Q4 2019 Earnings Call
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Good afternoon, ladies and gentlemen, thank you for standing by welcome to life persons fourth quarter 2019 results Conference call. My name is in and I will be your conference operator today at this time, all participants Arnie listen only mode. After their prepared remarks, the management from life person will conduct a question answer session.
And conference call participants will be given instructions at that time.
As a reminder, this conference call is being recorded I.
I would now like to turn the conference over to Mr., Matthew Kempler, The Companys Senior Vice President of Investor Relations and planning. Please go ahead Sir.
Thank you very much in joining me on the call today is Robert Locascio, Livepersons, founder and CEO and creates Greiner, our chief Financial Officer and Young Collins. Please note that during today's call will make forward looking statements, which our predictions projections or other statements about future results. These statements are based on our current expectations and assumptions attitude.
Okay and are subject to risks and uncertainties actual results may differ materially due to various factors, including those described in today's earnings press release in a comments made during this conference call any 10-K's 10-Q's and other reports we file from time to time of the FCC.
We assume no obligation to update any forward looking statements also during this call we will discuss certain non-GAAP financial measures a reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release.
This press release and supplemental slides, which include highlights of the quarter or available Investor Relations section of life persons website with that I will turn call over Iraq.
Thanks, Matt. Thank you for joining why persons Q4 2019 earnings call.
The fourth quarter, Mark yet another milestone to fly purchase onstream create a new industry.
On conversational commerce.
After a year that demonstrate inflecting customer demand a market leadership, one year ago, we set a target of why person hitting 20% organic growth.
We delivered on that goal in Q4.
Sorry, six percentage points and 14% growth.
2018, we signed five seven figure deals in the fourth quarter and 24.
For the entirety of 2019.
167% increase over 2018.
Annual contract value assigned in 2019 grew by nearly 60% year over year.
Within enterprise alone the Dol weighted average term was 31 month, a testament to the increasing strategic nature, our offerings in our growing backlog.
We invested in the sales and product momentum need to reaffirm our goal of generating at least 20% growth in 2020, but continued acceleration towards at least 25% growth.
In 2021.
Among the many wins, we haven't Q4, our success in opening up the healthcare vertical warrants a call out we signed new contracts with a fortune 500 global Biopharma companies.
On the top five U.S. health insurance provider, the former seeking improved consumer experience and enhance aegion efficiency by replacing a legacy chat vendor with messaging powered over the web and Facebook.
The latter is leaving street to automation leveraging Liveengage live intent dashboards to create a highly highly scalable autonomous consumer engagement 2019, we set our sights on health care as a key new vertical I'm thrilled with a promising start.
Another vertical we are targeting 2019 was travel and I'm pleased to report and in years seven figure expansion the top five global airline.
This leading brand is on the path to become a true conversational airline they will deploy our full suite of AI offerings, including conversational builder.
Moving to page in the says enliven 10 analytics with the aim to provide a differentiated high inexperienced eliminate tens of millions a phone call broken web experiences.
Our core verticals also continue their strong traction in fourth quarter as we had.
The new wins expansions in telco.
Financial services retail and technology.
Strong demand exemplified success of our mission with Liveengage over the past few years during that time, we've increased the white space in our platform, adding <unk> automation lessening endpoints use cases and care sales marketing and retail.
Frac and messaging, social and even integration into traditional email.
And we have obviously disrupted the voice contact center, approximately 300 or the world's leading brands now depend on liveengage to make messaging available as a preferred alternative to wasting time with one 800 calls email clicking around web sites and one way notifications.
Improving the lives of hundreds and millions of consumers in delivering a powerful pay back to our customers.
The strong momentum in delivering messaging as a new communication channel. We're now focused on driving the second leg of our strategy, which to make life easier for people on brands everywhere to a trusted conversational AI.
Consumers are increasingly demanding 24, seven high touch personalized expenses.
Good according to our Forrester study.
Less than one third of brands feel confident they can that they can respond to consumers in real time brands can keep solving these challenged by adding expensive inefficient labor with messaging, we give a brands the tools to create a superior customer experience with conversational AI bolt on top of messaging will help them complete the journey automating ATSC.
Well the millions of conversations they have with their customers each day.
The conversational space will transform the way consumers seek information and make purchases and disrupt disrupt traditional ecommerce website advertising content creation of course traditional contact centers.
We've been Liveperson is in the pole position to when this market.
We've invested purposely in this direction over the past three years now have a powerful portfolio of leading a high products that span consumer facing aegion assist spots and enterprise analytics better operationalize automation.
Use of enterprises, Midmarket small business customers deployed our conversational building a platform in 2019.
And began developing and deploying automation.
Many of these customers are also adding our agent assist offering in our life intent.
Offering as well.
This is impressive adoption for the first year of the platforms launch we will work with our customers go wider and deeper with AI in automation over the next several years.
Over the past year, we've been focusing on driving strong go to market in growth by have also kept an eye and what we can do to drive real scale and leverage on the bottom line.
Evangelize the largest companies in the wall that if they embraced the and conversational I business it will radically change their industry.
We want to lead the way with that vision and transforming our own company and internal operations.
There is an article for Mckenzie Global Institute that concludes that at least 40% of finance activities for instance, cash disbursements revenue management and general accounting in operation to be fully automated and that the CFO will learn how to manage processing and communication within a data democracy, but business information is available anytime.
We were for everybody.
We're really proud of liveperson be a leader in many areas over the past 20 years, especially what we're doing recently in the AI space I think you'll find that we're going to take a lead and transform the finance operations. The CFO role to being led by data scientists and engineers, who will use AI and machine learning algorithms put put the power of data predict.
Capabilities into the hands on all of our employees.
Last year, we brought on John Kong SVP of quantitative strategy to accelerate our internal use VI automation and predictive intelligence to create scalable systems to deliver our next phase of growth.
As a rare combination as a season data scientists business leader and entrepreneur with a strong background in finance and the financial service industry.
