Welcome to Freshworks First Quarter 2025 Earnings Conference Call. At this time participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Joon Huh, Head of Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to Freshworks first quarter 2025 earnings conference call. Joining me today are Dennis Woodside, Freshworks' Chief Executive Officer and President; and Tyler Sloat, Freshworks' Chief Operating Officer and Chief Financial Officer. The primary purpose of today's call is to provide you with information regarding our first quarter 2025 performance and our financial outlook for our second quarter and full year 2025. Some of our discussion and responses to your questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our management's beliefs about our business and industry, including our financial expectations and estimates, uncertainties in the macroeconomic environment in which we operate and market volatility, the timing of future repurchases of our Class A common stock and certain other assumptions made by the company, all of which are subject to change. These statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks include but are not limited to, our ability to sustain our growth rate to innovate, to reach our long-term revenue goals, to meet customer demand and to control costs and improve operating efficiency. For a discussion of additional material risks and other important factors that could affect our results, please refer to today's earnings release, our most recently filed Form 10-K and other periodic filings with the SEC. Freshworks assumes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this call, except as required by law. During the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures for historical periods are included in our earnings release which is available on our Investor Relations website at ir.freshworks.com. I encourage you to visit our Investor Relations site to access our earnings release, supplemental earnings slides, periodic SEC reports, a replay of today's call or to learn more about Freshworks. And with that, let me turn it over to Dennis.

Thank you, Joon. Freshworks had another fantastic quarter. We outperformed all our financial metrics for growth and profitability in Q1. We continue to see that our uncomplicated customer and employee service solutions are winning against outdated legacy software vendors. Companies are choosing our AI-powered solutions to remove complexity, improve efficiency and unlock growth. We continue to demonstrate our ability to drive growth and profitability for the business. In Q1, revenue grew 19% year-over-year to $196.3 million and we delivered a non-GAAP operating margin of 24% and adjusted free cash flow margin of 28%, beating our financial estimates once again. Adding our revenue growth and adjusted free cash flow margin for Q1, we achieved a Rule of 47 in the quarter. In driving profitability, we significantly expanded our non-GAAP operating margin by more than 10 percentage points compared to last year. We added over 1,000 net customers in the quarter, including large customers such as Freudenberg Group and All3Media. We also expanded with our customers as we maintained a net dollar retention of 105% on a constant currency basis, in line with the last 2 quarters. We ended the quarter with over 73,300 customers. We've continued to deliver strong revenue growth each quarter and drive profitability as we execute on our strategy. As a reminder, our 3 strategic imperatives are: one, investing in employee experience, or EX which is our largest, fastest-growing business in ITSM, ITAM, ITOM and ESM; two, delivering AI capabilities across our products and platform that drive productivity improvements for our customers; three, accelerating growth for our customer experience or CX solutions. Here's how ongoing execution of our strategy led to strong Q1 results. First, on employee experience, our focus to drive upmarket growth is paying off. Q1 was another strong quarter for our EX business. We surpassed…

Thanks, Dennis and thanks everyone for joining on the call and via webcast today. As you just heard, we had a strong start to the year in Q1 with robust financial performance that reflects our operational discipline and focused execution of our strategic initiatives. We once again exceeded our revenue growth estimates and improved our profitability measures as we expanded our non-GAAP operating margin nearly 300 basis points quarter-over-quarter to 24% and grew our adjusted free cash flow 43% year-over-year to $55.4 million which resulted in a strong adjusted free cash flow margin of 28%. For our call today, I'll cover the Q1 2025 financial results, provide background on the key metrics and close with our forward-looking commentary and expectations for Q2 and full year 2025. As a reminder, most of our discussion will be focused on non-GAAP financial results which exclude the impact of stock-based compensation expenses, restructuring charges and other adjustments. We will also talk about adjusted free cash flow which excludes the cash outlay related to the restructuring costs. First, in contrast to the prior quarter, FX changes were a tailwind in the quarter, driven by a weaker U.S. dollar. While Q1 revenue impact was minimal, there was a 1 percentage point positive impact to ARR growth or a $7 million increase to ARR. During the call today, we will include constant currency comparisons to provide a clear view of our underlying business trends. Starting with the income statement. Q1 total revenue increased to $196.3 million, growing 19% on an as reported and constant currency basis. Professional services revenue contributed $2.1 million in the quarter, reflecting the ongoing shift of services revenue to our growing partner network. Our EX business has increased to over $420 million in ARR, representing growth of 33% year-over-year for both as-reported and…

[Operator Instructions] And our first question comes from the line of Rob Oliver of Baird.

