Earnings Call Transcript - YEXT Q2 2023

Operator, Operator

Good afternoon, and welcome to the Yext Second Quarter Fiscal 2023 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Nils Erdmann, Senior Vice President, Investor Relations. Please go ahead.

Nils Erdmann, Senior Vice President, Investor Relations

Thank you, operator, and good afternoon, everyone. Welcome to the Yext fiscal second 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, strategy, forward-looking guidance, and estimates of financial and operating metrics, capital expenditures and other non-historical statements as further described in our second quarter earnings press release. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Yext's growth, the evolution of our industry, our product development and success, our management performance, and general economic and business conditions, such as the impact of 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 earnings press release, which is available at investors.yext.com. With that, I will turn the call over to Mike.

Michael Walrath, CEO

Thanks, Nils, and thanks to everyone for joining us today. The second quarter was a solid quarter for Yext and we executed well against our strategy of driving long-term growth through increased operational efficiency, best-in-class product innovation, and improving customer satisfaction. Our revenue for the quarter was $100.9 million and our non-GAAP net loss per share was $0.03, beating the high end of our guidance range by $0.02, driven by our success in streamlining the business and improving our operating efficiencies. These results highlight the momentum we're generating through a realignment of our sales and customer success organizations, while successfully managing costs in order to increase our cash position in the future. As our full year non-GAAP EPS guidance suggests, we expect to achieve profitability in the back half of this year. I'd like to share some observations about our progress toward achieving our strategic objectives and how the rate of this progress factors into our expectations for the second half of the year. First, as we noted in our first quarter call, providing greater clarity around our brand and platform capabilities is a key to re-architecting our go-to-market strategy. During the quarter, we made significant progress against this priority and transitioned the name of our Answers product to Search and our core set of products, Listings, Reviews, Pages, Search and Knowledge Graph together as the Answers platform. We made this change with the launch of our summer release that included 60-plus new features and upgrades across every area of the platform, reflecting our continued commitment to innovation and realizing our vision as the Answers company. To help us continue to strengthen our brand positioning, we announced our new Chief Marketing Officer, Raianne Reiss in late August. Raianne has more than 20 years of global technology marketing experience at companies like AWS, Juniper Networks and more recently Elastic. Raianne will oversee Yext's global marketing organization and be responsible for building and strengthening the Yext brand and increasing demand for Yext solutions globally. Second, we continue to lay the groundwork for future revenue opportunities, landing deals across all of our products. Although it's still early, I'm very encouraged by the breadth and variety of deals we closed during the quarter as they demonstrate that our product suite and value are resonating with customers. Mark will discuss our recent product innovations and share customer wins in a moment. I believe these customer stories are leading indicators reflecting that the ongoing re-architecture of our go-to-market is having an impact and we are well positioned to capture additional opportunities as we continue to improve all elements of our go-to-market motion to drive product innovation and expand customer use across the platform. In conversations with dozens of customers and prospects this quarter, I've observed first-hand the increasing importance to the C-suite of answering their constituents’ questions wherever and whenever those questions are being asked. The individual use cases and priorities of each customer vary from location-based questions on third-party properties to various company-controlled search use cases such as support search, but this is a clear priority across the diversity of customer use cases. While we remain cautious on our outlook, I am highly encouraged by our prospects to drive tremendous customer value. Third, our third quarter guidance reflects our ability to successfully improve our operating efficiencies. We've demonstrated we can operate more efficiently and the team is excited about the changes we are making to drive success for our customers. We continue to make organizational changes in the business that lower our operating expenses by reducing layers, increasing spans of controls, and creating more coordination across our teams. I could continue to believe that we'll drive better customer outcomes and ultimately sell and service our products more effectively by creating a leaner, more agile organization. As we noted on our last call, ARR is a metric we focus on because it provides insight into the performance of our recurring revenue business model and is less impacted by fluctuations in billing and contract terms. Direct ARR continues to be our primary revenue driver. We are working to broaden our relationships with third-party resellers and refocus on our share growth opportunities. As I look at the ARR picture, our total ARR is relatively flat over the last couple of quarters. This is largely driven by significant negative foreign exchange in Q1 and Q2 and weakness in third-party reseller ARR. We are seeing growth in direct ARR, which we believe is the most immediate measure of our overall product-market fit. Darryl will provide more detail on the specific dynamics around foreign exchange and ARR. We will continue to look at the ARR picture conservatively as we work to improve our go-to-market motion and in light of global macroeconomic and foreign exchange conditions. We do see a global trend towards more scrutiny on overall spending and longer deal cycles, and this is reflected in our outlook. Our Q2 results and full year guidance demonstrate that we are executing well against our strategy, while making clear progress on our path to profitability. The team and I continue to operate the business based on the principle that long-term sustainable growth is the result of a more clinical and efficient operating model and I remain extremely optimistic about our ability to capitalize on our large market opportunity. We have installed a lot of change inside the company in the last six months. Change like this is challenging in any environment and even more so with the backdrop of uncertainty in the global macro environment. I'd like to take a moment and thank our entire global team for their dedication and commitment to getting to the right answer for our customers and the company. We continue to believe that our stock is a great investment and this is reflected in our continued share repurchases in Q2. With that, I'd now like to turn the call over to Marc.

