Matt Vanvliet

Matt Van Vliet requested more details on the RPO change, specifically regarding contracts booked last year, their renewal cycle, and how to reconcile the significant sequential decline in total RPO. He also asked about key learnings from the initial phase of Project Bear Hug as it expands to a larger cohort of customers.

Answer

CEO Rory Read attributed the RPO change to timing issues with larger telco deals booked last year, expecting RPO to move positively in coming quarters, aligning with NAR and renewal rate progress, noting an 'apples-to-apples' comparison would show flat or slight increase. Regarding Bear Hug, Mr. Read identified poor execution, inconsistent support, and frequent organizational changes as past issues. Learnings for expansion include building consistent account teams, proactive engagement, focusing on value creation over renewals, and leveraging a 'utility belt' of programs to drive next-generation usage and platform improvements, with proof points expected by Q1/Q2 next year.

Matt VanVliet asked for more details on the RPO change, specifically regarding contracts booked last year and their renewal cycle, and the key learnings from the initial Project Bear Hug rollout as it expands to a larger customer cohort.

Answer

Rory Read, President and CEO, explained that the RPO change was primarily due to timing issues and large telco deals pulled forward in Q3 FY25, expecting a positive shift in coming quarters. For Project Bear Hug, key learnings include building consistent account teams, proactive engagement ahead of renewals, and utilizing a 'utility belt' of programs like service skills and platform redos to drive value and upsell.

Matt VanVliet asked about Wix's vision for re-engineering the web for the AI era, specifically how the company plans to make small business websites 'agent-ready' for discovery by LLMs like Gemini and ChatGPT, and what new products or features are planned to support this over the next three to four years. He also inquired about Base44's cohort retention trends for monthly customer plans compared to Wix, specifically on one-month or monthly retention.

Answer

CEO Avishai Abrahami detailed that Wix is ensuring all websites are indexable by LLMs and continuously adding new e-commerce standards (like OpenAI's MCP) to enable functionality within or discovery by LLMs. He emphasized the platform's role in supporting new AI standards for business visibility. CFO Lior Shemesh stated that Base44's early cohort behavior is similar to Wix's early monthly plans, and potentially better, with expectations for improvement as brand visibility grows and retention efforts strengthen.

Matt VanVliet inquired how much of the growing revenue per customer is driven by cross-selling finance/IT modules versus AI/usage monetization. He also asked for an update on how the original $2 billion HCM target fits into the new $3 billion revenue target, and how much of the $1 billion increase is from finance and IT.

Answer

Executive Chairman Steve Beauchamp explained that differentiating ARPU drivers is challenging due to bundled sales, but cross-sells (currently mostly HCM, with finance/IT in early innings) and product strategy extensions contribute to a mix of unit growth and ARPU expansion. CFO Ryan Glenn clarified that the $3 billion target is driven by a consistent formula of client growth and ARPU expansion, enabled by continuous innovation across HCM, finance, and IT, rather than a specific breakdown of the $1 billion increase.

Matt VanVliet from Cantor Fitzgerald asked about the drivers of Paylocity's growing revenue per customer, specifically how much is attributed to cross-selling finance or IT modules versus other product expansions or AI usage monetization. He also inquired about the composition of the updated $3 billion long-term revenue target, asking how much of the original $2 billion HCM business contributes and how much of the $1 billion increase is exclusively from finance and IT TAM expansion.

Answer

Steve Beauchamp, Executive Chairman, explained that differentiating revenue drivers is challenging due to bundled sales, but noted that current cross-sell is largely driven by the HCM suite, with early excitement for finance and IT modules contributing to higher average revenue per customer. Ryan Glenn, Chief Financial Officer, clarified that the $3 billion target is a continuation of their consistent growth formula, combining client growth and average revenue per user (ARPU) expansion, with opportunities across HCM, finance, and IT contributing to the overall TAM expansion.

Matt VanVliet inquired about the continued international sales strength, seeking details on performance across Europe/EMEA versus APAC and whether the Marriott deal is creating a 'halo effect.' He also asked about the current capacity of the delivery team to manage backlog and if further significant headcount additions are anticipated that might impact margin structure.

Answer

Ramesh Srinivasan, President and CEO, stated that international strength is driven more by product improvements than a Marriott halo effect, though global wins will further contribute. EMEA, particularly the U.K., is seeing record levels. He confirmed that bulk capacity increases in the services team were completed earlier in the calendar year, and while steady expansion will continue, no further 'bulk growth' is needed to manage backlog, despite ongoing customer-side delays.

