Michael Funk

Michael Funk asked about Digital Realty's strategy regarding contract duration and annual escalators, given the strong reported and forecasted releasing spreads for 2026.

Answer

President and CEO Andy Power noted the company is pushing for higher escalators (minimum 3%, up to 4% or CPI-linked) due to the inflationary environment and rising infrastructure delivery costs. CFO Matt Mercier added that 0-1 MW contracts are typically shorter-term and closer to market, allowing for more frequent price adjustments, while larger contracts are long-term with embedded renewal options, and the company continuously seeks optimal pricing for value delivered.

Michael Funk asked about Digital Realty's capacity and interest in pursuing shorter duration contracts or shifting to higher annual escalators, given the strong reported and forecasted releasing spreads.

Answer

President and CEO Andy Power and CFO Matt Mercier stated that Digital Realty has been pushing for higher escalators, targeting a minimum of 3-4% or CPI-linked, due to the inflationary environment and the critical nature of the infrastructure. Matt Mercier added that 0-1 MW contracts are typically shorter-term and closer to market, offering more frequent opportunities for price adjustments, while larger contracts, though longer-term, are also reviewed for optimal pricing during renewals.

Michael Funk from Bank of America asked for the rationale behind why re-leasing spreads might be lower in the future, given the strong current performance and raised guidance for the year.

Answer

CFO Matt Mercier explained that the first-half results were boosted by outperformance in the 'other' category, likely related to shell space, which is not expected to recur at the same level in the second half. He clarified that the underlying strength in the core zero-to-one and greater-than-one megawatt segments is expected to continue.

Michael Funk inquired about Crown Castle's multi-pronged approach to DISH, including legal actions and lobbying, and sought an update on the process and expected timing for these different strategies.

Answer

Chris Hillabrant, President and CEO, stated that Crown Castle has filed suit against DISH and, as part of the industry, met with the FCC to advocate for DISH to honor its obligations. He emphasized aggressive defense of shareholder interests but declined to provide specific details on legal strategy or timing, noting that court processes could take a year or longer.

Michael Funk from Bank of America inquired about Crown Castle's multi-pronged approach to DISH, including legal actions, lobbying the FCC, and court proceedings. He asked for an update on the process and expected timing for these different strategies.

Answer

Chris Hillabrant, President and CEO, stated that Crown Castle has filed suit against DISH and, as an industry (under WIA), met with the FCC to advocate for DISH to honor its obligations. He indicated that the company is taking various aggressive steps to defend shareholder interests but declined to go into specific legal strategy details or timing, noting that court proceedings could take a year or longer.

Michael Funk of Bank of America inquired about the allocation of overlapping costs between the core tower and divested businesses and asked about capital allocation priorities, particularly the approach to programmatic versus opportunistic share buybacks.

Answer

CFO Sunit Patel clarified that cost overlaps are minimal and primarily on the corporate side (e.g., IT, accounting). Regarding capital allocation, both Sunit Patel and Interim CEO Daniel Schlanger reiterated that priorities post-sale are debt reduction to maintain an investment-grade rating, a dividend growing with AFFO, and share repurchases. The execution strategy for buybacks will be determined based on market conditions to maximize shareholder value.

Michael Funk asked about Lumen's strategies to avoid construction delays, particularly for data center builds, and whether PCF contracts allow customers to delay acceptance or if revenue is recognized upon completion and activation.

Answer

Kate Johnson, CEO, highlighted Lumen's scale in supply chain (favorable contracts, priority status) and workforce, enabling swift execution, often involving overbuilding existing infrastructure rather than new builds. She shared an anecdote about a cloud company being surprised by Lumen's speed. Chris Stansbury, CFO, added that Lumen has a special relationship with Corning for fiber access and that hyperscalers are consistently demanding more speed, with many contracts including performance bonuses for faster delivery. He also noted that many deals leverage Lumen's network proximity to existing data center areas.

Michael Funk asked about Lumen's specific strategies to avoid construction delays, particularly for data center builds, and whether customers have the ability to delay acceptance of delivery for PCF revenue recognition once projects are completed.