Marc Ferrentino, COO and President

Thanks, Mike. As Mike noted earlier, we reached an important milestone in our brand cleanup this quarter and added new features across the entire platform with the early access launch of the Summer Release. I'll begin by discussing how we are rolling out updated branding and highlight the product innovations included in our Summer Release, followed by a few customer success stories. Last quarter, we discussed how we would be working to clean up our messaging and simplify our brand. I am proud to report that we have made major progress on this front. We have revised and simplified our brand positioning, cleaned up our usage of the term Answers by updating the product name to Search and establishing Answers as the name of our platform. We've updated our website, products, solutions, and marketing materials to reflect this updated messaging and brand positioning. We believe that every CEO has an Answers problem. Every day, customers, employees and partners are asking questions about your business in an attempt to find information. Answering these questions is hard for any business since the answers are scattered across different content silos and digital channels are managed separately. With the Answers platform, Yext solves this problem by collecting and organizing your content, then answering these questions through seamless multichannel digital experiences. This updated messaging and branding is being rolled out to the organization throughout Q3. The rollout of our new branding coincided with the early access of our Summer Release. With this release, we have added Google Business Profile listings analytics and more detailed listing statuses, which offers never-before-seen insights into user performance and operating data. We believe these insights will further strengthen the value of our flagship Listings product. We also enhanced our connector framework to allow us to connect to a larger range of internal systems in order to populate the Knowledge Graph. We continue to make great strides with our developer experience with major enhancements to our Pages offering and allowing a greater set of development options to create search experiences. Overall, we have launched over 60 new features across our Listings, Pages, Reviews, Search and Knowledge Graph products. These features significantly upgrade the ability of the Answers platform to create multichannel experiences that are more efficient, cost-effective, and gratifying for the end user. General availability will kick off tomorrow, September 8. As Mike noted, we believe the diversity of our customer wins across listings only, listings upsell, search, and multiproduct solutions are a good indicator that we have the opportunity to expand these partner relationships over time, particularly as we continue to strengthen our go-to-market and customer support teams. Here are a few examples. Texas Children's Hospital was a listings renewal and upsell this quarter; originally, they used listings for several hundred of their care providers. After we were able to demonstrate incremental revenue lift, the customer decided to renew and increase their commitment to approximately 3,000 providers. This is a listings customer that started small and by showing value, we were able to expand our relationship over time, and we see future potential opportunities to expand with other products. Piedmont Health is another good example of a healthcare client that started with listings over three years ago and, seeing that Yext could deliver on both scale and speed, invested in additional products. This quarter, we expanded our agreement with Piedmont Health to include additional providers. In retail, we've expanded our listings and pages relationship with the SPARC Group to include additional brands that we haven't worked with before, including Aeropostale, Eddie Bauer, and Nautica. We also transformed Nationwide Support Hub by adding Yext Search. After Yext was able to successfully deliver on Listings and Pages over the past two years, Nationwide decided to expand our relationship to include support Search. Internationally, HCA UK was a great win for us, as they are one of the largest private healthcare companies in the UK. We landed with search this quarter, helping them solve the support pain point, but with over 3,000 consultants in 240 facilities, we see future opportunities to expand with this customer. In Japan, we signed Tsuruha Holdings, one of the leading companies in the drugstore industry in Japan, which will be using our Listing solution. After a competitive evaluation process, box the Content Cloud selected Yext to transform the search experience of their Zendesk support site. The support search deal is their initial high-priority use case and we see additional room for growth across the business. We have been working with L'Oréal's SalonCentric brand as a Listings client for over a year. This quarter, we expanded across three additional brands that sell their products through salons. Our Search product was able to provide a centralized platform for managing data, integrate with other technologies like Salesforce, and handle non-location-related data to provide additional accurate information about the salons that sell these products. On the partnership front, our partnership with Acquia helps provide a solution for Pegasystems where we will power their search on their support and community sites. And our partnership with Adobe helped us win a site search deal at Booz Allen. On the competitive front, win rates for our Search product were very high. Notably, we beat several of our competitors in new business wins, including the largest global insurance provider based in Europe, Community Health Network, Exponent, and ECCO Shoes. In closing, we're excited about the pace of our product innovation and the diversity of use cases as demonstrated by our customer wins. Now, I'll turn the call over to Darryl.

