Q3 2019 Earnings Call
Good day and welcome to.
Q3, 2019 earnings call today's conference is being recorded at this time.
The conference over to Mark Furlong. Please go ahead Sir.
Good morning, everyone. Thanks for joining us on block bought third quarter 2019 earnings call.
Today, we will review, our financial and operational results.
Commentary on our performance in the context number four point growth strategy.
Joining me on the call today or might you know any blackboards, president and CEO , Tony bore Blackbaud executive Vice President CFO .
Hi can Tony will make prepared comments and then we will open up the line for your questions.
Please note that our comments today contain forward looking statements subject to risks and uncertainties that could cause actual results could differ materially from those projected.
Please refer to our most recent Form 10-K , and other FCC filings for more information on those risks.
We believe that a combination of both GAAP and non-GAAP measures are more representative of how we internally measure our business.
Unless otherwise specified we will refer only to non-GAAP financial measures on this call.
Please note that non-GAAP financial measures should not be considered in isolation from whereas a substitution for GAAP measures.
A reconciliation of GAAP and non-GAAP results is available in the press release, we issued last night and a more detailed supplemental schedule is available in our presentation on our Investor Relations website.
Before I turn the call over to Mike I'll briefly cover our upcoming investor engagement activity, which is available on our Investor Relations website.
During the fourth quarter, our team will be attending Morningstars management behind the most conference in Chicago.
People's Midwest, one on one growth conference in Chicago.
Credit Suisse's 20, Threerd annual Technology conference in Phoenix.
The next Investor Conference in London and.
And Raymond James Technology Conference in New York, We.
We will also be holding meetings with investors and Boston, New York, and the Ohio Valley.
With that I'll turn the call over to Mike.
Thanks, Mark good morning, everyone and thanks for joining our call today.
We continue to gain momentum in our aim to drive digital transformation across the social community.
No the markets that we serve.
As many of you know we held our annual conference PV Con earlier this month.
It's clear that the progress we've made is having a major impact.
Individuals that use our solutions every day.
We have packed agenda and introduce more than 80 product innovation updates to over 3000 attendees, who joined us in Nashville, making it the most well attended PV gone to date.
There's no question, our customers and prospective customers are excited about the pace of innovation being driven by Blackrock.
Partner ecosystem, which was evident by the overwhelming positive audience reaction to the long list of Mainstage announcements constant flow of attendees in our innovation Expo Hall in over 300 breakout sessions.
We are uniquely positioned to enable a digital transformation within social organizations through our cloud software services expertise and data intelligence.
Because honestly industry extends beyond our cloud software technology and solutions.
We have a culture built on an unmatched commitment to firing social good and that includes our participation in this ecosystem.
In fact, 89% blocked by employees volunteered in the past year.
Employees participate and black box matching gifting program at over two times, the National median and wanting for employees serves on nonprofit board or committee.
And we're incredibly proud to be named as a leader on that and either be dock or 2019 top companies for women technologist and the second consecutive year.
Just last week, we released our second annual corporate social responsibility report, highlighting our environmental social and governance accomplishments in the past year.
Okay. Thank critically about our responsibilities as a technology provider employer public company Environmental Stewart and member of the global community.
For example, as the owner of the industry's largest days that we were early adopter of industry, leading cyber security and data privacy standards.
Blackrock Cyber security team reflects 400 years of combined experience.
Including service in key government offices, and Fortune 500 companies.
This year, we launched the consumer proxy center of excellence.
Give up subject matter experts from different departments, all trained in pricey and how to access data usage within their respective departments.
Lastly, social good is that the heart, who we are as a company.
Earlier in a brand.
As usual Tony will provide more detail on our results.
I'll provide an update in the context of our four point growth strategy.
First of our for growth strategies.
Like customers with innovative cloud solutions.
We made a slight modification to the strategy to highlight our relentless focus on driving value and outcomes for our customers throughout solutions.
Skyline our platform for innovation is a core tenant strategy and continues to power an unprecedented level of innovation fire engineers and enable a growing ecosystem developers were also passion about social good to create amazing new capabilities that often look and feel like black but bill came.
Abilities.
For the first time in the history the company.
Now significantly more outside developers developing on our platform that Blackrock engineers.
