GTM - NASDAQ

Good day and thank you for standing by. Welcome to the

Thank you, Amy. Welcome everyone to

Thank you, Jerry, and welcome everyone. We ended the year on a more positive note with revenue, profitability, and cash flow that exceeded our guidance. Revenue for the fourth quarter was $316 million and adjusted operating income was $126 million, a margin of 40%. Both ahead of the guidance we provided. For the full-year we delivered $1.24 billion in revenue, generating nearly $500 million in adjusted operating income and converting 93% of that into unlevered free cash flow. During the quarter, we purchased approximately 10 million shares of

Thanks, Henry. In Q4, we delivered revenue of $316 million, up 5% year-over-year. Annualized revenue based on 92-days in Q4 was $1.255 billion, up 0.8% sequentially. We were pleased to have delivered better-than-expected revenue with improving sequential annualized revenue growth relative to Q3. Adjusted operating income was $126 million, better than guidance and represented a margin of 40%. GAAP net loss was $5 million and GAAP EPS was a loss of $0.01 per share. Non-GAAP EPS was $0.26 per share. For the full-year, revenue was $1.24 billion, up 13% compared to 2022. Adjusted operating income was $499 million, margin of 40% and unlevered free cash flow was $463 million. We were again GAAP profitable for the year with net income of $107 million and GAAP EPS of $0.27 per share. Non-GAAP EPS was $1.01 per share. We are initiating guidance for 2024 with revenue growth of 2% to 3% as an implied operating -- adjusted operating margin of just over 39%. For 2024, we expect to deliver $455 million of unlevered free cash flow at the midpoint of guidance. While the operating environment has curtailed growth currently, we continue to believe that there is an extremely large opportunity to transform the way businesses go to market, which gives us confidence in our ability to accelerate revenue growth over the long-term. Given uncertainty in the economic environment and the subscription nature of our business, we have not incorporated these potential tailwinds into guidance for 2024. When we do realize higher levels of potential growth, we would expect to realize additional operating leverage in the business and drive higher margins in the future. Net revenue retention was 87% for the year, with mid-market companies, particularly those in software and technology space, being most unchallenged. The outsized down sells from customers most impacted by the economic environment exceeded the net upsell that we generated from other customers in 2023, creating a drag on net retention. In the near-term, we expect to maintain customer churn at levels we experienced over the last few years. We anticipate additional down-sell pressure in Q1 as we are still lapping a peak of negativity from last year and working through the long tail of multi-annual contracts that were most recently transacted in a very different operating environment. Our expectation is that as we move through the year we will see opportunities to stabilize net retention and begin to return to structurally higher levels. Our guidance prudently assumes that for 2024, net revenue retention does not meaningfully get better, and at the low end of the range of guidance, it assumes that retention declines for the full-year. We now have 1,820 customers with more than $100,000 in ACV. While that metric declined by 49 in the quarter, it belies our success expanding with larger customers, as average revenue for this cohort has increased. Our investments have helped drive the enterprise portion of our business to record highs, while mid-market customers have fallen out of this cohort. Enterprise ACV overall now represents just under 40% of the overall business, up approximately 10 points over the last three years. We also continue to see success with advanced functionality, which contributes roughly a third of our overall ACV, with particular strength from Operations OS, which now contributes more than 10% of our ACV. From an industry perspective, our software and technology customers were particularly challenged in 2023. Software, our largest vertical, now represents less than 33% of our ACV and was down on an absolute basis year-over-year as layoffs drove down sells among customers. ACV from non-technology industries increased as a percentage of overall ACV, as we continue to see growth and opportunities for greater penetration. This part of our business grew approximately 15% in Q4 relative to last year. Write-offs continue to impact us in Q4 as many of our smallest customers remain to challenge in their ability to pay. In addition to the increase in bad debt associated with write-offs, we've experienced a similarly sized impact to revenue. Our expectation is that the impact from write-offs will attenuate over time as our mix of revenue continues to shift to enterprise customers and we roll out more product-led functionality for smaller customers, which is paid at checkout. Operating cash flow in Q4 was $129 million, which included approximately $6 million of interest payments. In December we completed another repricing of our term loan at par, where we reduced the interest rate by 60 basis points from SOFR plus 285 to SOFR plus 225. This will result in annual interest payment savings of approximately $3.5 million. Unlevered free cash flow for the quarter was $126 million, representing 100% of adjusted operating income. We ended the year with $529 million in cash, cash equivalents and short-term investments, and we carried approximately $1.24 billion in gross debt, all of which has fixed or hedged interest rates. During the fourth quarter, we repurchased approximately 10 million shares of