Answer

Kate Johnson, CEO, highlighted Lumen's scale in supply chain (favorable contracts, priority access) and workforce, noting that much of their work involves overbuilding rather than new construction, enabling faster execution. She shared an anecdote about a cloud company being surprised by Lumen's speed. Chris Stansbury, CFO, added that Lumen has a strong relationship with Corning for fiber access and emphasized that hyperscalers are consistently demanding faster delivery, with many contracts including performance bonuses for speed, rather than seeking delays. Kate also noted Lumen's network proximity to existing data centers aids swift execution.

Michael Funk (Bank of America) questioned AT&T's national advertising strategy for its converged offering, noting little differentiation between fiber and fixed wireless, and asked about plans for more targeted Fixed Wireless Access (FWA) messaging and the market opportunity. He also inquired about the flat handset amortization outlook for 2026 and what it implies for wireless competition and AT&T's competitive willingness.

Answer

CEO John Stankey explained that AT&T prioritizes a broad, generic internet message nationally to build awareness as a capable national provider, based on AB testing. He stated that targeted "rifle shot" messaging for specific technologies like FWA is executed below the national level using digital means and customer data, aligning the right product with the right customer in the right geography. Stankey noted that the strategy will evolve as the fiber footprint expands. CFO Pascal Desroches clarified that the flat handset amortization headwind reflects AT&T's disciplined, convergence-focused competition, prioritizing fiber customer relationships over aggressive device promotions outside those areas, confident in managing ARPU dynamics.

Michael Funk questioned the national advertising strategy for converged offerings, noting little differentiation between fiber and Fixed Wireless Access (FWA), and asked about the approach to more targeted FWA marketing in 2026 and the market opportunity. He also inquired about the expectation for flat year-over-year handset amortization in 2026 and its implications for wireless competition and AT&T's willingness to compete.

Answer

CEO John Stankey explained that national advertising aims to build broad awareness of AT&T as a capable internet provider, with targeted 'rifle shot' messaging for specific technologies like FWA executed digitally at a local level. He expects this approach to evolve with fiber footprint expansion. CFO Pascal Desroches stated that flat handset amortization headwinds reflect AT&T's disciplined, convergence-driven competitive strategy, prioritizing fiber customer growth over broad promotional spending.

Michael Funk inquired about the pressures on Zoom's enterprise net dollar expansion (NDE) rate, which is still below 100%, and whether the company is experiencing post-COVID seat-based contraction, asking when NDE might inflect positively.

Answer

Michelle Chang, CFO, expressed satisfaction with NDE stabilization, noting that while inflection is the goal, new products like Contact Center and WorkVivo bring in new customers, which impacts the metric over time. She added that seat count contraction was not a significant factor, and overall macro demand remained strong.

Michael Funk inquired about the factors contributing to Zoom's enterprise net dollar expansion (NDE) remaining below 100%, including any impact from post-COVID seat-based contraction, and the expected timeline for NDE improvement.

Answer

CFO Michelle Chang expressed satisfaction with NDE stabilization after six quarters, noting that new products like Contact Center and Workvivo take time to fully impact the metric. She indicated that seat count pressure was not a significant factor in the quarter, citing strong overall macro demand.

Michael Funk of Bank of America requested color on the size and growth of the sales funnel for AI products and any observable uplift in customer ARR from the adoption of these AI solutions.

Answer

Founder & CEO Eric Yuan positioned AI Companion as a foundational platform that enhances other products like Zoom Virtual Agent. CFO Michelle Chang added that Zoom measures AI health by adoption, with monthly active users up 4x year-over-year, and by depth of usage across the platform. She reiterated that near-term monetization is led by Contact Center, with broader contributions expected in FY27.

On behalf of Michael Funk, Matthew Bullock asked about the early customer reception to the online monthly Pro SKU price increase, any observed pricing sensitivity or churn impact, and whether pricing could become a more significant growth lever.

Answer

CFO Michelle Chang characterized the price increase as modest and justified by added product value, such as doubled storage limits. She pointed to record-low churn and a more stable online customer base as signs of strength, and stated that while the company is thoughtful about pricing, there are no plans for further increases at this stage.

Michael Funk of Bank of America inquired about Zoom's market differentiation strategy as a broad platform and the relative importance of product versus price.

Answer

Founder and CEO Eric Yuan emphasized that Zoom's philosophy remains centered on "better product, better price, and better service." He identified superior product experience as the core strength, leading customers to consolidate on the Zoom Workplace platform. He argued that offering high-quality AI at no additional cost builds long-term trust and creates more monetization opportunities as a platform player, rather than competing on price alone.

