Q1 2025 Freshworks Inc Earnings Call
[music].
Welcome to the fresh works first quarter 2025 earnings conference call. At this time participants are in listen only mode.
After the Speakers' presentation, there'll be a question and answer session.
Please be advised that today's conference is being recorded.
Speaker Change: I'll now hand, the conference over to your first speaker today Joon huh.
Speaker Change: Relations. Please go ahead.
Speaker Change: Thank you good afternoon, and welcome to fresh works first quarter 2025 earnings Conference call. Joining me today are Dennis Woodside Fresh works, Chief Executive Officer, and President and Tyler Sloat freshwater Chief operating officer, and Chief Financial Officer.
Speaker Change: The primary purpose of today's call is to provide you with information regarding our first quarter 2025 performance.
Speaker Change: A natural outlet for our second quarter and full year 2025.
Speaker Change: Some of our discussion and responses to your questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 to 95 six.
Speaker Change: These forward looking statements are based on our management's beliefs about our business and industry, including our financial expectations and estimates.
Speaker Change: Uncertainties in the macroeconomic environment in which we operate and market volatility.
Speaker Change: The timing of future repurchases of our class a common stock and certain other assumptions made by the company all of which are subject to change.
Speaker Change: These statements are subject to risks uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward looking statements. Such risks include but are not limited to our ability to sustain our growth rate to innovate to reach our long term revenue goals.
Speaker Change: Customer demand and to control costs and improve operating efficiency for a discussion of additional material risks and other important factors that could affect our results. Please refer to today's earnings release, our most recently filed Form 10-K, and other periodic filings with SEC.
Speaker Change: <unk> assumes no obligation to update any forward looking statements in order to reflect events or circumstances that may arise. After the date of this call except as required by law.
Speaker Change: During the course of today's call, we will refer to certain non-GAAP financial measures reconciliations between GAAP and non-GAAP financial measures for historical periods are included in our earnings release, which is available on our Investor Relations website at IR Dot fresh works Dot com.
Speaker Change: Courage you to visit our Investor Relations site to access our earnings release supplemental earnings slides periodic SEC reports, a replay of today's call or to learn more about freshwater and with that let me turn it over to Dennis.
Dennis: Thank you Jim <unk> had another fantastic quarter, we outperformed all our financial metrics for growth and profitability in Q1.
Dennis: We continue to see that our uncomplicated customer and employee service solutions are winning against outdated legacy software vendors.
Dennis: Companies are choosing our AI powered solutions to remove complexity improve efficiency and unlock growth.
We continued to demonstrate our ability to drive growth and profitability for the business.
Dennis: In Q1 revenue grew 19% year over year to $196 3 million.
Dennis: And we delivered a non-GAAP operating margin of 24% and adjusted free cash flow margin of 28%.
Dennis: Beating our financial estimates once again.
Adding our revenue growth and adjusted free cash flow margin for Q1, we achieved a roll up 47 in the quarter.
Dennis: And driving profitability, we significantly expanded our non-GAAP operating margin by more than 10 percentage points compared to last year.
Dennis: We added over 1000 net customers in the quarter, including large customers such as freudenberg groups and all three media.
Dennis: We also expanded with our customers as we maintained our net dollar retention of 105% on a constant currency basis in line with the last two quarters.
Dennis: We ended the quarter with over 73300 customers.
Dennis: We've continued to deliver strong revenue growth each quarter and drive profitability as we execute on our strategy.
Dennis: As a reminder, our three strategic imperatives are one investing in employee experience or <unk>, which is our largest fastest growing business in ITM by Tam I, Tom and ESN.
Dennis: Two delivering AI capabilities across our products and platform that drive productivity improvements for our customers.
Dennis: Three accelerating growth for our customer experience or CX solutions.
Dennis: Here's how ongoing execution of our strategy led to strong Q1 results.
Dennis: First unemployed experience our focus to drive up market growth is paying off.
Dennis: Q1 was another strong quarter for our <unk> business.
Dennis: We surpassed $420 million in IRR and grew 33% year over year on a constant currency basis.
Dennis: We ended the quarter with approximately 18700 customers in Es.
Dennis: We believe that several factors are driving growth any acts.
Dennis: Our continued market success, our expansion with employee service management.
Dennis: The ongoing demand for device 42 from our accounts and our success in specific industry verticals, such as professional sports and educational institutions.
Dennis: More than 75% of the IRR in our <unk> business comes from mid market and enterprise companies.
Dennis: Large companies and organizations like Dave and Busters.
Dennis: In Europe, the state of Hawaii, and diner trees have cited the fast time to value that our fresh service products deliver.
Dennis: New mid market and enterprise companies like Travis Perkins and the largest homebuilding supply wholesaler in the U K are turning to fresh works and leaving our it competitors on a regular basis.
Dennis: Sofas, all three media Nexstar media group Kayak all chose <unk> over legacy solutions.
Dennis: For example, cyber security leader sofas needed a user friendly TSM solution with less complexity and a lower total cost of ownership.
Dennis: These differentiators, coupled with the ability to procure via AWS marketplace.
Dennis: <unk> switching from the legacy provider to our uncomplicated solution an easy decision.
Dennis: Another example, the largest title company in the U S chose fresh service to replace service now which was their legacy provider of nearly a decade.
Dennis: Frustrated with poor user experience low adoption and manual inefficiencies they opted for our uncomplicated intuitive solution that could be easily managed and trusted by internal teams.
Dennis: Since switching to fresh works. They have noted achieving faster ticket resolution improved SLA compliance through modular workflows and significant cost savings.
Dennis: The second factor driving our <unk> business is success in enterprise service management.
Dennis: DSM has become a key lever for expansion and an important component in new and existing deals.
Dennis: Customer adoption for fresh service for business teams has nearly doubled over the past 12 months.
Dennis: Customers are using press service in other areas of their businesses, including HR marketing and finance to deliver amazing service experiences.
Dennis: For example, EDF renewables, a leading power provider with more than 35 years in renewable energy and nearly 5000 employees in over 20 countries wanted to streamline their it service management asset management and change management processes.
Dennis: EDF chose fresh service because of its ease of use seamless integrations and code list customization.
Dennis: They are leveraging workspaces within fresh service to manage different departments outside of it like facilities, ensuring that each department has a tailored environment to operate in.
Dennis: The integration with Microsoft teams and the use of AI agents reduce manual intervention and routine tasks, resulting in higher employee satisfaction.
Dennis: The third <unk> growth driver is our advanced ITM offering with device <unk> 42.
