable profitable growth.

Dennis Woodside: We are excited about the many opportunities in our business and the transformative potential of our AI solutions.

Dennis Woodside: Thank you to our customers partners employees and shareholders for your ongoing support and we're looking forward to a strong finish to the year.

Dennis Woodside: And with that let us take your questions operator.

Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to the draw. Your question. Please press star one one again, please stand by while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Scott Berg from Needham and company.

Speaker Change: Hi, it's Rob Mcnally, Thanks for taking the question great to hear some of the competitive wins on the Midmarket and enterprise can you just touch on maybe some of the trends you saw in the SMB sector and how that business fared versus your initial expectations.

Speaker Change: Yeah. So thanks for the question.

Speaker Change: We saw some real positive signs in Q3 around SMB, but that really is a continuation of some trends we've seen in prior quarters. If you go back to.

Speaker Change: Three quarters ago, we had net adds of around 400 customers last quarter or two quarters ago was 600 and this last quarter was 800 and that trend is the result of some focused product investments, we've been making in ensuring the customers get to value faster and then some <unk>.

Dennis Woodside: We have made on the sales side and the service side to help those customers see the value in our products, which has helped churn in particular.

Dennis Woodside: We've also had some positive momentum in converting customers from free plans into paid plans theyre seeing value in AI theyre seeing value in the conversational solutions that we have on the CX side in particular, so that SMB business is starting to come around we've been talking about it for a while.

Dennis Woodside: And I think we saw some real positive signs this past quarter. We're excited to see how that plays out in Q4 and into the into next year.

Joon Huh: Got it helpful color and then on the reduction of force any areas that were impacted.

Speaker Change: Impacted more than others or was it pretty broad based.

Speaker Change: Yes, it was pretty broad based I would say at the margin.

Speaker Change: We made some reductions in sales and marketing that are more focused on putting.

Speaker Change: More of our effort around fewer markets bigger opportunities, but generally it was fairly broad based and really what we were doing is focusing our teams on the things that matter. The three big areas that I've been talking about <unk> and really driving that business up into the mid market AI AI capability across all of our.

Speaker Change: And getting that CX business back to more robust growth.

Speaker Change: Got it helpful. Congrats on the quarter.

Speaker Change: Yeah.

Speaker Change: Thanks, Rob.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of pendulum Bora from J P. Morgan.

Speaker Change: Yeah.

Pendulum Bora: Oh, great. Thank you for taking my questions congrats on the quarter.

Speaker Change: I wanted to ask you I think I heard CX business kind of improved.

Speaker Change: A little bit from I think 7% to 10% or something like that in here.

Speaker Change: What is driving that are you seeing.

Speaker Change: Has has seen growth kind of trough at this point is that I think bold is that kind of a bold statement at this point too.

Speaker Change: To make.

Speaker Change: What are you seeing in general and seat growth.

Speaker Change: <unk>.

Speaker Change: Yeah. So a couple of things so first of all yes.

Speaker Change: CX business has seen.

Speaker Change: An increase in growth in Q3, and that's really the continuation of this trend that has persisted for a couple of quarters, where we've started to see net adds pick up over the last three quarters, we've seen churn come down as I mentioned churn for our CX business was at an all time low in Q3 that.

Speaker Change: The result of focused product investments that we've made and some improvements we've made in how we support and service customers in terms of seat additions, we're seeing see growth continue across the business, but in CS CX in particular.

Speaker Change: So we're pretty optimistic about where that business is heading we're doing better operationally at driving growth from the business I mentioned, the free to paid conversion being higher this past quarter as a result of some real focused efforts.

Speaker Change: And as the SMB comes back we've talked about this for some time.

Speaker Change: Our CX business skews SMB smbs were more affected by higher interest rates and we saw that in the form of lower expansion rates, but if smbs come back, we're very well positioned to see that reflected in that CX business.

Speaker Change: Yes, understood one follow up for Tyler.

Speaker Change: Maybe talk about the assumptions around the 2025 number around ideas MTX are you kind of assuming CX to grow about 10% for next year within within the different components and are you baking in anything from at this point.

Tyler Sloat: Hey, pendulum. So we wanted to put some numbers out there for 2025, we saw where consensus is that where we're kind of in the middle of our planning efforts right. Now for next year also Q4 as you know is a really big quarter for us. So there's still a little bit of unknown. There. What we do know is that we have a lot of control on the bottom line and we're very optimistic about our.