[Operator Instructions] And our first question comes from the line of Mark Murphy with J.P. Morgan. Your line is open.

Thank you very much. So it looks like layoffs are continuing in tech. It looks like over 100 tech companies have announced layoffs, 34,000 workers so far this year. And I believe Snap and DocuSign and Pure Storage were all announced in the past week. Is that trend elongating beyond what you might have expected? Or do you still look back and think that 12 months ago was likely the peak layoff period? And then I have a quick follow-up.

Yes, thanks, Mark. I think what we're seeing is that the layoffs -- first of all, the total amount of layoffs you're seeing right now is meaningfully less than we saw a year ago. And I think the type of layoffs that are happening in or around tech are much more surgical than they were a year ago. A year ago, the layoffs were somewhat panic-driven and weren't thoughtful. I think what you're seeing today is a much more surgical approach to lay off. And so I think the overall amount is down, the surgical nature of the layoff is protecting account executives and many people in the go-to-market function that are driving growth for companies and those are our customers.

Yes, thank you for that Henry. And then my second question is on the copilot product. It sounds like an attractive value prop. And I believe you said that it is a migration and monetization opportunity for every seat out there. Can you shed a little light on how you're thinking about pricing the product? In other words, is it going to be a per user per month? Do you think you'll be using credit and tokens? And just at a high level, if you could sketch out how broadly you might picture the adoption there across your user base if we were to think about it several years down the road.

Think if you -- look, we're in market right now testing a number of different models for pricing and packaging of this. I think what I can tell you is that if you stretch this out for -- if you think about this in terms of years, we expect every one of our customers to be on our AI-enabled platform when you think of it in terms of years. We're going to go out in the back half of the year. and believe there's an opportunity to begin migrating our customers. And the nice thing about CoPilot is it lands just as well with our enterprise customers as it does with our SMB customers. And so we have the opportunity across the board to run this migration and monetization motion. That is a motion that in the history of

Thank you, very much.

[Operator Instructions] Our next question comes from Koji Ikeda with Bank of America. Your line is open.

Yes, hey guys. Thanks for taking the question. I wanted to ask on free cash flow and free cash flow generation for this year. When we look at the guidance, it looks like about 30% -- 36% on the free cash flow margins. So just trying to better understand the levers to drive upside to free cash flow this year. Is it a function of upside of revenue leverage within the organization, better collections? I mean, any sort of help there would be helpful. Thank you.

Sure. Thanks for your question, Koji. Certainly, we do face some headwinds with CapEx being up. And obviously, that's dependent on the timing of different leases. So that will last through this year and the beginning of next year and then start to fall off. But certainly, as we think about cash flow, it's largely a conversion rate against adjusted operating income. And so that conversion rate would actually improve as growth improves going outward, and that's a function of our customers that pay us upfront, having more of those as a percentage of the adjusted operating income will ultimately drive that improvement. And otherwise, we are very focused on improving our collections and reducing write-offs, which should, over time, improve as well.

Got it. Thanks, Cam. Thank you so much.

Yes.

And our next question comes from the line of Kash Rangan with Goldman Sachs. Your line is open.