Appreciate it. Dennis, it seems like from the early software reports here that the resiliency of software as a business model but also as adding efficiency here in tough times is kind of playing out. And it sounds like that's really playing out for you guys. So a couple of parts to my question. One is that Device42. It seems that's now really driving platform wins. Last quarter, you said that the pipeline there had doubled sequentially. And I don't know if I caught a comment relative to pipeline, so I would love to get an update there. And then on CX, I know you made some changes in CX as well and it sounds like that's really starting to pick up also. And I'd be curious if you are still seeing in that business, both growth in agents as well as seats or if you're starting to see some of the efficiency created by the agent purchases start to offset some of the seat purchases. I realize that's a lot.

Thanks, Rob. So let me just go tick through those. I think first of all, in terms of the overall demand and our positioning, we did not see any material change in demand in Q1 from Q4. Trend is pretty much the same. I would say, beginning part of the quarter, this quarter, same thing. And if you think about our value proposition and what customers need in tighter times, businesses are going to get -- need to get more efficient and our AI solutions absolutely help them do that. We've got over 30% improvement in productivity from Copilot. We're seeing deflection rates of 50% to 70% from AI Agents. So that's a positive for us. They want lower cost overall. And if you look at our positioning, our products in general are about half the total cost of a ServiceNow deployment or a Zendesk deployment or a Salesforce deployment. And that's when you take into consideration the time it takes to get the value, consultants you need to get a product up and running and then maintaining the product over time. So as those deployments come up for renewal, we're seeing it in our big wins. Customers are looking for an alternative. They're looking to bring us in and we're winning our fair share of deals there. And they want uncomplicated solutions that scale and that are enterprise grade and we've clearly built that. So regardless of the demand environment, we think we're going to be in good shape. On Device42, we had a great quarter for Device42. I would say that the majority of the business there is coming from us selling Device42 into our existing base at renewal for upsell as well as new deals. It's helping -- we did the -- we bought the company to help us win new business and we're seeing that. Two of our top 5 deals were Device42 deals and to enhance the value proposition for our existing customers. So really the best quarter in terms of number of deals that we've seen. We've really only been selling together for 2 quarters, 2.5. But increasingly, it's an integrated sale which is why, going forward, we're not really going to be speaking about it as a completely separate business. And then on the third point, CX, we continue to see agent count go up. We continue to see adoption of our AI solutions increase both for Copilot and for AI Agent. We're very optimistic about where AI Agent is going. Insights, as I mentioned, has over 500 customers in the beta. I think we had close to 1,000 customers at the latest point. So we're pretty excited about how those products are going to continue to add value for us. And I'm really proud about the investment that we've made and the results we're seeing in AI.

Our next question comes from the line of Elizabeth Porter of Morgan Stanley.

You mentioned some interesting OpEx efficiencies driven by some of the internal use of AI. I was wondering if you could provide kind of more granular color on what you're seeing and how you might be changing your own internal spending plans, if at all, based on what you're -- on the efficiencies you're seeing today? And then just lastly, just confidence in expanding the margin in that uncertain macro?

Sure. Thanks, Elizabeth. So we've been on an AI journey for a number of years now. And today, we have over 70 instances of AI products, our own products, third-party products that are enhancing our team's productivity and helping drive productivity and margin. I mean, if you look back at the last -- we were looking at this earlier, last 2 years in terms of our cash flow margin, we've gone from sort of mid-single digits to where we are today over the last 18 to 24 months. And if you look at headcount in aggregate, headcount has actually come down by close to 20%. Now none of that's explicitly driven from any single project. It's really about optimizing the business overall but AI plays a huge part in that. We're using AI and engineering for coding or using it all throughout our support operations. We're seeing the kind of high deflection rate in the 80-plus percent range for certain classes of queries. We're seeing our Copilot product assist us in areas like billing and customer support. So we're going to continue to press AI across our entire operation and we think that, that will continue to drive margin expansion and you see that in the guide. And Tyler, anything else that you would add on that?

Yes. I think your second part of your question, Elizabeth, was just spending in general. We've always prided ourselves on being relatively efficient. In fact, we took actions last year to really drive a lot of efficiency into the business. And we're going to continue to do that. I think we might be a little bit of an anomaly that we said, hey, we expect some increases in spend and some timing into Q2 and 3 and 4. And part of the reason for that is we actually think when times get really uncertain, we actually -- that might be an advantage for us. And we will lean into opportunities to try to grow faster, specifically investing in sales and marketing.

