Q3 2019 Earnings Call
Please standby.
Good day and welcome to the Fivenine third quarter 2019 earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Lisa Laukkanen. Please go ahead.
Thank you operator, good afternoon, everyone and thank you for joining us on today's conference call just got Fivenine third quarter 2019 resolved.
<unk> costs being hosted by Ron Trollope, CEO , Dan Brooklyn, President and varies weren't asking CFO . During the course of this conference call five nights management team will make projections and other forward looking statements regarding the future financial performance of the company industry trend company initiatives and other future events.
You are cautioned that such statements are simply predictions should not be unduly relied upon by investors and actual events or results may differ materially in the company undertakes no obligation to update the information such statements.
These statements are subject to substantial risks and uncertainties that could adversely affect fivenine future results and caused forward looking statements to be an accurate a more detailed discussion of certain of the risk factors that could cause. These forward looking statements to be inaccurate and that you should consider in evaluating fivenine and its prospects is included under risk factors and elsewhere and.
Slide nine filings with the security and Exchange Commission.
In addition management will make reference to non-GAAP financial measures. During this call management believes this non-GAAP information useful because it can enhance an understanding of the company ongoing before me.
Slide nine therefore uses non-GAAP financial information internally to evaluate and managed companies operation.
This non-GAAP financial information should be considered along with and not as a replacement for financial information reported under GAAP and could be different from non-GAAP financial information provided by other companies in our industry.
A reconciliation of the GAAP to non-GAAP financial data can be found in the company's press release issued earlier. This afternoon and it's also available in the Investor Relations section on Slide nine website now I'd like to turn the call over to five nine CEO Rolling Trollope.
Thank you Lisa and thanks to all of you for joining our call. This afternoon.
We delivered very strong third quarter results with $83.8 million in revenue up 28% year over year.
Increasingly larger enterprises are demanding cloud contact centers driving our enterprise subscription revenue to grow 36% on an LTM basis.
Our adjusted EBITDA margin was 18% a decrease of 160 basis points year over year, reflecting the significant incremental go to market and R&D investments, we mentioned at the start of the year.
I'll now turn the call over to our President Dan Brooklyn to share another great bookings quarter that.
Thank you Roland Hello, everyone.
Our Q3 enterprise bookings grew strongly year over year and once again reached an all time record for any quarter.
And our pipeline also reached another all time high.
This quarter, we continue to see larger and larger deals coming in and more than 60% of the deals were influenced by our ecosystem of partners.
Now I'd like to share some key enterprise wins for the quarter, including one which demonstrates our international momentum.
The first example was a publicly held online higher education company.
They had been using several outdated a bio premises space systems, requiring expensive maintenance I did not provide the scalability flexibility he's in depth of integration to salesforce lightning, nor the ability to innovate and infuse AI into their contact center customer experience.
Once they evaluated several cloud solutions. They concluded that Fivenine would solve these challenges as well as give them a platform to optimize intelligent performance based routing for every interaction.
They also plan to leverage AI to improve agent efficiency and reduce handle times by automatically inserting selective transcribed information from calls directly into their salesforce CRM.
We anticipate this initial three your order will result in approximately 3.1 million in annual recurring revenue to Fivenine.
The second example is a health care company, providing a wide range of services throughout the U.S.
They were using several promising space systems, which were outdated created silos in each of the locations and experienced frequent outages.
They researched and evaluated those leaders in Gartners Magic Quadrant report for contact center as a service including Fivenine.
Chose fivenine after understanding our industry, leading solution, including omni channel by night WSL powered by Barrett performance dashboards as well as our unparalleled implementation and ongoing continuous optimization services.
We anticipate this initial order to result in approximately one point sixmillion, an annual recurring revenue to Fivenine.
The next example is a national auto parts distributor, who had been using an inferior cloud solution with limited capabilities, which walk the reliability and scalability the required as their business grew.
Hired a consultant to help them find a next generation cloud platform to meet these needs as well as give them the flexibility and innovation required for the additional anticipated growth.
With the five died open if you guys, we were able to deeply integrate fivenine to their proprietary CRM bring a comprehensive w. EFO solution from five nine powered by sea ASI.
And evaluate and measure important keep you guys around age of performance.
We anticipate this initial order to result in approximately 1.6 million an annual recurring revenue to Fivenine.
Now as we normally do I'd like to share. An example of an existing enterprise customer who has significantly expanded their business with like not.
This global company provides wireless services and devices in over 57 countries.
Slide nine had been serving their U.S. contact centers with great success over the past two years.
They know our expanding with us to serve their European operations from our UK and Amsterdam data centers and we're also providing services in their Asia Pac contact centers in Singapore, Japan, and China through our five nine global voice solution, leveraging our Tokyo voice spot, which keeps voice calls local in region cutting costs.
Reducing latency and improving voice quality.
This customer increased its annual spend with five nine by more than 30% and is now anticipated to generate over 1.4 million an annual recurring revenue.
We are seeing increased demand from enterprise customers and we're executing well there multinational customers are truly leveraging our global voice architecture, and we are expanding our footprint and offerings within our growing customer base.
With that I'll turn it back to your ROIC.
Thanks, Dan those are awesome examples.
Now the market and our product and our go to market strategy are the three key pillars driving five nights growth.
I'll now share some of our progress in these areas in a minute start with the market.
As I've described previously the market has it tam of over $24 billion and it is massive.