Darryl Bond, CFO

Thanks, Marc. Our second quarter revenue grew 3% year-over-year to $100.9 million, which was above the high-end of our guidance range. As a result of the stronger dollar relative to countries where we transact in local currencies, second quarter revenue included a negative year-over-year impact of approximately $2.8 million or 3% using a constant currency basis. Excluding the FX impact, our second quarter year-over-year growth was approximately 6%. Unearned revenue was $165.9 million at the end of the quarter, up slightly from a year ago. Annual recurring revenue or ARR was $387 million at the end of Q2, up 2% year-over-year. ARR at the end of Q2 experienced an approximate $10.8 million negative impact from FX year-over-year on a constant currency basis. Excluding the FX impact, our Q2 year-over-year ARR growth was approximately 5% and has grown sequentially since the first quarter of this year. Our trailing 12-month net dollar-based retention, which excludes our small business customers, was 98%. Our trailing 12-month net dollar-based retention for direct, which also excludes small business customers as well as our third-party reseller customers, was 98%. Our customer count, which excludes small business customers and third-party reseller customers, increased 8% year-over-year to over 2,870. Last quarter, we began providing a more detailed look at ARR across our direct customers and third-party reseller customers to help investors measure our future opportunity as well as progress across new customer adoption, renewals and upsells. In the second quarter, direct customers represented 81% of total ARR. Direct ARR at the end of Q2 totaled $312 million, representing 5% year-over-year growth. Excluding the impact of FX, the direct ARR growth relative to last year was 8% on a constant currency basis. The direct sales team is primarily focused on enterprise and mid-market accounts where ARR growth is a good measure of adoption and satisfaction. Third-party resellers represent 19% of total ARR. Third-party reseller ARR totaled $74.9 million at the end of Q2, representing a decline of 6% over the prior year. Excluding the impact of FX, third-party reseller ARR declined 4% relative to last year on a constant currency basis. Turning to non-GAAP results, which are reconciled to GAAP in our press release. Q2 gross margin was 74.5% compared to 75.2% in the year-ago quarter, generally consistent with our second quarter seasonality and we expect to be in the range of our long-term non-GAAP gross margin target of 75% to 80% for the remainder of the year. Q2 operating expenses were $78.6 million or 78% of revenue compared to $79.8 million or 81% of revenue in the year-ago quarter. We continue to improve operating efficiencies, particularly in sales and marketing. Sales and marketing as a percentage of revenue declined to 48% in Q2 from 52% in the second quarter last year and we expect this metric to continue to improve on an annual basis. Our Q2 net loss was $3.9 million compared to a net loss of $7.2 million in the year-ago quarter. Our Q2 net loss per share was $0.03 compared to a net loss of $0.06 per share in the second quarter last year. Cash and cash equivalents were $188 million at the end of Q2, compared to $248 million at the end of the first quarter. The decline in our cash balances was driven largely by continued share repurchases executed during Q2, which totaled $31.6 million. Year-to-date our share repurchases totaled $59 million. We intend to continue to maintain a strong balance sheet and cash position going forward and will remain open to buying back our stock at attractive prices. Net cash used in operating activities for Q2 was $25.2 million compared to $32.6 million cash used in the year-ago quarter. Capital expenditures were $2.2 million in the second quarter compared to $3.1 million in the second quarter of last year as we have returned to a normalized annual capital expenditure run rate following the completion of our real estate expansions. Turning to our outlook. The U.S. dollar has strengthened even further versus the currencies in which we transact our international business, resulting in a larger than expected FX headwinds to both Q3 and the full year of our fiscal '23. Our guidance assumed present foreign currency rates and we expect Q3 revenue to be between $99 million and $100 million. Our Q3 guidance includes the negative impact of $1 million as a result of FX. While this indicates a sequential decline in revenue, when adjusting for FX on a constant currency basis, our business continues to grow. For example, total ARR grew modestly quarter-over-quarter this year when adjusting for the impact of FX on a constant currency basis. We expect our Q3 non-GAAP EPS to be between negative $0.01 and positive $0.01 assuming a weighted average basic share count of approximately 124.4 million shares. For the full year fiscal '23, we expect revenue of $399.4 million to $401.4 million. The total year-over-year FX impact is now estimated to be $8 million, an incremental $2 million since our last earnings call, which is based on present foreign currency rates. Our non-GAAP net loss per share is expected to range from $0.06 to $0.08, a $0.04 improvement from the midpoint of our previous guidance as we expect continued improvement across operating expenses, particularly sales and marketing. Full year EPS assumes a basic weighted average share count of approximately 126.3 million shares. Operator, we are ready to open it up for Q&A.