In fact third party developers have defined over a thousand blackrocks sky applications in nearly two thirds of these applications have already been enabled by our customers.
Providing the developer community and our partner network with the tools to extent enhance customers Blackboard solutions.
For them create truly connected offices.
Example, staff and sing Leo University are using sky.
To run automated daily integration between our fund raising solution in our student information system.
Spending hours entering data to keep directories and think integration creates new construction My records and hence new degree information to existing records.
Our segment of their non traditional students, graduating all year round.
This integration creates an average of 75 new records per week. So they can now leveraging the power of blackbirds Razor's edge NXT, two newly identified and major gift prospects among new graduates and rally around my office to start engaging with them right away.
The customers, we serve require vertical specific business solutions automate their operations.
Rebuilt integrated purpose built cloud solutions or southeast business needs.
Among the many product innovation on things across all our broken markets, We announced a general availability Blackrock Church management, which is already transforming the insurance technology landscape.
We didn't just one year of announcing plans for Blackrock Church management.
Serve churches and more than half of the 50 U.S. stage.
Presenting congregations of all different sizes in spanning more than 10 to nominations.
This pace of innovation is extraordinary in our industry.
We've built in environment of rapid innovation or combination of our modern cloud architecture industry standard methodologies are early adopter customers have a significant role in shaping our new solutions.
Blackbird Sky platform enables us to rapidly into rate based on their feedback before releasing the solutions to the general market.
This culture of innovation led to the general availability of Blackrock Church management and the process is highly repeatable, we're well underway with early adopters.
Higher education vertical as we extend our proven education management portfolio up market.
Early adopters are excited with one thing and I quote you look at a number of solutions. In addition, a black box you name. It we looked at it but our 20 plus year history with Black line and it solutions for higher education health the promise of providing everything we want to.
To achieve and more.
This brings me to our second growth strategy, which to drive sales effectiveness. As you know we have a large market opportunity extending across several markets that we spent the last several years organizing for scale and laying the foundation for our salespeople to be more successful.
This year marks an important milestone and that process as the structural transformation in sales is now largely complete enabling our account executives to focus on leading with total solution selling by vertical driving more products per customer higher ASP is an overall increase customer lifetime value.
The structural changes behind us our focuses on improving overall sales productivity.
The separate extends beyond just the sales organization into areas like marketing or investing in the necessary technology and resources.
Additionally drive an increased number of quality leads and better cover our large addressable market.
Over the last three years, we've tripled the number of account executives dedicated to prospect accounts.
These investments are just one way or equipping our growing salesforce sector.
I'll now turn to our third strategy, which is Tam expansion.
Earlier this year, we acquired your Cogs.
Market leader in the corporate social responsibility software and our ability to move fast on back office integration is enabling the team to further differentiate our solutions from the competition.
As corporate social responsibility programs are implemented around the world.
Becoming increasingly important for companies to have an acute local knowledge in the countries where employees are accessing the programs to remove any functionality barriers just last week, we announced expansion in the your costs global footprint.
Helping in market partnerships to advance employing giving now province support globally.
Also implementing key product features for universal functionality.
For example by partnering with give India, India's largest and most trusted giving platform your comps and the employees. The support worldwide will now have access to give any as network.
During a thousand verified nonprofits, India alone, which ensures that employees are donating defended organizations.
Our total addressable market currently stands at over $10 billion.
And we remain active in the evaluation of opportunities to further expand our Tam through acquisitions internal product development.
Our final strategic initiatives.
Focus on operational efficiency to strengthen the business and position us for long term success.
This continuous effort spans the entire organization as we drive towards a more scalable operating model.
Great efficiency and consistency and how we execute.
Infrastructure investments productivity initiatives in organization alignments. For example, we're now selling a portfolio of modern cloud solutions, which is driving a shift away from one time services as we reduced the hours needed for implementation and integration of our solutions.
In order to effectively scale as we continue to grow as a company we've been building out our partner ecosystem, which includes partnerships to implement our cloud solutions. We've made significant progress building out this program in 2019 and look forward to continuing the effort in 2020.
Overall, I'm pleased with our execution to third quarter, and we're focused on maintaining our momentum heading into the fourth quarter of 2019.
