And we are seeing that. Number two is we’re seeing a significant growth in pipeline. Now, remember, it takes 8 to 12 months to close these deals, and a lot of these products just are coming out of beta now. So that’s part of the greenshoots in the future, not to mention the stuff we’re already selling. But the growth in pipeline – and then number three is, third party validation, right? Metrigy ranking us number one for customer sentiment, or Gartner Critical Capabilities saying positive things about us. And these third party analysts are coming in, they’re doing their due diligence, they’re comparing us to other vendors – and there’s others, I’m not trying to show any favoritism. But these are all the – And then lastly, look, I spend a lot of time on the road traveling.
And it’s sitting down with our customers and our partners and me spending a half an hour or an hour going through where we’re going as a company and them just nodding their heads and saying, yes, you are on track, you’re going to meet our needs, you’re doing the right things, just deliver what you say you’re going to deliver and we’ll be customers or we’ll buy more or however you want to think about it. That’s really, on the dashboard level, it’s the increase in pipeline, the increase in win rates, the better performance on RFPs, the better performance of our new products, those kinds of things, and then just the raw qualitative sentiment you get when you sit down with customers and partners and them saying, yes, this is what we need for our customer base, for our ideal customer profile.
That small to medium-sized enterprise that doesn’t have a team of a whole bunch of developers, this is perfect. We think we can sell a bunch of this.
Ryan Koontz: Just a quick feedback, follow up on – you talked about new metrics, I think is what I heard in Q1, and loud and clear investors would like to hear about some CCaaS metrics, whether it’s revenue, ARR, et cetera. I think that would go a long way.
Operator: Our next question comes from William Power with Baird.
Yanni Samoilis: This is Yanni Samoilis on for Will Power. I was hoping you could provide an update as to what you’re seeing in the macro more broadly. Are you seeing stabilization yet in terms of renewal pressures, impact to seat counts, things of that nature? Are things still getting worse? I guess more importantly, what are you factoring into your guide for fiscal 2025?
Samuel Wilson: I’ll let Kevin cover the – so I spent a lot of time – I mentioned earlier on the last question from Ryan, I spent a lot of time on the road. I wouldn’t say it’s pretty out there. Layoffs were pretty high in February and March. We do see some of the effects of higher interest rates and those kinds of things on various industries and capabilities and those kinds of things. We see the positives and negatives, but I would say the environment is not pretty. It’s not great. There’s not a lot of tailwinds. There is some holdover post pandemic, right? There were a lot of orders made during the pandemic. Some people are right-sizing those orders. Kevin mentioned it around Fuze, some of the areas we see that. I think it’s fair to say every CFO or every IT guy I meet with is looking at the cost structure of their organizations and those kinds of things.
I would mention, though, we launched operator connect. And I’d like to say we’re number one on the panel because of our name. It’s already driven a lot of things. We have a Microsoft Certified Contact Center that goes with Operator Connect, but there are still hundreds of millions of seats of UC, and I think low-cost solutions unlocks this base. And so, the fact that we have low-cost Operator Connect available, I hope, allows us to accelerate the move from on-prem to cloud relative to other things. And so, I’m not exactly fearful of some decline in pricing because I think I’m becoming more and more convinced that’s what’s necessary. The idea that the entire world is all going to be on $30 per month seats, I think, is just unrealistic, and so we need to meet the customers where they are and try to capture those tens of millions and hundreds of millions of seats that are available.
What do you want to say about modeling?
Kevin Kraus: In the deal conversations I’ve been involved in, and we’ve said this before on earlier calls, there’s some caution out there. I think people are willing to still do the deals, of course, and we’re doing them. But I think there’s some cautiousness out there, maybe taking a little bit longer to sign the larger deals and so forth. So the cycle might be drawn out a little bit more, more signatories on deals and so forth. So in terms of our guidance, we’re basically factoring in the same. I think it’s neither pessimistic nor optimistic in the guide, but right now it’s been fairly consistent in terms of the attitude out in the marketplace that we see. So we just keep moving forward in our guidance under that assumption.
