Good day, and welcome to the Yext, Inc. First Quarter Fiscal 2023 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ho Shin, General Counsel. Please go ahead..

Thank you, Sarah, and good afternoon, everyone. Welcome to the Yext fiscal first quarter 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, forward-looking guidance and estimates of financial and operating metrics, capital expenditures and other nonhistorical statements as further described in our press release.

These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Yext 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 the COVID-19 pandemic.

We undertake no obligation to revise any statements to reflect changes that occur after this call.

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 press release, which is available at investors.yext.com.

Please note that Darryl is dealing with the case of laryngitis, so Mike will also be delivering Darryl's prepared remarks, but Darryl will do his best to participate in the Q&A. With that, I will turn the call over to Mike..

We have a lot of hard work ahead of us, and we expect economic uncertainty will persist at least for the near term. I believe disciplined execution stands out in more difficult economic environments. Our product platform is robust and provides tremendous value to our customers. The market opportunity is large and growing.

We will continue to focus on operational efficiency and making the right long-term decisions across the business to show tremendous customer value, which is the heart and soul of our growth opportunity. We remain confident in our ability to operate efficiently and believe our stock is a great investment.

This is reflected in our share repurchases in Q1 and our ongoing plan to continue to repurchase shares. We maintain a very strong balance sheet of business getting healthier by the day and an amazing team that will focus on the large opportunity in front of us. I'd now like to introduce Marc to discuss customer and product updates..

Thanks, Mike. First, I'd like to say that I am happy to be here. I've been with Yext since 2015, and I believe we have the most innovative products in the market, and we have significant growth potential. Our products are exceptional and solve real business issues for our customers.

Improving our go-to-market is my immediate focus, and I believe we've made progress this quarter. I'll start with our brand. Looking back, our pivot to Answers and our branding of our search offering as Answers created confusion both inside the company as well as with customers. Cleaning up our brand and vision has been priority one for Mike and me.

The concept of Answers has been fundamental to our business since we launched listings in 2010. The very first Answers product was Listings. Listings allows a business to control their answers across the largest network of publishers in the world. Our Reviews product allows a business to manage crowd-sourced answers about their products and services.

Our Pages product allows our customers to deliver answers via SEO optimize web pages. With the recent addition of our search product, our customers can now answer questions right on their website, Internet or anywhere in the company.

All of this sits on top of our Knowledge Graph product, which collects and organizes all the answers across the business into a next-generation content management system built for AI. Very simply, we want to help businesses answer every question from their customers, employees, partners anytime, anywhere. This vision goes way beyond marketing.

It takes us into support, e-commerce and workplace use cases. Every CEO has an answers problem. Having accurate real-time answers to the most pressing questions about a company's results in the most robust -- result in more robust top of the funnel, better customer conversion on the website, a reduction in support costs and more productive employees.

We will be rolling out this improved consistent branding and positioning that aligns with what we actually do. Going forward, you will hear us describe our core set of products, Listings, Reviews, Pages, Search and Knowledge Graph, all as the Answers platform.

Yext is and always has been the answers company, and each of our products solves a core problem for our customers, perfect answers everywhere. We will continue to build industry-specific solutions atop the Answers platform. The growth opportunities here are significant.

Our updated brand messaging is the foundation upon which we're building our go-to-market plan. I'll walk you through some of the other key focus areas for this year as we remodel our go-to-market motion. We are focusing heavily on customer success and customer education.

We have new programs launching to help our customers adopt our products to the fullest, driving the highest value -- the highest level of value from their purchase. Our customers look to us to be experts in our field, and we want to be seen as such.

We have consolidated all the data insights functions under one go-to-market insights team to create one view of the customer. We're also reorganizing the marketing team to work more cross functionally and increase their focus on our areas of growth, specifically our offerings in marketing, support, health care and financial services.