Most recently co founded pass those New York City base machine learning predictive intelligence company that creates machine learning algorithms used on large scale equity trading platforms.
He also previously regularly.
Financial firms that the New York stock exchange using predictive analytics and worked in leveraged finance at credit Suisse.
John has done a great work since joining us insight about John taking over as our next CFO and driving the vision. We have is using AI within our company to automate and drive growth and scale in operations.
I want to thank Chris for service over the past two years during its exciting time of Liveperson as well as you will be working alongside John during this transition.
And well in his new endeavors.
Thank you Chris.
We expect to allocate a portion of these efficiency gains to funding business innovations to expand our ongoing efforts in messaging conversation layout. For example in 2020, we're going to build a payment capability to handle commerce transactions within the messaging platforms through liveengage today, both consumer brands.
These challenges transacting with in the messaging platforms.
My first as a unique position to remove these obstacles made commerce seamless within messaging across all brands and across all endpoints.
Well, we're conversational commerce will dominate overall commerce. This present presents a significant opportunity for us we're going to allocate around 60 million of investment this year and the development of this payment platform and other conversational commerce related innovations.
In closing I wanted to generate two key points first.
Set out on a mission with Liveengage transform the way the people communicate with brands I believe we achieved that mission, bringing the power of messy and nearly 300, the world's leading brands in the processors, turning liveperson to 20% growth in the past over the past 24 months.
Second we are now executing on the next step of our strategy taking customers on the journey towards true conversational AI.
The market is showing a strong uptake for this offering we're focusing on our investments to raise the bar and what we deliver we believe that theres a massive opportunity for bands that emerge as leaders in the new conversational space.
And with that I will turn the call or Chris to provide an update on our operational and financial highlights Chris Thanks, Rob.
I want to Echo my strong alignment with the decision for Liveperson to take the next step in its journey.
By applying a provision for automation and AI to our internal corporate effort.
I personally recruited John last year with a view towards the next steps our company could take to leverage all the data process and analytics engines, we put in place the last two years.
John has expertise and strong track record of execution has enabled him to hit the ground running and making contributions injustice first several months I'm confident John will be another strong addition to the management team as CFO.
As you discuss our financial performance in more detail, it's helping to recall the two primary dimensions that underpins, our 2019 outlook and contributed to our increasing momentum throughout the year.
The first was an aggressive plan to increase investment in sales and engineering capacity.
In the second culprit, capitalizing on our robust opportunity pipeline to rapidly grow contract activity and accelerate revenue growth to 20% by the fourth quarter of 2019.
On both fronts, we executed extremely well and the punctuate the point, we delivered 20% growth in four different key segment measures of our business.
First total Liveperson revenue grew 20.3% year to year in the fourth quarter and is up 520 basis points sequentially.
Peeling back on that are B to B growth was also up 20%.
Up from 15% in the third quarter.
Further drilling into the BBB segment, our hosted services or software growth in the quarter was up 21% over last year.
Finally, our consumer segment once again delivered strong topline performance up 24% year to year.
With these headlines as the backdrop, let's dive deeper into the details that propelled our strong cap to the year.
Our enterprise and Midmarket ARPU hit another high watermark of $345000 and continued its trend of at least 20% growth for the seven consecutive quarter.
Revenue retention also held strong within our target range of 105% to 115%.
We once again healthy growth across our geographies in the fourth quarter with the us up 17% year year, and our international markets up 26%.
And as we discussed at our Investor day, we're expanding into emerging markets highlighted in four key with our new sales office and leadership team dedicated to Latin America.
As for our key verticals once again financial services Telecom and technology led the way each growing faster than 30% year over year.
From the platform usage perspective, 54% of enterprise customers are now and messaging and nearly 60% to messaging conversations rely on automation.
Contributing to these results throughout the year were very strong overall deal count.
Wins in 2019 increased 34% year over year fueled by 44% growth in new customers and 25% growth in existing customer wins.
We've also seen strong traction from our go to market and product investments.
In terms of sales capacity, we're exiting 2019 with 100 quota carriers, an increase of 100% from the 50, we had exiting 2018.
The distribution of quota carriers is approximately 55% enterprise and 45% Midmarket SMB.
More than 50% to these quota carriers had reached productivity at year end and we expect approximately 80% to be at productivity by mid year 2020, supporting our goal of continued growth acceleration in the second half of the year.
2019 also improved our ability to open up new large verticals like travel will be launched Delta spirit and the second top five airline in healthcare, where we signed a leading global pharma in the top five U.S. healthcare provider and in foodservice, we signed a meeting restaurant chain global hospitality provider.
Our highly tailored executive customer events continue to be a key asset and driving our success in fact that our most recent event in Dallas.
Seven of the eight presenting customers had never spoken before.
Impressively all of them started their conversational journeys a member of the audience Wunder bar events less than 12 months ago.
Regarding partnerships, we focused our efforts in 2019 on strengthening our channel in North America.
And signed deals the T. tech BMI and emerge although early.
Already commenced trading with these partners and even closed our first small joint deal with T. Tech validating the go to market strategy.
And finally, a few comments on product.
I personally invested wide across the platform in 2019, new solutions, new use cases, a new endpoint.
In 2020 will go deeper with these capabilities.
And there are already a few standouts worth mentioning.
As Rob discussed customers are rapidly embracing conversational AI.
And we now have nearly 300 customers using conversation builder.
Proactive messaging is also off to a strong start with more than a dozen customers already live and just the first quarter of its introduction.
Apple chat suggested seeing solid demand as well and we exited 2019 with more than 40 customers.
The conversations on Apple business chat had tripled since the launch of chat suggest a testament to the high click through rate to consumers and more customers adopting.
Moving on to profitability with strong financial controls in place the company delivered on its goal of generating renewed positive adjusted EBITDA in Q4.
Ended 2019 with $177 million cash and equivalents.
From a timing perspective free cash flow use at 32 million in the quarter was higher than anticipated due to strong contracting activity and billing execution in December we anticipate healthy collections in the first quarter to bring DSL back to historical levels.
