Domo, Inc. Q2 FY2024 Earnings Call

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Domo Second Quarter Fiscal Year 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. Peter Lowry, Domo Vice President of Investor Relations, you may begin your conference.

Good afternoon, and welcome. On the call today, we have Josh James, our Founder and CEO; and David Jolley, our Chief Financial Officer. I'll lead off with our safe harbor statement and then onto the call. Our press release was issued after the market close and is posted on the Investor Relations section of our website, where this call is also being webcast. Statements made on this call include forward-looking statements related to our business under federal securities laws. These statements are subject to a variety of risks, uncertainties and assumptions. These include, but are not limited to, statements about future and prospects or financial projections and cash position; statements regarding the potential of our consumption-based pricing; statements about our sales team and technology; our expectations for new business opportunities, transactions and initiatives; statements regarding our channel of communication and upcoming events; statements regarding the potential of artificial intelligence and its impact on our business; and statements regarding the impact of macroeconomic and other conditions on our business. For a discussion of these risks and uncertainties, please refer to documents we file with the SEC, in particular, today's press release, our most recently filed annual report on Form 10-K and our most recently filed quarterly report on Form 10-Q. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Domo's performance. Other than revenue, unless otherwise stated, we will be discussing the results of operations on a non-GAAP basis. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Please refer to the tables in our earnings press release for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measure, which we have posted to the Investor Relations section of our website at domoinvestors.com. With that, I'll turn it over to Josh.