Our next question comes from the line of Scott Berg of Needham & Company.

Really nice quarter. I have two. I don't know if Dennis or Tyler want to take it, but there was a quote in your press release talked about new global -- have a new global partner program with expanded offerings for resellers. I didn't hear much on the commentary on that. Can you help us understand maybe what changes you're making to your partner program and any potential impacts for fiscal '25 here?

Yes, I'll take it. So we made a change to the program overall at the request of the vast majority of our partners, where we're moving to something that's much more industry standard where we have -- we basically have a transfer pricing model for our resellers and then they can build services around that. They can price as they wish. If they want to price on a per seat basis, they can. If they want to add services into that, they can. And that's what we were hearing that we needed to do across the board to create more opportunities for our partners to build businesses on an ongoing basis around our products. I think the things that we're seeing, we continue to see a lot of interest from partners across the board that are bringing us into mid-market companies. So in Q1, we signed a deal with Unisys, which we've already been working with them throughout the quarter. We've got a nice pipeline of mid-market customers for our EX set of solutions there. And so I think we have a lot of opportunity in partners. I'm excited about where that's going and we'll continue to invest there.

Got it. Very helpful. And then your operating margin guidance, Tyler, I know you talked about timing of some expenses was favorable in the quarter, moving to the back half of the year. The operating margin step down in Q2 is, I guess, a little bit more significant than anything we've seen in the model the last several years. Is it purely just based on timing? Or are there some other maybe investments going on in the model that's maybe worth noting in the quarter?

Yes, it's a combination of both, Scott. I think there's always timing from Q1 to Q2 but mainly changes in our compensation. So our annual focal process hits at the end of Q1. So we get a kind of an uplift. And so that happens every single year. Secondarily, we did have some timing just on spend and some expenses that just got pushed out of Q1 into kind of Q2 in the back half. Some of those are related to sales and marketing. And so it's nothing -- we're really actually quite pleased with how we're doing from the efficiency perspective. We had a really significant beat against what our forecast was for Q1 but some of that was timing.

Our next question comes from the line of Pinjalim Bora of JPMorgan.

Congrats on the quarter. Dennis, maybe talk about the -- I think I heard you launched Freddy Insights at the end of Q1. I don't think we are -- at least I'm not aware of kind of the pricing for that product. Maybe talk about how you're thinking about pricing and monetizing Freddy Insights. And overall, if you take a step back, it seems like you're being successful fairly on the AI side. When do we start hearing kind of the contribution from AI to the business overall to the kind of the growth of the -- growth in ARR or any of the business metrics? And I have a follow-up for Tyler.

Thanks, Pinjalim. So let me just refresh you on the overall pricing model for AI that we have today. So we have AI Agent and AI Agent, most of the queries today are coming on the CX side. And for CX, we monetize on a consumption basis. Remember, you buy session packs, 100 session packs and you -- or 1,000 session packs and you buy -- and as you consume them, you purchase more. For AI Agent, that's an adder, a seat adder, the sticker price is $29 a seat per month on top of the regular license price. And then for AI Insights, we're incorporating that -- today, that's available in beta for EX. We're incorporating that into our enterprise plan to encourage adoption of the enterprise plan which, of course, is the highest price plan. So we expect that we'll have a mix of monetization methods for different aspects of AI. We also expect that we'll experiment with different methods as we hear feedback from customers. Some customers appreciate the certainty of a seat license model. Others are much more -- are comfortable with consumption because they are used to that in other services. I think in terms of when will we be able to talk about it separately -- right now, AI is such an integral part of our sale. People are buying or making decisions on switching from a legacy provider without really having a good understanding of the AI road map and AI capabilities. So it's really driving the business overall. And I think we'll have to give some thought into how we -- if we do break it out, how we talk about it. And we'll have more to say in September at the Investor Day.

Understood. Tyler, on the NRR dynamic, it seems like it's been stable. That's great to see. But when I think about kind of the 4-quarter average calculation on that, you're kind of giving up some of the higher numbers but still able to maintain a stable NRR which makes me feel like your in-quarter probably is expanding faster than your reported number. Any way to understand what is that in-quarter at this point? Or am I theoretically correct in that direction? And ITSM, I think you talked about 110% a couple of quarters back. Has that been holding up in that general zone?

