Q3 2025 Braze Inc Earnings Call

December 9, 2024

Call My name is Megan and I'll be your operator for today's call. At this time all participants are in a listen only mode. After the speaker's presentation. We will conduct a question and answer session I'll now turn the call over to Christopher Ferris head of <unk> Investor Relations.

Christopher Ferris: Thank you operator, good afternoon, and thank you for joining us today to review braces results for the fiscal third quarter 2025, I'm joined by our co founder and Chief Executive Officer, Bill Magnuson, and our Chief Financial Officer, Isabelle Winkles, We announced our results in our press release issued after the market closed today. Please refer to the Investor Relations section.

Christopher Ferris: Of our website at investors Dot <unk> dot com for more information in our supplemental presentation related to todays earnings announcement.

During this call we will make statements related to our business that are forward looking under federal Securities laws and the Safe Harbor provisions of the private Securities Litigation Reform Act of 1095.

Christopher Ferris: During this call we will make statements related to our business that are forward looking under federal Securities laws and the Safe Harbor provisions of the private Securities Litigation Reform Act of 1095.

These statements include but are not limited to statements regarding our financial outlook for the fourth quarter and the fiscal year ended January 31, 2025, the anticipated development release timing and performance and benefits of our existing and upcoming products and features the potential impact and duration of our current macroeconomic trends are anticipated.

Christopher Ferris: These statements include but are not limited to statements regarding our financial outlook for the fourth quarter and the fiscal year ended January 31, 2025, the anticipated development release timing and performance and benefits of our existing and upcoming products and features the potential impact and duration of our current macroeconomic trends are anticipated.

<unk> behaviors, including vendor consolidation and replacement trends and their impact on braise or potential market opportunity and our ability to effectively execute on such opportunity the expected effects of our social impact initiatives and our long term financial targets and goals.

Christopher Ferris: Or behaviors, including vendor consolidation and replacement trends and their impact on braise or potential market opportunity and our ability to effectively execute on such opportunity the expected effects of our social impact initiatives and our long term financial targets and goals.

These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations and reflect our views only as of today, we assume no obligation to update any such forward looking statements for a discussion of the material risks and uncertainties that could affect our actual results. Please refer to the identified risks in two.

Christopher Ferris: These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations and reflect our views only as of today.

Christopher Ferris: We assume no obligation to update any such forward looking statements for a discussion of the material risks and uncertainties that could affect our actual results. Please refer to the identified risk in todays press release, and our SEC filings both available on the Investor Relations section of our website I'd also like to remind you that today's call will include certain non-GAAP.

<unk> press release, and our SEC filings both available on the Investor Relations section of our website I'd also like to remind you that today's call will include certain non-GAAP financial measures used by management to evaluate our ongoing operations and to aid investors in further understanding the company's fiscal third quarter 2025 performance. In addition to the impact of these items.

Christopher Ferris: <unk> financial measures used by management to evaluate our ongoing operations and to aid investors in further understanding the company's fiscal third quarter 2025 performance. In addition to the impact these items have on the financial results.

On the financial results.

Please refer to the reconciliation of our non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with U S. GAAP included in our earnings release under the Investor Relations section of our website.

Christopher Ferris: Please refer to the reconciliation of our non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with U S. GAAP included in our earnings release under the Investor Relations section of our website.

The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with U S. GAAP and now I would like to turn the call over to Bill. Thank you, Chris and good afternoon, everyone. We are pleased with our third quarter results, which again proved the high ROI and long term value of the <unk> customer engagement platform.

Christopher Ferris: The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with U S. GAAP.

Speaker Change: And now I'd like to turn the call over to Bill. Thank you, Chris and good afternoon, everyone. We are pleased with our third quarter results, which again proved the high ROI and long term value of the <unk> customer engagement platform, we generated a $152 $1 million of revenue up 23% year over year, while driving continued efficiency across our business and improving non-GAAP operating.

Bill: We generated $152 $1 million of revenue up 23% year over year, while driving continued efficiency across our business and improving non-GAAP operating margins by 580 basis points year over year.

Bill: I'm also proud to announce that we passed $600 million of committed annual recurring revenue during the quarter. Another testament to the strong demand for the ROI delivered by the brace customer engagement platform and for the second quarter in a row, we achieved positive non-GAAP net income and expect to maintain positive quarterly net income moving forward as planned non-GAAP operating income.

Christopher Ferris: Margins by 580 basis points year over year I'm.

Christopher Ferris: I'm also proud to announce that we passed $600 million of committed annual recurring revenue during the quarter. Another testament to the strong demand for the ROI delivered by the <unk> customer engagement platform and for the second quarter in a row, we achieved positive non-GAAP net income and expect to maintain positive quarterly net income moving forward as planned non-GAAP operating income.

<unk> took a slight step back this quarter due to seasonal investments in marketing and we remain on track to deliver positive non-GAAP operating income and free cash flow in the fourth quarter and to sustain both on a go forward basis. This is an exciting set of financial milestones on our way to becoming the leading customer engagement platform globally, and we look forward to generating meaningful operating income while also thoughtfully re.

Christopher Ferris: <unk> took a slight step back this quarter due to seasonal investments in marketing and we remain on track to deliver positive non-GAAP operating income and free cash flow in the fourth quarter and to sustain both on a go forward basis. This is an exciting set of financial milestones on our way to becoming the leading customer engagement platform globally, and we look forward to generating meaningful operating income while also thoughtfully re.

Bill: Investing to grow our business in the coming quarters and years during.

Bill: During the third quarter, we continued to capitalize on the legacy vendor replacement cycle. So carrying a diverse set of new business wins were braces, replacing legacy marketing clouds, including at a gaming company in North America, and airline and a financial planning company in APAC and a fashion brand in EMEA.

Christopher Ferris: Investing to grow our business in the coming quarters and years during.

Christopher Ferris: During the third quarter, we continued to capitalize on the legacy vendor replacement cycle, securing a diverse set of new business wins were braces, replacing legacy marketing clouds, including at a gaming company in North America, and airline and a financial planning company in APAC and a fashion brand in EMEA.

Bill: We also continue to win against both channel specific point solutions and homegrown tools across a diverse set of industries geographies and use cases. Some notable takeaways included a leading north American party planning application of <unk> in EMEA and a traditional media company in APAC, we grew our customer count by 48 during the quarter to 20211 up.

Christopher Ferris: We also continue to win against both channel specific point solutions and homegrown tools across a diverse set of industries geographies and use cases. Some notable takeaways included a leading north American party planning application of <unk> in EMEA and a traditional media company in APAC, we grew our customer count by 48 during the quarter to 20211 up.

Bill: 200 year over year, new business wins, and Upsells included E on financial services Company Purple Crumble cookies beyond next exact sciences Hugo boss in digital Kurt Geiger Love's travel stops in country stores lush cosmetics, Rightmove Smart News, Inc, Telstra and weather bug along with many others.

Christopher Ferris: 200 year over year, new business wins, and Upsells included E on financial services Company Purple Crumble cookies Jan next exact sciences Hugo boss in digital Kurt Geiger Love's travel stops in country stores lush cosmetics right move Smart News, Inc, Telstra and weather bug along with many others.

Customers were again, a strength with our $500000 plus era customers, increasing to 234 up 24% year over year evidence of how customers continue to leverage Rich first party data and advanced artificial intelligence to drive sophisticated cross channel customer engagement at scale.

Christopher Ferris: Customers were again, a strength with our $500000 plus are our customers increasing to 234 up 24% year over year evidence of how customers continue to leverage Rich first party data and advanced artificial intelligence to drive sophisticated cross channel customer engagement at scale.

Bill: And in another proof point of the growing base customer community. We're excited to see a growing number of new business deals, which were accelerated by the presence of marketers, who previously learned and leveraged <unk> and past roles at prior companies.

Christopher Ferris: And in another proof point of the growing base customer community. We're excited to see a growing number of new business deals, which were accelerated by the presence of marketers, who had previously learned and leveraged sprays and past roles at prior companies.

Bill: Well, we haven't seen a meaningful improvement to the demand environment quarter over quarter, we remain focused on executing against our long term product and financial goals, while positioning <unk> for long term category leadership.

Christopher Ferris: Well, we haven't seen a meaningful improvement to the demand environment quarter over quarter, we remain focused on executing against our long term product and financial goals, while positioning <unk> for long term category leadership.

Bill: Our path to category leadership requires a range of complementary investments, including the continued elevation of our brand and awareness strengthening our partner ecosystem globally, enhancing our product and channel offerings, improving system performance and easing the on ramp into brace for new customers. Further we believe that both the legacy replacement cycle and vendor consolidation trends.

Christopher Ferris: Our path to category leadership requires a range of complementary investments, including the continued elevation of our brand and awareness strengthening our partner ecosystem globally, enhancing our product and channel offerings, improving system performance and easing the on ramp into brace for new customers. Further we believe that both the legacy replacement cycle and vendor consolidation trends.

Bill: Will lead to share gains for brands as brands increasingly look to upgrade their customer engagement strategies and deploy new AI driven advancements to increase their productivity and enhance the relevance of their customer messaging.

Christopher Ferris: Will lead to share gains for brands as brands increasingly look to upgrade their customer engagement strategies and deploy new AI driven advancements to increase their productivity and enhance the relevance of their customer messaging.

Bill: Through the growth of our customer community and the successful execution of our product roadmap and global expansion strategy race can position itself as a global category leader in customer engagement, delivering increased relevance and personalization to consumers at scale.

Christopher Ferris: Through the growth of our customer community and the successful execution of our product roadmap and global expansion strategy brace can position itself as a global category leader in customer engagement, delivering increased relevance and personalization to consumers at scale.

Bill: As brands continue to invest in their customer engagement efforts. It is crucial to find efficient opportunities to initiate new relationships and strengthen existing ones and the period from Black Friday, cyber Monday is particularly crucial for many retail and e-commerce brands as they get a jump on the holiday season.

Christopher Ferris: As brands continue to invest in their customer engagement efforts. It is crucial to find efficient opportunities to initiate new relationships and strengthen existing ones and period from Black Friday, cyber Monday is particularly crucial for many retail and e-commerce brands as they get a jump on the holiday season.

Bill: This was reflected by both our record breaking message volumes and the continued rise in sophistication used to orchestrate and enhance the performance of messages sent via bridge over the four day weekend brace delivered over 50 billion messages up 35% year over year with a 100% uptime, we saw marketers moving even further away from batch and blast single channel campaigns to instead delivered.

Christopher Ferris: This was reflected by both our record breaking message volumes and the continued rise in sophistication used to orchestrate and enhance the performance of messages sent via bridge over the four day weekend brace delivered over 50 billion messages up 35% year over year with a 100% uptime, we saw marketers moving even further away from batch and blast single channel campaigns to instead deliver.

Bill: Dynamic data informed campaigns, reaching customers across a variety of channels. We also saw a 46% increase in the messaging volume orchestrated by cross channel campuses supported by a 31% increase in the number of unique campuses executed by a real time stream processing engine. The ryzen usage of canvas reflects a growing conviction that marketers must embrace an experimental data.

Christopher Ferris: Dynamic data informed campaigns, reaching customers across a variety of channels. We also saw a 46% increase in the messaging volume orchestrated by cross channel campuses supported by a 31% increase in the number of unique campuses executed by a real time stream processing engine. The ryzen usage of canvas reflects a growing conviction that marketers must embrace an experimental data.

Bill: <unk>, an omnichannel approach to customer engagement, driving responsive and sophisticated customer journeys that inspire and connect with consumers. In addition, we saw increased usage of brace AI features to enhance marketer productivity, while amplifying the results of campaigns themselves and finally, we witness increases in premium messaging, including Whatsapp up 36% year over year and gains.

Christopher Ferris: <unk>, an omnichannel approach to customer engagement, driving responsive and sophisticated customer journeys that inspire and connect with consumers. In addition, we saw increased usage of brace AI features to enhance marketer productivity, while amplifying the results of campaigns themselves and finally, we witness increases in premium messaging, including Whatsapp up 36% year over year and gains.

Bill: We're in product messaging with content cards volume up 53% year over year, and Theyre, not messaging, increasing 46% year over year.

Christopher Ferris: For in product messaging with content cards volume up 53% year over year, and then at messaging, increasing 46% year over year existing.

Bill: Thing at the leading edge of technology is in our DNA and at the core of our innovation roadmap, we foresaw the opportunity presented by the coming Widescale adoption of mobile more than a decade ago and have since worked relentlessly to seize that opportunity through the use of sophisticated technology focusing on product innovation that can accelerate the legacy replacement cycle and compel more brands to upgrade their customer engaged.

Christopher Ferris: Existing at the leading edge of technology is in our DNA and at the core of our innovation roadmap, we foresaw the opportunity presented by the coming Widescale adoption of mobile more than a decade ago and have since worked relentlessly to seize that opportunity through the use of sophisticated technology focusing on product innovation that can accelerate the legacy replacement cycle and compel more brands to upgrade their customer engagement.

