Scott Berg

Scott Berg inquired about any changes in win rates since the launch of Paylocity for Finance and IT asset management modules. He also asked if there was any debate about investing the increased cash flows from tax law changes into other aspects of the business versus harvesting them.

Answer

Toby Williams, CEO and President, stated that win rates have shown relative consistency, but differentiation from Paylocity for Finance and IT solutions, along with momentum in the broker channel, are positive contributors. He added that the company is happy with both driving free cash flow leverage and investing in product development and other growth opportunities, indicating that increased cash flow is not coming at the expense of necessary investments.

Scott Berg of Needham & Company inquired about the current demand environment, noting the balance between strong ARPU growth and normalizing customer growth, and asked about the significant quarterly increase in sales and marketing expenses.

Answer

Toby Williams, President, CEO & Director, described the demand environment as stable throughout fiscal 2025 and into Q4, with balanced growth in both client units and ARPU. CFO Ryan Glenn attributed the Q4 sales and marketing expense increase to typical year-end timing, including bonus payments, new programs, and hiring to be fully staffed for the new fiscal year.

Scott Berg asked about the shift away from per-employee-per-year (PEPY) pricing for new modules, particularly for the Office of the CFO, and questioned the drivers behind lower-than-expected operating expenses in the quarter.

Answer

Executive Chairman Steven Beauchamp clarified that while core HCM products will retain PEPY pricing, new solutions for the CFO will adopt models like per-user or transactional fees to align with buyer expectations in a land-and-expand strategy. CFO Ryan Glenn attributed the strong operating expense control to timing of hiring and non-labor costs rather than any onetime items, noting that overall spend growth remains consistent with the business's trajectory.

Scott Berg from Needham & Company inquired if management's optimistic tone was due to stabilizing deal flow and better payroll forecasting, and also asked about sales hiring plans for calendar year 2025.

Answer

President and CEO Toby Williams affirmed their consistent optimism is rooted in their strategic growth plan. Regarding hiring, he mentioned they began the fiscal year with an 8% sales headcount growth, focusing on productivity. Given the stable macro environment and strong selling season, they are confident in their current investment level but remain prepared to hire opportunistically.

Scott Berg inquired about initial observations on the recently acquired Airbase, including the go-to-market strategy, and whether the composition of deals in the current selling season differs from a year ago.

Answer

Executive Chairman Steven Beauchamp stated that while it's only been 30 days, the integration thesis for Airbase is strong, with plans to leverage Paylocity's existing go-to-market motion over a 12-18 month integration timeline. President and CEO Toby Williams added that the sales momentum is strong and the mix of new business versus sales to the existing base remains consistent with recent quarters.

Scott Berg asked about the impact of pricing changes for the core AP/AR solution, seeking insights into early trends, customer feedback, and win rates, especially given the expected slight downtick in customer count due to the move-up market strategy.

Answer

John Rettig, President and COO, explained that ARPU expansion comes from two factors: customer size (payment volume, users) and specific pricing strategies. He noted that targeted transaction and subscription pricing changes are being implemented, which are small in FY26 but aim to align value delivered with value achieved, attracting and retaining best-fit customers. He added that a more holistic pricing optimization strategy, incorporating AI, is expected to roll out in FY27. Rohini Jain, CFO, stated that these pricing changes have been valuable learning opportunities, showing optimistic early results with customer stickiness and less churn than anticipated, all within current guidance. Scott Berg then inquired about the sustainability of spending on the platform, particularly for Spend & Expense, given past volatility, and asked for any Q3 trends that support management's more confident tone. Rohini Jain confirmed a very strong Q2, noting that while some trends are enduring, the company is cautiously optimistic about certain verticals returning. She stated that a material portion of the Q2 beat is being flowed into the back half guidance, which feels solid based on early Q3 trends.

Scott Berg asked about the impact of AP/AR pricing changes, including early trends, win rates, and customer feedback, given expected lower customer counts. He also inquired about the sustainability of improved spending trends, especially for spend and expense, and Q3 indicators.

Answer

President and COO John Rettig explained ARPU expansion from customer size and targeted pricing strategies, aiming to align value and attract best-fit customers. CFO Rohini Jain noted positive early results from pricing changes with less churn. Regarding spending, Jain stated Q2 was strong with enduring trends, leading to cautious optimism and flowing a material portion of the Q2 beat into back-half guidance.

Scott Berg of Needham & Company asked about the Q4 outperformance, questioning what specific areas were better than the conservative assumptions from 90 days prior. He also inquired about the company's strategy for monetizing its new AI 'agents'.

Answer

CFO Rohini Jain attributed the Q4 strength to better-than-expected performance in FX international payments and AP Card adoption, alongside a generally stronger spend environment which may have included some pull-forward of demand from Q1. Regarding monetization, Ms. Jain outlined a three-phase approach for AI agents: first, drive value and adoption; second, introduce differentiated subscription tiers; and third, in the long term, potentially monetize on a per-transaction basis. Founder, CEO & Chairperson René Lacerte reiterated the core philosophy of delivering significant customer value first.

