Q1 2020 Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to the Vocera Communications Conference call. My name is Sean tell and I'll be your coordinator for today at this time all participants are in a listen only mode.
Ask a question during the session you need to press star one on your telephone you.
Please be advised that today's conference is being recorded I would now like to turn the presentation over to your host for todays call.
Duly Vocera Investor Relations. Please proceed.
Thank you and Hello, everyone welcome to both parents conference call to discuss our first quarter fiscal Twentytwenty earnings.
Joining me today are both parents CEO, Brent Lang and sensing sensor our CFO.
Earlier. This afternoon, we distributed a press release detailing our quarterly results.
He just posted on our web site at investors docking Sarah Dot Com and is often available from new from normal news sources.
This conference call is being webcast line on the Investor Relations page of our website a replay will be archived.
Before we begin our prepared remarks I'd like to take this opportunity to remind you that during the course of the call. We will make forward looking statements regarding projected operating results and anticipated market opportunities. Its forward looking information is subject to risks and uncertainties described in both parents filings with the FCC and actual results or event.
May differ materially.
Except as required by law, we undertake no obligation to update or revise these forward looking statements.
On this call will refer to both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP financial measures is provided in our posted earnings release.
With that I'd like to turn to call on going into grant.
Thank you good afternoon, everyone. Thank you for joining of older wells and getting body during these challenging going.
On today's call I'll start by summarizing the highlights from the first quarter.
Then I'll provide some commentary on the current market environment.
On the or rules and because it's going to them Denmark.
I will conclude our prepared remarks.
Do you feel when are we were responding to the crisis.
<unk> for our customers and internally as an organization.
Before turning the call over to Justin for more detailed financials.
Q1, with a strong quarter for us, especially in these challenging and uncertain times.
In this rapidly changing environment.
It's very difficult to make predictions about future results. So my comments today, we'll themes for body bouncing can or business from my standpoint today.
I'm extremely proud of our two quick response to the global crisis, and how we rushed to help our customers care for patients while keeping their team food.
We pivoted quickly from an internal operations standpoint, very rapidly and effectively transitioning to a work from home paradigm.
On the bookings front, we were selling usually very dynamic environment.
There were some bright spots, including a couple of million dollar deals.
Which is positive for any Q1.
And strong performance from our international and Central business.
Overall.
However, as the crisis going forward in March or wins were increasingly weighted towards urgent booking to serve hospital focused on preparations for coated.
Other than traditional pipeline development.
As a result, while we continue to have higher activity levels in the business. Even this week our business is less predictable than it was before the crisis.
For the quarter revenue grew a robust 15% to $41 million driven by our efforts to help customers expand and in some cases accelerate deployments of our solution to enable rapidly changing and demanding care environments.
If there's one thing we've taken away from Q1 is that our mission to transform communications and health care and ensure patients and staff safety has been reinforced by the challenges of the pandemic.
Since the beginning of the crisis, we've seen a surge in device revenue.
Which grew 38% in Q1 over a year ago.
This included increased demand for smart patches has been weak word feature drove higher interest levels, especially for its unique application for use thunder personal protective equipment or PD.
I'm proud of how our teams quickly and creatively delivered our message and solution to hospitals adapting their environment cooler.
In a push to serve hospitals that wanted to leverage our devices and software ifyou in isolation environment.
We accelerated shipments.
Issued temporary licenses and push to ramp our batch production in a supply constrained world.
We move to remote deployments when possible to ensure the safety of Churchey.
We honor we're honored that many hospitals are recognizing the unique contribution our solution can make to their efforts at this time.
Earlier this year, we talked about 2020 being the year of the nurse and how our mission revolves around serving leave heroes.
On April towards the front pages, the Raleigh, North Carolina needs, an observer feature to UN see nervous as the symbol of heroism involved in the fight against Corona virus.
If you look up this article you will see a powerful image of a nurse serving on the front lines of this war.
You'll also see she's wearing a black will serve as owners scrubs symbolizing our role in protecting care teams.
And caring for patients.
Safety is the heart of our mission and we believe the current prices only underscores our long term thesis.
