Right, are we on time here? All right. Well, good afternoon, everybody, and welcome back to the Needham Growth Conference. My name is Joshua Reilly, and I'm an analyst on the enterprise software team here at Needham. Excited to have Zuora this afternoon, and CFO Todd McElhatton. Thanks, Josh. Good to be here. Uh- Old, but good. Yes. All right, so maybe we can just start off with an overview of Zuora for those who are less familiar with the story. I bet everybody in here is using a service that Zuora supports. You're using Microsoft, you're using Zoom on the enterprise side. We support those companies. We enable their business models. If you're on a B2C, think about New York Times streaming with DAZN. Those are customers of ours. On automotive, connected cars, you're seeing more and more other companies look at services they want to bring. All of those are run on the Zuora Platform. And what Zuora does is it is purpose-built to help companies that want to have business models that have recurring revenue, consumption, and once you start having those business models, it's very different than what ERP and CRM can handle. Not only is there a difference in how those business processes work and how you end up connecting to other legacy systems, but it causes challenges with your revenue recognition. So the Zuora Revenue product allows companies to flawlessly and automatically recognize revenue in the way that it needs to. So these new business models are challenging CFOs on how they recognize revenue. Then we have our payments and Zephr product. So across the board, we, I really want to think about Zuora as a company that's enabling all these new business models. We're a mission-critical, enterprise-grade tech stack that really supplements ERP and CRM systems. Got it. All right, so moving on to everybody's favorite topic, the macro. Maybe you can just review, you know, how did the year play out to now in terms of the macro, and maybe just highlight some of the challenges that you saw in calendar 2023 versus earlier in calendar 2022. I haven't talked to anybody that's a CFO that has said this has not been a challenging year. Across the board, what we've seen is a pretty nice slowdown, especially in tech. We have maybe 50% of our business with tech and SaaS companies. So 18 months ago, you saw these companies growing, you know, 25%, 30% was not the, was not abnormal for a growth rate. Now, you are seeing those growth rates settle down to double digits, teens. And obviously, there's a big piece of our business, about a third of our business is based on consumption. So as we run volume through our platform, we're able to monetize that. So the good news is, our customers are all still growing. They're just not growing as fast. And so as that slowed down, that certainly has given us a headwind during the year. We've also seen companies across the board in all industries just be really much more disciplined, thoughtful, taking their time as they're making incremental commitments. What we've seen is customers are out there, they're interested in doing deals, but it's just taking a lot longer. They're double and triple-checking, they're going through more levels of approval. And so what we would have saw move much faster has moved at a slower rate. And so that's kind of been what we've seen for the whole year. And as I think, and I'm looking into next year, I'm going to plan that environment stays the same, and we're going to operate in that way. If things do turn, we'll be ready to take advantage of that. At this point, you know, I've not seen anything change over the last four quarters, and I'm going to assume that we continue in this environment for next year. Got it. So just digging in a little bit more on the macro dynamics, the headwind has been that, you know, NRR has been challenged or, you know, for those less familiar customers not growing their spend as much as historical levels would kind of indicate that they would. Invoice volume growth is a major factor in that. Can you just discuss what it would take for invoice volumes to kind of return to normal growth trends and how much that has impacted the NRR over the last year? So when we think about NRR, we've got two items that impact that. One is our gross retention. We will have the best gross retention we've ever had as a public company this year. And that is really based on the customers that we've gone after and been very specific over the last three or four years, saying, "We want to go after enterprise companies. We want to go after the biggest and best companies that are moving to these new recurring business models." So feel really good about our ability to attract and retain customers. As you mentioned, though, how much are these customers growing with us? And as we've seen just the general macro slow, there has been an impact on the incremental volume that customers have needed to impact. One of the things that we saw, let's say, 18 months ago, it wasn't unusual for a customer to come to us at least once a year, sometimes twice or three times during the year, saying, "I need to buy more volume." And every time we had that discussion with them, we were also able to talk about our new products that came out. And so we've certainly seen a couple points of DBRR impacted by volume and by the macro, but it's also had an impact on when we're not selling incremental volume, it's not maybe an opportunity to have a sales discussion about some of the new products that come up. So across the board, that has been a slowdown for us. I do feel, though, that