Hi, thank you very much. Congrats on all the improvements you've taken to regain your customers back, Henry. If you can expand on that, you talked about a flurry of win backs. When do you think that trend becomes a little bit more pronounced. So the compounding effect of new business and improved retention can have a material impact to the growth rate of the company? Thank you so much and congrats.

Thanks, Kash. I think, look, we are -- we still have a meaningful retention headwind in Q1 that we're managing through. And so I wouldn't expect it to fully attenuate in this quarter. But I think as our customers are out there and actually experiencing lower quality solutions, they are realizing that what you get from

Wonderful. All the best for this March quarter. Thank you so much.

Thank you.

And our next question comes from the line of Surinder Thind with Jefferies. Your line is open.

Thank you. In terms of just the distribution around the NRR at this point as you kind of look forward, how much of there is just pure churn at the SMB level versus maybe what you're seeing in terms of reductions at the larger clients? Just any color around the differences in terms of the magnitude.

Sure. So our churn levels have actually remained fairly stable and '23, they are a little down from what we saw in '22, but not meaningfully so. Obviously, that part of the equation is largely driven by the lower end of the market. And so while we do see pressure on SMBs, particularly around write-offs and some downsells and kind of price requirements. We don't see a meaningful increase in the churn that we're seeing. Where we have seen a much bigger impact on net retention has been particularly in the mid-market and the lower end of enterprise, where we've seen downsell. And if you look at our customers that are most impacted by the economic environment, which tend to be those that are in technology or software-related spaces, that downsell has been really meaningful and is, in fact, outstripped the upsell that we've seen in other customers. And so that has been -- the biggest impact this past year in 2023. And I think as we look at least the first quarter, I think we still see some pressure with respect to those downsells. But as we look forward, there is an opportunity for that to hopefully stabilize, and we'll see that potentially improve going forward.

Thank you.

Our next question comes from the line of DJ Hynes with Canaccord Genuity. Your line is open.

Hey, guys. Thanks for taking the question. I want to go back to Kash's question on the win backs. Obviously, it's an impressive number. If we look at it an economic basis, right, like-for-like, are those customers coming back? Are they paying more? Are they paying less? Are they paying the same as they did prior to leaving? I'm just curious around kind of broader implications on pricing in the space and kind of read-throughs that we can derive from those folks.

And I think that -- what you see is that the experience is kind of across the board. You do see customers that go and try something else, realize what they're missing and then lean in even more for much bigger kind of ticket sizes and rolling that across their entire universe. You also see customers that down sold or that probably would have down sold anyways. They went with a lower-priced competitor and then they rolled out came back to

Yes, okay. And then, Henry, maybe I could follow-up with you, just competitive implications of HubSpot clear bit. particularly at the low end of your business. I realize those guys don't play much in the enterprise, but curious if you have any thoughts there.

Yes. Look, we've always been paying attention to this, but we haven't seen clear bit or HubSpot come across as a competitor in any of our recent deals. HubSpot seems to be talking fundamentally about enriching company level data and not prospect or contact level data. Before the acquisition of Clear bit wasn't a competitor that was meaningfully on our radar anywhere. And post the acquisition, we haven't seen them come up in sales processes.

Yes, makes sense. Okay, thank you guys.

Our next question comes from the line of Brian Peterson with Raymond James. Your line is open.

Hi, guys. Thanks for taking the question. So I know you mentioned that the median sales cycle shortened in the quarter. I wanted to understand maybe when that started to materialize, how we're thinking about the linearity into January and February. And is that kind of broad on SMB and enterprise, software and non-software, how do you guys think about that? Thanks.

Brian, I think the way that we've thought about that, we just -- it's a stat that we track across the board, medium sales cycles on our new business sales. And year-over-year across the board, we've seen those median sales cycle times shorten. We're also making an investment behind PLG that will allow customers to -- allow users to become customers in a self-service, no friction, no connect with the salesperson way. That will obviously impact sales cycles for us as well. But overall, in our new business sales team year-over-year, we've seen a meaningful a meaningful impact in sales cycles.

Good to hear. Thank you.