Due to development in our platform over the last year, we feel like we are ready to really engage the SI ecosystem in a much bigger way than we have in the past, and I expect that to be a big focus as we go forward. On the product front this quarter, we launched our Spring '22 Release, which includes several new features.

We are making the platform easier to integrate to internal systems in order to collect more answers from across the business. We have made enhancements to our search product, including our search merchandiser.

As part of this release, we have made major enhancements to our flagship Listings product, which once again shows our commitment to the product line. Our approach to product development aligns with our brand and go-to-market approach.

Yext is one platform with a mission to empower every business in the world to collect, organize, deliver and answers anytime, anywhere. Now I would like to talk about some highlights from our first quarter.

We were led by strength in health care, followed by financial services and food services with customers like Cardinal Health, UnitedHealthcare, Allied Financials and El Pollo Loco. We have a very strong solution set for health care, which includes not just locations, but also provider listings and reviews.

Provider pages and our find-a-doc offering have been good follow-on purchases. All of these solutions really build on each other and create a clean upsell path that provides an additive value for the customer.

The same thing exists in financial services, where we start with loan officers, insurance agents or wealth adviser listings and then move to reputation and pages. And then once all the data is in the Knowledge Graph, we create a straightforward upsell to search or guided search.

Since all the necessary data is already in the system from the previous solutions, this makes a deployment of the additional solutions a very light lift for the customer. Listings and Reviews continues to make up a large portion of our new business and upsell.

We're able to land one of our largest location listings, new logos for the quarter with DHL Express in EMEA. We also signed Shake Shack, which represents a lot of room for growth across the platform.

This shows you that our core franchise is still very much intact and with the renewed energy we are putting into the product and service, that will continue that momentum.

We have continued to innovate our flagship Listings and Reviews products as we always have, and our effort right now is educating the market on these innovations alongside all of the other innovations across the platform.

One deal that I'm very excited about for what it says about how far our search offering has come in just a few years, was with a large global appliance company. The team did a thorough assessment of the market, speaking with most of our competitors and looking for a search partner who could handle support search and e-commerce search.

They ran a competitive process, and ultimately, we were selected. With the additional features in our Winter and Spring releases, we can now match every player in the market in security while our AI search features continue to differentiate us from the pack.

We've had some recent success against long-time incumbents in replacing them as the search platform for the company with the Winter '22 Release and the addition of the security features that were necessary to deploy search for internal use cases, VMware is a great example of a competitive win that replaced an entrenched competitor for the global business.

Their current provider had a keyword-based front end and lack of analytics. This forward-looking team chose Yext for our NLP, robust analytics and tableau integration. We believe this current win represents a small portion of a much larger opportunity to expand globally. Now I will turn the call over to Mike..

Thanks, Marc. I always wanted to do the numbers. Our first quarter revenue grew 7% year-over-year to $98.8 million. Unearned revenue increased 5% year-over-year to $196 million as annual recurring revenue, or ARR, was $387 million at the end of Q1, up 5% year-over-year.

As a result of the stronger dollar relative to countries where we transact in local currencies, Q1 revenue experienced an approximate 1% negative impact from FX and ARR at the end of Q1, and ARR at the end of Q1 experienced an approximate 2% negative impact from FX.

Our trailing 12-month net dollar-based retention, which excludes our small business customers, was 99%. And 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 100%.

Our customer count, which excludes small business customers and third-party reseller customers, increased 11% year-over-year to 2,830. Further, customers with ARR over $100,000, was 613 at the end of Q1, up 8% year-over-year and also excludes small business customers and third-party resellers.

As I noted earlier, beginning this quarter and moving forward, we will provide a more detailed look at ARR across our direct customers and third-party reseller customers. We believe ARR is a strong measure of our future opportunity as well as progress across new customer adoption, renewals and upsells. Direct customers represent 80% of total ARR.

Direct ARR at Q1 totaled $310 million, representing 7% year-over-year growth. The direct sales team is primarily focused on enterprise and mid-market accounts and ARR growth is a good measure of adoption and satisfaction across these customers. Third-party resellers represent 20% of total ARR.