Scott Berg asked about the company's previously stated goal to reaccelerate core revenue growth to 20% by year-end and whether Q2 results affected confidence in that target. He also asked if the guidance included any incremental macro-related caution.

Answer

CEO René Lacerte affirmed his excitement and confidence in achieving the growth target, pointing to positive early signs from strategic initiatives. CFO John Rettig stated there was no change in their cautious macro view and that no explicit new caution was factored into the guidance, though they are monitoring the environment closely.

Scott Berg asked for more details on the early performance of the new invoice financing product and its expected business impact. He also inquired about customers using both AP and Spend & Expense solutions, asking if the synergy results in benefits beyond just improved retention.

Answer

CEO René Lacerte stated that the invoice financing product is in its early days but shows strong initial adoption and repeat usage, positioning it as a key future driver of ad valorem revenue. Regarding platform synergy, Lacerte confirmed that for joint customers, "1+1 is more than 2," citing not only better retention but also increased platform usage, especially in card payments, which aligns with market demand for unified solutions.

Scott Berg inquired if anything in the business suggested that the annual usage yield should deviate from the 7% range going forward, and he asked about the timing for deploying the additional capital for credit payments and its expected impact on the business.

Answer

Amy Butte (CFO) confirmed comfort with a ~7% usage yield, outlining headwinds like the slower-growing Reed & Mackay business and lower-yielding PLG growth, balanced by tailwinds such as increased hotel attach and product attachment (especially payments). She indicated that the deployment of capital for credit payments would be a multi-quarter phase-in over fiscal year 2027, with impact into 2028, while improved partner economics and lower cost of capital would yield more immediate benefits to interest expense and net interchange rate.

Scott Berg asked if anything suggested the annual usage yield should deviate from 7% going forward, and about the timing for deploying IPO cash for credit payments and its P&L impact.

Answer

CFO Amy Butte confirmed comfort with a 7% usage yield, citing headwinds (Reed & Mackay, PLG) and tailwinds (hotel attach, product attachments, improved capital structure). She indicated the P&L impact from credit payments would be phased over FY27 into FY28, with immediate benefits from lower interest expense and improved net interest income.

Scott Berg inquired about the drivers behind the significant jump in $500K+ ARR customer additions for two consecutive quarters, asking if it's due to changes in landing strategy or better expansion activity.

Answer

Isabelle Winkles (CFO, Braze) confirmed no change in the 'land and expand' incentive structure. She highlighted strong momentum in upsells from customers under $500K to over $500K, outpacing downselling or churn. This is driven by increased selling opportunities, including Decisioning Studio, the growing importance of cross-channel strategies, and rising message volumes, leading to upsells and increased consumption.

Scott Berg asked about the drivers behind the strong quarterly additions of $500K+ ARR customers, specifically if there's a change in landing strategy or increased expansion activity.

Answer

Isabelle Winkles (CFO, Braze) stated no change in incentive structure (land and expand). She attributed the growth to strong upsell momentum from customers under $500K, healthy outperformance against downsell/churn, more selling opportunities (Decisioning Studio, cross-channel expansion), and increased message volumes across diverse channels.

Speaking for Scott Berg, an analyst asked about customer reception to the flexible credits model introduced last year and whether it has successfully driven product trials and influenced overall customer spend.

Answer

CEO Bill Magnuson confirmed that the flexible credits model has been very well-received, successfully shortening negotiation cycles and reducing friction for customers to adopt new channels. He stated that while it's too early to quantify a direct impact on dollar-based net retention, the model is expected to be supportive by improving customer satisfaction and reducing sources of partial churn.

Scott Berg of Needham & Company asked about the benefits of Braze's vertical-focused R&D, such as the enhanced Shopify integration, beyond just streamlining technology. He inquired how these efforts might impact factors like sales cycles and overall efficiency.

Answer

CEO Bill Magnuson detailed that these vertical-specific enhancements are designed to accelerate time-to-value for customers. He explained that standardizing data models for industries like e-commerce not only speeds up deployment but also improves the effectiveness of Braze's machine learning models. The goal is to improve the product offering, shorten implementation times, and ultimately deliver more value through features tailored to common industry use cases.

Scott Berg asked about the buying behavior of customers who were previous Braze users at other companies and inquired about the balance between profitability and growth going forward.

Answer

CEO Bill Magnuson explained that former users drive greater velocity in sales cycles because less education is required, which is an upside from recent high turnover in the marketing industry. CFO Isabelle Winkles reiterated that the company will adhere to the financial framework from its Analyst Day, balancing growth with profitability and reinvesting for high ROI.

Scott Berg asked about early observations on buyer behavior following the recent change to a flexible credit strategy for premium messaging platforms and its impact on channel expansion.

Answer

CEO Bill Magnuson reported that the new credits model has been well-received by customers after some initial noise. He highlighted it as a 'win-win-win' that simplifies the launch of new channels like RCS, makes purchasing more aligned with actual usage, and provides customers more ways to use their entitlements over the contract term, which should create a healthier position for the company.

Scott Berg inquired about the potential impact of AI contract agents on DocuSign's momentum in fiscal 2027 versus fiscal 2028, considering customer awareness and budget procurement.

