ZoomInfo Technologies - Q4 2022
February 6, 2023
Transcript
Operator (participant)
Good day. Thank you for standing by. Welcome to the ZoomInfo Q4 and full year 2022 financial results. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker for today, Jerzy Sisitsky. Please go ahead.
Jerzy Sisitsky (VP of Investor Relations)
Thanks, Lisa. Welcome to ZoomInfo's financial results conference call for the Q4 and full year 2022. With me on the call today are Henry Schuck, founder and CEO of ZoomInfo, and Cameron Hyzer, our CFO. After their remarks, we'll open the call to Q&A. During this call, any forward-looking statements are made pursuant to the safe harbor provisions of U.S. securities laws.
Expressions of future goals, including business outlook, expectations for future financial performance and similar items, including without limitation expressions using the terminology may, will, expect, anticipate and believe, and expressions which reflect something other than historical facts are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our SEC filings. Actual results may differ materially from any forward-looking statements.
The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement on the slides posted to our investor relations website at ir.zoominfo.com. All metrics on this call are non-GAAP unless otherwise noted. A reconciliation can be found in the financial results press release or in the slides posted to our IR website. With that, I'll turn the call over to Henry.
Henry Schuck (Founder and CEO)
Thank you, Jerry. Welcome everyone. A year ago, you joined me on our earnings call as we talked about our expectations for 36% revenue growth for 2022. A lot has happened between that initial guidance and now, even in the face of a more challenging economic environment, we continuously raised our guidance as we moved through the year and delivered 47% revenue growth in 2022.
We delivered that growth efficiently with an adjusted operating income margin of 41% for the year and more than $450 million in unlevered free cash flow. In the Q4, we delivered over $300 million in revenue with a 42% adjusted operating income margin, which was up 100 basis points sequentially and up more than 350 basis points from Q4 last year.
Structurally, we are a profitable company and we remain committed to driving top line growth while expanding profitability and efficiently growing free cash flow. This combination of growth and profitability differentiates us from many other growth-oriented software companies that have struggled with a clear path to profitability. We have always operated with discipline, efficiency and a focus that allowed us to generate profitable growth, and we will continue to do so.
While these are good results, we can be doing better. Our customers are challenged by the current state of the economy. Within our largest vertical software, companies are laying off employees and cutting back spending. Many companies, regardless of size or vertical, have materially lower growth prospects than they did a year ago. All companies are looking to do more with less.
We remain early in the digital transformation of B2B sales, and while our platform drives meaningful efficiencies for companies in all industries, as our customers reduce their sales budgets and headcount, they take a harder look at all their spending. As we had indicated earlier in the year, the more challenging economic environment has impacted our upsell and cross-sell motions, with increased customer scrutiny causing an elongation of sales cycles.
The economy has had a direct impact on our business, to be sure. To continue to grow and scale through this time, we will be intensely focused on four priorities, surrounding ourselves with the right people, investing in enterprise solutions, delivering delightful product experiences, and executing with excellence and efficiency. I continue to dedicate my energy to those priorities every day.
As I have communicated to everyone in the company, if it is not driving us forward across these four initiatives, it is not a priority. With regard to the first priority, I have made significant changes to the leadership team over the last few months. We announced last week that our CTO, Nir Keren, is leaving ZoomInfo. Nir joined ZoomInfo in its startup phase and has helped us grow the engineering team from its very earliest days.
I wanna thank him for being a strong leader and a great partner. The new executives we have hired bring strong relevant experience, leading great teams, driving customer success, and building highly scalable world-class products. These leaders and others across the organization will help create the foundation we need to scale for the next phase of growth.
First, Ali Dastan joins us as our new Chief Technology Officer from Atlassian, where he was head of engineering for work management, Confluence, Trello, Jira and Atlas. He's coming from an organization that is universally recognized as having the best product-led growth motion, supported by a remarkably well integrated underlying platform, and he brings more than 2 decades of experience scaling global technology companies.
We're excited to have him join the company and lead our innovation and development efforts. Also, Dave Justice is joining ZoomInfo as our Chief Revenue Officer. Dave has more than 2 decades of experience leading global sales in the software space, serving as Chief Revenue Officer of PagerDuty for the past three years. Between PagerDuty, Salesforce, and Cisco, he has held sales positions at all levels of the organization with a particular focus on enterprise sales.
We need the right people in the right roles focused on the things that matter most, and I believe we have that now. With regard to the second corporate priority, investing in our enterprise business, we recently surveyed thousands of ZoomInfo users to understand the impact our tools and data have on their day-to-day productivity and the value that they derive from the platform.
Their responses underscored just how essential we are at a time when companies are trying to hit their targets with fewer resources. 67% of sales re-leaders reported immediate top-line revenue gains after implementing ZoomInfo. Sales development representatives cut their time researching prospects in half. Account executives reduced deal cycles by nearly 40% and increased win rates by more than 45%.
SDRs, AEs, and account managers increased quota attainment by more than 50%, the average quota attainment with ZoomInfo was more than 90%. 70% of marketers reduced spend due to more accurate targeting, the average recruiter using ZoomInfo reduced the time to hire by 20%. These results tell us that the ZoomInfo platform is mission-critical for our customers and delivers tremendous ROI.
With our platform, marketers are able to reduce spend and target leads more accurately. Sales teams spend less time researching and more time selling, and with more accurate data, more than double the response rates. Recruiters find better candidates and get them in the door faster. When our customers win, we win, and we will continue to ensure their success as we cement ZoomInfo as the essential revenue operating system for efficient businesses.
Our net retention rate, which was 104%, was a disappointment this year and in large part reflected the more difficult operating environment. The biggest driver in terms of lower net retention in 2022 was a lower level of upselling as the continued elongation of sales cycles impacted our reps' ability to sell more seats and more data into our install base. Customers continued to renew as our gross retention rate remained in the 90s, but upsell opportunities were diminished as customers looked to cut costs, particularly in the H2. We ended the year with 1,926 customers who spend more than $100,000 annually with us, up approximately 30% year-over-year, and advanced functionality now represents 31% of ACV.
There is a tremendous opportunity with enterprise customers. We're making it even more of a priority to unlock that opportunity. During the quarter, we closed transactions with leading organizations like Amazon Web Services, Bank of the West, Barclays, Cigna, Edward Jones, Goodwin Procter, FedEx, Panasonic, ServiceNow, Sodexo, and Waste Management. Companies are increasingly looking to work with fewer vendors and consolidate their tech stacks.