Thank you, Pete, and thank you, everyone, for joining the call today. In Q2, even in the tough macroeconomic environment, our year-over-year total revenue growth was still at 5%. Our subscription revenue growth was 6%, and billings declined 2%. Our results for Q2 were in line or better than our guidance, and I'm pleased with the progress we've made in the past few quarters, particularly with our consumption-based pricing, our AI strategy offerings and road map and our sales force retention. That being said, I expect our return to growth may take longer than we would all have hoped for due to some macro headwinds that seem to be affecting most companies we're familiar with. Let me give you an update on some of the progress we've made and what gives me confidence in our longer-term growth prospects. First, I'm confident that we have the people and technology to get back to the growth we've experienced in the past and to do so responsibly by managing our costs. I continue to spend my time on the road with our current and our prospective customers, and the conversations I'm having in the market are reinforced by optimism. We hear time and time again that Domo can solve complex data problems that our competitors simply can't, and we do it in record time. Many of these promising interactions are happening through our customer Connections Tour, where we've gained some candid insight into why organizations choose Domo over the leading competition. One customer from a large publicly traded advertising group expressed that Domo offers superior speed and computing power and significantly reduces the effort to create reports, training their data specialists to focus on higher-value business deliverables. I believe there is potential for conversations like this to translate into significant transactions for Domo in the near to midterm that could drive upside to our guidance. Second, I believe our increased focus on consumption-based pricing can be a growth driver and create stronger relationships with our customers as we've removed the limitation on the number of seats in an account by granting access to all employees of a customer and only charging for data usage similar to Snowflake, AWS and others. Because we can charge for usage while offering seat licenses and visualization for free, consumption pricing solves many of our historic barriers to adoption and more directly aligns our pricing to the value realized by our customers. Thanks to this, consumption pricing is opening more doors for upsell opportunities. One of the very encouraging trends we see with our consumption customers is an increase across key metrics, including data flows and connector runs, which represent a significant source of potential growth. Over the past year, we have seen almost a 30% increase in contract size for new logos going on consumption-based pricing compared to new logo customers going on seat-based pricing. Also, for customers renewing who have converted to consumption pricing from seat-based pricing, we are seeing almost a 60% increase in the number of user accounts created and somewhat surprisingly, a higher log-in rate of the total users on the consumption model versus the seat-based pricing model. We're also seeing momentum in increasing the percentage of new logo customers who choose consumption pricing. 50% of our new logos in Q2 were priced on a consumption basis. That's up from about 30% of our new logos in Q1, and we are targeting 75% this quarter in Q3 and even higher in Q4, setting us up well to have a substantial impact on the way we go to market and even convert renewing customers to the consumption model aggressively next year. We have over 250 customers on our consumption pricing model as of July 31, which represents over 10% of our customer base and over 13% of our ARR. Another benefit to Domo is that our consumption pricing contracts are structured as subscription contracts. This means the revenue is recognized ratably, mitigating some of the lack of predictability associated with pure consumption-based models. Beyond these direct benefits for Domo and our customers, our consumption pricing is also expected to improve our competitive positioning. Some customers see our competitors' visualization offerings as essentially free because their visualization tool is included as part of an enterprise license agreement. We think including visualization with the free seats under our consumption model is a compelling selling point for enterprise and corporate customers and prospects, positioning us better against some of our competitors. Another positive in the quarter was that we once again had much lower-than-forecasted attrition in the sales force. Year-to-date, we have stemmed the sales force attrition we saw last year when 30% of the sales team churned. Next, I continue to be excited about the potential for AI to be a growth driver for Domo. I believe we are strongly positioned to be a leader in delivering AI-powered data experiences, in governing those data experiences and in enabling businesses to achieve the data readiness required to capitalize on the broader possibilities of AI. Domo gives you the ability to apply the power of AI to your business now. For capacity planning, if a company needs to know the number and type and timing of employees they need to hire to achieve a business goal, they can do that right now. If a company wants to run simulations to dynamically price and bundle their offerings, they can apply AI to that problem in Domo now. If a lender wants to perform a risk assessment model on patterns of behavior and other factors, they can use AI to apply that to the data they have in Domo right now. This month, we announced progress showcasing our commitment to this ongoing ambition, including mobilizing the full force of Domo's AI technology, expertise and vision as Domo.AI. Data and technology are important foundations, but real transformation comes from making them useful and reliable in the hands of many. Domo.AI is championing a future where AI-powered data experiences truly transform business by amplifying a very powerful asset, human curiosity. The hurdle I think many businesses will need to overcome is building in the safety and efficiency required to effectively democratize AI. That's why Domo's approach goes beyond wiring OpenAI to the end-user experience. It's about embedding AI responsibly into the very fabric of the entire business. Let me tell you about some of the ways we're making this possible through Domo.AI. Our suite of AI tools empowers users with chat-style data exploration and provides flexible model creation, efficient model management, seamless deployment and superior governance and security. Domo's AI service layer lets businesses capitalize on the power of AI without getting bogged down by its complexities. Users can easily manage, deploy and optimize any AI model they choose right in our data experience platform to support real-world use cases that matter to everyone. AI is now easily accessible in Domo Bricks, Domo's app dev framework, and in Workflows. Even low-code tools such as Magic ETL are designed to tap into AI model management, making the power of AI accessible even to those without technical expertise. All of this and more is featured in our newly launched Domo.AI website, where we'll continue to share our progress in creating a new future for data and AI. We're also excited to be hosting our first-ever innovation summit focused on AI this month, a free online event that will highlight just how Domo.AI solutions are already helping businesses overcome real-world challenges to accelerate innovation and growth. AI is only as powerful as the data connected to it. We have a well-connected end-to-end data stack, opening up many possibilities for Domo to reimagine what data can do for business. I encourage all of our investors to follow Domo's AI journey, starting with visiting the website and attending our virtual innovation summit on August 29 in North America and EMEA and August 31 in Asia Pacific, where almost 3,000 people have already registered. While we're optimistic about these significant long-term growth drivers, the IT spending environment remains challenging. Enterprises are carefully scrutinizing vendors, and many are consolidating their spend among fewer vendors. We're seeing sales cycles elongate, and even satisfied customers are being asked by their IT and finance departments to evaluate their spend upon renewal. David will go into more detail, but we're also evaluating our renewals on a granular basis. And while each one is unique, we do see some risk to some of the larger renewals, which we have incorporated into our guidance for the second half of the year. We would not expect to see some of these discussions in a more normal spending environment or in an environment where these customers were already in a consumption model. And then on the new business front, as an indication that this is purely macro-driven, we saw conversion rates fall across each stage of the funnel, which is further evidence of the challenging IT spend environment that we're facing. However, we continue to find opportunities to deliver significant value to our customers, and we do have several notable wins to share from the quarter. We closed a very significant upsell with a Fortune 500 U.S. financial institution to provide a custom app for wealth management operations powered by our data platform. Domo stood out for automating previously manual, time-consuming workflows and offering custom smart content that is specific to each employee across thousands of employees. Ultimately, the customer chose Domo because our platform provided a complete elegant solution to a business challenge at scale. Another example, we worked with a nonprofit subsidiary of a high-profile private university, and we drove a significant upsell to support their digital corporate learning solutions. This customer rolled out the entire Domo data experience platform to 600 new users after successfully improving learning experiences, thanks to real-time insights into course interactions. This win is a strong endorsement of our impact and a great example of how our consumption-based pricing model is opening doors to grow existing business. We also won a significant new logo with a global healthcare leader that chose Domo to provide a unified view of their marketing performance. We are in this business after a successful proof-of-concept trial to improve marketing performance across multiple brands and countries. In addition to the fantastic customer wins, we also continued to create movement within our industry. This quarter, Domo was ranked the number one self-service business intelligence vendor by Dresner Advisory Services. Domo was also recognized as an overall leader in Dresner's 2023 Wisdom of Crowds study, which included our perfect recommendation score for the seventh consecutive year. Among our best-in-class categories were integrations with third-party technologies, our ease of installation and our ease of administration, all of which showcase our readiness to help businesses seize the imminent opportunities for data. In addition to this outstanding recognition, Domo was also included on two Constellation ShortLists, which are published to help organizations search for technologies to meet their digital transformation goals. Domo's placement on two ShortLists, the list for multi-cloud analytics and BI platforms and the list for embedded analytics, is a strong endorsement for our reputation of driving customer success. I'm also proud to share that Domo was once again named to the Parity.Org list of Best Companies for Women to Advance. This marks our fourth consecutive year of being recognized for our commitment to supporting women through career advancing opportunities. We believe that diversity makes organizations stronger and view our continued progress in this commitment as a factor in Domo's future success. In closing, while there are certainly some near-term challenges driven by the macro and current IT spending environment, I'm as confident as ever in our team, our technology and our long-term growth opportunity.

