Bret Richter : Jason, thanks for the question. Welcome to the call. I don’t — our message on capital allocation, I hope, has been very, very consistent. Four pillars: first and foremost, healthy balance sheet, which I believe we continue to maintain and continue to achieve. We have a tremendous amount of flexibility and liquidity in our balance sheet and capital allocation strategies are built on the back of balance sheet health. The 3 areas that we allocate our investable capital are to the business, M&A and shareholder capital returns. For the prior question, we believe we’re giving the business the capital it needs to pursue its opportunities. We’re thoughtful about that capital allocation. You can imagine debates within 4 walls of institutions about where that capital goes.
But we like to believe that we’re judicious but thoughtful about how we give our businesses the capital that they need to pursue their growth opportunities. And we talked a little bit about how some of that money was spent this year. So then that leaves M&A and shareholder returns primarily stock buybacks — we’ve also — if you look back over the last 2 years, bought back certain debt securities. We’re prioritizing M&A. It’s been challenging to close transactions in this environment. That’s a known dialogue within this group. But we supplement that with capital returns, particularly through our stock buybacks. And we’ve done that this year, we bought back almost 1.6 million shares. So as we move forward, I don’t think those dynamics change.
The mix may change. It certainly our ambition to see more capital deployed through M&A. It’s beyond an ambition, it’s an expectation. Again, rewarded for our patients, but we have the capital, we have the pipeline. We’re in the dialogues. The gap between buyer and seller expectations will close and we’ll announce deals, and we’ll supplement that with stock buybacks as we think is appropriate for the overall mix.
Operator: The next question is coming from Rishi Jaluria from RBC.
Rishi Jaluria : I’ll keep myself to 1. I wanted to dig a little bit deeper into MozCon. One of the answers you brought up kind of the data and usage there. Can you talk a little bit about momentum you’re seeing within Moz because I got to say when I was recently at MozCon was really impressed with some of the enterprise traction that you’re getting there? And the opportunity both to continue to move Moz up market as well as the opportunity with Gen AI and Moz because I think there is a little bit of a misnumber that generative AI is going to completely replace SEO, and you and I know that’s absolutely not true. But maybe expand a little bit on kind of your opportunity there with Gen AI.
Vivek Shah : Thank you, Rishi, and I’m glad. I know you’ve taken the time and energy to attend MozCon, which we really do appreciate and sometimes seeing some of our brands in live, give you a sense of their power and — and again, I’ll say we have multiple different ones across different events. So if anyone’s ever interested and witnessing themselves, they should reach out to us, and we can be helpful there. What I will say is that I think all of the attention that generative AI has generated, I actually think puts Moz in a very interesting space because I think with change and questions come opportunities. And so I think Moz and others in this space, and there are a few other really good players in this space, will all benefit.
So I think there’s going to be a rising tide phenomenon. What I’ll also say is that the broader martech portfolio of Moz and our e-mail marketing assets really are a powerful set of entities, and we’re really excited about all of those. Because look, I think we say SEO, we say e-mail, a lot of this means basically using software tools and content to extract traffic versus paid media where you’re buying traffic. And so for SMBs and even enterprises, you want to do the first before you get to the second, right? You want to get “earned media” before you get into paid media. And so we think that the Moz Group really has an opportunity around earned media and driving earned media. And then the last thing I’ll just say is that, Moz is a unique entity because it is both a business for us but it is an internal resource for us as a company that is always focused on earned media and ways in which we can drive earned media, whether that’s search, whether that’s social, whether that’s e-mail, Moz becomes a strategic resource for us.
So it’s kind of kind of interesting, and I will say that it was part of our underwriting thesis. Our acquisition thesis was this would be good to have in-house is to have the Moz scientists, frankly, on our side.
Operator: And the next question is coming from Jon Tanwanteng from CJS Securities.
Jonathan Tanwanteng : I just wanted a quick clarification on 1 issue and then a follow-up after that. Vivek, just the 20% AI-enabled search ratio — were you surprised by how low that was? And kind of does that imply to you that there’s more upside as the AI experience has rolled out to more search terms and capacity is upgraded? Or is that more that AI is already just choosing the ones that are going to return more and get a better ratio to start with?
Vivek Shah : I think — here’s what I’d say, Jon. So the queries that — not all queries generate AI, right, an AI — the Gen AI result. Like in my own experience, I thought it would come up more and it hasn’t. But remember, when it does, it actually has a higher click-through rate. So I’m not in this one is good versus one is bad, one is positive versus one is negative. It is what it is — the incidence rate of AI is less than I thought and the click-through rate on AI is higher than none. That’s just the fact set. Why it is? How it is? Not entirely sure. We have our own theories. This is honestly, we’re using our own scientific method around trying to understand and verify causation and correlation. So it’s early days. I guess what I will say is that I think the search operators are very careful to not just inject AI every time if it’s not going to make something more productive and better — and I think that’s what they’re probably seen.
In fact, I would say in some of our analysis, but don’t go to the bank with this, that the rates of AI injection are actually coming down. that if we looked at this earlier, it was higher. I’m sure they were looking at it and wondering, where does it have click-throughs better? Where does it not? What is the right success metric? Is a non-click a success metric because they got the answer? Is it click a success metric? I’m sure the search operators are spending a lot of time thinking through all of this. All we wanted to present with data based on our properties where we have perspective to just give a sense of scale and context.
Jonathan Tanwanteng : Okay. Great. That’s great color. And then just second, I wanted to ask about your pharma businesses. I was wondering how much of the momentum you’re seeing there is related to these new weight-loss GLP-1 drugs? And second, is there a risk for other drugs to be disintermediated by that over time? And is that a net positive or net negative in your view? Or is it too early to tell?
Vivek Shah : Yes. So look, I think the GLP-1 category is an interesting opportunity for us in 2 ways: one, I think it’s going to unleash a significant amount of spend as there is now competition for customers. So I think that’s only going to be good for us. But I also believe it’s going to actually drive our Lose It! business. And the reason for that is that nutrition is an important companion to these GLP-1s? And what you don’t want to have happen is weight loss for bad nutrition, then different knock-on effects. In fact, I think there’s a lot of momentum around using an app like Lose It! and others and attaching it to a GLP-1 prescription to ensure nutrition and ongoing weight management because if you get off the GLP-1, you can have a rebound very quickly.
If you can change behavior and have it, then good things happen. And so there’s an adherence piece to it, too. So it’s actually — it might even seem counterintuitive, which is, well, do you need a Lose It! it when you have a GLP-1? And the answer is actually yes. And I think that’s also seen by the pharma industry as well. So I think there’s some interesting ways in which we’re going to benefit from the — and their new therapies today, a new one was got FDA approval. So I actually think this is going to be a good opportunity for us.