Third-party reseller ARR totaled $77 million at Q1, representing a decline of 3% over the prior year. Our third-party reseller customers vary widely in terms of their size and their customer base, so we expect third -- we expect revenue from third-party resellers to be less predictable than revenue from direct.

Turning to non-GAAP results, which are reconciled to GAAP in our press release. Q1 gross margin was 76.4% compared to 77.8% in the year ago quarter, and we continue to be in the range of our long-term non-GAAP gross margin target of 75% to 80%.

Q1 operating expenses were $82.9 million or 84% of revenue compared to $74.2 million or 81% in the year ago quarter. The primary drivers of our operating expense increase were employee-related costs and various sales and marketing events. Many of our events for the first half of the year had already been committed.

However, as we look at the second half of the year, we expect to realize efficiencies within sales and marketing expense. Our Q1 net loss was $7.8 million compared to a net loss of $3 million in the year ago quarter. Our Q1 net loss per share was $0.06, which was better than our guidance range.

Net loss was $0.02 per share in the first quarter last year. Cash and cash equivalents were $248 million at the end of Q1 compared to $261 million at the end of fiscal year '22. During the quarter, we authorized a $100 million share repurchase program of our common stock.

We repurchased $31 million through the end of the quarter and subsequently repurchased an additional $24 million. We intend to continue to maintain a strong balance sheet and cash position going forward, and we will remain open to buying stock at attractive prices.

Net cash flow from operations for Q1 was $17.9 million compared to $35.1 million in the year ago quarter. We expect to continue generating annually -- generating annual positive operating cash flow in fiscal '23 and going forward.

CapEx was $1.6 million in the first quarter compared to $7.5 million in the quarter ended April 2021 as we have returned to a normalized annual CapEx run rate following the completion of our real estate expansion. Turning to our outlook. We expect Q2 revenue to be between $99 million and $100 million.

Our Q2 guidance includes the negative impact of $1.8 million as a result of FX. We expect Q2 non-GAAP net loss per share between $0.05 and $0.06, assuming a weighted average basic share count of approximately 124.6 million shares. For the full year of fiscal '23, we expect revenue of $399.3 million to $403.3 million.

Our guidance includes the negative impact of $6 million as a result of FX. Our non-GAAP loss per share is expected to be between $0.10 to $0.12, a $0.07 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 127.1 million shares. Operator, we are ready to open it up for Q&A..

[Operator Instructions] Our first question comes from Naved Khan with Truth Securities. Please go ahead..

Thanks a lot. A couple of questions from me. So Mike, in your commentary, you talked about some impact from customer downgrades and maybe some increased churn.

Can you give us some more color in terms of what's going on sort of under the covers here? So are you seeing these losses on the -- more on the third-party customers or more in the direct customers? And also, when these customers are downgrading or say, churning off, what's the primary reason for that? Where are they going to? Are there other sort of new products in the market that might be -- might have led to increased competition?.

Yes. Thanks for the question. I'm happy to talk about those dynamics a little bit. So one of the things we saw in Q1 was that we saw our gross retention slip into the low 80s, which was down sequentially from Q3 and Q4. The good news is, is that it's our smallest up for renewal quarters. So the relative impact is fairly small.

And really, it was driven by a single churn. And it's a great example of where we have to do a better job with the customer. So this particular customer had had numerous disruptions to their -- to the service that we're providing them, numerous team changes. And frankly, I think we weren't responsive enough to their needs.

And for that, unfortunately, that was a logo churn.

Very much what we're focused on here is addressing these customer satisfaction challenges before they happen because when they do happen, then they create an opening for competitors who can't match us from a functionality or service standpoint, but we're certainly exposed when our customers aren't happy.

And so the focus internally is absolutely on logo retention, even if with that certain customers comes at some level of downgrade churn. I would much rather see that than logo churn than customer churn because we have amazing upsell opportunities with these customers.