Now I'd like to provide you with some more detail on our performance in Q1 before discussing what we're seeing in the market and given adjusted and opportunities to cover our financial results and our outlook for the rest of the year.
During Q1, we successfully closed two large enterprise deals amidst the colder disruptions.
We had a $1.1 million expansion for new construction at Williams, Oman Army Hospital.
And Kaiser Permanente, please and urgent $1.2 million coated related order to outfit their soco regions eight hospitals with hands for communication here to be used in their isolation room and IC view.
University of Virginia, and several VA hospitals placed urgent orders with us as well.
Internationally, we saw strong results in the middle East with key wins increase and the new Randy and we also delivered good growth in the United Kingdom fueled by several urgent orders to address the crisis is catalyzed summit new customer wins there.
Yes.
Despite these highlights overall bookings were below our original expectations at several hospitals in final deal pages began to focus only on responding to the outbreak.
In some instances that meant an urgent order for a more limited applications our solution.
These broader strategic deals has not gone away and conversations to close the reason we start as soon as possible.
In addition to the kinds of deployment I mentioned earlier redeployed urgent requests for our solution at several other customers. We also completed a number of previously planned deployments in Q1.
Including already medical center.
The risk of Chicago, and a large behave facility.
In addition, Nordstrom went live in a fulfillment center in Riverside, California.
A small but strategic expansion.
However, we did see and continue to see some delays of customer installations as hospitals are shifting their priorities as well as restricting access to their facilities.
As a result, expanding our remote deployment capabilities will be an important initiative as we continue into Q2.
This is one particularly dynamic aspect of our business in the near term.
Now I'd like to spend a moment describing the rule out solution is playing in these cobot environments.
Currently nurses and doctors say that they are war with an invisible enemy.
Comments like this when the front lines remind you the conversation I recently had with a friend who is an army Ranger.
He told me that as a young officers heading off to combat the most powerful tool at its disposal, which is radio and the ability to communicate with historically platoon.
It is way more important than any weapons system. He said.
Speaking about my friend story in what Im seeing and hearing from healthcare workers around the world. It has become clear that hands for communication is an essential part of PBD.
It will center badge were smart that does not just something that nurses can use with ERP.
We believe these wearable devices are part of the essential protective gear.
The care teams require.
Effective patient care demands, we apply and protect three important cumin senses touch site in here.
In hospitals this means globe goggles Anvil Sarah.
Soldiers would not go into battle with only to boost helmets and rifles. They require the radios to stay connected and safe and on the front lines of healthcare clinicians need access to PPD, including an effective communication solution.
Working under PV presents a real challenge.
Any care team member wearing PV caring for a patient in isolation and meetings to contact the team member given a very difficult position in most cases, they will have to lead the patients bedside go through an answer room removed their PPD and then go out and ask for health or pickup of from.
Every time members of the care team are meaningful replaced ERP, there's a risk of contamination.
Whether in a trios tent and the ifyou or an isolation room. Our solution provides access to a clear secure communication channel that his hands free underneath the PPD, increasing care team faci and improving the quality of patient care.
The global pandemic is highlighting the need to protect the people providing care.
While at the same time optimize inpatient throughput.
Without affected communication patients cannot be moved through the hospital.
Yes, with a highly infectious fires to simple active communicating using conventional tools can put care providers at risks.
There are big economic benefits as well using the therapy hands free solution, we can help preserve ERP by avoiding unnecessary removal and replacing extra trips in and out of the isolation group.
And the Wakeboard feature.
He is a striking new addition to our offering that is particularly relevant in this environment.
We are hearing from the front line that clean from between patients is a huge use of scares declines and take valuable time.
During the crisis companies are defined by how they respond to the challenge blends in terms of their interactions with customers and in terms of how they evolve their internal operations.
As a result, I'd like to take a moment to discuss our responses to the pandemic both in terms of our customers and our internal activities.
And our customer facing efforts, we are leading with urgency experience and innovation.
Our field team reacted quickly to request from customers for new and unique uses of our product for example, new coated specific care team roles in groups are being created with our software to extend care team to include temporary workers and even reach outside hospital walls.
Our solution was built for changing environments.
As flexible robust easy to use.
Just this week, we heard from our customer piece help people as they were able to extend our solution to temporary care team tense on their own.