Speaker Change: <unk> to kind of achieve and overachieve on our numbers, specifically the greater than 25% free cash flow margin, we havent broken out.

Speaker Change: So we just put out a range for revenue based on what were preliminary scene right now as we go through the planning process at the end of the year, we will break that out more and obviously drive a lot more color and we haven't provided any details on the product breakdowns.

Speaker Change: Got it thank you.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Brent Thill from Jefferies.

Brent Thill: Thanks, just back to the.

Brent Thill: Improving execution.

Brent Thill: When you think about how you kind of split between.

Brent Thill: Macro getting better your own internal team executing better in the field, how would you kind of characterize the split.

Brent Thill: Is there improvement across both is there more improvement on execution no macro improvement how would you characterize that that mix.

Speaker Change: Yes. Thanks.

Speaker Change: So first of all speaking about X. So on the Es side. We've continued to have success in moving up market and you see that in the 40% headline growth, 30% organic growth for that business and that's because the solution that we have in terms of.

Speaker Change: Fast time to value low <unk> enterprise grade product that really is resonating in particular with customers that have say five to 20000 employees, that's where we're really gaining a lot of traction and that's regardless of what the macro is doing.

Brent Thill: We're also seeing traction in AI and again I don't think this has much to do with macro but we're seeing widespread adoption of co pilot. It's now half of all of our large deals have a copilot element to them right out of the box and we have a lot of upsell that has co pilot.

Speaker Change: And then then on CX, we've been we've been executing against this playbook to improve that product experience improve the first 30 days for some time, we started to see signs of improvement in the prior quarter. This past quarter, we made a big emphasis on driving better conversions of free users.

Speaker Change: That are really just dabbling in the product into paid deployments and that's worked out quite well. So again, it's hard to it's hard to separate what's macro and what's us we've done a lot of work to drive the business and I have to say a lot of that credit goes to the teams here.

Speaker Change: Okay, and Tyler good to see.

Brent Thill: Mid teen margins I would assume.

Speaker Change: That that's more of a pit stop and kind of a long term playbook has has more in it over time, how are you balancing kind of that framework growth versus profitability.

Speaker Change: Yes, I mean, we're clearly so I think youre talking about kind of what we said for next year, which is kind of mid teens.

Speaker Change: non-GAAP operating margins in <unk>.

Speaker Change: <unk>.

Speaker Change: And then the free cash flow greater than 25%.

Speaker Change: Look we're definitely focused on being efficient.

Speaker Change: Producing cash and bringing profit to the bottom line, but that being said, we're definitely also very focused on investing in growth and its part of kind of some of the things, we announced but really specific to the strategy that we outlined and we are.

Speaker Change: Really focused on kind of doubling down on that strategy and definitely are still investing in growth.

Speaker Change: Great. Thanks.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Brent bracelet from Piper Sandler.

Brent Bracelet: Thank you good afternoon.

Brent Bracelet: Really appreciate the prevalent preliminary look into next year.

Brent Bracelet: The focus on improving margins here with with.

Speaker Change: With the global restructuring Dennis I just wanted to.

Speaker Change: Frame in light of that in light of the strong balance sheet in light of the appetite to double down in.

Speaker Change: And really the mid market enterprise can you talk about like opportunity to for four four smaller M&A.

Speaker Change: How fragmented is the market.

Speaker Change: How broad is the product today and that fresh service area and how much more room can you fill out the portfolio there.

Speaker Change: To accelerate growth essentially.

Speaker Change: Yeah. So thanks, Brent for the question. So look <unk> is a fantastic market the market is growing.

Speaker Change: Double digit rates the competitive landscape is very clear you got service now who cares about the biggest companies in the world. We do run into Atlassian Theres, a number of small players in some incumbents, but nobody is really focused on that mid market and lower end of enterprise, where where sophisticated it departments that need a solution they want to.

Speaker Change: Automate their their it.

Speaker Change: Operations item.

Speaker Change: And they need an enterprise enterprise grade platform. That's what we provide there is a lot of growth in that market. So just ASM alone right, that's where we're investing some of the resources that we reallocated into the <unk> team to going deeper in ASM in particular in HR workflows, where we have a lot of customers asking us help us.

Speaker Change: With Onboarding help us out with off boarding.