Thanks, Josh. In Q2, we posted 6% subscription revenue growth and 5% total revenue growth. We exceeded the billings guidance we provided at the beginning of the quarter and delivered Q2 billings of $70.6 million, a year-over-year decrease of 2%. In reviewing the metrics that will impact the remainder of the year, current RPO was $232.1 million, an increase of 3% year-over-year, and our total RPO grew 2% to $357.6 million as of July 31, 2023. Our ARR grew in line with subscription revenue growth. An area where we saw continued success was multiyear contracts. On a dollar-weighted measure, we now have 67% of our customers under multiyear contracts at the end of Q2, up from 64% a year ago. Our gross retention improved from Q1, was just under 90%, while our net retention was just below 100%, down from Q1. Our net retention was driven by a challenging upsell environment, which I'll talk about in a moment. Q2 total revenue was $79.7 million, a year-over-year increase of 5%. Subscription revenue represented 89% of total revenue and grew 6% year-over-year. International revenue in the quarter represented 21% of total revenue, down slightly from Q2 of last year. Our subscription gross margin was 84.9%, down 0.4 percentage points from Q2 of last year and down 1.1 percentage points from Q1, primarily due to our move from a fully depreciated data center. We would expect to remain in this range in the near-term. I'm also pleased that in Q2, our non-GAAP operating margin was positive 5.7%, up 12.2 percentage points from a year ago. Our non-GAAP operating margin primarily excludes stock-based compensation as well as executive severance, which was related to the transition of C-level executives. Our net loss was about $800,000, an improvement from $8.2 million a year ago, and our net loss per share was $0.02. This is based on 35.9 million weighted average shares outstanding, basic and diluted. In Q2, cash provided by operations was approximately $600,000. In total, our cash balance declined $2.1 million from last quarter to $63.9 million. We expect Q3 cash from operations to be near breakeven, and we continue to expect full-year fiscal '24 cash from operations to be positive. We believe we've got adequate cash in order to continue to pursue our business objectives. In terms of guidance, let me share some thoughts. As Josh mentioned, the IT spending environment has been challenging for us, similar to some others in our sector. There are two factors I'd like to highlight. First, while our sales rep attrition has been less than forecast in Q1 and Q2 and we continue to build our sales capacity, our conversion rates, new leads and resulting new business have also been less than forecast. Part of what we're seeing is a sense of caution even greater than six months ago across the board with customers looking carefully at their software spend. While we believe we have superior technology, some customers and prospects are already paying for another solution as a part of a broader enterprise-wide license agreement where their BI tool can be perceived as incrementally free, and they may be already using that BI tool for a big portion of their organization, leading some customers and prospects to consolidate their spend on these solutions. As Josh mentioned, I think our consumption-based pricing helps our positioning against this specific challenge. The second factor is that ongoing uncertainties about the macroeconomic environment are presenting challenges with renewals with some large customers. Oftentimes, this is due to the conflicting objectives of business use cases versus overall IT spending mandates. Based on what we're seeing, we believe our return to growth will take longer than originally anticipated. As a result, we've lowered our new business and gross retention forecast for the remainder of the year. To put this in context, for the entire fiscal '24, our reforecast has resulted in a downward adjustment of about 7.5% in billings and 2.5% in revenue. For Q3, we're guiding to billings of $72 million to $73 million, down 2% year-over-year. For full-year billings, we're providing a range of $313.5 million to $321.5 million, representing a year-over-year decline of 1% to 3%. Now to guidance for our GAAP metrics. For the third quarter of fiscal '24, we expect GAAP revenue to be in the range of $78.5 million to $79.5 million. We expect non-GAAP net loss per share, basic and diluted, of $0.10 to $0.14 for Q3. This assumes 36.3 million weighted average shares outstanding, basic and diluted. For the full-year of fiscal '24, we expect GAAP revenue to be in the range of $316 million to $320 million, representing year-over-year growth of 2% to 4%. We expect non-GAAP net loss per share, basic and diluted of $0.39 to $0.47. This assumes 36.1 million weighted average shares outstanding, basic and diluted. Our EPS guidance implies a positive operating margin for the full-year. In summary, in spite of the challenges we've discussed, we are committed to remaining operating margin positive for the year and near cash flow breakeven through the second half of the year. I'm confident we've got the right people and technology to execute against our market opportunity.