we've got a tremendous opportunity in front of us. We got 1,000+ customers or enterprise customers, and what we've talked about is, if I take a look in that install base and say: What can these customers reasonably consume from us? We feel really good that we've got a $500 million opportunity within the install base. So if I never develop another new product or never sell another new customer, I've still got the ability to go ahead and monetize that $500 million. So obviously, that's going to take a certain amount of time to do it, but we've seen a really steady pace of customers having this really strong DBRR, five, six, seven, eight years after they make their initial Zuora purchase. Got it. I think that's helpful to understand the dynamics there between the invoice volume and everything else going on. Yep. So, one of the questions I get, often get from you guys is, is the correlation of growth to ERP cloud migration projects. Can you just discuss maybe why you would be or wouldn't be kind of correlated to these projects and their growth? So we certainly can be correlated to that, and there's times when people are doing a refresh of their ERP or their CRM system, and we're part of that. But I would say that's not the majority of the times. What we're really seeing is, and what drives the demand for the Zuora tech stack is, companies get to a certain point where they say, the business is big enough, it's scaling at a size, it's gaining complexity, because now I want to have a consumption model, I want to have a drawdown model. Oh, I didn't realize that consumption was going to impact my revenue recognition. So now I need to talk to you about revenue recognition, and you can help me there, and I've got a challenge in payments. And so I think what we really see the main driver is, businesses get to a certain level of complexity, and what they've built themselves or what they've kludged together on their ERP system or CRM, just doesn't give them the flexibility and the agility they need for the size and scale where they're going. That's really where we tend to have most of our conversations with customers. Got it. Final macro question. So when you do you know, hopefully, we do see a recovery at some point, help us think about the expected time frame from the recovery and demand to actually seeing growth in ARR and bookings. You know, I think you've talked about before, that your sales cycles are kind of in the six-nine months range, and, you know, there can be a lag between the RFPs and the actual ARR growth. Obviously, probably one of the first things that you see that help us will be tailwinds that we get from volume. As people install the system, as the volume goes through, automatic ability for us to capture incremental dollars. So that'd be the first thing that will come back. I feel we've felt really good about what we've seen from a standpoint of there are customers out there, the pipeline is healthy, we continue to have really good discussions with customers. It's the elongated sales cycles. People say, "Let me kick this down the quarter or kick it down one more quarter or two more quarters. Let me think about it." I'm actually seeing. Feel really good about our closure rates. What we're just seeing is these things drag and the sales cycles elongate. So I think that what you'll see is, first, you'll see volume come back, and then over time, I think the backlog that we've got with these sales cycles that we've been working, you'll start to see that break. I'm not an economist. I don't know that I want to get ahead of myself in saying when I think that's going to happen, but I feel that we've got the right pipeline and we've got the right products, and as that does, we'll certainly be able to take advantage of it. Got it. Moving on to some product questions. So you made a number of pretty compelling releases, I think, in 2023. Just starting on strategy, we know there's a new Chief Product Officer, Pete Hirsch, in the seat now, and you have had nice momentum on product in the last kind of three years here. How do you maintain this momentum under new product leadership? So first, Pete has been a fantastic add. Background, came from BlackLine, so certainly familiar with our product. They were a customer of ours. Also understands the back-end financials. He'd worked at Ariba before, you know, a long history in enterprise tech. The other thing I'd say to keep in mind is, his leadership team is pretty much largely unchanged from what we had before. So still going ahead where we were going, no change in focus or strategy. And really, what you've seen is us focusing on, what are our customers telling us that's important to us? So one of the things that we did do this year is we talked about how do we modularize or help land with smaller lands, and then we'll expand those over time. I've talked about this quite a bit over the last year, and some of our biggest multi-million-dollar ARR customers started at $100,000-$150,000 deals. So it's not where we land them, it's where do they have the runway in front of them that they can get to. And so we're continuing to land with those right customers, and we have the ability to do that. Where Pete's been focused, outside of the modularization, consumption's been a big area this year. You've seen us take a look at things in analytics. How do we work together with the Snowflake offering? How do we have incremental security features for people? How do we have better performance that we can drive for them, where they have dedicated environments, dedicated charts to let