So we’re really, really looking forward and hoping that the economy cooperates because it really does tie very closely to that, but that’s not all. What our analysis shows is that we’ve got a number, not just five, 10, but more of big companies, enterprises that came into the base starting in Q2 of 2023 that are ramping. And I’m not just talking about the healthcare companies and so on, a lot of them. And those mechanically will also help given the floor in the spot rate, if you see where are we. And then the last one is this tail breeze that we have from professional services. We will get a moderate amount from this major Fortune 50 institution financial services company and that will help as well.
Michael Turrin: Very helpful, Barry. Thanks.
Operator: Samad Samana with Jefferies has the next question.
Samad Samana: Great. Thanks for squeezing me in. Barry, I have a question for you; just thinking about the monetization of AI, I think someone earlier had asked about maybe a pricing model shift and when I think about maybe gross profit dollars for a dollar of AI revenue versus maybe what you would get for core subscription. If it’s obviously double the revenue, you should get more gross profit dollars. But when you factor in maybe WFO as well, I guess what I’m trying to figure out is should we think about AI being a gross profit dollar tailwind as well, and not maybe just on the top line, and actually we think about that flowing through maybe over the next year or two.
Barry Zwarenstein: Yes. So I’m going to resist the temptation to talk about it for the next year and the reason I’m going to resist that temptation is that we’ve got five reasons why gross margins are going to go up, but they’re going to go up over time. And the biggest of those is not what you’ve just been referring to, although that’s number two. It is the fact that revenue growth against fixed and semi fixed cost is by far away the biggest one and we actually, I don’t know how to put this without sounding boastful, but we’re pretty happy with the fact that we’ve maintained the gross margins where we have, despite the somewhat soggy revenue growth currently. And so I’m not going to get into, — I don’t want us to get into a corner with the revenue.
But in terms of your number two is the upsell and the cross sell and the attach rates from these AI and automation solutions and they clearly, clearly have higher gross margins and these attach rates, both in the new bookings and in the install base, are non-trivial. I’m not talking about 1%, 2% increases. It’s a component of the total is more than that. And then, just in case with that teaser, you’re wondering what the other items are. It’s what we talked about in the prepared remarks, namely the mix shift away over time from both usage, which has margins and fifties, rather than the seventies and professional services, which had negative gross margins. Thirdly, that was the number three one. We’ve also got one time investments. FedRAMP features prominently there.
Those are transitory. India is another one. The cost is there, the revenue is not there and then we have a number of initiatives in the professional services organization. Of course, there’s no need why that needs to run at a negative gross margin.
Operator: We have time for one additional question. So our final question is going to come from Peter Levine – Evercore.
UnidentifiedAnalyst: This is Bill on for Peter and thanks for taking my question. With the healthcare expansion story going from $2.3 million to $6 million of ARR, how often will this kind of increase be the norm? Or should we think of this kind of uplift as an every now and then?
Barry Zwarenstein: That amount, I would say it’s an every now and then. That’s why I highlighted it, but we get our install based customer. We talked about, I think last quarter about the folks that are focused on our install base. We had individuals that were wearing both hats of CSM and seller. So they were taking care of day to day issues with the customers and then putting their sales hat on and trying to do cross sell upsell. We’ve actually taken that team and divided it into separate individuals for each customer. So they now have a CSM that’s responsible for the day to day and they have a seller that’s there to upsell cross sell that carries a bookings quota. And they’re primarily focused on these applications, the cross sell upsell applications and so that will take effect and show itself over time.
But that’s what typical most software companies about our size go to, that mix of hunter and farmer, even in the install base, and that should contribute nicely to it. And we’re seeing software being sold to our install base at good rates, and that will only increase as we roll out more and more of these.
Operator: And again, this does conclude our Q&A session. So I’ll turn it back to you, Mike, for closing comments.
Mike Burkland: Yeah, thank you very much for joining us today. As I said in my prepared remarks, it’s been an amazing journey, 10 years as a public company. I really look forward to the next 10 years and seeing what we’re able to achieve as a team. I want to thank all the Five9ers one more time and thanks again for joining the call.
