Hello, and welcome to the Zuora Fiscal Year 2024 Q1 earnings 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, simply press star one on your telephone keypad. If you would like to withdraw your question, again, press star one. I would now like to turn the call over to Luana Wolk, Vice President. Thank you. Good afternoon, and welcome to Zuora's 1st quarter fiscal 2024 earnings conference call. On the call, 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 be joining us for the Q&A session. During today's call, we will make statements that represent our expectations and beliefs concerning future events that may be considered forward-looking under federal securities law. 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 any obligation to update any forward-looking statements or outlook. 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 other important factors that could affect our financial results, please refer to our filings with the SEC. Finally, unless otherwise noted, all numbers except revenue mentioned today are non-GAAP. You can find a reconciliation from GAAP to non-GAAP results for both the current and the prior year periods in today's press release. Our 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. Thank you everyone for joining us. Welcome to Zuora's first quarter fiscal 2024 earnings call. I am pleased with our execution in Q1 and our solid start to the year. We executed well on the strategy that has guided us for the last few years. We came in ahead of guidance on both the top and bottom line, and we also made great strides towards the profitability and cash flow goals that we set out at the start of the year. In Q1, subscription revenue grew 18% in constant currency and 14% as reported. ARR grew 15% as reported, and we came in at 6% operating margin for the quarter. That is a positive swing from a loss to a 6% profit since last year. As usual, Todd will cover our financials in detail later on, but I'll start with some color commentary for the quarter. Let's start with the macro, which I know is on everyone's minds. Overall, I'd say that buyer behavior in Q1 was consistent with what we saw in Q4. The shift to recurring revenue models continues to progress, and the emerging template for a modern business is one that has a direct relationship with their customers and one that is constantly finding new ways to monetize that relationship. Of course, our technology continues to be a critical part of enabling that shift. At the same time, buyers continue to be cautious. Knowing this at the start of the year, we made some adjustments in the field to focus our sellers on smaller, faster, new logo lands. These adjustments seem to be paying off. In fact, we closed more new logos in Q1 than we did in any quarter of fiscal year 2023. One of these new logos in Q1 was TELUS Corporation. They are the second largest telecom company in Canada, with more than $13 billion in annual revenue. As a telco, they obviously know billing systems, and they put us through our paces. For their new digital services, they wanted a modern cloud-based system. They looked at everything, and they ultimately selected Zuora Billing to power these next gen services. Out of Q1, we are now powering the full Order to Revenue process for Gannett, a leading publisher with 250 newspapers and two million subscribers, including their flagship publication, USA Today. Gannett came to Zuora to offer more flexible pricing and packaging, and we're already seeing their subscriber conversion rates go up significantly since going live on Zuora. Thales Group, a global technology leader that serves the security, aerospace, digital identity, and transportation industries with more than EUR 17 billion in annual revenue. They went live on Zuora in Q1 as well to streamline and automate billing for its data protection on-demand services. We're also making faster lands with Zuora Revenue. In Q1, a late-stage private SaaS company in the security space with more than 14,000 customers selected Zuora Revenue to meet their needs as they prepare for their upcoming IPO. Of course, our partners continue to be an important part of our strategy. In fact, in Q1, over half of our go-lives included an SI partner. Given the macro backdrop, we're adjusting with our partners as well. We're focusing with them on closing smaller, faster lands that provide a quicker ROI. In an environment where these global SIs are seeing less demand for large, multi-year transformation deals, the good news is that Zuora solutions are not exclusively tied to such large projects. In fact, our SI partners are creating more pipeline for us year over year. We're seeing faster lands, including with our partners. That's only part of our land and expand strategy. Our focus on enterprise accounts. These are companies that are or will be multi-billion dollar revenue companies. This is also giving us plenty of room to expand. As you know, our products are sticky. When we land within an enterprise account, this gives us a lot of runway to grow. Let's look at what happened in Q1. In Q1, the number of customers with an average contract value of $500,000 or more actually grew 26% YoY. In Q1, churn