They choose ZoomInfo because our integrated platform aligns sales and marketing teams to optimize conversion, and it can expand with them as they grow and develop a more sophisticated go-to-market strategy. As examples, a leading provider of human capital management solutions traditionally only leveraged company data from ZoomInfo to drive their territory planning activities.
After a SalesOS pilot that delivered significant ROI in a short amount of time, they rolled out SalesOS to thousands of their account executives, expanding their use of the platform. One of the largest financial institutions in the world doubled its investment in ZoomInfo, adding more SalesOS seats, and is now integrating our data into Salesforce for their commercial banking unit while leveraging intent data to improve their targeting efforts.
We are focusing our 2023 development efforts on extending our lead in data excellence, delivering a scalable enterprise experience, developing and training customers on high-impact plays that drive go-to-market efficiencies directly from the ZoomInfo platform, and investing behind more product-led growth opportunities. We will continue to invest in accuracy and coverage to further extend our data leadership and optimize our search experience.
We will also invest in more robust bi-directional syncs with CRMs and APIs to meet the needs of our enterprise customers and in holistic signals and unified scoring mechanisms to meet the needs of sales and marketing teams that use ZoomInfo as their shared source of data truth. When I think about building a world-class enterprise experience, it comes down to the scalability and simplicity of our product to create a delightful experience for users. As we move upmarket to serve larger global enterprises and deliver predictable and efficient performance for our customers, our product focus is shifting to driving scalability, automating workflows, and simplifying everyday tasks for our users and their admins.
We will invest more in enterprise-grade settings and permissions for admins, simplified account setups and integrations, in-product analytics and performance dashboards for leadership, and a better self-guided product onboarding experience to help unlock value along the user journey. In the recent G2 Winter 2023 Grid report, ZoomInfo ranked in first place across 29 grids and was listed as the number one
enterprise solution in 8 different sections. For the eighth straight quarter, we led all 4 of the sales intelligence, marketing account intelligence, account data management, and lead intelligence enterprise grids. We are also doubling down on our investments in MarketingOS. We will continue to build out our advertising capabilities related to our proprietary B2B demand-side platform, build deeper account-based marketing functionality, expand reporting capabilities, and invest more in unified scoring mechanisms.
MarketingOS is a common upsell pathway after customers have successfully implemented SalesOS, and we are seeing more traction with sales and marketing teams who want to share the same foundational data, tools, and processes. We will also invest heavily in supporting our customers to execute high-impact go-to-market plays. Customers are looking to do more with less, whether that means with smaller teams or fewer advertising dollars. Being able to take timely action on signals is key to successful and sustainable go-to-market motion.
We will continue to invest in both user-level workflows enabled through SalesOS and MarketingOS, and organization-wide workflows and workflow management through OperationsOS. Scalable workflows supported by our RingLead and DaaS offerings have been integral for companies looking to become more efficient and automate time-consuming motion. In closing, I'm confident that we have the team, the platform, and the strategy to win this market.
A huge opportunity remains ahead of us. We are well-positioned to capitalize on it as more and more sales teams use data and insights to find, acquire, and grow customers. Our customers are generating significant ROI, and our users are reporting phenomenal results as they leverage the ZoomInfo platform. We've added a number of leaders who will continue to help us grow and scale and who bring a wealth of enterprise experience and a customer-first mentality to the organization. As I mentioned last quarter, while we can't control the macro, we can control how we manage the business. I am all in, the team is all in. We're ensuring that we're consistently delivering the results that you have come to expect from us.
While Cameron will be sharing our specific guidance for next year, I will share with you the framework we use in developing our guidance. We have assumed that the economic environment does not get better. At the low end of the guidance, we have assumed that things get progressively worse. We understand that while our new leadership is great for the long term, we may see some disruption while the team gets up to speed. We remain steadfast in our belief that we will continue to expand profitability, and we will continue to lead with efficiency, focusing on compounding free cash flow growth over the long term. With that, I'll hand it over to Cameron.
Cameron Hyzer (CFO)
Thanks, Henry. In Q4, we delivered revenue of $302 million, up 36% year-over-year, which implies 5% sequential growth compared to Q3 2022. Excluding the impact of products acquired within the last 12 months, our organic revenue growth for the quarter was 34%. Adjusted operating income in Q4 was $127 million, a margin of 42%, up 100 basis points sequentially, and up 360 basis points compared to the Q4 of last year. For the full year, we delivered revenue of $1.1 billion, up 47% compared to 2021, and meaningfully better than our initial full year guidance of 36% growth. Organic revenue growth in 2022 was 41%.
Adjusted operating income was $448 million, a margin of 41%. Unlevered free cash flow was $457 million. We were GAAP profitable for the year, with net income of $63 million. GAAP EPS of $0.16 per share. Non-GAAP EPS was $0.88 per share. We are initiating guidance for 2023, with revenue growth at 17% at the midpoint, with an implied AOI margin of 41%, up 50 basis points compared to 2022. For 2023, we expect to deliver $512 million in unlevered free cash flow at the midpoint of guidance, which implies more than $450 million in free cash flow for the year.
It is no secret that the tech sector is seeing layoffs and companies, regardless of vertical, are being pressured to cut costs and drive efficiency. We believe that our focus on driving an efficient go-to-market motion for our customers and the strong and near immediate ROI from our platform provides across verticals has enabled us to continue to deliver a leading combination of revenue growth and profitability, even in this more challenging environment. Longer sales cycles and the increased time our reps are spending on renewals has impacted our ability to upsell and cross-sell existing customers, which was a meaningful driver of growth and net revenue retention expansion in the past. As Henry indicated, net revenue retention for the year was 104% as we operate in this more challenging economic environment.
Bridging from our prior net revenue retention, the biggest driver, approximately 10 points of the change, was driven by reduced upsell. Similar to many other software companies, our sales reps continue to spend more time on deals and renewals than they have in the past, limiting their ability to drive more upsell opportunities with existing customers. In addition to adding more capacity, we have shifted account loads, reallocated resources to higher potential customers, and automated low-end tasks, creating the potential to improve efficiency.
While we believe these efforts will yield positive results, we are cognizant of the ongoing macro challenges and acknowledge that our improvements could be offset by further deterioration in buyer sentiment and behavior. As a result, we think it is prudent to model net revenue retention at lower levels for the foreseeable future.