These same forces also positively influence deferred revenue, which increased 61% year over year.
In terms of guidance, we enter 2020 with strong market demand and momentum in sales productivity in product adoption.
This backdrop, we're guiding for 2020 revenue growth of 20% to 22% positioning us to achieve our previously stated goals at least 20% growth in 2020.
We are guiding for the first quarter revenue growth of 17% to 18% and expect second quarter in the same range.
Similar to 2019, we expect steady growth acceleration in the second half of the year. The key driver this improvement will be increasing productivity of quota carriers, we hired in 2019.
We anticipate many of these reps to close their first opportunities late first quarter in into second quarter as their when stack up we would expect second half revenue growth to accelerate putting us at an exit rate that supports at least 25% growth in 2021.
As for profitability, we expect our internal focus on automation in AI to drive material efficiencies within liveperson, enabling fewer people to do more while providing critical business insight that even faster pace.
Tied to this initiative, we set a goal to meet our 2020 growth objectives, while maintaining essentially flat headcount year over year.
This in turn should drive material leverage in our core business.
In fact, we estimate that adjusted EBITDA for our core BBB and consumer segments will improve on a combined basis from negative $13 million in 2019 to now positive 13 million to $19 million in 2020.
As Rob discussed there are several new conversational commerce innovations such as payments that we think offer the potential to be meaningful catalyst.
Reallocating approximately 16 million to these innovations in 2020.
And on a combined basis. This brings our adjusted EBITDA guidance for 2022 range of minus three to positive 3 million.
Now, let me wrap up with a few final remarks first we entered 2019 with the right strategy at the right time.
Scaling sales capacity and increasing product velocity underpin our growth acceleration plan and we're executing with precision on both fronts.
Second we are now operating on a plan that will allow us to drive meaningful scale efficiencies in our core and drive higher profitability and cash flow, even while funding new business innovation.
And finally this is a great time to put John in the position of leadership that can turn our external expertise in automation Eni inward.
And we recruited and hired John myself I can attest that he's an exceptional multifaceted leader with domain expertise across numerous areas that intersect with the finance organizations mission and future vision.
For the personally thank Rob the board.
Senior management, and my finance and HR team for the opportunity to played a leadership role in the continued scaling extension of our great company.
Cited the partner with John to ensure is ramping a smooth and successful.
Once again, John Congratulations my friend.
Thank you, Chris and Hello to our shareholders analysts employees partners and customers I'm very grateful to Rob interest for the opportunity and for embracing division to deploy automation and machine learning to transform the finance organization and its impact on the business.
Considering liveperson size and near term market opportunities now as the optimal time to invest in the model driven processes that will enhance operational leverage and accelerate growth.
The CFO and finance organization or the center of a vastly of data that could be used in organized and useful information to reduce uncertainty and reveal opportunity.
Yes data scientists and engineers are rare sites in finance departments, and most data lives and disconnected enterprise systems were changing.
My team of data scientists and engineers has already deployed Automations and machine learning that are delivering meaningful ROI.
The main goals are to support decision, making under uncertainty and free capital and people from repetitive transactional tests in order to redeploy them on strategic and innovative opportunities.
These changes, we're making will accelerate the natural evolution of the finance function and maximize its effectiveness as a steward of company resources and a strategic partner in the creation of long term value.
I look forward to getting better acquainted with all of you in the coming weeks and months.
Thank you.
All right operator with that we'll turn it over to the audience for questions.
Ladies and gentlemen, if you like to ask a question you may do so by pressing star one on your telephone keypad, if you'd like to withdraw your question press, the pound or Kashi and the interest of time and to make sure that management can get to everyone. Please limit yourself to asking one main question and one follow up question. Thank you. Your first question Brian.
Some odd Simona from Jefferies Surmont.
Hi, good evening, Thanks for taking my questions, maybe Rob one question for you. So yes, there is a big investment being put onto the payment side. We've seen the question the collision of software and payments as with other vendors. So maybe if you could just expand on that a little bit how you're investing in the company's plans are you going to partner with a pay.
Payment processor, just give us a little bit more color I know, what the investments will be there and I have one follow up.
So.
What we see today is it's hundreds of millions of dollars are running around our platforms for the conversations take place on our platform and then usually the transaction takes place in newly a web form or some sort of web experience off of messaging. So as we analyzed did we see these hundreds of millions of dollars running through our platform and we think theres an opportunity to cry.
An opportunity to do a secure.
Payment within the platform and we'll work with other.
Providers to process the payment, but we're going to handle the the pure transactional element of that fewer conversational you why and then we're building all of the authentication services. We can do to factor office authentication with the consumers. So they can basically tokenize a credit card or debit.
Card will tokenize it and then it can be used across different messaging platforms, including enap in our customer on the lab, but but on the other messaging platforms and then will secure that and then they can invoke it and that brand can and voted in use and as a payment. So I think it's a it's a pretty big opportunity, it's hard to do conversational commerce without the commerce part.
And that's the part we're really attacking today, we did hire someone in the banking space.
Who is now leading up that group at the company. He joined US about four or five months ago and he is leading that effort and we have a now a key here of X banking people, who are leading the effort to build them the payments platform and from there, we'll see we'll start with payments and there's other services.
That we're looking at beyond that but that's where we'll start.
Okay. That's helpful and then Chris maybe one for you on the financial side.
The ones you guidance.
Revenue ticking down from 40 to one Q.
Can you maybe give us a little bit more color, how we should think about.
Hosted services business revenue and if that's part of it because that's what's driving the decline or is it professional services just trying to understand better maybe seasonality and what the cadence of that looks like and 2020.
Yes, Thanks, Matt good to talk to again be hosted services software should follow the growth of the overall company. So just as an underlying principle. The SKU of the first half revenue growth versus the second half revenue growth is actually consistent with our internal models that we've had dating back to our Investor day. So we think about.