Operator, Operator

We will now begin the question-and-answer session. Pardon me, this is the conference operator. We seem to have lost the connection with the main speakers, rejoining them momentarily.

Nils Erdmann, Senior Vice President, Investor Relations

Hello.

Operator, Operator

Yes, Nils. Can you hear me?

Nils Erdmann, Senior Vice President, Investor Relations

We can hear you now.

Operator, Operator

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

Naved Khan, Analyst

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

Michael Walrath, CEO

Thank you for the question. I will let Darryl address the net dollar discussion. Regarding your inquiry about sales and marketing efficiencies, particularly concerning headcount, I want to emphasize that we are not going to manage the business solely based on capacity. Our focus is on enhancing sales productivity, and we plan to reinvest in the business once we achieve the desired productivity levels. We are indeed driving efficiency throughout the organization, which includes more than just the number of quota-carrying staff; we are identifying efficiencies across the board. Therefore, I won't be providing a specific quota-carrying number as it's a dynamic figure that we continually assess in light of our sales teams' effectiveness in the market. Much of our branding and positioning work is aimed at delivering improved results through our channels. The key takeaway is that we are approaching this from a productivity perspective rather than just a capacity perspective.

Darryl Bond, CFO

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

Naved Khan, Analyst

Got it. I have a quick follow-up. Regarding your recent appointment of Raianne Reiss, I believe that’s an excellent hire. Could you share your thoughts on how you see her leveraging her background in relation to Yext’s product offerings? Do you view this impact primarily in the Search offering, or where do you see the most opportunity?

Michael Walrath, CEO

Yeah. So, we're absolutely thrilled that Raianne has joined the company, she is about two weeks in the job. So we're going to give her a little time to get oriented, but she brings 20 years of technology marketing experience to the table, AWS, Juniper, and Elastic more recently. And she is a complete marketing executive, who will oversee our whole marketing organization. We are not thinking about things from a Search being separate standpoint here anymore and I think that's reflected in the positioning. So what we're excited about and I think what Raianne is excited about here is that there's a complete platform to sell here, it's keyed in on solving some of the most important problems of the C-Suite, which are answering their constituent questions anytime, anywhere. And between our brand positioning work, which Raianne will continue to advance as well as really importantly the demand generation background that she has and the ability to drive that we just really saw she actually bring a lot to the table here.

Naved Khan, Analyst

Understood. Thank you.

Arjun Bhatia, Analyst

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

Marc Ferrentino, COO and President

All right. Hey, this is Marc. Thanks for the question. So on the rebrand, what we're doing is expressing the total value of the platform more clearly. In the past, we've focused on individual products; now we're viewing things in a way that emphasizes experiences across multiple channels. We have a digital experience platform that enables you to deliver your solutions across various channels. To do this effectively, it's important to adapt accordingly. From a pricing perspective, we shifted to a capacity-based pricing model two years ago in anticipation of this move toward the platform. Therefore, there's no need for change at this time, as we already aligned with that significant shift a couple of years ago.

Michael Walrath, CEO

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

Arjun Bhatia, Analyst

Yes, sorry, that was correct. Just how long will it take before we start seeing a broader impact from some of the initiatives you're implementing today?

Michael Walrath, CEO

It's Mike again, and I would say that this Friday will mark six months since I started in this role. The first thing I focused on was organizing the team, which took some time, and the second was the restructuring and efficiency efforts we've been implementing. I still believe that the more efficient operation we're developing, which you can start to see reflected in our expenses, will ultimately lead to better results through a more coordinated, streamlined, and agile organization. However, it's important to recognize that our sales cycles exceed six months. Therefore, our ability to significantly change bookings and retention will take longer than our ability to adjust expenses. What we're observing in the business are early signs of improved coordination and better management of our opportunities, but it's still quite early in the process. As we move into the next six to twelve months, I expect we will begin to see the benefits of all this work.