New customer additions remain the larger driver of revenue growth in 2022. Our expectation is that will continue to be true in 2023. International customers contributed 13% of revenue in the quarter, which grew 49% relative to Q4 2021. International markets are seeing a similar, and in some cases worse, economic environment relative to the U.S. During the year, we grew our employee base approximately 30%, which was slower than revenue growth. In the H2, we intentionally moderated the pace of headcount growth, raised the bar with respect to performance, and eliminated some positions. As a result, we are currently at a headcount level below where we ended September.
In 2023, we expect to realize operating leverage in the business as we continue to grow our overall team less quickly than revenue, while focusing on adding sales capacity. Turning to cash flow. Operating cash flow in Q4 was $120 million, which included approximately $6 million of interest payments. Unlevered free cash flow for the quarter was $122 million, or 96% of adjusted operating income. For the full year, unlevered free cash flow was $457 million, or 102% of adjusted operating income, yielding a margin of 42%. Going forward, we expect unlevered free cash flow conversion in the range of 95%-100% for the year.
With respect to the balance sheet, we ended the Q4 with $546 million in cash equivalents, and short-term investments. At the end of Q4, we continued to carry $1.25 billion in gross debt, all of which has fixed or hedged interest rates, with about half of that coming due in 2026, and the remainder coming due in 2029. Additionally, we successfully transitioned from LIBOR to SOFR during the quarter. We again drove an improvement to our leverage ratios with a net leverage ratio of 1.5 times trailing twelve months adjusted EBITDA and 1.3 times trailing twelve months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements. This represents approximately a full turn improvement from the beginning of the year.
With respect to liabilities and future performance obligations, unearned revenue at the end of the year was $420 million, and remaining performance obligations, or RPO, were $1.1 billion, of which $842 million are expected to be delivered in the next 12 months. We believe that calculated billings, bookings, and RPO are imprecise metrics to assess in-period activity and forward momentum.
Because of the inherent noise in those metrics, we focus on days adjusted sequential revenue growth, which was 5% in the Q4. We move to guidance, we have developed a prudent set of assumptions. The low ends of guidance includes an expectation that there is a further deterioration of the macro environment and buyer sentiment in 2023, as well as some near-term disruption as we onboard new leaders.
With that, I will provide our outlook for the Q1 and initial outlook for the full year 2023. For Q1, we expect revenue in the range of $299 million-$301 million, reflecting the fewer days of recognition, revenue recognition in Q1 relative to Q4. We expect adjusted operating income in the range of $118 million-$120 million and non-GAAP net income in the range of twelve or $0.21-$0.22 per share. Our Q1 guidance implies year-over-year revenue growth of 24% and an adjusted operating income margin of 40% at the midpoint of guidance. We are providing initial full year 2022 guidance as follows.
We expect revenue in the range of $1.275 billion-$1.285 billion, adjusted operating income in the range of $523 million-$533 million, and non-GAAP net income in the range of $0.98-$1.00 per share based on 418 million weighted average diluted shares outstanding. For unlevered free cash flow, we expect to generate between $507 million and $517 million. Our full year guidance implies 17% revenue growth at the midpoint and both adjusted operating income margin and unlevered free cash flow margin at or above 40%. With that, let me turn it over to the operator to open the call for questions.
Operator (participant)
Thank you. One moment while we prepare for our Q&A session. First question that I have is coming from Mark Murphy of J.P. Morgan. Your line is open.
Mark Murphy (Managing Director and Senior Equity Research Analyst)
Yes, thank you very much. I wanted to drill in just given your exposure to the software vertical, I believe it's around 40% of ARR. What are you embedding into the guidance there? In other words, do you assume that this wave of layoffs continues to intensify through the year? You know, we hear of SDR teams being let go, and that would put more pressure on seat expansions into the software vertical or do you see a scenario where perhaps that would kind of level off sometime in the next couple of quarters? Then I have a quick follow-up.
Cameron Hyzer (CFO)
Yes. Thanks, Mark. Certainly our guidance contemplates that we continue to see a challenging macro environment, and I think that would be continuing to see, you know, layoffs occur. We did experience a bunch of that in Q4, as I'm sure you can imagine. The guidance assumes that things will get worse as we go through the year.
Mark Murphy (Managing Director and Senior Equity Research Analyst)
As a follow-up that we had heard some feedback that seat growth is obviously very, very sluggish, very challenged out there broadly across the entire software vertical, but that there are cases where companies are continuing to consume kind of the bulk credits or the data credits. Is that something that aligns with your observations? Or do you think the trajectories are pretty similar if we toggle between the seat growth and the bulk credit growth?
Henry Schuck (Founder and CEO)
I think that when you look at the look internally at the results, the bulk credit usage is performing better than the seat growth or any seat down sell that we see. Part of our strategy for 2023 has been to focus on our Data as a Service offerings, our RingLead plus enrichment offerings, our Databricks that are available inside of Snowflake and Google BigQuery and Amazon AWS. Those are performing better in this environment.
Mark Murphy (Managing Director and Senior Equity Research Analyst)
Okay. sorry, one final question for you. Cameron, I believe you're guiding above actually on the unlevered free cash flow for 2023. I know it's above our model. Could you remind us what is it that is underpinning your ability to preserve margin like this and to drive free cash flow better than the rest of the industry, even when we have such challenges out there in the environment?
Cameron Hyzer (CFO)
I mean, we are continually, you know, focusing on managing the business and driving, you know, kind of better margin. You know, overall, I think our expectation is that operating income as a percentage of revenue will increase by about 50 basis points in 2023. We are expecting a little bit less free cash flow conversion. You know, overall, obviously we're laser-focused on continuing to be efficient and drive efficiency in the business, which has been a core thesis of ours since I've been here.
Mark Murphy (Managing Director and Senior Equity Research Analyst)
Excellent. Thank you very much.
Operator (participant)
Thank you. One moment while we prepare for our next question. Our next question will be coming from Elizabeth Porter of Morgan Stanley.
Elizabeth Porter (VP in Equity Research)
Thank you so much for the question. I first wanted to ask just about the management changes. Can you provide some more clarity on what Dave is expected to change within the sales organization? You know, how we should think about the impact from disruptions. You know, is this something that might take just a quarter to work through, or is it gonna extend through a greater period of time? Thank you.