Dennis: In Q1, two of the top five largest deals had a device 42 components.
Dennis: For example, a large multinational tech company recently chose device 42 with fresh service for business teams and Freddie AI agents over service now.
Dennis: They wanted to scalable agile AI native offering that will deliver faster time to value.
Dennis: Our integrated platform powered by fresh service and device 42 provides a unified modern experience for it and employees.
Dennis: Our <unk> success is also being driven by our momentum in specific industries.
Dennis: We're expanding our professional sports leadership position outside of the U S to include top Bundesliga football clubs in Germany.
Speaker Change: If the strip guard DFL, Balkan and TST Hoffenheim.
Speaker Change: In education, we added 10 state who has achieved a 95% <unk> with fresh service and do you Bill University, who has seen improved asset management accuracy and reduced average resolution times to under 24 hours since using our solutions.
Speaker Change: Simply put fresh works helped mid size and larger enterprise organization scale and compete at a global level.
Speaker Change: Next on AI adoption customers have moved from AI experimentation to realizing tangible business value and returns on their investments.
Speaker Change: Pretty copilot was included in three of the top 10, new deals in Q1.
Speaker Change: Nearly half of all new large deals over $30000 AAR had copilot attached in Q1.
Speaker Change: For new SMB customers, we continued to see double digit attach rates with increases quarter over quarter.
Speaker Change: We ended the quarter with more than 2700 co pilot customers, reflecting quarterly net adds of more than 500 or 23% growth quarter over quarter.
Speaker Change: Organizations are adopting Freddie AI, because they see fresh works successfully taking customers from AI experimentation to execution.
Speaker Change: Fences for beds, which uses copilot with both fresh desk Empress service saw a 54% improvement in resolution times.
Speaker Change: Our AI offerings has proven to be rapid measurable and transformative for our business balancing growth with seamless customer and employee experiences.
Speaker Change: In Education school administrations are increasingly using AI to handle repetitive tasks and streamline operations. So that they can improve student outcomes.
Speaker Change: San Ramone Valley High for example uses copilot with fresh service to say, 50% of their management time every year.
Speaker Change: Pretty AI agent became generally available for CX customers in Q1 and represents the next generation of self service capabilities.
Speaker Change: We added approximately 250 customers and finished the quarter with over 600 customers using Freddie AI agent.
Speaker Change: In CX AI agents were instrumental in the deflection of Alwan inquiries and creating triage of multiple issues to help improve overall customer service operations for our customers.
Speaker Change: As Freddie AI agents became generally available for <unk> customers in Q2.
Speaker Change: We expect to see improved momentum in these numbers going forward.
Speaker Change: We already have approximately 1000 customers using Freddie AI agent for <unk> needs.
Speaker Change: A leader from a top health care company shared that AI agents cut response times in half from four minutes to just two.
Speaker Change: Well autonomously handling over 70% of inquiries.
Speaker Change: This allowed human agents to focus on complex issues boosting first call resolution by 30% and raising C sat from 82% to 94% all while cutting operational costs by 25%.
Speaker Change: Finally for managers, we launched Freddie AI insights into public beta at the end of Q1.
Speaker Change: Pretty AI insights is an AI powered intelligence partner for leaders delivering fast.
Speaker Change: Proactive and actionable insights, enabling smarter decisions agility and sustained growth.
Speaker Change: I look forward to sharing more in upcoming quarters.
Speaker Change: Here at fresh works, we use AI to drive performance and accelerate results across our own business.
Speaker Change: Our finance team uses AI to analyze our cloud infrastructure spend and identify savings opportunities.
Speaker Change: Our billing team uses Freddie copilot to summarize billing inquiries.
Speaker Change: Our engineering teams have developed an AI agent specifically for highly technical Escalations.
Speaker Change: We continue to push the boundaries on whats possible today, because AI is delivering results and driving efficiency.
Speaker Change: And we were recently recognized by Gartner once again as an emerging leader in their innovation guide for generative AI.
Speaker Change: We are in the next stage of generative AI and have moved from output to outcome.
Speaker Change: While some other vendors may sell vaporware fresh works is the ROI driven AI solution, turning AI hype into real results.
Speaker Change: Turning to <unk>, we saw growth and retention in our flagship business and one of our two core offerings.
Speaker Change: We ended the quarter with approximately 59000, CX customers generated over $370 million in IRR, reflecting 7% year over year growth on a constant currency basis similar to the prior two quarters.
Speaker Change: Our CX win rate against competitors like Zen desk increased sequentially over the prior quarter.
Speaker Change: We know that exceptional customer experiences drive loyalty, while complexity drives them away.
Speaker Change: <unk> are choosing fresh desk over others, because our product is easy to use provides a lower total cost of ownership and delivers new AI features to improve productivity and efficiency.
Speaker Change: Companies of all sizes, such as two cows meson demand Landmark group and center World are leaving legacy software competitors and coming to us.
Speaker Change: NASDAQ Europe has relied on fresh desk for over four years to deliver high quality support to clients across multiple countries.
Speaker Change: With several fresh desk instances their teams depend on the core automation features and SLA policies to consistently meet their high customer service standards.
Speaker Change: In 2020 for NASDAQ Europe achieved a 97% resolution SLA and a 93% <unk>.
Speaker Change: <unk> desks uncomplicated and efficient platform continues to be a critical part of their support infrastructure as they scale and serve complex cross border markets.
Speaker Change: Our CX products are expanding in numerous ways.
Speaker Change: First CX customers are adopting our AI products.
Speaker Change: Customers have seen a 40% to 45% productivity improvement due to reduction in ticket resolution and response times from Freddie AI agents.
Speaker Change: For example, Panasonic North America chose fresh works as part of their strategy to drive continuous improvement.
Speaker Change: Pretty AI agent handles over 75% of their customer queries.
Speaker Change: To reduce customer effort scores and increased customer satisfaction.
Speaker Change: Another CX customer drive uses Freddie AI agents to deliver detailed explanations relevant article links and clear and actionable information to their customers, which has significantly reduced response time.
Speaker Change: Another expansion path is CX customers also buying our CX solutions and vice versa.
Speaker Change: We continued to see cross sell success with customers like Trinity College Finance company, Prem Pheno and the popular German football club VSP Stuttgart.
Speaker Change: Who initially used fresh desk to provide stellar customer experiences then expanded to <unk> X.
Speaker Change: On the product front, we launched several improvements to fresh chat in Q1, including enhanced integration with Apple messaging for business.