They are using but fair to announce codes call for ventilators and convey important patient information without having to be face to face saving time and lives.
We now have a dedicated section of our website, including more than a doesn't use cases, describing specific workloads batch can enable you to covert environment, highlighting the robustness and flexibility of our solution.
To some of the specific ways, we supported our customers in Q1.
In response to inbound requests from existing customers. We distributed several thousand free served license keys for the use of our software related to covert environments. We hope to convert some of these to permanent paid licenses in the future.
We developed a coated response bundle of our core voice solution to rapidly to delivered to customers.
We quickly outfitted eight Kaiser hospitals in southern California, with both their gear to use in their isolation rooms and icees.
These are already up and running.
Based on inferred from customers, we created a temporary patient communication solution by attaching of a fair advantage to the patients bed in temporary hospital and in single room being converted to double room or otherwise there will be no access to a traditional nurse call system.
This solution massively simplified communication and preserve the valuable PD.
Additionally, it allows for care teams do remote rounding and even include a patient span the number in the three way call.
As we look urgently for our hospital customers in the face of coated it is equally important that we make the right internal decisions to effectively lead the company's through this crisis.
The third took an early leadership position by deciding to pull out of him to protect our employees and focus resources on supporting our customers.
Prior to and we have scheduled a robust set of meetings and we quickly transition as many of these sales development meetings as possible to virtual meeting in order to continue building the longer term pipeline for our business.
We also see the leadership role and transitioning to remote work ahead, a formal directive from the government.
Our migration to remote work has been nearly seamless and as a testament to our achieve preparedness disaster planning and strong culture.
We continue to lead by a virtual connections to employees worldwide with town halls, and regular initiatives to preserve our unique culture.
On the professional services front, our teams are acting quickly to accelerate our remote deployment capabilities when possible.
For the safety of our employees and to ensure patient care is uninterrupted early in the crisis, we successfully pivoted to remote service offerings for planning configuration installation and training of our solution.
Our services team can now complete mini deployment services off site.
As for our supply chain, we ramped up our manufacturing in both Mexico and Taiwan in order to meet the strong demand for the batch.
As we move into Q2. This remains a priority as we will react to the impacts of the pandemic on our suppliers and work to fulfill the strong demand from our customers.
As we move into Q2, our strategic initiatives for 2020 will continue in the context of coated.
The therapy sales and support teams around the globe are working to help our customers through this crisis by innovating, creating and delivering coated specific use cases and by providing the remote and onsite services and support they require.
In some instances this may mean, we completed bookings sooner than originally anticipated, but in the configuration that is smaller and specifically targeted to the immediate challenge of program.
Our priority is to address these immediate and pressing needs and we will revisit the opportunity for a more complete deployment of our solution. After the immediate crisis settled down.
We will also continue with deployments where possible and work to continue to make progress with our large deal pipeline.
Despite the elevated uncertainty I believe we're creating lasting goodwill and meaningful use cases that demonstrate compelling value over the longer.
I'm very proud of work of our teams and the impact our unique solution. We have had during this crisis.
We had a strong Q1, despite the challenges and uncertainty presented by this crisis.
With that I'd like to turn the call over to Justin.
Listen.
Thanks, Brent Hello, everyone I'd like to briefly review, our Q1 results before discussing our outlook.
We had a strong start to the year, beating both our first quarter revenue and profitability goals.
Total revenue in Q1 was $40.7 million up 15% over last year.
Product revenue, which includes both devices and software increased 27% to $17.9 million.
Device revenue of $13.9 million with robust up 38% versus last year.
And with driven in part by customer requests for badges in response to coated.
We were equally pleased to see a healthy increase in smart batch volume.
And we expect sales of this device to steadily grow overtime and complement our be 3000 patch.
Tougher revenue in the first quarter with $3.9 million, which was flat compared to last year.
Software revenue is typically the lowest during Q1, its bookings and software tied to new deployments, hence the increase as the year progresses.
Well, we delivered some additional paid software licenses for coated we were pleased to help.
Several customers quickly powerup their users on will Sarah by providing free temporary surge licenses.