We're continuing to execute against our strategic plan, which is strengthening the business and enabling us to deliver greater innovations.
Customers.
I'll turn the call over to Tony to cover our financial performance in greater detail before we open it up for couponing Tony.
Thanks, Mike Good morning, everyone.
Please refer to yesterday's press release, and the Investor materials posted on our website for the full detail of our Q3 financial performance.
Today I'll focus on key highlights so we can get to your question.
Recurring revenue increased 8.6% over Q3 of 2018 and 5.6% on an organic basis.
We posted solid recurring revenue growth for the first three quarters of the year and anticipate carrying that performance through the end of 2019.
We continue to see a healthy shift in mix as recurring revenue represented 93% of total revenue in the third quarter.
As you know we now have one global compensation plan for our salespeople that puts an increased focus on driving recurring revenue bookings.
Through our sales effectiveness programs, we continue to focus on opportunities to further shift our bookings mix towards our and optimize the mix of business within a our bucket.
Ultimately incenting and prioritizing offerings with the best economics.
Onetime services and other revenue represented only 7% of our total revenue mix and declined nearly $5 million in the quarter, which has a 24% decline versus Q3 2018.
During the first three quarters of 2019 onetime services and other declined 22% compared to the year to date 2018, and we still anticipate the rate of year over year decline to accelerate to roughly 25% for the full year 2019, which is healthy for the long run.
I'll remind you that last year onetime services and other declined 17%.
Turning to profitability, our third quarter gross margin was 59.5% we generated operating income of 37 million, representing an operating margin of 16.5% and diluted earnings per share of 56 cents.
Our third quarter operating margin performance is inclusive of strategic investments to further expand our selling footprint.
Bring new solutions to market.
And our shift to third party hosting.
Investments, we're making into R&D are delivering tremendous value for our existing customers and we've created entirely new product opportunities in our education and face verticals.
The investments in the sales and marketing or improving our ability to scale increase our selling footprint and position us to drive future growth.
As Mike mentioned, we've seen early traction building out our partner network, including third party implementation partners. We're planning to continue these high investments through the end of the year.
With three quarters behind us were position the land within our full year guidance for operating margin of 16.7% to 17.2%.
Given our planned pace of investments in incremental costs associated with the growth of our partner program, we're anticipating coming in towards the low end of our guidance range for operating margin.
Moving to the cash flow statement and balance sheet, our Q3 free cash flow was $63 million, which puts us on track to deliver our full year guidance of 124 million to 134 million.
We continue to making necessary innovation and infrastructure investments to support our move to the cloud amounting to $3 million in Capex primary associated with our global workplace strategy and investment in infrastructure and $11 million for capitalized software development.
During the quarter, we paid out $6 million in cash dividends to shareholders and ended with $474 million net debt.
Capital strategy calls for a debt to EBITDA ratio of less than 3.5 times and at the into Q3, we stood at just under 2.5 times.
In summary, we continue executing against our strategic plan, which is allowing us to strengthen the business and reiterate our full year financial guidance, we're maintaining our disciplined approach to balance investments that drive growth with improved profitability and we will continue to execute on our capital deployment strategy to maintain a strong balance sheet return capital.
To shareholders and create growth and scalability.
With that I'd like open up the line for your questions.
Thank you.
Where do you Tonight.
Keith.
Can you limit yourself to one question.
Good question Pete Princeton.
In some key.
Thank you the mute function on your telephone system.
Richard.
Please state your name and company before senior.
Begin please.
Thanks.
Okay.
Yes.
We will now take your first question, Brian Peterson from Raymond James. Please go ahead.
Thanks, gentlemen.
Congrats on the quarter suit. So maybe just start off on the sales hiring it looks like you're through some of the structural changes so far this year.
Curious where youre in terms of you're hiring plans so far what should we expect maybe in the fourth quarter as we think about 2020 anything or any commentary you can make on the magnitude of the sales and marketing investments.
Yes, we continue its Mike Brian .
We continue to higher in sales.
And Thats.
Going to continue for a while we're going to moving toward.
Continuing with hiring model if you will.
It's going to be a little lumpy this year like it was last.
