Tim Wan: Yes. I think — no, it’s a great question, Alex. I think one, just for clarity, I just want to say while we’re encouraged by the multi — the number of multiyear deals, they do — they are still a minority, a small percentage of our total billings. So that’s one. Two, I would say, certainly, I think we continue to see kind of the same environment that we’re operating in, in the first half of the year and that the environment not getting materially better or worse right now. So to the degree that with our net expansion rate, I do think it’s going to take another two to potentially three quarters for all the renewals to work themselves out so that we have an easier comp after that. And then I also — obviously, we have new sales leadership coming on and we want to just make sure that there’s adequate room for the leaders to kind of make the necessary changes as we go upmarket.
Operator: Thank you. Our next question comes from the line of Josh Baer of Morgan Stanley.
Josh Baer: Great. Thank you for the question. I wanted to ask one on the net retention rates. Tim, just kind of thinking to some of your comments on some areas not as strong as they hoped and sort of taking another two to three quarters to get easier comps. Just wondering like what gives you confidence that retention rate can remain above 100%, just kind of looking at some of the trend lines and deceleration that we’ve been seeing.
Tim Wan: Yes. So I would say, Josh, that the thing we looked at, obviously, is a combination of both the downgrades and the expansion. And that’s where most of the compression has really come from in our net expansion rate. That companies aren’t expanding as fast as they had during prior years. Companies that were planning to grow ultimately ended up doing layoffs and having to readjust their renewals with us. So I do think like those things need to work themselves out and that over time — the one encouraging sign, I would say is that when we look at logo churn, especially in our large customers and across the base, essentially, those have remained unchanged. So the companies that are using us are staying with us, while they are downgraded or expanding less right now.
I do expect them to, over time, as the economy gets better, to hire, deploy more seats. And as we add more functionality into our different packages, have them kind of move up into these kind of more advanced packages that we’ll be offering later this year.
Josh Baer: Okay. Got it. And then kind of related, since that’s backwards looking. I was hoping you could give a little bit of color on the linearity through the quarter, but then also into August as well on what you’re seeing as far as demand trends?
Tim Wan: Yes. I mean I think in terms of just kind of like how the quarter shook out this last quarter. I would say no different than what we saw in Q1. And the Q4 of last year that generally the first couple of little bit slower and then kind of deals being somewhat in the — most of the larger deals being somewhat in the last month of the quarter. And I think August traditionally for us, there’s some seasonality, primarily because EMEA is a slower month. They’re generally on vacation. But I think when we look at the pipeline and when we look at how we entered the quarter, I think we feel pretty good about how the quarter is shaping up right now.
Operator: Thank you. Our next question comes from the line of Robert Simmons of D.A. Davidson.
Robert Simmons: Hey, thanks for taking the question. I was wondering if you can give a little more color on the net retention number. First, was it closer to 105 or to 110? And then how did it trend over the quarter and so far in 3Q?
Tim Wan: Yes. I think what we disclosed is that was over 105. So last quarter, I think I believe we said it was over 110. So you can imagine kind of the data point and the trend lines of that why we would drop the disclosure from 110 to 105.
Robert Simmons: Okay. And then I guess two things. I mean have you seen any change so far in 3Q? And also, could you give us some color on what you’ve seen on that number kind of inside and outside of tech?
Tim Wan: I think it’s certainly stronger outside of tech. And I would say, similar to the commentary that we made about the different segment, I would say the headwinds, particularly — we’ve seen headwinds in obviously, tech and non-tech, but I would say it’s more — definitely more pronounced in the tech segment.
Operator: Thank you. Our next question comes from the line of Patrick Walravens of JMP Securities.
Patrick Walravens: Great. Thank you. Dustin, I know it’s kind of off message, but I was intrigued when you commented that the AI functionality might help with the free-to-premium conversion. So, you guys really haven’t talked about that for a while. Remind us how many free users are there? And what is the size of that opportunity?
Dustin Moskovitz: I don’t have the free user base number off hand, but I don’t want to [Multiple Speakers] here. I think the opportunity is small. I just think it’s a bit of a wildcard of like maybe it will show up. We’ve paid attention to some other vendors that have more of like a prosumer market and seeing that some of their customers are empirically willing to upgrade even for sort of single player usage. So most of our per-user base is individuals, personal use cases, prosumer use cases. And so I think some of them might be more enticed by this than some of the other functionality that was more oriented around teams. I just think there’s a little more of that is valuable to specific individual end users, even if they’re not collaborating or if they’re just collaborating a little bit. So that’s the only reason I mentioned that, but I do think it’s small, it could be nothing — I don’t want that to end up in analyst models, to be honest.
Patrick Walravens: Yes. Okay. A lot of us pay for ChatGPT. So it is kind of interesting. And then one for you, Tim. Just how should we think about the shape of free cash flow margins in the second-half? I mean you said not to expect necessarily another $15 million. But how do we think about that?
Tim Wan: Yes. I think you should expect our free cash flow to be negative in the — for both Q3 and Q4. But we’ll make improvements on a year-over-year basis and that the margin will improve from kind of Q1. I think Q2 was a quarter where we essentially had a large invoice in Q1 with one of our largest customers. We collected that cash in Q2 that certainly helped with our free cash flow. But we don’t see that for another year. But it will improve on a year-over-year basis.
Operator: Thank you. Our next question comes from the line of — our final question comes from the line of Brent Thill of Jefferies.
Brent Thill: Dustin, impressive hire with Ed McDonnell coming in as CRO from Salesforce. Maybe if you could talk through your top aspirations out of the gate for him and if you could speak to also anytime we see new CROs come in, there tends to be a little wake turbulence that’s felt. Do you — how impactful do you think that wake turbulence will be in the changes that you would like him to make.
Dustin Moskovitz: I’m Sorry, that word was weight turbulence?
Brent Thill: Okay. Sorry, for getting the airplane chatter on you.