Samuel Wilson: I wouldn’t say we’re expecting bounce back on our guidance. Kevin and I are both sort of quasi-pessimistic when it comes to the macroeconomic environment, at least when it comes to forward modeling. That way we try to be always on the safe side.
Yanni Samoilis: I appreciate the color on Operator Connect as well. I was wondering if you could provide an update just on the Teams partnership generally, and then trends within that base of users. And then, I guess more specifically, any update on the competitive dynamics and play there with others that are also trying to lock on to that base of users. I guess just any color around that would be great.
Samuel Wilson: When you mean basic users, do you mean Microsoft Teams or do you mean on-prem?
Yanni Samoilis: The Teams users, trying to lock on to those.
Samuel Wilson: Team users. So, look, I think we’re one of the fewer or only – for sure, we’re the only vendor that has Operator Connect, direct routing, and a Microsoft native certified contact center. And we see a significantly higher attach rate of contact center with our Teams deals. Teams is well over 400,000 seats. It continues to grow very rapidly. We love Teams and I think Teams is a much better product than those guys that start with a Z anyway. So more benefit to Microsoft, the better they do, the happier I am. And it’s just a better solution for mid and large enterprises that we participate in. So I think Teams is here to stay. I think telephony is going to be a key component of Teams, and we have the most richer offering around that. And I look forward to doing more Teams deals every day. And by the way, we get solid margin doing it also. So, before anybody second guesses it, yes, we get a solid margin for doing it.
Kevin Kraus: Our attach rate to contact center is much higher with Teams deals, so happy about that too.
Operator: Our next question comes from George Sutton with Craig-Hallum.
James Rush: James on for George. Excluding the CPaaS headwinds and Fuze down sales, would you have grown in the quarter? Could you maybe quantify the mix from CPaaS and some of the new products that’s assumed in the full year guide?
Kevin Kraus: Did you say the headwinds in CPaaS from Q3 to Q4? Is that what you’re referring to?
Kate Patterson: I thought he said headwinds from Fuze.
Samuel Wilson: I think he said both.
James Rush: From both, yes.
Kevin Kraus: I think the reality is that basically the sequential impact is fundamentally on the Fuze and headwinds in the CPaaS seasonality. The rest of the business is basically even quarter on quarter.
Samuel Wilson: Yeah, I would say don’t hold me directly to the third decimal place, but the general answer I think is, eyeballing it, is yes is the answer to your question.
James Rush: I think you made a comment about continuing to invest in driving awareness and making some other go-to-market investments. Can you provide some color on what investments you’re making there and maybe how you’re investing those dollars differently than you may have in the past?
Samuel Wilson: Look, in the past, we invested a little bit more in the middle of the funnel. We’re investing more top of the funnel activities now. We’ve added sales capacity, in particular BDR capacity. And we’re being aggressive about going out and telling our story. So I call out the fact that a couple quarters ago we hired Justin Robbins to be our evangelist, and that guy’s been logging a lot of miles on the road telling just a fantastic story. We have a really, really good product innovation led story. We’re still somewhat known as that stodgy UCaaS company, but once we can get that story out, we have the references, we have the capabilities, we have the case studies. I mentioned them on the call, Sovereign Housing Group or Upland or any of those types of things.
And so, it’s just a matter of getting people to realize kind of what we’ve evolved to and we’ll see those corresponding business improvements. And we see it already in the pipeline. I think it’s a lot about that. And it’s a lot less about spending money on Google AdWords and fighting with the lead ags and these two-bit UCAS providers that dive on pricing at every instance. Like that’s where I want to get us out of.
Operator: Our next question comes from Michael Turrin with Wells Fargo.
Ronit Shah: This is Ronit Shah filling in for Michael Turrin. A quick question on the AI piece. So where are you seeing the best opportunities in AI use cases among customers? And is there an avenue for monetization here?