And call penetration is under 15%.
Now we believe the pace of migration is likely to accelerate.
Enterprises have learned a trust the cloud with digital transformations underway company leaders recognize that transforming their customer service experience is a necessity.
And we believe that recent changes to the you see landscape have the potential to accelerate decisions to upgrade the contact center.
The second pillar of our growth strategy as our product.
So this year for the fifth consecutive year Fivenine was recognized as a leader in the Gartner Magic quadrant for contact center as a service underscoring. The Fivenine is viewed as a trusted partner to enterprises that can deliver a secure reliable scalable and innovative platform with a very compelling vision for the future.
There are.
Our leadership position as a result of over a decade of experience in investment working with these increasingly larger customers building out a resilient platform with a very significant surface area of capabilities.
Now for the past several quarters under our new leadership, we've been hiring more engineers and scaling our team at a rapid rate, resulting in a substantial increase in throughput and innovation.
And that team is focused on further scaling our platform for these global enterprises deepening our CRM and partner integration and making the platform increasingly open via enhanced Cpis NFC case.
Closing out on the second pillar the product we continue to make progress building out our new software delivery engine, which leverages a blend of our own robust cloud infrastructure and public cloud from both Amazon and Google.
And we're making strides with our AI strategy under Jonathan Rosenberg our CTO.
As we've shared before a I roadmap has been validated by our largest and most advanced customer and we've begun implementation hiring coding and performing AI model evaluation and performance tuning.
We look forward to sharing more of our AI progress with you at our analyst day on Tuesday of next week.
The third pillar of our growth strategy is our go to market engine.
Our results continue to demonstrate that our team led by Dan is one of the best in the industry and we're making progress on multiple fronts here.
First the leadership of our channel team that we introduced in our last earnings call is really making excellent progress our channel influence and pipeline continue to show impressive growth.
We're also seeing significant engagement and pipeline growth coming from key global distribution channels.
These channels are now recognizing the need for proven scalable cloud contact center solutions and our new channel leadership team is able to leverage long term trusted relationships to help accelerate our go to market progress.
So stay tuned for.
For more details in the coming month.
Second we continue to build momentum with systems integrators, like Deloitte Accenture, Eli slalom and I B M and we're adding people dedicated to the ASI channel in Dan's organization.
These s. eyes are driving a meaningful portion of our bookings as they're often tap to help enterprises with their digital transformation strategies.
Third we continue to increase our focus internationally with our key leadership appointment in our UK office as well as doubling our international go to market personnel.
Our channels in the EMEA region, Latin America, and Canada continue to be successful with Fivenine and several of them are increasing their investment to lead with the Fivenine solution as its now proven in these markets.
Meanwhile, our professional services and customer success teams remain pivotal in driving our revenue growth together, they make up one of the largest such organizations in our industry staff with customer facing contact center experts instilling confidence trust and loyalty and our customer base as they demonstrated by our blended LTM dollar based retention rate, which was a hub.
Third and 7% in the third quarter.
Our recent global CX summit in Las Vegas had more than doubled the number of attendees from last year, which was not only reflective of their excitement in our platform and services, but also a testament to the momentum were seeing in our business. The voice of our customers is what drives our vision and continued innovation and it was clear.
At our product road map is resonating well with customers prospects and partners alike. In fact, several participants have already joint Fivenine is new customers one of whom is the largest example of the customer wins, we previously mentioned and we expect more in the upcoming month.
In closing.
As this huge market continues to evolve we believe our product and go to market engine position Fivenine for continued gains are balanced approach to growth is succeeding.
And we believe the investments we've made in the product and our channel sets us up for ongoing success, including many years of Thirtys level growth in LTM enterprise subscription revenue.
Expand upon our financial performance and guidance I'll turn the call over now to our CFO varies Weinstein.
Mary.
Thank you Roland.
Before going into specific reminded that unless otherwise indicated all financial figures I will discuss our non-GAAP .
Reconciliations from GAAP to non-GAAP results are included in the appendix of our Investor presentation.
Lastly, I know website.
We're very pleased with outperformance with both top and bottom line results exceeding our expectations.
Revenue grew 28% year over year.
And 8% sequentially, our largest Q2 Q3 growth rate as a public company.
These growth rates continued to be driven by our enterprise business.
Enterprise now makes up 80% of LTM revenue.
Enterprise subscription revenue continued its multiyear performance of growing in the cities.
Posting growth of 36% on an LTM basis.
And as enterprise business is highly profitable generating a six to one LTV to CAC ratio on a truncated five year basis.
Our commercial business, which represents the other 20% of LTM revenue.
Good again in the single digits.
We expect continued single digit commercial revenue growth.
Recurring revenue accounted for 91% of our revenue.
The other 9% of our revenue was comprised of professional services.
Third quarter, adjusted gross margins with 64% slight decrease of approximately 30 basis points year over year.
Mainly due to strong professional services revenue growth.
Driven by the continued bookings growth.
We have been enjoying.
Adjusted EBITDA was $15 million, representing an 18% margin.
Well this is a decrease of 160 basis points year over year.
We are very pleased with the decision we made two rents go to market and R&D investments.
We continue to guide the 20% adjusted EBITDA for the fourth quota.
non-GAAP net income was $12.8 million a year over year increase of $1.7 million.
Finally, before turning to guidance, some balance sheet and cash flow highlight.
Dsos was 31 days.