Michael Funk of Bank of America asked if recent Contact Center wins were primarily for internal help desks or external customer engagement, and whether its growth trajectory was tracking in line with the precedent set by Zoom Phone.

Answer

CEO Eric Yuan clarified that while early adoption included internal IT help desks, the majority of current wins are for external use cases like customer support and engagement. CFO Kelly Steckelberg confirmed that Contact Center's growth is tracking in line with the company's expectations, which were benchmarked against Zoom Phone's historical ramp.

Michael Funk asked for clarification on revenue growth expectations, noting the FY26 guide is below a previously discussed 'mid-single-digit' target, and questioned the underlying drivers.

Answer

CFO Michelle Chang maintained that the company's approach is unchanged, pointing to positive trends like improving enterprise down-sells and record-low online churn. She stated that the growth drivers for FY26 remain consistent: moving upmarket, expanding the channel, and growing new products.

Michael Funk inquired about AST SpaceMobile's strategy regarding future prepayment deals with customers, the commercial financial benefits of securing these now that the company is fully funded, and requested more details on the broad terms of these prepayment contracts, including capacity or subscriber specifics.

Answer

Scott Wisniewski, President and Chief Strategy Officer, explained that the strategy to pursue agreements with prepayments and long-term revenue commitments remains unchanged, balancing capital market access with these agreements. He clarified that prepayments are for near-term commercial services, while commitments can span near, medium, and long terms, with each relationship balanced appropriately.

Michael Funk from Bank of America inquired about AST SpaceMobile's strategy regarding future prepayment deals with customers, the commercial financial benefits of securing these agreements, and requested more details on the broad terms of these prepayment contracts, including capacity or subscriber focus, now that the company is fully funded.

Answer

Scott Wisniewski, President and Chief Strategy Officer, explained that the strategy of pursuing long-term revenue commitments and prepayments from aligned partners remains unchanged, balancing capital market access. He clarified that prepayments are for near-term commercial services, while commitments span near, medium, and long terms, with each relationship balanced appropriately.

Michael Funk asked Keith Taylor about the impact of accelerating builds and capitalizing expenses on the AFFO outlook provided at Analyst Day. He also asked Adaire Fox-Martin to size the addressable market for Equinix's distributed AI infrastructure solution and other emerging solutions.

Answer

Keith Taylor, CFO of Equinix, noted that the company's lower cost of borrowing and higher returns on cash, combined with increased capitalized interest due to accelerated construction, would positively impact the balance sheet. He specified that capitalized interest increased from $14 million in Q2 to $27 million in Q3, with Q4 expected to be between $20 million and $30 million. Adaire Fox-Martin, President and CEO of Equinix, highlighted the significant increase in interconnection revenue and Fabric provisioning, emphasizing connectivity as Equinix's 'secret sauce' for AI and non-AI workloads. She identified latency, model provider flexibility, edge processing, data residency/compliance, and intellectual property protection as key considerations for customers deploying AI workloads on Platform Equinix, representing a viable growth opportunity.

Michael Funk asked about the impact of accelerating builds and capitalizing interest expense on Equinix's 2026 AFFO outlook, and requested an assessment of the addressable market for distributed AI infrastructure solutions and other emerging offerings.

Answer

Keith Taylor, CFO of Equinix, noted that a lower cost to borrow and good returns on cash, combined with increased capitalized interest due to accelerated construction (Q2: $14M, Q3: $27M, Q4: $20-30M), will influence the AFFO outlook. Adaire Fox-Martin, President and CEO of Equinix, highlighted the strong interconnection revenue ($422M) and Equinix Fabric's 57% year-over-year increase and 110 terabits provisioning as key to the connectivity narrative for AI/non-AI workloads. She emphasized that Platform Equinix addresses latency, model provider flexibility, edge processing, data residency/compliance, and intellectual property protection, representing a significant and viable growth opportunity.

Michael Funk of Bank of America asked why stabilized portfolio growth was only 3% given favorable market conditions, and what customer experience areas the new Chief Customer and Revenue Officer might improve.