Speaker Change: Managed service provider is another big area of opportunity we have over 1000 MSP is on our platform today and our product doesn't have the kind of capabilities that they really want to manage multiple customers. So we're building that and that should should help spark more growth for our MSP business device 42, and <unk> is a huge.

Speaker Change: <unk> opportunity for us and beyond the item we see.

Speaker Change: Areas in ops.

Speaker Change: Ops and generally AI ops potentially observe ability all of these are spaces that are open to us we have a lot on our plate right now to execute against the areas that I identified but but we're pretty optimistic about that of course, we're always on the lookout for for acquisitions that we can tuck in and <unk>.

Speaker Change: Kale.

Speaker Change: We will tend to look for areas, where we have.

Speaker Change: Roadmap holes or capability gaps and we want to we want to scale up faster. So that's another another tool in our tool kit as we continue to scale the business and generally we're committed to delivering long term value for our shareholders. So we're going to we're going to be smart about the investments that we made right now device 42 is on everybody's.

Speaker Change: Minds here, how do we scale that and we've seen real good progress in the first couple of months of having 242 under the same roof.

Speaker Change: Great to hear thank you for the color.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Elizabeth quarter from Morgan Stanley.

Elizabeth Quarter: Great. Thank you so much I wanted to understand a fiscal 'twenty five.

Elizabeth Quarter: Guidance, just a little bit more it sounds like <unk> is still strong in CX is getting better and you also have the opportunity to drive better monetization with Freddie.

Speaker Change: Given our organic billings right now already in that mid teens range are there any areas that you are kind of incrementally cautious on or help us think about some of the puts and takes.

Speaker Change: Yeah, Hey, this is Tyler so again, we're right in the middle of our planning process for next year, and we're kind of going through everything as a reminder, we're going to.

Speaker Change: We're going to lap the annual anniversary of the device for the two acquisitions in the back half of the year, the Comparables do get more difficult.

Speaker Change: So we've taken that into account we are also I think taken.

Speaker Change: Kind of Prudence into account in terms of how we're looking at the year.

Speaker Change: And right now, we're saying that low to mid teens now as Dennis just mentioned there is a whole bunch of things that.

Speaker Change: We are accelerating on roadmap on the <unk> side in particular, there is also a whole bunch of AI investments that we're going to continue to make and as we see dates firm up from when these are coming out and as we can see expectations of what this might mean from a business model impact perspective, we will build those and we'll provide a lot more color at the end of the.

Speaker Change: At the end of the year with our Q4 earnings, but we wanted to put that out there because thats kind of our best view right now.

Speaker Change: Got it yes, certainly appreciate the luck.

Speaker Change: And then just as a follow up I wanted to dig in on Friday, and ask about I know, it's early but the uplift that you're seeing to some average deal sizes when customers do start to adopt Friday and is it typically rolled out to a smaller segment of users and then kind of expand from the great deals on how that motion goes.

Speaker Change: Yes Elizabeth incentives.

Speaker Change: So Freddie is rolled out to all customers. In fact, we have we have substantial adoption among smbs smbs in many ways can benefit the most because they are the ones that.

Speaker Change: Have.

Speaker Change: Have in some cases, <unk> businesses and they need to handle lots of consumer questions. They don't have a lot of people to staff.

Speaker Change: It really has been across all segments for us.

Speaker Change: As I mentioned earlier, our attach rates are going up so our attach rates. This past quarter on larger deals. That's that's for US at 30000 up deal, we're north of 50% and that's improved from last quarter.

Speaker Change: For co pilot, so we're seeing that co pilot product getting a lot of traction cut.

Speaker Change: Customers are seeing up to 30% improvement in some cases more in terms of the speed of resolution and that allows them to free up their agents to do other things allows them to scale their business faster on the self service side, we've seen our customer count.

Speaker Change: Double since the beginning of the year of paid customers for Friday self service.

Speaker Change: And we just launched <unk> AI agent, which is really designed to be super easy out of the box get up and running with AI within 30 minutes.

Speaker Change: With a with a an agent that can answer any question that pertains to your products anything thats in a <unk> or an a product.

Speaker Change: You can train the AI agent on and then your customers can ask questions directly to the agent and get answers that do not require a human so we as a reminder, we've been monetizing copilot just since February and our self service product today, while it's quite powerful it does require a level of programming to to manage.

Speaker Change: So with the introduction of AI agent.

Speaker Change: That opens up a new market segment for us a customer that wants to do more faster.