Speaker Change: Customers can now use apple messaging for business as a support channel and provide exceptional customer service with fresh fresh desk and Freddie AI agents.
Speaker Change: We also released the <unk> chat off authorization, which makes it easy.
Speaker Change: To integrate apps and reduces security risks, we believe these product improvements drive improved customer experience and retention.
Speaker Change: We recently announced enhancements to our global partner program with expanded reseller and services offerings designed to give partners more predictability and building long term fresh works practices.
Speaker Change: We have more than 500, transacting partners, including global partners, such as Gorilla services.
Speaker Change: <unk> International Unisys accession and climb.
Speaker Change: A recognition of our growth and innovation.
Speaker Change: Climb recently named fresh works its strategic vendor of the year.
Speaker Change: We're leveraging partners at every step of the customer relationship.
Speaker Change: For example, we teamed up with a preferred partner to help one of our longtime <unk> customers drive a major operations initiatives.
Speaker Change: Our collaborative approach helped reduce our customers' resolution times by 30%.
Speaker Change: As partners become a larger part of our business, we expect to see increased efficiencies in our go to market efforts and overall business.
Speaker Change: Once again I am.
Speaker Change: I'm excited to capture the opportunity in front of us.
Speaker Change: Particularly in the current economic environment, we expect our enterprise grade software to be a strong competitive advantage because it delivers results fast and has a lower total cost of ownership.
Speaker Change: We will provide more product updates at our virtual refresh summit in June and updates to our long term strategic plan at Investor Day in September.
Speaker Change: We will expound on our vision to help customers realize their full potential with the transformative power of AI.
Speaker Change: Thank you to our customers partners employees and shareholders for your ongoing support.
Speaker Change: Now, let me turn it over to Tyler to go through the operational and financial details.
Speaker Change: Thanks, Dennis and thanks, everyone for joining us on the call and via webcast today.
Speaker Change: As you've just heard we had a strong start to the year in Q1 with robust financial performance that reflects our operational discipline and focused execution of our strategic initiatives.
Speaker Change: We once again exceeded our revenue growth estimates and improved our profitability measures as we expanded our non-GAAP operating margin nearly 300 basis points quarter over quarter to 24%.
Speaker Change: And grew our adjusted free cash flow of 43% year over year to $55 4 million.
Speaker Change: Which resulted in strong adjusted free cash flow margin of 28%.
Speaker Change: For our call today.
Speaker Change: I will cover the Q1 2025 financial results provide background on the key metrics and close with our forward looking commentary on expectations for Q2 and full year 2025.
Speaker Change: As a reminder, most of our discussion will be focused on non-GAAP financial results, which exclude the impact of stock based compensation expenses restructuring charges and other adjustments.
Speaker Change: We will also talk about adjusted free cash flow, which excludes the cash outlay related to the restructuring costs.
Speaker Change: First in contrast to the prior quarter FX changes were a tailwind in the quarter driven by a weaker U S dollar.
Speaker Change: While Q1 revenue impact was minimal there was a one percentage point positive impact to AOR growth or $7 million increase to <unk>.
Speaker Change: During the call today, we will include constant currency comparisons to provide a clearer view of our underlying business trends.
Speaker Change: Starting with the income statement.
Speaker Change: Total revenue increased to $196 3 million growing 19% on an as reported and constant currency basis.
Speaker Change: Professional services revenue contributed $2 1 million in the quarter, reflecting the ongoing shift of services revenue to our growing partner network.
Speaker Change: Our <unk> business has increased to over $420 million in IRR, representing growth of 33% year over year for both as reported and constant currency.
Speaker Change: And as we continue to drive our up market strategy.
Speaker Change: Our CX business increased over $370 million of IRR, reflecting growth of 8% on an as reported basis and 7% year over year on a constant currency basis in large part due to steady execution and positive momentum from our SMB customers to start the year.
Speaker Change: Moving to margins we.
Speaker Change: We maintained a strong non-GAAP gross margin in Q1 to 86% as we made ongoing improvements in delivering our solutions efficiently and scaling our business.
Speaker Change: This represents an improvement of approximately 100 basis points compared to the prior year.
Speaker Change: Our non-GAAP operating income for Q1 came in at $46 4 million.
Speaker Change: Representing a non-GAAP operating margin of 24% and ahead of prior expectations.
Speaker Change: The improvement in profitability was driven by our top line outperformance as well as lower personnel related expenses as some of these costs moved to future quarters.
Speaker Change: We also had favorable timing of expenses with specific spend expected for later this year.
Speaker Change: Moving to operating metrics are two key business metrics, our net dollar retention in customers contributing more than $5000 in the IRR.
Speaker Change: Net dollar retention performed better than our expectations coming in at 105% on both an as reported and constant currency basis.
Speaker Change: Looking ahead, we estimate our net dollar retention of approximately 105% on an as reported basis and 104% on a constant currency basis for Q2.
For our second key business metric of number of customers contributing more than $5000 and they are as of the end of Q1.
Speaker Change: This metric grew 13% year over year on both an as reported basis and constant currency basis to 23275 customers.
Speaker Change: This customer cohort continues to represent 90% of our era.
Speaker Change: For our larger customer cohort contributing more than $50000 in the IRR as of the end of Q1, we saw growth of 24% year over year on both an as reported and constant currency basis to 3217 customers.
Speaker Change: This cohort represents 50% of our era.
Speaker Change: For total customers, we added over 1000 net new customers in the quarter as we saw a partial benefit from our free to paid initiatives that we began towards the end of last year.
Speaker Change: We ended Q1 with over 73300 customers.
Speaker Change: Now, let's turn to calculated billings balance sheet and cash items.
Speaker Change: Our calculated billings grew to $203 $3 million in Q1, representing an.
Speaker Change: As reported growth of 16% year over year, and 17% growth on a constant currency basis.
We saw higher bookings performance and increased pull in activity that contributed approximately two percentage points of growth in Q1.
Speaker Change: Looking ahead to Q2 2025, our initial estimate for calculated billings growth is 11% to 12% on both an as reported and constant currency basis.
Speaker Change: For the full year 2025, we expect calculated billings growth to be approximately 13% year over year on an as reported basis and 14% on a constant currency basis, which is in line with our expectations from last quarter.
Speaker Change: Moving to our cash items, we generated $55 4 million and adjusted free cash flow in Q1 outperforming our estimates thanks to strong collection activities and continued improvements in our operational efficiencies.