Arjun Bhatia, Analyst

Understood, very helpful. And then you talked about some of the channel, the progress in the channel that you're making. I'm curious, what is the reach today, like, I know it's 90% of ARR, but as you think about focusing on as an issue in the future here, do you want more partners, do you want deep relationships with existing partners, is there a potential for Yext size to get involved here, just walk us through how you're thinking the partner strategy?

Michael Walrath, CEO

We are experiencing some challenges in the partner channel, particularly outside of the reseller segment, where we primarily engage with small and medium-sized businesses. We believe there are more obstacles in that area compared to the enterprise market. However, we see potential for improvement with our reseller partners, which would allow us to create more opportunities and enhance the value of those relationships. We are dedicated to exploring ways to drive value through product innovation and by establishing different structures and business relationships with our third-party resellers. Additionally, we are broadening our perspective on what our partnership ecosystem looks like. Marc and his team have been actively engaging not only with reseller partners but also with a diverse range of other partners, all of which is vital to our future strategy.

Arjun Bhatia, Analyst

Understood. Thanks for taking the question, guys.

Wyatt Swanson, Analyst

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

Michael Walrath, CEO

Yeah. So, I'll start, it's Mike. And then I think, let Marc talk about a bunch of the product stuff. So what we saw in Q2 was gross retention in the business in the low 80s, which is consistent with what we saw in Q1. And as a reminder, and Fred, I wasn't maybe clear enough about this on the last call. The way we calculate gross retention when we talk about it in this context is it's the grand total of contracts that are up for renewal in a given quarter is the number and then what we actually renew. And so we're not happy with that number the last couple of quarters in the low 80s. But we have a much smaller set of contracts in Q1 and Q2 that are up for renewal. And so, there is no higher priority for us in the business than driving performance in this number. And a lot of that comes down to happier customers which I've talked about a lot, product enhancements, which Marc can talk about are a big part of that process as well.

Marc Ferrentino, COO and President

In the last two releases, the Spring Release and Summer Release, we have continued to innovate on the Listings product, which has been a core flagship product for a long time. This release included two significant features that I mentioned earlier, focusing on the Google Business Profile analytics. This enhancement now provides keyword-level insights into how our brands are performing, showcasing the overall value of Listings beyond just operational metrics like status tracking. With each release, we have consistently evolved and improved the Listings product. I believe that in the last quarter, we have done a better job of communicating these new features to our customers, and feedback has been positive. Many of our customers have expressed appreciation for the insights and the targeted product updates that highlight our progress in this area.

Wyatt Swanson, Analyst

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

Michael Walrath, CEO

I'm happy to discuss that. We've been using our balance sheet to invest in our own stock, which we believe is the best investment, and we will continue to pursue that moving forward. From an M&A standpoint, I think it’s something to consider for the future. However, at this point, we have a lot of work to do to strengthen our go-to-market efforts and complete the initiatives we’ve started to make our operations more efficient. Therefore, I wouldn't say that pursuing M&A is a top priority right now. There may be opportunities that arise, and we will evaluate anything that seems beneficial and practical, but it’s not currently a focus for me or the team.

Wyatt Swanson, Analyst

Got you. Okay. Thank you.

Operator, Operator

The next question is from Ryan MacDonald with Needham. Please go ahead.

Unidentified Participant, Analyst

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

Michael Walrath, CEO

We are noticing that customers are being more careful in assessing their costs. Procurement cycles seem to be taking longer, and many businesses are closely examining their spending. We observe that there might be an elongation of sales cycles, particularly in Europe compared to the U.S., although most global businesses are reevaluating their expenses. On a more positive note, this scrutiny is leading to a preference for partners who can offer multiple solutions and platform-based approaches instead of just individual point solutions. We're also focusing on collaborating more closely with our best partners to reduce overlap and duplication. This is beneficial for us as our platform addresses a wide range of customer needs, and we believe any consolidation in focus will advantage us over competitors who lack a comprehensive platform.

Unidentified Participant, Analyst

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

Michael Walrath, CEO

I believe there has been a noticeable shift in the hiring landscape, which has cooled down significantly. Consequently, hiring for our quota-carrying positions is currently not a top priority as we focus on ensuring that our existing representatives are productive and that our systems are functioning effectively to drive production. My response to the question about quota-carrying representatives is tied to our assessment of their performance. We will concentrate on the number of quota-carrying representatives once those we have are meeting our production expectations. We plan to continue adding talent, and I think the current environment will facilitate that, but we aim to ensure our foundational processes are solid before we pursue aggressive expansion.

Unidentified Participant, Analyst

Great. Thank you.

Operator, Operator

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