Henry Schuck (Founder and CEO)
Yeah. We're super excited about having Dave here. If you followed his tenure at PagerDuty, Dave was known for building a really strong land and expand motion and re-architecting that business for growth. He has a long tenure of enterprise leadership and that's an area where we believe we have a tremendous amount of opportunity. Where we think we're gonna get quick impact from Dave is really driving that land and expand motion within our customer base and really driving our opportunity within the enterprise.
We're especially excited about that. From a timing or disruption perspective, you know, we're hopeful that Dave hits the ground running quickly, and he's making an impact right away. You know, that being said, we're being really conservative about that impact. When we guide forward, we're assuming some time of disruption before we're feeling the full impact of his tenure here.
Elizabeth Porter (VP in Equity Research)
Got it. Then just as a follow-up, you know, I think that the headwinds on kind of the expansion of seats are pretty well understood, but I was hoping you could give some more color on just, you know, the top of funnel demand trends and changes over the last 3 months and kind of what the outlook on particularly the new customer side is, that's incorporated into guidance.
Cameron Hyzer (CFO)
Sure. You know, with respect to guidance, we are expecting that the environment becomes more challenging in 2023. That includes, you know, both a customer side as well as a new sales side, where we're expecting, you know, flat to lower new sales in 2023 versus what we had in 2022. I think from a, you know, pipeline perspective, we continue to see, you know, more pipeline than we've ever had, and win rates are actually, you know, modestly starting to improve if we look at Q4, relative to what we'd seen previously.
Elizabeth Porter (VP in Equity Research)
Thank you.
Operator (participant)
Thank you. One moment while we prepare for our next question. Our next question is coming from a Raimo Lenschow of Barclays. Your line is open.
Raimo Lenschow (Managing Director and Senior Equity Research Analyst)
Hey, thank you. Could we talk a little bit about the seasonality that you guys are expecting for the year? The issue on the kind of missing upsell or less upsell is kind of something that should kind of play out as people come up for renewal. Should I just kind of think about that that's kind of leaning, like, being like a Q1, Q2, Q3, Q4 until you go for this, you know, big one year, you know, one year of renewals, and then we kind of there, or is there other factors we should think about?
Cameron Hyzer (CFO)
I think when you think about seasonality, Raimo. You know, I think that there's potential upside as we lap people that have, you know, maybe down sold because they went through a restructuring of their firm or, you know, down sold for another reason as we get into the H2 of the year. That's not explicitly contemplated in terms of our guidance. We don't see evidence of that happening yet, and certainly, you know, while it may be upside, we're not counting on that being a big driver of growth this year.
Raimo Lenschow (Managing Director and Senior Equity Research Analyst)
Yeah. Then if you think about the, you know, obviously we kind of have like every week almost or every day, like an announcement where people are looking at their internal kind of cost, their internal investment levels, et cetera. You know, you obviously, you know, as Henry, as you said, you were always kind of much more profitable and much more, much better built. Like, how do you think about this dynamic about like, you know, revisiting some of the stuff internally? Thank you.
Cameron Hyzer (CFO)
We have a process where we do revisit our kind of trajectory and plans on a monthly basis and make bigger moves on a quarterly basis. Yeah, I think that's a big part of the reason why we were able to look at our business as we were exiting Q2 and into Q3, adjust many of our kind of hiring plans and investments and drive to an improvement in margin as we got through to the end of the year.
Raimo Lenschow (Managing Director and Senior Equity Research Analyst)
Mm-hmm. Okay. Thank you.
Operator (participant)
Thank you. One moment while we prepare for the next question. Our next question will be coming from Siti Panigrahi of Sorry, Mizuho. You can go ahead. Your line is open.
Siti Panigrahi (Managing Director and Senior Equity Research Analyst)
Hi, this is Siti Panigrahi. Thanks for taking my question. Just want to ask on the NRR, you know, 104%. Looking at that, you know, upsell opportunity, Henry, what can you do to improve upsell opportunity? Are you seeing the demand? Is it more on the company, you know, go-to-market strategy changes that can drive demand? What's your view on upsell, driving more upsell given the RevOS platform you built last couple of years?
Henry Schuck (Founder and CEO)
I think Part of the way that we're thinking about this is where do we see the most opportunity within our customer base? We see a tremendous opportunity in the enterprise. We see it around our MarketingOS products and our DaaS products. really making sure that our organization, our go-to-market organization, is designed to go after those opportunities is how we're thinking about it. we've made a number of shifts in the back half of the year to make sure that we're resourced to drive Data as a Service, to drive MarketingOS, which are higher dollar ASPs into that enterprise and upper end of the mid-market customer base. we think that'll drive efficiency, and it will use our resources the best.
When our customers buy our MarketingOS platform, the ASP is over 5x our average SalesOS pricing. When our prospects buy our MarketingOS platform, the ASP is over 3x our SalesOS pricing. It's looking for opportunities where the return on our resource investment is the highest and making sure that we have our resources dedicated to those areas.
Siti Panigrahi (Managing Director and Senior Equity Research Analyst)
Thanks for that color. When you think about growth opportunity, where does international expansion stand? What are you seeing right now on the international front?
Cameron Hyzer (CFO)
Hey, we continue to have a strong international team that's, you know, driving new business and expansion. Certainly, you know, I think there are areas particularly where we're most focused in, you know, Europe, where the economic environment might be more challenging than in the U.S. I think that long term, there's a real opportunity for international to be a much larger % of overall revenue, but that's not something that I think we see in the short term.
Siti Panigrahi (Managing Director and Senior Equity Research Analyst)
Great. Thank you.
Cameron Hyzer (CFO)
Thank you, Sit.
Operator (participant)
Thank you. One moment while we prepare for our next question. Our next question will be coming from Brad Zelnick of Deutsche Bank. Your line is open.
Brad Zelnick (Managing Director and Senior US Software Analyst in the Equity Research division)
Hi. Can you guys hear me?
Cameron Hyzer (CFO)
Yes, we can.
Henry Schuck (Founder and CEO)
Yes.
Brad Zelnick (Managing Director and Senior US Software Analyst in the Equity Research division)
Oh, excellent. Thank you so much for the question. First for you, Cameron, just if we look at the Q1 sequential guide, I believe you've guided to 2% sequential growth, days adjusted. Just curious, what trends are you seeing in January that inform your view and if anything has really changed or downticked in terms of your view into customer budgets this year?