as a percentage of ARR reached the lowest rates in the company history. This is the second time we've set records for churn in the past 12 months. If you look at the past four quarters, out of our more than 1,000 customers, over 60% expanded and grew with Zuora over this time. Let me give you a few examples. Now we've been powering Zoom. Zoom's growth since they were a sub $50 million company. We helped them through the rocket ship growth rates they saw in 2020 and 2021. Well, in Q1, Zoom didn't just recommit to Zuora for another four years, they also added several new innovations, including Advanced Consumption. Now before they renewed, they of course, did their homework. They asked themselves, should we simply consolidate onto a single ERP? Ultimately, they decided that Zuora was simply the best fit for their needs. Let's look at a global healthcare technology leader that operates in more than 100 countries. In Q1, they continued to invest in Zuora. Now, with Zuora Billing and Zuora Revenue, hospitals will be able to access and pay for specialty medical equipment based on consumption-based models, a major shift for the industry in how it prices. These are just two of the many examples that enabled us in Q1 to maintain our dollar-based retention rates at 108% despite the tough macroeconomic environment. Of course, what powers our land and expand strategy is our innovation, our ever-expanding product portfolio that delivers more and more value to our customers. Take for example, Zuora Revenue, which continues to be a star in helping us expand with our customers. In Q1, not only did we close more Zuora Revenue deals YoY, but the average selling price of our cross-sell deals increased as well. Zephr, our newest addition to the product portfolio, continues to do well. In Q1, global media leader Forbes, which reaches over 150 million people online and in print, went live on Zephr. Last quarter, we talked about how 20% of our bookings last year came from innovations that we delivered in the prior 18 months. We are not stopping there. In Q1, we launched Fraud Protection, a service we OEM from Microsoft, which uses AI to analyze transactions and help our customers reduce fraudulent payments. There is a lot more to come. In fact, on June 21st, we will be hosting our next major customer event, Subscribed Live, in New York City and online. I am incredibly excited to share at that event some new product announcements. As a preview, we will touch on how we're bringing Zephr to verticals beyond just simply media publishing. We will be unveiling our expanding connectors with major CRM and ERP players. We'll be showcasing a new power admin tool that allows you to manage all your billing and revenue environments from production to test to QA, including moving configurations across these various environments, track the performance of all your systems, and more. We'll be making it easier and faster to get started on Zuora's flagship products. We hope you will join us at Subscribed Live to get a preview of all this and more. In Q1, we reaffirmed our commitment to ESG with our latest ESG impact report available at investor.zuora.com. I am proud to say that we've implemented an integrated approach to ESG that's authentic to Zuora. It is aligned to our vision, purpose, and the business models we power. Here at Zuora, we want to help people subscribe to modern ways of doing business. That means ways that are better for people, better for companies, and ultimately, better for the planet. In our latest report, we announced that we reached 100% renewable energy across our global offices in addition to maintaining carbon neutrality for the second year in a row. We're proud of the progress we've made, and we're committed to expanding our efforts. In closing, I want to thank our ZEOs for your commitment in starting the fiscal year with another solid quarter. It's clear that our technology continues to be critical for our customers as they grow with us. We remain committed to our strategy in helping our customers subscribe to modern business. Now, I'll turn the call over to Todd to review our financials. Thanks. Thank you, Tien. Q1 was a good start to the year with a healthy balance of growth and profitability. While we continue to see similar cautious buyer behavior as we experienced in Q4, I'm pleased that we delivered on our goals. We exceeded our outlook for subscription revenue, total revenue, and non-GAAP operating margin for the quarter. Let's start with some more color into our Q1 performance. Subscription revenue was $89.7 million, growing 18% YoY in constant currency and 14% as reported, exceeding the high end of our guidance. We continue to experience some FX headwinds during the quarter based on the strength of the U.S. dollar, similar to what we saw in previous quarters. Professional services revenue was $13.4 million, a decrease of 9% YoY. This represents 13% of our total revenue and is aligned with our go-forward expectations for professional services. Total revenue ended just ahead of our guide of $103.1 million, up 14% in constant currency and 11% as reported YoY. Over a third of our revenue is international, which created FX headwinds of