Good afternoon, and welcome to Zuora's second quarter of fiscal 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star followed by one on your telephone keypad. If you would like to withdraw your question, again, press star one. With that, I would like to turn the call over to Luana Wolk, Head of Investor Relations for introductory remarks. Thank you. Good afternoon, and welcome to Zuora's second quarter fiscal 2023 earnings conference call. On the call today we have Tien Tzuo, Zuora's Founder and Chief Executive Officer, and Todd McElhatton, Zuora's Chief Financial Officer. Robbie Traube, our President and Chief Revenue Officer, will also be joining us for the Q&A session. During today's call, we'll make statements that represent our expectations and beliefs concerning future events that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be relied upon as representative of our views as of any subsequent date. We disclaim no obligation to update any forward-looking statements or outlooks. These statements are subject to several risks and uncertainties that could cause actual results to differ materially from expectations. For further discussions of the material risks and important factors that could affect our financial results, please refer to our filings with the SEC. Finally, our discussion today includes non-GAAP financial measures. You can find the details in today's press release, which includes a reconciliation table of selected GAAP to non-GAAP measures that reflects the adjustments made to both our current and prior year's results. Our results, press release, and a replay of today's call can be found on Zuora's Investor Relations website at investor.zuora.com. Now, I'll turn the call over to you, Tien. Thank you, Luana, and thank you everyone for joining us today. Welcome to Zuora's second quarter fiscal 2023 earnings call. Q2 was another solid quarter for Zuora. We exceeded guidance across all of our key financial metrics, including subscription revenue, total revenue, and non-GAAP loss from operations as we continued to execute against the long-term plan that we have laid out. There's a lot to cover this quarter. We've got an exciting acquisition that we just announced, the first step in adding acquisitions to our land and expand strategy side by side with the organic innovation machine that we have built. There's the impact of foreign exchange rates, especially on cash flow. I know there are general questions on how the macroeconomic environment is affecting us. Later in the call, Todd will walk through how we're thinking of all this from a financial impact perspective. Let me start with the big picture. The net net is that we have built a very resilient business, and I feel confident in our ability to navigate the current macroeconomic climate. Not only do we have a recurring revenue business, our customers do as well. If the recurring revenue is a resilient business model, we actually have a double layer of recurring revenue protection. More than that, what we do is mission-critical for our current customers. It's an area that they are continuing to invest in. Finally, the shift to the Subscription Economy continues on and is strategic to the growth prospects of companies in a variety of different industries. The forces driving demand for what we do continue to be intact. Against that backdrop, the strategy that we laid out 18 months ago is proving to be the right strategy. First, we said that we would focus on the best companies in the Subscription Economy, enterprises north of $1 billion in revenue, as well as the fastest-growing companies who are on track to become billion-dollar companies. Our experience told us that this segment of the market has lower churn and the resources needed to invest in growing these subscription businesses, which ultimately are scaled businesses. This has been the right choice. In Q2, we saw our lowest churn rate as a percentage of entering ARR since going public in 2018. In Q2, we saw our customers doing even more with us, adding more products, and driving more volume through our system. In fact, if you look at our cohort of customers a year ago with annual contract value above $500,000, this cohort has grown by over 40% in ARR year-over-year. You see our biggest customers are going all in with us. Today, we have over 60 large enterprise names with annual contracts of $1 million or more. In Q2, we continued to land more of these companies and take them live, including leaders like BNP Paribas, with over $46 billion in revenue, Santander, with over 200,000 employees, and Sodexo, with over 400,000 employees. Second, two years ago, we said that by fiscal 2025, we expected to be driving our business to 25%+ ARR growth with a 112%-115% dollar-based retention rate while bringing down professional services to 15% of our revenue mix. In the last few quarters, we've made great progress against those goals, and we did so again in Q2. Dollar-based retention rate ticked up one percentage point from 110% in Q1 to 111%, up from 108% from Q2 of last year. The ARR grew 20% on a reported basis, so it would have been about 21% if not for the headwind due to the continued strength of the dollar. We've already hit our professional services revenue target mix of 15% as a percentage of total revenue ahead of plan. As a result, we saw improvement in blended gross margins to 67%, an increase of over three percentage points year-over-year as our subscription gross margin also continued to improve by over 100 basis points year-over-year. Third, we said that we would focus on global system integration partners to give us relevance and scale. In Q2, our partners continued to deliver. We saw our SI partners participate in over 70% of new business transactions, and the size of these deals have been trending higher each quarter. In fact, in Q2, deals that were sourced by our SI partners were more than twice as big as they were just one year ago. These partners are also helping drive go-lives where SIs were involved with over 60% of go-lives in Q2. Importantly, our partners are providing key leverage to our model. In