Cameron Hyzer (CFO)
Yeah. I think there are two things. You know, January, you know, has gone reasonably well. We actually had less a change in linearity with respect to Q4, where there was less activity in the last, you know, couple weeks of the of the year that is partially impacting Q1 as well. Additionally, you know, certainly, you know, Q1 is the kinda timeframe where we are at least contemplating some disruption from the management changes that we've executed. Therefore, I think we wanna make sure that we're prudent with respect to the guide there as well.
Henry Schuck (Founder and CEO)
I would add that our pipeline in January was the strongest it's ever been. We generated more MQLs than we ever have in our history. There's real demand out there in the market for our products. Ultimately, what we're ending up seeing is customers are waiting. They're not making purchase decisions at the level, the velocity levels as they were, you know, a year ago. There is real demand out there. We're generating it, we're generating that pipeline. We'll continue to do that and feel like as the uncertainty fades, we'll be in a really great position to accelerate through that.
Brad Zelnick (Managing Director and Senior US Software Analyst in the Equity Research division)
That's helpful color. Henry, maybe a follow-up for you. Your message has been fairly consistent to say that the headwinds you face to date are macro-related, which makes complete sense. Now you're bringing in a new CRO from the outside, which you're saying could potentially be disruptive. Why is now an external CRO the right hire, especially, by the way, given your unique go-to market? You know, you got somebody externally that's gonna bring their experiences. I guess what's the risk or opportunity, frankly, to modify your go-to market under Dave to be more like some of the other great companies he's worked for in the past?
Henry Schuck (Founder and CEO)
I think the big thing that we know today is that, there is a real growth opportunity within our enterprise customer base. You know, today we have 35,000 customers, and we're driving real growth across our enterprise customers. When we look within the enterprise, we think we can significantly accelerate that. Bringing in a Chief Revenue Officer who has a ton of experience within the enterprise, this felt like the right time to do it. We see that segment as the biggest growth opportunity, and we wanted to bring somebody in who had significant experience in that land and expand motion, and especially across the enterprise.
Brad Zelnick (Managing Director and Senior US Software Analyst in the Equity Research division)
Thank you so much.
Operator (participant)
Thank you. One moment while we prepare for our next question. Our next question will be coming from Brian Peterson of Raymond James.
Brian Peterson (Managing Director and Senior Equity Research Analyst)
One, for Cameron. You know, just given the magnitude of the kinda upsell, downsell dynamic of the 10 point you referenced, I'd love to understand, you know, any linearity changes you can provide, you know, Q3, Q4, how did that trend? I think you mentioned that we should be modeling a lower NRR going forward. What was the reference point on that? Is that versus the 104? I just wanna make sure we're all clear on what that comment meant. Thanks, guys.
Cameron Hyzer (CFO)
Yeah. The reference point there is against the 104, which is the, you know, reflects the activity that we saw for the year. You know, certainly, you know, most of our most of our backlog from 2021 expired in the last 4 months of the quarter when we're seeing, you know, a lot of macroeconomic pressure. I think that we're expecting that that'll continue and perhaps get worse, you know, in 2023. Therefore, I think the expectation is that, at least base case, the NRR could be lower in 2023.
Brian Peterson (Managing Director and Senior Equity Research Analyst)
Thanks. Anything on the linearity of how that trended over the course of the year? I don't know if you could comment on Q4 versus Q3 or how that progressed over the course of the year.
Cameron Hyzer (CFO)
Yeah. It certainly got worse, particularly in the last four months of the year. That being said, you know, if you're weighting the environment, you know, almost half of our bookings from 2022 or 2021 were in those last four months, which is a good indication of when we're renewing those contracts as well.
Brian Peterson (Managing Director and Senior Equity Research Analyst)
Understood. Thanks, Cameron.
Cameron Hyzer (CFO)
Yep.
Operator (participant)
Thank you. One moment while we prepare for our next question. Our next question is coming from D.J. Hynes of Canaccord Genuity. Your line is open. I'm sorry, Brent Bracelin of Piper Sandler, your line is open.
Brent Bracelin (Managing Director and Senior Technology Equity Research Analyst)
Hello, can you hear me?
Cameron Hyzer (CFO)
Brent.
Brent Bracelin (Managing Director and Senior Technology Equity Research Analyst)
Okay, perfect. A little confusion there. Maybe I'll start with you, Cameron, here. As we think about what sounds like an increasing enterprise opportunity and an enterprise focus going forward, what is the revenue split today as you think about customers over 100K? What are they generating overall of the mix versus the smaller customers? One quick follow-up for Henry, if I could.
Cameron Hyzer (CFO)
Yeah. The 100K customers generate, you know, roughly 45% of overall revenue. Yeah, I think that the number of customers has grown, but also the revenue on a per customer basis is at the highest level we've seen.
Brent Bracelin (Managing Director and Senior Technology Equity Research Analyst)
Got it. Super helpful color there. Cameron, I guess the $1 million question here is, really how quickly and what else are you contemplating besides the new CRO to really accelerate the pipeline and the pipeline build outside of software? Clearly you've built a great business de facto standard in that kind of software ecosystem. How do you replicate that outside of software and how fast can you pivot?
Henry Schuck (Founder and CEO)
I think first we are, the rest of the industries outside of software are growing faster than our software and technology base of customers. We talked about companies like Waste Management and Barclays, and ABM Industries who are large clients of ours, Capital One. So we continue to grow our share in non-tech company. They also present a really large opportunity for us in the enterprise that we're focused on.
We'll do some specific vertical mapping as well in the customer base. So for the first time, we'll have account managers who are aligned to a financial services vertical and account managers who are aligned to a business services vertical it's a little bit more specialized service that, where they can build relationships with the customers and put ourselves in a position to continue to upsell within that non-tech customer base.
Brent Bracelin (Managing Director and Senior Technology Equity Research Analyst)
Makes sense. Helpful color. Thank you.
Operator (participant)
Thank you. One moment while we prepare for the next question. Our next question is coming from DJ Hynes of Canaccord Genuity. Please go ahead. Your line is open.