And so that's what I'm talking about when I'm talking about starting with customer satisfaction and starting with happier customers. We take the competitive opportunity very much off the table when our customers are happy, which most of them, the vast majority of them are..

Got it. But maybe sort of -- so just maybe digging a little bit deeper into this. So coming out of COVID, which we are now, it would kind of seem to us that the demand would improve, maybe you would see more licenses as more locations open or just more upsells.

Are you sort of starting to see any of that even in the months that we just ended? Or any kind of color or commentary would be helpful there..

Yes. I think from a -- it's Mike again. I think from my point of view, I think I would agree that we, at the moment, seem to be through the COVID headwinds, and it feels like business as usual.

The -- when you hear Marc talk about the platform and the opportunity across the entire product set, we're encouraged to see a breadth of types of deals coming through.

We're probably not at the volume of deals that we want to see yet, but with the amount of disruption that we created with the reorganization and the beginning of this re-architecture of the go-to-market machine, that's not particularly surprising. So no, I mean, we're excited about those opportunities.

I think Marc might want to talk a little bit about some of the dynamics with the improvements we made to the Listing platform and also how that relates to our reseller customers, where there is a substantial opportunity, not only on the listing side, but also on new product expansion there..

Yes. So on the listing side, we really spent -- we kind of -- we've been innovating on our listings products really at a similar pace over the last few years. But I think one of the areas that we have not done as good a job on was really articulating the value and the additional innovation on that listings product.

And that's part of -- which is -- it's pretty easy thing to fix on our side, which we are. What that does is it increases the utility by adding this functionality, increases the utility of the listings product, making it more valuable, making it something that is more core to the business of our customer base.

Within the third-party reseller channel, that was a channel that we only were able to sell listings and reviews into. And we're looking really to hopefully add a few new products potentially in the future to that channel and see if we can drive additional value there..

Understood. The second question I had is just on the sales and marketing.

So in terms of the headcount reduction and the impact on the P&L, is that more kind of loaded towards the back half? How should we think about the -- this expense line as we move through the year?.

Naved, it's Darryl. Yes. So it's a great question. As we look at the EPS guidance that we put together, obviously, it suggests some big improvements in the back half of the year. The changes that we've made in terms of quota-carrying reps that we talked about on the last quarter call are sort of -- is kind of roughly where we're at.

We ended last quarter at 190. This quarter, we're ending at about 180 sales reps. So we feel pretty good about where we're at with respect to those numbers there..

And so just in terms of the dollar impact, why aren't we seeing that sequentially between Q4 and Q1 and maybe even more so? Yes..

Got it, got it. So I think it's a matter of scope and magnitude, right? Like the sales and marketing line is much bigger than just our quota-carrying reps. There's support, there's some other functions around customer success in there and so forth.

So as all of the efficiency work and the reorganizations and the streamlining and the removing of silos, as that comes to fruition, the benefits will start to realize in the back half of the year. If you think about the timeline, Mike really only took over midway through March.

By the time we got through all the reorg, it's kind of difficult to impact the numbers within the quarter, but we expect to see the improvements going forward, and you see that from our EPS guidance in Q2 shows some improvement over Q1, but we expect further improvement in the back half of the year..

Our next question comes from Ryan MacDonald with Needham. Please go ahead..

Thanks for taking my questions. Maybe first starting on the customer success motion. I know from discussions earlier in the quarter that we -- that there's a big focus here on sort of standardizing that customer success motion across the organization and trying to drive some improvements around quarterly business reviews.

Can you just talk about some of the success or the progress maybe that you're making in this area? ..

Yes. I mean I'll take the first part, and Marc may have examples that he wants to talk about or anecdotes. It starts with understanding what's not working. And I think we're -- we've begun to understand where those breakdowns come in. We've seen tremendous turnover within our customer organizations.