As Brent mentioned earlier with even more badges and service and these surge licenses expiring in a few months once covance urgency subsides we.
We expect several customers to convert these to paint licenses.
Furthering longer term demand for our software.
Additionally, we continue to have healthy software backlog, which should help fuel our software revenue in the future.
Turning to as revenue was $22.8 million, which is comprised of software maintenance and professional services was up 7% on a combined basis.
Software maintenance revenue was up 10% and was driven by ongoing expansions and new deployments of our software as well as a high customer renewal rate on our existing maintenance contracts.
This consistent and recurring revenue stream continues to provide a strong foundation of growth and profitability for our business and reflects in large part the overall health of our installed base.
Our professional services revenue was down slightly compared to last year, because we had some customers, particularly new ones.
Just the timing of their deployments so they could focus their energy on responding to Colin.
We expect to see more events in the near term until this crisis subsides.
Despite some short term headwinds associated with scheduling new customer deployment and the associated deliberate software and hardware. We continue to have a very healthy combined level of backlog and deferred revenue.
At the end of Q1, our combined backlog and deferred revenue was $125 million up 5% versus Q1 last year.
This continues to be a key part of our revenue picture for the year.
Now I'd like to comment briefly on our profitability.
Adjusted EBITDA loss was $2 million.
Better than last year and are on expectations.
Our GAAP net loss for the quarter was $10.5 million also better than expectations.
Here are some color on our non-GAAP gross margins and operating expenses.
Non-GAAP gross margin in Q1 was 61% right, where we expected and followed our typical seasonal pattern for the first quarter.
Product margin decreased slightly compared to last year due mostly to a lower mix of software revenue in the quarter.
Our devices gross margin continues to be very healthy and consistent with historical levels.
Services margin improved year over year as a result, with a higher mix of software maintenance and support revenue and some adjustments we need in Q4 to further optimize our cost structure and professional services.
Non-GAAP operating expenses of $27.2 million were up 6% compared to last year.
As we and most other companies manage through this period, we are proactively managing our expenses, we've refocused on critical hiring and cut non essential discretionary expenses.
Most of our workforce is currently working from home following local government guideline.
As a result, our operating expenses will knock rail at the rate we previously anticipated.
To cap off my Q1 commentary weekend added to our cash balance ending at approximately $234 million.
Our balance sheet continues to provide a strong foundation for our business, especially at a time like this with both ample liquidity to weather near term market headwinds and capital to fuel our longer term.
Now I'd like to take a moment to describe some of the factors in play as we think about our outlook for the business.
We started the year on a strong noting Q1, despite some delays of implementation and end customer bookings due to the pandemic.
And we have continued to see strong product orders from existing customers in early Q2.
We also continue to how the solid amount of backlog and deferred revenue.
Which in normal times with convert at a predictable rate to adequately support our initial expectations for the year.
However, as mentioned earlier some customers have temporarily delayed their implementations they focus all of their resources on responding to the coding crisis.
Additionally, we believe the broader spending environment for hospitals will be very challenging in the near term.
As they experienced significant budget pressures and are distracted from longer term strategic initiatives in the faces this crisis.
We anticipate this will lead to some delays in purchasing decisions around our solution, particularly with some of our larger Newark, new customer prospects.
That said the majority of our revenue comes from existing customers.
In addition to the recurring revenue from software maintenance and supplies. Many existing customers are expanding vocera within their facilities to address new coated use cases.
Even in these uncertain times existing customers help providing strong foundation for our business.
The code in 19 crisis has already had and will likely continue to how the significant impact on our customers.
Putting a tightening of budget and redeployment of resources.
We are all now in a period of unprecedented uncertainties about a specific timeline for recovery.
After considering both the positive trends, you're seeing and the potential headwinds ahead for hospitals.
We've decided to move to our 2020 guidance sense extend our practice of current quarter guidance as it is difficult for us to adequately predict the impact of these offsetting factors on our business at this time.
For the reasons described earlier, our revenue and profitability will likely be lower than the original expected in 2020.
In the face of this we have already implemented expense management control to help mitigate the near term impact on our profitability.
Despite this period of uncertainty we are fully engaged to help our customers. During this crisis, which is reflected in our Q1 results Im confident that we are well positioned for growth once these headwinds subside.