Operating cash flow was a record $17.7 million a.
A year over year improvement of $8.2 million.
We are optimistic about potential for continuing cash generation given our long tomo.
Substantial anywhere else and allowed Dsos.
I'd like to finish today's prepared remarks with a brief discussion of our expectations for the fourth quarter and full year 2019.
As well as some initial comments on 2020 in particular.
The quarterly profile of the bottom line.
In 2019, we expect revenue to be in the range of $321.7 million to $322.7 million.
GAAP net loss is expected to be in the range of $6.8 million to $5.8 million or 11 10 cents per basic share.
non-GAAP net income is expected to be in the range of 48.8.
$49.8 million was 77 to 78 cents per diluted share.
For the fourth quarter. Therefore, we expect revenue in the range of 86 million to $87 million.
GAAP net loss is expected to be in the range of 1.4 $2.4 million or two to one cents per basic share.
non-GAAP net income is expected to be in the range of 15.72 $14.7 million or 21 to 23 cents per diluted share.
I would now I'd like to provide insight into current thinking for 2020 .
Well, we're not providing formal guidance at this stage, we can provide some high level commentary.
First with respect to revenue, we're comfortable with the current treat consensus of $368 million for the full year 2020 .
We expect revenue to fund a typical pattern with slightly more than 50% of I revenue.
In the seasonally stronger second half.
Second with respect to non-GAAP net income.
We're also comfortable with it $57 million current consensus for the full year 2020 .
However.
The consensus by quarter does not take into account the strong sequential decline, we anticipate from Q4, Nike Q1 20.
Note that non-GAAP net income decreased by $4.5 billion sequentially from Q4, 18 Q1 19.
And we expect at least the same sequential dollar decline in the first quarter of 2020 .
For modeling purposes, we'd like to provide the following additional information.
For calculating EPS.
We expect our diluted shares to be 64.8 million and basic shares to be 62 million for the full quota 2019, and 63.5 and 60.6 million respectively.
For the full year 2019.
We expect our taxes, which relate mainly to foreign subsidiaries to be approximately $85000 into fourth quarter of 29 team.
And $115000 for the full year 2019.
Capital expenditures for the fourth quarter of 2019, I expect it to total approximately 6.5 million to $7.5 million.
For the full year 20, Nike, we expect capital expenditures to be between 19 and $20 million.
In summary, we are very pleased with our third quarter performance driven by strong revenue growth and excellent unit economics.
The importance of customer engagement continues to be a key driver and the 519 continues to execute extremely well against this massive opportunity.
Operator, Please go ahead.
Thank you she would like to ask a question. Please go by pressing star one on your telephone keypad.
If you're using a speaker phone. Please make sure. Your mute function is turned off to like you are saying no to reach our equipment.
Again that is star one if you'd like to ask a question.
Our first question will come from Scott Berg with Needham.
Hi, everyone. Congrats on a fantastic quarter and thanks for taking my questions.
Let's run yes, Ron let's start off with one of the statements you made about the you see environment I think pretty well known there's couple large vendors out there.
Made some changes in the competitive dynamic there with your comments about.
Maybe pulling ahead are forcing some contact center.
Decisions you have any anecdotal information it kind of support that view from what you're hearing from existing customers or is that more of an expectation of changes is probably good forever one ecosystem.
Well.
No I don't have any specific anecdotal that's just more my prediction that I think with some companies sort of throwing the towel on different parts of their portfolio. It feels to me like there's that admission of paid you need to make a change in the cloud as where it's at.
And as a result, I think those customers that have to make a decision are going to evaluate and look at the market, perhaps sooner than they might otherwise have done. So so that that was what my comment was a targeted at Scott.
Got it if that's helpful.
Right.
Okay.
Dan and then from a follow up perspective, you guys are spending a little bit more in sales and marketing I think the topline numbers speak to themselves in terms of a productivity, but outside of some of the partner investments.
Is there any way to think about some of the other incremental investments is that kind of broader based.
Across all your go to market channels or is there maybe in the area of emphasis right now.
That might be working a little bit better too so those.
Sure. Thanks, Scott and we've said throughout the year that we've really got four areas of key investments that we're making not only to continue to scale and drive our direct sales organization and bring in leadership that really has experience of having been they're done that for much larger organizations.
Which will help prepare us to go to the next level.
But we're also investing in the channel and our ESI partnerships as well as our international expanded footprint.
The productivity isn't quite as large and some of those international markets, but it's very important for us to establish ourselves and get a brand and get to get market share in those in those markets.
Great. That's all I have the boat and thanks for taking my questions.
Thanks Scott.
Next we'll hear from Sterling Auty with JP Morgan.
Yes, Thanks, Hi, guys can you give us a little bit more color in terms of how much of the booking strength that you're seeing in the quarter is actually coming from expansion deals from existing customers and what is the structure or you're just seeing more seats within current divisions orders or any type of pattern that that you're kind of.
Seeing that's making the the kind of break out that you're seeing possible.
Yeah. Thanks Sterling. This is down yeah, you're kind of hit on all three.
You know, we're seeing it really exist from booking more new logos and larger logos.
At record levels as we indicated a than that new bookings for enterprise was an all time high for any quarter as we said in the prepared remarks and then we also are seeing expansion within the base lots of the customers as you go into larger and larger enterprises.
Tend not to go in and replace all several thousand seats at once they tend to find the departments that are most in need of innovation and most in need of an upgrade.