Speaker Change: This resulted in an adjusted free cash flow margin of 28%, which represents a five percentage point improvement year over year.
Speaker Change: As a reminder, these results do not include a onetime use of cash of $1 $5 million related to restructuring costs for.
Speaker Change: For the full year 2025, we are expecting to generate approximately $210 million of adjusted free cash flow with approximately $50 million in Q2 and slightly higher amounts in Q3 and Q4.
Speaker Change: In Q1.
Speaker Change: We repurchased an additional 111 $8 million of our shares at an average price of $16 60 per share.
Speaker Change: Since the beginning of the program, we have repurchased more than seven 7 million shares using $127 $3 million through Q1.
Speaker Change: We remain committed to executing on an appropriate capital allocation strategy and delivering long term value for our shareholders.
In addition to the repurchase program, we continue to manage and offset share count dilution by net settling vested equity amounts by using approximately $17 million during the quarter.
Speaker Change: This activity is reflected in our financing activities and is excluded from our free cash flow calculations.
Speaker Change: Looking ahead, we will continue to net settle vested equity amounts and expect Q2 cash usage of approximately $13 million at current stock price levels for the full year, we expect to use approximately $55 million net settle vested equity amounts.
We ended the quarter with cash cash equivalents and marketable securities of $1 billion.
Turning to our share count as of March 31, 2025, we had approximately 325 million fully diluted shares which represents growth of less than 1% year over year.
Speaker Change: Diluted calculation includes 298 million shares outstanding which is a slight reduction compared to the prior year and quarter.
Speaker Change: This calculation also includes 24 million shares related to Unvested, <unk>, ampere shoes, and 2 million shares related to outstanding options.
Speaker Change: We plan to thoughtfully manage share count dilution with net total activities and share repurchases into the future.
Speaker Change: Now onto our forward looking estimates.
Speaker Change: For the second quarter of 2025, we expect.
Speaker Change: Revenue to be in the range of $197 3 million to $200 $3 million growing 13% to 15% year over year on an as reported and constant currency basis.
Speaker Change: We expect non-GAAP income from operations to be in the range of $27 8 million to $29 8 million.
Speaker Change: non-GAAP net income per share to be in the range of 10 to 12.
Speaker Change: Assuming weighted average shares outstanding of approximately $299 7 million shares.
Speaker Change: For the full year 2025.
Speaker Change: We are raising our revenue expectations to be in a range of $815 3 million to $824 $3 million growing 13% to 14% year over year.
Speaker Change: Adjusting for constant currency using FX rates from Q2 of last year. This reflects growth of 13% to 15% year over year.
Speaker Change: We expect non-GAAP income from operations to be in the range of $139 5 million to $147 5 million.
Speaker Change: And non-GAAP net income per share to be in the range of 56 to 58.
Speaker Change: Assuming weighted average shares outstanding of approximately $299 1 million.
Speaker Change: Our financial outlook is based on a few assumptions that we would like to call out first.
Speaker Change: Our forward looking estimates are based on FX rates as of April 25, 2025, so any future currency moves are not factored in.
Speaker Change: Second as a reminder.
Speaker Change: We will anniversary the device 42 acquisition in early June.
Speaker Change: Such we anticipate revenue growth rates will be higher in the first half of the year compared to the second half.
Speaker Change: For operating metrics, including customer numbers that net dollar retention, we will anniversary these comparisons in our Q2 results.
Speaker Change: In addition, and consistent with prior years, we expect Q2 expenses to increase in connection with our annual merit cycle as well as shifting of investments in sales and marketing, which will impact our operating margin quarter over quarter.
Speaker Change: Lastly, we acknowledged that we are in a period of market volatility and economic uncertainty.
Speaker Change: While we have not seen meaningful impact to our business from these factors to date, we continue to monitor things closely.
Speaker Change: If parts of the economy do turn worse, we believe we are well positioned given our value proposition to customers.
Speaker Change: To summarize we are pleased with our strong performance in Q1, which reflects effective execution of our strategic initiatives and the dedication of our teams.
Speaker Change: We are focused on creating uncomplicated and innovative products for our customers, while driving long term profitable growth for the business.
Speaker Change: Thank you for your continued support and we look forward to updating you on our progress for the rest of the year.
Speaker Change: And with that let's take your questions operator.
Speaker Change: Thank you at this time, we will conduct a question and answer session.
Speaker Change: Finder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Speaker Change: And our first question comes from the line of Rob Oliver of Baird. Your line is now open.
Rob Oliver: Great. Thank you good afternoon appreciate it.
Speaker Change: Got it is it seems like on.
Rob Oliver: From the early software reports here.
Rob Oliver: The resiliency of software.
Rob Oliver: Okay.
Rob Oliver: Our business model, but also as adding efficiency PRN tough times, just kind of playing out and it sounds like that's really playing out for you guys. So a couple of questions. My question. One is that device 42. It seems that's now really driving platform wins last quarter, you said that the pipeline there had doubled sequentially and I Didnt I don't deal if I caught a comment relative to.
Rob Oliver: Pipeline, So would love to get an update there and then on <unk> I know you made some changes in CX.
Rob Oliver: Well it sounds like Thats really starting to pick up also.
Rob Oliver: Be curious if you were still seeing in that business both growth in.
Rob Oliver: Agents as well as seats.
Rob Oliver: Youre starting to see some of the efficiency created by the agent purchases start to offset some of the purchases.
Speaker Change: That's a lot thanks, guys I appreciate it.
Rob Oliver: Thanks, Rob So let me just tick through those I think first of all in terms of the overall demand and our positioning.
We did not see any material change in demand in Q1 from Q4 trend is pretty much. The same I would say beginning part of the quarter. This quarter same thing.
Rob Oliver: And if you if you think about our value proposition and what customers need.
Rob Oliver: In tighter times businesses are going to get need to get more efficient and our AI solutions, absolutely helped them do that we've got.
Rob Oliver: Over 30% improvement in productivity from co pilot, we're seeing deflection rates of 50% to 70% from AI agent. So thats a positive for us they want lower cost overall.
Rob Oliver: And if you look at our.
Rob Oliver: Positioning our products in general or about half the total cost of service now deployment or Zen desk deployment or our sales force deployment.
Rob Oliver: And that that's when you take into consideration the time it takes to get the value consultants you need to get our product up and running and then maintaining the product over time, so as those deployments come up for renewal, we're seeing it in our in our big wins customers are looking for an alternative theyre looking to bring us in and we're winning our fair share of deals.