Answer

Allan Thygesen (CEO, DocuSign) stated that AI contract agents are not expected to be a significant financial contributor to momentum in fiscal 2027 but are strategically important for providing visibility into future capabilities and will involve a number of trials.

Scott Berg asked about ServiceTitan's investment plans for the commercial opportunity in fiscal 2027, specifically if the company will do anything differently to tackle this market now that it has the necessary functionality. He also asked for unique insights into the commercial GTV outperformance despite its lower usage take rate.

Answer

CEO Ara Mahdessian stated that the thesis for commercial remains the same, focusing on construction for subcontractors, with future value creation shifting to AI-driven features, particularly in CRM. CFO Dave Sherry attributed commercial GTV growth to continued progression as a driver, with overall usage take rate augmented by higher fintech product adoption, offsetting the lower commercial GTV usage take rate.

Scott Berg asked about the functionality included in the Roto-Rooter partnership (base platform vs. Pro functionality) and how it differs from typical franchise entities. He also inquired about the less positive performance of HVAC in the quarter, its drivers, and potential seasonality.

Answer

Co-Founder and CEO Ara Mahdessian stated that Roto-Rooter, like most customers, is expected to go wall-to-wall with the core solution. CFO Dave Sherry explained that HVAC's slower growth was due to a challenging comparable period from last year, which was one of the hottest summers on record, impacting HVAC despite this summer being warm.

Scott Berg of Needham & Company asked about the potential to expand into new, non-stated trades, citing a customer in the glass industry as an example.

Answer

President Vahe Kuzoyan acknowledged that a broader set of verticals could likely use ServiceTitan but stressed the company's strategic focus. He explained that to ensure customer success and proper resource allocation, they proactively concentrate on priority areas rather than chasing opportunistic deals in non-focus trades.

Scott Berg of Needham & Company asked about the potential to expand into adjacent trades not officially targeted, referencing a customer in the glass industry.

Answer

President Vahe Kuzoyan acknowledged that other verticals could use the platform but stressed the company's strategic focus on its prioritized areas. He explained that while opportunistic deals may be considered, the primary goal is to concentrate resources on the main focus areas to ensure success.

Scott Berg inquired about the expected benefits of shifting Customer Success Manager (CSM) priorities to drive expansion and whether the company's playbook for the roofing trade is a direct replication of other trades.

Answer

CEO Ara Mahdessian explained the CSM strategy aims to create natural conversations about Pro products when performance gaps are identified for a customer. He also clarified that while the core sales and marketing playbook applies to roofing, specific workflows like measurements, estimates, and procurement are meaningfully different and required product adjustments.

Scott Berg asked which of the company's growth vectors is most exciting in the near term and how growth investment priorities might change in fiscal '26 compared to '25.

Answer

CEO Ara Mahdessian and President Vahe Kuzoyan highlighted continued focus on two main vectors: achieving market-standard status in newer segments like commercial and roofing, and driving adoption of Pro products. CFO Dave Sherry stated that the FY26 investment strategy will remain consistent, prioritizing R&D with minimal leverage, while seeking leverage from S&M and cost of revenue. He reiterated the focus on incremental margins, which will be impacted by public company costs in FY26 but are targeted at 25% long-term.

Asked which of the company's growth vectors is most exciting in the near term and inquired about the investment priorities for the upcoming fiscal year '26.

Answer

The near-term focus is on improving product maturity in newer segments like commercial and roofing, as well as driving adoption of Pro products. The investment strategy for fiscal '26 will remain consistent with '25, prioritizing R&D to support long-term growth, while expecting leverage from sales & marketing. The overall focus remains on delivering incremental operating margins.

Scott Berg asked how Via's contracts change with the Waymo partnership, specifically if they become more software-weighted and higher margin. He also inquired if the near-term growth algorithm (next two to four quarters) would shift towards more net new customer revenue or continue to rely on the predictable cross-sell model.

Answer

Clara Fain, CFO, confirmed that Waymo acts as a fleet provider, and outsourcing fleet/vehicle costs to Waymo results in higher-margin contracts for Via, as a large chunk of costs is externalized. Daniel Ramot, Co-Founder and CEO, stated that the growth algorithm is expected to remain consistent with historical results, focusing on both growing within existing customers and adding new ones.

Scott Berg inquired about the Waymo partnership, specifically how contracts are structured in this scenario, suggesting they might be more weighted towards software than services. He also asked if Via's growth algorithm for the next two to four quarters would shift towards more net new customer opportunities or continue to rely on the predictable cross-sell model.

Answer

Clara Fain, CFO, confirmed that Waymo acts as a fleet provider, allowing Via to outsource a significant portion of its costs, resulting in higher-margin contracts that are more software-centric. Daniel Ramot, Co-Founder and CEO, stated that the growth algorithm is expected to remain consistent with historical performance, focusing on both expanding within existing customers and adding new ones.

Scott Berg from Needham & Company inquired about the strategic fit of the new subscription-based merchant, Life360, within Global-E's portfolio. He also asked for the specific drivers behind the accelerated growth in the company's U.S. business.

