Anthony Folger: Yes, sure, Ray. I think when it comes to — I guess I would break it up into two bits, right? There’s at the operating margin line and then at the EPS line. And so from an operating margin perspective, I think we felt good about our ability to control costs. We’re certainly aware of the uncertainty in the macro as we look forward as it relates to inflation and what our costs may run to. And so we felt like there was a little bit of upside in Q1, good — like real performance upside. And so perhaps we’re a little conservative at the operating margin line based on where the macro is. When you get down to the EPS line, I think interest expense certainly is something that’s outside of our control and there’s more uncertainty there.
And so I think that drives the sort of holding after Q1, even a strong Q1 with our earnings guide. So, we sort of chunked it up and looked at both lines. And I think those were two factors that where we would say we feel really good about strength in the topline. There’s a lot of uncertainty out there and so comfortable taking the topline up a little bit want to be a little bit conservative on the margin side, both operating and EPS.
Ray McDonough: Makes sense. Thanks guys.
Operator: Thank you. And that will come from the line of Pinjalim Bora with JPMorgan. Your line is open.
Pinjalim Bora: Hey guys. Thanks for taking the questions and congrats on the quarter. I was looking through a number, it seems like the subscription gross margins did really well. I was wondering to what extent the price increases play a role in the performance in quarter? And second part, Yogesh, you had done a go-to-market realignment in Q3. Talk about that organization, has that does kind of settle and how are you kind of layering in MarkLogic?
Yogesh Gupta: Yes. So, Pinjalim, I just want to make sure I heard the questions clearly that we had a little bit of a challenge hearing you. So, the first part, I think you were asking about whether price increases and what kind of an impact they might have had on the topline, I believe? And the second part of your question was related to the operational realignment that we did around three product portfolios and how is that going, right?
Pinjalim Bora: Correct. And how MarkLogic kind of fits into that realignment?
Yogesh Gupta: How MarkLogic, okay. Perfect. So, let me answer the first one first, it’s pretty straight forward. Pinjalim, as you know, by and large for the vast majority of our products, we have certain relationships where price increases are either not possible or are rather limited or muted. These are multi-year contracts. And especially our OEM contracts or ISV contracts, they are based on — often on percentage of their revenue and so on. So, those things really don’t — aren’t really conducive to price increases. That said, we have increased some prices on some of our products. We are not seeing a lot of resistance from the customer base in those areas, but it’s not a huge amount and not enough to really have a meaningful impact on our product — on our overall revenue.
I think it’s a — the number of contracts that come up every year for renewal — or every quarter that come up for renewal for expansion is not as much as the whole portfolio, right? So, it’s a more than one-year cycle, it’s actually close to two to three-year cycle that we would have to go through. So, the spread is over a fairly large period. But we are beginning to see a little bit of advantage from it. But again, I’ll let Anthony further clarify it. Anything else, Anthony, on that one?
Anthony Folger: No, Yogesh, I think that’s right. I don’t think we’re seeing it really pull-through in the numbers at this point, but more to come.
Yogesh Gupta: Yes. On the realignment, the realignment went really well. As I mentioned, we have realigned ourselves into these three product groups and the MarkLogic product has been moved into the application and data platform business. So, it is in the same business as DataDirect as well as OpenEdge, which makes sense, right? If you think about OpenEdge is a database product, both an application development language that is specifically in a platform, specifically for that database and business applications that are built around that. MarkLogic is complex data processing and a databases in its own right and actually has access to that data from — using languages like SQL, so you can actually have an OpenEdge database and an OpenEdge application, even access MarkLogic data.
So, we see potentially that that is something that potentially the market can maybe be interested in. As you know, Pinjalim, when we do acquisitions, we don’t really count on cross-sell, right? That’s not our intent. But at the same time, we still want to make sure that it is in the right place. We also see significant opportunities to leverage both DataDirect technology to support and expand the data hub capabilities of MarkLogic. So, all of that being together, those two products made a lot of sense and so that’s where it is. It is rather early. It’s been six weeks since we closed the acquisition. So, we’re early in the integration phase and so far things are, things are going well.