Thank you. Your first question comes from Derrick Wood with TD Cowen. Your line is open.

Okay, thank you. Yes, it sounds like a challenging environment out there. And I'm just wanting to kind of parse out the macro versus potentially internal changes that you guys have made. And really, one of the big initiatives for you guys was to go after this consumption-based pricing model. And it sounds like you've had good success and conversion when, I guess, succeeding at that. But has that been a factor in leading to longer sales cycles, more investor education? Just trying to get a sense for how much is external versus how much is internal because on the macro front, it generally feels like things haven't changed a whole lot in the last six months, but it sounds like you guys have seen some more change.

Yes, we've definitely noticed more changes from our customers. Our conversion rates have significantly declined over the past six months. However, from a consumption perspective, this has actually been beneficial. Our sales cycle remains consistent with consumption, and in fact, it's slightly better for those deals. We see quicker upsells and repeat business comes in faster for consumption deals. The deal sizes are also larger when we pursue consumption. Last quarter, 50% of our new logo deals were based on consumption, and we're aiming for 75% this quarter, even with only part of the teams trained. By the year's end, we believe we can increase that to the 90s. Additionally, consumption leads to larger deals, happier customers, higher retention, and quicker upsells. Importantly, we gain a much larger presence within those organizations. Instead of being in one room while our competitors are in another, we can increase user numbers since we don’t charge based on the number of users. We've seen a 60% increase in users when customers switch to our consumption model. They start with a certain number of users and then grow by 60% after moving to consumption. This has been encouraging, and they are logging in more frequently, indicating greater adoption across the organization. Another exciting aspect is knowing that at the start of the year, we have growth within our accounts without needing to upsell—it's all driven by consumption. We recognize there is growth from consumption, but it's still early to determine the exact increase in those deals. We need to navigate through a few more quarters to get a clearer picture, but we are confident there will be an uptick as we continue working with customers and manage a substantial portion of renewals.

It seems there are some challenges arising from vendor consolidation. You surpassed your Q2 expectations, but you're indicating a significant decrease in guidance for the second half of the year, along with mention of tougher renewals. Can you clarify whether these issues are primarily affecting the enterprise side with potential contract losses, or if they're occurring more in the corporate segment? Is this situation concentrated or widespread? What factors are leading you to identify this risk for the second half? Any additional insights would be appreciated.