Bill: Practices at our forge customer conference in late September we unveiled new low code and AI driven product innovations designed to more effectively personalize brands customer engagement efforts and drive more agile and productive marketing teams. These included project catalyst, our new brace AI driven agent, which we are developing to help brands deliver personalized customer engagement by rapidly.

Christopher Ferris: <unk> practices at our forge customer conference in late September we unveiled new low code and AI driven product innovations designed to more effectively personalize brands customer engagement efforts and drive more agile and productive marketing teams. These included project catalyst, our new brace AI driven agent, which we are developing to help brands deliver personalized customer engagement by rapid.

Bill: Creating testing and optimizing experienced variations at a scale that only AI can achieve we also debuted additional canvas template embrace AI assistant features to help marketers more easily get started and deliver sophisticated customer experiences and we shared upcoming expansions to our channel offerings, including line in Rcs business support and new Whatsapp features such as dynamic.

Christopher Ferris: Creating testing and optimizing experienced variations at a scale that only AI can achieve we also debuted additional campus template embrace AI assistant features to help marketers more easily get started and deliver sophisticated customer experiences.

Christopher Ferris: And we shared upcoming expansions to our channel offerings, including line in Rcs business support and new Whatsapp features such as dynamic images click tracking and commerce support I'd like to take a moment to highlight each of these enhancements starting with our in development raise AI agent code named project catalyst.

Bill: Just click tracking and commerce support I'd like to take a moment to highlight each of these enhancements starting with our in development raise AI agent code named project catalyst.

Bill: As you know for over a decade braces deploy dedicated teams of engineers and data scientists focused on using machine learning to integrate AI into our product with a multifaceted goal set of optimizing customer journeys, increasing the relevance of message content, improving marketer productivity and enhancing targeting strategies.

Christopher Ferris: As you know for over a decade braces deploy dedicated teams of engineers and data scientists focused on using machine learning to integrate AI into our product with a multifaceted goal set of optimizing customer journeys, increasing the relevance of message content, improving marketer productivity and enhancing targeting strategies.

Bill: Catalysts combines our past investments in automated decision, making and experiment optimization with frontier innovation and generative AI to help marketers craft and uncover the best experience for each individual consumer marketers using project catalysts should benefit from Brazos tightly integrated tech stack, combining its rich data integrations real time stream processor and cross channel architecture.

Catalysts combines our past investments in automated decision, making and experiment optimization with frontier innovation and generative AI to help marketers craft and uncover the best experience for each individual consumer marketers using project catalysts should benefit from Brazos tightly integrated tech stack, combining its rich data integrations real time stream processor and cross channel architecture.

Bill: Great relevant experiences across a range of digital touch points with project catalyst marketers can define guardrails for journeys or content specify their goals and then allow brace AI to optimize accordingly and.

Christopher Ferris: Relevant experiences across a range of digital touch points with project catalyst marketers can define guardrails for journeys or content specify their goals and then allow brace AI to optimize accordingly and.

Bill: In addition, marketers can combined capabilities across project catalyst and brace Candace, our No-code journey orchestration solution to bring together human inspired experiences with machine optimize performance and scale.

Christopher Ferris: In addition, marketers can combine capabilities across project catalyst and brace Candace, our no-code journey orchestration solution to bring together human inspired experiences with machine optimize performance and scale catalyst is assigned to truly break down the limits of experimentation as the agent can generate a multitude of variance for each component of that experience.

Bill: A list is assigned to truly break down the limits of experimentation as the agent can generate a multitude of variance for each component of that experience the attention grabbing headline the tone of the message that nudges and promotional offers available the channel mix optimal timing and more combining the best of each component to create an individual unique experience for each and every consumer.

Christopher Ferris: The attention grabbing headline the tone of the message that nudges and promotional offers available the channel mix optimal timing and more combining the best of each component to create an individual unique experience for each and every consumer with each one receiving the combination that's best suited for them and.

Bill: With each one receiving the combination that's best suited for them.

Bill: And with Configurable contact controls optimization levers experiment automation and real time reporting marketers can ensure they are in control of their engagement, making adjustments evolving focus areas and improving their business outcomes over time.

Christopher Ferris: And with Configurable content controls optimization levers experiment automation and real time reporting marketers can ensure they are in control of their engagement, making adjustments evolving focus areas and improving their business outcomes over time.

Catalyst is expected to be available in beta in the first half of next year, helping our customers deliver tailored one to one personalized experiences for their consumers at scale.

Christopher Ferris: Catalysts is expected to be available in beta in the first half of next year, helping our customers deliver tailored one to one personalized experiences for their consumers at scale.

Speaker Change: At Ford, We also unveiled new AI solutions that inspire marketers improve ease of use and enable more sophisticated use cases with less training upfront. These include our liquid assistant now generally available and our message template assistant currently in early access to extend the power of generative AI beyond coffee and image creation. These features help marketers create advanced logic.

Speaker Change: At Ford, We also unveiled new AI solutions that inspire marketers improve ease of use and enable more sophisticated use cases with less training upfront. These include our liquid assistant now generally available and our message template assistant currently in early access to extend the power of generative AI beyond copy and image creation. These features help marketers create advanced logic.

Speaker Change: For personalization as well as sophisticated message templates, all with a simple and interactive plaintext prompt.

Speaker Change: Zooming out a bit earlier this year, we announced the Braves data platform, our comprehensive set of data capabilities and partner integrations designed to streamline data unification activation and distribution.

The Braves data platform simplifies the process of collecting and organizing first party data from any source at forge in September we announced multiple enhancements to the brace data platform, including new cloud data ingestion integrations for AWS S. Three and Microsoft Azure as well as cloud data ingestion segments, which allow marketers to build audiences with a simple to use zero copy process.

Speaker Change: The brace data platform simplifies the process of collecting and organizing first party data from any source at forge in September we announced multiple enhancements to the <unk> data platform, including new cloud data ingestion integrations for AWS, three and Microsoft Azure as well as cloud data ingestion segments, which allow marketers to build audiences with a simple to use your okapi process.

We also debuted new automated identity resolution capabilities to help marketers maintain accurate customer profiles as consumers engage brands across a variety of digital touch points or they transition from anonymous to identified an area of increasing importance as the browser cookie landscape continues to evolve.

Speaker Change: We also debuted new automated identity resolution capabilities to help marketers maintain accurate customer profiles as consumers engage brands across a variety of digital touch points or they transition from anonymous to identified an area of increasing importance as the browser cookie landscape continues to evolve.

Speaker Change: Finally, we launched innovations to help marketers easily access insights that inform their high level of customer engagement strategies, both natively embrace reporting and analytics dashboards as well as through further enhancements to our integrations with third party business intelligence tools.

Speaker Change: These innovations illustrate our commitment to furthering marketers' ability to use first party data and an ever evolving set of channels to create more valuable customer experiences.

Speaker Change: And of course, we've continued to expand and deepen those channel offerings to help marketers reach consumers with the most relevant message anytime anywhere at forged we announced support for line. The most popular messaging App in Japan. That's also widely used in Thailand, Taiwan, and Indonesia lineup since launch to general availability and we've already had several existing customers purchase.

Speaker Change: Upsells, we also previewed enhancements to whatsapp, including dynamic images click tracking and commerce support scheduled to be generally available soon <unk>.

Speaker Change: Upsells, we also previewed enhancements to whatsapp, including dynamic images click tracking and commerce support scheduled to be generally available soon as.

Speaker Change: And we expanded traditional texting options with support for Rcs business messaging to help brands stay at the forefront of mobile innovation. We've already had our first customers send test Rcs messages and opened up our Rcs early access program to eligible customers earlier today with more content types scheduled to be supported in the coming months.

Speaker Change: And we expanded traditional texting options with support for Rcs business messaging to help brands stay at the forefront of mobile innovation, we've already had our first customers send tests Rcs messages and opened up our Rcs early access program to eligible customers earlier today with more content types scheduled to be supported in the coming months.

Speaker Change: As I close out I'm also excited to share that our commitment to innovation and industry leadership was recently highlighted by being named as a leader in the Gartner Magic quadrant for multichannel marketing hubs for the second consecutive year. We're proud of this placement and the recognition reinforces our commitment to helping brands meet evolving customer expectations through continued innovation.

As I close out I'm also excited to share that our commitment to innovation and industry leadership was recently highlighted by being named as a leader in the Gartner Magic quadrant for multichannel marketing hubs for the second consecutive year. We're proud of this placement and the recognition reinforces our commitment to helping brands meet evolving customer expectations through continued innovation.

Speaker Change: Finally, I'd like to update you on an important social impact initiative, we're excited to announce the brace successfully submitted its near term science based targets to the science based target initiative marketing a significant milestone in our sustainability journey. The science based target initiative is a globally recognized organization that helps companies set emissions reduction targets in line with the latest climate science spending.

Speaker Change: Finally, I'd like to update you on an important social impact initiative, we're excited to announce the price successfully submitted its near term science based targets to the science based target initiative marketing a significant milestone in our sustainability journey. The science based target initiative is a globally recognized organization that helps companies set emissions reduction targets in line with the latest climate science submitting.

Speaker Change: Our near term science based targets is a key step towards strengthening our sustainability program. We expect to have an approved target in FY 'twenty six aligning us with best in class standards for carbon reduction I'll wrap my remarks by reiterating our confidence in our long term growth story, we are committed to driving durable revenue growth operating efficiently and driving profitability. Thank you for your interest and support in <unk>.

Speaker Change: Our near term science based target is a key step towards strengthening our sustainability program. We expect to have an approved target in FY 'twenty six aligning us with best in class standards for carbon reduction I'll wrap my remarks by reiterating our confidence in our long term growth story, we are committed to driving durable revenue growth operating efficiently and driving profitability. Thank you for your interest and support in <unk>.

Isabella: And now I'll turn the call over to Isabella.

Isabella: Thank you Bill and thank you everyone for joining us today as Bill stated, we reported a solid third quarter with revenue, increasing 23% year over year to $152 $1 million driven by a combination of existing customer contract expansions renewals and new business subscription revenue remains the primary component of our total top line contributing.

Speaker Change: And now I'll turn the call over to Isabella.

Isabella: 96% of our third quarter revenue, while the remaining 4% represents a combination of recurring professional services and one time configuration and onboarding fees.

Subscription revenue remains the primary component of our total top line contributing 96% of our third quarter revenue, while the remaining 4% represents a combination of recurring professional services and one time configuration and onboarding fees.

Isabella: Customer count increased 10% year over year to 2000, and 211 customers as of October 31 up 200 from the same period last year and up 48 from the prior quarter. Our total number of large customers, which we define as those spending at least $500000 annually grew 24% year over year to 234 and <unk>.

Isabella: Total customer count increased 10% year over year to 2000, and 211 customers as of October 31 up 200 from the same period last year and up 48 from the prior quarter. Our total number of large customers, which we define as those spending at least $500000 annually grew 24% year over year to 234 <unk>.

Isabella: As of October 31 contributed 61% to our total <unk>. This compares to a 58% contribution as of the same quarter last year.

Isabella: As of October 31 contributed 61% to our total <unk>. This compares to a 58% contribution as of the same quarter last year measured across all customers dollar based net retention was 113% while dollar based net retention for our large customers 216%.

Isabella: Across all customers dollar based net retention was 113% while dollar based net retention for our large customers with 116%.

Isabella: Expansion was again broadly distributed across industries and geographic regions revenue outside the U S contributed 45% of our total revenue in the third quarter consistent with the prior quarter of this year and up one percentage point from 44% in the prior year quarter.

Isabella: Spansion was again broadly distributed across industries and geographic regions.

Revenue outside the U S contributed 45% of our total revenue in the third quarter consistent with the prior quarter of this year and up one percentage point from 44% in the prior year quarter.

Isabella: In the third quarter, our total remaining performance obligation was $717 million up 28% year over year and up 4% sequentially current Rps was $458 million up 24% year over year and up 5% sequentially. The year over year increases were driven by contract renewals and upsells and assigning of.

Isabella: In the third quarter, our total remaining performance obligation was $717 million up 28% year over year and up 4% sequentially current R. P. L was $458 million up 24% year over year and up 5% sequentially. The year over year increases were driven by contract renewals and upsells and assigning of.

Isabella: New customer contracts.

Isabella: Overall, our dollar weighted contract length remains at just over two years.

Isabella: New customer contracts.

Isabella: non-GAAP gross profit in the quarter was $107 million, representing a non-GAAP gross margin of 75%. This compares to a non-GAAP gross profit of $89 million and non-GAAP gross margin of 71, 4% in the third quarter of last year decline in year over year margin was primarily driven by expansion of premium messaging channels.

Isabella: Overall, our dollar weighted contract length remains at just over two years.

Isabella: non-GAAP gross profit in the quarter was $107 million, representing a non-GAAP gross margin of 75%. This compares to a non-GAAP gross profit of $89 million and non-GAAP gross margin of 71, 4% in the third quarter of last year. The decline in year over year margin was primarily driven by expansion of premium messaging channels.

Isabella: Partially offset by continued cost optimization of our technology stack with additional benefits from personnel efficiencies.