Matt Vanvliet of Cantor Fitzgerald asked about the progress of the new sales and marketing leadership's multiyear plan to enhance the go-to-market strategy. He also questioned how the Book4Time acquisition is contributing to new customer wins and cross-selling, and whether the company might invest more aggressively, potentially lowering the 20% EBITDA guidance.

Answer

CEO Ramesh Srinivasan stated that the sales structure and territory coverage plan are now well-established and yielding results, though they are in the early stages of seeing the full benefits. He mentioned that marketing investments will continue to increase presence and content quality. Regarding Book4Time, he acknowledged that cross-selling into its customer base is in the early stages but is beginning to happen. Srinivasan affirmed the company's commitment to the 20% adjusted EBITDA target for the year, stating they can fund necessary growth investments without sacrificing that profitability level.

Matt Vanvliet from Cantor Fitzgerald asked how NewsWhip's technology complements the existing listening platform and what its impact would be on the second-half operating income guidance.

Answer

CEO Ryan Barretto positioned NewsWhip as a strategic complement, differentiating Sprout's offering. He described Sprout's core listening for deep analysis and NewsWhip as a 'command center for real-time action' and crisis management. CFO Joe DelPretto confirmed the guidance assumes NewsWhip will be breakeven for the remainder of the year, with no additional integration costs impacting the outlook.

Matt Vanvliet from Cantor Fitzgerald asked about the pipeline for on-premise to cloud flips, the impact of the Tyler Connect conference, and the expected progress and ARR magnitude of flips for the second half of the year.

Answer

President & CEO Lynn Moore stated that momentum from successful flips, like the first California court migration, continues to build interest. EVP & CFO Brian Miller added that flips are back-end weighted for the year and they still expect the number of flips to grow around 25% year-over-year. He reiterated that the peak for larger, high-value flips is anticipated in the 2027-2028 timeframe.

Matt Vanvliet from Cantor Fitzgerald inquired about the evolution of the Innovation Studio monetization strategy and its potential impact, and asked about growth opportunities for the Helix business given the changing regulatory stance on digital assets.

Answer

CFO Jonathan Price stated that Innovation Studio's high-margin revenue is growing with adoption, emphasizing the long runway for expansion within the 85% of customers using it. President Kirk Coleman noted that while early, there is opportunity in stablecoins for bank customers, and the Helix business is seeing encouraging 'green shoots' as the regulatory environment has settled.

Matt Vanvliet from Cantor Fitzgerald inquired about the integration progress and go-to-market strategy for the recently acquired revenue recovery solutions, and asked about headcount plans in the context of the 200 basis points annual margin expansion goal.

Answer

CEO Chad Collins reported that the Supply Pike and Carbon6 go-to-market teams are being combined, with a lead-sharing program in place with the core fulfillment team. CFO Kim Nelson explained that headcount will be added efficiently to support growth, which contributes to the margin expansion goal, noting that gross margin is already improving due to leveraging past investments.

Matt Vanvliet asked about the cross-sell motion, specifically what programs are being implemented to drive EX sales into the CX customer base and, conversely, to increase CX penetration within the EX base.

Answer

CEO Dennis Woodside noted that while cross-sell is strong at the high end, with about half of the top 50 accounts using both CX and EX products, the key opportunity lies in the mid-tier and long tail. He mentioned that driving this broader cross-sell is an ongoing programmatic effort for the company.

Matt Vanvliet asked about the size of the OfferFit sales team, when Braze sellers would begin cross-selling the product, and whether the company is approaching a trough in net retention given upcoming renewal cohort sizes.

Answer

CEO Bill Magnuson said OfferFit adds 15 reps and that for the remainder of this year, Braze reps will partner with them to qualify leads before a fully combined sales motion begins next fiscal year. CFO Isabelle Winkels reiterated that revenue growth is expected to stabilize before dollar-based net retention, and she is not yet calling a trough for the DBNR trend.

Asked about the product attach rates within the embedded channel and how they compare to the overall average. Also inquired about the strategic focus of the 20% sales headcount growth across different market tiers.

Answer

The product suite sold through the embedded channel is broader than initially anticipated. While payroll is the primary driver, partners are also demanding workforce management, reporting, analytics, and talent modules. The sales headcount growth is strategically allocated, with about 70-75% of new hires going into Tier 1 markets (the 15 largest cities) and the remainder into Tier 2 and Tier 3 markets.