Answer

Co-Founder and President Nir Debbi explained that offering subscription services is an evolution to support merchants who sell both physical and digital goods, though pure digital subscription is not a core focus. Debbi attributed the U.S. outperformance to the strong growth of digitally native U.S. brands, which tend to have faster same-store sales growth than brands in other regions.

Scott Berg asked for clarification on the potential impact of changes to the U.S. de minimis rule on the 12% of GMV that is inbound to the U.S. He also inquired how the revised Shopify 1P partnership is expected to accelerate growth for that product.

Answer

President Nir Debbi clarified that of the 12% of GMV inbound to the U.S., only about 30% originates from China and Hong Kong, putting the total affected GMV at around 3%, with a relatively light impact observed so far. CEO Amir Schlachet explained that the new 1P structure will offer a more seamless experience for merchants, particularly around payments and settlement, which is expected to drive broader adoption and accelerate growth.

Scott Berg asked about the composition of year-to-date bookings and whether the pattern has shifted towards larger initial launches. He also inquired about the cause of the sequential decline in G&A expenses.

Answer

Executive Nir Debbi confirmed that bookings are at a record level, with a positive trend of large enterprises launching with their entire global and even domestic e-commerce operations. CFO Ofer Koren explained that the G&A decline was due to some one-off expenses in Q2, and that Q3's level, or a midpoint between Q2 and Q3, represents a more sustainable base going forward.

Scott Berg asked if the new AI tools like Magic and Vibe could serve as lead generation functions. He also questioned if the back-half guidance implies a continued prioritization of profitability over growth from lower-end customers.

Answer

Co-CEO Roy Mann explained that tools like Monday Magic are indeed a new way to demonstrate value to potential customers. CFO Eliran Glazer stated that the guidance philosophy is consistent with Q1, balancing growth and profitability. He noted they would invest in growth opportunities, such as in performance marketing, should they see a strong recovery and return.

Scott Berg asked for an explanation for the apparent growth deceleration in the European business during the quarter, questioning if it was due to sales execution, FX, or other factors.

Answer

CFO Eliran Glazer acknowledged that Europe had shown some weakness over the past year compared to the strength in North America. However, he stated that the situation in the region is now stabilizing and the company is getting a clearer picture, though performance is not yet at the level of North America. He did not attribute the trend to a single factor.

Scott Berg inquired about the 'digital workforce' AI strategy, asking what components of the monday.com platform a customer would need to purchase to make the AI agents work effectively.

Answer

co-CEO Roy Mann described the AI agents as a layer on top of the entire Work OS, designed to work across all products to perform powerful, cross-functional tasks. He noted that while monetization plans are not yet finalized, the vision is for a marketplace of agents that leverage the full power of the integrated platform, rather than being tied to a single product purchase.

Scott Berg questioned the driver behind the abnormal quarter-over-quarter increase in R&D spending and asked if the company expects to catch up on its slower sales and marketing hiring in Q4 or if it will persist into 2025.

Answer

CFO Eliran Glazer attributed the higher R&D spend to proactive investment in talent for product innovation, including new products, mondayDB, and AI capabilities, which are core to the company's strategy. He stated that sales hiring is expected to rebound in Q4 and that the company plans to ramp up hiring for sales quota carriers in Q4 and into fiscal year 2025.

Scott Berg asked about the performance of the North American enterprise business, noting that the prepared remarks had focused more on the commercial segment and CPM Express.

Answer

CFO Bill Koefoed confirmed the North American enterprise segment performed well, citing several significant wins mentioned in the script. He highlighted that the multi-product strategy is working effectively, evidenced by strong add-on sales and a 10% year-over-year increase in the average deal size per customer. He also noted new logos continue to make up over 60% of new business.

Scott Berg from Needham & Company asked about the financial uplift from customers adopting multiple use cases for the consumption-priced SensibleAI product.

Answer

CEO Tom Shea confirmed there is 'significant upside' and that it represents a 'material opportunity for us in terms of ARR growth.' He explained that demonstrating success with initial use cases encourages customers to explore more, creating a self-fulfilling growth cycle for the product.

Scott Berg of Needham & Company noted the company's strong revenue growth and healthy profitability, asking if the demand environment could support higher investment to grow even faster or if the current level is appropriate.

Answer

CEO Tom Shea affirmed that there is an opportunity to invest more to fuel long-term growth. He outlined an expanded product vision encompassing core finance, AI, and operational analytics. He indicated that the company plans to increase investment, particularly in R&D for AI and the core platform, after ensuring the framework for efficient investment is in place.

Scott Berg asked whether the significant outperformance in net new ARR was driven more by the volume of deals or the size of individual transactions. He also inquired about traction with marketing teams and how those deals compare to the core product analytics business.

Answer

Founder, CEO & Director Spenser Skates responded that the strength was broad-based, involving both a record expansion deal and success across various verticals and new customers like Twilio and Telenor Denmark. Regarding marketing analytics, he explained that this is an earlier-stage opportunity. While customers are now evaluating Amplitude as a full replacement for legacy marketing tools, which was rare two years ago, it remains a smaller part of the business compared to the mature platform consolidation motion.

Scott Berg asked for details on the outperformance in net new ARR, questioning the key drivers, and inquired about the company's strategy to improve market awareness for its newer platform products like Guides and Surveys.