Isabella: I'll remind you that we increased our long term non-GAAP gross margin target by 200 basis points to 69% to 74% at our recent Investor day in September as we continue to realize scaling efficiencies across both personnel and technology costs.

Isabella: non-GAAP sales and marketing expenses were $65 million or 43% of revenue compared to $58 million or 47% of revenue in the prior year quarter.

non-GAAP sales and marketing expenses were $65 million or 43% of revenue compared to $58 million or 47% of revenue in the prior year quarter. While the dollar increase reflects our year over year investments in head count costs to support our ongoing growth and global expansion. The improved efficiency reflects our disciplined investment approach to resource deployment.

Isabella: While the dollar increase reflects our year over year investments in head count costs to support our ongoing growth and global expansion. The improved efficiency reflects our disciplined investment approach to resource deployment across our go to market organization.

Isabella: non-GAAP R&D expense was $22 million or 15% of revenue compared to $20 million or 16% of revenue in the prior year quarter.

Cross our go to market organization.

Isabella: non-GAAP R&D expense was $22 million or 15% of revenue compared to $20 million or 16% of revenue in the prior year quarter.

Isabella: The dollar increase was primarily driven by increased headcount costs to support the expansion of our existing offerings as well as to develop new products and features to drive crowd. Our R&D expenditures reflect our intentional yet disciplined technology investment strategy as we approach our long term non-GAAP R&D percent of revenue target of 13% to 15% non.

Isabella: The dollar increase was primarily driven by increased head count costs to support the expansion of our existing offerings as well as to develop new products and features to drive growth. Our R&D expenditures reflect our intentional yet disciplined technology investment strategy as we approach our long term non-GAAP R&D percent of revenue target of 13% to 15% non-GAAP G&A.

Isabella: non-GAAP G&A expense was $22 million or 15% of revenue compared to $19 million or 15% of revenue in the prior year quarter. The dollar increase was driven by investments to support overall company growth and global expansion.

Isabella: Expense was $22 million or 15% of revenue compared to $19 million or 15% of revenue in the prior year quarter. The dollar increase was driven by investments to support overall company growth and global expansion.

Isabella: non-GAAP operating loss was $2.2 million or negative 1% of revenue compared to a non-GAAP operating loss of $8 $9 million or negative 7% of revenue in the prior year quarter. As a reminder, third quarter operating income was impacted by approximately $5 million related to the cost of several global customer events, including forged our annual fee.

Isabella: non-GAAP operating loss was $2.2 million or negative 1% of revenue compared to a non-GAAP operating loss of $8 $9 million or negative 7% of revenue in the prior year quarter.

Isabella: As a reminder, third quarter operating income was impacted by approximately $5 million related to the cost of several global customer events, including forged our annual flagship customer of that.

Speaker Change: Like ship customer of that now.

Speaker Change: non-GAAP net income attributable to praise shareholders in the quarter was $2 $5 million or two cents per share compared to a loss of $4 $5 million or a loss of five cents per share in the prior year quarter now turning to the balance sheet and cashless statement. We ended the quarter with approximately $493 $1 million in cash cash equivalents restricted cash and marketable securities.

Isabella: non-GAAP net income attributable to praise shareholders in the quarter with $2 5 million or two cents per share compared to a loss of $4 $5 million or a loss of five cents per share in the prior year quarter now turning to the balance sheet and cashless statement. We ended the quarter with approximately $493.1 million in cash cash equivalents restricted cash and marketable securities.

Speaker Change: Cash used in operations during the quarter was $11.4 million compared to cash used in operation of $2 million in the prior year quarter, including the cash impact of capitalized costs free cash flow in the quarter was negative $14 $2 million compared to a negative free cash flow of $5 $9 million in the prior year quarter and as we have noted in the past.

Isabella: Cash used in operations during the quarter was $11 $4 million compared to cash used in operation of $2 million in the prior year quarter, including the cash impact of capitalized costs free cash flow in the quarter was negative $14 $2 million compared to a negative free cash flow of $5 $9 million in the prior year quarter and as we have noted in the past.

Speaker Change: We expect our free cash flow to continue to fluctuate from quarter to quarter, given the timing of customer and vendor payments.

Isabella: First we expect our free cash flow to continue to fluctuate from quarter to quarter, given the timing of customer and vendor payments.

Speaker Change: Now turning to guidance for the fourth quarter of fiscal 2025, we expect revenue to be in the range of $155 million to $156 million, which represents a year over year growth rate of approximately 19% at the midpoint fourth quarter non-GAAP operating income is expected to be in the range of $2 million to $3 million at the midpoint. This implies a non-GAAP operating.

Isabella: Now turning to guidance for the fourth quarter of fiscal 2025, we expect revenue to be in the range of $155 million to $156 million, which represents a year over year growth rate of approximately 19% at the midpoint fourth quarter non-GAAP operating income is expected to be in the range of $2 million to $3 million at the midpoint. This implies a non-GAAP operating.

Margin of approximately 1.6%.

Speaker Change: Fourth quarter non-GAAP net income is expected to be $5 million to $6 million and fourth quarter non-GAAP net income per share in the range of five to six cents per share based on approximately $107 5 million weighted average diluted shares outstanding during the period.

Isabella: Margin of approximately 1.6%.

Isabella: Fourth quarter non-GAAP net income is expected to be $5 million to $6 million and fourth quarter non-GAAP net income per share in the range of five to six cents per share based on approximately 107.5 million weighted average diluted shares outstanding during the period for the full fiscal year 2025, we expect total revenue to be in the range of 588 to 500 and <unk>.

Speaker Change: For the full fiscal year 2025, we expect total revenue to be in the range of $588 million to $589 million, which represents a year over year growth rate of approximately 25% at the midpoint fiscal year 2025, non-GAAP operating loss is expected to be in the range of $5 million to $6 million at the midpoint. This implies a non-GAAP operating margin of negative one.

Isabella: $89 million, which represents a year over year growth rate of approximately 25% at the midpoint fiscal year 2025, non-GAAP operating loss is expected to be in the range of $5 million to $6 million at the midpoint. This implies a non-GAAP operating margin of negative 1% roughly a 750 basis point improvement versus fiscal year 'twenty 'twenty four.

Speaker Change: Percent, roughly a 750 basis point improvement versus fiscal year 2024, non-GAAP net income for the same period is expected to be in the range of $11 million to $12 million and net income per share is expected to be 10 to 11 cents per share based on a full year weighted average diluted share count of approximately 107 million shares and <unk>.

Speaker Change: non-GAAP net income for the same period is expected to be in the range of $11 million to $12 million and net income per share is expected to be 10 to 11 cents per share based on a full year weighted average diluted share count of approximately 107 million shares and as Bill noted we remain on track to deliver a positive non-GAAP operating income and free cash flow beginning in Q4.

Speaker Change: As Bill noted we remain on track to deliver a positive non-GAAP operating income and free cash flow beginning in Q4 of this year.

Speaker Change: We remain excited about praises future and remain committed to providing industry, leading customer engagement solutions and driving product innovation, while executing against our long term financial targets and with that we'll now open the call for questions. Operator, please begin the Q&A.

Speaker Change: Four of this year.

Speaker Change: We remain excited about <unk> future and remain committed to providing industry, leading customer engagement solutions and driving product innovation, while executing against our long term financial targets and with that we'll now open the call for questions. Operator, please begin the Q&A.

Speaker Change: We will now begin the Q&A session, if you'd like to ask a question. Please use the Raytheon feature at the bottom of your zoom window.

Speaker Change: We will now begin the Q&A session.

Speaker Change: Wait for a moment, while the queue assembles.

You'd like to ask a question. Please use the Raytheon feature at the bottom of your zoom window I'll.

Speaker Change: Our first question.

I'll wait for a moment, while the queue assembles.

Speaker Change: Will come from Ryan Macwilliams with Barclays.

Speaker Change: Please.

Our first question.

Speaker Change: Don and ask your question.

Speaker Change: Will come from Ryan Macwilliams with Barclays.

Speaker Change: Okay.

Hey, Thanks for taking the question Bill will love to hear more about project catalyst. If will this will be included as a part of Kansas canvas or be a separate add on and then maybe if you aren't charging for it discretely. How do you think this can be additive to raises the results next year. Thanks.

Speaker Change: Please.

Speaker Change: Line and ask your question.

Speaker Change: Hey, Thanks for taking the question Bill will love to hear more about project catalyst will this will be included as a part of Kansas canvas or be a separate add on and then maybe if you aren't charging for discretely. How do you think this can be additive to bridges. The results next year. Thanks.

Speaker Change: Yeah, Great question, and we're obviously really excited to see project catalysts start to get into customers' hands as we release it into beta and then continue its progression next year. So we're expecting project catalyst to absolutely be a part of canvas and that's one of the things that I'm actually most excited about as this ushers in a new era of canvas design you know historically.

Speaker Change: Yeah, Great question, and we're obviously really excited to see project catalysts start to get into customers' hands as we release it into beta and then continue its progression next year. So we're expecting project catalyst absolutely be a part of canvas and that's one of the things that I'm actually most excited about as this ushers in a new era of canvas design historically.

Speaker Change: Obviously, we've done a lot with artificial intelligence machine learning to be able to automatically make decisions when it comes to orchestration or to targeting and we've been able to help optimize the content through things like personalization or localization or a dry better results, but what this allows us to do actually is have the market or come in and just tell us the goal and then we opt.

Speaker Change: Obviously, we've done a lot with artificial intelligence machine learning to be able to automatically make decisions when it comes to orchestration or to targeting we'd been able to help optimize the content through things like personalization or localization or a drive better results, but what this allows us to do actually is have the market or come in and just tell us the goal and then we opt.

Speaker Change: Is that on a one on one basis with the aid obviously of generative AI content generation with hopefully as we continue to see more of the reasoning capabilities of frontier all our models continue to improve throughout the year and in the years to come ought to be able to make more and more comprehensive decisions throughout the journey and then continuing to optimize that on a one on one day.

Speaker Change: Is that on a one on one basis with the aid obviously of generative AI content generation with hopefully as we continue to see more of the reasoning capabilities of frontier all our models continue to improve throughout the year and in the years to come out and be able to make more and more comprehensive decisions throughout the journey and then continuing to optimize that on a one on one day.

Speaker Change: <unk> now I've spoken about personalized path quite a bit in the past because it's an exciting place where we already do a one on one optimization, but the way that something like personalized path works marketers still need to build different variance and so that limits them. Both from the kind of productivity side of the house because they have to literally create more of those variance in.

Speaker Change: Now I've spoken about personalized path quite a bit in the past because it's an exciting place where we already do a one on one optimization, but the way that something like personalized path works marketers still need to build different variance and so that limits them. Both from the kind of productivity side of the house because they have to literally create more of those variance in.

Speaker Change: Build them out within canvas, but it also limits our ability to do that full one on one optimization at scale with as many degrees of freedom as project catalyst is going to bring to bear and so we're really excited about it bringing in this kind of new era of customer journey design. If you will to really be a companion to that journey optimizing for exactly what the most important goals are.

Speaker Change: Build them out within canvas, but it also limits our ability to do that full one one optimization at scale with as many degrees of freedom as project catalyst is going to bring to bear and so we're really excited about it bringing in this kind of new era of customer journey design. If you will to really be a companion to that journey optimizing for exactly what the most important goals are.

Of the businesses that we're working with and then having that live within a really robust environment in Kansas, where customers will be able to guide configure test the different versions of catalyst and their preexisting solutions head to head against each other be able to use canvases robust reporting frameworks in order to understand performance over time and how that's evolving.

Of the businesses that we're working with and then having that live within a really robust environment in canvas, where customers will be able to guide configure test the different versions of catalyst and their preexisting solutions head to head against each other be able to use canvases robust reporting frameworks in order to understand performance over time and how that's evolving.

Speaker Change: And really just all the capabilities that you need around these frontier capabilities in order to really bring them to life quickly now from a monetization standpoint, I'm definitely still early days, but this will be a paid in premium feature our first the first focus on getting it out there and kind of optimizing its performance and usability and we're going to have two different options for pricing. This the first one is gonna be.

Speaker Change: And really just all the capabilities that you need around these frontier capabilities in order to really bring them to life quickly now from a monetization standpoint, I'm definitely still early days, but this will be a paid in premium feature our froze for first focus on getting it out there and kind of optimizing its performance and usability and we're going to have two different options for pricing. This the first one is gonna be.

Speaker Change: Leveraging our flexible credits model and we will talk about that more I'm sure throughout the call and the progress that we've been making there to charge per in vacation or establishing as a net new SKU and it'll really depend on the kind of the the volume and.

Speaker Change: Leveraging our flexible credits model and we will talk about that more I'm sure throughout the call and the progress that we've been making there to charge per invocation or establishing as a net new SKU and it'll really depend on the kind of the the volume and the cost function as we get it out into customer hands and start to see the performance there.

Speaker Change: The cost function as we get it out into customer hands and start to see the performance there.

