We have the first of those two being worked. And so we feel like there’s a lot of value we already have in our portfolio. There’s work to be completed, and we want to keep our teams focused on that work on the technology side. On the go-to-market side, we also have more broad enablement and training for our sales teams to be able to position Spot and Instaclustr and CloudCheckr into the account. So we feel good about the work we’re doing. We got to finish it before we look at other things.
Q €“ George Wang: Okay. Cool. Yeah, a quick follow-up is on the cost cuts. Maybe you can elaborate on the kind of disaggregate just components for the cost cuts, whether that’s sales and marketing, the SG&A or kind of some of the R&D? Any color would be appreciated.
A €“ Mike Berry: Hey, George, it’s Mike. And just I want to make sure your question was the — what are we looking at for cost reductions in the second half? Was that the question?
Q €“ George Wang: Yes.
A €“ Mike Berry: Perfect. Thank you. So there’s several that I think you’re going to see flow through the P&L. I’m going to start all the way at the top, which is we do expect to finally see some relief from our significant expenditures related to premiums. The supply chain is getting a little bit better. It gets better every day. So that’s going to help the second half. In addition, NAND pricing will help us as well. Now we do have a little bit of inventory to work through. And you’ll see that still in Q3, but we expect by Q4, you’ll see that as well. On the OpEx side, we’re — George talked about and we’ve already done a headcount freeze. We’re taking a look at all discretionary spending, including travel, programs, outside services, just like everybody else who has embraced the hybrid work environment.
We’ll take a hard look at our facilities costs as well. So we’ve already started down the path on several of those as I talked about, hey, we’ll continue to look at those as we go into the second half. So there’s numerous areas for us to focus on. In addition, keep in mind, too, that in OpEx, there’s a good bit of that cost structure related to incentive comp and commissions. And certainly, those will come down in the second half as well.
Q €“ George Wang: Okay. Great. Thank you.
Operator: Our next question will come from Nehal Chokshi with Northland Capital Markets. Please go ahead.
Q €“ Nehal Chokshi: Yeah. Thanks. So — the total revenue guidance is lowered by 400 basis points that characterizes 100 basis points due to incremental FX, another 100 basis points due to lower PCS ARR target. And then the remaining 200 basis points either due to weaker billings results on a constant currency basis during the quarter, or is it a weaker billings result that has started to transpire during the third quarter, again, on a constant currency basis?
A €“ Mike Berry: So for the second half, Nehal, that is mostly related to product revenue, which would be largely booked and recognized in the quarter. So it’s — there’s — backlog is largely at the normal rates, the seasonal normal rates that we would expect. So that is going to be systems in the second half, I think, is the third part of your question.
Nehal Chokshi: Excellent. Okay. And then dollar-based net revenue retention rate declined quite significantly, 192 to 140. Is this largely because of the project-related stuff?
George Kurian: Dollar-based net revenue retention was 150 last quarter, and it’s now 140. So, step down as the base of customers expand, and we did see some churn in our consumption business, as we noted on our call, so we don’t see that as materially different than what we would expect.