Speaker Change: An easier way, so we're pretty optimistic about AI and how it's affecting both our CX and our <unk> business. It's just at this point it is becoming a core to all of our Upsells in all of our new deals.

Speaker Change: Great. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Ryan Macwilliams from Barclays.

Speaker Change: Yes. This is Damon coggan up Ryan Macwilliams. Thanks, Dave question, just curious how linearity looks throughout the quarter and if you've left the quarter with better visibility on <unk> secured 25.

Speaker Change: Yes.

Speaker Change: Hey, Thank you for the question. This is Tyler we so we have two businesses right from a go to market perspective, we have this inbound business that feeds the SMB, which linearity for the SMB actually in Q4 is pretty even especially.

Speaker Change: And we've talked about this in the past.

Speaker Change: SMB actually slows down a little bit in the holidays and seasons.

Speaker Change: More just more of like an individual that being said.

Speaker Change: Over time, we've shifted more and more to our field business.

Speaker Change: Driving the majority of our bookings and revenue for us.

Speaker Change: And that fuel business looks much more like an enterprise sales motion so the monthly linearity.

Speaker Change: That.

Speaker Change: Tends to be backend loaded and we have visibility to extent the deals are out there, but that does tend to be backend loaded. They are larger deals and have been increasing in size over the last couple of years and we've been talking about that so.

Speaker Change: It's a mix, but definitely has become more backend loaded.

Speaker Change: Got it great. Thanks, Tyler and then.

Speaker Change: It's an improvement in macro environment needed for fresh funds to get back to the 110 ish NR or are there other levers that you can support this metric near term.

Speaker Change: Okay.

Speaker Change: So so first of all I would just say an improvement in macro is not required for us to continue to drive the growth that we're seeing and and.

Speaker Change: I don't think that the improvement.

Speaker Change: It's not it's not entirely clear, but I think we've done a lot to drive growth in particular in that <unk> business and that <unk> business as well. So I think we've got a lot of growth levers ahead of us regardless of what the macro kind of throws at US and are again are pretty excited about going into 25 with with where we are and the momentum that we're building in the last half of this year.

Speaker Change: Tyler or anything on the <unk>.

Tyler Sloat: No for net dollar retention as Dennis just mentioned the work we've been doing we're really pleased with how churn has been going.

Tyler Sloat: And Dennis mentioned CX said, an all time best churn rate in Q3, and we're just going to continue those efforts from an expansion motion we've been talking about the reduction of our expansion rate for two years now.

Tyler Sloat: And that really is driven by agent addition expansion now our agent counts are going up and we're clearly expanding with customers still but we've been very very focused on how can we expand with customers outside of agent addition, that's a lot of the AI products, we've been talking about it it's a lot of.

Tyler Sloat: Addition strategy as well as things like device 42, and GSM. So these are all things that we are in control of ourselves and we are actively working on now clearly.

Tyler Sloat: Interest rates in particular impact Smbs and if that starts to turn that.

Tyler Sloat: We think that would be a benefit for us and a tailwind we just can't count on it.

Speaker Change: Got it great. Thanks, guys.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of DJ Hynes from Canaccord Genuity.

DJ Hynes: Hey, guys.

DJ Hynes: Dennis I was hoping maybe you could double click a little bit more on device 42, I mean, obviously, we have the headline numbers.

DJ Hynes: It looks like you're taking a little bit more of a conservative cut in Q4, which I think makes sense at this point, but just can you speak to kind of the demand youre seeing for asset management integration of the employee base kind of how you're thinking about that.

Speaker Change: The lift that will take the rewrite that product color along those lines would be helpful.

Speaker Change: Yes, sure. So let me just break it into the go to market imperatives in the product imperatives on the product imperatives, it's very clear the first deliverable that youll see in Q1 is a <unk>.

Speaker Change: Much improved integration between fresh service and device 42 that our customers have been asking for that allow.

Speaker Change: Bidirectional sync of information in a very seamless way.

Speaker Change: The second milestone will be towards the latter part of next year.

Speaker Change: Which is a cloud based version of the device 42 that we can sell seamlessly alongside fresh service. So we're on track for both of those lots of work is going on to ensure that they are successful and excited to start with the launch of the new integration on the go to market side. The priority has been building pipeline and in <unk>.

Speaker Change: Cross selling device 42 into our existing base of thousands of customers and bringing them into deals where we have larger accounts that are looking for.