The ramping of our Salesforce as I mentioned in his prepared remarks is about half of our quota carriers today. They are at full productivity that group is the group that drove you heard from Rob over 60% HBCD growth in the year 24, seven figure deals that they've been outstanding for US we expect to have about 80% of our quoted.
Barriers fully online.
In.
By the end of by midyear, so as they start to scale and reach productivity that will then layer on the growth in the second half, but in terms of be more immediate first quarter seasonally our gainshare business.
Had some peaks in the fourth quarter and tends to trend down in the first in we're seeing that play out just like we have in past years in this first quarter of 2020.
And our next question this line of city Pena Groggy from Mizuho City.
Thanks for taking my questions. So I just wanted to dig into your guidance or 25% growth for 2021, what's your expectation victim to date in terms of adding more self serve sources, including sales productivity Rudy or even increasing speed.
Sure.
We know now we know from our modeling that Dick sales capacity that we have going into 2020 and again when we expect them to reach productivity will put us at an exit profile on 2020 with the right momentum to achieve our longer term range of at least 25% growth.
Now this year, while we're able to maintain relatively flat head count that's not to imply that there won't be hiring in the sales ranks and there will be hiring in engineering ranks, it's simply that.
Through John's expertise and his team that is beginning to hire and bring onboard we'll be able to drive efficiencies in the middle layer of the company in the back office, if you will to be able to free up funding just as we've done throughout the year, but to do it in a way that doesn't allow us or doesnt not require us to take our overall head count.
All right and then the can invest when you talked about $16 million, how should we think about.
So the towards the year is it more than first half versus second half and then is that what do you need to for two payment are we should think about event for the next year.
So sort of Tinker with EBITDA going forward.
So it's a grows over time so the team that's building right now and there are there are people and that team as we speak.
The it'll give us a good chunk of the technology that we need to just go to market and then we'll see where we want to go from there it's going to be embedded in the Liveengage platform. So it's basically all of our thousands of brands can invoke it as a way to take payment on the platform. So it's not writing outside the platform today. So we're now.
Promoting it as like into an external consumer facing.
Payment.
Technology will be within the platform to start.
And our next question. This line of our John Mattio from William Blair Arjun.
Hi, guys. Thanks for taking my question.
Just wanted to maybe touch on the on the go to Mark emotional little bit it seems like the Salesforce is now fully built out.
But just curious as you're looking into 2020, what what are your prioritizing in terms of growth avenues, you know it seems like Theres theres plenty of opportunities available to you from opening the final it off in the pipeline to increasing endpoints, but I would just love to get your thoughts on maybe what you're most excited about what were the highest ROI is on a on a go to market.
Active.
So I think there is there's a few areas. One is we have some new verticals like the healthcare vertical we really want to get a couple of key plans in and we did towards the end of the year and so I think that vertical we'll be opening up we've got the travel vertical as we talked about delta, but there's a number other airlines now we've signed in the us.
And now globally, we're opening up as Chris mentioned South America. So we're seeing some nice pipe develop as many of you may know like Whatsapp in Brazil, and Mexico. These are the main channels and how people are communicating and brand. So we're bringing will kind of coming in under.
That front end in that market and then we've got a lot expansion opportunities within our base when it comes to our conversational AI platform. So as I want it as I was mentioning the real focus over the last 24 months was really about the channel of communication, which is messaging and really what we started to focus on.
At the ended the year is is how do we automate conversations upscale does what we found as if you hit 20 or 30% of voice calls get moved onto the Liveengage platform. We now need to automate a real scale. So thats a focus to expand our customers to get them. Our goal is always to get to like 80% of all customer Tom.
Tax are running.
Through our platform and they're going to have to the automated at some scale. So that that will be the focus from our product perspective, we'll see some changes in the marketing in the next couple of months of how we're positioning our conversational AI and even the the platform as a whole so so that'll be more AI conversational AI focused.
Got it that's very helpful. Thanks, and then on the payments real fast just wanted to maybe follow up what role do the endpoints play here like Apple and Google and Facebook and does this does the payment functionality that you're building out overlap with some of the functionality of at the end points already have incorporated into there.
Into their applications.
Yes hopes for the greatest accounts, we see is that they're all the endpoints have obviously a payment.
Platform, but not every consumer use it in the who have these devices nor is it cross device upset can't use Apple pay on an Android device and so forth and so on half the world is on Android the other half.
Please now 70% of wells on Android Thirtys on on iOS 50, 50 in the U.S., but so we found as it's just very tough for consumer and the brand to take a payment within messaging and most of time, what we do as we invoke a web experience so that to secure form.
Thats invoked it's called the PCI form it's it's encrypted have certain principles to it for security. It's a very cumbersome experience. So we just feel that in hearing from our customers, there's got to be away, where I'm, having the conversation I am showing product I've got service and I'm, just invoking which carton and so we also from a cash.
Tumor perspective see that they constantly have to put their card in every time, they do a transaction versus put it in once into the platform will tokenized and then they can use it over and over again without having to put the card and.
Ever again, so thats kind of what we're focused on on the payment side.
And our next question this line of Raimo Lenschow from Barclays Raimo.
Thanks, guys if someone to go beyond four IMO.
Thanks for taking my question so.
I wanted to start with us steel on this topic with the gaming spectrum. So I was wondering if you can talk a little bit more about the go to market motion then.
You should think about so is the ideal customer profile ought to maybe award to move that do you have probably sort of like.
Going to make the first one with the statements smartphone and also I know, it's only stages, but I was wondering if I can speak about the potentially SBLF limit to how you're thinking about pricing. This new functionality and how do you think about the upside Dsps conduct and then I'm in front of cushion for Chris.
Yes, I think it's a little early to go through all that I will say that.
On the go to market, we have thousands of brands and we're doing close to 60 million conversations a month on our platform. So there is a fair majority of those conversations are our commerce based.
And so we are going to the go to market is embedded in the platform make it available to our our customers to that invoke it in a transaction and then let the consumer than Tokenized their card and start there their payment of that process and then once again the cards Tokenize. Once and then we can the consumer can come back and use again at that brand.