Our next question comes from the line of Siti Panigrahi with Mizuho. Your line is open.

Thanks for taking my question. I wanted to ask about the enterprise business that you said the third quarter. I remember early last year, you talked about going top-down selling, winning mind share of C-Suite. So help us understand the progress you have made on that changes on the go-to-market side that's helping you now?

Yes, we've made an intentional focus on the enterprise business, both from a new business perspective where we segmented the way that we go to market and so that we have enterprise-specific reps on new business. And in our customer base where we've segmented our customer base so that our enterprise reps who are tenured enterprise sellers now are have the right account loads and the right accounts to drive growth. And then we have the strongest product market fit in the enterprise where our investments from a data quality and data accuracy perspective, but also our investments from a data privacy perspective, put us in a position to win across the enterprise. That's a place where we see almost no competition. And so it's an area that we're really investing behind, and we're seeing traction in the customer base. And on the new business side, the team is new, but off to a pretty good start.

Thank you.

Our next question comes from the line of Elizabeth Porter with Morgan Stanley. Your line is open.

Great, thank you very much. I wanted to ask a little bit on the non-software side. I believe last quarter, you mentioned growth had moderated in Q3. So I just wanted to get a sense for how growth trended in Q4? I know you mentioned it remained healthy, but any sort of qualification on Q4 versus Q3 and outlook into fiscal '24. Thank you.

It remained consistent. It's maybe down a little versus where we were in Q3, but at kind of mid-teens growth, that's pretty healthy for that area of the business. As we look forward, I think that we're expecting that net retention overall stays pretty consistent. How that interact between the technology businesses and the non-kind of technology businesses that we serve will likely be impacted by just how the macroeconomic situation unfolds more than anything else. But yes, I think we see some good stability there. We still see a lot of opportunity in terms of new customers coming in because we're just so underpenetrated with respect to those industries. And I do think that while we haven't built it into our expectations, the kind of natural usage of AI in those non-technology businesses is pretty low. And our ability to really push insights to those sellers, I think is probably pretty exciting with respect to those customers.

Great, thank you.

Our next question comes from the line of Brad

Great. Thank you so much for taking my questions. First for you, Henry, the changes that you made last year to flatten the sales organization, you also moved some key people around. What if any tweaks are you making now into the new year? Just wanted to revisit that to make sure you feel you have the right players out in the field. and in the right configuration. And I just had a quick follow-up for Cameron as well.

Yes. Thanks for the question, Brad. I feel really great about the team that's around me. The team that we brought together from a product and engineering perspective from a go-to-market perspective. I feel like we have really great I have really great partners across the business today. And they are -- they have an opportunity now to execute across the business, and we're expecting a lot from them.

Okay. Cool. And Cameron, as it relates to the write-offs, is it still contained to SMB customers? And how has it been playing out relative to expectations and the reserves you've been taking? And lastly, what are you assuming in 2024 guidance for bad debt.

So it has been playing out largely as we've expected. It is almost entirely -- and I think that's where we expect it to say it tends to be kind of the lowest spending folks that we have, which, for us, we're really focused on getting as many of those customers into a product-led motion where we're collecting either an ACH payment or a sales payment upfront. And avoiding the need to go chase those customers or see them fall out later on. For our expectations in 2024, we're expecting a similar level of write-off activity, which ultimately might be a slightly lower absolute number in terms of bad debt is there's not as much to catch up on from previous periods as we had in 2023.

Very helpful, thanks.

Our next question comes from the line of Michael Turrin with Wells Fargo Securities. Your line is open.

Hey, great. Thanks. I appreciate you taking the question. I want to go back to just some of the segmentation commentary. And on the software side, we've spent time in the past talking about just the renewal cycle and Q1 seasonal impacts, given it's mid-February, anything you can do to just top level set where you are in terms of those renewal discussions and if the combined fleet base there is at all stabilizing relative to the step-down you saw over the prior year? And maybe Cameron, if you can just add any commentary around how the visibility coming into this year compares to prior periods given it sounds like they're or signals, some of the pressures are moderating with the guide still assumes what sounds like stable to potentially declining retention rates in the coming year. Just further commentary on the feed base and what's happening there is helpful. Thanks.

