Ladies and gentlemen, thank you for standing by, and welcome to the Upwork Third Quarter 2019 Q and A Conference Call. At this time, all participants are in a listen only mode. After the speaker introduction, there will be a question and answer Please be advised that today's call is being recorded. I would now like to hand the conference over to your speaker today, Paulina Gerlach. Please go ahead, ma'am.
Hi, and good afternoon, and welcome to Upwork's discussion of its Q3 2019 Q and A call. Leading the discussion today are Stephane Kasriel, Upwork's President and Chief Executive Officer and Brian Kinion, Upwork's Chief Financial Officer. Following Stephane's brief introductory remarks, we will be happy to take your questions. But first, let me review the Safe Harbor statement. During this call, we may make statements related to our business that are forward looking statements under the federal securities law.
These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties and assumptions. Our actual results could differ materially from expectations reflected in any forward looking statements. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and on our Investor Relations website as well as the risks and other important factors discussed in today's press release. In addition, reference will be made to non GAAP financial measures. Information regarding reconciliation of non GAAP to GAAP measures can be found in the press release and stockholder letter that were issued this afternoon on our Investor Relations site.
Please note that the stockholder letter is now available on our Investor Relations Web site at investors. Upwork.com. Now, I'll turn the call over to Stephane.
Hello, and thank you for joining the call. Earlier this afternoon, after the market closed, we released a stockholder letter as well as our quarterly press release and filed our 10 Q for the Q3 with the SEC offering a detailed look at our results. We will open up the call to Q and A shortly, but I first wanted to cover some brief highlights. We're very pleased with our Q3. Revenue grew 23% year over year to 78,800,000 dollars Marketplace revenue grew 25 percent year over year to $70,700,000 Core clients grew 19% year over year to approximately 120,500.
Client spend retention was 104% with client spend retention from clients on the Upwork business and enterprise offerings above 125%. Gross margin expanded more than 3 points year over year to 71%. We continue to see great opportunity and clear signs that our investments are paying off. While our market opportunity is very large, we are still in the early stages of a long term shift in how work gets done and this is what is driving our decision to invest further across 3 initiatives where we have experienced early success sales, marketing and product. As such, we announced our plan to further invest in our growth initiatives, including increasing sales headcounts and in Q3 with 65 quota carrying account executives with 90 planned by the end of Q4.
And with that, I look forward to discussing our results further in Q and A. Operator, Brian and I are now ready to take your questions.
Thank you. And our first question coming from the line of Mark Mahaney from RBC. Your line is open.
Okay, thanks. I'm sorry, I'm going to ask a couple of questions. One, can you just go through the gross margin improvement year over year to what extent that was a mix shift or whether they were core factors driving that? Secondly, in terms of the Q4 guidance, it looks like you beat your guidance for the Q3, but your new guidance is a little bit lower than what you had implied before in your full year guidance. Just speak to that please.
And then 3rd, in terms of these investments in new areas, you talked about increase in the sales headcount from 65 to 90. Can you talk about other changes or other areas of investments in that marketing and the product side? Thank you very much.
Sure. So there's 3 different questions. Let me make sure I get them in order. So gross margin is a combination of mix shift and through operational leverage. So the mix shift comes from managed services growing slower than marketplace and managed services because of GAAP accounting rules, we recognize the growth.
So the GSV, we recognize as revenue. And so when managed services is growing slower than the marketplace, which it has in the last few quarters and we expect it to continue moving forward, that means that take rate is going in one direction and gross margin is going in the other, right? And so that's the mix shift. The true operational leverage that we're getting is a combination of payment costs, which is the number one source of cost of revenue, where progressively we're shifting people to ACH and also we are continuing to improve the different initiatives, some of which I described in the stockholder letter, the different initiatives to strengthen our payments platform as well as another big source of cost of revenue is AWS cost. And we've been focused on making sure that AWS cost was growing slower than GSV and slower than revenue and we've been successful in doing that for the last several quarters.
So those are real margin expansions, if you will. If you're looking purely at the marketplace side of the business, if you look at the ratio of gross profit for the marketplace of our revenue for the marketplace, you find it to be pretty close to 90 sorry, to 80%, which is kind of what we've said in the long term model. We think we can get to a gross margin level of 80% to 85%. And on the marketplace side of this, we're already getting really close to that. To answer your question about guidance, I would say some of the revenue that we expected to get very early in Q4 ended up happening really late in Q3.
