Elizabeth Elliott: Great. And then just as a follow-up, I wanted to hit on margin. You had some really impressive expansion over the last year. Looking ahead, guidance implies more minimal expansion despite still some of that solid topline growth. So, first, just how should we think about the leverage in any incremental areas of investment in fiscal 2024? And then second, should we just be thinking more about some back-end linearity to hit your fiscal 2026 targets? Thanks.
Tyler Sloat: Yes. So, thanks, Elizabeth, this is Tyler. We did make some huge improvements last year. Some of those improvements were kind of onetime. And I think we’ve been pretty consistent. You don’t kind of expect the same kind of stair step improvement coming into fiscal 2024 here. The — we are still very, very focused on efficiency, but we also think that there’s some areas to invest. On the R&D side, it really is going to continue to invest in innovation, and we think that’s a big advantage that we have. And on the sales and marketing side, we are going to continue to lean in where we see opportunities specifically in field — in hiring there where we see appropriate. So we have built in some areas of investment, but while also focusing on driving margin, we’re driving more dollars to the bottom-line and driving more cash.
Elizabeth Elliott: Great. Thank you.
Operator: Thank you. And our next question will be coming from Brent Bracelin of Piper Sandler. Your line is open.
Hannah Rudolph: Hi guys. This is Hannah Rudolph on for Brent today. Thanks for taking my questions. It’s really encouraging to see you that record 50,000 net adds this past quarter. I guess, what do you attribute that to? I imagine a lot of it is ITSM, but some of it was probably driven by that new CS Suite as well. So, wondering if you could just talk about the dynamics you witnessed in that cohort?
Dennis Woodside: Yes. You’re correct. A lot of it is driven by ITSM, but we’re seeing some promising results for CSS. One of the companies that I talked about in the prepared remarks, Carlson One, that’s a new CSS customer, they’re a loyalty company up in Canada. Klöckner, one of the larger steel companies in Europe. That’s a new ITSM customer. Tata also another customer we talked about earlier, that’s another ITSM customer. I think it’s not just something that we’ve done in the last quarter, but the investment that we’ve made in the product over the last couple of years, where we built out an enterprise-grade ITSM suite, added on ITOM, ITAM, and then more recently, ESM with Freshservice for business teams. That really has driven growth of that product.
And then with CSS, our customers have a best-in-class, fully integrated product that covers both conversational and traditional ticketing enhanced by AI. And that’s something that really is unique in the marketplace where if I’m an agent in a single pane of glass, I can ingest and see comments from my customer coming in through WhatsApp, coming in through SMS or e-mail or phone and respond. And that is — has had a lot of positive acceptance in the market so far.
Hannah Rudolph: Great. Super helpful. And then Dennis, what do you feel still needs to be done to continue to execute on this upmarket motion that you’re on right now? And is it just execution? Or is there more that you still need to do?
Dennis Woodside: We’re going to be making a meaningful investment in partners and partnerships. We announced a couple of weeks ago in a partnership with AWS, where they’re bringing us into new deals. We’re working with them on deals. One of our largest deals with a large apparel maker this year was assisted by AWS. We — our customers are able to retire AWS commitments in terms of credits that they’ve committed to spend over multiple years by buying our software. So, that makes the buying process much easier for them and for us, it speeds the time to sale. So, that’s an example of a large partner that we think can help us accelerate growth over time. I think just also getting better and better at execution. We had our best quarter ever in North America.
Not surprisingly, about six months ago, we brought him Will [Indiscernible], who is leading our North America sales effort. So, we’re seeing the benefit of some of the big hires that we’ve made in the last year as well. And we think that will continue with Abe coming in. Abe is a tried and true field general and I think he’s going to up our game even more as we go-to-market.
Hannah Rudolph: Great to hear. Thank you so much.
Operator: Thank you. And our next question is going to be coming from Brian Peterson of Raymond James. Your line is open.
Brian Peterson: Hey guys. Thanks for [indiscernible] question. So, I wanted to follow-up on the seat dynamics [indiscernible] had improved. You also mentioned that the overall seat [indiscernible] CS has been under pressure for a little bit. Do you think we’re through that and the broader [indiscernible] could expand going forward? [Indiscernible] your thoughts.
Tyler Sloat: Hey Brian, this is Tyler. You’re breaking up a little bit, but I think you’re asking about kind of seat degradation or just expansion pressure and is whether it’s over or not. Now, — we actually — we saw really good expansion in Q4. And we — you’re right, we’ve been talking about kind of agent addition having kind of lower amounts over the last, call it, year and a half. That has not recovered from what it was several years ago, and we don’t expect it to actually recover right away. There was good signs in Q4, but we’re not planning on that just coming back. Because at the same time, also SMB did see some pressure and continue to see pressure, and that’s one of the reasons for the lower net adds is at a very long tail of SMB specifically, CX, we saw some little bit churn there.
In general, what we’ve been talking about is focused on figuring out how to expand with our customer base outside of seat addition. In seat edition, an agent addition comes back, to the levels it was a couple of years ago, that would be fantastic. But we are very focused on introducing new products, introducing new feature functionality, moving customers up the addition stack and things like that as well as getting them to use more across other divisions. And so that’s what our focus is right now. It’s not all the way back, but we did have a good expansion quarter.
Brian Peterson: [indiscernible] And maybe a follow-up to this, just on the [Indiscernible] teams. Any update on how you’re thinking about the pace of [indiscernible]. Any comments if you could make on [indiscernible]. Thanks guys.
Tyler Sloat: I think you’re asking about the pace of hiring in field is what I heard. We have been hiring in the field and specifically in areas that we think there’s opportunity, and we think there’s areas to definitely lean in. We’re going to continue to do that. Our regional leaders are in place and have been for a while, so Abe is coming in and he’s taking that over, and he’s going to work through. And part of the plan is to continue to hire and build out quota capacity because we think there’s a big opportunity there.
Operator: Thank you. And our next question is coming from Alex Zukin of Wolfe Research. Your line is open.
Alex Zukin: Hey guys. Thanks for taking the question and congrats on a solid quarter. Maybe just the first one, Dennis or Tyler, can you maybe just talk about the macro exiting Q4, like entering the year? Has it changed? Has it gotten better? Is it different by geography in terms of what you’re seeing? And to what extent do you feel like this was you guys executing meaningfully better versus the macro changing to the positive? And then I got a quick follow-up.
Dennis Woodside: Sure. So, I think the trends we saw in Q4 were consistent with trends we saw earlier in the year. And that is that in enterprise and mid-market, we continue to see really solid traction. You see it in the 50,000 ad number. And part of that is because vendors are consolidating spend. They’re looking for platforms they can do much more for them. They’re looking to bring AI into their operations, their workflows, their help desks, and we can do that. And they’re excited about the AI road map and what we already have out there in beta and now in GA. So all those things help there. I think on SMB, SMB overall is a bit more challenged. I think the — what we’re hearing from our customers is the market is under a little bit more pressure if you’re a smaller business.
There are also things we can do better. And that’s, again, going back to driving product-led growth to the next level, aligning marketing more tightly with our SMB efforts, all those things we think will pay off for us. So, we think SMB is potentially a source of upside for us going forward. But what we saw in Q4 was consistent with prior quarters where that was the part of the business that was not growing quite as quickly as what we saw in the larger customer cohort.