Answer

CFO Keith Taylor explained the 3% growth is on a high-returning, mature asset base and is impacted by factors like temporarily moving high-performing assets like DC2 into redevelopment. CEO Adair Fox-Martin said the new CCO, Shane Paladin, will build on strong NPS scores by focusing on enhancing the customer journey, particularly around customer success and post-implementation project management.

Michael Funk of Bank of America questioned why stabilized portfolio growth was only 3% given industry tailwinds and asked about specific areas for customer experience improvement under the new Chief Customer and Revenue Officer.

Answer

CFO Keith Taylor explained that 3% growth is strong for their high-returning, mature asset base and noted the figure was impacted by temporarily moving a top-performing asset (DC2) out of the pool for redevelopment. CEO Adair Fox-Martin said new CRO Shane Paladin will focus on enhancing the customer journey, particularly in customer success and post-implementation project management, to build on already strong Net Promoter Scores (NPS).

Michael Funk asked CEO Dan Schulman about specific strategies and tools for reducing churn, distinguishing between proactive and reactive approaches. He also inquired about the utilization of AI for efficiency efforts, retention, and the broader opportunity of AI infrastructure for Verizon.

Answer

CEO Dan Schulman discussed churn reduction by addressing known pain points, competitive offers, and a thoughtful, urgent turnaround to become a 'scrappier' company. He highlighted AI's potential for efficiency, dramatically improving value propositions, anticipating customer needs, proactively addressing issues, and tailoring customized offers at micro-segment levels, viewing it as a large and growing opportunity for Verizon and American industry.

Michael Funk of Bank of America asked about Verizon's specific strategies and tools for reducing churn, distinguishing between proactive and reactive approaches. He also inquired about the utilization of AI for efficiency efforts, retention, and the broader opportunity of AI infrastructure for Verizon.

Answer

CEO Dan Schulman stated that Verizon has a clear understanding of churn drivers and plans to address them through a multi-part business turnaround, focusing on thoughtful, prudent, and urgent execution to become a "scrappier" company. He highlighted AI's potential for dramatic improvements in efficiency, customer satisfaction, proactive issue resolution, and personalized offers, noting its rapid advancement and its role in shifting the internet's operation.

Michael Funk of Bank of America asked about the year-over-year increase in postpaid phone subscriber acquisition costs and what Verizon considers the optimal budget mix between customer retention and acquisition.

Answer

Chairman and CEO Hans Vestberg explained that the company does not disclose specific acquisition cost figures. He described the allocation of capital between acquisition, retention, and media as a fluid and dynamic process, managed weekly to optimize for the best return on investment and customer lifetime value, all while adhering to strict financial discipline.

Michael Funk asked about services revenue as a leading indicator for domestic deployments in 2026 and the potential impact of the AT&T EchoStar spectrum acquisition on AT&T's deployment plans.

Answer

President and CEO Steve Vondran noted that services revenue had a near-record year, indicating robust carrier activity, and is expected to be a strong contributor in 2026. Regarding the AT&T EchoStar spectrum acquisition, Vondran stated that carriers typically deploy newly acquired spectrum, which is positive for American Tower, but refrained from specific comments until AT&T announces its build plans.

Michael Funk inquired about the implications of robust services revenue for domestic deployments in 2026 and the potential impact of AT&T's EchoStar spectrum acquisition on AT&T's network build-out plans.

Answer

President and CEO Steve Vondran noted that near-record services revenue reflects strong carrier activity, particularly 5G mid-band build-out and early densification, indicating a healthy pipeline for 2026. Regarding AT&T's spectrum, he stated that carriers typically deploy acquired spectrum, which bodes well for future activity, but specific build plans are pending.

Michael Funk asked for more context on the delayed leasing-to-commencement conversion, questioning if past experience or specific issues could explain the timing. He also requested more detail on the business outlook in Europe.

Answer

President & CEO Steven Vondran described the U.S. issue as a minor slowdown in one customer's deployment pace, not a pervasive problem. Regarding Europe, he noted a steady deployment of mid-band 5G, consistent with mid-single-digit organic growth expectations. EVP, CFO & Treasurer Rod Smith added that Europe's stability is supported by CPI-linked escalators and low churn, expected to remain below 1%.

Michael Funk asked if NICE was observing the same softer Q4 seasonality mentioned by a competitor and inquired about potential catalysts or tipping points for accelerating cloud revenue growth.

