Yext - Q2 2023

Transcript

Operator (participant)

Good afternoon, and welcome to the Yext Q2 fiscal 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Nils Erdmann, Senior Vice President, Investor Relations. Please go ahead.

Mike Walrath (CEO and Chairman)

Thank you operator, and good afternoon, everyone. Welcome to the Yext fiscal Q2 2023 conference call. With me today are CEO Mike Walrath, COO and President Marc Ferrentino, and CFO Darryl Bond. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements, including statements about expectations regarding growth of our business, our management and governance plans, strategy, forward-looking guidance, and estimates of financial and operating metrics, capital expenditures and other non-historical statements as further described in our Q2 earnings press release. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Yext's growth, the evolution of our industry, our product development and success, our management performance and general economic and business conditions, such as the impact of COVID-19 pandemic. We undertake no obligation to revise any statements to reflect changes that occur after this call.

Nils Erdmann (SVP and Investor Relations)

Descriptions of these and other risks that could cause actual results to have a material difference from these forward-looking statements are discussed in our reports filed with the SEC, including our most recent quarterly and annual reports and our press release that was issued this afternoon. During the call, we also refer to non-GAAP financial measures. Reconciliations with the most comparable GAAP measures are also available in the earnings press release, which is available at investors.yext.com. With that, I will turn the call over to Mike.

Mike Walrath (CEO and Chairman)

Thanks, Nils, and thanks everyone for joining us today. Q2 was a solid quarter for Yext, and we executed well against our strategy of driving long-term growth through increased operational efficiency, best-in-class product innovation, and improving customer satisfaction. Our revenue for the quarter was $100.9 million, and our non-GAAP net loss per share was $0.03, beating the high end of our guidance range by $0.02, driven by our success in streamlining the business and improving our operating efficiencies. These results highlight the momentum we're generating through a realignment of our sales and customer success organizations while successfully managing costs in order to increase our cash position in the future. As our full-year non-GAAP EPS guidance suggests, we expect to achieve profitability in the back half of this year.

I'd like to share some observations about our progress toward achieving our strategic objectives and how the rate of this progress factors into our expectations for the H2 of the year. First, as we noted in our Q1 call, providing greater clarity around our brand and platform capabilities are a key to re-architecting our go-to-market strategy. During the quarter, we made significant progress against this priority and transitioned the name of our Answers product to Search and our core set of products, Listings, Reviews, Pages, Search, and Knowledge Graph together as the Answers platform. We did this to align with what we actually do for customers and our vision to help businesses answer every question from their customers, employees, and partners anytime, anywhere.

We made this change with the launch of our summer release that included 60+ new features and upgrades across every area of the platform, reflecting our continued commitment to innovation and realizing our vision as the Answers company. To help us continue to strengthen our brand positioning, we announced our new chief marketing officer, Raianne Reiss, in late August. Raianne has more than 20 years of global technology marketing experience at companies like AWS, Juniper Networks, and more recently, Elastic. Raianne will oversee Yext's global marketing organization and be responsible for building and strengthening the Yext brand and increasing demand for Yext solutions globally. Second, we continue to lay the groundwork for future revenue opportunities, landing deals across all of our products.

Although it's still early, I'm very encouraged by the breadth and variety of deals we closed during the quarter as they demonstrate that our product suite and value are resonating with customers. Marc will discuss our recent product innovations and share customer wins in a moment. I believe these customer stories are leading indicators reflecting that the ongoing re-architecture of our go-to-market is having an impact, and we are well-positioned to capture additional opportunities as we continue to improve all elements of our go-to-market motion to drive product innovation and expand customer use across the platform. In conversations with dozens of customers and prospects this quarter, I've observed firsthand the increasing importance to the C-suite of answering their constituents' questions wherever and whenever those questions are being asked.