Yes. So Pinjalim, yes. So we obviously -- well, you know how it's calculated, right? It's a 4-quarter look back on the net dollar retention. We continue to make really good progress on churn and that's just kind of been steady. You're right. On net dollar retention, we have kind of seen at level. 105 was a little bit better than what we had forecasted. We had said 104 -- we're saying 104 to Q2. Again, it's an estimate of -- we know the churn. We have 3 quarters of data but the expansion rates and churn are just the ones we have to wait for in the quarter to get to. But in general, we're actually pleased with the progress that we've made and we see some good results. Expansion motion on agent addition, we've been talking about that for years in terms of that coming down. And we're starting to see offsets in terms of the other products that we have to bring to our customers to offset the agent addition expansion which is also going positive. The second piece of your question, Pinjalim, can you remind me?

The ITSM...

I'm sorry, the byproduct. We haven't updated that in the last couple of quarters. That's again something we will talk about at Investor Day in terms of looking kind of deeper into the byproduct information, both and net dollar retention will be part of that.

Our next question comes from the line of Alex Zukin of Wolfe Research.

I guess, Dennis, I mean, outside of the mentioning maybe some pull forwards in billings or pull-ins in billings that you saw, you really aren't seeing any of the macro changes yet. So I guess why is that. How do you see that playing out? What are you may be hearing in conversations around macro for the full year? And Tyler, maybe just go a bit deeper on those pull-ins in -- were they from Q2? Were they from later in the year? And maybe just qualify how, if at all, you've included kind of more risk adjustment around macro uncertainty in the guidance?

Thanks, Alex. So look, first of all, we operate in a must-have categories. If you have a customer support team, if you have an IT team, you have to automate their operations. You have to bring AI in and get as much out of the people as you can. And it's just not optional. So a lot of software categories are optional. And so it's easier to defer decisions or not have something or survive with whatever old legacy system you have. So I'd say that's one. I think the second is, a lot of our competitors are way more expensive. And you see that with these big wins that we have like Travis Perkins which is equivalent to the Home Depot of the U.K. It's a big, sophisticated customer. They were a customer of ServiceNow for 10 years plus. And they are looking for something that's easier for them to manage themselves without having experts on staff that just understand the system and can baby sit it. And that's what our product does. You can manage it without the kind of overhead that other systems require. So when they're looking to save money, when they're looking to become more efficient, of course, they're going to look at alternatives to their existing providers. And 3 years ago, 2 years ago, maybe when they signed their renewal, our product was not as robust and mature as it is today. So we actually think that, that's a great position to be in going into kind of a tighter time. And I think that, that's just true across the business. Now that can change. But as of now, we really didn't see anything that's recognizable that indicates that the macro is having a big effect on us so far.

Yes. And the question on kind of the timing of billings, Alex, we say, hey, we got about 2% benefit in Q1 from both overperformance but also pull-in and that pull-in really is from Q2. Some of that stuff happens every quarter. It really has to do with kind of when expansions are happening during contract terms and things like that and that is relatively unpredictable and then sometimes early renewals. And that takes away from a little bit of the forecast from Q2. But for the full year, we're still seeing the same. We guided to the same number in terms of the billings forecast that we had already done coming into the year. The second part of that question is what's derisked. We're really -- everything that we're talking about is based on the full information that we have today and that would include kind of any of the uncertainty that's out there. Now if things get considerably worse or buying behaviors change from anything new, then obviously, we'll update that but we're not seeing that right now.

And our next question comes from the line of Brent Thill of Jefferies.

Can you address the market strength? You called out a number of these enterprise wins. What are you seeing? How would you characterize the pipeline? And just give us an overall sense of what you're seeing and I had a quick follow-up.

So the pipeline looks good. Again, you see it in the numbers from last quarter or just some of the examples in terms of our wins. Kayak, they replaced Jira. Kent State, big public university, they came in with Freshservice. As I said, Travis Perkins replaced ServiceNow. We had a big U.S. technology player, [indiscernible] ServiceNow. They replaced them. AMEX Business Travel upgraded to D42. Coherent, Alterra Mountain Company, ChampionX, all these are replacing legacy players with our products. So we've got great momentum. And if I look at our pipeline, it looks kind of like the last quarter, right? It's strong both on the upsell and on the new business side. So -- again, I'm not really seeing much change from what we started seeing Q3, Q4 last year. It's just building. And I think for that mid-market customer, like the ideal is 5,000 person but it ranges up to 20,000 people. That segment is not well served by the big enterprise players or the legacy players. They haven't historically had a choice. Now they do. And I think that momentum is starting to build. The customers are starting to talk to one another. They're starting to recognize that there is a choice out there and that we're it. And so that's fantastic on that side of the business and we look to continue that.