Yes. We're seeing good stability with our enterprise customers, which is better than with corporate ones. However, enterprise customers tend to use multiple vendors, making them more vulnerable to vendor consolidation, a common trend in the IT industry. Over the past five years, we've been focusing on a consumption model, and we're excited about its potential for our business. When we switch an enterprise account to consumption, they often reconsider their other vendors. Customers have told us they can eliminate vendors for projects because they're not paying us by the seat anymore. This has greatly improved our relationships with large enterprise clients. Nonetheless, a few accounts may still pose a risk, prompting us to be conservative in our guidance. While we have increased sales capacity, low conversion rates in the pipeline make us question whether to invest more in marketing, as we aim to remain financially sound, cash flow positive, and maintain a positive operating margin. We believe the transition to a consumption model will be beneficial, particularly with opportunities like freemium, which we anticipate will materialize in the next quarter.

Okay. And just one for David. I mean, how low can that revenue retention rate go in the second-half? And I guess to Josh's point about staying breakeven, do you need to make any kind of OpEx cuts or headcount cuts? Or how are you feeling about the initiatives for the second half around OpEx spend?

Yes. I think to that point, specifically, we've sat down, taken a look at the business for the second half to say, okay, if we don't produce the same number of billings that we originally forecast and we don't have that cash as a result, how do we manage that? And we're confident that we can bring down costs in areas that aren't going to affect our ability to go out and compete effectively in the market and win in the market.

A lot of the spending was additional costs that we had initially projected. So, we are adjusting for that extra spending. We are not bringing on a lot of new employees and are being cautious with our expenditures on outside consultants. That's where we've identified the necessary cost savings. We have also discovered some efficiencies. Since our arrival, we have been uncovering efficiencies, and with the efficiencies we have already realized, we are optimistic about our ability to achieve our margin targets.

Okay, alright. Thank you.

Thank you.

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

Oh, great. Thank you. So I guess, first of all, with respect to the large renewals in H2, have some of those large renewals already informed you of their intention not to renew?

No, we are aware of a few situations, which is reflected in our guidance. Additionally, we are noticing a low renewal rate due to vendor consolidation. As we engage in more discussions, we are working to determine the appropriate percentage to factor into our forecast, which led us to our current conclusions.

Okay. And then I mean, if you look at those large renewals and take them as a whole, I mean, just rough ballpark, what percentage of the business are we talking about? 1%, 5%, 10%?

If you examine our top 50 customers, there are only a few that concern us, specifically five or six. We maintain strong relationships with the majority of our customers and even with those few that cause us concern. However, we recognize that there are other vendors involved, and discussions about vendor consolidation are happening. Price negotiations are taking place, which prompts us to be cautious and conservative in our approach. Overall, it does not seem like there is a widespread issue with our enterprise business. It feels more like just a few specific deals are under pressure, including one particularly affected by COVID, which is among the handful we are concerned about. The situation does not suggest a systemic problem but rather relates to a few deals impacted by IT consolidation among large enterprises. For instance, one CIO mentioned having a multi-billion dollar IT budget, and when the CEO intervened, he insisted on cutting $1 billion from that budget. This conversation highlights the need for caution in forecasting our renewals.

I would like to add that from a defensive perspective, when we have 300 or 400 seats in that account and are aware that our competitors are nearly enterprise-wide, it emphasizes the importance of being in a similar defensive position. Transitioning to a consumption model enables us to achieve that same level of coverage across the entire enterprise. This motivates us to hasten our shift to consumption and ensure all our accounts move in that direction.

Okay. Great. And so Josh, I always ask you under what circumstances this business might be sold, and the way the shares work in Domo, it's basically your decision. So does this consolidation trend impact how you think about that?

I always consider that in the same way. It really comes down to whether anyone presents us with an offer, at which point we would assess it based on the opportunities in the marketplace and our view of the long-term share value. Currently, despite the short-term challenges that many companies face, there are some exceptions as seen in various earnings calls. Many are navigating similar issues. Nonetheless, as we mentioned on the call, we are quite optimistic about the future. We have great enthusiasm for our team and the opportunities before us. We discussed AI at length. With the excitement around ChatGPT and the shift toward using it for prompts instead of traditional methods, it’s an intriguing development. We are genuinely thrilled about it. Additionally, the capability to automate any AI model within our platform is significant. For instance, you can utilize models from Hugging Face and apply them to your business data effortlessly. We have completed the initial steps necessary for this process, enabling you to harness that AI capability within your business immediately. Furthermore, we can facilitate the deployment of those benefits across your organization, ensuring it works continuously with updated data. We are among the few platforms that can provide this capability, which excites us greatly.