Speaker Change: Excellent and then one for Isabelle how should we think about the dollar based net retention rate within the third quarter itself and I know, we're still going through some of the renewals, but any update on how we should think about the dollar based net retention rate from here. Thanks.

Speaker Change: Excellent and then one.

Speaker Change: For Isabelle how should we think about the dollar based net retention rate within the third quarter itself and I know, we're still going through some of the renewals, but any update on how we should think about the dollar based net retention rate from here.

Speaker Change: Yeah. So we back into some in September we gave an indication of where we thought the year would land around 110 am and so when you think about where we are in Q3 that 113 that number is actually it's a rounding up to 113, so its actually landing pretty much where we would have anticipated it to to land in.

Speaker Change: Yeah. So we back our into some in September we gave an indication of where we thought the year would land around a 110 am and so when you think about where we are in Q3 that 113 that number is actually it's a rounding up to 113, so its actually landing pretty much where we would have anticipated it too to land in.

Speaker Change: In the context of that visibility that we wanted to provide for that at year end number and so we are encouraged by.

Speaker Change: The context of that.

Speaker Change: Visibility that we wanted to provide for that at year end number and so we are encouraged by.

Speaker Change: The some of the in quarter stability that we're seeing but you know we do continue to see some pressure on this metric and so the that 110 number will stick to that for after the end of the year.

Speaker Change: Some of the in quarter stability that we're seeing but we do continue to see some pressure on this metric and so the that 110 number we'll we'll stick to that for after the end of the year.

Speaker Change: Excellent appreciate the color thanks, guys.

Speaker Change: Our next.

Speaker Change: She comes from Gabriela Borges with Goldman Sachs. Please UN mute your line and ask your question.

Speaker Change: Our next question comes from Gabriela Borges with Goldman Sachs. Please on mute your line and ask your question.

Gabriela Borges: Hi, good afternoon. Thank you Bill.

Gabriela Borges: I wanted to ask about some of the improvements that you've been making what the heck out of market at sales and marketing productivity, maybe just level thoughtful half I'll, let Karen your initiatives are going.

Hi, Good afternoon. Thank you Bill I wanted to ask about some of the improvements that you've been making what the heck out of market at sales and marketing productivity.

Gabriela Borges: About tightened credit.

Speaker Change: Maybe just level fossil half I'll, let Karen your initiatives are going to be talking about tightened credit.

Gabriela Borges: No.

Gabriela Borges: <unk> talking about ways to improve engagement within the platform and customer success, So would love to hear it taking a step back how some other questions. Thanks.

Speaker Change: I tried a different muscle car, that's higher or at least talking about ways to improve engagement within the platform and customer success. So would love to hear it taking a step back how some other questions. Thanks.

Speaker Change: Yeah, absolutely so I'll start with a flexible credit just as a continuation from Ryans question as well and we actually already have over 450 customers that have purchased the flexible message sending credits across the various customer base. So rapidly approaching a quarter of our legacy customer base, but it's also a very high percentage of all incoming customers and that's already enabling a few.

Speaker Change: Yeah, absolutely so I'll start with a flexible credit just as a continuation from Ryan's question as well and we actually already have over 450 customers that have purchased the flexible message sending credits across the various customer base. So rapidly approaching a quarter of our legacy customer base, but it's also a very high percentage of all incoming customers and that is already enabling a few.

Speaker Change: New exciting things you know first of all we launched line earlier this year and all of those.

Speaker Change: All of the early line Upsells were done with flexible credits and not only that but actually the way that we price them is a pilot for how we're anticipating pricing things like whatsapp dynamic pricing dynamic message pricing in the future where a customer simultaneously has a billing relationship with lined by the message volumes and then braise or selling.

Speaker Change: Exciting things you know first of all we launched line earlier this year and all of those.

Speaker Change: Them, a higher margin kind of higher up in the software stack orchestration personalization and reporting capability and so you know as we continue to push ahead on both the flexible credits being able to sell existing channels. It's also unlocking great opportunities for new channels. Another great Testament to that actually is that we announced earlier today.

Speaker Change: Our higher margin kind of higher up in the software stack orchestration personalization and reporting capability and so as we continue to push ahead on both the flexible credits being able to sell existing channels. It's also unlocking great opportunities for new channels. Another great Testament to that actually is that we announced earlier today.

Speaker Change: To eligible customers in the U S and the U K I a pilot for early early access to premium Rcs messaging that is immediately available to those customers who have purchased flexible message credits already who are already sending out some asset in the U K and the U S, but it's something where they're not gonna have to process, a new order for them to buy a new message channel and so we can already see.

Speaker Change: Are you eligible customers in the U S and the U K I a pilot for early early access to premium Rcs messaging that is immediately available to those customers who have purchased flexible message credits already who are already sending us a mass and in the U K and the U S, but it's something where they're not going to have to process, a new order for them to buy a new message channel and so we can already see.

Speaker Change: <unk> the great benefits both from the flexibility of how we can bring new channels to market, but also being able to speed up the go to market side I mean, as we've discussed in the past as well, we think that customer's ability to use these channels more flexibly and use these flexible credits more fungible you will also support expansion overtime and.

Speaker Change: The great benefits both from the flexibility of how we can bring new channels to market, but also being able to speed up the go to market side I mean, as we've discussed in the past as well, we think that customer's ability to use these channels more flexibly and use these flexible credits more fungible you will also support expansion over time and you know.

Speaker Change: No lead to less instances of places, where a customer maybe estimated a particular channel or our country channel in the wrong way and then we experienced partial churn at the renewal, which is something that we've talked about seeing throughout this year. So those are all really great.

Lead to less instances of places, where a customer may be estimated a particular channel or our country channel in the wrong way and then we experienced partial churn at the renewal, which is something that we've talked about seeing throughout this year. So those are all really great.

Speaker Change: The band since we think that our customer friendly as well as really helping out from a go to market productivity standpoint. We're also really excited in the quarter to bring on a new VP of sales for the Americas I'm, Jerry Shaun joined US I use previously at Salesforce for 11, and a half years and that actually completes the transition of our global sales leadership that began with the elevation of our global S. E T.

Speaker Change: Advanced since we think that our customer friendly as well as really helping out from a go to market productivity standpoint. We're also really excited in the quarter to bring on a new VP of sales for the Americas I'm, Jerry Shaun joined US I use previously at Salesforce for 11, and a half years and that actually completes the transition of our global sales leadership that began with the elevation of our global F C.

Speaker Change: Of sales at the beginning of this fiscal year with when Eric Sanders stepped into that role and the hiring of our VP of sales for APAC in December of last year, and then we saw the promotion of our dock regional leader to the VP of sales for EMEA over the summer and so I'm really great to see all of those leadership roles now fully completed around the sales organization and there's just been a lot of great.

Speaker Change: P of sales at the beginning of this fiscal year with when Eric Sanders stepped into that role and the hiring of our VP of sales for APAC in December of last year, and then we saw the promotion of our dock regional leader to the VP of sales for EMEA over the summer and so I'm really great to see all of those leadership roles now a fully completed around the sales organization and there's just been a lot of gray.

Speaker Change: <unk> as well as we've continued to strengthen the Braves value framework motion as we continue to activate the partner ecosystem and have been bringing more of our services and agencies partners into deal cycles earlier to be able to coordinate with them better that's leading to higher win rates, it's leading to a better onboarding outcomes as theres more services support throughout so really excited.

Speaker Change: Progress as well as we've continued to strengthen the Braves value framework motion as we've continued to activate the partner ecosystem and had been bringing more of our services and agencies partners into deal cycles earlier to be able to coordinate with them better that's leading to higher win rates, it's leading to a better onboarding outcomes as theres more services support throughout so really.

Speaker Change: See these different dimensions of investment in the go to market motion and we're starting to see those bear fruit.

Speaker Change: To see these different dimensions of investment in the go to market motion and we're starting to see those bear fruit.

Speaker Change: Absolutely I'll ask one follow up on that go to market, which is specifically around the price the startups in the franchise programs are a smaller company and maybe as part of that maybe give us an update on the.

Speaker Change: Absolutely I'll ask one.

Speaker Change: One follow up on the go to market, which is specifically around the price the startups in the free trial programs are a small company and maybe as part of that maybe give us an update on the health of that small company ecosystem. That's all thank you.

Speaker Change: Health attack small company ecosystem, that's all thank you.

Speaker Change: Yes, I think that we're continuing to see you know the health metrics around the SMB sector are mean theyre maintaining the same challenges we've seen throughout the year just as a reminder, we did lower our sales capacity in that category I midway through last year and so while our sales team there does continue to be productive and we've.

Speaker Change: Yes, I think that we're continuing to see you know the health metrics around the SMB sector.

Speaker Change: I mean, they are maintaining the same challenges we've seen throughout the year just as a reminder, we did lower our sales capacity in that category I midway through last year and so while our sales team. There does continue to be productive and we've been and I'm happy to see their progress with new business. There. It's definitely a category that has still been challenged on the free trial side at all.

Ben and I'm happy to see their progress with new business. There. It's definitely a category that has still been challenged on the free trial side I'll remind everyone as well that our free trial goal is twofold first of all is really helping with top of funnel awareness in and those those customers you know in particular that might participate in the brace for startups program or those that are in geographies.

Speaker Change: To remind everyone as well that our free trial goal is twofold first of all is really helping with top of funnel awareness in and those those customers you know in particular that might participate in the brace for startups program or those that are in geographies around the world that we maybe don't have a direct sales presence and and just being able to give them an opportunity to have a more fulsome.

Speaker Change: Around the world that we maybe don't have a direct sales presence and and just being able to give them an opportunity to have a more fulsome experience within abrase trial environment right out of the gate, but also to be able to be there as a sandbox environment during enterprise sales cycles and so we're seeing good early progress in both of those use cases are we're definitely learning and Iterating as we go.

<unk> within Abrase trial environment right out of the gate, but also to be able to be there as a sandbox environment during enterprise sales cycles and so we're seeing good early progress in both of those use cases are we're definitely learning and Iterating as we go as we're seeing places where you know a product that had previously been gated by you know very deliberate onboarding, obviously is going to have some rough edges.

We're seeing places where you know a product that had previously been gated by you know very deliberate onboarding, obviously is going to have some rough edges and we're still working on smoothing out those when we find them and improving the on ramp into <unk>, but we think that it's it's a obviously a really exciting investment area for us as we continue to focus on product led growth investments that are going to make our existing.

Speaker Change: And we're still working on smoothing out those when we find them and improving the on ramp into brain, but we think that it's it's a obviously a really exciting investment area for us as we continue to focus on product led growth investments that are going to make our existing sales team more productive in the near term and then also allow us to unlock a much larger opportunity over the long term with them.

Speaker Change: Sales team more productive in the near term and then also allow us to unlock a much larger opportunity over the long term with a big customer addressable customer base.

Speaker Change: Uh huh.

Our big customer addressable customer base.

Speaker Change: Our next question comes from Tyler Radke with Citi. Please on your line and ask your question.

Speaker Change: Well it makes sense.

Speaker Change: Our next question comes from Tyler Radke with Citi. Please send me your line and ask your question.

Speaker Change: Hi, good evening. Thanks for taking the question Bill you talked a lot about project catalyst and I'm wondering if you could just sort of frame how youre seeing the conversations just around Egencia AI.

Speaker Change: And front office above obviously up sales force out there talking a lot about agent force.

Speaker Change: You did talk about a lot of competitive.

Speaker Change: In front office above obviously up Salesforce out there talking a lot about agent force I know you did talk about a lot of competitive.

Speaker Change: Takeaways being strong in the quarter, but what role are customers sort of viewing braised in this context and do you think the focus on agent take AI, but kind of the incumbent on office providers sort of helps or hurts your.

Speaker Change: Takeaways being being strong in the quarter, but what role are customers sort of viewing braised in this context and do you think the focus on Agentic AI, but kind of the incumbent on office providers sort of helps or hurts your.

Speaker Change: Competitive win rates over time.

Yeah. So there's a lot to unpack there and you know I think that just to speak to sales force out of the gate and what we're seeing competitively you know obviously with their huge focus on agent force I think that the another consequence of that is that they've clearly taken their eye off the ball in the Salesforce marketing cloud and it's not just their existing in particular enterprise customers, but also the.

Speaker Change: Competitive win rates over time.

Speaker Change: Yeah. So there's a lot to unpack there and you know I think that just to speak to sales force out of the gate and where we're seeing competitively you know obviously with their huge focus on agent force I think that the another consequence of that is that they've clearly taken their eye off the ball in the Salesforce marketing cloud and it's not just their existing in particular enterprise customers, but also the <unk>.

Speaker Change: Agency and analyst community, they're noticing and we're excited that that's opening the door to a new generation of both ecosystem relationships.

Speaker Change: Agency and analyst community, they're noticing and we're excited that that's opening the door to a new generation of bolt ecosystem relationships.

Speaker Change: And you know specifically a lot of businesses out there that build great agency practices on the back of Salesforce marketing cloud are now kind of picking up their heads and looking around and realizing that that product has been by and large orphan by salesforce in terms of future investment and you know they need to work out where to build future practices and I think that's really well time for us continuing to mature our.

