Operator: Moving on to KeyBank of Tom Blakey.
Thomas Blakey: Thank you very much. Good to see you, Eric, and hi, Kelly. Just wondering quickly on the stability that we were talking about a couple of quarters ago in online. It’s a pretty impressive that we went back and forth on that a little bit here and very stable. I mean obviously talked about the churn. Can you just maybe update us that on that in terms of should we expect the same type of stability in online into the fiscal 4Q and maybe even similarly into fiscal ’25, that would be helpful. Thank you.
Kelly Steckelberg: Yeah. So the team has done a lot of work this year to — on many fronts around online. First of all, stabilizing retention, which you’re seeing the benefits of that today as well as focusing on free-to-pay conversion because it’s really important that we’re continuing to fill the top of the funnel, and those are things like force brakes. And as Eric mentioned earlier, also being able to procure additional products online, things like whiteboard and scheduler are very well aligned to the strategy of our online buyers. So those are all of the initiatives that went in our team are continuing to focus on. In terms – I mean, we hold ourselves to a very high standard. We say stabilization. What we really want to see is dollar stabilization quarter-over-quarter.
And while it’s very, very close, it’s not quite there. And I expect it will be slightly down, just very, very slightly down again in Q4. But as we’re working on FY ‘25 planning with the team, really looking forward to initiatives that drive stabilization and if not, some growth into FY ‘25.
Thomas Blakey: Very helpful. Thank you, Kelly.
Kelly Steckelberg: Yeah.
Operator: The next question is from Shebly Seyrafi with FBN Securities.
Shebly Seyrafi: Yes. Thank you very much. You guided deferred revenue to decline 6% to 8% in Q4. Do you sort of billing frequencies with enterprise customers. The question I have is what kind of decline would that have been without that billing frequency change? And related to this, you’re going to have a big renewal cycle in Q1. So do you expect deferred revenue growth to pick up meaningfully in Q1?
Kelly Steckelberg: Yes. So as a reminder, the way the deferred revenue trends about the year is it’s always the highest in Q1 and then it declines throughout the year. And there’s two things that are happening. First of all, Q1 is the largest renewal period. So if the bucket gets filled up, and then that’s getting amortized through the rest of the year. But also the subsequent renewal cycles are lower than Q1. So it’s the inverse of probably every other SaaS company in the world where usually you’re adding higher renewals every single quarter, we are actually adding a lower number – a lower dollar amount of renewals every single quarter. So as Q1 is getting amortized down, what’s coming into refill at the top of that bucket is coming down every single quarter. And that’s why you have seen for quite a number of years now, typically a sequential decline in deferred revenue quarter-over-quarter.
Shebly Seyrafi: Okay. Thanks.
Kelly Steckelberg: Yeah.
Operator: We’ll now hear from James Fish with Piper Sandler.
James Fish: Hi, guys. Thanks for the questions here. Appreciate all the details around some of the product lines. But building off of a few prior questions with that contact center customer count up to about 700 versus the 500 last quarter. If my math is right, given kind of what you guys have talked about with price points kind of seems like we’re nearing $100 million of ARR now or how should we think about that average seat count at this point? And then, Eric, for you, look, it got released and was available this quarter, but how has that workforce engagement solution really gone in terms of penetration with the contact center installed bases, is that acting as sort of a consolidation function underneath for especially that small mid-market. Thanks, guys.
Kelly Steckelberg: Go ahead, first.
Eric Yuan: I think if you look at the contact center, right? So not only just all fast to offer the core kind of contact center of capabilities, we want to offer a full platform, right, including workforce management, right? This is the — based on modern architecture, not something like, hey, you have on-premise solution for a long time, you just put it into the — in the cloud, that’s not the case. We built it everything from ground up. It’s tied to integrated with our core contact center solutions. That’s the reason why when you look at our customers right from SMB, minimum size, all the way to lot enterprise, I think we are ready. And however, as I mentioned earlier, sweet spotters should be the major, right. However, one thing is realized, customers do have one seamless experience for everything contact center and workforce management, virtual agent AI feature call, engine, right, so we are trying to offer all of them.
So that’s kind of our strategy. In terms of our workforce management contribution, it really helped because we tell them, hey, we offer everything to you. We are not going to let you deploy other third-party workforce management solutions. We offer all the services, all the functionality to you with one platform.
Kelly Steckelberg: Yeah. And James, in terms of your ability to kind of understand how those products are progressing themselves, we’ll do done with others and announced milestone metrics as we start to see them emerge. They’re just so new right now that doesn’t really sense, but we will do that over time.
James Fish: All right. Thanks, Kelly. Thanks, Eric.
A – Kelly Steckelberg: Yeah.