Speaker Change: A sophisticated asset management solution.

Speaker Change: So a lot of Q3 was spent seeding the pipeline getting getting dollars 42 involved in deals getting them into the sales cycle. Now we are in the process of starting to close down some of those deals some of them are going to <unk>.

Speaker Change: Last into Q1, and then making device 42, just a core part of our selling motion.

Speaker Change: So we're pretty excited about where that stands device 40 twos pipeline.

Speaker Change: John is the CEO device for adhesives has never been this big because they've just got a.

Speaker Change: An influx of demand from our existing customers. So I think it's a real winner for us over time, it's still really early but we're excited about it for sure.

Speaker Change: Excellent and then.

Speaker Change: Follow up on <unk>.

Speaker Change: Your comments on agent seat count on the CX side of the business. It's good to hear that they continue to grow.

Speaker Change: Curious specifically about what that looks like for customers using Freddie self service I know you said 1100 of them.

Speaker Change: Our seat counts, they're growing as well or is it flat or the down like when they incorporate self service what happens is he counts.

Speaker Change: Yes overall seat counts are going up so I don't have a breakout in terms of different customer cohorts, but overall theyre going up and I think that that just says that customers are going to have a mix of AI and human agents, they're going to find value in freeing up the time of the human agent.

Speaker Change: The more mundane tasks, but that's what we're seeing so far we're seeing continued growth of seats, while customers are taking on AI as well across the base.

Speaker Change: Okay very good thank you guys.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Patrick Wall Ravens from citizens JMP.

Speaker Change: Great. Thank you and let me add my congratulations.

Speaker Change: Dennis can you just talk a little bit more about your conversations with customers.

Speaker Change: On the AI front.

Speaker Change: What is what is the problem.

Speaker Change: They're looking to solve or benefit that theyre, hoping to capture the most often as it just self service for users or is it something broader.

Speaker Change: And then when they are actually looking at implementing it what is the biggest challenge that.

Speaker Change: That they have in terms of actually implementing these capabilities.

Speaker Change: Yeah. Thanks, Thanks, Pat So our customers are looking to do a couple of things. The first is they want to arm their agents with the best information the best tools available to make them the most productive and in some cases that.

Speaker Change: That's that's improving the quality of the answer that they can provide by suggesting an answer because the AI has already been trained on things like product manuals and faqs. The agent doesn't have to do laborious research before answering a question that's coming in from a customer. So they can answer more accurately in a more times.

Speaker Change: Fashion the customer at the end of the day is more satisfied because the answer is more accurate and the agent is more productive. They can answer faster time up either answer more questions or do other work. So that's one area and that's where co pilot has really taken off and become really clear in the marketplaces as a solution that improves.

Speaker Change: Proves agent productivity, 30% or more and we've seen that time and time again across customers on the L. One support.

Speaker Change: Task, they're looking to deflect questions coming in.

Speaker Change: That our routine wrote this is the first half that theyre looking for it routine wrote and free their agents from that kind of mundane work frankly.

Speaker Change: So the first thing they are looking for is how can I create.

Speaker Change: Create an agent that is fully trained on my information My Faq's my product manuals and answer questions right out of the box from customers. That's what Freddie AI agent does and Thats why were getting a lot of positive feedback on that and again, it's a quest to both improve the productivity of their exist.

Speaker Change: <unk> staff improve the experience of their customers. So we're seeing success on both fronts and I think I think net net but.

Speaker Change: But they are not doing is theyre, not saying, hey, I'm going to build it myself and theyre, not saying, Hey, I'm going to go find another point solution. They are looking to us in the first instance to solve that problem for them. If they are looking for a new customer support tool. That's the first question, they're asking tell me about your AI story on the Es side. It's the same thing theyre looking to automate.

Speaker Change: The employee experience.

Speaker Change: Virtual agents handle more direct questions that employees are asking of it.

Speaker Change: Fritos valuable agents up to do something else and likewise theyre looking to empower those AI agents or those human agents that they have with tools that make them more productive. So that's a little bit of a flavor of what I hear and I think we're really well positioned to solve those problems.

Speaker Change: Super helpful. Thank you.

Speaker Change: Thank you.

Speaker Change: Our final question.

Speaker Change: One moment.

Speaker Change: Our final question comes from the line of Michael Funk from Bank of America.

Michael Funk: Yes. Thank you for the question this evening.