Sure. I'll just start out, Michael, and then let Henry add some color. But certainly, in terms of visibility coming into the year, I think we do feel that trend that we've seen coming out of Q3 and Q4 is much more stable and that our customers are being more surgical in terms of how they're thinking about their investments and where they're putting seats and those sorts of things. So I think that makes us feel good about our visibility and frankly, I think it's prudent for us to think about the fact that the world could get worse and the retention could get worse as we kind of develop guidance and think about it. I'll let Henry jump in on any other color.

I would just say that our customers continue to have budgetary constraints and they're scrutinizing every dollar of spending. And so we're still managing through that inside of the customer base. That hasn't -- against the back half of 2023 that hasn't changed in any material way.

Got it. Thank you.

And our next question comes from the line of Brent Bracelin with Piper Sandler. Your line is open.

Good afternoon. A lot of the questions have been asked and answered on the demand. I wanted to double-click into operations OS. I think you flagged that at 10% of revenue mix now. Henry, are there any levers to drive broader adoption, particularly in the enterprise space? What's the attach rates today? Could you just double quick into what is driving the mix shift to operations OS, and how much potential is there for that segment to be an upside lever this year? Thanks.

Yes. Thanks for the question. operations OS, our DAS product that fits inside of operation at OS continues to be one of our fastest-growing products, particularly in the enterprise. There's still a tremendous amount of white space, not just in accounts that we haven't gotten operations OS and DAS into, but also accounts that are using a small piece of operations OS or data as a service. And every account data is looking to do something real with generative AI from a go-to-market perspective, the first thing that they're struggling with is how do I get my data up to date and accurate and then keep it that way, and we're the most obvious solution to that problem. And so our sellers across the enterprise are taking that message into their customers. There's still -- that continues to be an area that we're immensely focused on and have put together a really strong team around and think that's going to be a meaningful grower in our portfolio this year.

Helpful color. Thank you.

Our next question comes from the line of Alex

Hey guys, thanks for taking the question. I apologize for coming in a slightly loud place, but maybe just the first one, can you maybe unpack verticals that you saw or pockets of strength that you saw in the quarter and in the pipeline from a vertical and geographic perspective? And then I have a quick follow-up.

Sure. So from a vertical perspective, tends to be all those things outside of technology and IT services and software. So financial services continues to see strength. Manufacturing continues to see strength, transportation logistics, retail, kind of all of those more traditional industries are areas where we continue to build. And frankly, they're all in the either teens or, in some cases, 20%-plus growth areas. Geographically, it tends to be a little bit more U.S.-centric still. I don't think we've seen our European businesses kind of pick up. They continue to grow, but they're much lower penetration area. So I'd say that we don't see the same sort of acceleration internationally, as we've seen historically.

Perfect. And then maybe in terms of the guide for the year from a revenue perspective, as we go through this, let's call it, attenuating open period of macro uncertainty, it looks like the back half and maybe Q4 sets up for a mild reacceleration. But just maybe help bridge, how we should think about the exit rate for growth in Q4? And as we think about some of those potential sources of upside in the guidance.

Yes. So certainly, our expectation is that Q1 will continue to be tough. And certainly, the we expect to see some downsell pressure continuing in Q1 as we're lapping kind of peak negativity still. I think if you build out a model, you'll end up with Q4 exit growth rate relative to Q4 of this year and the low to mid-single digits. Obviously, the mid would be much more at the high end of the range. And low would be at the low end of the range. So as you get further out into the year, if that spread widens a little as we think about guidance.

Perfect. Thank you guys. Congrats on great quarter.

Our next question comes from the line of Tyler Radke with Citi. Your line is open.