Answer

CEO Spenser Skates attributed the strong net new ARR primarily to lapping a period of high churn from previous over-buys, bringing churn to a more normal run-rate. He also cited good enterprise wins and contributions from new products. Regarding market awareness, Skates acknowledged the challenge of shifting perception from an analytics-only company to a full platform, stating the strategy involves consistent messaging and educating the existing customer base on the broader product suite, where he sees strong interest once they are engaged.

Scott Berg from Needham & Company inquired about the outperformance of sales from System Integrator (SI) partners, asking about differences in deal sizes, customer segments, and module attachment rates compared to the direct sales channel.

Answer

Chairman & CEO David Ossip responded that SI-led sales were up 80% in the first half, driven by the value proposition of Dayforce's single data model for both system consolidation and AI. He noted that full-suite attachment rates are high across all channels, with 93% in Enterprise and 90% in Major Markets, and that SIs are active across all segments, typically implementing the full HCM suite.

Scott Berg asked for an update on the increased demand from the larger enterprise segment for HRMS and payroll deals, a trend mentioned on the fourth-quarter call, and how it has developed over the last 90 days.

Answer

CEO David Ossip confirmed that the strong demand from the large enterprise segment has continued. He announced that Dayforce signed its largest deal ever in Q1 with a government agency and also secured a full-suite deal with an entertainment company of 61,500 employees. Ossip emphasized that strong sales performance was seen across all segments and geographies, continuing the momentum from Q4.

Scott Berg asked about customer response to Dayforce's AI and Copilot strategy and how partners are impacting the sales environment, specifically in relation to the professional services margin improvement.

Answer

CEO David Ossip highlighted strong early adoption, with 60 Copilot units sold since its November launch, calling it a key differentiator. Chief Strategy Product and Technology Officer Joe Korngiebel added that upcoming AI agents will expand across the suite. David Ossip confirmed the professional services margin improvement to breakeven for the year is largely due to success with system integrators (SIs) priming implementations, which also positively impacts the sales pipeline.

Scott Berg questioned the modest full-year EBITDA guidance raise despite a significant Q3 float revenue beat and asked about the drivers for the operational efficiencies expected in the FY25 guidance.

Answer

CFO Jeremy Johnson explained that the company is reinvesting some of the outperformance into strategic initiatives for next year. He stated that 2025 efficiencies will be driven by the same factors as this year: improving recurring gross margins, scaling G&A, and driving productivity in sales and marketing.

Scott Berg asked about customer interest in the new Zeta Answers AI module, its potential impact timeline, and whether business linearity in the quarter was consistent or back-end loaded.

Answer

CEO David Steinberg stated that AI products are the 'tip of the spear' driving growth now, with awareness building ahead of a major showcase at Zeta Live. CFO Chris Greiner confirmed that growth was consistent throughout the quarter, not back-end loaded, with broad-based strength across key verticals and customer cohorts. David Steinberg added that market turbulence often accelerates adoption of Zeta's ROI-focused platform.

Speaking on behalf of Scott Berg, Rob Morelli from Needham & Company asked for feedback on new channels like RCS and WhatsApp, whether interest was broad-based, and the potential impact on gross margins.

Answer

Co-Founder and CEO Andrew Bialecki reported broad-based interest in both RCS and WhatsApp across SMB and enterprise customers, as these channels enable richer customer experiences. He noted that while it is still early, he expects the gross margin profile for these channels to be 'somewhat similar' to what Klaviyo currently sees for SMS.

Scott Berg asked for details on the financial incentives and terms of engagement for the new WooCommerce partnership.

Answer

CFO Amanda Whalen confirmed the partnership includes a typical revenue share component but did not disclose specific details. She explicitly stated that there is no equity involved in the deal. The key value, she explained, is being named the 'preferred marketing automation provider' for WooCommerce's four million global merchants, which will drive recommendations and growth.

Scott Berg of Needham & Company questioned how the recent hires of a new Chief Technology Officer and Chief Product Officer would influence Klaviyo's technology platform and future development.

Answer

CEO Andrew Bialecki stated that the new executives bring experience in building 'planet-scale infrastructure.' He expects them to enhance the platform's scalability, reliability, and security, reinforcing Klaviyo's position as a system of record for customer data, and noted the new CPO was a former Klaviyo customer.

Scott Berg asked about the nature of buying pressure at the low end of the customer market and whether it was broad-based. He also questioned how the new $150M share buyback program would affect the stock's liquidity, a known concern for institutional investors.

Answer

CFO Brian Mulroy clarified that the pressure is contained to the freelancer and less sophisticated customer segments, a trend they've discussed for about a year, which was exacerbated by rising cost-per-click in Q2. Regarding the buyback, Mulroy stated its primary purpose is to express management's conviction in the company's future momentum in enterprise and AI, rather than directly addressing liquidity concerns.

Scott Berg asked for clarification on the drivers of ARPU for Enterprise SEO customers to meet year-end guidance and questioned whether the new AIO solution could potentially cannibalize the core SEO product.