Okay, great. And then, just a quick follow-up. Some of your partners have called out some changes in the sales team with Abe departing. Can you just refresh us on what is happening there? Is this a distraction? How do you think about managing that transition?

Sure. So Abe left the company earlier this month for personal reasons and we respect that. And throughout the -- he landed the quarter, obviously, we did well in Q1. Ian Tickle, who is our Head of International, he has stepped in on an interim basis and has picked up the mantle with no real loss. He's been a fantastic leader who joined us last year. He was the CRO of Domo and has had a long career in enterprise sales. So we continue to see the progress that we've made in the go-to-market motion across the board. And we really didn't see any disruption and I don't anticipate any.

Okay. Dennis, I just want to clarify, this change, this is an interim change and you're looking for a full-time head of sales. Is that correct?

That's correct. That's correct.

Our next question comes from the line of David Hynes of Canaccord Genuity.

Dennis, AI touch [ph] on new deals is obviously doing really well based on the stats you've shared. Maybe you could touch on the strategy for driving even better adoption in the installed base, particularly on the CX side and just how you think you're positioned for that opportunity?

Yes. So I think -- it's -- on the one hand, we can look at the business and say, hey, 2,700 customers, up 500 year-over-year for Copilot, 1,500-plus per AI Agent. But what I say, I keep reminding the team, we've got 73,000 customers. So there's a long way to go. I think part of that is just how businesses are adopting AI. It's very similar to any other new technology where you're going to have the early adopters who are comfortable experimenting and they're comfortable trying new technology. Also, those that have a bigger opportunity are the ones to jump in first. Like PhonePe is a big customer of ours in India that's a big early adopter of all things AI. And then you're going to have other customers that have other issues, regulatory issues. They want to get comfortable with how we're treating information. They want to test the product. They want to deploy in a POC before rolling out more broadly. So we're working through all that with our customers. And where they're seeing success, they're broadening out and broadening their deployments and that's really the work that's ahead of us as a team. So I think that adoption curve, we're going to continue to work on. We've got several exciting products that are coming out in June at our June 11 Refresh Event. There will be a virtual -- for those who can't attend, the event is going to occur in London but there'll be a virtual version of it on the 12th, where we'll share our -- a bunch of new products introductions which we think will accelerate AI adoption even further across that base. And then every quarter, we're getting better at selling in AI, at demonstrating success. We have more and more success stories to talk about with prospects and with our existing customers who haven't yet adopted. So I think it's really just a matter of time before we kind of continue to drive those numbers up and see broader and broader adoption of our AI products.

Okay. Makes sense. And then, Tyler, a follow-up for you. Do you have an organic growth rate on that EX ARR number? I think you've shared that with us in the past. I'm not sure I caught it this quarter.

Yes, David. Coming into the year, we actually said we're not going to be breaking out organic and inorganic. And the main reason is actually a positive reason that the Device42 kind of co-sell motion has been doing really, really well. And so a majority of the business that we're closing now is all combined. And so some of those numbers don't make sense to break out anymore. We called that out coming into the year that kind of Q4 was the last time we're going to do that.

And our next question comes from the line of Patrick Walravens of Citizens.

And let me add my congratulations. So Dennis, I had another CEO yesterday, tell me something, I'd love to hear your reaction to it and see if this is similar for you. He said he's never seen anything go as fast in technology as AI. And 4 months ago, a lot of the functionality was served like science fiction but now it's table stakes. And in particular, he said the RFPs that are coming through now have got all these AI functionality requirements in the RFPs that weren't there 4 months ago. Are you seeing the same sort of thing in your space? Do you even have RFPs?

We absolutely do have RFPs. So typically, in CX or in EX, any customer that's looking for a new solution to replace their existing solution or maybe they don't have a solution, every customer is asking about AI because they understand it's integral to what these platforms need to deliver. And yes, we do have lots of RFPs all the time. And I don't know the exact number but I would hazard a guess that 80% plus, AI is a consideration. I can't remember a conversation I've had in a sales situation or an upsell where AI is not a topic that our customers want to understand. They want to understand the road map. They want to understand what we're going to be offering and how we can help benefit their business over time. It's absolutely table stakes. And that's why I'm excited about how we've been able to monetize it here and how we've been able to drive from a year, 1.5 years ago where we first launched that Copilot SKU into GA, we've been able to drive pretty broad adoption. So it's totally table stakes in this space and I suspect most of the software.

