And while it is early, the pipeline generated and the early wins received thus far from AI-powered ACE makes me optimistic about the future of this offering. From a utilization point of view since the beginning of the year over 15% of our customers have used our tested AI capabilities. I’ll give you the example of one of the largest technology companies in the identity and security space, their marketing team now uses AI-powered ACE to automatically produce streams of short-form video content from the long form webinars and virtual events, and deliver them across channels, tailored for specific audiences. So overall a good start. We are learning from it and we are bullish about the ramp as the year progresses into 2025.
Rob Oliver: Okay, really helpful color. Thanks Sharat, and then Steve just a follow-up for you, in response to last question you gave a lot of detail as well as in your prepared remarks around the various costs operations through the rest of the year on the specifically around a AI-powered ACE, just curious around potential gross margin implications particularly if we get and it would be a good problem to have a lot of customers like that large identity management company and all — is that also factored into your consideration as well, or how should we think about that impact to margins? Thanks.
Steve Vattuone: Yeah, it is factored into our guidance on margins already, but just a quick recap on margins. Our gross margins were 77% in Q1 and that’s up from 73% in Q1, a year ago. And that really reflects our disciplined approach to cost management that we’ve taken. For 2024, we expect our gross margins to continue to be in the mid 70s, which is consistent with our full year 2023 margins, which were 75%.
Rob Oliver: Great. Very helpful. Thanks Steve.
Operator: Your next question comes from DJ Hynes with Canaccord. Your line is open.
Unidentified Analyst: Hey guys. This is Ryan [ph] on for DJ. Thanks for taking my question. So I know you’ve been building up this regulated industry go-to-market motion. But I’m just kind of curious as the appetite here for AI and the ACE platform in any softer than I guess some of your lesser regulated industries. It just seems like we’ve been seeing some industries that maybe aren’t as far along in terms of digitization being more reluctant to this change?
Sharat Sharan: Yeah. I think, that’s a very good question. What we are seeing interestingly that in markets like technology, which are currently the budgets are tight, but clearly they are the early adopters for things like AI-powered ACE and others. And even in that, we generally see that the larger enterprises tend to have everybody is trying to do a little more compliance oriented work related to AI these days, and some of that is even more acute in the regulated industries. So I think your thought process there is right. The one thing that we are looking at and one thing we are doing is because we literally have three different modules and some of them are simpler than others and that’s where we are seeing more adoption.
For example, things like derivative content, taking long form content and creating things like e-books and takeaways. Those are easier for people to understand and do and probably don’t require as much regulation, but there are some in regular industry overall. There are a little more compliance hoops that we have. It kind of jumped through and that does delay the sales cycle, a little. That being said, at the end of the day what we are doing is, we are really allowing people to do more with less and getting more engagement and data points. So it’s a victory for our customers even though it may take a little longer in some cases.
Unidentified Analyst: Okay. Yes it makes sense. And I guess just to piggyback off that obviously, Q2 you have a couple of big customers renewing. So with your go-to-market strategy for the ACE platform, are you where are you actively like upselling into the installed base? Or are you just kind of waiting for a customer’s normal renewal cycles to push on that?
Sharat Sharan: No, we are you know we are selling at AI- powered days to go to both existing customers and to new customers. Clearly, the maturity of the existing customers is higher. When you look at that and be in a different levels of maturity. So we are seeing a lot more uptick, at this stage from our existing customers related to AI- powered days. And again, there are three different modules things like personalization at scale, you’re seeing people gravitate more towards that things like derivative content. So that’s that’s the way we are looking at it.
Unidentified Analyst: Okay. Awesome. Thanks, guys. Appreciate it.
Operator: [Operator Instructions] Your next question comes from Noah Herman with JPMorgan. Your line is now open.
Q – Noah Herman: Hi, guys. Thanks for taking the question. So good to see that off of the $100,000 plus ARR customer count and that only question declined by one this quarter. I think during the same period last year, it declined by about 12. And while at the same time, the total customer count sequentially decreased by higher costs compared to the same period last year. So just trying to get a sense for maybe what you’re seeing downmarket with maybe some of your smaller customers, or just anything you’re doing there to sort of alleviate on the customer churn that would be really helpful. Thanks.
Sharat Sharan: Yes, Noah, let me take it up. You know our main focus right now especially in the time that we are seeing this macro uncertainty and budget pressures. And there really are even a lot more on the down market, is our — so our focus has been on companies greater than 1,000 employees. I’ve outlined that as one of our top three strategic priorities and our $100,000 plus ARR customers. As you said, which is — look at that as a proxy for the large customers was approximately flat in a seasonally softer quarter. Yes, logo count overall decreased by 86%, but it’s primarily driven by our smallest customers which had a disproportionately large number of customers coming up for renewal this quarter. Now we are looking at how to address that. That being said, I mean, this is a group of customers 0 to 25,000 ARR cohort that is really feeling the pinch in this market environment.