Okay. Last one, I'm sorry, it goes along. So what steps do you think you guys can take to help build back shareholder value until we get through this tough macro and until we get through this consumption shift?

Yes. I think the shift in consumption is actually beneficial for our business. It is positive at every stage of the process, and we don't have to wait to see the benefits – we are experiencing them with each incremental improvement. In this kind of environment, it’s crucial to avoid burning cash and to maintain a positive operating margin, and I believe we are managing that effectively. We still have several levers we can pull if needed, but I hope we won't have to. It's important to stay focused, maintain our capacity, and continue to develop high-quality products. We are confident about our future in this regard.

Okay, thank you.

Yes. You bet. Thanks, Patrick.

Your next question comes from the line of Sanjit Singh with Morgan Stanley. Your line is open.

Thank you for taking the questions. Regarding the topic of consumption, I was curious about the 10% of the base that has transitioned to consumption. Is there any accounting revenue recognition headwind associated with it? Specifically, when acquiring a customer through subscription versus consumption, are there any revenue recognition differences that might impact revenue? I understand that deal sizes tend to be larger with consumption. Is there any impact on total contract value in that regard? I just wanted to confirm if there are any headwinds as customers adopt consumption instead of subscription.

Yes. Thanks for that question. It's an important observation. So the way that we have structured our contracts and then the way that we have structured our consumption model, that still allows us to have ratable revenue recognition, so providing the same level of predictability that we've got today. We've spent a lot of time working together with our outside accountants to make sure that our contracts are structured in a way that will allow us to retain that. And so we don't really see anything on the near-term or even medium-term horizon that would cause that to change, unless the rev rec rules change somehow. But we're pretty comfortable with the way we've structured it and the resulting ratable recognition.

Great. And Josh, I've covered a couple of companies who have gone through a transition to consumption. And some of the things that have come up in the past is around the customer incentive to move to consumption. And I get the idea that there are no shelfware and things like that. But when you talk about deal sizes being larger in consumption versus subscription, like what's sort of in it for the customer? Because in the sense, they still outlay more dollars to work. And I get the removal of the seat-based friction. But like what's in it for the customer to make that initial conversion, particularly the existing customer base, from subscription to consumption?

Yes, that's a great question. First, there are many internal projects that can benefit from this approach without incurring additional costs for extra seats. A significant advantage is that customers gain access to the entire platform. Many features of our platform have additional charges, and we bill incrementally based on usage. For example, our data science tools are utilized four times more by consumption customers compared to those on a seat-based model due to the budgeting process and the need to contact us for additional usage. In contrast, with consumption, users can simply click and start using the features they want. If they find value, they continue using them. This leads to a fourfold increase in usage, which is beneficial as it drives our consumption revenue. Overall, having access to the full range of benefits and the ability to develop applications for various internal projects strengthens their commitment to us, as they recognize the future possibilities we can help them create.

Understood. I really appreciate the thought. Thank you.

Yes. Thank you.

Your next question comes from the line of Eric Martinuzzi with Lake Street Capital. Your line is open.

Yes, I was curious on the billings reset for the year. I was just looking at the midpoint of your prior outlook on billings at $344 million and then comparing that to the new midpoint at roughly $318 million. So about an 8% lower number. And I wanted to try and size that up between new logo and renewal. Did we get more pessimistic on new logo? Or is it the same level of conservatism that we had 90 days ago, and it's really more about the renewals?

Yes. I mean there's definitely an impact to both of those. I would probably, at this point, on a weighting perspective, it might weight a little bit more towards the renewals for the second half of the year.

Okay. You mentioned the historical ramped capacity and it seems like you are pleased with the progress. Can you provide some metrics regarding the percentage of the total sales force that has ramped up compared to 90 days ago and a year ago? This is relevant because it was about a year ago when we first recognized issues with the ramped capacity.

Yes. If we look back a year, we lost about 30% of our overall capacity within a short time, which we needed to rebuild and ramp up. Now, I would say we are relatively well ramped. We are still ramping some of those team members through the rest of the third quarter and into the fourth quarter. We feel comfortable with our current head count and have the capacity to meet our targets. However, productivity levels have not been as high as they have been historically, which presents a challenge. Overall, we are positive about our head count and ramped capacity.

Got it. Thank you.

This concludes our Q&A session and today's conference call. Thank you for attending. You may now disconnect.