Clarke Jeffries: Perfect. Sounds like multiple ways to bring that percentage up, not just, say, the up-sell motion. Daniel, I wanted to ask if you could frame the opex growth after the restructuring. What will you be targeting in terms of opex growth, either sequentially or year-over-year on a like-for-like basis, or maybe said another way, what investment level are you planning for that high single digit or low double digit growth in revenue framework for next year?
Daniel Lentz: Yes, thanks for the question, Clarke. Let me answer that a bit by building on Brent’s point, because I think there’s a really important point to understand about our business and why we’re making this really a focus on cross-sell, up-sell. The fact that we have such a big percentage of our revenue growth coming from new customers, which comes with a higher cost of acquisition particularly in sales and marketing, part of where we’re looking to grow leverage in this business is by getting more in kind of the main strike zone of where B2B SaaS typically is, where more than half, and we’d like to see substantially more than half of our revenue growth come from existing customers, because it comes at a much more favorable sales and marketing leverage point of view.
When I think about what that means for us for opex next year, we’re hoping that we can get another up to 5 to 9 points of additional growth in operating margins next year – that’s what’s implied when we talked about the growth numbers for next year. When I step back and just think about the quarter as a whole, kind of the headline from my point of view on this, I think the quarter really reflects the commitment to leverage that we called out very clearly going into the year was going to be the main focus of our efforts this fiscal year. Now, I’d highlight two areas in particular. One, apart from the roughly $33 million final acquisition payment to Feedonomics, which was in operating cash flow, we had positive operating cash flow for the second consecutive quarter, which is a huge improvement versus where we were last year.
That also even includes several million dollars in annual payments for this and that, which is really, really strong. Secondly, we got to our profit goal roughly a quarter early, which is a 19-point improvement in operating margins compared to where we were just a little over a year ago, and to be clear, we’re not stopping there. The restructuring that we took, I think reflects the commitment, our ongoing commitment to this. This is not a 2023 thing. Brent and I are very, very committed to running a profitable, growing business with strong operating cash flows, and I think that we can continue to do that. When I look at operating expense growth, I think we’re going to see the most leverage going into next year particularly in sales and marketing.
We’ve had really, I think solid results there in R&D and G&A this year, we want to see a little more as well next year. But based on the restructuring that we’ve taken and the playbook that Steven is very excited to lead, I think we’ll see especially disproportionate leverage growth next year in sales and marketing.
Clarke Jeffries: Really appreciate the color, thank you gentlemen.
Operator: The next question comes from Scott Berg from Needham & Company. Please go ahead.
Rob Morelli : Hey, this is Rob Morelli on for Scott Berg. Thanks for taking the questions. With 3Q results in mind, any commentary regarding the overall sales environment – you know, how did U.S. perform relative to international, and are you starting to see some of the benefits of your international go-to-market investments that you mentioned a couple of quarters ago? Thanks.
Brent Bellm: Yes, as is typical, you have certain regions of the world that over-perform in any given quarter and others that are not quite as strong. U.S. was solid, Asia Pacific was particularly strong last quarter, EMEA, it sort of differs from country to country. Overall, what we’re observing in the market is a continued high win rate for us. We have historically had high win rates relative to the average in ecommerce. We continue to have high win rates. The cycle time, though, for enterprise remains elongated, as we’ve commented in prior quarters. It’s elongated even slightly in mid market – hopefully that’s a temporary thing, but as a general rule, sales is going well. I think a thing I would emphasize is our broad set of go-to-market changes that Steven has introduced, which are around value marketing and selling rather than solution marketing and selling, and I went into details on many of our strong value statements in the prepared remarks.
The land-and-expand strategy, the fixation of leadership with customer success as the foundation for all of that, and improved engagement of our referencible merchants in events and industry selling opportunities, all of that is meant to be strongly additive to where we are today, to build a much bigger pipeline. I think if we can build a much bigger pipeline and even just maintain our win rates, let alone grow them, then that will be a strong way to add big growth to our existing run rate in the year and years ahead. Thanks for the question.
Rob Morelli: Thank you, that’s all from me.
Operator: The next question comes from DJ Hynes of Canaccord. Please go ahead.
DJ Hynes: Hey guys. Brent, I have two questions for you. Look, I think we all know who the key enterprise players are in this space. I’m curious if you’re seeing Shopify starting to show up anymore in your mid market and enterprise RFPs. They’re obviously talking more about composable commerce and headless, so wondering if that’s translating to what you’re seeing in the field.
Brent Bellm: Less so for headless, yes for mid market. Enterprise, it just depends on the complexity. There are a lot of things that they can’t do in enterprise, like multi-storefront which just disqualifies them from certain opportunities, so we’ll see them a little bit more in that arena. Switching to us, I would highlight as indicators of just how powerful our platform is and what we can do, some of the merchant launches that we announced this quarter. Just taking the apparel category, there were three really extraordinary ones that showcase our strength in enterprise. Harvey Nichols is the iconic leading luxury department store in the U.K. They went live with a really beautiful digital transformation that takes full advantage of buy online pick-up in store.
You can actually look up what inventory is in each store, they have the ability when they have just one size of one item in one store, to know that, ship that from the warehouse to the consumer if the consumer isn’t picking up in store. It’s a really great use case. White Stuff, you may not know them here in the U.S., but they’re almost 150 stores across the U.K. and Ireland. That’s a phenomenal transformative best-in-breed composable implementation using partners of ours – Vue Storefront, Amplience for CMS and Adyen for payments. They went live with that full transformation in an extraordinarily fast time, and they loved getting up on stage and saying how easy it is to do headless with a best-of-breed implementation, you just pick the right platform and the right partners, which White Stuff did.