approximately $3 million this quarter. For Q1, non-GAAP subscription gross margin was 81%, a 140 basis point improvement YoY. This was driven by continued investment in our infrastructure to drive further margin expansion. Non-GAAP professional services gross margin was negative 3%, a 400 basis point reduction YoY. Our long-term plan is to run professional services at or near breakeven. However, we plan to make some incremental investment in our services team in the near term to support the growth of our subscription revenue. Our non-GAAP blended gross margin saw an improvement of nearly 290 basis points YoY, ending the quarter at 70%. This illustrates the incremental leverage we've experienced in our model due to our focus on improved subscription margin and the mix of our business. Q1 non-GAAP operating income was $6.1 million compared to a non-GAAP operating loss of $0.2 million in the prior year. This resulted in a Q1 non-GAAP operating margin of 5.9%, a 600 basis point improvement over last year. This was driven by continued top-line growth and disciplined investment in the business. We expect to continue to generate non-GAAP operating income on a quarterly basis going forward. Our fully diluted share count at the end of the quarter was approximately 165.3 million shares using both the treasury stock and if-converted methods. Let's dive into some other key metrics. We ended Q1 with a dollar-based retention rate, or DBRR, of 108%, flat sequentially and a two-point reduction YoY. We continue to see strong retention rates given how mission-critical our solutions are. In fact, in Q1, we again improved our retention rate and had the lowest churn as a percentage of entering ARR in the company's history. At the end of Q1, we had 782 customers that spent at or above $100,000 in average contract value, up nine sequentially and up 36 YoY. This cohort continues to represent 96% of our business. As noted on our previous earnings call, this metric is less indicative of our overall execution as this cohort has grown since our IPO to become the vast majority of our business. We will no longer provide this metric going forward. Starting this quarter, we are providing a new metric of customers spending $250,000 or more in average contract value. This should provide investors greater visibility into our continued success in the enterprise space and our land and expand strategy. In Q1, we had 436 customers reach this threshold, up five sequentially and up 50 YoY. This cohort represents 81% of our business. While we continue to see success among enterprises, today's buying environment certainly has impacted those types of deals. There are fewer large digital transformational deals happening, but we've seen continued success on deals that produce faster ROI for our customer. This quarter, we closed four deals with ACV of $500,000 or more, including one deal over $1 million. On our last earnings call, we noted we would be revisiting our transaction volume metric. As our business has expanded over time, we are no longer a one-product company, so we are providing visibility into the transaction volume of our three main products. In fiscal 2023, our systems processed $87 billion of billing transaction volume, representing 16% growth YoY. In addition, we processed $190 billion of revenue volume, growth of 20% YoY. Finally, we processed $40 billion of collect volume, representing growth of 27% YoY. These metrics speak to the depth and breadth of our solutions. Going forward, we plan to provide these new disclosures annually as quarterly volumes ebb and flow. Looking at ARR and free cash flow. At the end of Q1, ARR was $373.9 million and grew 15% as reported. As we discussed in April, we are now reporting on adjusted free cash flow, which is free cash flow excluding expenses and settlements related to acquisition-related costs and non-ordinary course litigation. In Q1, adjusted free cash flow was $13 million. As a reminder, free cash flow can fluctuate on a quarterly basis due to timing of cash collections and seasonality. We believe it's best to assess our cash flow performance on an annual basis. Total CapEx for the quarter was $1.7 million. Turning to the balance sheet. We ended the quarter with $396.9 million in cash and cash equivalents, a sequential increase of $11 million. As a reminder, the previously announced litigation settlement will impact our cash balance later in the year by approximately $75 million. Let's turn to our financial outlook. We are seeing a similar buying behavior relative to last quarter. We are assuming these conditions will continue for the remainder of the year. Starting with our guidance for Q2, we currently expect subscription revenue of $95 million-$96 million, representing YoY growth of 14% at the midpoint. Professional services revenue of $13 million to thirteen and a half million dollars. Total revenue of $108- $109.5 million, representing YoY growth of 10% at the midpoint. Non-GAAP operating income of $7 million-$8 million, and a non-GAAP net income per share of $0.03-$0.04 per share, assuming a weighted shares outstanding of approximately 138.6 million. For the full fiscal year 2024, we are raising the low end