Jacob Roberge: Congrats on the great results. Pete, you’ve talked a lot about cost rationalization and moderation of your hiring plan helping on the margin front. Given you beat by over $16 million on the operating margin front, could you dig a little more into the areas you’re finding leverage in the model. And then when we think about moderation in hiring, do you expect that to continue into next year when comparing it to this year’s hiring plan?
Pete Godbole: So the $16 million beat you’re referencing is for the quarter, right? So I just want to make sure I answer your question.
Jacob Roberge: Yes, for the quarter.
Pete Godbole: Great. So I’d say the two elements of that beat are coming from — I’ll lay it out for you, probably half the beat is coming from the revenue leverage that we’ve had as we’ve moderated and controlled costs. So revenues have grown up. We’ve moderated our hiring and people-related costs that go with it. that’s produced sort of more than half the effect. About 3 points or 3 percentage points of it have come from — we’ve looked at the customer duration that’s associated with a greater gross retention rate, and that’s meant a lower commission expense, that’s accounted for about 3% of it. So that gives you some texture. And the rest of it is just hard core operational cost containment. Looking at every dollar that you’re spending and asking whether it has value in terms of the priorities you’ve set up.
That’s the first part of it. And the second part of your question was on hiring in the future. We don’t expect to have a similar sized hiring class coming on board and hiring expectations in the future will be significantly smaller. So we’re going to see the benefit that we’ve created this year in a continued manner next year as we think of the operating leverage.
Jacob Roberge: That’s really helpful context. And then some of your peers have called out some headwinds from a user perspective, given slower hiring rates and some layoffs at tech companies. Have you seen any large customers reduce headcount as a result of those headwinds, or just given your enterprise customer base and that focus, are you more immune to those issues than some other peers?
Mark Mader: I think for the last 5 years, our whole mindset about penetrating the enterprise has been what we call the earned enterprise. So what we don’t do is we don’t go in and sell what we think at the time is a big air or a deal and go wall to wall. We say, how can we mobilize, how can we deliver value and then we grow over time with them because very few of our large customers are full wall to wall where your dollar retention is reliant on the next person they hire. We’re actually somewhat insulated from that. The other piece that’s helpful to us is because some of our ARR is grounded in value components that we call capabilities, it’s actually not tied out to a user license. And if you want to keep benefiting from that, you will keep subscribing to it. But it is not hinged on that next hire. And I think that’s where our mixed model or hybrid model is turning out to be quite helpful.
Operator: Your next question comes from the line of Steve Enders with Citi.
Unidentified Analyst: This is George on for Steve. Just want to congrats on great execution in a difficult environment. I wanted to circle back on the discussion earlier about rep productivity. I think when you were talking last quarter, you were talking about expected improvement over the forward 3 to 6 month time frame. But I am just curious, obviously we have seen improvements over these first 3 months. What are you thinking about — how are you viewing improvement potential in Q4? And is there any of that baked into the guidance?
Pete Godbole: George, this is Pete. I just wanted to quickly say, we are really pleased with how the field teams have sort of gone about improving productivity of newer reps who have started. We’ve seen the benefits of it as they’ve become productive. Our expectation is we will continue to see productivity improvements in those reps because our plans involve multi-quarter changes and how we get them productive. That’s baked into our guidance. So you should think of our guidance as an overlay of improving new rep productivity, combined with the macro that we have thoughtfully and prudently considered.
Unidentified Analyst: Got it. That makes sense. And then just 1 quick follow-up on the billings upside came in quite ahead of — Are we still remodelling. I was wondering if you could just dig into kind of what drove that upside and if there’s anything unusual or onetime in nature that we should be aware of?
Pete Godbole: George, there was nothing unusual or onetime nature in those numbers. So it’s organic bookings which translates into billings.
Operator: Your next question is from the line of Michael Turrin with Wells Fargo.
Unidentified Analyst: This is Michael Bird on for Michael Turrin. I wanted to dive into expansion rates again quickly, they have been pretty nicely in the quarter. And I know the exit rate expectations are still the same. Maybe with a discussion on potential seat expansion issue, you can walk us through the mix of seats versus capabilities on driving that expansion rate number and if that’s changed meaningfully over the past quarter or 2?
Pete Godbole: I’ll start with the question. And then from a meta standpoint, Mark will chime in, in terms of how that’s operating. We’re not seeing a big difference between the seats and the, what I call, capabilities. Obviously, capabilities are still growing faster than the sear part of it, that is factored into the expansion rates we see. We gave you some stats on capabilities. We said that they’re 29% of revenue. And if you looked at them sort of a year ago, they were 24%. So clearly, people are expanding with capabilities. but you’re seeing a healthy mix of people with seats as well in that mix. So that’s kind of a meta point of like how expansion rates are moving.
Mark Mader: Yes, I think — I don’t think I have much to add to that.