The individual use cases and priorities of each customer vary from location-based questions on third-party properties to various company-controlled search use cases, such as support search, but this is a clear priority across a diversity of customer use cases. While we remain cautious on our outlook, I am highly encouraged by our prospects to drive tremendous customer value. Third, our Q3 guidance reflects our ability to successfully improve our operating efficiencies. We've demonstrated we can operate more efficiently, and the team is excited about the changes we are making to drive success for our customers. We continue to make organizational changes in the business that lower our operating expenses by reducing layers, increasing spans of control, and creating more coordination across our teams. I continue to believe that we'll drive better customer outcomes and ultimately sell and service our products more effectively by creating a leaner, more agile organization.

As we noted on our last call, ARR is a metric we focus on because it provides insight into the performance of our recurring revenue business model and is less impacted by fluctuations in billing and contract terms. Direct ARR continues to be our primary revenue driver, but we are working to broaden our relationships with third-party resellers and refocus on our shared growth opportunities. As I look at the ARR picture, our total ARR is relatively flat over the last couple of quarters. This is largely driven by significant negative FX in Q1 and Q2 and weakness in third-party reseller ARR. We are seeing growth in direct ARR, which we believe is the most immediate measure of our overall product market fit. Darryl will provide more detail on the specific dynamics around FX and ARR.

We will continue to look at the ARR picture conservatively as we work to improve our go-to-market motion and in light of global macroeconomic and FX conditions. We do see a global trend towards more scrutiny on overall spending and longer deal cycles, and this is reflected in our outlook. Our Q2 results and full year guidance demonstrate that we are executing well against our strategy while making clear progress on our path to profitability. The team and I continue to operate the business based on the principle that long-term sustainable growth is the result of a more clinical and efficient operating model, and I remain extremely optimistic about our ability to capitalize on our large market opportunity. We have installed a lot of change inside the company in the last six months.

Change like this is challenging in any environment and even more so with the backdrop of uncertainty in the global macro environment. I'd like to take a moment and thank our entire global team for their dedication and commitment to getting to the right answer for our customers and the company. We continue to believe that our stock is a great investment, and this is reflected in our continued share repurchases in Q2. With that, I'd now like to turn the call over to Marc.

Marc Ferrentino (President and COO)

Thanks, Mike. As Mike noted earlier, we reached an important milestone in our brand cleanup this quarter and added new features across the entire platform with the early access launch of the summer release. I'll begin by discussing how we are rolling out our updated branding and highlight the product innovations included in our summer release, followed by a few customer success stories. Last quarter, we discussed how we would be working to clean up our messaging and simplify our brand. I am proud to report that we have made major progress on this front. We have revised and simplified our brand positioning, cleaned up our usage of the term Answers by updating the product name to Search and establishing Answers as the name of our platform. We've updated our website, products, solutions, and marketing materials to reflect this updated messaging and brand positioning.

We believe that every CEO has an Answers problem. Every day, customers, employees, and partners are asking questions about your business in an attempt to find information. Answering these questions is hard for any business, since the Answers are scattered across different content silos and digital channels are managed separately. With the Answers platform, Yext solves this problem by collecting and organizing your content, then answering these questions through seamless multi-channel digital experiences. This updated messaging and branding is being rolled out to the organization throughout Q3. The rollout of our new branding coincided with the early access of our summer release. With this release, we have added Google Business Profile Listings Analytics and more detailed listing statuses, which offers never-before-seen insights into user, performance, and operating data. We believe these insights will further strengthen the value of our flagship Listings product.

We also enhanced our connector framework to allow us to connect to a larger range of internal systems in order to populate the Knowledge Graph. We continue to make great strides with our developer experience with major enhancements to our Pages offering and allowing a greater set of development options to create search experiences. Overall, we have launched 60+ new features across our Listings, Pages, Reviews, Search, and Knowledge Graph products. These features significantly upgrade the ability of the Answers platform to create multi-channel experiences that are more efficient, cost-effective, and gratifying for the end user. General availability will kick off tomorrow, September eighth.