of our subscription and total revenue ranges and raising our guidance for non-GAAP operating income. We now expect subscription revenue of $337- $384 million, representing a YoY growth of 12% at the midpoint. Professional services revenue of $54- $56 million, and total revenue of $431- $440 million, representing a YoY growth of 10% at the midpoint. A non-GAAP operating income of $30- $32 million, a non-GAAP net income per share of $0.15-$0.17, assuming a weighted shares outstanding of approximately 140.2 million. For fiscal 2024, we're committed to delivering adjusted free cash flow of at least $24 million, a significant improvement of over $55 million from fiscal 2023. We are also increasing our operating profit objective and are now committed to deliver a minimum 7% non-GAAP operating margin for the year, up 100 basis points from our previous guide. Turning to DBR and ARR growth. For the fiscal year, we expect DBR of 107%-109% and ARR growth of 12%-15%. For fiscal 2024, we continue to expect to be under 5% in annual share dilution with a midterm target of 4%. For this purpose, dilution is calculated as the number of equity awards granted net of forfeitures during the fiscal year, divided by the total shares outstanding at the end of the fiscal year. Looking ahead, we remain focused on balancing growth and profitability regardless of the macro environment. Our solutions continue to be critical for our customers to run their business and solve challenges from billing to collection to revenue recognition. Our multi-product portfolio offers them the necessary agility to monetize and expand their offerings. We look forward to continuing to innovate and create more opportunities for our customers to grow with us. One housekeeping note: We've added a supplemental table to our IR website, which breaks down stock-based compensation by OpEx lines. With that, team, Robbie and I will take your questions, and I'll turn it over to the operator. Operator? Thank you. If you have a question, please press star one on your telephone keypad. If you wish to remove yourself from queue, simply press star one again. One moment please for your first question. Your first question comes from the line of Joseph Vafi of Canaccord. Please go ahead. Hey, guys, good afternoon. Nice to see the nice results and the guide up for the year. Maybe we just start on the guide real quick since we just went through it. If, you know, it's nice to see the guide up on the revenue line, the $6.1 million in operating income, I believe, which was pretty strong. Is there anything in the guide in the assumptions relative to operating margin performance versus the previous guide here other than, you know, just leverage in the business? Then I'll have a couple follow-ups. Hi, Joe. When we took a look at the guidance, you're absolutely right. We raised the lower end of the revenue based upon what we had in Q1 and the midpoint of the guidance that we gave for Q2. We also brought up the operating profit by 100 points. We're really getting that from two things. One is the leverage that we're getting as we're growing, being extremely disciplined, and of course, we're being really thoughtful about everything we spend. There are certainly opportunities for us to continue to gain leverage out of our model, and we'll continue to do that through the year. Sure. Fair enough. On the kinda tweak to the go-to market and going after some smaller deals that can close given the macro, maybe kinda dive into, you know, what that means longer term for those deals and deal size over time if it's. I mean, it's clearly probably a positive on net retention over time, but, you know, how do you see some of these more rapid deals expanding versus, you know, kinda, you know, perhaps the really large deals that we may have seen occur without the macro headwind? Thanks a lot, guys. Joe, I'll go and answer that. This is Tien. There's no change in the strategy. We've always talked about how we believe this marketplace skews towards larger companies, subscription business models or scale business models, and we are continuing to focus on that segment. We obviously think that's the right segment. We land an account, we continue to grow. So if we're talking about, you know, smaller land deals, we're still talking about the same customer segments that we're going after, right? So we feel really good that once we get these companies, that the second half of our land and expand strategy, the expand part remains an intact part of the strategy. The other thing I would hit you with, Joe, is, you know, we also talked in the earlier remarks about the fact that during the year, 60% of our customers expanded their footprint with Zuora, and we expect that will certainly continue. Right now, what we've really done is just taking a look at where the environment is and making sure we're directing our salespeople to where we can be most productive based on the current macro environment. Your next question comes from the line of Joshua Reilly of Needham & Company. Please go ahead. Thanks for taking my questions. Nice job on the quarter here in what we all know is a challenging macro environment. We've heard that the European