With the plan is to move more towards the continuous delivery model.
Going forward so.
No same plan.
Got it and maybe a follow up Mike could you just on the Sky architecture, I know with it the faith based offering now generally available curious how you're looking at some potentially new markets.
Any appetite versus build versus buy thanks, guys.
Yes sure so.
Hi, Engineering platform just gets better.
Every month every quarter given all these engineers that are contributing.
Based engineering system.
Search management platforms now in general availability.
Customers implementation right now.
We're not looking to build a new vertical market solution today, because we have enough flake to execute.
In both.
Medication management and higher Ed and in fact based and those are both going quite well, but.
But I take your questions also related to.
Build versus acquire.
We're still.
In always are sort of in the market looking for tuck in opportunities that make sense in the vertical markets up room and with this engineering platform now we're in a much stronger position due builds versus just design as we demonstrated in the face based marketplace.
Your next question.
Jason. Please go ahead your line is.
Yes, I have met favorably on for Tom Thanks for taking my questions.
I guess following up on that last question as you look at.
The opportunity for the church management products.
Versus something like the higher Ed, whereas a little more organic in adjacent build out.
From what you've been doing in the K 12 market in your historical.
Some penetration in the higher end market, Tony just curious on how how each of those products can sort of flow into the model as we look out into the fourth quarter and more importantly out in the next couple of years, what what kind of build.
As over revenue waterfall are you expecting how quickly qms ramp up and be pretty significant contribution.
Yes, Matt its Mike.
Tony.
Well, if you want to.
So the deals in the higher Ed in C.
Our.
A little different.
Not that different so we took our K 12 operating platform, if you will and moved it up to the higher Ed.
Thanks, very successful LNG 12.
And thats for the whole programs going well in the face margin. We did do search management net new on the engineering platform, while we already had a presence and fund raising and financials in the fee based margin and this is genetic to an extension of that so we've gone from fund raising and.
Financials over to the operating side.
In the space.
Both of those will just continue to build we're selling and market we're implementing both.
We announced general availability for the search management platform.
Mentioned in our Investor session at our conference BB gun couple of weeks ago, we have over 70 customers right now in implementation on the church platform.
Continue to sell.
Every week every day.
Both those platforms and.
We anticipate the junior build of.
Revenue from those platforms in.
Subsequent years moving forward now it does take a while for that to happen, but we're pleased with.
Most of launches in the presence and the reception in those markets.
And Matt maybe I'll follow up on your waterfall question I think that.
Both of those new products be new entrants per se that higher end church, it'll take a limited time.
The build out our footprint in those markets. We've done a good job I think of getting a good base sales and marketing team and investment in awareness built in both of those markets. We just as Mike said announced general availability of the church. One it's a little further had there will continue to ramp sales and marketing investments in both of those.
Think of above the startups I'd expect what we'll see as we get both of those GA.
Some good traction on bookings, although a very small base in 20 and more of that starting to turn into revenue as we go into 21 and that kind of align with our sales and marketing investments.
Folks Bill the territories pipeline et cetera, then to turn those into bookings bookings ultimately into revenue.
Okay.
We will now take your next question from James.
Stephens Inc. Please go ahead.
Alright, Thanks, Hey, Mike Hey, Tony Thanks for taking the questions I was hoping to dig in on the gross margins a little bit.
Tony you've seen some year over year compression here for three quarters in a room I believe can use enumerate some of the main drivers of this and give us an idea how long these headwinds might persist.
Sure I think the largest is one we've been talking about for a couple of years now which is our move to the cloud is.
That one's going to continue to.
Push down on margins for that.
At least for the foreseeable future as we migrate out of all our Colo data centers into the cloud there's a slew of just.
Complicating factors as we make that transition you have licensing issues and other things that we have to deal with but as we get out of the old products complete rewrites on NXT and some of those others. It will free up some costs and then as we get out of the Colos turn off those networks in those rigs and datacenters themselves will free up costs. So.
I'd expect we will see kind of this increase pressure at least the next two or three years with its starting to lighten after that.
The other two things that are getting us is software amortization just with all the innovation we've done over the last few years, the amortization amount of amortization is increasing so thats, putting a little bit of downward pressure that we will continue for the next couple of years as well tell that plateaus and then more recently in the quarter.