As Mike noted, we believe the diversity of our customer wins across listings only, listings upsell, search, and multi-product solutions are a good indicator that we have the opportunity to expand these partner relationships over time, particularly as we continue to strengthen our go-to-market and customer support teams. Here are a few examples. Texas Children's Hospital was a listings renewal and upsell this quarter. Originally, they used listings for several hundred of their healthcare providers. After we were able to demonstrate incremental revenue lift, the customer decided to renew and increase their commitment to approximately 3,000 providers. This is a listings customer that started small, and by showing value, we were able to expand our relationship over time, and we see future potential opportunities to expand with other products.

Piedmont Health is another good example of a healthcare client that started with listings over three years ago and seeing that Yext could deliver on both scale and speed invested in additional products. This quarter, we expanded our agreement with Piedmont Health to include additional providers. In retail, we expanded our listings and pages relationship with SPARC Group to include additional brands that we haven't worked with before, including Aéropostale, Eddie Bauer, and Nautica. We also transformed Nationwide's support hub by adding Yext Search. After Yext was able to successfully deliver on listings and pages over the past two years, Nationwide decided to expand our relationship to include support search. Internationally, HCA Healthcare U.K. was a great win for us, as they are one of the largest private healthcare companies in the U.K..

We landed with Search this quarter, helped them solve a support pain point, but with over 3,000 consultants and 240 facilities, we see future opportunities to expand with this customer. In Japan, we signed Tsuruha Holdings, one of the leading companies in the drugstore industry in Japan, which will be using our listings solution. After a competitive evaluation process, Box, the Content Cloud, selected Yext to transform the search experience of their Zendesk support site. The support search deal is their initial high-priority use case, and we see additional room for growth across the business. We have been working with L'Oréal's SalonCentric brand as a listings client for over a year. This quarter, we expanded across three additional brands that sell their products through salons.

Our Search product was able to provide a centralized platform for managing data, integrate with other technologies like Salesforce, and handle non-location-related data to provide additional accurate information about the salons that sell these products. On the partnership front, our partnership with Acquia helped provide a solution for Pegasystems, where we will power their search on their support and community sites. Our partnership with Adobe helped us win a site search deal at Booz Allen. On the competitive front, win rates for our Search product were very high. Notably, we beat several of our competitors in new business wins, including the largest global insurance provider based in Europe, Community Health Network, Exponent, and ECCO Shoes. In closing, we're excited about the pace of our product innovation and the diversity of use cases as demonstrated by our customer wins. Now, I'll turn the call over to Daryl.

Darryl Bond (CFO)

Thanks, Marc. Our Q2 revenue grew 3% year-over-year to $100.9 million, which was above the high end of our guidance range. As a result of the stronger dollar relative to countries where we transact in local currencies, Q2 revenue included a negative year-over-year impact of approximately $2.8 million or 3% using a constant currency basis. Excluding the FX impact, our Q2 year-over-year growth was approximately 6%. Unearned revenue was $165.9 million at the end of the quarter, up slightly from a year ago. Annual recurring revenue, or ARR, was $387 million at the end of Q2, up 2% year-over-year.

ARR at the end of Q2 experienced an approximate $10.8 million negative impact from FX year-over-year on a constant currency basis. Excluding the FX impact, our Q2 year-over-year ARR growth was approximately 5% and has grown sequentially since the Q1 of this year. Our trailing-12-month net dollar-based retention, which excludes our small business customers, was 98%. Our trailing-12-month net dollar-based retention for direct, which also excludes small business customers as well as our third-party reseller customers, was 98%. Our customer count, which excludes small business customers and third-party reseller customers, increased 8% year-over-year to over 2,870.

Last quarter, we began providing a more detailed look at ARR across our direct customers and third-party reseller customers to help investors measure our future opportunity, as well as progress across new customer adoption, renewals, and upsells. In the Q2, direct customers represented 81% of total ARR. Direct ARR at the end of Q2 totaled $312 million, representing 5% year-over-year growth. Excluding the impact of FX, the direct ARR growth relative to last year was 8% on a constant currency basis. The direct sales team is primarily focused on enterprise and mid-market accounts, where ARR growth is a good measure of adoption and satisfaction. Third-party resellers represent 19% of total ARR. Third-party reseller ARR totaled $74.9 million at the end of Q2, representing decline of 6% over prior year.