And that's -- I think that's a challenge because when people move around inside the customers, we often have to restart initiatives and retrain adoption and things like that, that are really important from a client success standpoint. And yes, it's an operational challenge.

We -- as I've talked about a lot on the last call, we had numerous different groups touching the customer who all contribute to that customer success, and they were -- those efforts were less coordinated than they should have been.

And so we've made a lot of change in the quarter in order to unify those and make sure that our coordination and touch points to the customers are more consistent.

It's also a big part of our decision to seek a Global Chief Revenue Officer who would be focused across not just the sales organization, but the customer success organization in order to make sure that we're building upon our efforts to better operationalize the entire go-to-market machine..

Just to add to what Mike said. Our product in many ways is a sort of straightforward cause and effect. The more adoption, the more usage of the product, the more value you get. It is actually pretty straightforward in that regard.

And so one of the things that we're doing, one of the things that we're focused on is really driving adoption inside of our customer base, being customer focused, having that be really the driving force, the driving consistency behind our customer success experience.

Now in years past, there wasn't a clear set of metrics for us to operate against, and what we spent the last quarter on is really metering much of that product experience, much of that consumer experience, all driving towards eventually being able to -- hopefully in this next quarter, being able to at least measure adoption across a very, very large customer base that we have.

That will then lead to higher levels of systems and processes and automation that we'll be able to deliver. What that really means for us and means for the customer is a much more consistent customer experience. Whether you're a single location pizza place or you are our largest customer, that we're delivering that consistent experience.

And what we're doing it at scale and we're doing it efficiently. And so that's something that we're really excited about to watch that unfold over the next few quarters, and our customers will definitely feel that benefit of that innovation..

That's helpful. And Marc, maybe as a follow-up to that. You talked -- you said something along the lines of more usage, obviously, leads to stickier customers and more success over time. And you talked about customer education there and as a way to drive that better usage.

As you continue to sort of drive that customer education or drive usage, do you feel like that the route there is more accomplished through better self-service and making it simpler to use? Or by being able to be more consultative in the services that you provide to customers to help them in their usage?.

Well, because of our very large diverse customer set, we have to start with self-serve. That really is the foundation.

So through our community site, through our hitch-hiker site, really being a place where customers go to educate themselves on the latest and greatest in the industry, being a place where they go to understand best practices and how to optimize and maximize the value of the product they have. But then that's not where we stop.

For higher -- for larger customers, ones specifically in the enterprise, the upper enterprise, then also having a customer success, folks who are going in and sort of taking the self-serve information and really helping those larger customers implement it themselves or make sure that they are implementing it, that's a really big piece of it.

And when we talk about adoption, one of the interesting parts of our platform is that for us, adoption is really about content.

How much content is someone adding to the platform? Is it quality content? Is it content that ultimately helps them show up in search and helps them really drive top of the funnel performance? And that's something that is also -- that's something that we can help both from a self-serve standpoint, but also we can provide consultative experience for some of our largest customers..

Excellent. And then maybe last one for me, Mike. You talked about, I think one of the previous questions about, Q1 is a relatively light renewal quarter for you. And then so despite having some churn, it was a relatively small impact.

Can you give us a sense of, as you look out through the remainder of the year or at least in the second quarter, what the renewal cycle looks like? And what you're kind of doing right now to try to prevent any incremental churn? And perhaps what assumptions are built into the guidance currently for any incremental churn at these levels?.

Sure. So yes, so Q1 is -- every quarter gets a little bit bigger when it comes to what's up for renewal as we go through the year.

And so my point of view is that I think we learned some hard lessons over the last few quarters about what happens when you don't provide the level of customer experience that we expect to provide, and our focus is very much on reversing those trends. Thankfully, we've got some time to work on that.

And we know the value is there, but we have to do a better job of providing that kind of unified experience.