As we started to build out partner networks more fully we actually started utilizing implementation partners in the last couple of quarters and you can see that in the onetime and other margins says puts some pressure there.
From using those third parties, which is great for long term, we'll have some near term pressure on a gross margins will look at those models potentially start shifting some of that on the their paper as we determine we've got partners that we can trust to work with on that front, but thats something that will be a little bit a moving target as well, but those are the three major drivers on.
Margin pressure and they will continue for the lease for the foreseeable future.
Got it helpful. There and then a follow up to that question would be on the payments business and whether it's generally how that business is doing and if thats affecting that mix toward payments is affecting the gross margin line as well. Thank you know not right now payments is kind of running right in line with expectations. You recall, we built a much more robust forecasting tool for that payments business.
Coming into this year.
And Thats worked really well we're right on track obviously year end is always a wildcard.
Tax reform from last year, those kind of things what happens around giving Tuesday Christmas season, all those pieces of still yet to see what happens here in the fourth quarter, but year to date, we're kind of right on track with expectations. The mix has not changed significantly so thats not really having an impact on the gross margins.
We will now take your next question from Rob.
Your line open. Please go ahead.
Great it's that Lemenager on for Rob Oliver This morning.
The question around larger deals one of the nice differentiators of black lot of the ability for a nonprofit to go and to add.
Thinking about tools from top of funnel marketing to fund raising the payments and I guess, all the way down the finance alleged this I'm wondering if you can update us even if its qualitatively how larger deals have track.
Here, perhaps how the pipeline looks for the fourth quarter and the importance of.
Large deals if thats the I guess prime time promote those larger deals to come so just to be update around larger deals even if its qualitatively.
Yes sure this Mike.
We are continuing to do quite well with large deals and a lot different markets.
A few of the.
Earnings calls going back I mentioned, and we've got some press releases on large deals in the K 12.
Market with large ktwelve private schools.
I've mentioned universities in the large deals we've gotten with universities and now we've expanded our portfolio with universities and includes the vegetation management platform.
So the opportunity there and its happens with larger ASP deals the University the university market as well because we're servicing the whole school not just the foundation same is happening in the in the face based market as well, where we're seeing the opportunity to sign.
Contracts that cover.
Tens or sometimes hundreds.
Churches are schools, where typically we sold one at a time.
And so we're seeing.
In large deals and multiple marketplaces, including in our international business as well.
Got it thank you.
Okay. Thanks.
We will now take your next question from Rishi Jaluria.
Davidson Your line is open. Please go ahead.
Hey, guys. Thanks for taking my questions couple products' third quarter two product lines first just wanted to start.
On the higher Ad side.
Maybe help us understand like.
When you are getting these deployments what it did that you're replacing it congrats systems is that kind of a combination of 10 different point solutions that now you can come and then have one broader suite of solutions that does everything.
And from like a portfolio perspective.
He is everything kind of all the pieces in place.
There are said to be successful and higher Ed or are there still kind of areas in the higher that portfolio that you want.
More products to be round out that portfolio be it internally developed or acquired and I've got a follow up.
Sure as Mike So at higher Ed sort of the.
Repeat in the story, that's been quite successful for us in K 12, where we have a big presence now and higher Ed in the foundation.
In fund raising and in scholarship management.
And financials and we've now expanded that to the operating sizes school student enrollment classroom scheduling and student information system.
So it's a whole portfolio. So that covers most of the major departments.
In a university, we are starting with smaller universities are several thousand of them.
And we also have cross sell opportunities.
Because in a lot of them, we have a fund raising or financial footprint.
And so we're starting with smaller universities and we're going after that market.
The product is.
Three advanced because again it is the same product has been in Q1 2 years, and we've taken over two years and added a lot of capabilities for higher education market and also includes on Jewish management, as well, which is new for us and the higher end.
Market somewhat dependent standpoint, we see some legacy competitors out there mostly license time installations.
Theres, some home grown point solutions as well.
And again it.
Macro level it looks a lot like what we've been doing in K 12.
Got it. Thanks Thats helpful. Thanks, Mike and then on the Church management side.