Excluding the impact of FX, third-party reseller ARR declined 4% relative to last year on a constant currency basis. Turning to non-GAAP results, which are reconciled to GAAP in our press release. Q2 gross margin was 74.5% compared to 75.2% in the year ago quarter, generally consistent with our Q2 seasonality, and we expect to be in the range of our long-term non-GAAP gross margin target of 75%-80% for the remainder of the year. Q2 operating expenses were $78.6 million or 78% of revenue, compared to $79.8 million or 81% of revenue in the year ago quarter. We continue to improve operating efficiencies, particularly in sales and marketing.

Sales and marketing as a percentage of revenue declined to 48% in Q2 from 52% in the Q2 last year, and we expect this metric to continue to improve on an annual basis. Our Q2 net loss was $3.9 million, compared to a net loss of $7.2 million in the year ago quarter. Our Q2 net loss per share was $0.03 compared to a net loss of $0.06 per share in the Q2 last year. Cash and cash equivalents were $188 million at the end of Q2, compared to $248 million at the end of the Q1. The decline in our cash balances was driven largely by continued share repurchases executed during Q2, which totaled $31.6 million. Year to date, our share repurchases totaled $59 million.

We intend to continue to maintain a strong balance sheet and cash position going forward, and we'll remain open to buying back our stock at attractive prices. Net cash used in operating activities for Q2 was $25.2 million, compared to $32.6 million cash used in the year ago quarter. CapEx was $2.2 million in the Q2 compared to $3.1 million in the Q2 of last year as we have returned to a normalized annual CapEx run rate following the completion of our real estate expansions. Turning to our outlook, the U.S. dollar has strengthened even further versus the currencies in which we transact our international business, resulting in a larger than expected FX headwind to both Q3 and the full year of our fiscal 2023.

Our guidance assumed present foreign currency rates, and we expect Q3 revenue to be between $99 million and $100 million. Our Q3 guidance includes the negative impact of $1 million as a result of FX. While this indicates a sequential decline in revenue, when adjusting for FX on a constant currency basis, our business continues to grow. For example, total ARR grew modestly quarter-over-quarter this year when adjusting for the impact of FX on a constant currency basis. We expect our Q3 non-GAAP EPS to be between -$0.01 and $0.01, assuming a weighted average basic share count of approximately 124.4 million shares. For the full year fiscal 2023, we expect revenue of $399.4 million-$401.4 million.

The total year-over-year FX impact is now estimated to be $8 million, an incremental $2 million since our last earnings call, which is based on present foreign currency rates. Our non-GAAP net loss per share is expected to range from $0.06-$0.08, a four-cent improvement from the midpoint of our previous guidance as we expect continued improvement across operating expenses, particularly sales and marketing. Full-year EPS assumes a basic weighted average share count of approximately 126.3 million shares. Operator, we are ready to open it up for Q&A.

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Pardon me. This is the conference operator. We seem to have lost the connection with the main speakers. We'll be joining them on the.

Nils Erdmann (SVP and Investor Relations)

Hello?

Operator (participant)

Yes, Nils, can you hear me?

Nils Erdmann (SVP and Investor Relations)

We can hear you now.

Operator (participant)

Okay. Let me just try the other line real quick here. Hang on one second, please. Okay, we're gonna proceed on this line, gentlemen. Our first question is going to come from Naved Khan with Truist. Please go ahead.

Naved Khan (Managing Director and Senior Research Analyst)

Yeah. Thanks a lot. Just a few questions from me. First on the sales and marketing, we're seeing nice leverage. Can you just maybe update us on the headcount? I understand the rebranding that you're doing. But outside of that, what are the other things that you might be doing to increase sales efficiency and maybe sales motion? Maybe any color there would be helpful. On the net dollar retention for direct, it seems like it went down from Q1. Wanted to clarify if there's any FX impact there or how should we understand that sequential decline? Thanks.

Mike Walrath (CEO and Chairman)

Hey, it's Mike. Thanks for the question. I'll let Darryl handle the net dollar retention.