DJ Hynes (Managing Director and Senior Equity Research Analyst)
All right, we're back. Hey, guys. Look, in the context of the layoffs we're seeing in the tech space, when you have customers coming to you looking to trim back on their commitments, what are the levers you have in place to stave off that partial churn? Like, are you throwing in additional modules to preserve ACV? Like, how often is that happening? Any color on that front would be helpful as we think about NRR dynamics.
Cameron Hyzer (CFO)
Yeah. certainly we've seen a reduction in seats driven by layoffs, and that impacts both upsells and downsells, and that definitely occurred in Q4. you know, we are always looking to run plays against that. those plays obviously include additional functionality or, you know, looking for other pockets of the organization that could benefit from our software.
Realistically, those plays haven't, you know, worked as well as we want to, particularly given that the buyer behavior is much more fragile in that moment when people are executing a restructuring and, you know, kind of worried about their own team. you know, in some cases, we do see that work, but in many cases, particularly here in Q4, I'd say that there was an impact related to that.
DJ Hynes (Managing Director and Senior Equity Research Analyst)
Yeah. Okay. Okay. Then Henry, a follow-up for you. What's the appetite for M&A in 23? I mean, do you batten down the hatches, make sure the house is in order first, or, you know, do you wanna be opportunistic as a consolidator, as some of your peers, I'm sure, are facing similar challenges?
Henry Schuck (Founder and CEO)
Look, there's nothing on the near-term horizon from an M&A perspective. Short term, we're really just focused on driving the business. Our criteria around M&A remains the same. I tell you, we have a much higher bar around this. The criteria around improving the customer experience fits within the go-to-market motion is accretive in the short to medium term. We're gonna be meaningfully more selective in this environment. Nothing on the near-term horizon. I'm pretty focused on making sure we're driving the business, landing these executives, and growing the top line, doing that profitably.
DJ Hynes (Managing Director and Senior Equity Research Analyst)
Yeah. Got it. Okay. Thank you guys for the color.
Operator (participant)
Thank you. One moment while we prepare for the next question. Our next question is coming from Alex Zukin of Wolfe. I'm sorry, the participant list jumped. It's Taylor McGinnis of UBS.
Taylor McGinnis (Equity Research Analyst)
Hi. Thanks so much for taking the question. It sounds like in terms of growth drivers this year, that new business is expected to hold up. Cameron, can you just give some color on the mix of new logo versus existing, you know, maybe implied in this growth guide this year and how that might compare to last year or what we've seen historically?
Cameron Hyzer (CFO)
Well, when you look at the, you look at the organic growth of 34% and in the quarter and, you know, Net Revenue Retention at 104%, that obviously implies that the remainder of that, roughly 30%, came from new business in 2022. I think our guidance certainly contemplates that both new business and Net Revenue Retention will be challenged. So I'd expect that, you know, new business is, you know, likely flat to down, based on a deteriorating level of buyer behavior and the macro environment. Similarly, Net Revenue Retention will be, you know, more challenged as well.
Taylor McGinnis (Equity Research Analyst)
Got it. Thanks. Just one follow-up. It's just on margin. You know, with the potential for NRR to deteriorate and I guess some of the risks that you mentioned on the sales side and continued investments in capacity, does that serve at all as, you know, a risk to the margin upside this year? If not, maybe you can just talk about the areas of leverage that serve as an offset.
Cameron Hyzer (CFO)
Yeah. We, you know, are always focused on being more efficient and harvesting the operating leverage that's natural in the business. As you mentioned, you know, with a more challenging environment, that obviously impacts our efficiency with respect to sales and marketing. We do expect to be able to realize operating leverage from other areas of the business. I expect cost of revenue to, you know, decrease as a percentage of revenue and probably be the biggest driver of operating leverage, but we'll also get some from G&A and, from R&D as we get further into the year.
Taylor McGinnis (Equity Research Analyst)
Great. Thanks.
Operator (participant)
Thank you. One moment while we prepare for the next question. Next question is coming from Alex Zukin of Wolfe. Your line is open.
Alex Zukin (Managing Director and Senior Equity Research Analyst)
Yeah. Hi guys. Sounds like having some operator trouble today. Henry, first question for you. I guess with respect to the sales cycles, the demand environment, do you feel like we've reached kind of peak uncertainty or at least a trough in terms of the demand? Is it getting better or is it still the level of uncertainty persisting kind of in real-time in the market? Have you had to deal with more competitive intensity, particularly, you know, on calls as cost is often mentioned as an issue with respect to actually getting deals done?
Henry Schuck (Founder and CEO)
Yeah, look, there hasn't been any material change in buyer behavior that we're seeing out in the market as it relates to uncertainty or the macroeconomic environment. We haven't seen any change in that. What I, what I'll tell you from a demand and pipeline generation perspective, January, we saw our largest pipeline we've ever generated. We're generating more MQLs than we've had in our history. When buyers are buying, they're buying decisively and at strong ASPs.
We're seeing less competition in our deals in Q4. Where we do see competition, primarily in the SMB segment of our business, we're seeing the highest end-month win rate ever for a non-end of the quarter month.All of that tells me that while there is room for improvement from an execution perspective, it really is customers' uncertainty about the broader economic environment that's holding us back from delivering more top line growth. As the uncertainty fades, I'm confident that we'll be in a great position to accelerate out. We haven't seen that fading yet.
Alex Zukin (Managing Director and Senior Equity Research Analyst)
Perfect. Cameron, for you, on the margin side, if I look at the free cash flow margin guide versus the operating margin guide, they're a little inverted from where they've been previously. Historically, free cash flow margins have exceeded operating margins. Just walk us through kind of what are the assumptions there? In general, obviously we all love to see margin leverage, but with the growth moderating and modulating to the extent that it is, kind of what is the decision point when you potentially unlock greater margin leverage? Is that in the cards, or not?
Cameron Hyzer (CFO)
Sure. With respect to the free cash flow conversion, we are expecting free cash flow conversion to be at, you know, 95% to 100% this year, as opposed to historically where it was, you know, above 100%. The real big factors that impact that are really, you know, A, that our customers are, you know, shifting a little bit more to pay, you know, quarterly or at least not annually up front. That certainly has an impact on the kind of cash flow part of the unlevered free cash flow conversion. Additionally, lower growth impacts the weighting of those upfront payments in the H2 of the year. That is another impact.