Rob Oliver: There and they want uncomplicated solutions that scale and that our enterprise grade and we've clearly built that so regardless of the demand environment. We think we're going to be in good shape on device 42.
Rob Oliver: We had a great quarter for device 42, I would say that the majority.
Rob Oliver: Already of the business there is coming from us selling device 42 into our existing base at renewal for upsell.
Rob Oliver: As well as new deals it's helping.
Rob Oliver: We bought the company to help us win new business and we're seeing that two of our top five deals where device 42 deals and.
Rob Oliver: <unk>.
Rob Oliver: Enhance the value proposition for our existing customers. So.
Rob Oliver: Really the best quarter in terms of number of deals.
Rob Oliver: We've seen we've really only been selling together.
Rob Oliver: For for two quarters, two and a half, but but increasingly it's an integrated sale, which is why going forward, we're not really going to be speaking at about it as a completely separate business and then on the third point CX. We continue to see agent Count go up we continue to see adoption of our <unk>.
Rob Oliver: Hi solutions increase both for co pilot and for AI agent, we're very optimistic about where AI agent is going insights as as I mentioned is over.
Over 500 customers in the beta I think we had close to 1000 customers at the latest point so we're pretty.
Rob Oliver: Excited about how those products are going to continue to add value for us.
Rob Oliver: And I'm really proud about the investment that we've made and the results we're seeing NII.
Rob Oliver: So thank you.
Rob Oliver: Great really appreciate it thanks guys.
Rob Oliver: Thank you one moment for our next question.
Elizabeth: Our next question comes from the line of Elizabeth quarter of Morgan Stanley. Your line is now open.
Great. Thank you so much.
Speaker Change: She is an interesting operation opex efficiencies driven by some of the internal use of AI I was wondering if you could provide kind of more granular color on what youre seeing and how you might be changing your own internal spending plans if at all based on what Youre on the efficiencies you think.
Elizabeth: And then just lastly, just confidence in expanding the margin.
Matt Brown: Matt Brown.
Matt Brown: Sure. Thanks Elizabeth.
Matt Brown: So we've been on an AI journey for a number of years now and today, we have over 70 instances of AI products, our own products third party products that are enhancing our team's productivity and helping drive productivity and margin I mean, if you look back at the last we were looking at this earlier last two years in.
Matt Brown: Terms of our our cash flow margin, we've gone from sort of mid single digits to where we are today over the last 18 months to 24 months and if you look at look at head count and aggregate head counts actually come down by close to 20% now none of that none of that explicitly driven from any single project, it's really about optimizing the business overall.
Matt Brown: But AI plays a huge part in that we're using AI in engineering for coating, we are using it all throughout our support operations, we're seeing the kind of.
Matt Brown: Hi, deflection rate in the 80 plus percent range.
Matt Brown: For certain classes inquiries, we are seeing our copilot product.
Matt Brown: Assist us in areas like billing and customer support.
Matt Brown: So we're going to continue to press AI across our entire operation and we think that that will continue to drive margin expansion and you see that in the guide and Tyler or anything else that you would add on that.
Matt Brown: The second part of your question was with was just spending in general we've always prided ourselves on being relatively efficient in fact, we took actions last year to really drive a lot of efficiency into the business and we're going to continue to do that.
Matt Brown: I think we might be a little bit of anomaly that we said hey, we expect some increases in spend and some timing into Q2 and three and four.
Matt Brown: And part of the reason for that is we actually think.
Matt Brown: When times get really uncertain, we actually.
Matt Brown: That might be an advantage for us and we will lean into opportunities to try to grow faster specifically investing in sales and marketing.
Matt Brown: Great. Thank you so much.
Speaker Change: Thank you Michael for next question.
Speaker Change: Our next question comes from the line of Scott Berg of Needham <unk> Company. Your line is now open.
Scott Berg: Hi, everyone really nice quarter. Thanks for taking my questions I have two.
Scott Berg: Dennis I wanted to take it but there was a quote in your press release talked about new global head of a new global partner program with expanded offerings for resellers didn't hear much commentary on that can you help us understand maybe what changes you're making to your partner program.
Scott Berg: Any potential impacts for.
Scott Berg: Fiscal 'twenty five year. Thank you.
Speaker Change: Yes, I'll take it so we made a change to the program overall at the request of the vast majority of our partners, where we're moving to something that's much more industry standard where.
Speaker Change: We have we basically have a transfer pricing model for our resellers and then they can build services around that they can prices. They wish if they want a price on it.
Speaker Change: On a per seat basis. They can if they want to add services into that they can and that's that's what we were hearing that we needed to do across the board to create more opportunities for our partners too.
Speaker Change: Build businesses on an ongoing basis around our products I think.
Speaker Change: The things that we're seeing we continue to see a lot of interest from from the.
Speaker Change: Partners across the board.
Speaker Change: That are bringing us into mid market company. So we in Q1, we signed a deal with Unisys.
Speaker Change: Which which we've already been working with them throughout the quarter. We've got a nice pipeline of mid market customers for our <unk> set of solutions there.
Speaker Change: So I think we have a lot of opportunity in partners and I'm excited about where that's going.
Speaker Change: And we will continue to invest there.
Speaker Change: Got it very helpful and then.
Speaker Change: Your your operating margin guidance, Tyler I know you talked about timing of some expenses was favorable in the quarter moving to the back half of the year.
Speaker Change: Operating margin step down in Q2 is I guess, a little bit more significant than anything we've seen in the model over the last several years. The purely just based on timing or are there. Some other maybe investments going on in the in the model, that's maybe worth noting in the quarter. Thank you, yes. It's a combination of both Scott I think there is always timing from Q1 to Q2, but mainly.
Speaker Change: Changes in our compensation so our annual focal process hits at the end of Q1, So we get a.
Speaker Change: Kind of an uplift and so that happens every single year secondarily, we did have some timing just on spend.
Speaker Change: And some expenses that just got pushed out of Q1 into into kind of Q2 and the back half some of those are related to sales and marketing.
Speaker Change: So it's nothing we're really actually quite pleased with how we're doing from the efficiency perspective, we had a really significant.
Speaker Change: Beat against what our forecast was for Q1, but some of that was timing.
Speaker Change: Excellent. Thank you nice quarter again.
Scott Berg: Thanks Scott.
Speaker Change: <unk> for our next question.
Speaker Change: Our next question comes from the line of pendulum Barra of Jpmorgan. Your line is now open.
Pendulum Barra: Oh, great. Thanks for taking my question and congrats on the quarter.