Or other brands that are on Liveengage, So thats really going to start I don't really want to talk about the pricing of it or business follow yet I think later on in the year, we'll talk more as we as we do bring into market.
Towards the end of year will bring to market, we'll be testing it with some large.
Enterprise customers and then we'll we'll go from there.
Understood and not follow up question.
So just wanted to 16 million on June I know you mentioned that.
The the old on headcount do you expect to be around the same number and over the next year right, but you are trying to sort of like often use and leverage machine learning sort of like we'll make sure that you can invest in that I give us in terms of headcount.
The leverage some.
Some efficiencies this but can you breakdown as production at least a 16 million is too rich functions. We is it more skus investments are going to make or this is more you need to R&D.
Headcount to grow just just to for wind to function on just back from so any more color on that 15 minimum basis, yes.
I wanted to I think it's important first to highlight that we purposeful and breaking out our core b to b in consumer segments profitability versus the new innovations payments being obviously, a key area that did change in adjusted EBITDA year over year in the core is is very meaningful.
Just going from a negative 13 to a range of positive 13 deposit of 19, so at the midpoint almost 30 million dollar improvement year over year and as you highlight in your question our ability.
Because of the the extension of our vision from what was an external automation and now internal is allowing us to make exciting inroads not just in the office of DNA, which is obviously has been and we'll continue to be even more of a focus but there are many processes inside the enterprise today.
That impact sales that can free sales up.
Prioritized time, better I wouldn't want to give you definitely play precision as to how will free up and what functional areas, but it should not be thought of as just being generated by gionee will be wider than that.
And our next question is from line of Steve vendors from cubic Steve.
Hi, great. Thanks for taking the question and credit spent a great working with though.
I just want to kind of get a better sense of the deals that you're seeing in come in and I know that historically they've been more focused on the on the customer care side.
But wondering if there's any and mix there that's more.
More marketing driven.
Yes, I mean, we have now the proactive marketing capabilities in the platform. So we are starting to sign more and more customers around that so obviously, we will be heading into customer care and then fanning out as we said I think mid last year into the sales and marketing use cases, so we're starting to see a pickup.
In that in that product area.
Okay, Great and just quick follow up just want to better understand.
You guys think about the changes and the finance Oregon.
And how you think about that I mean, what are the.
And maybe a little bit early on this but just kind of wondering what are the core areas that you think you can change and what are the new processes that.
Could you put in place to top automate that.
Yes.
I wrote in my remarks.
A couple of things one is I think it's important that our company take a lead with our own platform envision around conversational AI in AI as a whole.
It's one thing we sell division to our customers, we implement them and they get these great results, but when you look at US I think we should be sort of the leading test case. The next step in the thinking there was if we look at DNA lines as a whole and finance fees are really the central areas, where a lot of data flows.
And so we were thinking.
The best leader for that today would be someone who has the data science background also a business background and is massive leverage we can get Justin that alone right now if we see some spend between 16 and 18% of our revenues on Gionee I think we could drive that one day down five 6% 9%.
It would be like World class, but when you look at what we can do automation and when I. When we bought John in one of the things. We told them is like if you can do this for us will product ties it run it on our platform and then we'll take it out and sell it because conversational business is not just about commerce with our customers. It's about also in terminal and.
And we use it now for like we have an HR bought here and we do have some stuff in finance very limited stuff, but.
I think of a company like our largest enterprise they probably spend between five and 700 million on DNA. We talk about these giant brands and I know what goes on there we talked to them. So we really want to use ourselves as a way to show the world that we can transform the way of business gets momentum and growth.
And also scale on the bottom line by bringing AI and machine learning and the conversational experience. So so thats why it's pretty exciting tab, John takeover and once that Chris has done a great job, it's not a something about Chris It's really about we have this vision of let's change and take leadership not to go on but I really believe you will see in the future that the.
And we'll change has many articles written about it now about how it should be a data centric place, but we're really taking a leadership position on on saying, we're going to put a leader who can drive that.
And our next question. This line of Ryan Macdonald from Needham and company Brian.
Yeah. Good afternoon, I guess as you're looking at the pipeline and our also back at the improvements that you've made an ARPU. This year can you talk about the mix of benefit that you're seeing from one interaction volume increases, perhaps with the supportive AI versus expansion of the number of messaging endpoints that customers are adopting.
Hey, Ryan, it's Chris touched yet.
We don't report on that data externally, but let me maybe answered a different way if you think about where the deal volume was contributed this year by over a full year. So it's pretty good swath of execution on the opportunity pipeline our deal counts for the year as I mentioned was up 34% that about 44%.
We are from new customers and about 25% from existing customers, we talked about the CV.
Attached to those volumes being up over 60%.
So then that that's what you'd Peel out and say, okay. How much is from existing business growth versus new we are seeing or messaging volumes.
Continued to grow it continues to be a strategy of the go deeper with an endpoint or wider but what we've also seen we commented on in the past, but now that we have evidence over the automations that we're selling continue to grow we said we had over 300 customers on conversation builder. The ARPU is when our AI is present our two.
Why what the standard ARPU is so a lot of exciting.
Growth and execution the pipeline focused on leveraging our automation technologies and even more of our core AI.
Great. Thanks for that and then just in terms of the pacing cadence of sales and marketing investment as we look into 2020, what role is cut our customer segments going to play moving forward and obviously they've been a big we generator in the past should we start to see that moderate a little bit in 2020. Thanks.
Yes, I mean, we did have we're doing a fair amount of them in May 2019 was sort of hold the cadence when I can increase it right now some new markets like South America, we will but we have a very good I mean, it's like.
It is more than once a month now they are running we just did one in San Diego, while one coming up in New York, There's lot of in the month event. So I think we've got a good process going.
And where I don't think we need to add an accelerated because we got a lot happening. It would just I think dilute the quality of the ones we have now.