Our recurring revenue and loyal customer base, along with a solid sales pipeline in healthy backlog and deferred revenue provides a strong foundation for growth.
Based on the urgent applications of our solution. We are seeing during this crisis and the clear need to prioritize carotene safety for the foreseeable future. We believe our solution will have magnified important from year to sign of coded 19.
I'll now turn to Dr. Brent.
Thanks, Justin.
It's early in the year and early in the timeframe to fully understand and predicts the impact of dependent and crisis.
There are lot of unknowns as we head into Q2 Q1, with a strong quarter for us and I'm confident in the promise of our market and our unique solution to drive our future success.
We remain assured that as we transition out of this unprecedented crisis, we will resume cadence of strong growth in fact, we're working with our customers to translate the learnings from this crisis. So we can apply them to increase the velocity of customer adoption of our solution.
Coated new normal paradigm.
Care team safety, a prioritized valley.
Meanwhile, I'm very grateful for the ever resilient business with a strong cash balance and demonstrated demand for our unique solutions that it's so relevant during this crisis.
I want to conclude by thanking the entire vocera team and by saying we value our relationship with the investment community.
Our whole team extends our best thoughts for use your teams and your family.
With that will conclude our formal remarks. Thank you for listening today, operator, we're ready to open up the lines for questions. Thank you very much.
As a reminder to ask the question you will need to press star one on your telephone to withdraw your question as to pound or Heskey. Please limit. Your question to one question to allow other participants time for questions.
Please stand by only compiled M&A roster.
Your first question comes from Sean Dodge with RBC capital markets. Your line is open.
Thanks.
Good afternoon.
Brian you mentioned bookings during the quarter shifted to more volume kind of an urgent order.
You can provide as opposed to some of the more traditional projects are installed that you'd be selling I think you touched on it a bit during your prepared remarks, but.
What is an urgent order look like compared to a more traditional when it sounds like it's a little bit more device heavy are there any other kind of hallmarks or or things worth mentioning I'd point out there.
Yes, Sean certainly will be more product oriented both device and in some cases software been heavy on on device less professional services.
Because there are typically existing customers and when I say urgency in many cases this was less than a 24 hour turnarounds.
The orders that were coming in one afternoon, and they were shipping out by the next morning, because hospital customers were desperate to try to set up.
Their environments for the sort of the patients that there was coming in and so in some cases.
The whole sales pipeline from identification of the need booking the order and shipping the order was those turning around in a very very short period of time as opposed to more of the to traditional sales pipeline development that we work on with some of the larger deals.
Okay. That's helpful. Thank you.
Your next question comes from Ryan Daniels with William Blair. Your line is open.
Yeah. Thanks for all the colors, thus far for everything you're doing to help the healthcare.
Let me ask a quick question, Bob implementations going forward it sounds like.
With the smart badges or heavy device or is that something probably ship out.
Thank you saw pretty quickly, but if we think of the core business in new accounts in particular, how much of that.
We do remotely.
We continue to.
Dr. implementations and start recognizing sales how.
Very good is that based on what declines.
Type of device and alarm management integration capabilities. Thanks.
Yes, good question, Ryan and I would say, it's evolving over time first I would want to highlight forever. One just to remind everyone that in a similar between 75, an 80% of our bookings and ultimately revenue comes from our installed base. So we've got a very heavy emphasis on installed base with with the combination of Maine.
And certainly we will put supplies business and then expansions of existing customers and in those environments. We can continue to serve those customers.
Without a whole lot of professional services either on site or off site as it relates to the new customers certainly the larger.
Projects.
A lot of the planning and implementation design can be done off site, even some of the training can be done off site. Some of these are hard to do on site would be things like the wireless site survey, where we're going around and measuring the wireless coverage throughout the facility to make sure Theres no coverage gaps.
And then certain kinds of integration, particularly if we're trying to do integration with other clinical system.
That oftentimes requires on site work.
And frankly it requires the time of the hospital clinicians to be able to define policies much of the value for example, within engage platform is creating rules for escalation and.