So there's a little bit of a shift from Q3 and Q4 that explains some of this. I mean, net net, we're talking about $1,000,000 between the two quarters. So the back half of the year, we're going to do about $150,000,000 of revenue. So $1,000,000 between $150,000,000 is still pretty accurate, I would say. So there's some of that.
There's also just the fact that from a lapping standpoint Q4 is a little bit more difficult than Q3 was. And so we do expect Q4 to be a little bit less strong than Q3 has been. And then to your third question about sales and what else are we doing, as you can imagine, it's a massive effort for the company to be dramatically increasing the size of the sales team. And we are encouraged to do this because salespeople are hitting their numbers and when they hit their numbers the ROI of that investment is very sound. We also think that we have lots and lots of leads.
There's well over 10,000 companies that are using Upwork today on the basic or plus product that have not been touched by sales and who look like the type of customers that should be upgrading to business or enterprise. So we think we have lots of leads. We think that the salespeople that we've had in place are generating a good ROI. But in order to ramp up, we do have to create a little bit of growing pain. So we've had to promote some of the top performers to sales management roles.
We've promoted some of the sales development reps who were generating those leads in the 1st place to sales executive roles. And we've changed our marketing approach to do a lot more ABM, a lot more brand advertising, relatively speaking, less SEM than before. So there's a lot of moving pieces at the same time. But it's a combination of product, marketing and sales in a very integrated way and in a way that is probably more aligned than it's ever been in the company. And generally, everybody is really focused on this idea of companies that have 100 employees or more will become the majority of the business in the future, even though at this stage it's only about 20% of the business.
Okay. Thank you, Stephan.
And our next question coming from the line of Ron Josey with JMP Securities. Your line is open.
Great. Thanks for taking the question. And now that we got Mark, those are very helpful questions for Mark. But maybe longer, bigger picture, Stephane, you talked about the 10,000 clients that are using Boston Basic today. Just talk about the penetration there.
Last quarter, you talked about the first half of the year seeing, I think, around 60 or so new contracts won. So just talk about the penetration, how you're going against that and how you're selling into those 10,000? And then in the letter, you talked about not yet reaching full potential for sales productivity. We're growing sales force, right thing to do, understood. But can you just talk to us how do you reach that full potential?
How far away are you from reaching that full potential? Thank you very much.
Sure. Maybe start with the second question around sales productivity. It's good enough, meaning like the CAC to LTV is sound. It gives us a good ROI, a strong payback period. You will see it in the numbers, however, that in the short term, it increases sales and marketing as a percentage of revenue and therefore puts downward pressure on EBITDA.
The unit economics being strong over time this will more than pay for itself. It will also help us get to scale faster which gives us more leverage on G and A and more leverage in R and D. So it's the right type of investment for the business. That being said, we do want to continue to improve sales rep productivity and that comes frankly from, I would say, 3 different angles. 1, which is sales operations itself and partly just stabilize the sales team.
The issue of promoting lots and lots of people is you're removing some of your best performers in a specific role and moving them to become new in a new role and that causes some amount of stress in the system. Another angle is around marketing efficiency. We hired Lars a few months ago now who came more from a traditional B2B enterprise sales and marketing background. And he's helping us shift from a very self-service online only type of approach to doing marketing to something that is more of a partnership with sales where the role of marketing is to do sales enablement, to do field marketing, to do demand generation, to drive marketing qualified leads into the sales development team and then eventually into the account executive and account management team. And lastly, I would say from a product standpoint, we focus a bigger part of our R and D efforts in sales productivity and sales efficiency.
Features like single sign on that makes it easier for existing users to sign up more hiring managers or internal tools that we can use to help the sales team get access to a consolidated view of the data across the different data sources that we have internally. Number of deals. Sorry, your other question was on the number of deals. Yes, I mean, it's kind of a continuation of what we saw last quarter. The Upwork Enterprise business continues to be one that is driven quite a bit by the sales team itself and the sales cycle remains multiple months.
The Upwork Business account tends to be a lot of upsells from the traditional marketplace, much more sales driven and where the sales cycle is more like a few weeks. And then the other thing about Upwork Business is not only is it high velocity, but you're starting with customers that are spending money already. So what happens is, as they upgrade, we increase the take rates because it goes from the Upwork basic Upwork Plus take rate to the Upwork Business take rate, which is significantly higher, and they start spending more money almost instantly. So it's a faster cycle that also ramps up faster, if you will. But one of the numbers I wanted to call out that we wrote in the stockholder letter because we got a lot of questions about that last quarter is this notion of client spend retention.