And our next question is line of Peter 11 from Evercore Peter.
Great. Thanks for taking my questions in a Chris as Lux first of all year is.
With the sales hiring the I think the goal was to kind of gets a number of concurrent deals that reps carry down see more of an industry average. So if you're looking at more of your senior reps as a benchmark and really I'm just trying to get a sense of the bundle is working how do you quantify the productivity of you newer reps meeting if you have a senior wrap with 20 deals to close a model.
It does that turn into two reps closing 10 deals or is it more more so distribution of the funnel.
Getting kind of disbursed across the <unk> of the Salesforce.
Sure a couple different forces and one very much linked to what you heard.
Rob speak to in terms of the evolution of the off to finance first.
We are.
More heavily scrutinizing, what's coming in the top of funnel and revolving how our sdrs, Kansas the market to where it's not as much just an emphasis on quantity, but it's also an emphasis on quality and that in turn should provide a filter to.
Last burden on the individual seller and just how many deals that were carrying you talked about our hunters carrying on average 15 opportunities concurrently we think thats far too many what John and his team will be able to bring is an even more granular data links to be able to route and.
Really curious what are the best field and John you can feel free to add any any more commentary on that but we're excited about with the data scientists can actually bring to the process.
Great and final call here is any updates on your conversations with our size.
Certainly the sense of what you're competencies and yourselves or ratios is the number of deals are getting larger.
And your sales or how to deliver on the last mile or at some point going to have to rely on as size to kind of get some of these deals I guess thanks.
Yes, I mean, we're we're starting to shift, especially in 2022 model, where there is other people doing the implementations in integration. So essentially we talk about P. Tech, which.
I've known the CEO for many years and we never really had a work together, but what we when we crafted does.
This partnership at the end of last year, and what we're seeing right now they're really trying to they have part of their business, obviously about technical implementation parties BPL, but that technical implementation group.
We're seeing some very good pipeline being built and other ones around the world. So some of the deals were thinking right now are about working with those as size and having them due to work because you're right. It's hard for us to add the capacity into the business I'd also like us to move more towards just focusing on the try.
Sounds action.
And that happened on our platform versus all the services around the platform.
Where we are technology company, that's where we're very strong.
Implementing and doing services, it's we have to do it but I think it's better if we build an ecosystem around ourselves. So 2020 will be more aggressive about that plus we have a lot of learnings from 19 and 18 that now we know how to sort of operationalized messaging and do that we can pass that to a partner.
And our next question. This line of Sterling Auty from JP Morgan Sterling.
Hey, guys. This is cylon for Sterling Ah. Thank you for taking my question. So customers that have gone live in the conversation commerce and the Buster I'll be seeing a a big getting bigger in terms of the revenue opportunity.
And then on the Cline summits.
Going to be headed anymore summits in twentytwenty.
Yet to be clear and he site.
Rob answered before that we're going to hold our customers. Some it's roughly flat 2020 to 2019 in 2018 was a pretty hefty increase year over year.
We do see their customers that we've signed get bigger with us that comes in two different ways. Those had signed and initially onboard with us through a pilot program. We've seen nice success in scaling them from pilot.
To full launch and as customers are starting to see volumes growing the messaging platform and the value proposition whether its cost savings ROI in the contact center there see sat scores higher sales conversion. It's compelling then to add new endpoints or if you will open up the spigot for how much volume gets diverted away from.
Placed into messaging so.
We are seeing growth from new customers.
Thank you.
And our next question is one of Richard Baldry from Roth Capital Richard.
Thanks.
They talk about the difference in growth between the U.S. up 17% International 26 is it really feel like in the school 20.
The catch up of the U.S. growth rate because that really what you're counting on to get up to 25% growth exiting the year or do you think both will accelerate some degree.
There are some structural delta between the two for example could the rollout of Rcs in the us over the next year or two.
Bring that growth rate up sort of on a natural demand increasing basis. Thanks.
Hey, Rich I don't believe it will be driven by Rcs, we're optimistic but it's we're not counting on it.
You asked has many businesses.
Inside of it what we're really excited about we've commented in several causes the enterprise business within North America continues to grow at very high rate right materially higher than the overall company.
And the pipeline that we have in North America. The talent that we have in North America. The marketing programs that are attached and enable the those sellers were optimistic that that should continue on a really exciting rate and pays the consumer business in the segment of consumer is also largely inside of you asset that had a slightly slower growth profile, we take it.
Gross should think of is growing equal with the overall company in 2020 International we are really happy with the performance of Asia Pacific It's still a.
It said, it's a young market for us were largely penetrated mostly in Australia, and Japan, but we're optimistic about the growth prospects that are there over the longer term in Asia Pacific.
And.
Just last one of the receivables kind of stepped up in the quarter fairly substantially is there anything to better understand that and what the trend should be starting the year throughout 2020. Thanks.
No I think we anticipate dsos to return to regular levels in the first quarter. In fact, if you look at the aging of our customers. It's better today than it was a year ago. So just a really good job in contracting activity in billings execution in the quarter.
And our next question is one of Jeff Van Rhee from Craig Hallum, Jeff.
Thank you.
So Rob maybe you talked to start with you if I take a longer term view you've outlined the 50 billion dollar Tam and a substantial lead over your peers, given what you're bringing to market now given the limited resources as a company.
You've got to make a decision between incremental sales capacity or incremental products, given the 50 billion Tam and the leadership position I'm curious the decision to front burner, new product development back burner.
Sales capacity, which seemed like it had been the priority just walk me through how you've we'd those two.
Yes, it's still if you look at our overall spend is.
We still have a fair amount so let's say, it's 50 50, but it's when you look at the field as a whole and engineering group as a whole they're almost equal in headcount. So we are funding some new innovation on the product side. We are product led company. So sales can't sell air they have to sell something thats innovate.
Live and unique and so we always have to maintain our leadership on the product side and once can we gave a little color about some of the areas of looking like payments.
I mean, the field, we added a lot of capacity last year and so.