the environments run faster? This is becoming even more important as we become a more compelling piece of companies' technology stack on how they manage their businesses. So in terms of the releases for 2023, Zuora for Consumption, you know, I got a lot of incoming questions about that, and I think investors are pretty excited about it. Can you just discuss the uptake thus far of this particular module, and is it primarily tech customers buying it, and is it helping you on the competitive front, maybe win some incremental? Absolutely, it's helping us win. We've seen quite a few deals that have been driven, and consumption has been front and center for why they're coming to Zuora. And remember, consumption gives you huge challenges in revenue recognition, and we're the only people in the market that have... Not only can we manage your consumption, get that into your billing, we can also make your consumption as we modularize things, as maybe we're just handling your consumption, you've got a different billing system, and then we'll manage your revenue. So that gives us lots of other ways to land in with a customer. So tech has been a big driver for us. It's a big driver for our business. We're seeing companies, I think Asana is a great example, where they are looking for consumption models to say, in a tough macro environment, how can people try my product, not have a commitment, they like it, they continue to buy it? If it turns out it wasn't something they wanted, then there's no commitment, and they move on. But it's a great way for people to land and try. So there's a lot of interest in it, especially in the tech side. But it's actually driven in areas, in a couple other areas in our business, so some of the other verticals. So it's not just coming from the tech customers. ... so I believe your largest source of new customers is from custom homegrown solutions. How are you thinking about product innovation to lead these customers to a packaged software solution? And are you seeing any evidence in the latest round of innovations that you came out with in 2023, that this is getting some more interest to move on from their legacy kind of solutions? Really timely question. I had lunch with the CFO of a prospect of ours today. They've got a do-it-yourself system, and basically what the CFO told me is, "I've got 32 people that are working on this. It's a huge challenge for me to get new products out, because it's a long pole in the tent where I can't move forward. And it's just not sustainable for me to have this team of 30-some people that continue to build and manage." And as we have new currencies that come out, as we have new business models that come out, they just can't keep up with it. And so that's where we're seeing, those do-it-yourself companies come to Zuora, and that's really we have the out-of-the-box functionality, and that we can deliver what they need delivered with really minimal amounts of customization. There's some configurations that can be done, but out of the box, you can deliver 40-some different kinds of subscription, or consumption, or drawdown-type models. Yeah, and I think just to follow up on that, I think historically, you know, previously you'd put out some slides around the size of the TAM, and if you look at the kind of the segments that are still left to tackle there, it's a big piece of the pie that's the custom homegrown solutions, right? So- It is a really big piece of the pie, and I think that's one of the things that we've been really focused on: ultimately, I think everybody is going to be a potential Zuora customer. The question is: When are they going to be ready? Right. What we've done is a much better job, and it's really helped us this year, is making sure we're going to where the at-bats are. Let's spend our time, let's spend our go-to-market muscle on when customers are ready. They certainly are aware of Zuora. They know we are the leader. They know that by far we're handling the biggest volumes, and the question becomes is: When are they at the point where their system no longer handles the complexity or the volume that they need to process? Got it. So for those familiar with the story, they probably, everybody's kind of aware that, you know, historically focused on technology, media, and manufacturing verticals. Are you shifting that focus a little bit here now? Can you tell us if you are, you know, what are you doing from a go-to-market perspective to kind of adjust the targeting of verticals? So we think there is a ton of white space still in those three core verticals. One of the things that we've talked about pretty consistently, though, is our solution will work in almost any industry. So we're agnostic to how the solution can work, what the industry is, but we certainly get really much better CAC economies of scale by focusing on those three segments. There's a lot of opportunity in those three segments, so they continue to be where we're focused. You'll probably see this year that we'll spend a lot of time, when I think about it, in the SaaS or technology. That's our largest area. It's where we're most known, so we'll continue to double down in that area. And you also see B2C. So as we work with B2C customers from a standpoint of whether they be the connected cars, whether they be things like the New York Times or DAZN, where we can really help companies that are growing at scale. And think about these as being companies that have millions of subscribers, and not only are there millions of subscribers, but they're low-dollar, sometimes transactions