And people kept on asking me, is client spend retention better for the bigger customers than it is for the smaller customers? And while the overall client spend retention for the business is about 104% at this stage, the client spend retention for the clients that are signed up for Upwork Business, Upwork Enterprise has been north of 125% for several quarters now.
Thanks, Stephan.
Our next question coming from the line of Brent Thill with Jefferies. Your line is open.
Hi, thank you. This is John De Jong for Brent Thill. I guess on some of the more detailed guidance, you talked about the trend for the first half and second half being a little bit low and high, I believe. And is that really mainly due to comparison or are there other fundamental factors there? And then in terms of the guidance and the new revenue standards, would that mean that it might potentially be more back end loaded in
the second half due to the deferrals? Thank you. Yes. So let me try to answer the question in 2 pieces. 1 is kind of the overall trends in the business.
And then the second one is, how does it look from a quarter standpoint? So if you look at the overall trend in the business, we've been acquiring about 5,000 core clients every quarter more or less for the last several quarters and we think that trend is going to continue for the foreseeable future. Obviously, the base keeps on getting bigger, right? So if it's a constant number of core client adds, then as a percentage, it goes down slightly over time. The second thing that we think is going to happen is client spend retention has peaked at 108% a couple of quarters ago.
It's back to 104% right now. And we see a trend where it's probably going to soft land slowly back into the historical average of around 100%. And we can talk in more details as to why that is. Within the marketplace take rates, which is higher than it's been in several quarters, is now stabilizing more or less at the new rates. And again, we can get into the details of why that is.
But the changes we've made to pricing and monetization in the last few quarters, the mix shift between business, enterprise and the basic product, all of these things drive a more or less constant marketplace take rate moving forward. And then managed services has been growing slower than the marketplace for several quarters in a row and we expect it to continue that way, right? So all of these things together mean that when people are modeling the future of the business, that's those are some of the key inputs into figuring out what the model looks like. Now in terms of what that looks like from a quarter standpoint, realize that this quarter this year, we had relatively weaker Q1 and Q2 and relatively stronger Q3 and Q4. And so from a lapping standpoint that makes Q1 and Q2 next year easier and Q3 and Q4 of next year a little bit harder.
And so if you think about market based revenue as a key component of the overall business, relatively speaking, market based revenue is going to be stronger in Q1 and weaker in Q3 and Q4. Add to that the fact that there's a number of Mondays that is also somewhat different between next year and this year and next year is a leap year which is one more day. And so if you're looking at it Q1 is going to be relatively stronger from that standpoint whereas Q3, Q4 are going to be a little bit more challenging. Now of course, that's more than 12 months from now. So hopefully, we can do all sorts of other things to try to get above and beyond those numbers, but that's what we have line of sight for at this stage.
And under all these numbers obviously under 605, so we are working with our under the new 606 standard. So we would, as of January 1, 2019, have an adjustment to our balance sheet, retained earnings and deferred revenue, and that would bleed over time. We're still determining the impact, but we do not believe that's going to be material to our consolidated income statements going forward. But when we do give our Q4 call, at that point, we'll do everything in our 606, but you'd anticipate it not being that material.
Thank you.
Our next question coming from the line of Hao Yan with Citi. Your line is open.
Thank you. I have two questions here. So first, the State of California recently passed the legislation of Assembly Bill 5, which requires the reclassification of independent contractors as full time employees and to certain facilities. Can you discuss about the impact of the fluctuation on our business and how would you assess the changing regulatory environment on freelancer economy as a whole? 2nd, I guess, can you also share some of the latest thoughts around M and A strategies?
How would you define a suitable M and A target? And in terms of complementary business that could strengthen your market positions, would you focus on vertical integration or rather geographic expansion?
Great question. Thank you. So let me start with AB5. So AB5 is codifying into law what was a court justice decision from a court case called Dynamex, which is going back in my memory escapes me a little bit, but somewhere between 12 18 months ago. So I think most companies who think about worker classification and we are definitely there have been operating under the assumption of AB5 for quite a few quarters already.