They moved to the cloud and then they see the performance that we provide to them and then they upgrade the rest of the enterprise.
So we see a lot of that as well and then you mentioned the third item, which is also selling more applications.
And more solutions as we broaden our offering and be able to do so it means they buy more from us. So it's kinda all three of what you mentioned.
They are all three of hitting that watts.
Great and then one follow up questions that time of year, where I think you guys are usually talking about the hiring that you're doing especially in sales marketing to drive next year's growth can you give us some insight as to where you are in that process.
Sure just as we've done in previous years this tends to be the season, where we we load up.
And do more hiring in the latter half of the year to prepare for the following year. We have a annual sales kickoff meeting that takes place in January so we bring everybody on and it's a great way to get folks on get them, a partially ramped up and ready to go for a very successful next year and we're doing the same this year.
Great. Thank you.
Yes.
Our next question will come from Raimo Lenschow with Barclays.
Hey, Congrats from me as well two questions on.
On international and can you talk a little bit about the the skill off the organization and kind of whats kind of needed to try and ongoing growth here in terms of war.
Other countries somebody to send us et cetera, given like you know the more sensitive nature out held over there.
And then a question for Berry and obviously you said, we're comfortable with the current consensus, but that's kind of assuming quite a big deceleration of grow is there anything in the numbers that we should know or is that very guidance. Thank you.
I'll take the first part Raimo on what investments are needed on international So we actually already have a team.
Go to market perspective in dances hired a new leader very excited about that as the same gentleman, who built out the Cisco contact center business.
Over 10 years ago. So so I think we've got the leadership in the team there that we need from a data center perspective, we actually already have data centers and footprint and our financial Analyst Day Conference next week on November 12 will be covering more details about that.
But we have the datacenters we need.
Across Europe , we are making incremental investments there and as we mentioned previously the focus that we have with regards to datacenter footprint is on leveraging public cloud who have made those investments to have the availability zones that we need so that we can have data centers in country without need without us needing to make the invest.
To say standup colo agreements and and rack and stack hardware. So we're looking to public cloud availability zones.
So to leverage the data centers footprints that we need as we expand into additional countries.
And the second questions were buried into Raimo with respect to the South guidance had been given for 2020. If the question is around the strength of our business.
Let me assure you that business is strong and we are confident competitive position.
Dan as you are on talk about.
The investments is making in sales and marketing we have one of the leading products on new.
Leadership and increased funding they getting.
So it's not about the strength of the business, but it is about is our guidance philosophy, which you alluded to.
Tends to be prudent.
And the focus of time.
We will see Todd actually does too.
Okay, Thanks to take care.
And we went out here from Mehta Marshall with Morgan Stanley .
Great. Thanks, guys and congrats on the quarter, you know with the three point or the 3 million dollar Air Our deal you announced you know some of the AI use cases seem to be coming on a little bit earlier than expected. So have all the trials concluded at this point or just kinda give us a status of whereas.
Some of those trials are and then you know I know that there was kind of an announcement of Microsoft teams being a partner last quarter or kind of in the summertime just any update on their or where you're seeing kind of traction with your partners. Thanks.
Sure Mehta with.
With a I know the trials are not completed we're actively in trials with five of our large customers and you know, we we could be doing many more than that but that's what we need right now is that to get the big big use cases into production essentially and so again, we'll be giving an update on that next week at our financial analyst day, and even a demo I think so you'll get to see that.
I have an action and even here from a customer so very excited about sharing the progress we've made there.
It's been pretty it's been very encouraging and your second question.
It's about.
What was your segments can you can you repeat second question James Yeah, just Microsoft teams as a partner or just kind of Microsoft as a partner.
Yeah, we continue to be excited about that they've been making good traction with teams as they have integrated Skype for business and they're calling offers and into teams and I think yeah. The news has been full of reports about the success of teams in the market and so.
So that's that's a great partner, we are intending to launch our support with them and they've been a you know having us out to their events and introducing us to their partner channel and so on but no new news on that specifically adds just in progress.
Alright, great. Thanks, guys.
Thank you.
Your next question will come from David Hynes with Canaccord.
Hey, Thanks, guys congrats on the strong numbers.
I wanted to ask about on the services side right with all the bigger deals we've seen over the last few quarters.
Where are we in terms of services capacity can you keep up are you thinking about.
Pushing more that services work to your ASI partners sooner and then and then maybe up a corollary to that for Barry would be just can you update us on services margins how that picture is looking.
Yeah. So this is Dan as you know weve historically.
Done our implementation and services directly to the end user customers and that's primarily to ensure quality, we want to make sure that that doesn't get sacrificed one bit.
It's been a big reason for our success raising our retention rates.
We have every intention of leveraging partners to do some of those services for us.
And as we're bringing them on literally as we speak several are investing their resources and getting trained and certified to be able to do those services. So we haven't seen it moves the needle yet on the financial front, but we're definitely seeing it from an interest level. We have some folks in fact, a this very weak that are in our training center getting.
Certified a handful of folks from our key partner so stay tuned for that but we will eventually see leverage and have an impact the financials as they come on board.
And TJ with respect to the PS margins you know the the cost we've even on a you had to go to as a triple digit negative and double digit then.
A single digits. This just recently.
Well it actually no teen.
In Q2, and now a single digits. So we on a very good.
Victory that as we've been predicting before we a whole lot Aldo will will get into positive territory and the leadership that.