fact, one of the big four now have salespeople dedicated to looking for opportunities to sell Zuora into their customer base, showing their investment and commitment to us. Finally, we said the key thing that underpins all of this is our multi-product land and expand strategy. With our focus on large companies, we wanted to have multiple paths to get in the door and then different paths to expand as we delivered more value. Let's take one of the world's largest auto manufacturers, who after being a customer for many years, came to us for their leasing division to power all payments through our Zuora Collect product, and they substantially expanded their footprint with us in Q2. Or let's take one of the world's largest media publications who chose Zuora in Q1 to manage payments with Zuora Collect, and they came back in Q2 to add Zuora Billing as a second major product when it was clear that their previous in-house solution could no longer support the scale they needed to monetize their millions of subscribers. Zuora Revenue also continues to be a differentiator for us with leaders like Microsoft expanding their investment with Zuora Revenue on Azure just this past quarter. In fact, in Q2, we more than doubled our Zuora Revenue bookings year- over- year, and almost half of our new business deals included our Zuora Revenue product. We're continuing to innovate. We're building even more ways to drive value and growth with our customers. In Q2, we launched Zuora Secure Data Share for Snowflake. This extends Zuora's data into Snowflake Data Cloud without any custom integration needed, making it easier for our customers to analyze their monetization and subscription data with leading data platform on the market. This brings us to our big announcement for today. It's our first acquisition since the investment from Silver Lake back in March. Our internal innovation machine is cranking, as you know, but we continue to see a strong appetite in our customer base that exceeds even what we can develop. We've been building our inorganic innovation machine. In this quarter, we're excited to announce our acquisition of Zephr, and it's expected to close in early September. Zephr is actually an existing partner. It's a team we've gotten to know well over the years. We've always been impressed with our shared vision, their people in the technology, and the feedback from joint customers who are using our pre-integrated solutions. Now, what Zephr offers is a leading subscription experience platform, and they work with some amazing brands across industries. Particularly, they've had a lot of traction in the media and digital publishing industries, which has been one of our core focus areas as well. Their customers include companies like News Corp, McClatchy, and Bauer. What is happening in the media industry that has created this opportunity for Zephr? Why is the focus on the subscriber experience so important? Well, if you look at the success that this industry is having, specifically companies like Disney, who just overtook Netflix in subscriber growth, or The New York Times, who exceeded 10 million subscribers this year and is ahead of the subscription growth plans. What you see is the winners in the media industry are the ones who have been able to consistently experiment with new services, new bundles, new offerings, and they're figuring out new ways to connect these services to the right subscribers at the right time. This is what it means to deliver an optimal subscriber experience, and this is exactly what Zephr helps companies do. They offer capabilities like identity management, intelligent trials, dynamic paywalls, and entitlement and access management. Most importantly, all of these capabilities is backed by a decision engine that helps deliver experiences personalized for every subscriber. For example, Zephr will know that this is an anonymous user and to throw a promotion for a free trial. That user is an existing subscriber, but is primed for an upsell offer. All this is already working at scale. This technology is already handling nearly 8 billion requests a month for some of the biggest publishers in the world. Now, imagine this decision engine powered by data from Zuora's Billing, Collect, and Revenue products, tens of billions of transactions each quarter. Now you've got an incredible platform that can help companies understand their subscribers, formulate the right digital offerings, and optimize the digital experience, which we believe will drive up for them conversion, retention, and growth. Finally, here's a rub. Where the media industry goes, other industries will follow, from software to financial services to retail and more. Companies in the subscription economy are ultimately going to have the same need to nurture these subscriber experiences and monetize these relationships over time. In the near term, for Zuora, this means we will have additional paths to both land new customers and expand within our existing customers in the media and publishing space. We also see the potential of this platform to go beyond this vertical with additional new products and platform enhancements that we expect to be able to monetize in the coming quarters. To wrap it up, we had a solid quarter. We are mindful of the macroeconomic conditions, but we continue to be confident in our ability to navigate those conditions because of the resiliency of the subscription model and because our technology is mission-critical. We have the right customer base. We have the right product. We're confident that our land and expand strategy is working. We continue to innovate organically and now through acquisitions, and all of this while making steady progress towards our financial goals. Thank you to our ZEOs for their continued focus, for putting our customers at the center of everything we do, and for driving another quarter of strong results. Now I'll turn it over to Todd to review our financials. Thank you, Tien, and thanks to everyone for joining our call today. Our second quarter financial results were solid. We continue to see the largest companies in the subscription