What I'll say on the, you know, your question about the sales and marketing efficiencies and specifically headcount. One of the things I told you on my first call here six months ago was that we were not gonna be continuing to run the business from a capacity point of view, and that we're gonna be focused on driving sales productivity and that we would reinvest in the business when we saw the productivity that we wanted. You can clearly see that we're driving that efficiency through the organization, and it's a lot bigger than just quota-carrying headcount, but it's across the board, we're finding these efficiencies.

We're not gonna be providing a quota-carrying number as that's just a moving target for us, and it's something that we're constantly evaluating and will continue to be constantly evaluating as we look at the ability for the sales teams to be effective in the market. So much of the work that we're doing from a branding perspective and from a positioning perspective is gonna help us drive better results through the channels. You know, I think the headline there is we're just taking a totally different look at it and approaching it from a productivity standpoint as opposed to a capacity standpoint.

Darryl Bond (CFO)

Yeah. On the net retention, you're right, it did tick down from 99% last quarter to 98% this quarter. It's really a result of, you know, just some of the challenges that we've talked about in previous calls around, you know, customer success and gross retention. Obviously, as we continue to move through a lot of the go-to-market changes that we've been talking about, you know, that's certainly having an impact on our upsells, which are really, you know, what's contributing to the movement there.

Naved Khan (Managing Director and Senior Research Analyst)

Got it. Quick follow-up, if I may. You know, your recent appointment of Raianne Reiss, I think that's a great hire. Maybe just talk about how you think, you know, where do you see sort of her kind of leveraging her background as it sort of, as it relates to the product offering at Yext. Do you see that in the search offering or where do you see the most opportunity there? Just kind of give us your thoughts.

Mike Walrath (CEO and Chairman)

We're absolutely thrilled that Raianne has joined the company. She's about two weeks in the job, so we're gonna give her a little time to get oriented. You know, she brings 20 years of technology marketing experience to the table, AWS, Juniper, and Elastic more recently. You know, she's a complete marketing executive who will oversee our full marketing organization. You know, we're not thinking about things from a search being separate standpoint here anymore, and I think that's reflected in the positioning. You know, what we're excited about, and I think what Raianne's excited about here is that there's a complete platform to sell here.

It's keyed in on solving some of the most important problems of the C-suite, which are answering their constituent questions anytime, anywhere. You know, and you know, between our brand positioning work, which Raianne will continue to advance, as well as really importantly, the demand generation background that she has and the ability to drive that, we just really feel like she can bring a lot to the table here.

Naved Khan (Managing Director and Senior Research Analyst)

Understood. Thank you.

Operator (participant)

The next question is from Arjun Bhatia with William Blair. Please go ahead.

Arjun Bhatia (Software Research Analyst)

Perfect. Thank you guys for taking the question here. Just one on the rebranding efforts and how you're repositioning Yext. What impact, or what change rather have you made to pricing, if any? Do any of these rebranding efforts impact how customers are actually purchasing Yext? Or is it more in just the broader sales process where the communication is easier, the value proposition is clearer? Just on this topic as well, do you have a sense of how long it might take before we start to see some of the broader impacts from some of the initiatives that you're rolling out today, like play out?

Marc Ferrentino (President and COO)

All right. Hey, this is Marc. Thanks for the question. So on the rebrand, what we're doing here is really articulating in a really strong way the total value of the platform. Historically, we've talked about individual products. We are sort of looking at the world now in a way that you know sort of experiences now span across multiple channels, and we have a digital experience platform that allows you to deliver your answers across those multiple different channels. Of course, to do this right, you need to of course do that. From a pricing standpoint, we've changed actually two years ago to a capacity-based pricing model that was in anticipation of this move towards the platform.

At this time, there's no need to change. There's no reason to change because we've already made that big shift a couple years ago.

Mike Walrath (CEO and Chairman)

I think the second part of your question got lost. There was some background noise there, but it sounded like it started with how long will it take, and I lost the second part of it.

Arjun Bhatia (Software Research Analyst)

Yep. No, sorry. That was right. Just how long it would take before it starts like it sounds like you're seeing some early impacts, but how long before we see a broader impact from some of the initiatives you're rolling out today?