Understanding the clinical workflows that requires the attention in times of the clinicians and even if we were able to go on site. Those teams are so focused right now on on the responding to the crisis. They don't have a lot of bandwidth for doing more the company complex workloads. So what we've seen due to shifts to what I'm just.
Private simpler workflows really focused on delivering these urgent communication.
Needs and maybe less of the complexity associated with more of the complex.
The integration type of work.
Very helpful. Thank you.
Your next question comes from Jamie Stockton with Wells Fargo. Your line is open.
Hey, good evening. Thanks for taking my question I guess I'd love to just touch on the software line.
I think just incident has comments that Q on seasonally weak it was kind of flattish with last year.
There was a huge pickup as we count progress through the year last year.
I think just said you guys have a good backlog, obviously them by the environment very uncertain right now.
Is it is it reasonable for us to.
Still expect to the kind of a seasonal pick up the rest this year. Although I know you guys don't want to put an exact number around it.
Yes.
Hi, Jamie.
The software revenue picture continues to be quite solid we have.
First of all we had a really healthy software backlog as it is high as a separate them in the last few years and.
And.
In part by the strength of our of our bookings, particularly as we close the last.
The Q4 last year.
We have seen a few.
Some of these customers the breadth alluded to on delayed or implementations and that does have an effect on the timing of when that software can be shipped and delay.
But overall the underlying metrics.
Once.
Fixed at some point in the future when when things normalize a bit.
The software will be delivered maybe shift and will convert to revenue. The other thing we mentioned that in the near term we have really pleased and proud of how we've been able to step up and help our customers, particularly those customers that have needed to augment there there could have their current capacity real quickly in the provided.
Several thousand temporary software licenses in some of those we believe based on our history will will convert we don't know exactly how many are what percentage, but some of them will likely convert to pay licenses. So.
Once once we do get back into a normal cadence will see the software.
Backlog convert to convert to revenue and that will continue to fuel the growth of that part of our business over the long term.
Okay. Thank you.
Your next question comes from Matt Hewitt with Craig Hallum Capital. Your line is open.
Good afternoon, and thanks for taking the questions.
I guess.
Look at that the situation are you seeing from your hospital customers that there's I don't want to see.
Well, maybe at a reluctance to adopt new technology, where.
Historically, they might be a candidate to acquire the smart batch, but given the current situation. They just need batches, so you're likely to see at least over the near term more adoption or more reordering of that these 3000 ends versus our customer that maybe you had already pegged or they've even signed a contract for the smart batch maybe they come back for that later.
Right now they just need that the technology that they are nurses and doctors are comfortable using.
Hey, Matt the spreads we're actually seeing strong demand for both.
And I think frankly, there they're very comfortable if there is they're happy with the these men are placing more orders for the 3000 ends in some cases, you're seeing real value in some of the functionality of the smart badge, particularly the wake word and for those who are looking to make batch purchases and sort of headed down the Mike.
Ration path there they're comfortable moving.
To the new migration and we've definitely seen more robustness with custom existing customers, but I will also tell you we've seen instances, where there might have been a deal. It was talking about what the customer that's a year old or more and.
To customer got together to figure out how they can respond to crisis and it's actually accelerated the deal that may have been stale or stalled out and that actually resulted in in several new customer wins for us in the quarter as well. So I don't think I would characterize it is just people keeping with the sale Tanal I think we've seen a mixture.
Both.
Great. Thank you.
Your next question comes from.
Dave in Delhi with Jefferies. Your line is open.
Hi, Thanks for taking my questions and good afternoon, good to hear healthy voices on the other end of the line.
I wanted to get a little bit more clarity on gross margin in.
Thank you basically answered it but but if you could clarify.
The is the composition of your product revenue I think just talked about lower software.
Was it also.
A bias toward the 3000 batch in the quarter or was there also some tech resale in there that pulled the gross from product gross margin down year over year, just wanted to it to kind of get into the composition of product around a little bit more please.
Sure Hi, Dave.
The product revenues comprised of our device revenue in our software revenue.
The majority of art of our device revenue income from the B 2000, and although as you mentioned, we're starting to see more uptake of the TARP ads, which is really encouraging.
Our overall margins if we look at the individual components.
Or.
Device margins and software margins independently they were very healthy.
