Mike Walrath: Yes. So, the distinction I draw here, and I think it’s a really important one is that the question I think enterprises are asking when they are looking at different AI solutions is what’s the level of risk of deploying different AI solutions, right. So, to the extent that I am utilizing a generative AI solution as an internal tool, to create content or something like that, that has human intervention, then I think there is an appetite there because the risk is limited to the extent that we are talking about letting the AI deliver the customer experience. I think there is a lot more reticence, especially from larger enterprises and regulated industries about kind of setting the AI free in talking to the customer directly.
And so we have, we believe, huge advantages over the long run because of the nature of our content system and our knowledge graph storing authoritative information, which makes the – allowing the generative AI to generate the customer experience. But and I think, the but is important here, when the AI is talking to the customer, there is going to be more scrutiny. There is going to be more legal and regulatory and compliance review on those solutions. And so I think the real core question here is at what level is the AI being set free to interface with the customer, and are you relying on the safety mechanism versus using tools internally. And our tools just tend to lean more to the customer experience because that’s what we do. Does that make sense?
Matt Shea: Yes. I think that makes sense. Thank you.
Operator: [Operator Instructions] The next question is from Arjun Bhatia with William Blair. Please go ahead.
Chris Madison: Hi. This is Chris on for Arjun. Thanks for taking my questions. I just wanted to unpack a bit on what you are seeing in terms of the go-to-market. I know you mentioned some deals slipping kind of falling out. Are there deals getting stuck in a certain part of the funnel, or are deals kind of progressing the way you would expect based on everything you have seen so far this year, but then dropping out towards the end, and is this getting better or worse in the third quarter?
Mike Walrath: Yes. So, I think generally speaking, right, and this is – it’s hard to be generally descriptive when you are talking about hundreds of deals or even thousands of deal opportunities. There are some trends that we see. So, one trend is that there is generalized budgetary pressure. And so what we are – and this is where – one of the things I think you are hearing, and I hear it from other software CEOs as well is there is a lot of pipeline, there is a lot of opportunity, and there are a lot of customers saying, I want to do X and I want to do Y. And sometimes what they are saying is, look, I want to do X, Y and Z, right. And then when you – but there is more budget pressure inside the enterprise than there has been previously.
And so what’s happening to deal sometimes is that the buyers are saying, I want to do X, Y and Z. And then once you get it later in the deal cycle and you get procurement and finance involved in the deal, it turns out that there is not budget for X, Y and Z. And so the X, Y, Z deal turns into just the X deal or just the X, Y deal. And so what that causes is that causes slippage in terms of deals late in the cycle where they get smaller, right. I think you see the same trends in subscription software renewals, where budgets are pressured, I mean the extreme version is this isolated churn, we are talking about where budgets were pressured to the tune of 80% plus. And so when you layer all of this stuff on together, what you get is, you get this picture of really robust pipeline that actually on a dollar basis closes at a lower percentage than we have seen historically.
And the signal here can be really confusing because you can go into quarters with very robust pipeline and then find that you are sort of – your model that you have relied on for the last, let’s call it, 10 years or 11 years since the last software, anything like a software recession that we have seen in terms of projected close rates is just not as reliable as it once was. And I think that’s kind of what we are seeing. I would describe the environment. Typically, I think part of the problem is that the expectation is that this environment usually gets better in Q4 because of the natural sort of upwelling of the financial planning process, and we all know this is the case in software. And so if you have expected things to get better in Q4 and they have really just, let’s say, stayed the same pressures that we have seen throughout the year, then that’s going to introduce softness that may not be in the models.
Hopefully, that makes some sense.
Chris Madison: No, it does. Yes. And that’s all really helpful color. The other thing I want to touch on, I think you kind of hit on this a little bit with your last answer. But aside from the singular large logo trend that we have obviously talked about quite a bit, is there any other increase in logo trend that you would call out, or is a lot of the NRR pressure still kind of coming through down sales at this point?
Mike Walrath: I wouldn’t call it any other like singular large churns or anything like that, we don’t see that. In fact, I think in our larger customer base, we see stronger retention trends. We haven’t seen anything. We talked about in March, our trailing 12 months gross retention rates were in the high-80s. We were going to call out if that changed. We haven’t seen that change. We will update that number in Q4, and it may be affected by this singular customer churn. But no, there is steadiness there. It’s just – like everything, it is pressured in the environment just as our new bookings are.
Chris Madison: Got it. Thank you. That’s all for me.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mike Walrath for any closing remarks.
Mike Walrath: Thanks everybody for joining. We look forward to talking to you next quarter, if not sooner.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