The other thing I mentioned, and I'll say it again because I think it's really important is that sometimes -- especially for a multiproduct platform company like we are, sometimes you have to do things for clients that may not be in -- have the best impact from a very near-term revenue standpoint, but they create the fertile ground for the bigger opportunity.

And I'll speak about this going forward. Those are considerations that we're going to take very seriously, and we're going to make sure that we're setting the table for future growth in our decisions around how we address potentially the minority of our customers who may have experienced some of the service disruption.

That said, I feel like -- you asked about guidance. From my point of view, I think our guidance is -- for the rest of the year is we're obviously a little bit cautious about the macro environment, and we are in the process of a lot of change here, and that's obviously not -- isn't entirely complete. And so I think we're being cautious on that front..

[Operator Instructions] our next question comes from Arjun Bhatia with William Blair. Please go ahead..

Thank you. This is Chris on for Arjun. So the first question I wanted to touch on was, so in terms of go-to-market, I think last quarter, we talked about the QR headcount coming down, but also wanted to kind of build out some of the supporting cast around the sales rep.

So where do we stand kind of today in that process in terms of adding pieces in sales enablement and those kinds of things?.

Yes. So let me start, and I think Marc may have some comments on this, too. So -- as we've gotten deeper into this, one of the things that's become clear is that a better customer experience and increased operational efficiencies, they go together.

So I think as we've gotten deeper here, it's less clear that we have not enough resources and it's very clear that those resources have been less coordinated than they should be or potentially misallocated in some cases.

And so as we move forward, we want to make sure that we're using the resources that we have in the business and reallocating resources as we need to, to create the efficiency which has a direct positive effect on the customer impact because it means less redundancy in their touch points, less discoordination, and those are the primary drivers that we've seen of historical customer dissatisfaction..

I mean the only thing I can add to that is just, I mentioned this a second ago, just consistency is really at the heart of it -- of what we want to deliver. We have -- obviously, we're a decent-sized company, so we have lots of -- we do have happy customers.

And there's definitely some inconsistency across the customer experience right now, which for us is not necessarily -- it isn't solved by more resources. It's solved by automation, it's solved by process, it's solved by data, it's solved by systems design.

All of these things ultimately trying to keep a consistent experience across every customer, across every size and every geo. And so as Mike said, the sort of realization that we had was that it was on allocation of resources and keeping consistent allocation of resources across the organization and less so about really adding additional ones..

Got it. That makes a lot of sense. It's very helpful.

So zooming out in an ideal world, I'm not asking for guidance here, but if we're to dream the dream, where is the Yext two, three years from now? So what are the kind of key dominoes that have to fall in terms of product and go-to-market that kind of gets you from here to where you want to be? I know we've talked about some of the table stakes things like kind of improving the customer experience, that's the near-term focus.

But is it continuing to expand the product portfolio, add new opportunities to go-to-market? How should we think about that?.

So I'll give you some general ways that I think you can think about this, that will be helpful. I would say this, I'd say the product portfolio that we have today is incredibly robust, and we talked about the Listings, Pages, Reviews, Search product lines.

And what we also have are countless industry-specific solutions that sit on top of that, and Marc and his team have been architecting and delivering those solutions for years. So we don't feel limited by the product opportunity, and Marc may want to expand on that.

On the big picture, I think one of the shifts that is in flight right now is the idea that growth and efficiency have to be disconnected in some way. We are not subscribing to that point of view here. And as I mentioned in our last call, every business I've ever built has been a growth business led by efficiency.

And so when we look into our EPS guidance for the back half of the year, as you can see, it's -- we're effectively guiding around breakeven for the back half of the year. I think that is a significant change from -- given especially some of the headwinds that we're seeing in FX and the macro environment.

So we feel like the opportunity is to get organized and to get lean and to get nimble, and that's going to make us better with the go-to-market by virtue of happier customers and a better upsell path.

I mean one thing I can tell you is I've talked to every customer who will talk to me, who's left Yext in the last -- in the recent history, and the themes are very consistent. They didn't -- I hear a lot, we didn't really want to go, the service was not where we expected it to be. And that tells us two things.