economy doubling down on Zuora. This reinforces the long-term opportunity we see despite the macro environment and foreign exchange volatility. We once again exceeded expectations for the quarter across the board and are pleased with our results. Let's start with top line. Subscription revenue ended at $83.8 million, growing 19% year-over-year in constant currency and 17% as reported, exceeding the high end of our guidance. This was driven by continued go-to-market execution. Professional services revenue was $15 million, flat year-over-year. As you recall, our midterm objective was for professional services to represent 15% of our total revenue mix. As Tien mentioned, we're pleased we've reached this goal ahead of plan. Going forward, PS revenue will be at or slightly below 15% of our total revenue. This will result in stronger overall gross margins. Total revenue ended above the high end of guide at $98.8 million, up 17% in constant currency and 14% as reported year-over-year. Non-GAAP subscription gross margin was 80%, an improvement of more than 100 basis points year-over-year. Non-GAAP professional services gross margin was -3%, in line with our goal to run at or near breakeven. We continue to see SI partners increase capacity, allowing us to move more implementation services to them. This growing partnership with SI has also created additional margin leverage. Our non-GAAP blended gross margin saw an improvement of 345 basis points year-over-year, ending the quarter at 67%. We will maintain a disciplined approach when managing our expenses in the second half while accelerating investments in product development and quota-carrying sales capacity. Non-GAAP operating loss was $0.2 million compared to an operating loss of $3.9 million in the prior year. This was driven by continued top-line growth and disciplined investment in the business. This resulted in a non-GAAP operating margin of -0.2%, a 440 basis point improvement over last year. Our fully diluted share count as of the end of the quarter was approximately 162 million shares using both the treasury stock and if converted methods. Now, let me walk you through some of the key metrics for the quarter. In Q2, we increased our dollar-based retention rate to 111% despite FX headwinds. This was an improvement of one point sequentially and three points year-over-year. Our multi-product land and expand strategy has accelerated within our install base. Customers are coming to us for a full monetization platform. At the end of Q2, we had 745 customers that spend at or above $100,000 in ACV, a decrease of one sequentially. In Q2, the $100,000 cohort represented 95% of our business. More importantly is the success we're seeing from our strategy of moving upmarket and land and expand with our large customer cohort. The number of customers with ACV at or higher than $500,000 grew over 25% year-over-year, and we closed seven deals with an ACV of $500,000 or more, up from two a year ago. In the past, we also talked about the investments we've made in customer success, and this has led to the lowest churn as a percent of entering ARR since we went public. To close off on this metric, we do expect the number of customers at or above $100,000 to increase in future quarters. Our strong product portfolio is also unlocking larger and longer duration deals. In fact, this quarter, the average contract term was the longest since our IPO. This drove our total remaining performance obligations to grow $32 million from prior quarter and 41% year- over- year. Turning to billing transaction volume. Our systems processed $21 billion of volume in the quarter, representing 18% growth in constant currency and 16% growth as reported year- over- year. As we've noted before, processed billing transaction volume is not indicative of our revenue growth because our customers gain cost efficiencies as they scale. This metric is helpful as it highlights the level of scale we offer our customers, another key differentiator for our solutions in the enterprise space. Now looking at ARR and free cash flow. At the end of Q2, ARR was $337.6 million and grew 20% as reported with about one point of headwind due to FX. We continue to make progress towards the goals we've laid out by fiscal 2025 of reaching ARR growth of 25%-30%. Free cash flow was -$7.6 million for the quarter. As a reminder, free cash flow may fluctuate on a quarterly basis due to the timing of cash collections and seasonality. We believe it's best to assess our cash flow performance over a longer term. As I'll discuss later, during the month of July, we observed some collection timing pushing out by a few days on average. Total CapEx for the quarter was $2.8 million. Turning to the balance sheet, we ended the quarter with $449 million in cash and cash equivalents, a sequential decrease of $4 million. Before we turn to outlook, let me give you some color on our pending acquisition of Zephr. As Tien noted, this acquisition adds some great customers and strengthens our position in media and publishing, one of our key verticals. This addition to our product portfolio also gives us a holistic solution to establish, nurture, and monetize subscriber relationships. Beyond the media vertical, we believe this technology will bring value to our wider customer base with other expanded solutions that we will be able to bring to market in coming quarters. Under the terms of definitive agreement, Zuora will acquire Zephr for $44 million in cash with a potential earn-out of an additional $6 million if certain ARR growth objectives are achieved by the end of our fiscal year. This transaction is subject to customary closing conditions. Zephr's current ARR is approximately $5 million. We expect Zephr to add approximately $2 million to our subscription revenue in the second half of fiscal 2023. When the transaction closes, we don't expect a material impact on our consolidated non-GAAP operating loss. We're committed to managing our bottom line and plan to absorb the incremental OpEx in the second half of this year. Now let's turn to our financial outlook. While we continue to see