Answer

CFO Brian Mulroy clarified that reaching the $30 million ARR target relies more on acquiring new customers and upgrading them to the $50k-$60k ARPU range, rather than a significant ARPU increase for existing enterprise clients. CEO William Wagner asserted that the AIO solution is 'net additive,' not a cannibalistic trade-off, as sophisticated enterprise users require visibility tools for both traditional and AI-driven search.

Scott Berg of Needham & Company asked how the fiscal 2025 guidance accounts for the macro environment, particularly SMB sentiment. He also sought details on the new enterprise AIO solution's functionality and potential pricing uplift, and questioned the drivers behind the 40% growth in customers paying over $10k.

Answer

CFO Brian Mulroy stated the guidance remains prudent, assuming a continuation of current trends until hard economic indicators improve. He described the AIO solution's initial focus on visibility and sentiment analysis in LLMs, reiterating that pricing is undecided. He attributed the >$10k customer growth to both the new enterprise solution and broader success in platform cross-selling and upselling.

Scott Berg from Needham & Company asked how current sales pipeline activity compares to the levels seen in 2021 and early 2022, before the broader industry slowdown.

Answer

President Andy Dignan responded that pipeline levels have remained consistently elevated and are comparable to the levels from two years ago. He noted that AI continues to act as a tailwind for pipeline generation and expressed confidence in the health of the pipeline for both new logos and the installed base.

Scott Berg of Needham & Company inquired about the subscription revenue outlook for the year, asking if Q1 represented the trough, and sought details on the composition of the company's Rule of 40 target.

Answer

President Bryan Lee explained that while specific subscription growth guidance isn't provided, the unchanged total revenue guidance reflects prudence amid macro uncertainty. For the medium-term Rule of 40 target, Lee outlined a model assuming 10-15% revenue growth and a 25-30% adjusted EBITDA margin, driven by subscription gross margin expansion into the deep 70s and overall operating expense leverage.

Scott Berg asked if the bookings environment has returned to 'normal' after the 'AI fog' of mid-2024 and inquired about the monetization model for AI agents co-developed with Salesforce.

Answer

CEO Michael Burkland stated that while Q4 was better than Q3, the environment is not fully 'normal' due to macro uncertainty. COO Andy Dignan highlighted strong execution on large deals. Regarding Salesforce, Burkland explained that if a partner's AI is used, Five9 monetizes via transcript and voice streams, but often it is Five9's own AI being deployed in these joint solutions.

Scott Berg of Needham & Company asked about the rationale for choosing private credit for the recent refinancing, the company's capital allocation plans for excess cash flow, and which products are driving the projected 3% core business growth.

Answer

CFO Mike Hill explained that after paying down significant debt, the remaining amount was below the typical size for the Term Loan D market, making private credit a better fit. CEO Jack McDonald stated that near-term cash flow is prioritized for deleveraging, with no M&A anticipated at this point. McDonald also identified AI-enabled knowledge and content management products, such as Upland Right Answers and Upland BA Insight, as key growth drivers, noting their role in larger enterprise LLM implementations and upsell opportunities for products like Qvidien.

Scott Berg of Needham & Company inquired about the rationale for choosing private credit for refinancing, the future allocation of excess cash flow between M&A and debt reduction, and the specific products driving the projected 3% core business growth.

Answer

CFO Mike Hill explained that the company's current debt of $240 million is below the typical size for the TLD credit market, making private credit a better fit. CEO Jack McDonald stated that near-term cash flow will be prioritized for deleveraging, with no M&A anticipated at this point. He added that growth is being driven by AI-enabled products in knowledge and content management, such as Upland Right Answers and BA Insight, which are integral to enterprise LLM implementations, and the AI-assist feature in the Qvidien RFP product.

Speaking on behalf of Scott Berg, Ian Black asked about Upland's go-to-market strategy following the termination of its Chief Sales Officer and inquired if more divestitures should be expected as the company streamlines.

Answer

CEO John McDonald explained that the company has realigned its sales functions with the general managers of its product groups, eliminating the need for a centralized sales management role. He stated this creates more focus and efficiency. McDonald also confirmed that the repositioning of the business is substantially complete and no further material divestitures are anticipated.

Scott Berg of Needham & Company asked for a breakdown of the post-2025 high-single-digit organic growth forecast by product area and questioned how the recent tariff macro-environment has impacted customer activity and spending.

Answer

CFO Kim Nelson explained that the growth outlook considers varied performance across fulfillment, analytics, and revenue recovery products. CEO Chad Collins added that while retailer activity is strong, suppliers are exhibiting heightened spend scrutiny and slower deal cycles due to macro uncertainty, which has specifically affected analytics and variable fulfillment fees.

Scott Berg inquired about the current demand environment, how the quarter progressed against expectations, the outlook for net new business, and the anticipated investment cadence for 2025.

Answer

Executive Chad Collins described the demand environment as positive, with a strong pipeline of community programs. He noted that recent programs had a higher mix of existing customers, driving wallet share growth, a trend he expects to continue as the product portfolio expands. Executive Kimberly Nelson confirmed that comprehensive 2025 guidance would be provided in Q4 and reiterated the long-term targets of 15-25% adjusted EBITDA growth and continued investment in the business.