We are now we added a market in South America. So we just want that capacity to really start to hit.
And then we'll add more throughout the year, but I don't see it is a terrible trade right now I think we just feel like we got to keep the product.
Always we know 20 steps ahead of competitors and we end the Tam is really big and we know there's a lot to fill out the product line, but I.
I don't think it's a real change from from the past.
The actually can last call. The the comment was that you are going to come into the latter part of year and do a real fullwood sort of deep dive on what happened in sales over the course year make some decisions about capacity additions.
As you went in and did that deep dive on sales I'm curious what you've learned what are you doing well what do you not doing well what did the cohort analysis.
Tell you about sales execution and I guess inherent in there is did they hit quota and plans for the year in the quarter, but but more importantly, what did you learn when you did that these jive, what's working what's not.
Hey, Jeff Chris I'll go ahead, and take that and certainly others can jump in as well.
We did have we didn't wait till the end of year to have learnings in fact during the year when the starting to really ramp investments. We began to look at in particular sales investments whether it was sdrs, whether it was our quota carriers, whether they be hunters and farmers, even our marketing and looking really at the are aligned so our strategy throughout the year evolve.
Does that data continued to come into key learnings to respond to your question was North America is a hot market for us.
We invest in first in late 2018 in the SDR profile in our hunters and farmers, there and Odyssey complemented their efforts with.
Marketing events and that strategy is paying off well and we've continued to put resources behind it and the talented leadership team is just exceptional.
In terms of other key learnings, we were able to validate that in our enterprise business, our quota carriers ramp to productivity in about 12 months you can shave.
Three four months off of that for the commercial business, but.
With that opened our eyes up too and that's another area of investment this year that we're making inside the overall spend profile. The company is aggressively on rethinking how training should be done in companies specifically of reps, but not only reps, making everybody in AI expert I needed. So that was a key learning for us that investment in training has.
Hi, ROI to it and we're going to getting better at how we.
Train all of our employees not just our sales reps.
And then on the on the SDR front. It was about the quantity of opportunities that were coming through and its bearing effect on the quota carrier and as we started to see the quality of leave their aging.
How quickly they are being taken onboard and progressed there were deals being left behind and we put in new lens on it John will be instrumental in this new team will be.
Many of quality layer of the opportunities that we're starting to chase. So that we don't have 20 or 15 on top of each had a need we go down to 10 or eight but there are deals that are able to be faster progressed, even faster disqualified that has the potential to shave a quarter off from the sales cycle when we do it well.
Okay.
And our next question is one of those that comes from B. Riley FBR SEC.
Yes, hi, good afternoon, Thanks for taking my question.
With the investments in the new payments capability is expected to be kind of spread out over the year can you provide a little more color around the current adjusted EBITDA guidance for Q1 is there any major estimates that are there are happening more so than I guess, what would be spread out through the rest of the year. Thanks.
Yes.
First quarter for US has some timing built into it sees a couple different forces that are in play in terms of the cadence and profit and how should be thought of over the course of the year. The first is we've got a lot of the heavy lifting of hiring behind us in 2019.
With that is the continued annualization of the salaries right. So thats present in the first quarter present in the second begins to fall off into in terms of Annualization, the third and certainly more fourth quarter.
In terms of.
Timing related items.
How we treat our vacation accruals here payroll taxes healthcare benefit costs, all those are quarter four key to one key dynamics.
That that tend to sales sales commissions.
The bonus payments things like that those are present in the first quarter that aren't as heavy in the fourth so they came to profit across the year will.
Be a loss in the first continued losses in the second and I know the get trend in turn positive by the fourth quarter.
Got it thank you.
And our next question is one of Mike Latimore from Northland Capital Mike.
Yeah. Thanks, Thanks, a lot on the.
CV up 60% was that sort of across the board meeting small mid enterprise or is that just mid enterprise.
The deal Count volume was driven by both nice healthy growth by both but the HCV was certainly more contributed on the enterprise side. If you think about the 24 seven figure deals that were signed in 2019, it's up 167% year over year. These are exciting transfer.
National deals being done with enterprises, but probably still scratched the surface of what we could take down in the future.
Okay and then on the.
Conversational AI strategy obviously.
Double ERP ARPU with that and Thats a focus.
What's the what are the kind of core elements of improving.
Attachment of conversation only I going forward is it.
Tailoring box to verticals or is it a sales strategy or what gets that attachment up.
Yes, so I mean.
We believe we built a.
Pretty major pieces of technology and year end, which is called lives intent.
Our intent analyzers. So we have the ability to process conversations. We're also taking we can take in conversations outside of messaging platforms could be emails things like that we're going to expand into picking voice calls in and that maps all the intense.
That are happening in the organization then we built models based on the data we have of matching those intends to use cases, so we can see that.
Certain certain conversations in the intense are matched to let's say paying a bill at a bank credit card payment. So we pre put that populate that and we're able to organize now we're about like 40, 50% of conversations we can debt down based on those pre packaged intense than the rest the customer has a tools.
As for say, Okay. This grouping of intense is related to something in the so something up the next step and when they build the automation in the conversations than they deploy the conversations of two conversation builder and then on on the actual platform where the agent console is that becomes a place that they actually improve the the automation because they're watching.
In a real time.
Actually performing and they can changes so the three major pieces to the conversational AI platform and the intent one was the last piece that we built and released.
At the ended the year, it's quite powerful we're using it here and we actually use adhere to optimize our keyword spend with Google and Facebook, So where we can look at the intends to come through in our company and then were looking what to do as Im actually trying to use it in the company now to look at all the intense that are happening in our company.
In employees and with our customers to map those intense and see where we can automate them. So that's it's a pretty major piece of technology that was built last year.
Okay. Thanks.
And our next question, there's a lot of bread knoblock from Berenberg capital markets Brent.
Hi, guys. Thanks for taking my question on Investor Day, you kind of broke out revenue contribution from large and mid and small customers I understood to their respective ARPU. So do you plan on also giving that information for 29 Jim.