It tells us that eventually we think we can win those customers back, and it tells us exactly where we need to focus. And as -- the other thing I heard consistently is, you wanted to sell additional products, but you're not going to sell us additional products, and we're not happy.

And that is a key principle for us going forward is that we have a -- when you think about the long term, we have a tremendous upsell, cross-sell path. And the search products and things like that have an enormous market, which we get to tap into when our customers are happy.

So I realize I'm a broken record on this, but I don't feel like I can say it enough..

Yes. On the -- I was going to say, on the -- it all starts with customer success. Customer success is the engine that drives everything. Our happiest customers buy more from us. They want to do more with us. They -- we become the trusted adviser in that relationship, which is what's exciting. And so we see the path.

The question is how do we create that path more consistently across our entire base? So that's one part of it. The foundation of what we do here is that we bring customers in usually with one product, one of the products we talked about. We use that product to populate the Knowledge Graph, to populate that AI content management system.

And then from there, there is multiple expansion and upsell opportunities. And so when you talk about the future, two to three years from now, we hope that we have a go-to-market machine that is sort of built and systematically built around that concept.

The concept of landing with one solution and then expanding to many, many more solutions now beyond marketing, right, now into support and then into the future, e-comm, workplace and many other opportunities. And so you can see there's a very consistent path going forward, and we're pretty excited about it.

And the pace of innovation at our company is just especially over the last few years, it's been absolutely incredible. And I can't possibly sort of stress how excited I am about our road map and the next set of things that were coming up.

But I can't share those things because Howard, he would -- I was sharing forward-looking statements, which I'm not going to. But I can tell you that the road map is off the charts, incredible, and I'm super excited about it..

Great. That's all really encouraging to hear. So one thing I want to touch on just a little bit more. I know we've talked about here and there, some of the macro impacts and kind of taking that a little bit into guidance.

Are there any areas if we kind of double click on potentially seeing a slowdown in demand, maybe separate from some of the customer service issues that we've discussed? And if we were to enter a recessionary period, are there any product lines in particular that you would expect that to have kind of an outsized impact on? Or is it going to be just kind of broadly thought across the customer base as all?.

Yes. I'll take that one. It's Mike. So I think the biggest impact we're seeing is the FX impact, and it's not something we have any control over. So we'll continue to update you on that as from a kind of a headwind. I would say at this point, we're not seeing any particular demand slowdown based on the macroeconomic environment.

And if we look at it historically, I think software businesses tend to do well through recessionary or I don't know what we're calling this environment, but you guys are the experts on that, not me.

But I think software businesses do well because in those environments, our customers are going to be looking for opportunity to drive cost down, and digital transformation is an incredibly good way to increase ROI on your various activities. And so we feel like we're in a great place to weather whatever might come economically.

And at this moment, I wouldn't say we're seeing anything from a budgetary standpoint or a demand standpoint that's macro..

Okay. Great. And one more if I could slip it in. So revenue came in a little bit ahead of guidance despite some of the challenges mentioned with gross retention and the large customer that churned.

How do we think about reconciling that with the sequential RPO decline? So is there any way you can kind of quantify how much of that might have been related to the customer, the churn, versus FX impacts? Was it all primarily FX, I would assume? ..

It's Darryl. The RPO is kind of a tough metric. RPO looks at contract duration, contract terms. And we prefer to look at ARR. You might notice in the earnings release, we separated out our third-party reseller ARR from our direct ARR. We think that sort of removes the impact of things like contract terms, billing terms and timing.

I think if you think about multiyear deals, that's going to impact your RPO numbers, particularly year-over-year. So that's what's really driving that. It's not any one customer, and the FX impacts we mentioned are in like the 1% to 2% range for the metrics we called out..

This concludes our question-and-answer session as well as our call for today. Thank you for attending today's presentation. You may now disconnect..