Speaker Change: Dennis maybe talk about I think I heard you launched Freddie insights at the end of Q1, I don't think at least I'm not aware of kind of the pricing for that product, maybe maybe talk about how you're thinking about pricing and monetizing.
Pendulum Barra: Any insight.
Pendulum Barra: Overall, if you take a step back it seems like Youre being successful if any on the AI side.
Pendulum Barra: When do we start hearing.
Pendulum Barra: The contribution from each of the business.
Pendulum Barra: Overall to the kind of the growth of the growth.
Pendulum Barra: Or any of the business metrics and I have a follow up.
Pendulum Barra: Donna.
Donna: Thanks, Angela so.
Pendulum Barra: Let me just refresh.
Pendulum Barra: Refresh you on the overall pricing model for AI that we have today. So we have AI agent and AI agent most of the quarries today are coming on the CX side and for the CX, we monetize on a consumption basis remember you buy SESH impacts 100 session packs and U S.
Pendulum Barra: Session packs and and you bought and as you consume them you purchase more.
Pendulum Barra: For AI agent, that's an adder of seat at her the sticker price is $29 a seat per month on top of the regular license price and then four for AI insights, we're incorporating that.
Pendulum Barra: That's available in beta for Es, we're incorporating that into our enterprise plan to encourage adoption of the enterprise plan, which of course is the highest price plan. So we expect that we will have a mix of monetization methods for different aspects of AI. We also expect that we will experiment with with with different methods as as we hear feedback from.
Pendulum Barra: Customers some customers appreciate the certainty of the seat license model others are much more or are comfortable with.
Pendulum Barra: With consumption because they are used to that and other services.
In terms of when will we be able to talk about it separately.
Pendulum Barra: Right now AI is such an integral part of our sales people are buying are making decisions on switching from a legacy provider without really having a good understanding of the AI roadmap and AI capabilities. So it's really it's really driving the business overall and.
Pendulum Barra: I think we'll have to give some thought into how we if we do break it out how we talk about it and we will.
Pendulum Barra: More to say in September at the Investor Day.
Pendulum Barra: Understood.
Pendulum Barra: That makes seems like its been stable that's great to see but when I think about kind of the full corporate average calculation on that.
Pendulum Barra: Kind of giving up some of the higher numbers, but still able to maintain.
Pendulum Barra: Stable.
Pendulum Barra: Which makes me feel like you're in quarter, probably is expanding.
Pendulum Barra: Faster than your reported number is.
Pendulum Barra: Any way to understand.
Pendulum Barra: What is that in the quarter at this point or am I sort of ethical you're correct in that direction.
Sam: And Sam.
Speaker Change: Sam I think you had talked about 110% a couple of quarters back has that been holding up in the general zone.
Speaker Change: Yes, so it depends on yes, so we.
Speaker Change: Obviously calculate.
Speaker Change: Calculate right. It's a four quarter look back on the net dollar retention, we continue to make really good progress on churn and that's just kind of been steady youre right on net dollar retention. We are we have kind of.
Speaker Change: CNET level.
Speaker Change: 105 was a little bit better than what we had forecasted we had said one off where we're saying 104% Q2 again, it's an estimate.
Speaker Change: No. The churn we have three quarters of data, but the expansion rates and churn or just the ones. We have to wait for in the quarter to get to <unk>, but in general we're actually pleased with the progress that we've made.
Speaker Change: And we see some good results.
Speaker Change: Expansion motion on agent addition, that we've been talking about that for years in terms of that coming down and we're starting to see offsets in terms of the other products that we have to bring to our customers to offset the agent addition expansion, which is also going positive.
Speaker Change: The second piece of your question pendulum remind me.
Speaker Change: The <unk>.
Speaker Change: The byproduct Im sorry, the byproduct, we haven't updated that in the last couple of quarters. That's again, something we will talk about at Investor day.
Speaker Change: In terms of looking kind of deeper into the byproduct information both in that dollar types will be part of that.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Yes.
Speaker Change: Our next question comes from the line of Alex Zukin Wolfe Research. Your line is now open.
Alex Zukin: Hey, guys. Thanks for taking the question I guess, Dennis I mean outside of.
Alex Zukin: The mentioned, maybe some pull forwards in billings or pull ins in billings that you saw you really aren't seeing any of the macro changes yet I guess why is that how do you see that playing out what are you maybe hearing in conversations around.
Alex Zukin: Macro for the full year and Pilar, maybe just go a bit deeper on those pull ins from where were they from Q2, where they from later in the year and maybe just qualify.
Alex Zukin: If at all you've included kind of more risk adjustment around macro uncertainty in the guidance.
Alex Zukin: Thanks, Alex.
Look first of all we operate in a must have must have categories. If you have a customer support team. If you have an eye on ITT and you have to automate their operations you have to bring AI and get as much out of the people as you can and just not optional. So a lot of software categories are optional and so it's easier to defer decisions are.
Alex Zukin: Not have something or survive with whatever old legacy system that you have so.
Alex Zukin: So I'd say, that's one I think the second is.
A lot of our competitors are way more expensive.
Alex Zukin: You see that with these big wins that we have like a.
Alex Zukin: Travis Perkins, which is equivalent to the home depot the UK, it's a big sophisticated customer their customer service now for 10 years, plus and they are looking for something that's easier for them to manage themselves without having experts on staff, but just understand the system and can babysit it.
Alex Zukin: And Thats, what our product does you can you can manage it.
Alex Zukin: Without the kind of overhead that you that other systems require so when they're looking to save money. When they are looking to become more efficient of course theyre going to look at alternatives to their existing providers and three years ago two years ago, maybe when they sign their renewal our product was not as robust and mature as it is today. So we actually think that that's a great position to be in.
Alex Zukin: Going into kind of a tighter tighter time.
Alex Zukin: And and.
Alex Zukin: I think that that's that is true across the business now that that can change, but as of as of now we really didn't see anything.
Alex Zukin: Thats recognizable that indicates that the macro is having a big big effect on us so far.
Alex Zukin: On the question on kind of the timing of billings as we say hey, we've got about 2% benefit in Q1 from <unk>.
Alex Zukin: Both over performance, but also Poland and that pull it really is from Q2.
Alex Zukin: So it happens every quarter it really has to do with kind of a.
Alex Zukin: When expansions are happening during our contract terms and things like that.
Alex Zukin: <unk> is relatively unpredictable.
Alex Zukin: And then sometimes early renewals.
Alex Zukin: And that.