Right and then Dan and brought in a two to manage that business is brought a whole new degree of professionalism and for these enterprise customers.
I was alluding to the professional services is really important and what about key differentiators.
Perfect and then maybe one for parole and if I can.
So you talked about Hey, I model tuning your prepared remarks, and these five large trials that are ongoing.
Please remind me when you talk about.
Leveraging our accessing the data are you actually see not like cross tenant in other words can you use the data from all five of the large customers an aggregate to train your algorithms or does that customer data remains silos right I I I think while the key advantages of the cloud would they I pushes that you have this enormous swath of data to use to train the algorithms just remind me.
Kind of how that works and could evolve overtime.
It's the former its multi tenants so we're able to pull in data from across all of our customer base.
You know we have to be very careful about not using it in any way that would.
Be any violation of privacy. So we it's all anonymous usage of that data. So the data is totally anonymized, but no. That's absolutely that's part of the benefit I've been talking about I think for a year and a half year, which as we have over 5 billion minutes of of traffic going across our wires through our us through our system and a bit.
As we are Multitenant cloud.
That does give us the capability to leverage all of that data and that puts us I would say in a leadership position vis-a-vis any of the competition.
In terms of our ability to have more data access to more data for these customers and so that's that's really really exciting and I think a part of what makes our customers. So excited about.
What we can potentially do here because in many cases, there's no single customer that has enough data actually right. We find that it's only in the aggregate, but the fact that we we have so many customers and so many billions of minutes of data going across the wires that we can actually get the kind of insight that is needed to make make AI working.
In the best possible way and you've seen that that corollary and things like.
The consumer World, where you know Amazon Google.
And Apple have made very good strides on voice because they've got access to all of the consumers. It's not done an individual basis, it's done across the base.
Yes.
Makes sense. Thank you guys.
Thank you.
And they will be we'll now move to non done I'm glad he with Guggenheim partners.
Hi, good afternoon on thanks for taking my question, So I'm as you've signed up some of these larger customers.
What are some of the.
Factors that.
Enterprises take into account for very large contact centers.
So are there sort of natural boundaries to the size of the contact center that it might be willing to.
Migrate over.
Yeah, Great question and on this is Dan.
I'll take that as we as we move up market and really as the market accepts Pos and trust us to deliver a in the enterprise. There's some prerequisites that you've got to overcome or accomplish before you can even approach enterprises with this type of solution and you know when you've got to be able to demonstrate scale way beyond what they've got.
Today, because they may have growth or M&A acquisitions that require.
Multiple ex of growth beyond what they have you've got to demonstrate security and data protection and making sure that you can secure and encrypt and protect their data as well if not better than they can you've got to have an always on.
Fault tolerant platform that has the resiliency and redundancy is built into it that is very hard for an individual entity to achieve on their own but with a knock in a 24 by seven monitoring.
We can give them a lot of greater assurance there. The fourth area is really the ability to make sure that weve been able to duplicate and allow them to move to the cloud without compromising our sacrificing anything that they have today. So you know enterprises get caught up on wanting to use certain capability. So you've got to be able to emulate and delivery precisely.
But they have today and then the fifth and final, it's really being able to give them a platform for innovation.
How can you allow them to then go improve what they deliver from a customer experience standpoint, and give them the opportunity to to infuse things like AI into their into their workflows and be able to build in.
Enhancements that they couldn't otherwise do with the legacy promises systems, so as they recognize and see that being proven.
This industry is rather conservative in their decision, making so they always want to see others that have made the same decision and basically they usually comes down to Oh, well. If you can show me that you're doing it for them I'm sure you can do it for us and we do a lot of that a ton of what we sell the earlier question that came up about AI.
Those folks are moving forward with Fivenine and one of the primary reasons was they went and talk to the folks that are doing the pilots with us on the pie and that help them recognize that hot we want to do the same so it's a lot of.
Customer reference selling and proving proving out those factors that I just mentioned.
Great then a a quick follow up on the bought a press release you made.
Sales for SAP exchange.
How does the functionality differ from your sort of if I could call Lipton native bought a.
In your Fivenine environment versus box that maybe Ron and other environments like gap exchange.
Yeah, we don't have a native bought on our platform and so we partner with that Salesforce and really this is a connector what we announced as the connector. It's on the Salesforce App exchange.
That allows essentially.
Customers to build a bought using these the the Einstein bought framework and so we just basically made that really easy and really flexible so that a lot a lot of the challenge with boxes that very often customers want to escalate into a life conversation.
Very quickly with context, you kind of you ask a couple of simple questions and determined that the Vod isn't going to give you the answers and so this is really all about deeply integrating with CRM.
So that the experience can be totally seamless set the by doesn't have the answer you want you click wants to say you know escalate to a call you speak to an agent they've got all the context or even bring a live agent into the bought conversations said, it's all about that flexibility and deep deepening of our integrations with the CRM platforms.
Okay. Thank you.
Okay.
And your next question will come from Terry Tillman with Suntrust.
Yeah, Congrats on the quarter I just first wanted to ask about is the engagement. It seems like they're just going to be a natural interest for them to even one or more collaborate with your than they had in the past as you have your own enterprise traction. So anything you can quantify or qualify in terms of just ongoing increased engagement with highest needs, particularly on the CRM side.
Yeah are you.
Just to clarify are you talking about I asps are highest fees.
Hi, as the.