double-digit growth in our pipeline for our solutions, we believe it's prudent to de-risk our second half given the current macro environment. We will continue to be nimble and disciplined on how we invest for growth while working towards our long-term financial targets. Our revised full-year outlook assumes an impact to subscription revenue due to FX and macro uncertainty and a $2 million benefit from Zephr. For professional services, we are accounting for both FX impact and our strategy of moving implementation services to our SI partners. Looking ahead, our professional services revenue mix will represent 15% or slightly less of our total revenue mix. Turning to Q3, our outlook is we expect the following. Subscription revenue of $85.5 million-$86.5 million. Professional services revenue of $14 million-$15 million. Total revenue of $99.5 million-$101.5 million. A non-GAAP operating loss of $2.5 million-$1.5 million. We have yet to finalize the purchase price accounting, including tax impact for Zephr. Excluding these impacts, we expect a non-GAAP net loss per share of $0.06-$0.05, assuming a weighted average shares outstanding of approximately 132.7 million. Subsequent to the close of the acquisition, we'll provide any adjustments. For the full year, we are revising our revenue outlook. We now expect subscription revenue of $337 million-$341 million. Professional services revenue of $57 million-$59 million. Total revenue of $394 million-$400 million. A non-GAAP operating loss of $2 million to breakeven. Excluding the potential purchase price accounting and tax impacts of Zephr, we expect non-GAAP net loss per share of $0.18- $0.14, assuming a weighted average shares outstanding of approximately 131.6 million. Next, let me review our free cash flow outlook for this year. We're revising our outlook based upon two trends we're currently seeing. First, approximately 35% of our revenue mix is international, which is more heavily weighted versus other companies of our size. We believe this global footprint is an advantage. However, this year, our FX mix exposes us to the strength of the dollar. We're seeing the FX impact from our international customers at the time of renewal and to a lesser extent, from net new bookings. Based on current trends, we anticipate the foreign exchange impact to be approximately $16 million. Second, the timing of collections is impacting our free cash flow. In the most recent quarter, we saw a few days increase on our average collection time. We believe it's prudent to expect this trend will continue for the balance of the year. Note, this appears to be simply a delay in payments as we've not seen an impact on overall collectibility of our receivables. As a result, our free cash flow outlook assumes that $4 million will be pushed into next fiscal year. These are the primary two factors impacting the guidance. Our prior guidance for free cash flow was $6 million-$9 million. We now expect free cash flow for the year to be between -$16 million to -$13 million. This does not include the impact of acquisition-related expenses associated with the Zephr transaction. We expect these expenses to be approximately $4 million. If it weren't for the impact in FX and collection timing of $20 million, we would have been cash flow positive and within our guided range for the year. We're managing the business based on the current trends we are seeing and are committed to running a disciplined business. We're maintaining our goal to drive towards a Rule of 40 by fiscal year 2025. As a reminder, the Rule of 40 is defined as the sum of year-over-year subscription revenue growth rate plus free cash flow margin. For the full-y ear, we're maintaining our previous targets of dollar-based retention rate of 112% and better, and AR growth of 21% or better. To close off, Q2 demonstrates the strategy we laid out to focus on the enterprise is working. We continue to land and expand with our customers, offering them a differentiated monetization platform. Our mission-critical technology is transforming business and allows us to be very sticky. We believe this puts us in a position to deliver strong top-line growth with an eye towards profitability. We are confident in the strength of the Subscription Economy. Before moving to Q&A, I'd like to send a big thank you to all of our employees around the world for their incredible dedication and commitment. With that, Tien, Robbie and I are happy to take your questions, and I'll turn it over to the operator. At this time, I would like to remind everyone, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Chad Bennett with Craig-Hallum Capital. Your line is open. Great. Thanks for taking my question. Just maybe a point of clarification first, for Todd, just on the FX impact. You know, you laid it out in the press release, the impact in the quarter, both on subscription revenue and overall revenue is 2% to subscription and 3% overall. Then you gave a $16 million free cash flow impact for the year. I guess, just in your guide, because you didn't give it in the release, what is the FX impact on your revenue guide subscription and overall for the second half? Hi, Chad. Thanks a lot for the question. I think what you see on the overall guide, we took revenue on a subscription piece to $337 million-$341 million. I think if you take a look at what we did is we said there was $2 million that we went ahead and we added in, for Zephr, and then the balance would be what we de-risked, to get to that guide of $337 million-$341 million. You got a couple million dollars worth of risk there, and then we didn't flow through the extra million dollars that we beat on the top end for subscription revenue in Q2. When you talk about de-risk, is that FX impacted risk, or is that actual business getting done risk in the second half? Because the FX is a pretty big headwind, and I assume you didn't think rates. Oh, I'm sorry, go ahead. I assume you didn't. You know, rates are dramatically different from when you reported last quarter. FX is a real headwind. Is it purely FX or you're seeing a slowdown in the business? It's almost