Alex Zukin: That takes away from a little bit of a forecast from Q2, but for the full year. We're still seeing the same we guided to the same number in terms of the billings forecast that we had already done coming into the year.
Alex Zukin: The second part of that question is what's de risks we're really.
Alex Zukin: Everything that we're talking about is based on the information that we have today.
Alex Zukin: And that would include kind of any of the uncertainty that's out there now if things get considerably worse or buying behaviors change from anything New then obviously, we'll update that but we're not seeing that right now.
Alex Zukin: Perfect. Thank you guys.
Speaker Change: Thank you one moment for our next questions.
Speaker Change: And our next question comes from the line of Brent <unk> of Jefferies. Your line is now open.
Speaker Change: Thanks, Dennis could you address the market strength you called out a number of these enterprise wins what are you seeing how would you characterize the pipeline as it is.
Speaker Change: Give us one.
Speaker Change: <unk> sense of what Youre seeing that had a quick follow up.
Speaker Change: So the pipeline looks good again.
Speaker Change: You see it in the numbers from last quarter. It just didn't or just some of the examples.
Speaker Change: In terms of our wins.
Speaker Change: They replaced year Ken State.
Speaker Change: Big Public University. They came in with fresh service as I said Travis FERC <unk> replay service now we had a big U S technology player 10 year customer service now they replace them Amex business travel upgraded at $2 42.
Speaker Change: Coherent Alterra Mountain Company Champion X. All of these are replacing legacy players with our products. So we've got great momentum and if I look at our pipeline it looks kind of like the last quarter right. It's strong both on the up sell and on the new business side. So again I'm not really seeing much change.
Speaker Change: From what we what we started seeing Q3 Q4 last year. It is building and I think for that mid market customer.
Speaker Change: Like the ideal is 5000 person, but it ranges up to 20000 people.
Speaker Change: That that segment is not well served by the big enterprise players or the legacy players. They don't they haven't historically had a choice now they do and I think that momentum is starting to build the customers are starting to talk to one another they are starting to recognize that there is a choice out there that we're at and so that's fantastic on that side of the business and we look to.
Speaker Change: Look to continue that.
Speaker Change: Okay, Great and then just a quick follow up some of your partners.
Speaker Change: And called out some changes in the sales team with <unk> <unk> can you just refresh us on what was happening there is just a distraction.
Speaker Change: How do you think about managing that transition.
Speaker Change: Sure So abe.
Speaker Change: <unk>.
Speaker Change: Let the company earlier this month for personal reasons.
Speaker Change: We respect that and.
Throughout the <unk> landed the quarter, obviously, we did well in Q1, Ian Tickell, who is our head of international he has stepped in on an interim basis and.
Has ticked up the mantle with no real no real losses, he has been a fantastic.
Speaker Change: Leader, who joined US last year, he was a CRO domo instead, along a long career in enterprise sales so.
Speaker Change: We continue to see the progress that.
We have made in the go to market motion across the board and.
Speaker Change: And we really didn't see any disruption I don't anticipate any.
Speaker Change: Okay. So I just wanted to clarify this change this is an interim changed and Youre looking for a full time sales is that correct thats correct. Okay.
Speaker Change: Thank you.
Speaker Change: Thank you Amit for next question.
Speaker Change: Our next question comes from the line of David Hynes of Canaccord Genuity. Your line is now open.
David Hynes: Hey, Thank you guys Dennis AI touch on new deals is obviously doing really well based on the SaaS you've shared maybe you could touch on the strategy for driving even better adoption in the installed base, but particularly on the CX side and just how you think you're positioned for that opportunity.
David Hynes: Yes, so I think it's on the one hand, we can look at the business say, Hey, 2700 customers up 500 year over year for Copilot 500, plus for AI agent, but but what I would say I keep reminding the team. We've got 73000 customers. So there's a long way to go I think part of that is just how big.
David Hynes: This is our adopting AI, it's very similar to any other new technology, where youre going to have the early adopters, who are comfortable experimenting and theyre comfortable trying new technology also those that have a bigger opportunity are the ones to jump in first like phone pay is a big customer of ours in India.
David Hynes: Its a big early adopter of all things AI.
David Hynes: And then youre going to have other customers that have other.
David Hynes: Other issues regulatory issues, they want to get comfortable.
David Hynes: With with how we're trading information they want to test the product they want to deploy in.
David Hynes: C before rolling out more broadly so we're working through all that with our customers and and where theyre seeing success, there broadening out and broadening their deployments and that's that's really the work Thats ahead of us as a team. So I think that adoption curve, we're going to continue to work on we've got.
David Hynes: Several exciting products that are coming out in June at our June 11 refresh event there'll be a virtue for those who cannot attend the event is going to occur in London, but there'll be a virtual version of it on the 12th where real share are a bunch of new products.
David Hynes: Introductions, which we think will accelerate AI adoption even further.
David Hynes: Across that base and then every quarter, we're getting better at selling and AI at demonstrating success with more and more success stories to talk about with <unk>.
David Hynes: Prospects and with our existing customers, who haven't yet adopted so I think it's really just a matter of time before we kind of continue to drive those numbers up and and see broader and broader adoption of our AI products.
Speaker Change: Okay makes sense and then Tyler follow up for you do you have an organic growth rate on that <unk> number I think you've shared that with us in the past I'm not sure I caught it this quarter.
David Hynes: Yes, David had coming into the year, we actually said, we're not going to be breaking out organic and inorganic and the main reason.
Speaker Change: Actually a positive reason the delight <unk> 42.
Speaker Change: Kind of co sell motion has been doing really really well. It's a majority of the business that we're closing that was all combined.
Speaker Change: So some of that those numbers don't make sense to break out anymore, we call that out coming into the year that that kind of Q4 was the last time, we're going to do that.
Speaker Change: Okay. Okay got it thank you guys.
Speaker Change: Thank you Amit for next question.
Speaker Change: And our next question comes from the line of Patrick Walgreens handset citizens. Your line is now open.
Speaker Change: Oh, great. Thank you and let me add my congratulations.
Speaker Change: So Dennis I had another CEO yesterday, telling me something I'd love to hear your reaction to it and see if this is similar for you. He said he's never seen anything goes fast and technology is AI and four months ago, a lot of the functionality with sort of like science fiction, but now it's table Stakes in particular, he said the rfps that are coming through now you've.
Speaker Change: <unk> got all of these.
Speaker Change: AI functionality requirements and the Rfps that werent there four months ago are you seeing the same sort of thing in your space do you even have rfps.