Answer

CEO Scott Russell and CFO Beth Gaspich both confirmed they are not seeing any signs of softer Q4 seasonality, attributing NICE's stability to its diversified customer base across various industries. Regarding growth acceleration, Ms. Gaspich indicated that more detailed forward-looking guidance, including the impact of the Cognigy acquisition, would be provided at the upcoming Capital Markets Day.

Michael Funk asked if NICE is observing softer Q4 seasonality, what could signal an acceleration in cloud revenue growth, and whether the churn at LiveVox was primarily competitive.

Answer

CEO Scott Russell and CFO Beth Gaspich confirmed they are not seeing signs of Q4 softness, attributing this to NICE's diversified customer base. Gaspich pointed to the upcoming Capital Markets Day for a detailed growth outlook, highlighting the Cognigy acquisition as a potential catalyst. She clarified the LiveVox churn was not competitive but resulted from a few customers attempting to build in-house solutions.

Michael Funk of Bank of America asked if NICE is hearing of softer Q4 seasonality from customers, what might signal an acceleration in cloud revenue growth, and whether the LiveVox churn was competitive.

Answer

CEO Scott Russell and CFO Beth Gaspich both stated they are not seeing or hearing of any Q4 softness, attributing NICE's resilience to its well-diversified customer base across industry verticals. Gaspich pointed to the upcoming Capital Markets Day for more details on growth acceleration, including the impact of Cognigy. She clarified the LiveVox churn was not competitive but was from a handful of customers attempting to bring capabilities in-house.

Michael Funk asked if NICE was observing softer Q4 seasonality similar to competitors, inquired about a potential tipping point for accelerating cloud revenue growth, and questioned if LiveVox churn was competitive.

Answer

CEO Scott Russell and CFO Beth Gaspich both confirmed they are not seeing signs of Q4 softness, attributing NICE's stability to its diversified customer base. Beth Gaspich pointed to the upcoming Capital Markets Day for a detailed growth outlook, including the impact of Cognigy. She clarified the LiveVox churn was not competitive but from a few customers attempting to in-source capabilities, a move she suggested is often reversed later.

Michael Funk from Bank of America inquired about the disconnect with customers not being ready to accept rapidly provisioned wavelengths, asked about the risk of customers over-provisioning, and requested an update on the previously stated target of a $20 million quarterly revenue run-rate for waves by Q4.

Answer

Dave Schaeffer, Founder & CEO, explained that the "disconnect" is due to Cogent being a new entrant in the wavelength market and needing to build credibility for its unprecedented provisioning speed, which differs from the multi-month delays customers expect from incumbents. He dismissed the idea of over-purchasing, attributing delays to customer surprise. He also reaffirmed confidence in hitting the $20 million quarterly run-rate for wavelength revenue in Q4.

Michael Funk from Bank of America asked if the NICE and AT&T partnership extensions signal a strategic go-to-market shift and inquired about the FX impact on the quarter.

Answer

CEO Vlad Shmunis stated these are extensions, not strategic shifts. The NICE renewal solidifies a key enterprise tool, while the AT&T extension is 'momentous' as it adds RingCentral's new AI products to AT&T's portfolio. CFO Vaibhav Agarwal noted that while there was some FX benefit in the quarter, it was not material enough to warrant a specific callout.

Michael Funk of BofA Securities asked for context on RingCentral's annual guidance relative to overall market growth, whether it implies market share gains, and if the guidance incorporates conservatism for the mid-sized business market.

Answer

CEO Vlad Shmunis stated that RingCX is definitely taking share, though it's early, and that the annual guidance reflects current acquisition and retention patterns, macro uncertainty, and currency headwinds, without baking in a potential economic recovery. He emphasized the company's control over costs, leading to strong margin expansion and a forecast of over $500 million in free cash flow for 2025. CFO Abhey Lamba added that the guidance also accounts for a 1-point currency headwind.

Michael Funk from Bank of America asked if carrier conversations indicated that bonus depreciation benefits would be used for wireless network builds, not just fiber. He also requested any quantification of the traffic increase from AI applications.

Answer

President and CEO Brendan Cavanagh noted that while discussions aren't explicit to bonus depreciation, the excess cash is fungible and good for overall network investment, and he believes wireless will benefit. Regarding AI, he stated that he could not provide specific traffic quantification at this time, as it is still premature, but may be able to share more as the trend develops.