Look I think this is one of the bigger organic new product adoptions that at least I have seen and a very long time.
Help us understand kind of your expectations in sort of what the ramp looks like these it's clearly a big market opportunity going after but maybe just want to understand your expectations for an adoption curve and maybe when can we expect this to be incremental the topline. Thanks.
Sure so.
Again, it's it's a full cloud for that marketplace that goes across the operating components of the church.
It's across.
More than 10 denomination. So it's a it's a big market.
We're talking to lock in terms of all sizes and scales up we priced it so it scales up and down based on.
Reduced in size and also scales when we talk to an institution that isn't assembly of many.
Churches.
We also have a new mobile app.
Our mission.
Which is a mobile app for.
Sure.
Donations or ties in that market and offerings.
From a level standpoint, it's integrated in the quarter Sky set of capabilities. So we're really excited about this marketplace.
Sure in our opinion hasn't been any innovations space in a long time.
And.
Contracts were signing we are replacing.
Dozen or so single point solutions with this low single long on.
Modern cloud.
We got live customers, we have a lot implementation and this will just continue to build and build.
We have marketing efforts that are new.
In the space, we've had fundraising and financial customers in the space for a long time, but we're not that well known.
In that marketplace.
So we've got some marketing spend happening there in areas like lead Gen and digital footprint and conferences.
We started about a year ago. So we think theres a long runway here and.
We are doing it right by building Referenceable customers scalable high quality modern cloud platform.
We will now take our next question from Ryan Macdonald from Needham <unk> Co. Please go ahead.
Yes, good morning, Mike and Tony Thanks for taking my questions. Mike I guess first one for you can you talk about the with the drivers of the Youre caused international expansion was is this an area where you think that the domestic market is perhaps mid shrink quicker than expected or are there just a number of opportunities of customers wanting to.
Pull you internationally to expand their efforts in this area.
Sure.
So to your cost acquisition was completed in January and.
We remain super excited about that space in that business.
It continues to grow nicely, we continue to sign up a lot of customers as a big backlog implementations that we're driving we're adding to.
Sales head count in geographic regions.
Actual extension is sort of the natural.
Step we are already international platforms already international.
But on a large customers have international footprint, we've got over 100 customers on the platform that our fortune 500 companies.
So they need that international support so we've been driving sort of a localization.
Model here through growth product functionality and partners in market.
I think we mentioned a couple of partners one in Canada, Canada helps our word charity drops in the UK.
New partner in India call get Indiana.
And it's sort of a combination of.
Our.
Our sort of focus on expanding internationally organically and helping our large customers in.
Perspective large customers.
Really solid international footprint.
Got it and then just quick follow up for Tony you mentioned that during the BB kind that less than half of the direct sales reps run a full quota for 2019 can you give us a sense on what that progression looks like as these sales reps are ramping to full productivity and perhaps what expectations are.
For percent of reps that will be on a full quota into next year.
Yes, Ryan we talked about at the Investor session that going into this year in January we made kind of the last big organizational change, which is reallocated a lot of overlay in associate account exact roles in the full.
Bag caring sales roles and so that created a lot of what we would look at attrition. We look at attrition both external do I lose employ the salesperson to another organization, but also do they have territory change or did they change roles and so going into this year with that large reallocation of the workforce.
We anticipated much higher overall attrition in territory for the team we've tracked to kind of right in line with those expectations and what that resulted in then is what we call as productive full time equivalent sales reps that we had significant less fully productive reps because.
They were re ramping in their new role our new territory.
It takes depending on the roll it takes somewhere between six to nine months 12 months, probably on the outside to ramp to full quota. We made those changes largely in the first part of the year. We would have had some other attrition that resulted from all those changes kind of mid year. So I'd expect.
As you look at it in the whole.
We will see.
Nice fairly significant increase in productive ft ease exiting the year probably continues through the first quarter.
Before we get through all of this transition than we had this year. When do you think about that six to nine to 12 month transition period.
So I think by the time, we get the Q2 all this disruption we had this year from the last big organizational change should be behind US and then we're really deal with just normal attrition, which we're trying to make sure. We don't create any more of that internally then we absolutely have to and then obviously trying to control the loss of our employees going to third parties, which.