IT market is gonna recover before the U.S., possibly because they actually entered the recession, you know, before the U.S. did on the technology side of the economy. Is that something you're seeing at this point? You know, you have a fairly large business in Europe and, you know, just maybe you can touch on any trends that are diverging in the U.S. versus the European market. Hey, Josh. It's Robbie. I think across the board, we see really strong interest for our solutions. Although there is, I think, you know, more buyer behavior is more cautious, there's a high levels of interest across the side. Within the geos, we have really strong execution of our teams. There's really strong. There's a good diversity across our geographies and industries, and that's what enables us to have a really good balance. Yeah, this is Tien. I'll just add. Look, there's no doubt, right, you guys all experience is there a slowdown in tech macro? You know that better than we do. What we see is that regardless of, you know, where interest rates are, regardless of where the macroeconomic situation is heading, the secular shift to subscription business models is still important, and it still continues. Given that, the technologies that we have remain relevant and important in the marketplace. That's regardless of region and economy. Got it. That's helpful. If you look at switching the ARR per customer metric, you know, to this new figure at 250K versus 100K, you know, can you just help us, why is that the appropriate level to judge business performance? Is that a threshold where customers typically become multi-product on average or any other color on why that's the right metric? Josh, when we were really looking at it, we felt the 100 K metric wasn't just becoming very relevant anymore. It was in 96% of our business. One of the things that we've also said is the fact that we absolutely have a land and expand point of view. The 250 K felt like the right place to land us. It was similar to where we were from a standpoint of covering our revenue, about 80% plus, when we put in the 100 K metric. I think that's gonna really be demonstrative of landing in the enterprise space, the types of customers that we're going after, and our ability to grow them. Your next question comes from line of Adam Hotchkiss of Goldman Sachs. Please go ahead. Great. Thanks for taking my questions. You know, Tien, I wanted to go back to the go-to-market strategy. Could you just give us some color historically on what typical customer behaviors looked like for customers that land on smaller products versus landing larger? Do you typically see a different trajectory in upsell or cross-sell amongst these customers? How should we think about that, you know, playing out for the next couple of years? Well, it all depends on when you say history, how far back you go. You know, I think when, you know, we're over a decade into this thing, probably close to 15 years, and there were sort of periods when we're out there evangelizing subscription business models where we did see a lot of what we'll call science experiments, right? Companies saying, "Hey, is this something I should try?" And we might land a smaller deal that in hindsight, two, three, four years later, didn't go anywhere. We're just not seeing that, right? You guys, when you look at companies, when you look at CEOs of... These are, you know, these are public companies, these are multi-decade, often 100-plus-year-old companies with, you know, $ billions of revenue. Their CEOs are out there saying, "Look, subscription business, recurring revenue models are important." We have a target of 10%, 20%, 30%, 40% of our revenues being in the subscription space. We're not just talking technology companies here, right? We're talking like traditional manufacturing companies that are really saying the same things. I would say, you know, we're much more comfortable saying, "Look, there's no reason you have to start in a large place. You're looking for quick ROIs, right? You're looking for quick impact on your business. We can deploy a much smaller footprint of our product. We can get some success, we can show you success, and then we can grow from there." What you're seeing is the investments that we made in customer success and innovation and working with our customers, really proving out the expand motions, that's what's giving us a lot of comfort to say, "Hey, if it makes sense to do a smaller deal, given, you know, the current, the spend environment, why wouldn't we do that?" Right? It still locks into a long-term customer value. Hey. Go ahead, Robbie. I'm gonna add on top. I mean, one thing I think is across the board, it's 60% of our customers grew with us, right? If you go there, and you start looking at it beyond that, you know, the 500k plus cohorts, they grew 26% YoY. It comes back to the story team said about Zoom. I mean, they were $50 million, and they've grown significantly with us over time. I was gonna say, I think, Adam Hotchkiss, the correlation is not so much where we land, but it's landing with the right customers. If I think about our largest customers today, almost every one of those started maybe around 100k. We