There's a few things to it. So first of all, some of the work that's being done through platforms like Upwork is actually excluded from AB5. And if you look at the text of the law, there's various mentions around professional services being excluded. So that's one component of it. The second component of it is the fact that we actually offer payrolling services.
So we would we call it freelancing, but some of the work on Upwork is under 1099. Some of the work on Upwork is done through a W-two, through a product offering we have called Upwork Payroll. It's actually a profitable product. So we actually somewhat selfishly make more money on the W2 engagements than we make on 1099 engagements. So it may potentially a concern for other freelancers.
They're not very happy to be forced to become W-two. But from our standpoint, we potentially make more money from it. And then the last point I would say is California freelancers at this stage are low single digit percentage of the overall GSV and revenue for the business. And so at this stage, it's not a meaningful part of the business. But again, when the work needs to get classified as W-two, we offer the payroll offering.
When the client is an Upwork Enterprise client and they subscribe to our compliance offering, we actually make the decision for them and we indemnify them if we get it wrong. And then the last thing I would say is there's a pretty significant substitution effect, which is something that we tell regulators all the time. If you're making it harder for freelancers in California to be competitive, clients will hire freelancers in Colorado or Arizona or frankly outside of the U. S. And so not necessarily in the best interest of local freelancers to be impacted by those types of regulations.
Then your question about M and A, we hired Amanda Vincent as our new SVP of Corporate Strategy and Corporate Development a few weeks ago. And one of the things she's working on is building a more well defined strategy around M and A that allows us to be more proactive and more disciplined in how we look at opportunities. But I would say big buckets for us would be either companies that offer additional capabilities that we don't have internally or companies that bring the types of clients and the types of talents that we want to get into the business. The latter might look companies like us. There might be other type marketplaces for freelance work or there might be very traditionally run professional staffing firms and then everything in between.
There are plenty of companies out there that are semi tech enabled, but mostly services companies and we'd be looking at them. In the former, we'd be looking at capabilities that we can sell to either the clients or the freelancers on Upwork. And these would include things that I've mentioned when we were doing our IPO, but we're very interested in topics around financial services for freelancers. We're interested in benefits for freelancers. We're interested in collaboration tools, education, training and certification, those types of things.
But I would say at this stage, it's very open. We are just getting our team started to look at some of these opportunities.
Thank you very much, Stefan. It's very helpful.
Thank you.
Our next question Our next question coming from the line of Marvin Fung with BTIG. Your line is open.
Great. Good evening. Thank you for taking my questions. So I did want to drill down actually on the take rate stabilization since you did mention that you would we could go deeper into that and I certainly would like to. Just curious some of the tailwinds sort of suggesting that take rate will stabilize from here on out, which sort of suggests that some of those tailwinds may have played out already.
If you could just kind of go further into your thought process behind that, that'd be great. Thank you.
Sure. So maybe I can start with the headwinds to explain where we've been, right? So there's been 3 things that were driving take rate down. One is managed services growing slower than the marketplace, which is by design. We sell the marketplace offering more than we sell the managed services offering.
But because of revenue recognition policy, managed services is recognized as a 100% take rate, whereas the rest of our business is recognized as the net revenue being the take rate. And so when managed services is growing slower than marketplace, it puts downward pressure on take rate. That was one headwind. 2nd one was we were actively pushing clients to pay us by ACH instead of paying us by credit card. As I mentioned earlier on the call, our number one source of cost of revenue is credit card fees.
When we can get clients to pay us by ACH, we lower the cost of revenue order to convince them to do it, we give them a discount for doing it and that puts downward pressure on take rate. And then the third thing was the on Upwork Plus and Upwork Basic, the freelancers pay us a tiered service fee, which goes down over time as they earn more money from a given client, right? And it's based on lifetime earnings of a specific relationship between a specific client and a specific freelancer. But at the beginning of a relationship, the freelancers pay us 20% and then goes down to 10% and then it goes down to 5%. And over time, as client spend retention has been north of 100%, what that means is a lot of these relationships graduate from the 20% to the 10% to the 5%.
And so the effective freelancer tiered service fee has progressively continued to come down. And if you look at the graphics we pushed in the stockholder letter, you see how the take rate coming from the freelancer side on the tiered service fee keeps on going down, right? So those are the headwinds and they would have continued to happen if it weren't for the changes that we've made recently. And so the changes we've made recently, one was just a one time bump increase to the client's payment processing fee. So when clients pay us by credit card on Upwork Basic or Upwork Plus, until a few months ago, we would charge them an extra 2.75%.