on a monthly basis. So there becomes a tremendous amount of complexity there and a lot of product offerings that are being made and coming in and out as these companies are looking at how can they make sure they save these customers or, or retain these customers. We're really focused on how can we be more innovative in those areas and continue to outpace all of our competitors. Great. So when you look at net new customer growth, you know, you've really historically focused on the enterprise market and the larger customers, especially over the last several years. How do you think about the market opportunity that's still out there with these largest customers? Is there still plenty of greenfield opportunity or customers with out-of-package software solution, or do you increasingly have to kind of focus on competitive takeaways? I believe there is a tremendous opportunity still in the greenfield. When we take a look at the vast majority of companies that we talked to today are doing something themselves, or they have customized an ERP or CRM solution, and it just doesn't meet the needs that they have. So I absolutely think that continues to be our number one area, but we are seeing quite a few takeaways. I would say one of the areas that we're seeing is on some of the point solutions, where, quite frankly, they just don't scale. Companies have started maybe with a B2B, and now they have a B2C offering, and those solutions can't necessarily handle the. Or excuse me, they start with the B2C, and they go to a B2B offering, and those solutions can't handle it there. Or you're seeing the complexity of, "I'm in 100+ countries. How do I handle the currency here? How do I handle something specific that needs to be taken into account for regulatory terms?" We just have such a scale advantage over the customer base that we have and a lot of those point solutions. What I'm saying, what I would say we're seeing is, we're seeing companies graduate from those solutions. It was like, "Hey, it was great for our $25 million, $50 million, $100 million business." But now that they're growing beyond those raises, they're increasingly coming to Zuora to say, "Okay, we, we need a..." You know, what I'm going to say is an enterprise-grade solution that can work at scale. Got it. Yep. Just following up on the B2C versus the B2B, are you seeing any green shoots with the B2C customers in terms of invoice volume growth? And would you expect that that side of the business might recover before the B2B side, or is that too much parsing? Yeah, you might have parsed it down a little thin. For example, though, we see, especially I think automotive, I think that's an area over the long term that I feel really good about. We're seeing automotive manufacturers more and more are looking at, "How can I have additional services attached to my automobile that gives me a continued relationship with the end purchaser of those?" I was talking to one automobile manufacturer, it was a couple quarters ago, and it was really interesting. The comment was, "We had hundreds of customers up to a few years ago," and I was like, "What does that mean? I mean, you have millions of cars that you sold." He says, "Yes, we sold to dealers. We didn't know who our end customer was." And the conversation went, "Now all of a sudden we have a relationship with our connected car. Maybe we're not monetizing it right now, but we're starting to learn, I know how Josh drives. Josh, Josh is an aggressive driver. And, you know, he needs to have brakes more often. He's gonna need to have more tires, because we can tell that. And so we're able to say, "Hey, come and bring your car into service." We also have an idea that, oh, Josh's car is at 50,000 mi. And by the way, if you're the second time you've had this car, we might know that, eh, at 50,000 mi, it's time when you tend to replace, or we might know that you're leasing with us, and we're running the payments for that. We're doing that for one large automobile manufacturer. And so you're getting towards the end of your lease, so time to hit Josh up for the next new car." They're finding tremendous opportunities in there, and those are areas where we are running those billing systems. I feel like that is an opportunity that even though you might see some of these companies that are growing single digits, you have some of these connected car initiatives that are growing very fast, and they're really in the early days. I think that's an area where 12 or 15 automobile manufacturers have selected the Zuora Platform, that we really have a nice opportunity as we move forward. Got it. In September, you took down the final tranche of the $150 million investment from Silver Lake, yet to date, you've only made one acquisition, Zephr, thus far with these funds. As you look at M&A, is the opportunity set still kind of there from your perspective? And are you waiting for the macro to clear before doing more deals? Or just give us some sense of how you're thinking about this. So we've taken the $400 million down now, all from Silver Lake, and we did one acquisition, you mentioned it was Zephr, came out just a little under $50 million. Probably more than doubled that business in the 15 months that it's been part of Zuora. Feel really good about the value we got there. We're seeing that be part of media deals that we're doing. It's really helping driving there. We're seeing that product is extensible in our B2C segment. So been a really good acquisition. I think we were very disciplined on it. It's something we could cross-sell to our