Thanks so much for taking the question. If you were to unpack the strength in the quarter, the slightly better revenue than you've seen over the last couple of quarters, was it primarily driven by the strength in the create and close business? Or could you just talk about linearity of the quarter? And then specifically to the create and closed business, did that strength continue into January and the first part of February? Thank you.

Yes. So linearity in the quarter was reasonably good, I would say, maybe a little stronger towards the end of the year in December than what we saw in in October. Although, honestly, a lot of that has to do with the mix of what different businesses come in. So we do tend to see that December tends to be more enterprise-weighted, and that is where we're seeing the most traction with customers right now. So I think that improvement certainly helps that enterprise business does not tend to be created and closed within weeks. That's much more of the enterprise motion that we're going with. As we think about how that's continued into Q1, for better or worse, Q1 does tend to be a more SMB-focused renewal time frame, and it tends to be one of our biggest expiring quarters. So while in segment by segment, we've seen a continuation of what we experienced in Q4. The mix shift makes Q1 actually a little tougher than even what we saw in Q4.

That's helpful. And then a quick follow-up on the Copilot product. Just a clarification question. When you talk about doing these upgrades. Are you -- I guess, is it going to be a price tailwind as you perform these upgrades? Or is it possible that CoPilot just kind of gets folded into the base level of offering. So I guess, is it -- are you going to be charging an upsell at this point as you think about that upgrade path?

Yes. We are anticipating monetizing the upgrade path.

Okay, thanks very much.

Our next question comes from the line of Joshua Reilly with Needham Company. Your line is open.

Yes, thanks for taking my question. I believe the single seat SKU was released either last quarter or early into Q4, can you just give us a sense of how widely this has now been deployed to customers or prospects? And then are you seeing any impact positively in terms of customer retention on the very low end from the single feet SKU? Thank you.

We really released a single-seat SKU in Q4 of last year, early Q4 or late Q3. And we've seen the number of customers and the revenue associated with them tick up every month since we released it. So we feel good about that, but it's still super early on that -- on the single-speed SKU, which you can only buy through a PLG motion. And so it's really early, but the trajectory is really positive.

[Operator Instructions] Our next question comes from Taylor McGinnis with UBS. Your line is open.

Hi, there. This is Claire Gerdes on for Taylor. I wanted to press there a little more. If we assume that NRR remains the same in 2024 at 87%, then that would imply new customers, I believe, has to grow in the mid-single digits from a decline last year. One of the things that you mentioned was record new customer bookings. Could you comment what you saw in 4Q that would give comfort outlook and maybe what level of new logo growth you saw that could help give visibility for the year. Thanks.

I'll start Cameron. Throughout the year, relative to the customer base, new business demand and close stayed strong. We saw that continue throughout the year. And then at the end of the year, we brought on the most new logos we've had in a quarter. We had great metrics around the new sales motion. And then we had many customers who had left to come back to us as well. So we feel pretty good about our ability to forecast demand on the new business side. and see it continuing strength throughout 2024. Go ahead, Cameron.

Yes. And then I think the other dynamic that is interesting is that based on the market and what we've done within the company, our mix of ramps AEs is up significantly from where it was during the course of '23. So I think we are seeing kind of our strongest players in the field stay with us. They had a good Q4, as Henry mentioned earlier in his remarks. And I think seeing that continue as something that we're excited about.

Great. Thank you.

Our next question comes from the line of Raimo Lenschow with Barclays. Your line is open.

Hi, this is Frank on for Raimo. I wanted to ask one on the margin guide. How should we think about the puts and takes in the full year guide? And are you assuming any change to rep productivity or the mix of advanced functionality there? Thank you.

So with respect to margins, we are continuing to invest heavily into the AI functionality that we've put out there, and we think that, that's a really important factor where we can deliver value for our customers going forward. That frankly, between the engineering investment there as well as the actual infrastructure investment, that includes LOM models and so forth. That is probably a few hundred basis points of margin. Most of that, we've identified other areas of business where we feel we can be more efficient and drive value that way. So I'd say that, that is the kind of biggest focus is that particularly as we're early on with the CoPilot platform, there's a there's an investment cost related to that. But then as that grows, we'll be able to harvest operating leverage against that.