Now that rate went from 2.75% to 3%, right? So that's a one time increase to the price. 2nd thing we've done was launching a new version of the virtual currency that is that we call connects that the freelancers use in order to bid on jobs. And we've reduced the number of free connects, but we've also reduced the cost of connects. And the goal was to both improve quality, so forcing people to think a little bit more about whether they were truly interested and available and qualified for a job before applying to it, but also at the same time, improving monetization.
The third thing we've done was to introduce Upwork Plus and Upwork Business. Upwork Plus has a $50 per month subscription fee. It is more or less the same product that used to be called Upwork Standard, which did not have a subscription fee. And so there's $50 per month of additional revenue coming from the clients that choose Plus instead of downgrading to Basic. And then Upwork Business, we've talked about in the past.
A big chunk of Upwork Business is upgrading clients from basic of loss to business and business has a $500 per month subscription fee and the take rate does not have a sliding scale like it has for Basic and Plus. And so it's 10% on the buyer side, 10% on the freelancer side. And then last but not least, there's a lot of payment related. We have a pretty deep payments and fintech platform embedded inside of Upwork. And there's all sorts of levers both on the buyer side, the payment side of the platform and on the freelancer side, the disbursement side of the platform where we constantly innovate to either reduce the cost or increase the revenue that comes from it.
In some cases, it's things that we control on our end. In other cases, it's things that we renegotiate with the providers that we partner with.
Okay, great. Thank you, Stefan, for that. And if I could a few follow ups. So, now that we're now I guess over a quarter into the new membership plan, could you update us on what you're seeing in terms of the adoption of Upwork Plus versus basic? And then the other question is just in the shareholder letter you referenced, client spend retention trending back to 100%.
It seems like you called out the U. S. Marketplace, the retention rate not being as good. Do you have any thoughts on why that particular channel is the retention the wallet retention is not as strong as it started out at? Thank you.
Sure. Yes. So let me start with the second one. So U. S.
To U. S. Domestic clients, so clients who only use us to hire U. S.-based freelancers, tend to spend more early in their life cycle. They tend to post higher value jobs, higher people at a much higher rate and the early jobs tend to be longer.
However, they tend to retain less, which is new information frankly to all of us because we are just starting to see the early cohorts from last year. And conversely, what we find is that clients who start with the U. S. Domestic marketplace and then graduate to hiring people outside of the U. S.
End up spending significantly more than clients who stay within the U. S. Marketplace. And so one initiative we've started to work on is that graduation path. How do we get clients essentially it's getting the training wheels off, if you will.
People are more comfortable hiring in the U. S, but we find that they end up spending more and retaining more if they also hire freelancers outside of the U. S. And so we're progressively building a graduation path, if you will, where once we feel like you're comfortable enough with using the platform, we introduce you to non U. S.-based freelancers.
Now to answer your question, why do clients in the U. S. Retain less when they only hire U. S.-based freelancers? We don't know for sure, but there's at least one very clear explanation for this, which we hear constantly.
It's what the industry calls conversion or temp to hire or contract to hire, right, which is if you find a great freelancer who is based, especially if they're based in the same states that you are based and you decide that you want to work with them full time, at that point, you just make them your full time employee and you take them off of the platform. And it's something that historically we've discouraged people to do. We've considered it to be a fine essentially like we'll fine you and we'll say that you're misbehaving for doing it. I think you'll see us over the next few quarters building that capability to the product and saying look if you want to convert this person to a full time employee, that's actually completely fine with us, but you have to pay us a conversion fee just like you would for a traditional professional services firm, if you will. To your question about adoption, the way the system is designed, everybody who every company that we believe to have more than 10 employees starts with a trial period on Plus.
So we're not getting people to start on basic and upgrade them to Plus. We are starting all of these bigger companies on Plus. They get somewhere between 1 2 months for free. And after that, they can choose to either stay or opt out and go to the basic plan. And at this stage, what we found is that that approach works better and that the opt out rate is better than what we expected it to do.
And so at this stage, the Plus revenue is completely incremental to business that we would have had before. And the churn rate or the downgrade rate from Plus to basic is lower than we expected it to be.
Terrific. Thanks, Stefan, very much. Thanks, Brian.
Our next question coming from the line of Drew Kootenay with Cantor Fitzgerald. Your line is open.