If we do it will be part of another investor day, but it's not part of our plan as of right now.
Okay, and then on the last call you guys kind of talked about.
Sure.
Pull forward a lot of investments and kind of going to yes.
I guess sheet or step off the table and kind of digestion salvaging turned out and then this quarter you kind of announced another incremental 16 million investments or is this kind of thought process, where maybe the rest of the year like should we see another announcement of investments or you think this is really going to the bulk of it for the year.
Yes, I think.
Personally you're right.
On it but I think it's important to distinguish the difference between investments throughout 2019 second half in 2018 that were devoted to the core core being b to B and our consumer segment versus was for truly new innovations and as we talked about the core profitability year over year is.
Quite material and almost 30 million dollar improvement.
Whereas on the innovation side, we see based upon the activity that we can first hand witness across our platform that payments is an exciting in right opportunity.
That we should invest behind.
So I just think thats an important distinction that is what we have line of sight to right. Now I think we made a pretty clear commitment to holding head count flat yes.
[music].
We would've said that if we didn't need it right. So if we if you took the 16 now.
We would have head count going backwards and so we've added we're going to keep it flat.
And basically focus down on these.
These innovations I think you'll know we raised from capital.
Close to 200 million in 19, we believe that we can organically build and grow and that's why we brought by capital in we just we have good muscle on innovating and going to market and we're innovating places, where we can't buy a lot of stuff. So there.
There is no conversational AI payment platform out there today can't find it in the startup and the larger ones that are providing it thats why we see the gap. So we do want to stay focused on.
Filling the gap in the platform and in the market to to win this space This conversational space.
Our next question is one of Mark Shapiro from benchmark Mark.
Hi, Thank you for taking my question most of them have been answered just one though for you Chris.
And I've a question around the 25% revenue gross number that you expect in 2021 is just a little clarity around that do you expect that to average during or to averaged 25% during 2021 or just to exit the year of 20 to 21 with 25% revenue growth.
The latter.
And we'll obviously.
When we heard a lot closer to 2021 animal I think through the exact cadence on it but the point being is that.
What we invested in 2019, how we see 2020, playing out with high teens growth in the first half acceleration into 20, and then beyond will position US just like 2019 did for the right exit rate to achieve what we communicated our investor day of our long term model of at least 25%.
Thank you.
And our next question is fine of Koji Ikeda from Oppenheimer Koji.
Hey, Thanks, guys. Thanks for taking my questions and.
Chris It was great working with Yeah I'm just a question here on the competitive landscape Buda see messaging is really hot topic out. There are these days I guess, how would you categorize the competitive landscape right now maybe versus a year ago are you still seeing the same players are seeing anybody new out there any sort of color there would be helpful.
Yes, I mean, we're it's pretty much the same players the big contact centers software guys.
Our the major competitors that were out there.
So the competitive force hasn't changed that much over the last year, some not really too much change yet.
Okay, great. Okay, sorry, just making one clarification on on the 21, the 2020 when growth target the 25% is for the full year.
Okay, and then I guess just for Rob the follow up here, a big picture perspective, it sounds like the technologies in the right place sales capacity isn't the right place for 2020 sounds like the R&D is is where it needs to be Seattle, and and elsewhere and really the.
You just see messaging opportunity is really really profound out there I mean, I guess from real high level perspective.
What's what's keeping you up at night these days.
[laughter].
Good question.
Mike My greatest worry.
Is that.
We are operating in a space in the space, we call is conversational and I fundamentally believe it will be as big as search and social or any other space now.
I know, it's going to its going to assume things like E Commerce.
Bill will be see commerce conversational commerce will be the natural way in which consumers will buy so what keeps me up at night is I believe in five years from now.
And I also believe we also have in our minds already like we fundamentally believe right now we should be talking to machines, and saying I want to buy car machine says, okay, what kind of car and you go through a buying experience that that easy. So it's in its in the mind collective consciousness about I've got two.
As a leader and as a company shorten the timeframe to the five years, that's signing up enterprises Thats building consumer facing user experiences that's commerce and payments.
'cause this space, we know there's the biggest tech companies in the World are also after it so although we talk about the contact center companies were competing with today I've said. This many times you got Amazon Facebook, Google and Apple all in the game and we are providing the backend to them, but there will be a winner of the space and so for all the work we've done what keeps.
The up at night is just how quickly can we shortened the timeframe to the five years and can we deliver that so that's really what we're doing I really fundamentally type 2020 will be another big year for us.
Getting to that vision, and it's exciting and.
But I wish we could just get through it today that and then I just suite peacefully so.
And at this time I am showing that we have no further questions I'd like to turn it back to Robert Locascio for closing remarks.
I felt like I was a closing remark, but all of our.
And all of it so.
I'm very excited about what we did in 19, especially if you follow this for the last couple of years you went through this big transition and we came out of the box strong and then we hit our 20% goal in Q4 and now we're looking at in 2020, 125% and 2020, reaching that probably the ended the year.
The leading this transformation now we've talked about the second phase of our strategy. We very much we're focused on messaging as a channel we weren't even short people are going to use it we know now not only people use it they love it consumers and brands love It and now it's about how do we scale those conversations with conversational AI. Many of you know, we we hired Alex.
So from Alcs value from Amazon Alexa He's built a great team globally, especially on Seattle. So we've got this great talent here.
And then I.
I think as business is tremendous opportunity for us.
To change how we run as a company the best technology companies use their own technology to transform their company and I think it's important that we do the same and so look for us in 2020 to show the things that Liveengage and conversational AI in AI as a whole can do.
We all talk about how AI fundamentally is going to change the world and we have an opportunity as a company to not only sell that technology, but using internally and what's going on I'm excited about John being on board and the whole company. So.
Very excited for 2020 and thank you for all the support and we'll see you on the next call.
Ladies and gentlemen, we thank you once again for joining us for Liveperson fourth quarter 2019 results Conference call. This concludes scope when you may now disconnect.