Michael Funk of Bank of America inquired about the drivers for early contract renewals, the impact of falling AI inference costs on margins, and the current stage of customer adoption for Box's AI products, from small tests to wider deployments.

Answer

CFO Dylan Smith stated that the primary catalyst for early renewals is customer demand to adopt AI capabilities, especially Enterprise Advanced. CEO Aaron Levie explained that falling AI inference costs either reduce expenses or unlock more powerful features, and the company aims for AI to be margin-neutral over the medium term. He noted that AI adoption spans from included base features to full enterprise upgrades and high-volume consumption models.

Michael Funk inquired about the impact of macro uncertainty on customer purchasing behavior and asked for a breakdown of the components driving the Net Retention Rate (NRR), such as pricing and seat count.

Answer

CEO Aaron Levie acknowledged the 'dynamic macro environment' but positioned Box as an asset for driving efficiency and automation in such times. CFO Dylan Smith detailed that the expected NRR improvement from 102% to 103% in FY26 will be largely driven by improved pricing and price-per-seat expansion from advanced offerings, with seat growth remaining muted and churn stable at a best-in-class 3%.

Michael Funk sought more detail on the specific drivers that will take the company to high-single-digit revenue growth by fiscal 2028, such as seat count, wallet share, or pricing. He also asked what the CEO's top priority is now that significant progress has been made on the balance sheet and expense structure.

Answer

CEO Samuel Wilson explained the path to higher growth involves the accelerating core business shining through as the Fuze headwind diminishes, combined with higher retention rates from a growing base of multi-product customers. CFO Kevin Kraus added that the rapidly growing usage-based CPaaS business also contributes. Wilson stated his top priority has shifted to getting 'back to growth' by accelerating the Fuze shutdown and investing in areas like CPaaS.

Michael Funk of Bank of America asked for clarification on how much of the Fuze revenue reduction represented migration versus churn. He also posed a philosophical question on how management plans to address the disconnect between the company's improving fundamentals and its low market valuation.

Answer

CFO Kevin Kraus stated that on average, over 60% of the Fuze base revenue is retained upon migration. CEO Samuel Wilson added that while there's an initial step-down, migrated customers typically have a substantially higher NRR and often sign longer contracts. Addressing valuation, Wilson emphasized that the North Star is cash flow from operations per share. He detailed how the company has focused on de-risking by paying down debt and is now positioned to reinvest that cash flow into growth, believing the market will eventually reward these fundamentals.

Michael Funk of Bank of America requested clarification on the Fuze revenue decline, asking how much of the year-over-year reduction migrated to the Core 8x8 platform. He also asked for an expansion on the 'strange behavior' comment regarding competitors and inquired about any changes in the rate of change for seat counts over the last 12 months.

Answer

CFO Kevin Kraus specified that about $5.5 million in Fuze upgrades moved to the 8x8 platform in Q2. CEO Samuel Wilson clarified that even without this migration, the core 8x8 business still grew. Wilson defined competitors' 'strange behavior' as irrational pricing that slows deal cycles. Regarding seat counts, he noted that 8x8 is seeing accelerating UC and CC seat sales, which he attributed to the company's specific value proposition and sales restructuring rather than a broader industry trend.

Speaking for Michael Funk, an analyst asked for more color on the progress of the asset analytics business and help framing the potential upside for the remainder of 2025.

Answer

CEO Nicholas Cumins reported that asset analytics performed as expected in Q1, highlighting new contracts with the Florida and Michigan DOTs for the Blyncsy solution. He noted the Google partnership will increase market potential and win rates. He also mentioned solid growth in telecom solutions and expressed a desire to add capabilities through acquisitions to accelerate ARR growth in the space.

Michael Funk asked if the anticipated shift in U.S. infrastructure spending priorities under the new administration could create a temporary 'air pocket' in customer demand.

Answer

CEO Nicholas Cumins stated he does not expect an air pocket, as engineering firms have extensive backlogs and Bentley's portfolio is broad enough to benefit from any type of infrastructure investment. Executive Gregory Bentley concurred, noting the general expectation is for spending to be pushed out over a longer period, which aligns with the industry's current capacity.

Michael Funk of Bank of America asked if the improved business visibility extends beyond E365 contracts and also questioned if there is a difference between U.S. political parties' views on digitization and asset lifecycle management.