Scott Berg from Needham & Company inquired about the performance of the Keap business, specifically the strategy to move away from less profitable contracts and whether the recent quarter represented a trough. He also asked about the quarter-over-quarter contraction in organic Thryv SaaS customer count and if this was a temporary result of focusing on cross-selling.

Answer

Chairman & CEO Joe Walsh clarified that Thryv deliberately chose not to fund Keap's historically unprofitable sales channels to preserve cash during its 'pinch point.' He affirmed that the focus in 2025 is on keeping the subscriber base flat while significantly increasing ARPU through cross-selling. Walsh anticipates a return to subscriber growth in 2026 as the company invests in new channels.

Scott Berg asked for key takeaways from the first combined Thryv and Keep partner conference, focusing on partner sentiment about the acquisition. He also questioned the reason for the sequential decline in SaaS customer additions.

Answer

CEO Joe Walsh shared that partners are enthusiastic about selling the full Thryv catalog, which complements Keep's automation tools by adding top-of-funnel lead generation. Regarding the subscriber decline, Walsh cited typical Q4 holiday seasonality and a deliberate strategic shift to focus sales efforts on cross-selling to the existing customer base rather than on new customer prospecting.

Scott Berg asked about the drivers behind the Q4 decline in core SaaS net customer additions and questioned why the 2025 guidance for Keap wasn't raised after its Q4 revenue beat.

Answer

CEO Joe Walsh attributed the Q4 softness in customer adds to typical holiday seasonality, noting that while small business sentiment is stable, there's some caution in the macro environment. CFO Paul Rouse stated that the Q4 beat for Keap was due to initial conservatism in their forecast for the newly acquired business and that they are maintaining the full-year guidance out of caution during the complex integration process.

Scott Berg inquired about the product integration strategy for Keap, asking if it would be a full platform rebuild or an API-based connection. He also asked if the recent accelerated rate of Marketing Services to SaaS conversions should be considered the new norm.

Answer

CEO Joe Walsh confirmed the plan is a 'full and complete integration' of Keap into a unified platform, leveraging the combined engineering teams, while using APIs for immediate interoperability. He also affirmed that the accelerated pace of customer conversion from Marketing Services to SaaS is the new standard, driven by the appeal of Thryv's 'grow your business' tools. He noted these converted clients tend to increase their spend by 10-15% in the following year.

Scott Berg asked for details on the new global partner program, which touched over one-third of ARR, inquiring about its long-term contribution potential, its relative strength in EX versus CX, and any differences in deal characteristics.

Answer

CEO Dennis Woodside stated that the partner impact is evenly distributed across both CX and EX. He expects the partner-touched portion of the business to grow, noting that new global system integrator (GSI) partnerships are generating larger deal pipelines with significant expansion opportunities, particularly in markets like the UK.

Scott Berg of Needham & Company questioned the recent changes to the global partner program and sought clarification on the significant sequential step-down in the Q2 operating margin guidance.

Answer

CEO and President Dennis Woodside detailed that the partner program shifted to a more standard transfer pricing model at partners' request, enabling them to build services and price more flexibly. COO and CFO Tyler Sloat attributed the Q2 margin dip to the timing of annual merit-based compensation increases and certain expenses being pushed from Q1 into the latter half of the year.

Scott Berg of Needham & Company asked how the release of new AI agents is impacting the length of sales cycles.

Answer

CEO Carl Eschenbach stated that for existing customers, the new AI agents are actually accelerating sales cycles, enabling opportunities to be created and closed within a single quarter. For net new customers, he does not believe it is elongating sales cycles. He reiterated that customers are betting on Workday for their AI strategy due to the platform's integrated data and workflow, viewing AI as 'built-in, not bolted on.'

Scott Berg of Needham & Company, LLC asked how the introduction of new AI agents is impacting the length of sales cycles.

Answer

CEO Carl Eschenbach explained that for sales into the existing customer base, the AI agents are actually accelerating sales cycles, enabling opportunities to be closed within a single quarter. For net new customers, he stated that the AI offerings are not elongating sales cycles, as customers view investing in Workday as a strategic bet on their AI future due to the platform's integrated data and workflow.

Scott Berg inquired about the pace of expansion activity with newer customers in the current macroeconomic environment. He also asked how the recent acquisition of Search Monitor would impact the company's product platform going forward.

Answer

CFO Jason Schwartz provided an example of a Fortune 500 retailer that expanded its contract 4x in two years, moving from a single marketing use case to broader adoption by category management and e-commerce teams. CEO Or Offer explained that Search Monitor adds two strong, ROI-driven use cases: brand protection for PPC teams and compliance monitoring for affiliate programs, which will be integrated and rolled out to the existing customer base.

Scott Berg requested elaboration on the 'softness in fourth quarter execution,' asking when the sales cadence might normalize and seeking confirmation on the confidence in revenue acceleration later in 2025.

Answer

CEO Or Offer clarified that Q4 execution was 'okay' but not 'great,' with softness stemming from managerial changes and underperformance in certain regions. He noted the issue was partly due to not hiring fast enough to meet high demand, but performance is stabilizing in Q1. CFO Jason Schwartz confirmed the guidance for back-half acceleration is based on strong pipeline visibility.