all FX. Just in terms of new logos, you know, it sounds like the SIs are certainly, you know, more impactful, more influential on deals, and obviously deal size is up significantly year-over-year. From a new logo deal count standpoint, are we actually kind of volume-wise doing more new logo deals year-over-year or are we, you know, kind of replacing direct deals with SI deals, and it's a net-net wash? Yeah. I think what I would go ahead and tell you is I'm not overly concerned about the metric, and let me walk through why. We talked, and I think you just hit on it. We talked about the transformation that we've gone through over the past few years. The biggest companies are the companies that we are focused on. If you take a look at what we've done over the past couple years, is we're focusing on these larger customers. You've seen year-over-year our ASPs double. Number of customers over $1 million ARR is now 60, and that SIs are doing more and more of the integration. We're bringing in much larger companies. At the same time, some of the companies that we had focused on in the past weren't a great fit, and those are washing out. Those were companies that maybe haven't had a successful business launch with subscription, or they just put very minimal business through. As these companies are kind of transitioning out, we're replacing them with much larger companies in the platform, and these are the companies that we believe will grow a whole lot faster. Tien referenced the fact that if you take a look at our customers, that cohort of revenue over 500,000, you'll notice that that actually grew 40% year-over-year. Look, as we go through this transformation, I think you're just seeing the end of it of some of the customers that we had brought on a couple years ago that aren't a good fit. They're going out. I think in future quarters, you're gonna have a little bit of noise on this metric. In general, the bottom line is I see this as being a really natural evolution to our customer base and feel good about it. Got it. Maybe one last one real quick on Zephr. Just in terms of, you know, it seems to me more like kind of a B2C-focused subscription experience offering, maybe less so B2B, but I could be wrong. Just in terms of kind of how they price and nature of contracts there and kind of the, you know, the growth of the business. Obviously, it's a small business, but do we expect that business or has that business kinda doubled year-over-year? Any kind of color there. Thank you. Sure. This is Tien. I'll jump in there. The company's been around for three to four years. They've gotten to, you know, call it $5 million of ARR, with the vast majority of the company in the media space. Look, it's you know, as with many companies, startup companies, sub-$10 million, they're looking to get traction in the marketplace. They're not necessarily optimizing their pricing or their revenue potential. We're really excited about it because, you know, they're bringing to us 70 new logos. We now have the opportunity to sell our product into their base since media has always been a big focus of ours. You know, we have an opportunity to sell what they have into our base. The products are very, very complementary. You know, our data fed into their decision engine to drive that subscriber journey, that subscriber experience is really a no-brainer for many of these companies. We're pretty excited about it. I think the big picture is, you know, we've always talked about how, you know, our key part of our strategy is this land and expand strategy. We're gonna continue to sign on new logos. The key for us is to sign on the right logos, right? The type of companies that continue to invest in a Subscription Economy that can be worth, call it, $1 million or more. You know, and then continue to expand our footprint within those companies by delivering more innovations, more value. You've seen us execute that strategy really, really well over the last, call it, two years. You know, what we said at the start of the year, especially with the investments from Silver Lake, is we wanted to add an acquisition vector, if you will, side by side with our organic innovation vector. This is really the first step in that journey. We're pretty excited about it. But, you know, we do see this as an opportunity for us to continue to drive the growth that we've been delivering over the last two years. Got it. Thanks for the colors. Yeah. The only other color I'd give you, Chad, is they do come to us about $5 million of ARR, and they have been growing at a very healthy clip. You know, you think about that, over 60% annually. Got it. Thanks for the color. Seems like a good fit. We're excited about it. Thanks. Your next question comes from the line of Brent Thill with Jefferies. Your line is open. Hey, Tien. Hey, Todd. This is Luv Sodha on for Brent Thill. Thank you again for taking my questions. Maybe just to clarify on the previous question around the guidance, Todd. Are you saying that no macro headwinds have been embedded into that guide? We've de-risked the numbers. The vast majority of that was FX, but we've been prudent as we thought about what the second half looks like, and we've got pretty good visibility into what the pipeline looks like and how we're putting our deals together. We think we've got an appropriate guide for half two based on the current environment. Got it. You're assuming that the current environment stays as is or gets a little bit worse? We're assuming it as is. Yeah. I would say that, look, you know, what we're seeing is the demand for what we do continues to be strong, both in our customer base and in the broader market at large. Right? That being said, look, you know as well as I do reading the press out there, people are talking about possible recession and so on and so forth. We're gonna be smart and prudent in this. What you're seeing is FX definitely is a big impact for us, you know, with 35% of our customers being international. We're taking that into account. We're being, you know, cautious about the future and trying to make sure that we're doing our best job