Yes partners correct. So yeah, we're seeing a great deal of interest as we open up our platform and make it more easy to integrate and publish our npis.
That's the enabler that allows them to integrate with us, but just the sheer interest as you mentioned is we're up market within enterprises. They have so many off they have so many back office systems.
And so many adjacent platforms that they obviously don't want to replace but that we want to leverage and integrate to us and we've made that easier and easier and so more of the companies are coming toward us.
And saying, great we want to integrate with you we have a whole whole process and the whole thing.
And that takes place.
Bringing their solutions they do the integration in most cases, and then we certify it and validated and jointly bring it to market. Some of those we resell some of those we just refer to the ice we partners and.
We're in the process of being able to build that out and build that program out and so look for some announcements in the near future about to a full marketplace for that.
So just a follow up question is on international it seems like it's a really exciting opportunity expectation wise as we look into 20 versus 21, how big can this ramp in 20 as opposed to thinking more about 21, Thank you and again congrats.
Thanks as far as the international footprint, Yeah, we're putting the pedal down and really expanding our footprint.
As Ron mentioned earlier, we've got the infrastructure in most geographies. So when you look at the voice Pops as well as the fold datacenter pairs and leveraging public cloud it gives us the ability to expand more rapidly.
We're focusing our efforts on certainly on Canada as well as European markets in Latin America, and we've got customers that are spanning the globe from.
Global customers that are large in nature, as we move up market and most of them have.
Global operations that require us to be present in most countries. So that's just part of our natural natural growth and evolution as a company.
Okay.
As a reminder that is star one if you would like to ask a question.
We will now go to Matt Vanvliet with Stifel.
Hi, Thanks for taking my question I guess first you referenced that a the knew how to channel is really driving some some impressive growth and has brought a whole new level professionalism I wonder if you could just dig in a little bit there and talk about.
How much focus is this going to be on the global size, where you've had some traction and talked about some good.
Good growth there versus reaching out into the more traditional channel. It was in the communications market, where you're seeing more in the the maybe mid market section.
Yeah. So great question, yes, the understand the leadership we brought in is incremental addition, we've been in the market with channels.
Those historically have been primarily vars and the traditional folks that bring.
Contact center solutions and communication solutions to market.
We are seeing that evolve and expand much more in the aside the global our size. If you look at the large folks there, they're often times being brought in by these large enterprises to help them with their digital transformation strategies and they're being told Hey go find cloud.
Cloud everything, including contact center, and a and so the size of really started to build true practices around.
Cloud contact center and they've leaned in heavily if you travel around to the Deloittes or he wise and you look at their experience centers and you say contact center, they're going to they're going to Peel back and show you Fivenine and Salesforce fully integrated together as there as their recommended offering so that's given us great traction they've also walked us into some of the largest enterprises.
That we talk about on these calls.
Sometimes those are brought to us by those those enterprises.
We're also seeing additional traction.
Because as Ron mentioned the background of the folks that we brought in from a leadership perspective have in some cases decades long relationships with a very prominent global distribution.
Some of those global distributors are hard to crack.
Knock on their door, which we've done for several years as a as a smaller company.
Go back for five years, you're not going on their door they might listen they might say, yeah, we'll sign up and she will keeping our back pocket for where we might need you on an opportunity but.
We're now seeing them lean forward and say Wow you guys are over at Fivenine Weve trusted you for 10 years with platform you used to sell us.
And there's a media trust level at an interest to want to bring fivenine into their portfolio. So stay tuned on that as were solidifying some of those partnerships.
And then looking at the you open port or the open platform and a lot more the shipyard devolved you've had it as you move more and more to the high end of the enterprise market in seeing larger deals how do you focus the development of.
Different integrations with major platforms between going as deep and broad within maybe salesforce as you can versus trying to cover their 10, 15 20 different CRM tools, where they tend to sit maybe more on the lower end. So we're just sort of the thinking about the balance between getting as deep as well.
Well on the big platforms versus expanding into two others.
Yeah, we actually taken SDK approach to those so to start out with we have created a CRM integration SDK, which makes it very very easy for us or others to integrate any CRM platform into our product and frankly, what we see up is that many customers, particularly in the.
To see space have their own sort of home grown build CRM products. So this isn't really we weren't able to we're not we don't have a strategy, whereas apparel wise integration with every single one of those so the STK approach really helps us to accelerate that where we've got all right guys. But then we build on top of those they'd guys really easy sort of fast.
Start for doing a CRM integration. We also have the same thing for you see so you can.
So you can integrate with any you see backend as well and so we're taking that approach to help our customers do that and I would say stay tuned for more on that we've got we'll be sharing more detail about about the platform.
And the the.
At our on November 12 net.
Yes.
Thank you.
And we will now go to Jeff Van Rhee with Craig Hallum.
Hey, guys. Thanks for taking my question I'll add my congratulations Im just a few quick ones for me I want to spend just a minute not competitive landscape specifically around that you see side.
If you look at the final stages of bake offs at this point what percent of the time do you see you see guys in there one and two when when it was you and just really kind of used to comment on when rates versus the core cloud guys Incontact Nice Genesis interactive.
Maybe can you give us some sense of how that's trended versus the you'd see guys when they do get to that finalist position.
Yeah, Great question, we really don't see that you see guys playing in the head to head.
Except on occasion with Ringcentral when they'll bring in contact usually because they've already been talking to in contact and then ring is at the table, but if you look at the other cabos.