With respect to, you know, unlocking the, you know, ultimate margin growth, you know, certainly our expectation is that we will be able to improve sales and marketing efficiency over time, particularly as the environment stabilizes a little bit more. That'll enable us to, you know, either accelerate, you know, growth when we get to that stabilization point or, you know, harvest more of that operating leverage that you'd expect on the sales and marketing side.
Alex Zukin (Managing Director and Senior Equity Research Analyst)
Perfect. Thank you, guys.
Cameron Hyzer (CFO)
Thanks, Alex.
Henry Schuck (Founder and CEO)
Thanks, Alex.
Operator (participant)
Thank you. One moment while we prepare for the next question. Our next question is coming from Parker Lane of Stifel. Your line is open.
Parker Lane (Managing Director and Director in Equity Research)
Yeah. Hi, guys. Thanks for taking the questions. Cameron, when you look at the cohort of customers that have announced layoffs or cost reduction plans, can you give us a sense of the share of them that have already come up for renewal? As we think about 2023, do you expect that the impact of those renewals to be evenly spread through the year or more skewed towards the Q3, Q4 timeframe that you referenced earlier?
Cameron Hyzer (CFO)
You know, I think that the kinda timing of those renewals are maybe slightly more kind of set into Q4. I think that's when we have a bigger cohort of software companies that are renewing. We've seen, you know, a bunch of that, either people that already announced and then come up for renewal or, you know, in some cases, people who are, you know, renewing with an expectation that something like that might happen. You know, overall it is, you know, it's not that heavily weighted to Q4. I'd expect that it's, you know, a similar percentage to the, you know, almost half of our customers that are renewing in the last four months of the year and the remaining, you know, renew in the, you know, kind of the first eight months of the year.
Parker Lane (Managing Director and Director in Equity Research)
Got it. A quick follow-up here. Circling back to the headcount reductions that you said that you did during the September to year-end timeframe, was that pretty evenly distributed across the organization or were there particular areas that faced a higher degree of headcount trimming? Thanks.
Cameron Hyzer (CFO)
You know, we are super focused on continuing to raise the bar in terms of our performance expectations. while You know, it may have been somewhat more focused in R&D areas or G&A areas. It was pretty consistent across the board, in terms of really making sure that we have the best team around us and that we have team members that are supporting the overall growth of the company.
Parker Lane (Managing Director and Director in Equity Research)
Understood. Thanks again.
Cameron Hyzer (CFO)
Yep.
Operator (participant)
Thank you. One moment while we prepare for the next question. Our next question will be coming from Koji Ikeda of Bank of America. Your line is open.
Koji Ikeda (Finance Professional and Equity Research Analyst)
Yeah. Hey, guys. Thanks for taking the questions. Well, I wanted to go back to net revenue retention. You know, you ended the year at 104%. I believe you said maybe a good place to start is a tad below that for 2023. I guess, you know, a tad below that, call it, I don't know, 102.
Would you categorize that as an improvement from the exit NRR rate for the Q4? You know, first question there. Then thinking about the 17% guide for 2023. You know, assuming that low single-digit net revenue retention, you know, mid-teens growth coming from new customers, I guess the question is, maybe where are you most excited from a vertical perspective outside of software?Maybe what products are you most excited about as growth drivers for 2023? Thanks, guys.
Cameron Hyzer (CFO)
Koji, I'll start with the first part. Yeah, I think that certainly in relation to our guidance, 102 would be higher than what's implied there. I think we're expecting, particularly in a worsening environment, that, you know, we'll see retention below that. I'll let Henry go into the kind of most exciting other verticals.
Henry Schuck (Founder and CEO)
Yeah. I think we're seeing a lot of success in financial services. That's one of the key areas that we've reorganized special specialists across on the account management side, and see continuing opportunity there. You know, you see quotes in the slides we included from Capital One that ZoomInfo has become an integral part of their business. Without it, there'd be a huge gap in the sales enablement strategy, and they'd be scrambling to figure out how to fill.
We think that that same sentiment applies to any financial services company that sells to other businesses. We think we can really capitalize on that. I think in addition to that, I'd mentioned the success we're seeing in MarketingOS, our new ABM platform, where we're seeing ASPs on the customer side at 5x over average SalesOS pricing.
We're seeing ASP on the new customer side, prospect side, at 3x over the SalesOS pricing. People are really understanding the value unlock that you get when you deploy an ABM platform, but also the unlock you get when you align sales and marketing together with sales on SalesOS and marketing on MarketingOS. I think in addition to that, we continue to see better net retention stats with our DaaS platform and products.
We've continued to invest behind that. We see a good uptake of those products inside of the upper mid-market in the enterprise. We'll continue to focus on DaaS, which includes our enrichment solutions and RingLead, and our MarketingOS ABM platform. We see those as meaningful drivers in today's economic environment, and we feel good about those.
Koji Ikeda (Finance Professional and Equity Research Analyst)
Thanks, Henry. Thanks, Cameron.
Operator (participant)
Thank you. One moment while we prepare for the next question. Our next question is coming from Michael Turrin of Wells Fargo. Your line is open.
Michael Turrin (Managing Director and Senior Equity Research Analyst)
Hey, thanks. Appreciate you taking the question. I mean, there's some moving pieces in the guide for the full year relative to Q1. The optics are flat sequential growth-ish in Q1, then a return to sequential growth. You've talked about days adjusted a little bit but also worsening macro. Can you just help us out by maybe spelling out how much the days adjusted portion impacts Q1 and what else we should be just taking into account from a model perspective and thinking through the sequential growth trend beyond for the rest of the year?
Cameron Hyzer (CFO)
Sure. You know, because there are fewer days in Q1, there are 90 days versus there's 92 in Q4, you know, that's roughly a 2% headwind to the, to the, you know, absolute level of revenue that you'll see. The, you know, revenue guide at the midpoint implies a 2%, you know, sequential growth improvement. You know, our expectation is that, you know, particularly given that the linearity in Q4 is different than it normally would be, that the seasonality of, you know, Q1 is a little different than what you would have normally seen historically.You know, I think just by, you know, doing the math, you'll see a slightly better sequential growth in the, in the latter part of the year, based on getting to the, to the 17% overall growth.
Michael Turrin (Managing Director and Senior Equity Research Analyst)
Just, I mean, just squaring the improving sequential growth with the worsening macro. Just help us understand your, just the inputs you're using and what informs that, just so I think, just so it's clear on the call.
