So we couldn’t be more pleased with what’s happening in EMEA. Internationally, if you go into APJ, we had an okay quarter. We still have some work to do there. We think there’s tremendous upside in the APJ market, and we will continue to add resources both on the go-to-market and continue to internationalize and localize our products so we can have a better fit in some of the emerging markets we’re going after in APJ.
Kirk Materne: Thank you.
Operator: Our next question comes from the line of Alex Zukin with Wolfe Research. Please proceed with your question.
Alex Zukin: Hey, guys. Thanks for taking the question. Carl, maybe the first one for you and then a quick one for Zane. You mentioned a couple of really interesting deals in a number of different verticals, including state and local. You talked about a FedRAMP deal. I guess maybe — can you dimensionalize the growth of some of these verticals relative to financial services and retail hospitality, when do we think that the kind of the state local, the federal, the health and life sciences, the education verticals can start to rival that type of scale that you’re seeing with FINS serve and retail and opticality? And then a quick follow-up for Zane.
Carl Eschenbach: Yes. So thanks for the question, Alex. And as you know, we don’t break out or share specifically or percentages on any given market segment or industry. But in the case — this time, we did highlight our second $1 billion in annual recurring revenue business in retail and hospitality, which continues to be quite strong and growing. And we had another really solid quarter in industries as a whole and specifically in higher ed, we called out health care and financial services. In the government business, listen, we’re still in the very early days of state and local government. I think there’s only 15 states at this point who have decided to do a full platform replacement, which leaves 35 or 36 states up for opportunity for us going forward.
And we think we have a really good solution for that market. And on the federal side, listen, we’re just starting. We have FedRAMP moderate. We said we were excited to see our first customer civilian agency, do a full platform rollout on our FedRAMP Cloud. And we also said we were bringing in a new leader, right, a really seasoned leader to help us lead federal going forward. So this is an area we’ll continue to lean into. We do see opportunity in federal even without having FedRAMP high on the cloud, we do have a lot of opportunity with the existing agencies, and we see that as a rich market for us going forward.
Alex Zukin: Around the early renewal dynamic that you guys are seeing this year. Clearly, a solid benefit for Q2, 24 months description backlog, it sounds like there’s also some benefit in the guide for Q3. Maybe just dimensionalize it and remind us like what’s the customer activity? Is it an incentive that you’re giving? Is it the macro? Like what’s driving this? And like do we think about this as a future headwind? Do we think about this as an opportunity for code perming at upsell? Like what’s the right way to think about this?
Zane Rowe: Alex. Yes, I’ll start and then let Carl chime in as well. As you point out, we’re very pleased with the RPO growth on the 24-month side this quarter was 22.7% growth. But as we pointed out for all the reasons Karl and Doug mentioned, we saw about 1.5 points of that be early renewals coming into the quarter, which is a terrific opportunity for us to interact and interface with our customers, as well as upsell them as well. So we’re very pleased with the outcome in Q2. As we look to Q3, what we’ve done is taken a look at where our expectations are for Q3, which is included in that 21% increase as part of our guide. I’d say approximately 1 point of that as we look out to the next quarter right now is included in that 21%.
So we believe that activity will continue. Again, we’re thrilled with the activity. It means our customers are doubling down on us. They’re leaning into that platform, and we couldn’t be more pleased with that. As you point out, obviously, we’ve been running ahead of subscription revenue for some time on RPO. So we would expect some variability related to subscription revenue in the future, but we welcome the early renewals, and we think it’s a terrific opportunity for customers to continue to buy into the platform. Carl, I’ll let you add to that.
Carl Eschenbach: Yes. Thanks, Zane. Yes, Alex, we did have another really good quarter of selling back into our customer base. We talked about that earlier. And that is what drives a lot of the early renewals. But I want to make sure it’s clear to everyone, we don’t incent our teams to drive early renewals. We incent our teams to work with our customers to add additional SKUs as they look to consolidate more and more on top of the HCM or the financials platform. So the demand is being driven by our customers and then we go and we work with them in some cases, they add new SKUs. And when they do so, they actually do early renewal and they’ve co-term their agreements, which drives the uplift that Zane talked about in our 24-month RPO. So we’re not incenting people to do it. It’s customer demand. They’re looking to add more and more modules. And as we continue to innovate and bring new SKUs to market, we would expect this to continue going forward.
Operator: Our next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed with your question.
Keith Weiss: Excellent. Thank you guys for taking the question and congratulations on a really strong quarter. I wanted to sort of extend on Brad Sills earlier question about kind of the upsell motion. It seems like you guys are having a lot of success there. Carl, when I think back to your guys’ time at VMware, VMware was a machine in terms of packaging and mechanisms for selling more solution into existing customers, and there’s a huge kind of successful part of that business? Are there sort of learnings or sort of mechanisms or improvements that you guys can make in that hub cell motion that you could bring on board that could turbocharge this upsell effort even further from what we’ve been seeing thus far?