We've been able to do a pretty good job up compared to peers. So I think we'll see a much lower overall attrition in 2020 than we saw this year, which should bode well for productivity.
And productive reps as well.
I'll just add to that were not standing up a new vertical market either so.
Most recent one we created was the faith based markets. If you go back.
Five years to today, we had no vertical markets and today sales organized in our local markets K 12, higher end healthcare arts, and cultural foundations safe space et cetera, and their dedicated to the markets and what we've seen happen.
As.
Still significant presence in those markets and they're all very different conferences are different languages different competitors are different.
As we build muscle in each of those markets, we've become a lot more competitive.
It's caused some.
Disruption in sales productivity when you move folks around.
They settle into the market and they get some tenure in the market, we see productivity go up and our ability to have the bigger presence go up in those markets. So key add onto a Tony said is we are not standing up a new.
Local market settling into the markets that were.
Currently and we've already stood up.
We will now take your next question.
Now turning from Evercore. Your line is open. Please go ahead.
Yes, Thanks, maybe I'll just start actually at a follow up for Tony on that last question about sort of productive sales reps. I know you knew you guys called out effect that Theres a lot of moving parts. This year I guess, just the reps that have been put in seats are been there for six to 26 to call. It nine months or even six months. It was the kind of pipeline build you're seeing in line.
Expectations, meaning you, obviously a lot of investments in the in the sales reps. The is the pipeline, meaning has the investment sort of matching up to what you hope at least in terms of pipeline build because they obviously need to pipeline going into next year, if they're going be productive.
Yes.
Kirk we I think we've got this question talking about a little bit maybe at the investor sessions as well, but we've seen pretty good productivity.
In pipeline Bill we measure.
Kind of that ramp across many different metrics are they getting us leads generated is pipeline building as pipeline moving to close are they closing deals all of those we've got to really robust process around that to measure and we've been doing really well theres been a couple areas that have been a little bit soft.
One was just waiting for the product release in the face market now that we have general market availability, we believe the traction will increase significantly there.
And then one of the other areas, we created a new role would never had which was a prospect rep. That's kind of telesales and they were again largely in the faith based market because we did have general availability the product they were having a little tougher time ramping.
Prior to that with that market launch I think we'll see that pick up significantly but everywhere else.
Kind of track and rights expectation.
Which would be what I would expect because we built the ramps for that based upon our historical performance.
So we would have had to go backwards, if we wouldn't have been.
In line with those ramping next.
That's helpful. Appreciate the color and then just maybe Mike as you head in next year, obviously of Church management now you have a pretty broad suite of products I guess, what's the sort of your sort your thought process on M&A versus just kind of focusing on the suite of products you have already.
It's obviously additive from a 10 perspective, but I would imagine can at times be disruptive from service sales perspective, you're adding new products to someone's bag. So I guess, just how are you kind of balancing that kind of thought process. These days as you as you head into 2020.
Sure.
It's been a key part of our strategy.
Since I came which is to have Tam expansion in our vertical markets, there's still opportunity to do that without seeing any up a new broker market.
We don't cover 100% of the IBG spend.
In every market that we're in so it still represents opportunity for us.
It's it's something that we're actively involved in just given all the transactions that happened in the software world.
People know were an acquirer vertical.
Software companies and so we will continue to be active and look in learn and.
We can.
Expand Tam and the vertical markets, we're in and so.
It's not something that.
Ultimately required for us to hit our objective but.
We focus on how do we feel that the needs of our customers. How do we create an environment, where our current solutions or are stickier and integration at the end of the day wins rollout of our our customers in our cloud solutions and so it's still an active area for us.
And we remain active.
In that part of our business.
Thanks for taking the questions present it.
Sure.
There are no further questions in the Q.
During the call back over to Mike Kiani for any closing remarks.
Thanks, operator, I'll close by saying I'm pleased with our execution through third quarter of the year.
Clear our progress we've made is having on major impact on individuals that use our solutions everyday I'm excited about the advancement of church management are higher end platform.
And what's happening with your costs.
These investments, we're making will ultimately create lasting value for our customers employees and shareholders.
Not only for updating you on our progress on the next call. Thanks, everyone.
Thank you. This will conclude today's conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.