picked the right customer, we have the right product, and we have the ability to grow them over time. That's really what we're doing right now, is taking advantage for companies to give them something where we can land, they can get really quick value, and then we'll continue to upsell it. We've shown that is really what correlates with our ability to grow rather than so much the initial size of the customer. Got it. Great. That's all really helpful. Could you just give us an update on how you're thinking about further expansion of platform capabilities in Order to Cash? I fully recognize there's a lot of execution to go in the existing portfolio plus Zephr, curious how you feel like you need to go after given your relatively strong cash position. Thanks. Well, the simple story is when you have a sticky product that goes into an account and you tend to have a customer for life, if you keep them happy, if you continue to innovate, it gives us a fantastic position from which to expand. You've seen us do that with, you know, revenue recognition years ago. You've seen us do that with subscriber experience in the Zephr product. You're absolutely right, you know, we do believe there's continued expansion. Some of that is gonna be new innovations in new areas that are, you know, only coming about because of the shift to subscription business models. Some of that might be taking, you know, share away from other categories. You know, we don't have anything specific to announce right now. This is why we thought the strategic investment from Silver Lake is giving us the balance sheet to execute those things. You saw us do that last year with Zephr. That acquisition, I'm pleased to say, is going well, and it certainly gives us confidence to do more. At the same time, our organic innovations are also very, very exciting. That 20% of bookings coming from, you know, innovations over the last 18 months, those were all organic innovations. We do have this Subscribed Live event coming up in a few weeks, I think June 21st. I'm gonna save some of our announcements for that event. Your next question comes from the line of Chad Bennett of Craig-Hallum. Please go ahead. Great. Thanks for taking my question. Just on the ARR, I think you reiterated your ARR guide for the year and kind of how that lays out maybe linearly throughout the year, or sequentially. I guess, do you think, Todd, from a net new ARR standpoint, the April quarter from a dollar basis, I think you're a little under $9 million, is just kind of the baseline to grow off of sequentially? Or would Q2 kind of have some volatility in it from that? As far as you can see today, I guess. Chad, there's always a few ebbs and flows in it. As you know, the back half of the year is certainly our strongest part of the year as it is with most enterprise SaaS companies. I would probably say, you know, you probably see us around where we were in the most recent quarter and continue to accelerate through the rest of the year. That kinda implies a pretty decent second half from a YoY net new ARR growth standpoint. And just considering what you're seeing and everybody's seeing in the macro, you feel you have good line of sight into net new ARR, you know, decent growth in the second half of the year on a YoY basis as we stand today? We believe that the guide that we've given on the ARR growth is prudent, and it certainly does reflect what we're seeing with the growth of the funnel and the interaction that we're having with customers. You know, as I maybe referred to a little earlier, my expectation is I don't expect the year to get a lot better, but nor are we saying the year getting worse. Your next question comes from the line of Andrew DeGasperi of Berenberg. Please go ahead. Thanks for taking my question. I guess first on the, terms of new logos, I mean, you mentioned the really strong numbers this quarter. Can you maybe elaborate, what's happening there? Is it really just a function of the partner channel really kicking into gear? Then also could you add if there were any competitive wins in terms of these new logos that you added? Hey, Andrew, this is Robbie speaking. I think overall the new logos are something that we have really focused on. Where do we have a quicker land in terms of what it is that we're doing? I've seen really, really strong execution. As the markets change, we understand what people are looking for, how to be prescriptive in what they were looking for to buy. That has supported us really well. The partners continue, good momentum there, and very strong source pipeline from our partners as well. Yeah, this is where I would say, this is Tien here. You've heard us talk about our multi-product strategy. You've heard us talk about how we do have the capability to land with billing. We have the capability with the land with revenue. We have the capability to land with Zephr. I think, you know, a few years ago, we talked about Chegg being one of our customers that started with revenue, and then really expanded from there. You know, there's countless of other examples as well. I'd say perhaps last year, right? The marketplace and our SIs are saying, "Look, there's a lot of companies doing