Answer

Executive Chair Greg Bentley explained that with the core business now highly visible and linear, the company is more willing to embrace the 'lumpiness' of high-growth opportunities like Asset Analytics and Cesium. On the political front, he noted that greater private investment in infrastructure, which he hopes for, inherently prioritizes 'going digital' to improve efficiency.

Michael Funk requested an update on market penetration across Weave's key verticals, comparing dental to specialty medical. He also asked which verticals are most economically sensitive and about planned refinements to the go-to-market strategy to improve CAC or sales velocity.

Answer

CFO Jason Christiansen stated that penetration is below 15% in all verticals. CEO Brett White clarified that dental penetration is just over 10%, while specialty medical is still sub-1%. White asserted that their core verticals have proven resilient, even elective services, and that the company is always refining its go-to-market strategy, citing the new mid-market team as a recent example of driving efficiency.

Michael Funk's associate asked about the primary drivers for future gross margin improvement and the company's long-term target for terminal gross margins.

Answer

CFO Alan Taylor detailed that gross margin expansion is driven by the payments product, the structural benefit of phones coming off amortization, and operational efficiencies in support and engineering. He stated that Weave sees itself as a 75% to 80% gross margin company in the long term.

An analyst on behalf of Michael Funk asked for a breakdown of the use case mix within the Messaging product line, specifically between transactional and marketing-driven messages.

Answer

CFO Aidan Viggiano responded that the historical breakdown remains roughly the same today: approximately one-third for verification use cases, one-third for customer notifications, and one-third for marketing.

Michael Funk inquired about the strategy of "aligning price to value," asking for clarification on what this means and its potential impact on fiscal 2026 guidance. He also asked about the apparent strategic shift toward new business acquisition over prioritizing existing customer expansion (NRR).

Answer

CEO Dustin Moskovitz explained that refining pricing and packaging is about providing a better menu of options to meet more cautious buyer behavior, and that any changes implemented would be accretive to growth. He clarified the focus on new business is not a strategic shift but a reflection of current market dynamics where non-tech verticals and channel are showing strength, while NRR is being dragged down by the tech sector. He anticipates NRR will improve as AI Studio adoption scales.

Michael Funk asked how early learnings about AI Studio 'power users' are influencing the pricing strategy for consumption credits and token buckets. He also questioned if the improvement in in-quarter NRR was sustainable.

Answer

CEO Dustin Moskovitz explained the pricing model was designed for a power-law distribution of usage, with a platform fee for most customers and negotiated tranches for high-volume users. COO Anne Raimondi added this model provides budget predictability. CFO Sonalee Parekh expressed confidence that the in-quarter NRR improvement is sustainable and will continue, which will lift the overall reported NRR as prior-year comps roll off.

Michael Funk asked for more specifics on where in the sales pipeline deals had stalled and sought factors to build confidence in the significant Q4 revenue step-up implied by the guidance.

Answer

COO Anne Raimondi noted that as Asana moves upmarket, deals are more back-end loaded, causing some to slip from Q2 into Q3. CFO Tim Wan built confidence in the Q4 forecast by highlighting two points: 1) the company is past its most difficult renewal downgrades, and 2) a majority of the deals that slipped from Q2 have already closed, with the revenue impact expected in Q4.

Michael Funk asked about the factors contributing to competitive takeaways and whether the competitive landscape is shifting in Guidewire's favor.

Answer

CEO Mike Rosenbaum stated that competitive takeaways typically occur during a competitor's upgrade cycle or after a failed implementation. He emphasized that while Guidewire competes for almost every deal, its win rates have been steadily improving due to its track record of success and product investment. He noted that true competitive takeaways are unusual but are called out because they speak to a positive future potential.

Michael Funk asked for more detail on how Five9's engine-agnostic AI strategy provides a competitive advantage during the RFP and negotiation process compared to proprietary models.

Answer

CEO Michael Burkland explained that the engine-agnostic strategy is a key advantage because it allows customers to 'future-proof' their AI investment by easily integrating the latest and best LLMs. He emphasized that the true differentiator is the application layer, workflows, and data integrations Five9 has built on top of these engines, a point that resonates strongly with customers.

Michael Funk from Bank of America inquired about the competitive environment, specifically asking about pricing pressure, the number of competitors in deals, and any increase in customers asking for price concessions.