Speaker Change: Specifically a lot of businesses out there that built great agency practices on the back of Salesforce marketing cloud are now kind of picking up their heads and looking around and realizing that that product has been by and large orphan by salesforce in terms of future investment and you know they need to work out where to build future practices and I think that's really well time for us continuing to mature our.

Speaker Change: One ecosystem support in our own agency.

Speaker Change: Partnership work and so we're excited about that and you know seeing both previous salesforce customers that may have been in the kind of late majority are in the laggard side, who still haven't ever evaluated new modern solutions. This is giving them a good reason to start to pick up their heads and and look at that and so we're excited about that competitive opportunity I think from an age.

Speaker Change: One ecosystem support in our own agency.

Partnership work and so we're excited about that and seeing both previous salesforce customers that may have been in the kind of late majority are in the laggard side, who still haven't ever evaluated new modern solutions. This is giving them a good reason to start to pick up their heads and and look at that and so we're excited about that competitive opportunity I think from an agent.

Speaker Change: Perspective, you know and what we're seeing with a broader conversation to go back to the beginning of your question you know, there's definitely still a lot of noise out in the market. The underlying technology. In this space continues to advance extremely rapidly I think that we're and so therefore, we are also seeing I think a wide array of approaches to can have testing or implementing a generative.

I backed capabilities within our marketing stack within customer engagement within product delivery.

Speaker Change: I think that also it its really interesting to look at where we've seen broadly across the marketing space and this is in the third party, an advertising world, where brace doesn't operate as much but it's no surprise that some of the first places that the broader marketing industry saw Jenny I start to drive results was when that generative content production got married with an existing machine learning system and when I.

Speaker Change: I backed capabilities within our marketing stack within customer engagement within product library.

Speaker Change: Say something like that I'm thinking specifically of matters AD products. You know you have a massive experiment optimization engine, that's already operating and its eagerly awaiting new content variance to get fed into it and you know when I think about that as an example, and then we think about brace canvas and we think about the Braves data platform and how Braves AI has been able to be integrated throughout the stack in that.

Speaker Change: Say something like that I'm thinking specifically of Meadows AD products you have a massive experiment optimization engine, that's already operating and its eagerly awaiting new content variance to get fed into it and you know when I think about that as an example, and then we think about brace canvas and we think about the Braves data platform and how Braves AI has been able to be integrated throughout the stack in that are.

Speaker Change: Our our differentiated foundations in terms of real time data access the ability to rapidly understand context, and then all the advanced optimization that we're able to do around experimentation I think Fraser continues to be extremely well positioned with all the right foundations and the surrounding capabilities to continue to ingest and take advantage of new advances.

In the state of the art and and that I think is where we're investing you know we are simultaneously doing things like upgrading the canvas language to support things like canvas contacts and continuing to upgrade the run time to be able to better I have provide better native support for things like conversational use cases within that we're continuing to expand across all these new.

Speaker Change: In the state of the art and and that I think is where we're investing you know we are simultaneously doing things like upgrading the canvas language to support things like canvas contacts and continuing to upgrade the run time to be able to better I have provide better native support for things like conversational use cases within that we're continuing to expand across all these new.

Speaker Change: Channel options, so that as the kind of journey II.

Speaker Change: Reasoning capability or the content optimization capability continues to advance that we're going to have the most optionality to be able to leverage that across channels supported channels. You know of anyone in the industry and at the same time, obviously investing in our own agency capability through things like project catalyst and so broadly when we look at the space. It's still one that's moving very fast I don't think there.

Speaker Change: Channel options, so that as the kind of journey II.

Speaker Change: Reasoning capability or the content optimization capability continues to advance that we're going to have the most optionality to be able to leverage that across channels supported channels. You know of anyone in the industry and at the same time, obviously investing in our own agency capability through things like project catalyst and so broadly when we look at the space you know it's still one that is moving very fast I don't think there.

Speaker Change: Is anything near an industry consensus across marketers about exactly where to be placing their bets you know broadly across the space, but I continue to also feel really good about the preexisting advantages that raise is going to be able to leverage as we continue to bake braised AI you know more broadly into the platform and in VAT advance our canvas environment and then.

Anything near an industry consensus across marketers about exactly where to be placing their bets you know broadly across the space, but I continue to also feel really good about the preexisting advantages that Braves is gonna be able to leverage as we continue to bake braised AI, you know more broadly into the platform and in bad advance our canvas environment and then.

When we look at that against what we're seeing with both Salesforce and Adobe, both effectively and admitting that the prior products that they had in the space around Adobe's campaign products and the Salesforce marketing cloud are not fit for purpose for modern customer engagement use cases, they're gonna require a rebuild there obviously I'm going to invest in and do that but during that transition.

Speaker Change: When we look at that against what we're seeing with both Salesforce and Adobe, both effectively and admitting that the prior products that they had in the space around Adobe's campaign products and the Salesforce marketing cloud are not fit for purpose for modern customer engagement use cases, they're gonna require a rebuild there obviously I'm going to invest in and do that but during that transition.

Speaker Change: Period, it's a great opportunity for <unk> to be able to step in to both the customer and the ecosystem of the partner ecosystem community and be able to build more momentum in a place that you know they definitely had a strong incumbent advantage for the better part of the last decade.

Speaker Change: Period, it's a great opportunity for <unk> to be able to step in to both the customer and to the ecosystem.

Speaker Change: Partner ecosystem community and be able to build more momentum in a place that they definitely had a strong incumbent advantage for the better part of the last decade.

Speaker Change: Great. Thanks for all the detail Bill Oh up to you Isabelle is as we look at.

Speaker Change: Bookings in the quarter.

Speaker Change: Great. Thanks for all the detail Bill Oh up to you Isabelle is as we look at.

Speaker Change: Both bookings and billings.

Speaker Change: We accelerated from.

Speaker Change: From about 15% to call it 20% to 23%.

Speaker Change: Bookings in the quarter.

Speaker Change: Both bookings and billings.

Speaker Change: Yet the implied Q4 guidance suggests something in the teens 18, 19%. So can you help us understand was there was there any timing benefits that bookings performance or how should we just think about.

Speaker Change: We accelerated from.

Speaker Change: From about 15% to call it 20% to 23%.

Speaker Change: The run rate of Qunar relative to that yeah that guide 50 for sure. So for the billings number just stack keep in mind that that's that's obviously revenue plus change in deferred revenue.

Speaker Change: The run rate of.

Speaker Change: <unk> relative to that yeah that guide 50 for sure. So for the billings number just stack keep in mind that that's the that's obviously revenue plus change in deferred revenue.

Speaker Change: And there's a dynamic that occurred between Q3 of last year in Q3 of this year Q3 of last year, we actually had a bit of a lull a trough in terms of the volume of annual upfront contracts that we signed Q3 of this year, we actually had a bit of a peak in the annual upfront contracts that were signed and so that leads on that deferred revenue basis that'll lead to sort of.

Speaker Change: And there's a dynamic that occurred between Q3 of last year in Q3 of this year Q3 of last year, we actually had a bit of a lull a trough in terms of the volume of annual upfront contracts that we signed Q3 of this year, we actually had a bit of a peak in the annual upfront contracts that were signed and so that leaves on a deferred revenue basis that'll lead to sort of.

Our year over year acceleration in the change in deferred revenue just by virtue of that that dynamic that's happening year over year. So that is a that's a bit of what you're seeing in terms of the reacceleration there not necessarily directly tied to the evolution of the business, although were encouraged to see our ability to kind of.

Speaker Change: Our year over year acceleration in that change in deferred revenue just by virtue of that that dynamic that's happening year over year. So that is a that's a bit of what you're seeing in terms of the reacceleration there not necessarily directly tied to a the the evolution of the business. Although we're encouraged to see our ability to kind of.

Speaker Change: Can you to move our customers more and more into the annual upfront contract, but that's a bit of the dynamic that you're seeing there.

Thank you.

Speaker Change: Our next question comes from Scott Berg with Needham. Please send me your line and ask your question.

Speaker Change: Thank you.

Our next question comes from Scott Berg with Needham. Please send me your line and ask your question.

Speaker Change: Hi, everyone nice quarter. Thanks for taking the question Bill I wanted to focus on something that you said earlier in your remarks around.

Speaker Change: Hi, everyone nice quarter. Thanks for taking the question Bill I wanted to focus on something you said earlier in your remarks around.

Speaker Change: Existing customers when they go to a new <unk>.

Speaker Change: New company Youre seeing them rebound here.

Speaker Change: Existing customers when they go to a new <unk>.

Speaker Change: I guess when you look at those customers.

Speaker Change: New company Youre seeing them rebound here.

Speaker Change: Purchasing platform in China.

Speaker Change: I guess when you look at those customers.

Trying to understand within buying trends.

The platform any issue.

Speaker Change: Embrace.

Speaker Change: Customer just trying to understand women buying trends.

Speaker Change: Yeah, I think that the key thing that our sales team sees is just greater velocity, because obviously theres less education required and we usually have someone at the customer is helping be our champion and helping educate internally raise we both differentiate via our interconnections into the data ecosystem and into the product environment.

Speaker Change: You've.

Speaker Change: You've raised guidance.

Speaker Change: Yeah, I think that the key thing that our sales team sees is just greater velocity, because obviously, there's less education required and we usually have someone at the customer is helping be our champion and helping educate internally raise we both differentiate via our interconnections into the data ecosystem and into the product environment.

Speaker Change: You know it provides us both with greater context, and understanding of customers a stronger kind of wealth of first party data to be able to optimize.

Journeys as well as content with them as well as more interfaces are able to interact with those customers, but on all of those fronts. It means that there are more stakeholders and it means that there's more kind of relationships to navigate within an existing or within.

Speaker Change: Both journeys as well as content with them as well as more interfaces to be old interact with those customers, but on all of those fronts. It means that there are more stakeholders and it means that there's more kind of relationships to navigate within an existing or within.

Speaker Change: Prospects and Theres, often important architectural decisions that need to be made both from a technical architecture standpoint, as well as data flows and data governance, and so having preexisting brace customers within the environment. I think just helps all of those things were on a lot more smoothly I wouldn't necessarily isolate a specific difference in buying like literally what they buy or like what.

Speaker Change: Prospects and Theres, often important architectural decisions that need to be made both from a technical architecture standpoint, as well as data flows and data governance, and so having preexisting brace customers within the environment and I think just helps all of those things wrong, a lot more smoothly I wouldn't necessarily isolate a specific difference in buying like literally what they buy or like.

Speaker Change: Their goals are at the end of a sales process, but I think that it definitely speeds them up and you know this is something I've been talking about for a few years, which is that as Braves came into it you know broadly call. It this marketing automation space and we approached it with I, we approached it in a way that was more data driven it was more experimental it was tied tighter into the product and the first party experience.

Speaker Change: What their goals are at the end of our sales process, but I think that it definitely speeds them up and you know this is something I've been talking about for a few years, which is that as Braves came into it you know broadly call. It this marketing automation space and we approached it with I, we approached it in a way that was more data driven it was more experimental it was tied tighter into the product and the first party experience.

Speaker Change: That what that meant is that there was there were new skill sets that were required there were new working relationships that we're going to need to be forged and there were new kind of working cadences as well in order to take advantage of things like the gains that you get out of rapid experimentation and new agility and so those have all been you know those have all been I think.

Speaker Change: Barriers in front of our growth over the years, they're ones that we knew we would eventually break down they're ones that we know that a strong customer and ecosystem community continues to break through and you know when you explicitly called this out because I think it's a consequence both of all the investment that we put into the customer community and just the growing volume abrase educated customers in market.

Barriers in front of our growth over the years, they're ones that we knew we would eventually break down they're ones that we know that a strong customer and ecosystem community continues to breakthrough and you know when you explicitly called this out because I think it's a consequence both of all the investment that we put into the customer community and just the growing volume Abrase educated customers in March.

Speaker Change: Experts out there, but also you know I think it's no secret that the marketing world over the last two years or so has seen a lot of turnover within organizations. There has been a lot of moving around our marketing experts N C M o's across the broader enterprise and across the startups here and so that dislocation of marketers has obviously ban.

Speaker Change: Cutting experts out there, but also you know I think it's no secret that the marketing world over the last two years or so has seen a lot of turnover within organizations. There has been a lot of moving around our marketing experts N C M o's across the broader enterprise and across the startups here and so that dislocation of marketers has obviously ban.

A difficult challenge for us to work through with existing customers as we've had to retrain, new teams or or kind of regain new executive stakeholder relationships, but now we're seeing the upside of that in some cases on the other side, where those people as they move around the industry. They land at new customers and then they are bringing brace with them and so while that is a difficult transition to go through.

Speaker Change: There is great upside there and its a strong testament to the the strength and the value of the customer community.

Speaker Change: There is great upside there and its a strong testament to the strength of the value of the customer community.

Speaker Change: Got it very helpful. Thank you and then as well.

Speaker Change: Isabelle if you'd look at.

Speaker Change: Got it very helpful. Thank you and then as well.