guiding you all. Got it. In terms of the, you know, the current pipeline, have you seen any deal pushouts, or is it taking longer to get deals done given the current environment? Yeah, we're seeing a mixed picture there. Maybe, you know, Robbie, feel free to jump in here. But, you know, we're seeing both deals go longer, but we're also seeing a lot of deals actually have shorter sales cycles. It really is a mixed picture for us. I would say the root of that is what we do is important. Our customers are continuing to invest in this area. You're seeing that in the numbers, right? An increase in dollar-based retention rate and a decrease in churn. But it's also still relevant for all companies moving to the Subscription Economy. Yeah. I mean, Tien agrees on that side. I think the only other add I'd say is, you know, we continue with the sort of multi-product, right? It allows us some more avenues that we can go into, like land and collect, as we talked about in terms of, large auto organization. We look at a large publisher that's also come in in the second quarter after with another product. Again, I can land in many different places around that. Absolutely, we can see good positive momentum there. For certain macro environment, we're just gonna be operationally a lot more vigor and that we focus on that side. We'll continue to do so. Yeah, that last point I would emphasize, right? Robbie runs a tight ship, he runs a tight operations, and, you know, that discipline in the organization certainly is something that is incredibly important when there is, you know, macro-level noise or macro-level uncertainty. Got it. One last one, if I may, on Zephr. You know, any lessons learned from the Leeyo deal back in the day that, you know, you're bringing to bear here in terms of the integration plan? Thank you. Yeah. Absolutely. I mean, look, this is a modern technology. The company was founded four years ago. With Leeyo, there's something with on-premise software, single-tenant software that we had to sort through, made the integration much more challenging. We're not gonna have a lot of those problems here, right? They've already built an integration. We're gonna deepen that integration now that it's under one umbrella. We do have joint customers, and so, you know, look, we learned a lot. I would also say it's a brand new team here, right? With Todd, with Robbie, with Andy Cohen on our general counsel side that drove a whole bunch of acquisitions at EMC. We're feeling pretty good, not just about what we've learned, but about our ability to do a good job of bringing on this asset. The last thing I would say is, look, one of the reasons we picked Silver Lake as a partner and had Joe join the board is they've got a deep bench of experience in this area as well. Look, you know, you always wanna be smart, you always wanna be careful, you always wanna make sure that you do a good job. But I've got a lot of confidence in our ability to execute. Maybe the only thing I would add, Luv, is we have built capacity to specifically work on integrations. I think we've got a very good plan that goes out literally all the way through every step that needs to happen over the next 18 months. We'll have pretty good integration of the two organizations at the beginning of our next fiscal year. It's been really well thought out, put together, and the team that's running it has experience doing it in the past and successful experience. Perfect. Thank you. Your next question comes from the line of Joseph Vafi with Canaccord. Your line is open. Hey, guys. Good afternoon. Nice to see the acquisition. Maybe just one more follow-up on Zephr here. I know you're really focused on the land and expand, and I know you had a good media presence. These guys have a good media presence. Do you see kind of the forward playbook here early with Zephr more as a cross-sell or perhaps kind of a bigger sales effort on new logos? You know, related to that, how well does your product set fit into kind of a Zephr go-to-market? How do your products on a cross-sell basis fit with them? Then I'll have a quick follow-up. Yeah. I would say, look, if you look at the big picture, the media space is certainly an explosive space. It's a, you know, in many ways, it's moving into a new phase. You know, if you just look at streaming for a long time, you know, Netflix was a, it was a one-horse race, if you will. Now competition is increasing, and the companies that are winning, the way Disney has caught up with Netflix and exceeded them is pricing, it's offerings, it's bundling. It's not having one-size-fits-all strategy, but it's saying, "Look, we've got Hulu, we've got ESPN, we've got various Disney+ bundles. We can bundle the whole thing together." If you look what the New York Times has done, you know, their ability to exceed 10 million subscribers when they started this journey, they weren't even sure they were gonna get to a million. It's the same thing. It's pricing, it's bundling, it's The Athletic, it's Wordle, it's cooking. It's all these other, you know, offerings that they have. In order to execute those strategies, which every media company is gonna do, is gonna need to do, is you have to have both things. You have to have what I'll call the monetization engine, which is certainly what we do. You have to have what I'll call the experience engine, the customer journey engine, which is what Zephr brings to the table. You have to have these two things working really closely together. We're pretty excited that this is the offering that can help, you know, companies have the same type of success as you're seeing the leaders of the space. So cross-selling us into their customer base, cross-selling their product into our customer base, taking both products into branding logos, those are all things that we're gonna be focused on. The last thing I'll say is, you know, there's nothing specific here to the media industry. I think they're just a little bit further ahead. Any B2C company, and I think the previous caller had questions about B2B, this thing is also applicable to B2B as well. That's why we like the