Jim Cox: Sure. Ella, this is Jim. Happy to take that. If you all recall, back in Q1, when were at 106%, I kind of said, hey, this is about where we are going to live in the high kind of single digits. And I think that if you heard me say when we got to Q2 and were at 109%, I said, maybe I only said this, boy, it just rounded up to 109%, all things being equal. And so I think we are just in the margin there. We are living in that space and — of kind of where we thought we would live while we work to continue to build out the GTM function and the additional products and solutions and executing that to drive us towards that 115%. So we are continuing to work really hard to drive towards that aspirational 115% level. But this is not an easy task.
It is a Herculean effort and I don’t think that, I think we will work through all of 2024 to continue to push on that. But I don’t think we will get there in 2024. But if I am still talking about moving to NRR 115% in 2026, I think, I will consider that a failure, frankly, on my part. So we are going to push hard, it’s a multiyear effort, we are very committed to it and we want to drive to it. This kind of quarter-to-quarter changes in the margin, I am very comfortable with. All the initiatives are still pointing in that direction.
Ella Smith: That’s very helpful. Thank you so much, Jim. And for a follow-up, so listening to the Investor Day, which happened not too long ago in this call, a huge emphasis is obviously on your product developments and new product launches. It makes me think that you would expect a strong majority of your future growth to come from NRR expansion per client, as opposed to the number of clients expanding. Would you agree with that or not necessarily?
Jim Cox: Yeah. This I think looks great — oh, sorry, go ahead Sandeep?
Sandeep Sahai: Go ahead, Jim.
Jim Cox: I will start and then you go, sorry. I would say that, we have. So that is one path, right? So what is so great about adding NRR 115% to this level and all of the product development is that is yet another path of going back to the base to get that. But the truth is we have many, many different paths to drive 20% plus growth. We have geographic expansion, right? We have these new products, but they are also opening up adjacencies and additional market opportunities for new clients, as well as our existing clients. And yes, at — we talk a lot about going back to base because it’s a relatively new muscle for us, but it’s just yet another one of those options. So if we have five or six different options to drive that growth, it just makes it a more durable, resilient and strong business. Sandeep what would you add?
Sandeep Sahai: No. I think that’s exactly right, Ella. I don’t think you can sort of take these pieces, and say, ah, if this is going to get to 14 or 15, then new logos is going to go down. That’s not the way we think about it. What we do think about is, how do we put many irons in the fire? And some will work and some won’t work, and as — some will be good in one quarter and another will be good in another quarter. But we want to provide resiliency in our growth. And so, like Jim laid out, there are five things. There’s geography. The second one is markets and market adjacencies. The third one is these products and new products we are developing. Fourth one is the commercial model we have made changes to and that will help.
And finally, at some point there’s going to be an AUM tailwind. We have not had an AUM tailwind this year. Last year obviously hurt us. But at some point the value of assets will start to grow. Is it going to be 2%, 3%? Yes. And that’s what we would expect, but we obviously can’t forecast that and we don’t expect that. We don’t build it into our business model except to note that, yes, that would be another lever of growth we might expect in the outer years. So, yeah, it’s not about one versus the other. We want to work on all of these sort of simultaneously.
Ella Smith: Great. Thank you so much, Jim and Sandeep.
Sandeep Sahai: Thank you.
Operator: The next question comes from the line of James Faucette of Morgan Stanley. You may proceed with your question.
Michael Infante: Hi. It’s Michael Infante on for James. Nice results here. I just wanted to ask on NRR growth versus revenue growth. It looks like NRR is growing 19.4% in the quarter, probably, a touch lower on an organic basis, but you are seeing revenue growth that’s close to 24%. I know you have spoken about the delta between ARR growth and revenue growth ultimately compressing in 2024, but can you sort of unpack what’s driving that delta right now?
Jim Cox: Yeah. Sure. I think that’s — sure, I think that as you are onboarding clients, you can get some catch-up in revenue there that then plays through. So maybe just let me back up for a second, say, we are very rigorous and conservative in our approach for the revenue that we describe as recurring revenue. And so we have lots of new products and we have lots of things within our clients, which we are — which we believe will be recurring in nature, but we do not put them into ARR at that bucket, Michael, and so that’s a little bit of the delta there. ARR continues to — I agree with you that in the long-term those two will trend together. But let’s say that we choose to commercialize something in a non-recurring way.
We would have — at some point in the future, we would have a delta in that going forward. So I think they are very close to each other and so I think that’s — when you start looking at last 12 months and those sorts of information, they are trending pretty consistently.
Michael Infante: Makes sense. And I wanted to follow up just on some of the strategic commentary you made. Obviously record cash balance and pretty impressive free cash flow generation in the quarter. Seems like M&A is very much on the table. I guess, how are you thinking about the types of assets or geographies you would be targeting? I guess the reason I ask is, it seems like driving towards that 115% NRR is sort of the guidepost and M&A may not necessarily sort of aid in that goal. But I am curious how you are thinking about both of those vectors?
Jim Cox: I think…
Sandeep Sahai: [Inaudible] there is obviously. Jim, you go first, sorry, let’s coordinator the question.
Jim Cox: Okay, it looks like both of us are going to talk. So look, I think, that there are two things here. One is we obviously have $302 million of cash and that’s significant because you never had that much cash on our balance sheet. But what’s also useful is that we were — we continue to generate cash on a quarterly basis. Now, the first step we took, it was buying JUMP last year. And frankly we wanted it to play out a little bit. When you acquire something, as you know, it takes a little while for the company, the first acquisition in its history to sort of play out and I think we are very happy with the result and therefore we will be aggressive on M&A. But it’s not being done for a purpose. There’s no real purpose.
It’s not like we have to hit a certain gross margin target or a certain EBITDA target or a certain revenue target. What we do care about, as we have said before, is can it help us expand functionality. Can it help us bring in products we can take to our current clients and go sell to them or can we expand geographically? So I think it has got to be in service of one of those three things. And obviously, Michael, we want a bar to be high. These are really nice financials, the balance sheet is quite pristine and so therefore we want to be cautious, but we don’t want to be defensive. And so if you haven’t seen anything till now, it was because we did JUMP last year we wanted to make sure we had the right muscle and the right systems to have them integrated in the right way and then we will continue to act on this.