Speaker Change: Your non-GAAP profitability in the quarter, our non-GAAP operating margin that you guys here in the fourth quarter you are crossing over the chasm, how do we start thinking about profitability versus growth.

Speaker Change: Isabelle if you'd look at.

Speaker Change: Your non-GAAP profitability in the quarter, our non-GAAP operating margin that you guys see in the fourth quarter, you're crossing over the chasm, how do we start thinking about profitability versus growth.

Speaker Change: You all are.

Speaker Change: Yes.

Speaker Change: You're not getting.

Speaker Change: Your 26, obviously, but do we do we see this as kind of as planned.

Speaker Change: I know you all are.

Speaker Change: And they're not getting.

Speaker Change: Period of time are two years through their margin expansion EBIT Jordan.

Speaker Change: 26, obviously, but do we do we see this kind of an implant tool.

Speaker Change: Growth in demand remains.

Okay.

Speaker Change: Period of time are two years through their margin expansion EBIT GA.

Speaker Change: Yeah. So thanks for the question. So if we go back to some of the comments that we made in the framework that we laid out at analyst day back in September that the purpose of that framework was that to be sustainable for the next several years and so I would think about you know as we start to guide for next year, and we start to kind of work our way through the quarters and you'll see kind of be the result.

Speaker Change: Growth in demand remains unchanged.

Speaker Change: Okay.

Yeah. So thanks for the question. So if we go back to some of the comments that we made in the framework that we laid out at analyst day back in September.

Speaker Change: That the purpose of that framework was that to be sustainable for the next several years and so I would think about you know as we start to guide for next year, and we start to kind of work our way through the quarters and you'll see kind of be the result of kind of get the growth. We would look for the expansion in operating income non-GAAP operating income.

Speaker Change: Or kind of get the growth we would look for the expansion in operating income non-GAAP operating income to be within the boundary conditions of the framework that we laid out and so I think philosophically nothing has changed today or our expectations for the future even relative to kind of where we've been in terms of its never going to be growth.

Speaker Change: To be within the boundary conditions of the framework that we laid out and so I think philosophically nothing has changed today or our expectations for the future even relative to kind of where we've been in terms of its never going to be growth at all costs, we're always going be balancing growth with profitability. We are I am very focused on being able.

Speaker Change: At all costs, we're always going to be balancing growth with profitability. We are I am very focused on being able to reinvest available dollars back into the business Ive said this to the employees I've said this to analysts I said this to investors and so we are very disciplined with kind of having visibility and transparency into the financial path.

Speaker Change: To re invest available dollars back into the business Ive said this to the employees I've said this to analysts I said this to investors and so we are very disciplined with kind of having visibility and transparency into the financial path that we're on and ensuring that the capacity to reinvest is actually leverage to to the highest ROI potential.

Speaker Change: That we're on and ensuring that the capacity to reinvest is actually leverage to to the highest ROI potential possible.

Speaker Change: In the interest of time, please limit to one question for the remainder of the Q&A session. Thank you.

Possible.

Speaker Change: In the interest of time, please limit to one question for the remainder of the Q&A session. Thank you.

Speaker Change: Our next question comes from pendulum with Boral with J P. Morgan. Please on your line and ask your question.

Speaker Change: Our next question comes from pendulum with Boral with J P. Morgan. Please on mute your line and ask your question.

Speaker Change: Oh, great. Thank you for.

Speaker Change: Taking the questions Isabella just one for you.

Speaker Change: Oh, great. Thank you for.

Speaker Change: The way to understand when does the last cohort of the trees are kind of cohort renewal.

Speaker Change: Taking the questions Isabella just one for you.

Speaker Change: Renewables flushed through the system. It seems like you had a little bit of a stability on in quarter, but trying to understand is 110 is the trough at this point can go to a single digit number yeah. So look I'm not going to guide specifically on on dollar based net retention going forward, but one kind of indication are that.

Speaker Change: The way to understand when the the last cohort of the trees are kind of cohort renew.

Speaker Change: Renewables flushed through the system. It seems like you had a little bit of a stability on in quarter, but trying to understand is 110 is the trough at this point kind of good in a single visit number yeah. So look I'm not going to guide specifically on on dollar based net retention going forward, but one kind of indication are that.

Speaker Change: Encouraging is the you know it at analyst day, we did highlight the performance of posts deserved cohort relative to a few cohorts. The few years that comprise the deserve cohort.

Speaker Change: It's encouraging is the you know it at analyst day, we did highlight the performance of posts dessert cohort relative to a few cohorts. The few years that comprised the deserve cohort.

Speaker Change: And we identified kind of just nine point differential between between the two and does that are.

And we identified kind of just nine point differential between between the two and the that our differentiation and actually it is a little bit improved going forward. In this current quarter. So were encouraged by the continued evolution of the posts are cohort II and so you know well, we'll get we'll give you guys more trans.

Speaker Change: You know differentiation actually it is a little bit improved going forward in this current quarter. So were encouraged by the continued evolution of the posts are cohort II and so you know well, we'll get we'll give you guys more transparency and visibility consistent with how we've approached the annual guide it for the last three years of our public company life.

Speaker Change: Parents and visibility consistent with how we've approached the annual guide it for the last three years of our public company life. So look for more visibility on overall revenue expectations are in March of next year.

So look for more visibility on overall revenue expectations in March of next year.

Speaker Change: Our next question comes from Arjun Bhatia with William Blair. Your line to ask your question.

Speaker Change: Our next question comes from Arjun Bhatia with William Blair. Your line ask your question.

Speaker Change: Perfect. Thank.

Speaker Change: Thank you very much.

Bill.

Bill Oh: One for you just as you're talking to customers and.

Speaker Change: Perfect.

Speaker Change: Thank you very much.

Speaker Change: Discussing plans with them for next year, what is your sense on the overall spending environment as it relates to marketing budgets and I think you've highlighted a couple of times in your prepared remarks that the replacement cycle.

Speaker Change: Bill maybe one.

Speaker Change: One for you just as you're talking to customers and.

Speaker Change: It remains strong with a focus on AI and for data.

It houses.

Speaker Change: Remains strong with a focus on AI and first party data and cloud data warehouses.

Speaker Change: Alright.

Speaker Change: Replacement cycle might accelerate further next year as more folks.

Speaker Change: Or I could that replacement cycle them up accelerating further next year as more folks look to up level their marketing stacks. Thank you.

Speaker Change: Hum up level they are in their markets tax. Thank you.

Speaker Change: Yes, I'll start off just reminding everyone that we have in that we're not expecting any sort of improvement in the demand environment and.

Speaker Change: Yeah. So I'll start off just reminding everyone that we haven't we're not expecting any sort of improvement in the demand environment and.

Speaker Change: The forward guidance that we provided and you know as we've discussed well we are seeing great progress on the legacy airplanes like gold. It's also the case for many of them been harder to catalyze over the last couple of years as businesses have prioritized cost savings over a value creation and expansion, but we feel really good about the comparative gains that we've made over these last two years when we look at the competitive lands.

Speaker Change: The forward guidance that we provided and you know as we discuss well we are seeing great progress on the legacy replacement cycles. It's also the case that many of them have been harder to catalyze over the last couple of years as businesses have prioritized cost savings over value creation and expansion, but we feel really good about the comparative gains that we've made over these last two years when we look at the competitive landscape.

Speaker Change: Gabe and the broader partnership ecosystem and we look at the pipeline of you know in particular these enterprise takeaway opportunities that we've been able to build over the course of the last 12 to 18 months and we're looking forward to a robust competition for these opportunities that you know by definition only come up every five to 10 years in the years to come and so I'm excited that the I think the pieces have moved.

Speaker Change: Scape and the broader partnership ecosystem and we look at the pipeline of you know in particular these enterprise takeaway opportunities that we've been able to build over the course of the last 12 to 18 months and we're looking forward to a robust competition for these opportunities that you know by definition only come up every five to 10 years in the years to come and so I'm excited that the I think the pieces have moved.

Speaker Change: Around the board in a way that's favorable to us and we do think that those opportunities are.

Speaker Change: Certainly you could continue to show up in particular over the next 12 to 24 months due to some of the platform shifts at both Adobe and Salesforce and their focus shifts that I highlighted earlier in the call, but it does continue to remain a difficult environment I think that consistent with the last few quarters. We've continued to see stability there our marketing teams they know what their priority.

Speaker Change: Around the board in a way that's favorable to us and we do think that those opportunities are.

Speaker Change: Or certainly you could continue to show up in particular over the next 12 to 24 months due to some of the platform shifts at both Adobe and Salesforce and their focus shifts that I highlighted earlier in the call, but it does continue to remain a difficult environment I think that consistent with the last few quarters. We've continued to see stability there marketing teams they know what their prior.

Speaker Change: Saar for next year, they're not worried that their teams are gonna get cod or their projects are going to be cancelled or their you know their budgets are going to fall into next year, but that kind of full rotation back into a growth orientation, where their business. Overall is looking at new regions, new product expansions, new new customer acquisition efforts et cetera et cetera.

These are for next year, they're not worried that their teams are gonna get cod or their projects are gonna be cancelled or their you know their budgets are going to fall into next year, but that kind of full rotation back into a growth orientation, where their business. Overall is looking at new regions, new product expansions, new you know new customer acquisition efforts et cetera et cetera.

Speaker Change: All those things that kind of define a forward leaning growth posture, we're not seeing it robust signs of that yet we're seeing it in pockets and that's great. But we are seeing strong stability I think across marketing teams and across strategies and so you know, we're we're making as much progress as we can from an ecosystem and a competitive standpoint.

Speaker Change: Well as our own product robustness, and improving our pricing and packaging flexibility I'm trying to be prepared for when that rotation back toward more of a broad growth posture starts to show up amongst marketing teams and across.

Speaker Change: As well as our own product robustness, and improving our pricing and packaging flexibility I'm trying to be prepared for when that rotation back toward more of a broad growth posture starts to show up amongst marketing teams and across.

Speaker Change: More of the business sphere, but for right now you know having stability, having great foresight into next year's budgets and you know being in a position. The Braves is in is one where we're confident operating through this demand environment and you know that side, that's something that we're we're in our early foresee and our forecasting in our guidance, we're not assuming that that's going to improve into the.

Speaker Change: More of the business sphere, but for right now you know having stability, having great foresight into next year's budgets and you know being in a position that braces in is one where we're confident operating through this demand environment and that side, that's something that we're in our early fork in our forecasting in our guidance, we're not assuming that that is going to improve into.

Speaker Change: Next year.

Our next question comes from Derrick Wood with P. D. Cohen your line and ask your question.

Speaker Change: Next year.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Derrick Wood with P. D. Cohen your line and ask your question.

Speaker Change: Oh, great. Thanks, I'll direct it to you Isabelle.

Speaker Change: What are you guys saw some very large upside in operating income this quarter was solid with about $2 million of upside, but the last quarter was like $11 million. So could you just talk about the puts and takes on margins and investment focus this quarter versus last quarter or maybe what were some of the variances you would flag.

Speaker Change: Oh, great. Thanks, I'll direct it to you Isabelle.

Speaker Change: What are you guys saw some very large upside in operating income this quarter was solid with about $2 million of upside, but the last quarter was like 11 million. So could you just talk about the puts and takes on margins and investment focus this quarter versus last quarter or maybe what were some of the variances you flag.

Speaker Change: Including on the gross margin side. Thank you.

Speaker Change: Yeah. So on on the gross margin side, Yeah, we're continuing to see on on the headwind side. We're continuing to see you know good uptake of the premium messaging channels. So that is that and that's been that's been happening over the last several years and even with that that continuing to happen and we've been able to expand our gross.

Speaker Change: Including on the gross margin side. Thank you.

Speaker Change: And over the last several years and commit to you two rounds of increase long term ranges with the most recent one being at 60% to 74% and.

Speaker Change: And we expect that to continue because as the engineering team continues to do work to improve the efficiency and.

Speaker Change: And we expect that to continue because as the engineering team continues to work to improve the efficiency and performance of the overall platform, they're they're very very focused on on those initiatives across the board and and we've seen success there ongoing and there's more there's more to do and more to come I in that.

Speaker Change: And performance of the overall platform I'm you know there they are very very focused on those initiatives across the board and and we've seen success there ongoing and there's more there's more to do and more to come in that area. So from a gross margin perspective, you know, we're we're pretty excited with the continued trajectory and.

Speaker Change: So from a gross margin perspective, you know, we're we're pretty excited with the continued trajectory and.

Speaker Change: We expect to operate within the range that we have provided over that you know that the the long term here I'm on the operating income you know Q3 does have the impact of the forged event and some other than customer driven events that occurred in the quarter and so that's some of the dynamic there.

Speaker Change: And we expect to operate within the range that we have provided over that you know that that the long term here I'm on the operating income you know Q3 does have the impact of the forge event and some other and then customer driven events that occurred in the quarter and so that's some of the die.

You are seeing in terms of the the volatility with being over the profitability line. In Q2, then back under it in Q3, and then obviously, we've committed to being back over that line in Q4 and beyond and so that's some of the dynamic that you're seeing is just specific to the seasonality around some of the events and then leaders are as they.