All right. Great. And then the follow-up is I had a different CEO tell me that one thing that's made life more difficult for him is that he used the word vaporware from his competitors. Obviously, they're pitching his own book a little bit there. But he's like, it's just gotten so noisy because everyone is using the same words, everyone is talking about Agentic AI and Agentic [ph] workflows. And we really have it but other people don't really have it but it's just gotten hard because it's really noisy. It sounds like you guys are managing through that. But are you seeing the same thing in terms of the noisiness? And how do you get through it?

Well, I think a couple of things. So for our existing customers, we are one of the first places that they're going to turn for AI related to service automation. And that's the job of our teams to make sure that they understand what solutions they already have, or they already have access to, in some cases, they're already paying for that they can get value from. And so there, we have an unfair advantage in that kind of noisy environment. For a new customer coming in, again, think about the motivation for a new customer coming to us today, whether it's CX or EX, they're not satisfied with their existing platform typically for some reason. And they're looking for a modern AI-first platform that is going to help them scale. Typically, these decisions are multiyear decisions. You're not going to want to switch your ITSM or your customer support platform every year. And so they want to understand what's the history of innovation, what kind of innovation should I expect going forward? Do I believe in the road map? Do I believe they can deliver. They're going to talk to customers that are seeing real value from the AI. And that's why the fact that we've got 1,500 on AI Agent, close to 1,000 on Insights and 2,700 on Copilot. That is a huge advantage for us now because we have real customers with real value, tons of case studies that we can point them to. And what I do is I just connect them with the CIO. Don't take my word for it but to talk to our customers because they're seeing the value. So we think we're at that point in terms of our scale where we have a real advantage over some start-up coming in that has, like you said, 1 or 2 customers and a demo. And that's where we have a real advantage and we're seeing it.

Our next question comes from the line of Brent Bracelin of Piper Sandler.

Dennis, new customer logos, I think, more than doubled what you saw during Q1 last year. You've had now 3 quarters where the net retention trailing metrics stabilized in period improved. How much of the strength that you're seeing here would you attribute to the external environment getting better versus maybe some internal things, company-specific things that you're doing around go-to-market, new product, AI? Just trying to better understand the strength that you kind of saw the last 2 quarters? And how much of it is external versus internal?

Yes. So I've been CEO now for a little under a year. And I wouldn't -- I think the external environment has been somewhat constant, if not maybe there's -- if you just read the headlines, negativity in the last couple of months. But I don't think it's the external environment that's changed. We've very much been focused on continuing to move the company upmarket and to build products that appeal to that mid-market customer, again, 5,000 to 20,000 employees, not well served by the existing incumbents. We built the go-to-market to go after that, build partner network to go after that. That's paying off. If you see it in ARPA which is up meaningfully year-over-year as well as customer count. So that's one. And I think the second focus internally that we've had is on creating AI products that actually work out of the box, easy to use, easy to deploy and fast time to value, consistent with our overall value proposition. And that's resonating as well. You see it in all the monetization metrics that I was sharing before -- the customer count that I was sharing before. So those 2 things, I think, matter more than the environment. I don't think the environment has gotten better in the last 12 months. And there are signs that going forward, it might get worse.

Very clear there. And then, Tyler, just a quick follow-up for you. OpEx has actually been down on an absolute basis for 2 consecutive quarters that helped push margins above 20% here for 2 quarters. But you did mention the change and appetite to maybe lean in as this external environment maybe gets a little more challenging, try to accelerate share gains. Walk me through how closely you're going to be managing expenses. It sounds like you have an appetite to lean in but also an appetite to watch things closely. Are you watching things on a monthly basis or weekly basis? Just walk me through where you're going to lean in and how closely you're watching it?

Yes, we are watching pretty closely. I think some of the bets that we plan to make, they don't have overnight returns. So those are things we're laying a groundwork versus some of the pipeline things we can do actually have pretty near-term returns. And so we'll place bets across the field. Now I said there's -- hey, there's 2 things happening. One is timing, right? So we had some expenses that are just getting pushed but we're still going to make them. The other is that we have our annual compensation kind of uplift that kicks in, in Q2. The lean-in part that I was talking about is, yes, we do think that when times are kind of volatile and then companies are really looking to have the must-have products but at a great value, this is our opportunity to lean in. And so we will continue to invest in sales and marketing but we do look at making sure we're trying to make efficient investments and we'll be monitoring that on a regular basis.

Great. Thank you so much everybody for joining us and we'll see you next time. Thanks.

Thank you. This concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.