John Wagner: We are now going to take questions compiled from our analysts.
A – Unidentified Company Representative: Great. We’ll take our first set of questions from Steve Frankel of Rosenblatt Securities. Despite a better-than-expected performance in Q1, you’re guiding for revenue declines in the second quarter. Does this decline a function of the lost customer you discussed in the 4Q call? Or have you seen additional customer churn?
John Wagner: So, I guess, I’d start by saying we had a strong revenue quarter in Q1. We were pleased with the fact that we were able to deliver some upside against our guidance. As you look at Q2, we are guiding for a sequential decline in revenue. I think you’ve got the first major piece of that if we walk through the – from Q1 to Q2. First component is that, large media customer that churned in Q1 related to their own M&A. I’d say the second component is within professional services. Our guide implies about $700,000 less in professional services in Q2. And then lastly, I would mention two components, which would be the headwinds we’re seeing within FX, as well as lower overages. Q1 was a relatively strong quarter for overage. We expect a few hundred thousand dollars less in Q2.
Unidentified Company Representative: Steve’s next question is, can you provide an update on the company’s large deal pipeline, particularly in media?
Marc DeBevoise: Yes. I think we feel very good about the pipeline and how it’s been building over time. We’ve certainly closed the number of what I would call high $100,000 annual value deals in Q1. I think we see more of those coming down the pike. I think we also see numerous, let’s call them, 7-figure plus millions of dollars types of deals in each of the next potentially a few quarters. As we’ve always said, the challenge is knowing exactly when we can bring those deals to conclusion because it’s not always effectively within our control, the same way sort of smaller deals can be. We feel really good about how that’s been building. I think you’ll hear more from us in from Q2 and into Q3 and in Q4 for the rest of the year, and that’s going to be really the upside potential we see to our guidance if we can land more of those in the sequential quarters.
Unidentified Company Representative: And Steve’s final question is, what will it take to get the business to a point where it can consistently grow revenue?
Marc DeBevoise: Yes. I believe getting that add-on business back to sort of the historical levels we’ve seen, and we’re doing a lot of things, as we said on the call, to go after that, right? That’s about building our muscle and our enablement with our sales team to go sell those existing products up and into our existing customer base rather than the entitlement fueled growth we had over those previous years. And then if that entitlement growth does come back, you’ll really start to see that growth kick in. But we believe we’re doing the right things on the add-on side to bring that back. I feel pretty confident in the new business side. I think we’re doing well there. I think if those big deals also can come in more than one or two a quarter, but really start to cook at a higher rate per quarter.
I think we start to see some really consistent growth there. So that is our goal to get back to that consistent growth. You’ve seen us do a couple of quarters here of 3% ish. Obviously, we’re going to take that back here in a quarter, but I believe the goal here is to get to that – back to that type of growth, if not greater, by the end of the year.
Unidentified Company Representative: Okay. We’ll take our next set of questions from Eric Martinuzzi of Lake Street Capital Markets. Your prior outlook did not anticipate any recovery in add-on or usage business in 2024. Have you seen any green shoots either in Q1 or in the month of April?
Marc DeBevoise: I think we have seen some. I think as we’ve said, sort of that entitlement business has not come rolling back, and we’ve sort of said that from the beginning, and that was implied in our guidance for ‘24. We have seen some meaningful success in upgrading our enterprise customer base from what I would call existing video cloud accounts into marketing studio and now that we have Com Studio fully complete rolling that out as an upgrade potential for many of our customers. And I think we’re going to see more there, nothing we want to sort of let out at this point. We’re sort of early days in terms of the number of quarters we’ve had to go in and sell that to our existing customer base, but I do believe there’s going to be a greater opportunity to up that add-on business with those products on the enterprise side.
And then on the media side, it’s going to be about those existing pitches of total cost of ownership and really the excellence we deliver from a quality perspective to try to grow those add-ons with our existing customer base on that front.
Unidentified Company Representative: Eric’s next question, can you compare and contrast the demand environment in your pipeline between media accounts and your traditional enterprise accounts?
Marc DeBevoise: Yes, I think the demand environment in media is very big deal-driven for us. We have a decent number of customers in this space, especially on a global stage, but it’s really going to be about which big ones can be really upsell, either in big new things they’re doing or in big new customers we can bring on. So that’s where that big deal pipeline that was asked about earlier really comes into play. On the enterprise side, much more volume-based. We have a great customer base, over 1,500 enterprise customers. We’re really trying to figure out how we can build those add-ons into that business. And so, like I talked about earlier, as we built these products to be those upsell use cases, can we get customers into those.
And I think that will build from there. Again, from a new business perspective on enterprise, I think we feel relatively good. We’ve got some decent throughput on volume. We’d always love to see more. If I were critiquing one area, it’s really that North America is doing relatively well for us. And as soon as we can get international up to that sort of same speed, which I believe we can, that’s when you’ll start to see that growth come and that’s how those pipelines will build even more.
Unidentified Company Representative: And Eric’s final question is, you rolled through a 5% reduction in force in the first quarter. Are you done with cost cuts? Or are there still fine-tuning to the cost structure to be done?