Like that you're seeing in terms of the the volatility with being over the profitability line. In Q2, then back under it in Q3, and then obviously, we've committed to being back over that line in Q4 and beyond and so that's some of the dynamic that you're seeing is just specific to the seasonality around some of the events and then leaders are as.

Speaker Change: You know, we're very disciplined as it relates to performance management and then the process of backfill and the timing and so I always want to make sure from a budgeting perspective that we have the capacity to hire at the pace that makes the most sense for the business and sometimes what we find is leaders are extremely disciplined about going through the process to find the right <unk>.

Speaker Change: They were very disciplined as it relates to performance management and then the process of backfill and the timing and so I always want to make sure from a budgeting perspective that we have the capacity to hire at the pace that makes the most sense for the business and sometimes what we find is leaders are extremely disciplined about going through the process to find the <unk>.

Speaker Change: And that May result in head count adds that are a little bit behind what finance has budgeted for and that some of that dynamic youre seeing come through in the results, but again I'm very focused on staying very close to that and when we have capacity, which I can see you know intra intra quarter, we work to <unk>.

Right person and that May result in head count adds that are a little bit behind what finance has budgeted for and that some of that dynamic you're seeing come through in the results, but again I'm very focused on staying very close to that and when we have capacity, which I can see you know intra intra quarter, we we.

Speaker Change: And ways to to put those dollars to it to good use.

Speaker Change: Work to find ways to to put those dollars to <unk>.

Speaker Change: Our next question comes from Tom Mackinnon with UBS Your line and ask your question.

Speaker Change: Our next question comes from Karen Mcginnis with UBS. Please on mute your line and ask your question.

Speaker Change: Yeah, Hi, thanks, so much for taking my question, maybe just a isabelle. Please so just to clarify when we think about the in period and there are in the quarter and the stability that you talked that you mentioned so was that I guess around like 110% similar to what it was last quarter and then.

Speaker Change: Yeah, Hi, thanks, so much for taking my question, maybe just a isabelle. Please so just to clarify when we think about the in period end or are in the quarter and the stability that you talked that you mentioned there was that I guess around like 110% similar to what it was last quarter and then.

Speaker Change: And as a follow up as we think about and are are in for you could you just maybe walk us through the puts and takes about it sounds like on one hand, you guys are seeing good traction with messaging volumes from the holiday and obviously, it's your biggest renewal quarter, but on the flip side, maybe there are still some customers out there that are right sizing or not expanding to the degree that you'd like to see so.

Speaker Change: As a follow up as we think about <unk> four can you could you just maybe walk us through the puts and takes about it sounds like on one hand, you guys are seeing good traction with messaging volumes from the holiday and obviously, it's your biggest renewal quarter, but on the flip side, maybe there are still some customers out there that are right sizing or not expanding to the degree that you'd like to see.

Speaker Change: I guess, one what are the drivers behind some of the cautiousness near term and what do you need to see in the demand environment, you know to get comfortable that we're closer to the bottom.

Speaker Change: One what are the drivers behind some of the cautiousness near term and what do you need to see in the demand environment, you know to get comfortable that we're closer to the bottom.

Speaker Change: Yeah. Thanks for the question. So I just want to clarify that things related to kind of near term messaging activity or even in some cases like a short term you know the renewal cycle that doesn't necessarily playing directly to the N. R. R. A cause you don't we don't but the revenue.

Speaker Change: Yeah. Thanks for the question.

So I just want to clarify that things related to kind of near term messaging activity or even in some cases like a short term you know the renewal cycle that doesn't necessary sleep plan directly to that the N. R. R.

Speaker Change: It wasn't based on utilization are and so I. It's it's really more about continuing to manage the churn and continuing to improve that upsell motion and and bringing it back I you know to levels that are that we had to send it to you than.

Speaker Change: We don't the revenue isn't based on utilization are and so I. It's it's really more about continuing to manage the churn and continuing to improve that upsell motion and and and bringing it back I you know to levels that are that we had to send it to you and in.

Speaker Change: In prior years. So that's that's really the dynamic that we are dealing with is is continued management of both the the churn on the on the downside and then a continued push for a more success on on on the upsell motion.

Speaker Change: Our next question comes from Yun Kim with loop capital. Please on your line and ask your question.

Yun Kim: Okay, great. Thank you I have a quick question Bill can you just give us some update on the partner ecosystem not just with <unk>.

Speaker Change: Okay, great. Thank you I have a quick question on Bill can you just give us some update on the partner ecosystem not just with.

Global system integrators, but also perhaps the OEM opportunity with our other Isps out there.

Speaker Change: Global system integrators, but also perhaps the OEM opportunity with our other Isps out there.

Bill Oh: Yeah. So our strategy around sales continues to be a direct sales we do have some Oems out there or OEM agreements, but it's not a big part of the way that we go to market. We will continue to expand on our indirect motion using more resellers over time Asbury the brace community continues to expand it.

Speaker Change: Yeah. So our strategy around sales continues to be a direct sales we do have some Oems out there or OEM agreements, but it's not a big part of the way that we go to market. We will continue to expand on our indirect motion using more resellers over time as break the brace community continues to expand.

Bill Oh: The new geographies, but right now when we look at the Tech partner relationships. You know many of these are about making sure that we've got sales teams aligned we've got technical architectures are aligned and rationalized around bigger digital transformation efforts and that we've got the right partner integrations and product integrations, which you can see you know a lot of examples out of across the brace data.

Speaker Change: The new geographies, but right now when we look at the tech partner relationships. Many of these are about making sure that we've got sales teams aligned we've got technical architectures are aligned and rationalized around bigger digital transformation efforts and that we've got the right partner integrations and product integrations, which you can see you know a lot of examples out of across the Braves data plan.

Bill Oh: For him, but we've got a lot of great interconnection points throughout our product that our partnership.

Ecosystem takes full advantage of and so.

Speaker Change: For him, but we've got a lot of great interconnection points throughout our product that our partnership.

Bill Oh: That's something that we're going to continue to invest heavily and we know that are having more partners involved in deals leads to faster deal cycles. It leads to more usage upgrades.

Speaker Change: Ecosystem takes full advantage of and so.

Speaker Change: That's something that we're going to continue to invest heavily and we know that having more partners involved in deals leads to faster deal cycles. It leads to more usage upgrades.

Bill Oh: Entitlements by our customers and better expansion rates, a better renewal rates and so it's a you know.

A part of our partnership portfolio that we continue to invest heavily in but the specifically like OEM sales through them is not a key component of that strategy right now.

Entitlements by our customers and better expansion rates, a better renewal rates and so it's a you know.

Speaker Change: A part of our partnership portfolio that we continue to invest heavily in but the specifically like OEM sales through them is not a key component of that strategy right now.

Speaker Change: Our next question comes from Brian Peterson with Raymond James Please on your line and ask your question.

Speaker Change: Our next question comes from Brian Peterson with Raymond James Your line and ask your question.

Brian Peterson: Hi, guys. Thanks for taking my questions. So you gave some really healthy stats on activity for in App and content cards as we think about what's pushing that activity through the channels. How do we think about the balance of upsell via higher volumes or cross sell and new channel in bucket there.

Brian Peterson: Hi, guys. Thanks for taking my questions. So you gave some really healthy stats on activity for in App and content cards, as we think about whats pushing that activity through the channels. How do we think about the balance of upsell via higher volumes or cross sell a new channel in bucket there.

Speaker Change: Yeah, So I think that there's an interesting.

Speaker Change: And there there's an interesting impact that flexible credits will do which is that I think that in terms of cross sell its super supportive in the way that we're doing pricing or packaging expanding across both the optionality that marketers have to bring their strategies around the world. So for instance, if you are effectively running a U S. S. M. S strategy is now very straightforward for you to.

Speaker Change: Yeah, So I think that there's an interesting.

Speaker Change: And there there's an interesting impact that flexible credits will do which is that you know I think that in terms of cross sell its super supportive in the way that we're doing pricing and packaging expanding across both the optionality that marketers have to bring their strategies around the world. So for instance, if you are effectively running a U S. S. M. S strategy is now very straightforward for you to.

Speaker Change: Expand that to Whatsapp in key markets, where whatsapp is dominant to then further expand that using something like line, if you're in Japan, or Taiwan, or Thailand, and you know looking at now the launch of Rcs across Europe, and so what Reis has really been committed to you I think across the messaging spaces that we want them, we want marketers from anywhere in the world to be able to engage with global.

And so it is across the messaging channels that are most important for them to really accomplish their goals and deliver their messages and so the flexible credits model of giving them the opportunity to try out those use cases expand them globally and expand into new channels in a way that's commercially flexible for them. It was really strong I it could potentially have an impact on the way that they purchase new volumes because before if you will.

Speaker Change: And so it is across the messaging channels that are most important for them to really accomplish their goals and deliver their messages and so the flexible credits model, giving them the opportunity to trial those use cases expand them globally and expanded into new channels in a way that is commercially flexible for them. It was really strong I it could potentially have an impact on the way that they purchase new volumes because before if you will.

Speaker Change: Committed to a certain set of volumes across a certain set of channels and you wanted to try out a new one you would have to make a net incremental commitment to raise to buy that new channel, but we also saw that that requirement was slowing down deal cycles. It was making customers are less likely to experiment with new channels and as I alluded to earlier in some cases led to.

Speaker Change: Committed to a certain set of volumes across a certain set of channels and you wanted to try out a new one you would have to make a net incremental commitment to raise to buy that new channel, but we also saw that that requirement was slowing down deal cycles. It was making customers less likely to experiment with new channels and as I alluded to earlier in some cases led to.

Speaker Change: A partial churns as people werent able to forecast their consumption across these different channels or the you know with global estimates the kind of cross section of channels and countries as accurately as as they would hope to and that would lead to unused entitlements, which they would then you know in some cases choose not to renew and so there's some puts and takes as we think about moving into.

Speaker Change: A partial churns as people werent able to forecast their consumption across these different channels or the you know with global S to match, the kind of cross section of channels and countries as accurately as as they would hope to and that would lead to unused entitlements, which they would then you know in some cases choose not to renew and so there's some puts and takes as we think about moving into.

Speaker Change: This new world, but we think overall, it's customer friendly or it's also speeds up deal cycles helps with expansion across use cases, and ultimately that'll be supportive of more revenue, but it does have a little bit of you know if you think about that mechanic with respect to how net new bookings would come about as a as a customer adopts a new channel there not four.

Speaker Change: To do that right away, which will have some a little bit of a headwind on that versus before but when you. We think that when you net it out against customer expansion that we're going to be better in the long run.

Speaker Change: To do that right away, which will have some a little bit of a headwind on that versus before but when you. We think that when you netted out against customer expansion that we're going to be better in the long run.

Speaker Change: Our next question comes from Nick <unk> with Scotiabank. Please on your line and ask your question.

Speaker Change: Our next question comes from Nick Altmann with Scotiabank Your line and ask your question.

Speaker Change: Awesome. Thank you.

Speaker Change: I wanted to circle back to Tyler's questions around bookings Isabelle you've historically talked about how roughly one third of your new ACD is typically booked in the fourth quarter and so I was just wondering if you could provide any update on whether that same linearity applies for for this year.

Nick Altmann: Awesome. Thank you.

Nick Altmann: I wanted to circle back to Tyler's questions around bookings Isabelle you've historically talked about how roughly one third of your new ACD is typically booked in the fourth quarter and so I was just wondering if you could right.

Speaker Change: Yeah. That's it we're basically in a similar type of ZIP code for for this year and then keep in mind that that that from a linearity within the quarter or is.

Nick Altmann: Any update on whether that same linearity applies for this year. Thanks.

Speaker Change: Yeah. That's it we're basically in a similar type of ZIP code for for this year and then keep in mind that that that from a linearity within the quarter or is.

Speaker Change: Is gonna be about 50% of that is generally expected to be booked in the last month of the quarter. So that's that I think that that dynamic is is largely still intact.

Speaker Change: Our next question comes from Michael Berg with Wells Fargo. Please on your line and ask your question.

Our next question comes from Michael Berg with Wells Fargo. Please on your line and ask your question.

Michael Berg: Hi, Thanks for taking my question.

Michael Berg: I want to go in for physical here, you talked about some strength in the Black Friday, cyber Monday period, and I was talking about the post serve customers showing some strength are compressing.

Speaker Change: Hi, Thanks for taking my question.

Speaker Change: I want to go in for physical here, you talked about some strength in the Black Friday, cyber Monday period, and I was talking about the post serve customers showing some strength are compressing the expansion relative to the zero interest rate.

Michael Berg: The expansion relative to the zero interest rate cuts.

Customers as we enter into the new year, where it looks like interest rates are coming back down.

Speaker Change: Customers as we enter into the new year, where it looks like interest rates are coming back down and coming out of a period of a strong holiday shopping season, how can we think about how customers are thinking about their spending here and is there a reason to believe the expenditures could meaningfully accelerate as routes come to.