[Operator Instructions] Our next question comes from Rishi Jaluria with RBC Capital Markets. Your line is open.

Wonderful. Thanks so much for taking my question. I just wanted to go back to the comments made on maybe wanting to embrace more self-service and PLG. I guess, part one, when we've talked about this in the past, you said the unit economics on self-service just wouldn't work themselves on. It seems like there's maybe a little bit of a different tone around that? What has changed? And what sort of investments do you need to make in whether it's pricing and packaging or product to get that? And maybe alongside that, at least when we've gone through the trial, you still can't get public pricing and you still have to go through sales people to get on

Great. I think today, the no touch, no salesperson motion is live. It has just opened up to a certain a certain set of traffic to our website. So not every person who shows up on the website is guided through the PLG motion. We're treating that as a lead nurture model. So if a lead can't get to a sales rep because of the score, the score of that lead being below a certain threshold, we'll put that into the self-service motion, and it's limited to certain geographies and certain sizes and industries as it exists today. . As we learn more about the motion, learn more about the conversion rates, we'll continue to increase the traffic into that specific motion. And so that's probably why you're not seeing it. But we've had a number of transactions that are self-service that have come through since we launched this in Q4. Those transactions are increasing. And so we continue to see good trajectory there, and we're eating our way into a more fulsome PLG motion. It's less about building the product there. In fact, our [indiscernible] product that you would gain access to in that motion has one of the highest NPS scores across all of our products. It's more about releasing more and more traffic end users into that specific motion and away from a sales-led motion.

All right, got it. Thank you so much.

Our next question comes from the line of Pat Walravens with JMP Securities. Your line is open.

Great, this is Austin Cole on for Pat. I wanted to ask a more product-related question with CoPilot. I understand it's powered by an thoracic. I wanted to ask about if there's anything you can tell us about the architecture, how you guys are connecting your data to anthropic how you guys are getting context? Is there a vector database as part of the architecture. Any detail there would be helpful. Thank you.

Yes. The product is not fully operated by Anthropic. Anthropic is one of our AI partners that's plugged into a variety of different insights and motions that we're running with CoPilot. We've also built our own internal LLM that we're leveraging. We're also leveraging open AI in a number of different places. And so we are -- we internally have certain things that we run against our own LLM, certain things we run against Anthropics, certain things we run against open AI, and we're constantly balancing across those three different places. And so, so far, we feel pretty good about that structure and leveraging each one in its respective area.

Okay, I appreciate that clarification. Thank you.

Our next question comes from the line of Terry Tillman with Truist. Your line is open.

Well, I'll make it easy. I'll just ask one question, and thanks for fitting me in. maybe Cameron, in terms of the top line growth for the year, the low end to the high end, what is baked in, in terms of having meaningful success as the copilot upgrade path. And then secondly, I mean, it's really in the second-half. If you're going to have success or traction, would it be back-end loaded more fully in 4Q? Thank you.

And certainly, we're not planning to make copilot generally available until the middle of the year. So certainly, any success that we would have would be back-end loaded reality, we did not incorporate kind of meaningful success from CoPilot anywhere in the guidance range. I think the guidance range is more the world gets worse, it gets closer to the bottom. And obviously, we're not able to impact that through co-pilot. At the top end of the range, I think it's the well kind of stays consistent to its slightly better based on some of the other factors that's people not down selling as much given that they've down sold historically as well as our mix of business is starting to create a little bit of a tailwind for us in terms of larger customers tend to renew better. So I wouldn't peg much, if anything, even within the range on meaningful success with the copilot. Obviously, if it helps a little, it will push us closer to the top of the range, but we haven't said that it's going to be a big driver.

Thank you. That's helpful.