Mike Walrath (CEO and Chairman)

Yeah. It's Mike again. You know, the way I would describe this is, you know, on this Friday, I think I will have been in the job for six months. You know, obviously, the first order of business was getting the team organized, which took a little bit of time, and the second order of business was a lot of the restructuring and efficiency work that we've been doing. I still fundamentally believe that the more efficient operation that we're creating and that you're starting to see on the expense side of the business is going to help us produce better results by having a more coordinated and more streamlined, and a more agile organization.

I think it's really important to understand that, you know, our sales cycles are six months plus, right? Our ability to fundamentally change bookings and retention dynamics, you know, it's just gonna take longer than it is for us to affect the expense lines. I think what we're beginning to see in the business are very early indications that, you know, better coordination, you know, better management of our opportunities. We're just so early in that process, and as we get into the next, you know, six to 12 months, I think we start to see the fruits of all that work.

Arjun Bhatia (Software Research Analyst)

Understood. Very helpful.

Mike Walrath (CEO and Chairman)

Right.

Arjun Bhatia (Software Research Analyst)

You talk about some of the channel, the progress in the channel that you're making. I'm curious, what is the reach today? Like, I know it's 19% of ARR, but as you think about, you know, focusing on this initiative, in the future here, do you want more partners? Do you want deeper relationships with the existing partners? Is there a potential for SIs to get involved here? Just walk us through how you're thinking through the partner strategy.

Mike Walrath (CEO and Chairman)

Yeah. You know, you can see clearly that we have some headwinds in the partner channel. You know, that is the reseller channel. Our third-party resellers are how we access primarily small and medium, you know, SMBs. You know, we do think that there's a bit more headwind in that section of the market than there is in the enterprise. I also think there's a lot more we can do with those reseller partners to bring more opportunity to the table and bring more value to those relationships.

I've said this before, and I'll continue to say it, we're committed to figuring out ways to continue to drive value through product innovation, through different structures and different business relationships with our third-party reseller partners. Thinking more broadly about what the partnership universe looks like for us, which includes SIs and, you know, Marc's been spending a lot of time and his team, not just with the reseller partners, but also with partners of many flavors, and it's all part of our strategy moving forward.

Arjun Bhatia (Software Research Analyst)

Understood. Thanks for taking the question, guys.

Operator (participant)

The next question is from Tom White with D.A. Davidson. Please go ahead.

Wyatt Swanson (VP and Equity Research Analyst)

Hey, this is Wyatt Swanson on for Tom. Thanks for taking our questions. Sorry if I missed this during the prepared remarks, but can you guys talk a bit about retention trends in your listing business? I believe you guys recently rolled out some new product features and enhancements for listing customers. Does that have a quantifiable impact on listings retention?

Mike Walrath (CEO and Chairman)

Yeah. I'll start, it's Mike, and then I think, you know, we'll let Marc talk about a bunch of the product stuff. What we saw in Q2 was gross retention in the business in the low 80s, which is consistent with what we saw in Q1. As a reminder, you know, I'm afraid I wasn't maybe clear enough about this on the last call, the way we calculate gross retention when we talk about it in this context is it's the grand total of contracts that are up for renewal in a given quarter is the number and then what we actually renew. We're not happy with that number the last couple of quarters in the low 80s.

We have a much smaller set of contracts in Q1 and Q2 that are up for renewal. There is no higher priority for us in the business than driving performance in this number. You know, a lot of that comes down to happier customers, which I've talked about a lot. Product enhancements, which Marc can talk about, are a big part of that process as well.

Marc Ferrentino (President and COO)

Yeah. The last two releases, the spring release and the summer release, we've continued to innovate on the Listings product. The Listings product has been one of our core flagship products for a very long time. You know, this release, two big features that I mentioned in the prepared remarks were around the Google Business Profile Analytics, which actually gives you know, keyword level analytics now, as far as you know, how your brand is showing up, which is definitely something new and exciting, really highlights the value of Listings overall, in addition to just operational metrics around listing statuses and things of that nature. You know, every single release, we have continued to evolve the Listings product and innovate the Listings product.