Hi, thanks for taking my question. I wanted to go back to sales hiring real quick. Once you get through this big push of hiring over the next couple of quarters year, just curious how you see that, the team evolving over time in terms of size? And then second question, just any changes to the longer term margin expectations? And more importantly, what kind of timeframe are you looking at now that 2020 might be impacted a little?
Yes. So there's 2 ways you can accelerate the sales driven revenue. One is more salespeople and the second one is better sales productivity, right? And so what I mentioned, I think, in the stockholder letter is this year about 20% of incremental revenue comes from sales, which means 80% of our incremental revenue does not, right? And so at this stage, sales continues to represent a pretty small percentage of the overall business and a relatively small percentage of the incremental business.
That is not what the time looks like. That is not what our ambition looks like. So we need sales to grow significantly faster than the business in order for it to contribute a more meaningful part of the overall business and an even more meaningful part of the incremental business. So I think you'll find us to continue as long as the engine continues to run well, you'll see us continue to hire salespeople at a pretty significant rate. And given a certain level of productivity, sales headcount is going to be growing more or less in line with revenue that is driven by sales.
That being said, obviously, we do want to invest in sales productivity improvements and that includes marketing, it includes product, etcetera, etcetera. The impact it has on the model itself, as you can imagine what it means is sales and marketing as a percentage of revenue will go up slightly. It's not going to be overnight and it's not going to be massive, but you're going to see a few percentage points over time. Conversely, because it allows us to get to scale faster, you'll see us get leverage in G and A and in R and D faster than we would have had before. So essentially the goal is to try to get to that equilibrium faster than we would otherwise by accelerating some of the sales hiring.
And as we noted in the stuff on the letter as well, that the marketplace is pretty profitable generating cash as well as the managed services, which allows us to invest in the enterprise investment.
Thank you.
Our next question coming from the line of Logan Bender with First Analysis. Your line is open.
Hey, guys. Thank you for taking my questions. Just a couple. As far as usage patterns that you've seen in the market, just from a macroeconomic perspective, have you seen any kind of cautious behavior or anything that would indicate maybe a slowdown in spending environment from the corporate side going forward? And then maybe just talk about the business versus enterprise opportunity as far as like your sales team focus.
Or do you think the better opportunity that's maybe more profitable is the business or the large 4,500 employees 1,000 and more or where is your where are you kind of fine tuning your sales focus going forward with the new sales reps? Thanks.
Sure. So, we're not seeing any impacts of the economy. 1 of our economists looked at how is the U. K. Business doing compared to the risk of Brexit and the general fear that small businesses have in the U.
K. And it doesn't seem like much is going on. So we seem to be fairly resilient to exchange rates, to economic cycles and all of that. To answer your question about mid market versus the larger companies, we most of the hiring we're doing right now is in the mid market. In fact, a lot of the hiring we're doing right now is fairly junior sales development reps because the existing sales development reps who've been with us for some of them for a couple of years now are getting promoted to account executives.
So we're building this pipeline of relatively entry level junior sales development reps who eventually graduate to become sales executives on the mid market team and from there potentially become sales executive on the large accounts and strategic team. So partly it's a faster sales cycle. It's easier to find lots and lots of resources to be able to serve that market etcetera, etcetera. Partly it's also a time frame issue. We're very proud of the relationship we have with Microsoft and some of the other Fortune 500 companies in the world.
And I do think that if you look 10 years out, these will be major, major clients and a significant part of our revenue. But if you look at it today, the mid market is going to be probably a much bigger opportunity over the next 2 to 3 years than the very large companies. And so as a result, we'll continue to hire some amount of sales reps in the large accounts and strategic team, but we'll be doing a lot more hiring in the mid market team. And to answer your question about products, therefore Upwork Business should be growing faster than Upwork Enterprise.
Okay, great. And then maybe one last quick one I sneak in. Of the 10,000 leads that you mentioned, how should we think about the split between U. S. And abroad opportunity in that?
If you can give us more dimension on that.
Yes. Right now, we're looking so our sales team is based in the U. S. We don't have a ton of foreign language capabilities. And so at this stage, we're really looking at U.
S. And Canadian companies only. And in some cases, we're looking at the U. S. Subsidiary of an international company.
When we have a U. S. Company that also operates abroad, we'll be happy to serve them abroad as well. But for the most part, we're really targeting U. S.
And Canada based companies only.
Great. Thank you,
guys.