digital transformations, and so maybe the marketplace skewed towards larger suites." Right? The great news for us is because of our architecture, because of our product strategy, right? We can go either way. If the market is coming and saying, "Look, let's start with one of your modules. You know, we love the fact that you have a suite. We love the fact that we can grow with you. This is the right place to start from a budgeting and, you know, in a ROI justification standpoint," we can certainly flex with the marketplace really, really easily. That's helpful. Tien, maybe at a higher level, are you seeing any of your customers shift from subscription or SaaS to usage-based models? Are you seeing a pickup in that at all? Yeah. We've been doing usage-based models since day one. Our first customer, which happens to be a company of Coremetrics that was additionally, eventually bought by IBM, was a full-on usage-based model. We've got deep experience. We've got research that comes out of our Subscribed Institute that says the best companies really use a blend, right? You don't want more than 50% of your revenues coming from usage, but, you know, having no revenue come from usage might not make any sense. I would say this is very industry specific. I'd say the tech industry, especially, you know, if you skew towards infrastructure companies, because of Amazon, because of Snowflake, are definitely embracing usage or consumption-based business models, if you will. I'd say if you look at the media industry, you're gonna see less of that, right? They're still on a, you know, X dollars a month. They're more about packaging, pricing, and unbundling and rebundling their offerings. If you look at the telecom sector, you know, you look at your bill, you might remember we used to get charged $0.10 a call and, you know, now we're not doing that. You do see these blended models, though, where, you know, you opt into a certain amount of gigabytes, and then you pay overage fees. The great news is we've got a technology platform that allows you to price in any way you want, right? We continue to advance. We had an Advanced Consumption module that handles like things like prepaid drawdowns. You're gonna see us continue to invest in this area. The more complex pricing and packaging it is, the more valuable our technology really becomes. Your next question comes from the line of Brent Thill of Jefferies. Please go ahead. Thank you. This is Luv Sodha on for Brent Thill. Thank you, Tien, Todd, and Robbie for taking my questions. I guess the first question I had was for Tien. Tien, as you think of the portfolio of products that you have today, could you just briefly comment on the impact of artificial intelligence, and what you're, you know, developing internally, within the products, specifically as it relates to Zuora Revenue? Specifically as it relates to Zuora Revenue, well, I would say our artificial intelligence has been a big part of our strategy for many years. You've seen us use that for the collect product, which has the Configurable Payment Retry Logic. So we're using, you know, statistics and AI to basically decide when is the best time to retry that credit card. We've had a lot of success with that, and we're able to recover upwards of 10%, 20% of lost payments for many of our customers. So the new wave of AI around, you know, generative AI certainly is very exciting. It's multidimensional. We're obviously looking at that from a, you know, a productivity standpoint internally, whether it's developer productivity or non-developers. We're looking at that in terms of better customer experiences for our customers, right? Better interfaces into documentation support, being able to write sample code, right? Or a starting point code as an example for our customers. You know, we have a lot of data, and certainly, you know, being able to unleash natural languages interface to say things like, "Hey, which of the orders last quarter are the ones that I really should audit or pass through the auditor audit?" These are all really, really exciting capabilities. Look, I'm not sure that I wanna jump on the AI bandwagon for this call. I'd rather take the time, let my engineers really build some great innovations and then announce it when we're ready. Obviously, you know, we're excited as anybody else about the new capabilities that are now available. Got it. Todd and Tien, you know, one question as a follow-up on the net new ARR question you got. I guess, you know, net new ARR was down meaningfully YoY, it's the lowest net new ARR you've seen in, let's say, six or seven quarters. I guess based on pipeline and coverage, when do you think net new ARR will cross and start expanding again? Is that what you're baking into your expectations for, you know, given the full year guide? Thank you. Well, it's absolutely what we are baking in the guide that we gave that, you know, we will continue to see acceleration as we go through the year. I think it's been, you know, we're no different than anybody else. We're not immune from what's happening in the macro. As we set the guidance for where we were this year, we had the expectation that it would be slower in the