customer base, hit all the boxes. We're continuing to have lots of discussions with companies. I think there's a lot of interesting opportunities, and I think this year will be a good opportunity for us to utilize some of that. But we gotta make sure we find the right opportunity. I think the one thing that has been a bit surprising, in the conversations we've had to date is still we've not seen all the way that expectations for some of these smaller private companies have come down to what we're seeing in the public markets, and so we're gonna be really disciplined. So I feel like over time, there's some great opportunities for us. We're just being very patient. We're looking at things, making sure they're the right opportunity, and when there's one out there, we'll be ready to announce it. But, you know, don't feel like we're gonna rush it. We're gonna be very disciplined like we were with Zephr. We had a great outcome there, and I think there's many more opportunities like that, but we just gotta get through the process. Sure. Just following up on that, so are you seeing a thawing in perceptions around valuation from the private guys, or, or are they still trying to wait the cycle out and get to the next kind of leg of growth? I think some of the conversations that I've had with people is, you're starting to see people that are in that, "Look, I've got 12, 15 more months worth of cash. Need to do something here in the near term." And there is getting a reality that, hey, the market is different from what it was 24 months ago, 36 months ago when I last raised. Valuations are different. There's a lot of people that are culling their portfolio, that aren't willing to go up into the round. And so I would say there is a bit of realism that is hitting people. I think in a tough macro environment, people are also saying, "Wow, it's really hard for me to build a, a go-to-market force." And we've got a—I think that's a real competitive advantage that Zuora has. If we can find the right technology like we did with Zephr, then I can just drop that into Robbie's go-to-market, and there's really no incremental cost. And all of a sudden now, you've got a very large piece of, or you've got a very large group of quota carriers out talking about this product, and you've got a partner network that's also talking about it. And it's a way for people to say, "Okay, here's a way for me to really get this," rather than saying, "I'm gonna need three or four more rounds to go to maybe get to $100 million. Right. And so I think, you know, you are starting to see people being much more, what I'm gonna say, realistic about what valuations look like, just because they've got an event that's gonna have to happen, let's say, in the next 12-18 months. Sure. One of the items that's been a focus for you guys is sourcing more deals from partners. How did that kind of trend in 2023, and how are you thinking about sales productivity in 2024 in terms of the opportunity to kind of further increase productivity? So we'll certainly improve productivity as we go into the next calendar year, which will be our fiscal 2025. What we have seen is it was a tough year for partners. I don't think there was a single one of our large global SIs that didn't do a layoff. We actually, we've actually even talked about that, where we've seen on the services side, maybe projects that were $500,000, $750,000. 12 months ago, an SI would be like, "You know, you guys can do this with your internal group." And now, as they've got folks that are on the bench, they're like, "Hey, we're interested in that work." And I'm fine for them to do that work. Frankly, you know, we do that work, as you know, at breakeven, so, I don't have a problem with the mix coming down. That's one of the things that we've driven. But partners continue to be a really important part of our ecosystem. One of the things that, you know, I feel really good about is a couple of the large global SIs that we partner with have actually had folks that have made partner in the Zuora practice. And so those are areas where they are driving incremental growth, and we continue to see that be a real important part. And more and more companies, as they're going out to their SIs and saying, "I've got this challenge," they are recommending Zuora as a product of choice. We're also getting people, I think, thinking more of, it's not Zuora or your ERP or Zuora or your CRM system, it's an and. It's Zuora fixes this problem that you have right now. It is a ready-to-go, fit-for-purpose solution. It can scale massively. No reason for you to continue trying to kludge or rebuild something with the very skeletal capabilities that you have in your existing products. So I think the SIs will continue to be a real important part, and I've been pleased with the investments they've made, the certified training, consultants they have trained, and the fact that, like I said, you know, we've actually seen some people make partner in the Zuora practice. So- Right. I think that's a good sign up for things to come. Yeah. So just digging in on a couple of nuanced points within what you were just discussing there. A few quarters ago, you lowered the outlook for pro services, not due to any change in overall demand, but, as you mentioned, the partners are taking on more of the services. Should we expect the current mix of subscription pro services revenue to persist, kinda even into a recovery? And, you know, do the partners now have the capacity to handle higher levels of implementation and demand, assuming, you know, things