They typically are playing in the mid market to commercial space.
As you get up market and Weve validated this with our customers and other prospects out there the buying cycles in the buying motions are different right you move up market and you have a line of business buyer that typically is making the decision for contact center and you have I T who's making a decision for you see.
And and those are certainly we need to run the Gotland with going through the security audits and.
Check all those boxes with it but it's not the driving force of the decision. It's the business. So so we see those decisions as often separated I know that you'll see guys I'll try to say, it's better bundled and it's better together and that's fine and convenient for the small market, but typically not the case at the high end.
Got it that's helpful and what about against the core cloud competitors any changes in one rate say even versus a year ago.
No, we're still exceeding the 75% plus a win rates against them and you.
We don't see that changing so yes or no.
Good and last one then just with respect to acquisitions, maybe just some color what you're seeing out there are areas of potential interest on likelihood of maybe more aggression on the acquisition front just just your thinking maybe an update there on the acquisition front.
Yeah. This is Ron I'll cover that we don't have anything to announce or give you we are.
We continue to look at it Jason So we've been really Flushing out our I would say.
Our.
Horizons looking at all the ways in which these larger enterprises.
Want to buy and what they're interested in buying in and around the contact center and what we've been I guess guided by is our largest enterprises, who is who essentially been coming up to us, saying, Hey could you would you offer this kind of technology with that kind of technologies. So we've been getting a lot more disciplined.
Now looking at the adjacent sees we obviously do sell today by the way a variety of other technologies as adjacent seems to ours. So so we're right now in that process. We're looking at you know and having conversations with our our bigger enterprise customers in seeing well are the things, we can do organically or potentially inorganically that would help them accelerate the move to the cloud.
So that would be the focus for us is about moving up spot market faster, helping larger and larger enterprises get onto the cloud faster and that also once they get onto the cloud what are the new things that they can do because that's the focus in the parties that we've heard from our largest enterprises as once they're on the cloud they really haven't appetite to do more and they have an appetite to do.
More with slide nine so it's a great opportunity for us.
Yeah got it great.
Thank you.
And we will now move to Catharine Trebnick with Dougherty.
Oh, Thanks for taking my question excellent corridor on you mentioned in the overview that 60% of the sales came through your ecosystem of partners. It seems like you have four or five different bucket partner segments, I wouldn't say and can you elaborate a little bit more on the advisory firm.
I was I think because that's where you're seeing this being digital transformation take place and where are you in working with them and how long does can you give us some.
Background on how long it takes to actually move a sale say there and then what would be obviously in larger enterprise, but average seat size than what you go through the actually land one true ended I advisory firm thing.
Sure. Thanks, Catherine this is Dan Yeah, you're right, we do categorize our ecosystem of partners into kind of five buckets. The CRM is that we've talked about when we work with the Salesforce Oracle or Microsoft service now and others, they're a great source because every contact center has you know the combination of a contact of a CRM and contact center.
Our infrastructure.
We also have set of technology partners, whether it's the googles and IB EMS and and parents and see a size and others that we work with it or fully integrated product some of which we even OEM and resell.
Those are great sources as well for access or I asked me partners that we alluded to earlier tend to bring us into a lot of opportunity.
Both within our base as well as incremental new opportunities than we ever master agents and resellers and referral partners and then the category that you mentioned, which is really the advisories or systems integrators. We've had partnerships there that stems back from about four years ago. When we started working with Deloitte.
And we really just did that to get started to see if they had an appetite and traction for cloud.
And the momentum is absolutely picked up and so not only this year did we doubled down on what we're doing with Deloitte and made sure that they're in the well over 10 million in revenue with us and growing but we've got or duplicating that same model that we saw work you got to them navigate and.
Move through the cycle with a company like that and figure out what works what doesn't work what they're interested in and so moving sales with them. If you think about it the deloittes any wise and Accentures typically don't put the the contract on their paper, they're in their advising and guiding and helping the customer with there.
With their strategy and getting their recommendation is so important because they want to move forward with project managing a big portion of that rollout and until we work hand in hand with them as far as the types of customers you know they shoot the move they bring us up market and then take us into larger and larger enterprises, because they work with some of the.
Global.
Global 2000 companies and typically it's the largest of the large.
All right. Thank you very much I appreciate the description.
And our next question will come from Jonathan Kees with somebody insights crew.
Great.
I'll add my kudos to the results of the quarter and also say thank you for the granularity on the soft guide for 2020 of them a lot of my peers a lot of your peers excuse me have punted that until Q4 terms of provides some of the details that you have very so what I wanted to ask we've just a little more granularity on.
On the results.
Even what could have driven the upside obviously enterprise was really strong and you also mentioned the.
The international.
And the new logos as well expansion.
Were there any particular verticals any particular interest used that stood out and out of the partner ecosystem.
It sounds like as size were.
Non performers during the quarter better than better than.
Expected or just more co like to have one other question in terms of your ecosystem.
Yeah, so great questions first I'll.
Looking at the industry's you you asked about which industries, we continue to see healthcare financial services education, and then retail and consumer products and I'll leave it that broad because it can I can run the gamut. It can be everything from you know foodservice delivery to technology.
I'd solutions.
To detailing so it covers everything.
This is typically a very horizontal solution that fits lots of different industries.