Answer

Executive Andy Dignan stated that the competitive set remains unchanged and that Five9 is not experiencing pricing pressure, with MRR per seat actually increasing due to AI application adoption. Executive Barry Zwarenstein added that customers are making decisions based on the product roadmap and AI leadership, not primarily on price.

Michael Funk sought clarification on the accelerated Unity Vector rollout timeline and asked how much of the Q1 guidance reflects disruption from this migration versus normal seasonality.

Answer

CEO Matthew Bromberg confirmed the rollout is proceeding about a quarter ahead of schedule due to efficient progress. He affirmed that the prudent Q1 guidance anticipates 'some disruption' in the existing ad business as the transition occurs. He declined to share specific performance comparisons between the old and new models yet.

Michael Funk asked for commentary on the competitive environment, particularly regarding major players like Paychex and Paycor, and inquired about the long-term evolution of industry pricing as automation and AI become more integral to the product offering.

Answer

CEO Chad Richison stated there is no change in their view of the competitive landscape, emphasizing that their differentiation strategy is strong. Regarding pricing, he explained that it evolves based on the value delivered to clients. As automation increases ROI by reducing client effort and costs, Paycom aims to share in that created value.

Michael Funk asked about the success with larger customers, inquiring about deal complexity, expansion prospects, and market share gains. He also questioned if there was any reason to expect a slowdown in net new account additions for CRM and Dev in 2025.

Answer

CFO Eliran Glazer attributed large customer success to platform improvements like mondayDB, hiring enterprise-focused sales teams, and gaining market share. co-CEOs Eran Zinman and Roy Mann indicated that while net adds might moderate, the strategic focus is shifting upmarket to accelerate revenue and ARR through higher ACV, a decision reinforced by the recent price increase.

Michael Funk asked for help understanding the revenue growth trajectory, considering factors like flattening customer net adds, the impact of pricing, and limited contribution from monday Service, questioning if the law of large numbers is catching up. He also sought to confirm the price impact for FY24.

Answer

CFO Eliran Glazer explained that slower net new customer growth was expected with the price increase, but the average customer value (ACV) is higher. He reiterated that monday Service is expected to contribute to next year's growth, similar to CRM's adoption curve, and that the price increase will contribute ~$80 million through 2026. Co-CEO Roy Mann added that a large portion of the sales team and product roadmap is focused on driving growth within the large existing customer base. Glazer confirmed the FY24 price impact was raised from $25 million to $30 million.

Michael Funk asked for the potential range of outcomes for the large multiyear and EBA renewal cohorts in FY26 and requested quantification of the fixed costs associated with the new transaction model.

Answer

Interim CFO Betsy Rafael declined to provide a specific range for the FY26 renewals but reiterated expectations for a strong renewal year, similar to FY23. Executive Simon Mays-Smith directed the analyst to a slide in the earnings presentation for help with modeling the costs of the new transaction model.

Michael Funk inquired about the typical change in customer spend or contract value upon adopting AI and whether the incremental margin on these AI contracts is similar to, higher, or lower than other products.

Answer

CEO and President Dennis Woodside stated that AI adoption is a net expansion of deal value, as products are monetized either as a per-seat add-on (Copilot) or on a consumption basis (Self-service). COO and CFO Tyler Sloat added that incremental margins are currently similar, as the company has factored AI-related costs into its strong gross margin profile and is focused on its pricing and packaging strategy to maintain profitability.

Michael Funk asked about potential changes to sales or onboarding processes to accelerate emerging solution adoption and whether the upcoming election is causing any customer hesitation.

Answer

CEO Githesh Ramamurthy stated that CCC has aligned its client-facing teams to increase focus on pilots, which are growing significantly. He emphasized that adoption speed is a customer-specific timing issue. He also confirmed there are no signs of a macro-driven pause related to the election, as profitable customers are actively investing in next-generation solutions.

Asked for specifics on like-for-like customer spend under the new pricing model and inquired about the monetization plan for AI functionality after the free trial period ends.

Answer

The company reiterated that while they are not giving specifics, early indications from the first true-up show a higher ARR contribution. The plan for AI monetization post-trial is to integrate it into a standard trial experience where customers can discover and test all capabilities, rather than having a separate activation.