Chris Greiner: I was getting ready to kick-in because I thought you were going to go somewhere different, but–
David Steinberg: Or you thought I was going to say $2 billion in 2025. That’s a joke. I was kidding.
Chris Greiner: Thank you, Zach.
Operator: Our next question comes from the line of Ryan MacWilliams with Barclays. Please proceed with your question.
Ryan MacWilliams: David, that would be great. But I totally get it.
David Steinberg: I was kidding Ryan.
Ryan MacWilliams: I don’t want to hold on to that. No worries. So, did you see the improvement in ARPU growth from scale customers in the quarter? Now, that we’re further long into the year, do your larger customers feel better about where they stand compared to where they started the year in terms of their marketing spend just on the macro side? And — or are they just waiting to kind of see the outcome of the election and interest rates before getting more involved, David?
David Steinberg: No, we’re seeing marketer spend. I mean I would say that this is as bullish a marketing environment as I have seen in the last few years. And I’m not seeing people affected by interest rates, as it relates to marketing, and I have not seen — and when I say people, I mean organizations, and I’ve not seen organizations worried about the election as it relates to spending. Now what will happen is you get into the election cycle is this massive flood of dollars will begin to come in, and you’ll see marketing get more expensive in some of the channels. But quite frankly, we are a big beneficiary of that on our political business. So I’m not seeing any issues there right now.
Chris Greiner: Even if you look at it, Ryan, from an industry vertical perspective, like I think it was half of our top 10 verticals grew over 30%. So it’s really — it seems to be very healthy out there.
Ryan MacWilliams: Appreciate it. And two-part question. One for David, one for Chris. David, you guys have booked since IPO with the organic results, but any updates here on your thoughts around M&A and maybe how they could provide additional sell into some of your scale customers? And then for Chris, just like a quick housekeeping item, any update on how we could think about modeling gross margins for this year? Thanks, guys.
David Steinberg: Ryan, we continue to focus on being a high-quality organic growth company. But at the same time, we’re always looking for organizations we could merge in that have incredible human capital, great technology, great data and/or great people. And we continue to look. — until we find something that we think could be incredibly accretive, we will continue to look and not pull the trigger. But it is a good environment for M&A from the purchase side perspective, which is the side we’re on. And we look at a lot — we just haven’t pulled the trigger because we haven’t seen anything we thought could be accretive with all of the things we really need in an acquisition.
Chris Greiner: And just hitting quickly second question, Ryan. I think it’s same as what we said back in February. I would assume a similar direct revenue mix profile that we saw exiting 2023, so call it low 70s and a similar percentage cost of revenue on a GAAP basis that we saw exiting 2023, which was around 40%. We did a little bit better this quarter by about 60 bps, but I think that’s a good operating assumption for the rest of the year. That’s where our heads are at anyway, just given where our large agency HoldCos are in their early ramping process.
Operator: Our next question comes from the line of Arjun Bhatia with William Blair. Please proceed with your question.
Unidentified Analyst: Hi. This is Chris on for Arjun. So my congrats on the great quarter. First question for me what are some of the main factors behind the success that you’re seeing with enterprise customers, in particular? Is this primarily channel expansion that’s driving the accelerated scaling you’ve seen? Or are there other levers that customers are using to grow their spend as well?
David Steinberg: Well, thank you, Chris. I think AI is a major one. And I don’t want to downplay what an important component of why enterprises are choosing data at this point, it is. It’s — once again, a lot of organizations have been talking about AI for a number of months. We’ve been building it for now seven or eight years. And we continue to see enterprises looking for that from an adoption perspective. Chris?
Chris Greiner: Perfect
David Steinberg: Okay.
Unidentified Analyst: Great. Thanks. And then the second one for me was — so you’ve rolled out a number of new products over the past year or so. How are you seeing these products play out in terms of go-to-market? Is this having a role in some of the success you’ve seen in terms of seller productivity?
David Steinberg: Yeah. I mean, listen, it’s always good when there’s another quiver in the arsenal of the salespeople to be able to get out there and sell. And we continue to focus on additional channels and additional use cases. Chris?
Chris Greiner: Yeah. And Chris, if you — and what our — I think our customers appreciate in the early sales meetings that we have, we’re not pitching PowerPoints. We’re literally going to them with the data cloud, telling them oftentimes more than they know certainly about their prospects, but even sometimes about their existing customers. So it’s a very much very real sale from meeting number one, and it’s highly visualized, which I think also helps sales productivity at your plan. Thanks, Chris.
Operator: Our next question comes from the line of Dan Reagan with Canaccord. Please proceed with your question.
Dan Reagan : Hey. This is Dan Reagan on for David Hynes. I just want to say congrats to another solid quarter of consistent execution. Love to see the guidance raise, too. So you guys touched on this a little bit, but revenue growth has been pretty materially outpacing sales headcount growth for several quarters. That productivity gain is great to see. But I want to play devil’s advocate with two questions. First, you know or do you think you could grow faster with more sales capacity? And then secondly, what signals would inform you that it’s time to step up the pace of hiring — or is it more dependent on the availability of experienced sellers that you’re looking for?
David Steinberg: Yeah. It’s interesting. There’s a lot — it’s like a little bit of a DUC below the surface. We’ve hired a lot of people. We just also let go some of the earlier cohorts who are not as productive. I think we’ve gone through the vast majority of that cycle, and you’ll now see head count begin to grow again as it relates to salespeople. But we continue to really win a disproportionate percentage greater than 50% of the RFPs and engagements we get invited to participate in. And I think that will continue.
Chris Greiner: Yeah. We made a nice step up coming out of the fourth quarter. We had $136 million got to $142 million. I think we’ll be at $150 range in the third quarter. Sales productivity plays into a quality over quantity is big, the gates that we use to evaluate talent, marketing domain expertise, specific vertical expertise many years of experience. So it kind of narrows the pool down to a high-quality number of people that we’re going after. So I really like the sales productivity we’re seeing. I appreciate the point. But right now, we feel like we’ve got the right balance.
Dan Reagan : Awesome. And then many agencies have existing relationships with data and platform providers. And also, this question is also for the HoldCos. What makes data’s you approach unique enough to incentivize these agencies to shift significant portions of their budgets over to you. And — how is your approach different than what other guys in the space are doing? Thank you.
David Steinberg: Well, truthfully, a lot of people talk about doing what we do, but they can’t really do it. They come in with PowerPoint presentations, and they’re taking a third-party data set, a third-party AI algorithm, different — I’m sorry, different activation methodologies and building attribution and building targeting is almost impossible at scale in that world. So yes, obviously, the agency HoldCos have other partners that they are moving meaningful dollars from them to us, but it’s because by putting data and artificial intelligence as native to the application layer, meaning it’s native to the marketing cloud itself, we’re able to better target better active — I’m sorry, better target, better activate and better build attribution models to prove it.
And like Chris has said multiple times, they’re not waking up and saying, let’s move $50 million, $100 million to you. They’re starting with the test and then expand. Now what we’ve seen is the testing that we’ve been doing over the last year where we said we went from one to three. Now we’ve gone to five holding companies. What’s happened is the two that went from one to three are scaling very, very rapidly because our product — we don’t say that our product is superior. We prove that our product is superior, which is why they start on the test and then they move meaningful additional budget to us. Thank you very much.