Coming out of a period of a strong holiday shopping season, how can we think about how customers are thinking about their spending here and is there a reason to believe the expenditures could meaningfully accelerate as rates come down.

Michael Berg: Next year.

Speaker Change: Yeah, So I don't I wouldn't necessarily draw a huge parallel there and look at kind of activity around black Friday, cyber Monday, I remember as it relates specifically to kind of retail ecommerce that exposure for us is call. It about a fifth of our of our business to where you know very exposed on a global basis first of all there's a lot of companies that.

Speaker Change: The next.

Speaker Change: Next year.

Speaker Change: Yeah, So I don't I wouldn't necessarily draw a huge parallel there and look at kind of activity around black Friday, cyber Monday, I remember as it relates specifically to kind of retail ecommerce that exposure for us is call. It about a fifth of our of our business. So we're very exposed on a global basis first of all there's a lot of companies that are.

Speaker Change: Are not tied to that that seasonality, specifically, which which is largely a U S phenomenon and also in a very different industries are then than retail and E. Commerce. So I wouldn't necessarily look for any material upside related directly to that AR and the interest rate environment. These are modulations around the theme.

Speaker Change: We're not tied to that that seasonality, specifically, which which is largely a U S phenomenon and also in a very different industries are then than retail and E. Commerce. So I wouldn't necessarily look for any material upside related directly to that AR and the interest rate environment. These are modulations around the theme I think.

Speaker Change: I think we're we're not seeing material enough moves there relative to kind of going back to observe environment very different.

Speaker Change: We're we're not seeing material enough moves there relative to kind of going back to observe environment very different.

Speaker Change: Our next question comes from Brian Schwartz with Oppenheimer. Please send me your line and ask a question.

Speaker Change: Our next question comes from Brian Schwartz with Oppenheimer. Please on mute your line and ask a question.

Yeah, Hi, Thanks for taking my question.

Speaker Change: I'm going to just ask you about the impact you're seeing in terms of either sales cycles or deal size of from all the AI data and orchestration product enhancements that you've announced this year I know you announced some them earlier. This year that you had a lot of new product enhancements announced that Forbes.

Yeah, Hi, Thanks for taking my question I wanted to just ask you about the impact you're seeing in terms of either sales cycles or deal size of from all the AI data and orchestration product enhancements that you've announced this year I know you announced some of them earlier this year.

Speaker Change: You see what is that doing the sales cycles is it are you driving more opportunities with them or is it making the deals bigger.

Speaker Change: You had a lot of new product enhancements announced or.

Speaker Change: Or you see what is that doing the sales cycles is it driving more opportunities with them or is it making the deals bigger.

Speaker Change: And then maybe just kind of a follow up the big Blackstone in Q4, because clearly that that is the biggest bookings quarter for the company. It sounds like the macro hasn't changed much at this point, but how are you thinking about that specifically in Q4 and kind of anticipating that type of selling season. Thanks.

Speaker Change: And then maybe just kind of a follow up the big last time in Q4, because clearly that that is the biggest bookings quarter for the company. It sounds like the macro hasn't changed much at this point, but how are you thinking about that specifically in Q4 and kind of anticipating that type of selling season. Thanks.

Speaker Change: Yeah. So I think the biggest impact of the Braves AI innovation. So far has really been competitive differentiation and helping to standout bolt in rfps for new customers as well as be able to deliver on differentiated use case for use cases for existing customers and so.

Speaker Change: So that's been that's win win win I think across the board and actually when we look across the startup landscape and our sort of competitive landscape. You know we've spoken a lot about salesforce and Adobe so far on this call but I.

Speaker Change: I'd say just to give an update there we continue to see a fragmented landscape on the startup side and it's against primarily regional competitors, but while there's been some noise on the margin I think we've been really happy with our win rate and our takeaway trajectory against those competitors over the course of this year and we feel really set up well set up for the medium and long term in particular because of the investments that.

Speaker Change: We have made in the various data platform integrates AI and into Kansas, where we see these some of these startup competitors, who have obviously kind of follow a copycat product strategy just have not shown anywhere near the same ability to be able to mimic the features that we've been building into more advanced canvas capabilities and across all the different breeds a ifund.

Speaker Change: We have made in the various data platform integrates AI and into Candace, where we see these some of these startup competitors, who have obviously kind of follow a copycat product strategy just have not shown anywhere near the same ability to be able to mimic the features that we've been building into more advanced canvas capabilities and across all the different breeds a ifund.

And so that's been I think great to see I think that's been supportive of the improvement in competitive win rates that we've had against the startup environment throughout the year and we feel well positioned there I think that in terms of you know product the deal sizes and such it would be hard to disentangle the effects of these against.

Speaker Change: And so that's been I think great to see I think that's been supportive of the improvement in competitive win rates that we've had against the startup environment throughout the year and we feel well positioned there I think that in terms of product the deal sizes and such it would be hard to disentangle the effects of these against.

Speaker Change: Against that the broader backdrop of the demand environment and a lot of the other things that have changed in the way the deal cycles have been happening you know year over year, and so I won't try to kind of pull that apart, but you know looking at Q4 I think that also we started Q4 with a solid pipeline heading into it we've been executing as expected against that pipeline so far our.

Speaker Change: Against the broader backdrop of the demand environment and a lot of the other things that have changed in the way the deal cycles have been happening you know year over year, and so I won't try to kind of pull that apart, but you know looking at Q4 I think that also we started Q4 with a solid pipeline heading into it we've been executing as expected against that pipeline so far our differentiation.

Speaker Change: <unk> with braids AI is a big part of that and you know I think we feel really good about our ability to execute competitively and continue to see this improvement in win rates that we've enjoyed throughout the year.

Speaker Change: Okay.

Speaker Change: Our next question comes from Parker Lane with Stifel. Your line and ask your question.

Yeah.

Speaker Change: Hi, Thanks for taking the question here Bill maybe just to follow up on the last one if we get into a better demand environment out there and budgets start to unlock a little bit what is the right balance of legacy vendor replacement versus more point solution consolidation or takeaways.

Our next question comes from Parker Lane with Stifel. Your line and ask a question.

Parker Lane: Hi, Thanks for taking the question here Bill maybe just to follow up on the last one if we get into a better demand environment out there and budgets start to unlock a little bit what is the right balance of legacy vendor replacement versus more point solution consolidation or takeaways.

Speaker Change: Takeaways.

Speaker Change: Yeah, It's a great question and I think a lot of it goes back to the posture.

Speaker Change: Businesses are in and what they're prioritizing them. We've seen you know a lot of these point solution consolidation instances over the course of the last couple of years, even just being motivated by cost savings or being motivated by operational you know total cost of owner savings ownership savings or a smaller team you know trying to grapple with a hodgepodge.

Speaker Change: Yeah, that's a great question and I think a lot of it goes back to the posture.

Businesses are in and what they're prioritizing them. We've seen you know a lot of these point solution consolidation instances over the course of the last couple of years, even just being motivated by cost savings or are being motivated by operational you know total cost of owner savings ownership savings or a smaller team you know trying to grapple with a hodgepodge of.

Speaker Change: Tools and realizing that consolidating their own software usage into a braves is going to make their lives easier now that their teams have shrunk right. So those are some of the the major dynamics that you've seen in terms of team resources and prioritization over the course of the last 12 months to 24 months and I think that we've seen Braves able to execute within that when you shift gears over to you.

Speaker Change: More expansionary posture, you know that starts to create a lot more of the greenfield opportunities, where we both have had been able to you know go into enterprises that maybe had longstanding salesforce or adobe relationships and take down a new project that they're working on and we use that to get our foot in the door. You know that's obviously emotion that we utilize to first crack into the enterprise and also to.

Speaker Change: More expansionary posture, you know that starts to create a lot more of the greenfield opportunities, where we both have had been able to you know go into enterprises that maybe had long standing salesforce or adobe relationships and take down in new projects that they're working on and we use that to get our foot in the door. You know that's obviously a motion that we utilize to first crack into the enterprise and also to.

Speaker Change: Build up all three of those eight figure customers that we have celebrated throughout this year and that has been a really robust motion for us over time that hasn't been very potent over the course of the last 12 to 24 months because there just hasn't been an expansionary I'm voting for many of these businesses and then similarly, you know, making a kind of a wholesale switch from one platform to another does have.

Speaker Change: Change costs associated with it and you know when businesses are not prioritizing value creation in their stead very narrowly focused on on cost reduction are paying a transition costs versus just delaying that transaction a little bit you know ends up.

Speaker Change: Change costs associated with it and when businesses are not prioritizing value creation in their stead very narrowly focused on on cost reduction are paying a transition costs versus just delaying that transaction a little bit you know ends up.

Speaker Change: Being less desirable for them and so you know that other side of it where I just being able to go in and do wholesale replacement, which we are very capable of doing and we have great. Examples of those each quarter, but we definitely think that a more expansionary environment, where businesses are prioritizing value creation again over strictly looking at cost.

Speaker Change: <unk> is one that's going to be conducive to them incurring those switching costs and us being able to convert more of the legacy marketing cloud installed base into <unk> customers.

Speaker Change: <unk> is one that's going to be conducive to them incurring those switching costs and us being able to convert more of the legacy marketing cloud install base into British customers.

Speaker Change: Our next question comes from Austin Cole. Please on mute your line and ask your question.

Speaker Change: Our next question comes from Austin Cole. Please on your line and ask your question.

Speaker Change: Thank you.

Speaker Change: Just wanted to follow up on some of the net retention questions from earlier can you remind us maybe just asking it from a different way can you remind us what are the fundamental reasons for the pressure on net dollar retention and how much of that is pricing for this software Gardner has some research other shows marketing budgets.

Austin Cole: Thank you.

Austin Cole: Just wanted to follow up on the some of the net retention questions from earlier can you remind us maybe just asking it from a different way can you remind us what are the fundamental reasons for the pressure on net dollar retention and how much of that is pricing for this software Gardner has some research other shows marketing budgets.

Speaker Change: As a percentage of total revenue expected to be less than 8%. This year from 9% last year is that kind of simple data point accurate way to think about it. Thank you.

Austin Cole: As a percentage of total revenue expected to be less than 8%. This year from 9% last year is that kind of simple data point accurate way to think about it. Thank you.

Speaker Change: Yes, as we think about the dynamics that drive any sort of pressure on the dollar based net retention and so on on the upsell and we've talked about this a little bit in the past our buyer is whether there are new buyers or existing buyers that are up selling or buying a lot closer to their known needs and so there they recognize.

Speaker Change: Yeah. So as we think about the dynamics that drive any sort of pressure on the dollar based net retention and so on on the upsell and we've talked about this a little bit in the past.

Speaker Change: Buyers, whether they're new buyers or existing buyers that are upselling or buying a lot closer to their known needs and so there. They recognize they can come back to the well whether it's six months eight months 12 months later and by more volumes more entitlements that they need them, but in the moment their levels of commit.

Speaker Change: They can come back to the well whether it's six months eight months 12 months later and by more volumes more entitlement that they need them, but in the moment their levels of commit.

Speaker Change: So this is inclusive of upsell commits are going to be a little closer to the pin for them and so that means that the size of the up sells maybe aren't in the same ZIP code as they used to be in this zero a zero interest rate environment, where people were really buying for levels of future growth and so on the upside it's that you have that.

Speaker Change: So this is inclusive of upsell commits are going to be a little closer to the pin for them and so that means that the size of the upsell maybe aren't in the same ZIP code as they used to be in this zero a zero interest rate environment, where people were really buying for levels of future growth and so on the upside it's that you have that.

Speaker Change: <unk>, that's kind of working our working against you and then there is the element of turn where there are still some customers who are going through some element of right sizing their contracts are still contracts can't be down traded them in size or value prior to a renewal date them, but as they come up for renewal and their recognition.

Challenge, that's kind of working our working against you and then there is the element of turn where there are still some customers who are going through some element of right sizing their contracts are still contracts can't be down traded them in size or value prior to a renewal date.

Speaker Change: And I think that maybe they didn't quite grow into a level of entitlements that they had purchased and there. They are doing that right sizing and so you've got those two dynamics kind of that are working are simultaneously that are driving some of the pressures that we see on dollar based net retention.

Speaker Change: But as they come up for renewal and they're recognizing that maybe they didn't quite grow into a level of entitlements that they had purchased and there. They are doing that right sizing and so you've got those two dynamics kind of that are working are simultaneously that are driving some of the pressures that we see on dollar based net retention.

Bill Oh: Thank you that was our last question and there are no more questions in the queue I will now pass it back to bill for closing remarks.

Speaker Change: Thank you that was our last question and there are no more questions in the queue I will now pass it back to bill for closing remarks.

Bill Oh: Yes, Thank you operator, and thanks, everybody for joining the call today. We appreciate your continued interest and support and we're looking forward to seeing you at a conference or on the road soon.

Bill: Yes, Thank you operator, and thanks, everybody for joining the call today. We appreciate your continued interest and support and we're looking forward to seeing you at a conference or on the road soon.

Bill Oh: Yeah.

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