Michael Funk: Keeping with the AI theme can you share what youre seeing with the change in spend or contract value when customers adopt AI realize it's very early days today, but any kind of metric there would be helpful.

Speaker Change: Okay.

Speaker Change: So because it's very early days for us it tends to be a net net expansion because they didn't have AI before remember we monetize.

Speaker Change: Our products in two different ways for the products that have been in Georgia, We monetize co pilot as a per seat at her $29 a seat per month as the sticker price, we monetize Freddie self service ad.

Speaker Change: On a consumption basis right.

Speaker Change: Customers purchase CPAP or.

Speaker Change: Such impacts of 1000 sessions at for $100 a pack so when customers come in and they've not had AI before it's a net expansion on a dollar basis or we're going in on a new sale that's priced separately and that's that's a net increase in the deal value over what we would have without AI.

Speaker Change: Hi.

Speaker Change: So generally for us it's been a net expansion of.

Speaker Change: ACB and you'll also see that in the average.

Speaker Change: Average customer value for us in our numbers.

Speaker Change: Okay.

Speaker Change: The incremental margins.

Speaker Change: Similar or higher or lower when you add AI into a contract.

Speaker Change: I'll take that one Michael.

Speaker Change: Incremental margins right now are similar right.

Speaker Change: We've done a very good job on gross margins.

Speaker Change: I would say.

Speaker Change: For a company of our size and we're going to continue to focus on that we've also said hey, there should be a little bit of noise in that number.

Speaker Change: Now, we're kind of above mid eighties on gross margin, we've said hey, low eighty's to committees is really really good we've built in what expectations are for the costs that we're going to incur to serve AI to our customers, but at the same time, we're obviously very.

Speaker Change: We're focused on our pricing and packaging strategies there some of the some of the.

Speaker Change: Future revenue will come from specifically Freddie self service and for the agent that we just announced right because that'll be more usage based.

Speaker Change: As customers use it right they will have to buy more bought packs over time too.

Speaker Change: To supplement that usage and so that.

Speaker Change: We will be a revenue stream that is kind of to come as opposed to already already with US right. Now. So we're very focused on margins are I think we've done really really well and obviously we are delivering.

Speaker Change: Even the numbers, we put for next year.

Speaker Change: We think a really good bottom line figures.

Speaker Change: Great. Thank you all the time.

Speaker Change: You bet. Thanks, Michael.

Speaker Change: Thank you.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

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Speaker Change: Good day, and thank you for standing by welcome to fresh <unk> third quarter 2024 earnings Conference call.

Speaker Change: This time, all participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again.

Speaker Change: Please be advised that today's conference is being recorded I would now.

Speaker Change: I'd now like to hand, the conference over to your Speaker today Joon Hong <unk> head of Investor Relations. Please go ahead.

Joon Hong: Thank you good afternoon, and welcome to <unk> third quarter 2024 earnings Conference call. Joining me today are Dennis Woodside, <unk>, Chief Executive Officer, and President and Tyler Sloat, <unk>, Chief operating officer, and Chief Financial Officer.

Joon Hong: The primary purpose of todays call is to provide you with information regarding our third quarter 2024 performance and our financial outlook for our fourth quarter and full year 2024, as well as our preliminary outlook for full year 2025.

Speaker Change: Some of our discussion and responses to your questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 to 95. These forward looking statements are based on <unk> current expectations and estimates about its business and industry, including our financial outlook macroeconomic uncertainties managements beliefs, the timing and amount of.

Speaker Change: Future repurchases of our class a common stock.

Speaker Change: <unk> benefits costs, and the timing of our workplace realignment and associated reduction in head count and certain other assumptions made by the company all of which are subject to change. These statements are subject to risks uncertainties and assumptions that could cause actual results to differ materially from those projected in our forward looking statements such risks.

Speaker Change: Include but are not limited to our ability to sustain our growth to innovate to reach our long term revenue goals to meet customer demand and to control costs and improve operating efficiency.

Speaker Change: For a discussion of additional material risks and other important factors that could affect our results. Please refer to today's earnings release, our most recently filed Form 10-K, and our other periodic filings with the SEC.

Speaker Change: I encourage you to visit our Investor Relations site to access our earnings release supplemental earnings slides periodic SEC reports, a replay of today's call or to learn more about thresholds and with that let me turn it over to Dennis.

Dennis Woodside: Thanks, Joan and thank you everyone for joining us today on the call.