I think what we've done a better job of in the last quarter is actually articulating those new features to our customer base. That has been at least anecdotally well-received by many of our customers appreciating the insight and even sending out sort of listing specific product updates to sort of, you know, be able to highlight exactly what we're doing on that front.

Wyatt Swanson (VP and Equity Research Analyst)

Gotcha. Okay. Thank you. Just one more from me. Could you share your latest thoughts on potentially using your balance sheet to do some M&A, or does M&A kind of play less of a role right now for Yext, you know, just given your focus on simplifying the go-to-market and unifying the overall end customer experience?

Mike Walrath (CEO and Chairman)

Yeah. It's Mike. I'm happy to talk about that. I mean, we've obviously, you know, as you can see, been using our balance sheet to invest in our own stock, which, you know, we think is a great investment. We will continue to look at that as we go forward. You know, from an M&A perspective, I do think it's an interesting thing for the future. I think at this point, you know, we have a lot of wood to chop to continue to strengthen our go-to-market and complete the work that we've been doing here to reorient the business around a more efficient operation.

I wouldn't say it's a high priority for the team and I at this point to be, you know, aggressively looking at that. I do think there will be opportunities along the way, and we'll obviously look at anything that seems additive and feasible, but I'm not gonna say it's one of my or the team's highest priorities right now.

Wyatt Swanson (VP and Equity Research Analyst)

Gotcha. Okay. Thank you.

Operator (participant)

Again, if you have a question, please press star then one. The next question is from Ryan MacDonald with Needham. Please go ahead.

Speaker 8

Hi, everyone. This is Michael on for Ryan today. You noted it a little bit earlier, but could you talk a bit on the broad macro impact outside of just FX? Are there any verticals or regions that stand out to you in terms of the impact of elongated sales cycles?

Mike Walrath (CEO and Chairman)

Yeah. I think what we're seeing is, we're seeing customers assessing their costs more carefully. We're seeing, you know, I think procurement cycles that take a little bit longer. I think most businesses are taking a little bit closer look at what they're spending. The other thing we're seeing. You know, I think we're seeing a lot of what a lot of people are seeing, which is potentially some elongation of sales cycles and that may be regionally a little happening a little bit more in Europe than it is here in the U.S., although I really think most global businesses now are taking a closer look at their expense lines.

Well, the other thing we're seeing and that I think is more encouraging is that with that scrutiny comes a focus on, you know, which partners they work with who can provide multiple solutions and platform solutions as opposed to individual point solutions. One of the things that we're hearing from customers and frankly we're doing in our own business is we're figuring out where we can do more with our best partners and potentially eliminate overlap and duplication. We really think that's an advantage for us because we have a platform that crosses many of the needs of our customers and prospects.

We think that, you know, over the long run, any consolidation of focus is gonna be to our advantage relative to our competitors who don't have as broad a platform.

Speaker 8

Great. Given the turnover you saw in the workforce earlier this year, could you give us an update on how you are progressing on your hiring plans relative to expectations? In regards to those newly hired reps, could you give us a sense of how those reps are ramping relative to expectations? Thank you.

Mike Walrath (CEO and Chairman)

I think general comment on the hiring situation is, you know, I think we've seen a significant change in the hiring environment. You know, things have cooled down quite a bit. The flip side of that is that hiring in our quota-carrying positions is significantly less of a priority right now for us as we work through making sure that every rep that we have in the business is productive and making sure that our system is working in a way that drives production. This is, you know, my answer on the quota-carrying reps question is, you know, is related to this, which is, you know, I...

You know, I'll get very focused on the number of quota-carrying reps that we have in the business when all of the quota-carrying reps who we have and who are ramped are producing at a level that we want them to be at. We'll always look to add talent to the business, and I think, you know, the environment that we're going into makes that easier for us, not harder. We're gonna get our blocking and tackling together before we go out and aggressively expand.

Speaker 8

Great. Thank you.

Operator (participant)

This concludes our question and answer session, and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.