first half of the year. I think we came in right where we said we were gonna do. In fact, you know, if you go to the guidance, we raised the lower end of the revenue guidance. We're holding on the rest of the DBRR and the AOR, same range. The last thing I'd say is, you know, we also brought up the operating profit or the non-GAAP operating profit, to a minimum of 7%, so another 100 basis point improvement. We certainly do expect, you know, acceleration as we move throughout the year. Again, we're no different than anybody else with the impact of the macro. If you would like to ask a question, press the star then the one on your telephone keypad. Your next question comes from the line of Jacob Stephan of Lake Street Capital Markets. Please go ahead. Hey, guys. Thanks for taking my questions. Just, Todd, maybe if you could touch on some of the gross margin levers that you are seeing. Just talk about kind of the investments in infrastructure that you're making. Thanks a lot, Jacob. We've spent quite a bit of time. The overall gross margin obviously has been impacted by the mix of our business. As we have a heavier mix on the subscription business, that is certainly a benefit. In particular, though, with the subscription business, that has continued to strengthen. We're spending a lot of time making sure we're maximizing the efficiency of our hyperscalers. We now have a dual-hyperscaler strategy, which is something that's certainly helping us benefit from a pricing perspective. We're also spending time on how do we automate items such as support and technical operations. All of those are areas that we'll continue to focus on, and that will help us over time drive an even higher subscription gross margin. Okay. Maybe just on the professional services side, it sounds like you're gonna grow the team. That implies near term that you would have slightly, well, I guess, higher negative gross margins, but longer term, you still expect to kind of operate this business at break even. Is that what I'm hearing? Absolutely. Longer term, we'd like to have this business run at break even or slightly profitable, but we probably have some opportunities over the next quarter or so to help invest in some customers that accelerate our overall growth. I'm willing to make that trade-off, and that certainly fits within the guide that we've given today with the increase in profitability. We have time for one more questioner. We have your next and last questions from the line of Nick Mattiacci of Craig-Hallum. Please go ahead. Hi, guys. Thanks for taking the question. As we think about the new logo additions and the momentum you guys are seeing there, can you talk about the type of solutions you are replacing? I'm trying to think about the mix and how that may have changed between, you know, replacing homegrown solutions versus competitive solutions, if you think the current macro environment is lending to you being able to replace, you know, one more than the other, so to say. I wouldn't say there is a market shift in customer behavior between replacing a homegrown system or a commercial system. I think, I think the reality is if you're hitting a point in your business cycle where, look, your system is just not doing what you need to do, and the more, you know, dynamic your industry is, the more competitive your industry is, the more a shift is going on in your industry towards these new business models, right? The higher probability that whatever system you're using is just not gonna cut it. That's when you come to us. You know, again, that tends to be regardless of the macroeconomic environment, 'cause when you get to that point and your strategy is your strategy, and what you need to do is what you need to do, right? We're still seeing that. I think what you're seeing in the new logos is, look, one, our product continues to be relevant in the marketplace. Then two, you know, we have the ability to land smaller, if it makes sense, with one of our modules, and it could be, it could be revenue recognition, right? It could be billing. Heck, it could be payments. We've got companies now are saying, "Look, we're not eager to replace our billing system just yet, but we've got a gigantic payments problem." Anything we solve there goes right to the bottom line. You know, we can start there as well. I think, you know, I'm feel really good about our position in the technology investments that we've made and the focus on customer success that we've made, to be able to continue to drive growth in this marketplace. Hey, Nick, the last piece of color that I would add to Tien is if I take a look at the new logos that we added last quarter, really good balance between billing, revenue, and Zephr. Got it. All those products are resonating with customers. Awesome. There are no further questions at this time. I would now like to turn the call back to Tien Tzuo, CEO of Zuora for concluding remarks. Please go ahead, sir. Well, thank you everyone for joining us today. As a last plug, I do hope to look forward to having you join us at Subscribed Live on June 21st in New York City and online. Thank you very much. This concludes today's conference call. You may now disconnect.