The key there is making sure that you have an adaptable product that can fit within their environments and integrate to their back office systems, which sometimes our industry specific so it's key to have our eyes and be able to.
To go in and integrate with those so we're continuing to see a lot of the modern.
Brands and you know the companies that are coming and growing very very quickly in new markets.
As this has allowed it to happen.
Help me with your next question you mentioned our size again.
Yeah. It sound like a essays may have a.
Performed better than expected you mentioned it in this call more so than some of the others or were there any particular partners channel partners that stood out for the quarter.
Going forward, yes, and yes, I community Deloitte continues to to increase the momentum and double down.
Both from our standpoint, there's.
We're getting a lot from E why from swallowed IB.
Accenture those are the key big size that we're working with and.
I've seen great traction and then we're also seeing traction just into in the reseller community. When you look at.
The avantas and and some of the newer ones that we've signed that that have potential to go to go very large we were not at liberty to to discuss publicly yet a couple of those.
Announcements so stay tuned on those but we should have those in the coming months.
If I may one last question about also your ecosystem Euro technology partners.
Obviously, there's been a lot talk about mark softened a bit attendance assumes a user conference and kudos to you at their up.
The key presentation on contracts and are you guys were going once you presented even those zoom hasn't weather contact Center partners I guess terms of the integration with their product or is this more of a is there's going to be a kind of like what you're doing with Microsoft for its going to require incremental R&D investment and are you also investing in essence them.
Within in terms of Oh, well they have a direct sales team. So are you more are going to be train their folks or is it just couldn't be yeah, just standard partner nothing special beyond that.
Very very special beyond that [laughter]. So great question in a great segue from what I was just completing which was the partners I failed to mention zoom absolutely a key go to market partner with us.
And it does require.
Yes, some very straightforward as rowan alluded to earlier.
Simple integration simple beaming, because we have built DST case to be able to do that.
Integration and when you think about integrating two you see partner in some cases companies don't need integration like we said its separate decisions. It's front office back office in some environments, it's very rare to have.
Calls or interactions moved from the contact center.
Out into the back office or vice versa and in other environments. They do want to have that integration and where they want integration. It gives us the luxury of having the ability for contact center agent to pull down as an example, active directory and see back office individuals that maybe on the you see platform like Tsum and be able to say Oh I see their availability.
No who they are I want to escalate this to a subject matter expert or an engineer because I'm not skills to be able to handle their question rather than scheduled them for call back. They can immediately bridge in a subject matter expert that may not be a contact center agents, but can answer their questions. So doing point and click four digit dialing some of the key Oh.
Thats of integration with you see is absolutely there were a we're in the process of working closely with their product teams to have that integration deliver to the market person.
And also their sales team.
And our sales team the integration and engagement is phenomenal. We've got the you know we've taken our whole sales organization, they're wholesales organization and done a mapping of.
Meters to leaders and and groups to groups and we've done cross training of their teams.
So that they know our products and we know their products and we've definitely for leading the way we closed deals already yeah. Thank you had been close yes.
Okay. Thank you.
You bet.
And we will now move to Mike Latimore with Northland capital markets.
Thanks, Great results.
Just on the channels. So more time in terms of the category, where theyre actively reselling you'd like what percent of bookings talking just coming through that.
Through the channel and how has that changed over the last year.
Thanks for the question, Mike I loved next question, because historically when you rolled trucks and delivered the servers and you implemented the solution the vars could add a ton of value to putting it on their paper.
Even with our reseller partners in many cases they prefer to.
Go ahead and have us put it on our paper. So when you look at how many sales come through the channel and through the reseller, it's not as great as it would otherwise be.
History and historic terms, however, having said that we do have resellers that are signing up and putting.
Increased quantities I'll say.
On their paper and doing it more of the traditional way, which is resell it.
Now mind, you, we still have because it's our cloud it's our platform. We're doing 24 by seven monitoring we're still monitoring it in being able to do break fix directly for those end customers because of what I just mentioned, but we are seeing increased traction.
Both as they refer business as well as they resell them put on their paper and.
And we're starting to work with some of those global distribution distributors that will definitely do that at scale.
Yes.
Great and then just in terms of the.
You know customer interactions over the messaging channel.
You know husband growth rate of messaging kind of accelerated over the last year or there's been a pretty consistent growth rate.
I think it's been pretty consistent.
Messaging typically can be a and outreach and I won't say standalone, but it's a it's an application that may be used by the contact center and may be used also by folks outside the contact center. So most folks tend to to put that in as more of a point solution. Now. This is some folks offer it and we partner and offer it through a through.
One of our I asked me partners that does the messaging for us, but in most cases, the customers don't need or look for that to be fully integrated to the to the court.
Okay. Thanks.
Yes.
With no further questions in the queue I'd like to turn the call back over to management for closing remarks.
Great well, thanks to all of you for your great questions and for listening to our call today. Thanks to the management leadership team I'm I'm thrilled with a strong third quarter performance. We have here at five nine we're making excellent progress on our strategic priorities. That's been led by our increase investments you've seen us, making our product innovation and I go to market engines.
Weve really added some incredible talent to our team. So we've got now a fantastic fantastic leadership team and at an extended leadership team as we bring in that time, we shared that with Youve previously so there's tremendous opportunity for five nine here and we look forward to sharing our ongoing progress at our analyst day in New York City next week on.
November 12, we'll see you all there thank you.
Once again that does conclude our call for today. Thank you for your participation you may now disconnect.