Cameron Hyzer (CFO)
Yeah. Certainly, you know, I think in starting out the year, we do have a higher mix of, you know, ramped sales folks. Our ability to go out and get through the pipeline that we have is improved and, you know, will continue to grow, we'll be continuing to grow that capacity over the course of the year. We do have a an assumption embedded within the guidance that we'll see some disruption in the early part of the year related to the management changes that we've that we've instituted.
Michael Turrin (Managing Director and Senior Equity Research Analyst)
Okay. That's helpful. Thank you.
Cameron Hyzer (CFO)
Yep.
Operator (participant)
Thank you. One moment while we prepare for the next question. Our next question is coming from Terry Tillman of Truist. Your line is open.
Joe Meares (Analyst)
Hi, guys. Thanks for taking the question. This is Joe Meares on for Terry Tillman. Just first one, in the context of the weaker economy, can you give us some updated thoughts on your ability to drive vendor consolidation and displace point solution vendors in areas like conversational intelligence and sales engagement?
Henry Schuck (Founder and CEO)
Yeah, definitely. We're continuing to drive consolidation, particularly around sales engagement providers, conversation intelligence, products, and ancillary data providers, and data partners. We see that as a meaningful part of our strategy in 2023, and we'll be releasing in February an integrated experience that brings sales engagement and conversation intelligence natively inside of the SalesOS platform. We're excited about that. We are continuing to look for and drive consolidation opportunities. They are around those three things, sales engagement, conversation intelligence, and then ancillary data providers.
Joe Meares (Analyst)
Great. That's helpful. Just as a follow-up, last quarter, you noted an eight-figure expansion, your largest expansion ever, and you also had a $1 million plus land, which was your first ever of that size. I'm just curious if there are any more successes like these to speak of in the Q4. How does the macro affect the size of your lands and the logos? Thanks again.
Henry Schuck (Founder and CEO)
We didn't give the name of the company, but we talked about an HCM company that grew thousands of additional seats across their sales and account executive teams. That was a $7-figure transaction that happened in the quarter that leaves a lot of room for expansion too. In a typical deal, what you would have saw on that transaction in Q4 was instead of being across, call it 2,000 seats, you would have seen that be across 7,000 or 8,000 seats. It ratchets back in Q4, but we still see tremendous upside to grow there. That's one of the examples of sort of large transactions we saw in the quarter.
Operator (participant)
Thank you for your question. One moment while we prepare for the next question. The next question will be coming from Kash Rangan of Goldman Sachs. Your line is open.
Kash Rangan (Managing Director and Senior Equity Research Analyst)
Hi, thank you very much, Henry and Cameron. You guys are the, probably arguably the first to see the impact of the downturn because people are cutting back on sales, and even when they announce a layoff, their intention is to clearly freeze activity on the front office side as it relates to productivity tools. But your product also has tremendous productivity at the same time. I mean, we love a lot of statistics. What is holding back the customer? It is, it is a very useful tool, especially in this economy, right? Secondly, let's just go with the logic that it, it is a very useful tool. Shouldn't we start to see, the benefit?
Since you're early to see the cut-offs and the layoffs, shouldn't you be the first to start to see the improvement, especially because I look at your CRPO in Q3 of 2022, that start to show some signs of new business struggle? We have easy comps coming up in Q3. We'll have cycled through the layoffs, hopefully for the next couple of quarters. The industry probably stabilizes. Wouldn't you see better business conditions in the H2 based on this logic? If I'm out to lunch with this, please let me know. Thank you.
Cameron Hyzer (CFO)
I think that logic certainly outlines an upside case. You know, the way we operate our business is, you know, we don't necessarily kind of hope for the upside. I think we're looking more to drive better efficiency of our teams. You know, ultimately, I do think that as we do see stabilization in the environment and, you know, largely in terms of buyer behavior, but also the macro, that there is an opportunity for us to accelerate.
I just, you know, I don't necessarily have the crystal ball to say that that's definitely coming in Q3 or, you know, whenever else. You know, I think we'll see when that occurs, but certainly I think we are, you know, really investing into the company at this point in order to have the potential to realize that upside when the environment stabilizes.
Kash Rangan (Managing Director and Senior Equity Research Analyst)
Got it.
Henry Schuck (Founder and CEO)
I would add, look, it's still really early in this category. Which means that it's still an evangelistic sale. Our category is not a Gartner-blessed budget line item, so executives aren't conditioned to think of our value add as table stakes for their organization. Then we're selling into a challenging environment in our customer base within tech companies. We have exposure there. The slowdown isn't unique to us. If you look at other companies in our space who sell sales products to B2B organizations, you see a similar trajectory and slowdown. We obviously don't expect that slowdown to last forever, and we're incredibly confident as that uncertainty fades away, that we're gonna be able to accelerate through it.
Kash Rangan (Managing Director and Senior Equity Research Analyst)
Got it. Henry and Cameron, if you take the non-tech slice of your business, which is remaining 50%-60%, what are the business trends there? What is the net new ACV or revenue growth rate there, and how much better is it relative to your guidance for the overall company? Thank you so much. That's it for me.
Cameron Hyzer (CFO)
Yeah. It is better. I wouldn't say that it's, you know, so meaningfully better that you'd expect a, you know, totally different outcome. I think for what we've seen in Q3 and Q4 is that, you know, software is more impacted, particularly from a layoff perspective. All companies are, you know, looking to cut costs. They're looking to, you know, really manage into, you know, as a, you know, perceived recession that's coming. I think it's challenging, you know, regardless of vertical.
Kash Rangan (Managing Director and Senior Equity Research Analyst)
If you don't have a recession, there's gonna be a big pickup, which we hope so.
Cameron Hyzer (CFO)
Yeah, look, I definitely focus more on buyer behavior than I do on the macroeconomic. I think throughout this past year they've been, you know, aligned. Yes, it's more a question of whether buyer behavior changes than, you know, just what happens in the economy.
Kash Rangan (Managing Director and Senior Equity Research Analyst)
Got it. Very useful.
Operator (participant)
Thank you. This concludes today's Q&A session. I would like to turn the call back over to Henry Schuck for closing remarks.
Henry Schuck (Founder and CEO)
Great. Thank you everyone for joining us tonight. We look forward to sharing our continued progress with you at our upcoming investor events. Thank you.
Operator (participant)
Thank you for joining today's conference call. You may all disconnect, and everyone, enjoy the rest of your day.