recover? So partners are getting better and better every quarter at developing their practice and being able to deliver their solutions. So ideally, you know, I think we're what? 10, 12% has been the mix of professional services in our total portfolio. I'm comfortable with that. Over time, you know, we'll see where it goes. I haven't given much guidance, but I'm more than happy for my SI partners to take that work. So we do not compete with the SI partners. I've been really clear with our SIs. We are a partner-first organization. That's a business that I run at breakeven, so I think about it as a no-calorie business. So if somebody wants to do that, and they've got the ability to better monetize it than I do, I'm happy to let them do that. We know the deals that the partners bring us tend to close faster, they tend to be much larger, and they also have a better overall close rate. Awesome. So on the 3Q call, you gave a new target for exiting fiscal 2025 of a Rule of 30, which kinda, I don't know that you explicitly said this part, but it, it implies 10% subscription growth and 20% non-GAAP operating margin. This implies a pretty significant acceleration in operating margin. Can you just discuss what's driving this improved level of profitability over the next kind of four-five quarters? Sure. We've, we've made tremendous progress this year. If you think about us, you know, we exited last year, we were pretty much breakeven. What I've said, we'll exit at a run rate this quarter around maybe 13% profitability. So going from zero to 13, that's been a really nice progression on a quarter-by-quarter basis. So I think, you know, it's absolutely within our sight to get to the margin levels that, you know, in the neighborhood where you've talked about. And as I start thinking about that, we've got a couple of things. One is, you know, we'll be a $400+ million ARR company this year as we exit the year. So we absolutely are operating at a scale. You're seeing us be much more efficient in several areas. So, you know, let's maybe, you know, take it from the top. Our R&D, we have been very focused about where we've put people, how we had a location strategy, how we're grouping and focusing on certain areas, and we've seen nice, you know, nice continued improvements in the efficiency and effectiveness of our R&D organization. You're also seeing us being very focused on things that we can monetize and being able to drive incremental revenue out of those projects. On the delivery side, I think at the end of last year, we were probably 78%-79% on the overall subscription margin, and you'll see that be 81%-82% as we exit this year, and we've still got more gas in the tank, to be able to improve that. We're spending a lot of time and effort on how do we focus on our third-party hyperscaler spend. We're just getting much more optimized in using that capacity. We're also using AI as an example to get much more efficient on how we deliver support. Those are our two biggest expense items on the COGS side of things. On go-to-market, then area again, you know, how do we leverage the partnerships with our SIs? How do we? We've, you know, we've gotten really smart about where demand is coming from. Where can we influence that demand? And frankly, there was probably a fair amount of spending, not always, not only from program spending, but folks think about business development reps going out and trying to bring in leads that, quite frankly, we had people that just weren't ready to make a decision. And so we've gotten much more disciplined about how do we, you know, not have go-to-market spend in areas that's not productive. Then the last area is just overall efficiencies. We've made a lot of investments in tools and technology, and we're just getting a whole lot more efficient as we run the company. I don't think there's a single area, that you're gonna see next year that we don't continue to get more efficient. Sure, great. That's great color. Free cash flow is set to flip nicely positive here in fiscal 2025 as the adjusted cash flow of $37 million plus becomes an unadjusted metric... assuming, you know, that would be the assumption, implying a 10% free cash flow margin. How should investors think about upside to cash flow over the next couple of years? And will it be correlated to this growth in operating income that we're kind of anticipating? Absolutely. There would be a high correlation to what the operating margin grows and on GAAP operating grows. You'll see a corresponding relationship for the growth in the adjusted free cash flow. Got it. On the international front, you've historically had a nice strong business outside the U.S. How is that kind of performing relative to the U.S. right now, and how do you think about the focus of the go-to-market investments going forward domestically versus on the international markets? I don't know that I've seen it, you mean, that we've seen a huge difference between our domestic or international growth areas. You know, you might see specific countries, you know, one country may do better in a quarter than another, but we've been really pleased with how Europe has performed. Japan has performed very nicely, so I think those are two areas that I felt good about. Obviously, there's always countries in there that might lag and some that lead, but that breadth of spread between U.S. and international does give us a really nice geography balance to be able to, you know, when there's a yin somewhere, there's a yang somewhere else. Yep. Yep. I have one more question, but I'll check with the