Speaker Change: We absolutely do have RFP, so typically in <unk>.
Speaker Change: <unk>.
Speaker Change: Any customer that's looking for a new solution to replace their existing solution or maybe they don't have a solution every customer is asking about AI because they understand it's integral to what these platforms need to deliver and yes. We do have lots of Rfps, all the time and I would I don't know.
Speaker Change: The exact number but I would hazard, a guess that 80% plus AI as a consideration I can't remember a conversation I've had in a sales situation or an upsell where AI is not.
Speaker Change: Topic that our customers want to understand they don't understand the roadmap they want to understand what.
Speaker Change: What we're going to be offering and how we can help benefit their business over time.
Speaker Change: Absolutely table Stakes and Thats why I am excited about how we've been able to monetize it here and how we've been able to drive.
Speaker Change: From from.
Speaker Change: From a year year, and a half ago, where we first launched that copilot SKU in the gea, where we've been.
Speaker Change: Able to drive pretty broad adoption. So it's totally table stakes in this space and I suspect most of the software.
Speaker Change: Alright, great and then the follow up is I had a different CEO tell me that one thing Thats made life more difficult for him is that.
Speaker Change: He used the word vaporware from its competitors, obviously theyre pitching his own book a little bit there, but he has just gotten so noisy because everyone's using the same words everyone's everyone's talking about agent take AI and Agentic workflows, and we really haven't but other people don't really have it but it's just gotten harder because it's really noisy.
Speaker Change: Sounds like you guys are managing through that but are you seeing the same thing in terms of the noise in this and how do you get through it.
Speaker Change: Well I think a couple of things for existing customers.
Speaker Change: We are one of the first places that they're going to turn for AI related to service automation and.
Speaker Change: That's that's the job of our teams to make sure that they understand what solutions they already have or they already have access to some cases, they're already paying for that they can get value from and and so there. We have an unfair advantage in that kind of noisy environment for a new customer coming in again think about the motivation for a new customer coming to.
Speaker Change: Today, whether it's <unk> or <unk> they're.
Speaker Change: No they are not satisfied with their existing platform typically for some reason and theyre looking for a modern AI first platform that is going to help them scale. Typically these decisions are multiyear decisions youre not going to want to switch your TSM or your customer support platform every year and so they want to understand what's the history of innovation what kind of innovations.
Speaker Change: I expect going forward do I believe in the roadmap do I believe they can deliver there and when I talk to customers that are seeing real value from the AI and Thats why the fact that we've got.
Speaker Change: 500 on AI agent close to 1000 on insights and 'twenty 700 on.
Speaker Change: Copilot that is a huge advantage for us now because we have real customers with real value tons of case studies that we can point them to and what I do is I just connect them with the CIO don't take my word for it but talk to our customers because they're seeing the value. So we think we're at that point in terms of our scale, where we have a real advantage over some startup coming in that has.
Speaker Change: You said, one or two customers and the demo and and Thats, where we have a real advantage and we're seeing it.
Speaker Change: Awesome alright, thank you.
Speaker Change: Thank you one moment for our next questions.
Speaker Change: Our next question comes from the line of Brent <unk> of Piper Sandler Your line is now open.
Speaker Change: Thank you good afternoon Dennis.
Speaker Change: New customer logos I think more than doubled what you saw during Q1 last year, you've had now three quarters, where the net retention trailing metric stabilized in period improved.
Speaker Change: How much of the strength that youre seeing here would you attribute to the external environment getting better versus maybe some internal things company specific things that you're doing around go to market new product.
Speaker Change: Just trying to.
Speaker Change: Better understand.
Speaker Change: The strength of you kind of saw the last two quarters and how much of its external versus internal.
Speaker Change: So I've been CEO now for.
Speaker Change: A little under a year and I wouldn't I think the external environment has been somewhat constant if not maybe there maybe there is if you just read the headlines negativity in the last couple of months, but I don't think its external environment. That's changed very much been focused on continuing to move the company up market and to build products that appeal to.
Speaker Change: That mid market customer again, 5000 to 20000 employees not well served by the existing incumbents. We built the go to market to go after that they'll partner network to go after that that's paying off you see it in ARPA, which is up.
Speaker Change: Meaningfully year over year, as well as well as customer count so.
Speaker Change: So thats, one and I think the second focus internally that we've had is on.
Speaker Change: Creating AI products that actually work out of the box easy to use easy to deploy and fast time to value consistent with our overall value proposition.
Speaker Change: And that's resonating as well you see it in all the monetization metrics that I was sharing before the customer count that I was sharing before.
Speaker Change: So those two things I think a matter more than the environment I don't think the environment has gotten better in the last 12 months.
Speaker Change: And there are signs that going forward it might get worse.
Speaker Change: Very clear there and then Tyler just a quick follow up for you Opex has actually been down on an absolute basis for two consecutive quarters that has helped push margins above 20% here for two quarters, but you did mentioned the change in appetite to maybe lean in as this external environment, maybe gets a little.
Speaker Change: More challenging trend accelerate share gains.
Speaker Change: Walk me through how closely youre going to be managing expenses. It sounds like you have an appetite to lean in but also an appetite.
Speaker Change: To watch things closely are you watching things on a monthly basis weekly basis, just walk me through where you.
Speaker Change: We're going to lean in and how closely youre watching it. Thanks.
Speaker Change: Yes, we are we are watching it pretty closely I think some of the bets that we plan to make date.
Speaker Change: Overnight return so those are things where you lane.
Speaker Change: Round work versus some of the pipeline things, we can do actually have a pretty pretty near term returns and so we'll place bets across the field now I said there is hey, there's two things happening one is timing right. So we had some expenses that are just getting pushed in but there were still going to make them. The others that we have are our annual compensation.
Speaker Change: The uplift that kicks in in Q2.
Speaker Change: Lean and partner talking about yes, we do think that when times are kind of volatile and then companies are really looking.
Speaker Change: Have the must have products, but at a great value. This is our opportunity to lean in and so we will.
Speaker Change: Continuing to invest in sales and marketing, but we do look at making sure. We're trying to make efficient investments and we'll be we'll be monitoring that on a regular basis.
Speaker Change: Got it great great to hear thank you.
Speaker Change: Thanks.
Speaker Change: Great. Thank you so much everybody for joining us and we will see you next time. Thanks.
Speaker Change: This concludes our question and answer session. Thank you for your participation in today's conference. This concludes the program you may now disconnect.
Speaker Change: Alright.