technology. Really any company in the subscription economy is going to have to do the same type of things. We're pretty excited about this acquisition. We think it really broadens our footprint. It gives us a unique offering to continue to lead in the Subscription Economy. You know, I think this is gonna be a big game changer. Great. Just to follow- up, kind of a higher-level picture, just kinda where the business is today versus, you know, a year ago or so. You know, things are kinda humming along pretty well these days. If you kinda looked at, you know, new logo wins and as kind of, you know, enterprise businesses versus kind of, I guess maybe more subscription native businesses. You know, if you looked at the mix now versus a year ago, and then, you know, if you thought about points of growth on upsell, you know, where you're seeing that, is it in more in the kinda enterprise segment or maybe the mix between enterprise and kinda subscription native businesses? Just trying to get a feel for, you know, where the faster current is for you these days. Thanks a lot. I would say the big change that you've seen us in, you know, starting about two years ago, is we really took our experience working with a whole set of customers and really figured out who are the best customers, right? We have a sense of which company is going to be the winners in the Subscription Economy that can build billion-dollar subscription businesses, because we believe that that is where the growth is going to be. We're doing a good job picking and choosing the right companies to land, and then our expand strategy will take over. In terms of which companies to land, you're gonna see both. You're certainly gonna see, you know, continue to see subscription native companies, you know, the best SaaS companies, best media companies as an example. Look, with our Unified Monetization, we've been saying, though, while we wanna be subscription first in terms of where the world is going, we don't wanna be subscription only. The Unified Monetization module, for example, already has upwards of 60 customers that are using us to go beyond subscriptions. You're gonna see us really be able to, you know, broaden our focus and sign-up companies that are committed to the Subscription Economy, but perhaps have a mixed, you know, business model that we can bring them along for the journey. Thanks, Tien. Your next question comes from the line of Joshua Reilly with Needham & Company. Your line is open. Hey, guys. Thanks for taking my questions, and nice execution here in the quarter. Maybe just starting off, you know, what are you seeing in terms of demand in Europe? How should investors think about your mix of pricing of international contracts in local currencies versus the U.S. dollar? Then do you ever move all of that pricing just to U.S. dollars? Does that make sense, or would there be an issue with that? Yeah. Let me take the first questions here from a standpoint of the weighting of contracts that are outside. We talked about 35% of the businesses outside. A very high percent of that is contracted in local currency. We're a global company, and frankly, what we've seen is the expectation of our customers is that they want to contract in their local currencies. That's how we have done business because that gives us an advantage to playing in the market and acting more like a global type company. If that was your question there, I forgot what your first question was. I would say, look, you know, overall, we see that as a strength, right? That a company of our size and scale typically is gonna be, you know, almost U.S. only. We started focusing on international or a global marketplace. The Subscription Economy is a global trend. Certainly, it's not a U.S. trend. Overall, we see the geographic mix of our business as a strength. Now, certainly this year, with the strength of the US dollar, the abnormal strength of the US dollar is making it, you know, a little bit more work on our side to make sure we manage the business well. I think Todd is doing a good job of that. We see that as a strength, and I don't know that I wanna over-index, right, push customers or do anything unnatural to force them into a U.S. currency when, you know, currency is gonna go up one year, down another year. It's not something that we want. You know, we wanna manage the business in a smart, healthy way, you know, then do the right thing for the customers. Josh, I guess going back to your first question on what we're seeing in EMEA. I think Robbie hit it earlier. We're continuing to see really good demand. There is some noise out there. Europe is probably the place where we're seeing the most noise, but we do feel really good about the demand generation that we're seeing, and the pipeline is up in nice double digits year-over-year. So we're still seeing that. We're having good interactions with customers. As we thought about the second half guidance, we took that into account. Got it. Then a couple other quick ones. You mentioned the free cash flow is down on the extended collections times with some customers. Is there any particular vertical or customer side with the delayed payments? I got one other quick one. Sure. Let me take you through what we're seeing on the free cash flow. As I mentioned We're seeing about, you know, we've got $4 million worth of risk there. I wanna take you through what we're seeing. I would start first off is, this is not any concern that I have on collectibility. We have a really good base of solid enterprise customers, and in fact, if I take a look at my AR that's over 60 days, it's less than 2%. I don't have any collectibility issues. What we have seen is a couple things. One is we had a group of customers that pretty consistently paid early, and we've seen a big slowdown on that. The second thing is, we've seen some customers, especially some larger customers, seem to be pushing things out a few days at the end of the quarter, and that's sliding for us. Those are the two primary things that we're seeing. I believe that it's prudent to project that that's gonna continue and that $4 