audience and see if there's any questions from the audience. Is there opportunity to, The question was, is there a way to do better in dollar-based retention? I like to think about it... This is kind of, you know, the Goldilocks scenario for us, and, I'll just give an example. So let's say you're at a 10% growth. I wanna sit there and say, and I just do that because, you know, you probably want to be a 105, 106 dollar-based retention. And the reason I say that is, if you're a 110% if you're 10% growth. And if you're a 110%, that's saying you're not bringing any new customers on. And so I think if I start thinking about, you know, your 20% growth, you wanna be 110%-112%. So those are kind of the ways that we think about the business, and quite frankly, that gives us what we like to call it, as like the Goldilocks scenario for having the right amount of spend that we do on upsell versus new customers. And so it really helps us manage the CAC and get the most efficiencies we can get out of that, but also ensures that we are, you know, bringing on new customers and we have the runway in the future to be able to continue to drive that. Now, I wouldn't want to. At the same time, I wouldn't wanna go and say, "Oh, I wanna be 100% new customers," because, you know, we know the CAC on that is extremely more expensive than upselling or cross-selling into our install base. So, what's the confidence 12% is before the... I think one of the things- You might want to repeat that. The confidence is, you know, why do we think about 12% is the right ARR growth? And I think, you know, that 12% range, one of the reasons that we feel really comfortable about that is, 1,000 customers. These are enterprise-grade customers. We've talked about the likes of Google, Microsoft, GM, Zoom, New York Times, John Deere, Schneider Electric, you know, big companies. And I go back and take a look, how are these companies growing from a standpoint of 5, 6, 7, 8 years? And so we've kind of got a built-in growth there of, you know, with the, with the dollar-based retention where we're seeing now. We said, "Hey, this quarter," I think we said, "we'd be 107-108." So if you start thinking about that, you're like: Hey, I've got about a 7-8%, you know, built-in growth factor just from my install base. So that gives us, you know, I would say, kind of, you know, a modest growth that we have to have on the new logos in a tough macro. And we feel pretty comfortable about that, 'cause what we're seeing with the pipeline and what we're seeing with companies from a standpoint of having the demand to be able to offer these new products and services. So that's, Alex, where we got comfortable with, you know, the 12%, give or take. A point is where we, we think we end up for the next year. Awesome. Any other questions from the audience? Just to understand the Dollar-Based Retention, how much of that is driven by...? How much of that driven by consumption versus expansion? So the question is, how much of the retention has been driven by volume versus incremental new modules? And so if I went back to, you know, when I started, you know, 3+ years ago, 85%-90% of what we were selling in expansion was only volume. And what we've seen now is that's much more balanced. And I would say, you know, even over the last year, we've probably seen less than 50% of the expansion being handled by the volume. So we are seeing a nice pickup of the incremental new products that are coming out, and I feel really good about that. As we see a macro turn, at some point it will, I'm not sure when that happens, not gonna get ahead of myself there, but, you know, that'd be another area that will help us. So, and we, you know, for a while, we were running pretty balanced, 50/50. I would say during the last year, you've seen a little more balance of people taking on new modules versus the volume as businesses slowed down for especially our SaaS companies. But again, you know, it's interesting as we talk in SaaS, and people are like: "Oh my goodness, you know, low double-digit growth, what a, you know, what a tragedy!" And I go talk to our industrial companies, and like, "Oh, we'd give an arm and a leg, you know, for a double-digit growth. You know, we thought 3% growth was really good. Yeah, we were looking for those numbers." So I think, you know, it's all relative, but certainly the slowdown in the SaaS market has been a headwind for us. Got it. All right, well, last question from me. In terms of capital allocation, you know, we highlighted today that you've really improved profitability with more to come in fiscal 25. At some point, do you start repurchasing shares to kind of offset stock dilution, or do you kind of keep the powder dry for M&A? Kind of help us think about how you're thinking about capital allocation. Capital allocation is something that we constantly take a look at. What we had said was, the primary reason that we did the deal with Silver Lake is we wanted to have the dry powder. We believe there are some good opportunities for us to accelerate our roadmap and to give us more areas where we can land in our customer base. And so that's the primary thing that we've had, but we continue to take a look at what is the best use of capital, of, you know, that capital. And at some point, if we felt like that was the best use, was to do a buyback, that's something we're not opposed to. But at this point, you know, we've been focused on the M&A. But again, you know, we constantly take a look at what the capital structure looks like and, you know, should we allocate it to-