Mark Anderson : Thanks Mike.
Operator: Thank you. Our next question is from Joel Fishbein with Truist Securities. Please proceed with your question.
Joel Fishbein : Thanks for taking my questions and congrats on the great execution. I guess one for Paula and one for whoever else wants to answer this one. Paula, in terms of the go-to-market, are there going to be changes to sales incentives? I heard that there were some changes to your partner incentives. I’m just seeing how you’re getting traction there. And then the second question is basically, a lot of people are talking about AI initiatives. You guys obviously have a lot of products around AI. I’m curious about if you can give us some specifics around how you’re able to monetize the AI products. Thanks.
Paula Hansen : Thanks, Joel. I’ll take the first two and then Suresh can talk about our innovation. So relative to sales comp as we go into ‘24, we will take a look at all the levers like we do in any annual planning process to see what might make sense. I don’t think any of it’s going to be massively different from what we’ve got in place today. Relative to our partner program, we’re always benchmarking ourselves against industry standards and looking to ensure that we are as aligned with our partners in terms of where we want them focused and where the opportunity exists, which is what you’ve seen us make some moves on in recent quarters. And we’ll always do that to just make sure that we have really close alignment with our partner community.
Suresh Vittal : On the AI front, our focus is on finding innovative ways to create value and widen our competitive moats for the use of our products. So as we kind of embarked on the Generative AI journey, you saw us release capabilities like Magic Documents, Workflow Summary, and more recently, Playbooks, which just allows our customers and our users to get jump-started on these analytics use cases based on their industry and based on their roles. We are also again working on new offerings that are in private previews with dozens of customers like AI Studio and Multimodal, and we see opportunities to monetize these initiatives independently.
Mark Anderson : Then what our customers are telling us, Joel, is in terms of broad-based adoption for Generative AI, I think the preference is to do it in curated, like bite-sized chunks like we’re offering in their existing stack where it can really help them be more productive. In our case, to build better workflows and do it faster and so far the reception has been great. I really take my hat off to the R&D team around the world. They’ve been working really hard on this, and I think the results speak for themselves.
Joel Fishbein : Great. Thank you.
Mark Anderson : Thanks a lot, Joel.
Operator: Thank you. Our next question is from Brent Bracelin with Piper Sandler. Please proceed with your question.
Brent Bracelin : Good afternoon. Maybe one for Mark or Paula here. I wanted to go back to the external demand environment. Clearly, doing a lot better here on internal execution. Great to see, but if I look at net new ARR, we’re kind of three quarters in where net new ARR is below the four-year quarterly average. The guide implies another environment where it’s below the quarterly average. Is the optimism here for Q4 tied to just improving execution or are you seeing any sort of signs that maybe the external environment is getting better?
Mark Anderson : Hey Brent, thanks for the question. Yeah, I think we’ve assumed that the environment kind of stays the same if you will. Our confidence is in the fact that it’s Q4, the fact that I think we’ve got a really good team prosecuting opportunities that they’ve been working on for the better part of a year, and just seeing the execution improvements that we saw in Q3, we certainly feel those are going to be spilling over into Q4. That said, it’s not necessarily an easy space out there these days. With customers being very disciplined about where they are spending, and I’m really thankful that Paula’s kind of executive-led motion is really deeply rooted now in our sales motion.
Brent Bracelin : Great to see. Then Kevin, obviously, seeing really good cost controls, driving up margins higher here. I guess the next question is, when do those higher margins turn to higher free cash flow? Historically, free cash flow margins were well below op margins, but that was when this was a much faster growing business. Do you think those could converge next year as you think about more modest growth and op margins and free cash flow margins could start to narrow? Thanks.
Kevin Rubin : Yeah. Thanks, Brent. Appreciate it. As you may recall, the long-term model has free cash flow margin about five points below our op margin from a long-term perspective. As we get a lot of the one-time cost initiatives behind us, I would expect those to converge, and we’ll provide more color on the next call relative to 2024 expectations. But keep in mind, some of the cost initiatives that we’ve taken this year do have a trailing cash impact. Thanks, Brent.
Brent Bracelin : Makes sense. Thanks.
Mark Anderson : Thanks, Brent.
Operator: Thank you. Our next question is from Michael Turits with KeyBanc Capital Markets. Please proceed with your question.
Michael Turits : Hey, guys. Congrats on a nice stabilization and solid execution, all great to see. So two demand questions. Thanks Mark. Two demand questions, one on cloud, one on AI. But I guess on cloud, Cloud Designer seems quite strong and mature as a product now. And this is a time when we’ve seen stabilization in the growth rates of some of the hyperscalers. Are those two things coming together in a sort of positive way in the sense that you’ve got the right product right at the time that there seems to be a stabilization of demand on the cloud side?
Suresh Vittal : Yeah. I mean, we’re about three quarters of selling our cloud products and cloud solutions. The interest from our customers remains strong. There’s a lot of appetite for expansion-based use cases around the cloud solutions. But having done this journey a couple of times before, it takes multiple years for our customers to kind of embrace the cloud products and the cloud solutions. They have a significant estate with the on-premise products. They’ve got a lot of intellectual property built into these analytical workflows and apps. And so, we feel very comfortable that we’ve chosen an ‘AND’ strategy. They get access to our innovation wherever they want it. We don’t kind of hold them back on any access to any innovation.