million will get pushed into next year. You know, again, no concerns about the overall health of the business or our ability to overall collect. You know, the last thing I'd say is we've really got a fantastic collections team, and they've stayed on top of this. I feel good. Yeah, if you simplify it down, Todd's basically saying, you know, the last few weeks of the fiscal year, if some of those collections get pushed out, right, we wanna make sure we set expectations and we guide you guys to the right place. Operationally, you know, there's no real impact on the business. Got it. Then last quick one. Is there anything to note on the calculated billings? I have it at about 14.5% in the quarter. Any moving parts there that we should be aware of, either this quarter or the rest of the year? Thanks, guys. A couple things, Josh. You know, one is, I, you know, I hate going to the calculated billings because of all the noise in and out. We talked about ARR, which I think is probably the best way to look at the business. We had 20% growth there. If you take a look at headwinds with FX, that would've been closer to 21%. Now, on the calculated billings, 'cause you brought it up, and you'll see it when you see the contract assets, we're having about 17% growth there. If you look at that in constant currency, it'd be 22%. Then I think if you look at the first. The subscription calculated billings. Yes. Yeah, subscription calculated billing. Then if you take a look at the first half, we're about 24% growth on the calculated billings. Again, a lot of noise on that, and the real thing that we're really trying to get people's focuses on is that ARR. The other thing you might wanna point them to is RPO. Yeah, I should have hit RPO too. Look, we had a really fantastic quarter on the RPO, up 41% year-over-year. What you can see is, look, you know, FX is an impact in our business. We certainly are managing it. You know, we're gonna adjust a lot of what we do based on it. We're not doing anything abnormal. We're still in a mode where we wanna invest in the business, we wanna build technology, we wanna hire more quota capacity in our sales organization. We see the demand there. Look, we're gonna be smart. We're gonna assume that the FX environment is gonna continue. We're gonna build that into our plan. We also wanna be transparent to you all in terms of what the financial impact is of FX through the end of the year. Got it. Thanks, guys. Thanks, Josh. Your next question comes from the line of Andrew DeGasperi with Berenberg. Your line is open. Hi, everyone. Just wanted to ask a question on the M&A side, mostly big picture strategy. I mean, now that you acquired Zephr, just wondering, given Silver Lake gave you a lot more dry powder behind that, do you still see potential for M&A activity in the near future? Or do you expect to focus a lot more on integration of this asset? Look, I would say, as you know, you know, we took $400 million from Silver Lake, this transaction, call it $50 million, and so we still have a lot of dry powder. You know, we're not—we don't have any specific timelines to do that. We're seeing this as a long-term gain. You know, we spun up an M&A machine that is in gear right now. It's certainly looking at other opportunities all the time. We're gonna make sure our priority is to make sure we do a good job integrating the Zephr folks. We're already starting down that path. We wanna make sure that, you know, we optimize this acquisition and the benefits that we see from it. We're pretty excited about it. We do have an M&A machine that is spun up, that's making sure, you know, we've got our ear on the ground looking for future opportunities as well. Yeah, I think as Tien said, this is the first one that we've done, and you'll certainly see other things. We'll do it on the timeline that makes sense, when we find the right opportunity that can add value for our shareholders. The last thing I'd say is, you know, you can see us being really thoughtful here, right? Zephr was a partner. It was certainly, you know, a company that we knew. You know, feel free to dig into it, but the idea for Zephr was actually at one of our Subscribed events years ago, where James and Chris, the two founders, right, were talking to some of our customers in the media space. You know, we're looking to make sure we do everything to de-risk our first few transactions as we get some more success under our belt with this new strategy. That's helpful. Some of your peers have announced a slowdown in the pace of investment or at least are looking at it. Just wondering if, given the current environment has changed since a few months ago, have you taken a look at your strategy, and do you see any changes on the horizon? Yeah, I'll take that, Andrew. We've absolutely taken a look at the second half of the plan. We've been thoughtful about how we're going to invest, and we have made some adjustments to it. That being said, we are gonna continue to invest in quota-carrying assets and development. We're still a growth business, and so we will continue to do that. The other thing that you've also noted is we're gonna absorb the operating expense from the Zephr acquisition into our hiring plan. Yeah. I mean, I wanna make sure that doesn't get lost. You know, look, we're still a growth company. We're still in a marketplace that we believe is growing, that we know is growing. That being said, right, you've seen how Todd's managed the business over the last two years. He's certainly very prudent. We joke that prudence is his middle name. You know, so the decision, for example, to make sure that we absorb Zephr into our existing operating plan versus having it be additive to expenses was a smart decision, and you're gonna see us continue to be disciplined in our approach. Great. Thank you. There are no further questions. Now I'll turn the call over to Tien Tzuo, CEO, for closing remarks. Well, thank you for joining us. Thank you for doing our Q3 call, you know, Q2 call, and we look forward to talking to you in 90 days. Thank you. This concludes today's conference call. You may now disconnect.