Scott Berg inquired about the extent to which customers are currently using Similarweb to understand LLM-driven changes in consumer behavior. He also asked about the expected trajectory for Net Revenue Retention (NRR) and if it could return to prior peak levels.

Answer

CEO Or Offer stated that this is an early but growing trend, with more brands seeking to understand their visibility as consumers shift from search engines to chatbots. CFO Jason Schwartz expressed confidence in future NRR improvement, citing that 45% of ARR is from multi-year contracts and the success of their "land and expand" motion, as exemplified by their large accounts.

Scott Berg of Needham & Company, LLC inquired about the momentum in PROS' travel segment and the impact of the current macroeconomic environment on business.

Answer

President and CEO Andres Reiner stated that the travel segment saw strong performance in Q1, with wins at two of the top seven U.S. carriers, driven by innovations in offer optimization. He explained that while the selling environment is complex, market volatility is a tailwind, making PROS' AI-powered solutions mission-critical for customers. Reiner also noted an increase in inbound demand and sales meetings, indicating a healthy demand environment despite macro uncertainty.

Scott Berg inquired about the improved bookings environment, particularly the momentum in the travel sector and the impact of the current macro environment.

Answer

CEO Andres Reiner noted strong Q1 performance in travel due to offer optimization innovations and overall B2B strength. He acknowledged a complex selling environment but highlighted the mission-critical nature of PROS' solutions.

Scott Berg asked CEO Andres Reiner about the timing of his retirement and the ideal profile for a successor. He also inquired about the demand environment in the travel sector during Q3 and the near-term outlook, referencing the recent expansion with Lufthansa.

Answer

President and CEO Andres Reiner explained his retirement is a personal decision driven by a desire to spend more time with his family, made possible by his confidence in the company's strong leadership team and market position. He assured a thorough, unhurried search for a successor. Regarding the travel sector, Reiner stated that Q3 performance was in line with expectations, highlighting new deals and key expansions like Lufthansa, which are driven by new innovations. He noted that while the travel recovery pace is as expected, the B2B segment outperformed during the quarter.

Scott Berg inquired about the mix of cloud ARR growth, asking how much comes from migrations versus net new business. He also asked whether customers are starting with small agent pilots or making larger, initial deployments.

Answer

COO & CFO Ashim Gupta explained that cloud ARR growth is driven by both new logos starting on the cloud and existing customers migrating to access faster innovation. CEO Daniel Dines responded that while the vast majority of customers begin with small proofs-of-concept for agents, a few enthusiastic customers have already moved to large deployments.

Scott Berg inquired about the composition of deals driving the 65% growth in cloud revenue and how the focus on cloud-based use cases for the remainder of the year compares to previous periods.

Answer

CFO & COO Ashim Gupta attributed the consistent, strong cloud growth to increasing customer awareness and readiness to migrate. He noted that the value of moving to the cloud is enhanced by products like Communications Mining and Document Understanding. While UiPath maintains a 'cloud-first' mindset in its product releases, it remains committed to providing flexible choices to be customer-centric.

Scott Berg asked for clarification on the minimal sequential growth implied in the Q1 guidance despite constructive Q4 bookings commentary, and also inquired about the expected business seasonality for 2025.

Answer

CFO Joe Del Preto reiterated that the Q1 and full-year guidance reflects a more measured approach, factoring in a demand environment consistent with 2024. He confirmed that the business seasonality in 2025 is expected to be similar to 2024, with a more back-end weighted performance, which is already incorporated into the outlook.

Scott Berg asked about key learnings from the initial rollout of the client portal, particularly regarding pricing dynamics and potential future adjustments.

Answer

CEO Jeff Tangney stated that while it's too early for a deep pricing analysis, the portal provides more granular levers for add-on packages. He emphasized that a key learning has been the success of the agency partnership strategy, which has improved alignment and positioned Doximity as a valuable partner to agencies, rather than a competitor.

Asked about the consistency of customer module purchasing behavior and the characteristics of new embedded HCM partners.

Answer

Raul Villar confirmed that customer purchasing of additional modules remains consistent, with strong interest in talent solutions. Adam Ante added that new embedded partners are entering slightly different end markets, with more details to be shared at the upcoming Investor Day.

Asked management to reconcile their positive view of the market with competitors who see it as slowing, and questioned the assumptions for employee counts at existing customers within the fiscal '25 guidance.

Answer

Management's positive view is based on their own metrics (appointments, deal velocity) and the large market opportunity with legacy systems. They believe their modern product is well-positioned. The guidance for FY '25 intentionally assumes a flat labor market contribution, similar to FY '24, with no incremental growth from existing customer employee counts.

Questioned the sustainability of the high contribution (50%) from the broker channel to bookings. Also asked for an update on progress with selling additional modules to the existing customer base.

Answer

While the 50% broker contribution has been stronger than expected, the long-term outlook is for it to moderate to the high 30s or mid-40s, though significant white space remains. Selling to the existing base remains a consistent and successful channel, with strong attach rates for modules like Talent and Workforce Management, and the cross-selling team continues to perform well.