The dynamic we facing product margin in the quarter, let's just simply the higher mix or proportion of revenue.
From from devices versus software that happens quite frequently the headquarters that moves up and down based on that relative mix in other quarters, we've had product margin deal or higher because the software as a higher proportion as revenue and that'll that'll continue so there is nothing fundamentally.
Challenging with with the overall.
Health of our of our product margins be it as well devices and software.
Understood. Thank you.
Your next question comes from Sean why rental Piper Sandler Your line is open.
Thank you so I thought your ear comments around the designation of of the Vocera as a critical part of PE was pretty interesting and that.
90 days ago, I didn't know what ERP said poor, but now obviously and we're all in we stockpiling at once this is this pandemic has over so my question is.
Like how does this change this strike strategic importance of Vocera. If it is seen as part of PPD as they're probably going to think about how do they prepare for the next wave of a pandemics.
As shown in spreads I think it absolutely increases relative importance of it we are putting a heavy push on right now not just at the individual hospitals, but within.
Local state and federal government agencies about the significance of communications as it relates to PD.
We're talking to some other key decision makers across those different agencies and.
Listen to the workflows and listening to challenges from the front lines communication is one of the top concerns that they have and the amount of wasted PPD, that's being thrown away just because they had to go outside the room to ask a question are you get access to.
Some information on the phone or something that we can eliminate by bringing that communication inside the room with them and making that entirely hands free is I think a game changer and and I was just talking to some of our sales are up this morning, and they were highlighting for me that.
Customers that didnt nearly fully appreciate the value of hands free.
And in some cases here, we are working on RFP, where they asked us to only closed the smart that covers our smartphone sorry smartphone version of our solution. They now coming back to the table, saying you know that hands free capability sounds pretty interesting and pretty important right now so.
I think not only going to see more interesting hands free but we're also rising up into the must have category for a lot of these purchases seasons as they recognized just how important communication is in this crisis environment.
Thats great. Thank you.
Your next question comes from Matthew Gilmore with Baird. Your line is open.
Hey, Thanks for the question.
I was hoping you could expand on some of the supply comments you made with respect to the badges. Steve do you feel confident that you have all the pieces in place to keep up with the demands or are there pressure points that may cause delays that we should be considering.
Yes, Hey, Matt it so it's definitely a very dynamic situation I think the fact that has a coated prices hit.
Asia first created further challenges, we don't have any manufacturing directly in China, but we obviously rely on raw materials that come out of China that go into the finished goods manufacturing's occurrence for us in Taiwan in Mexico and so.
We did see some delays coming out of China for example, plastics or displays are seeing some some sub component parts.
We were able to manage through that during the quarter and.
We're able to meet the needs of our customers and then obviously on the supply side, we've seen kind of unprecedented demand.
Sure I haven't demand side, we've seen an unprecedented demand.
The increase in demand for the badges and so.
We were managing through its it's something we're watching very closely.
We're trying to build up excess inventory to be able to respond to any coming waves or additional surges might come in the future.
There's always going to be risk there we're happy that.
Our main manufacturing locations are in Taiwan in Mexico, and we've avoided some of the.
Higher risk environments.
And we feel pretty comfortable about the way things sit right now, but obviously there there's going to be risk there in this unusual environment, even simple things like.
Getting air shipments out of Asia. There has been delays in the amount of time it takes for shipment to get tiers of the last theres a backlog in at customer sites, it's taking longer than usual.
For the most part we've got things under control and we're comfortable go forward, so hard to predict what else might happen, but for right now we're feeling pretty good.
Got it thanks very much.
Your next question comes from X gene Mannheimer with Dougherty and company. Your line is open.
Thank you hey, congrats on the quarter under the circumstances, Brent and Justin.
Hey, this the second half of March when normally you would would be them most active part of the quarter or the month and I understand you saw surgeon in batch demand owing to the co related orders, but where was the inflection point in the quarter in which you saw that shift from your normal.
Cadence of bookings and implementations to the more emerge in response to the crisis.
Yes, I'd say within the last two three weeks for the quarter Jane.
That's one thing is really started heating up and it was a story of puts and takes right I mean on one hand, we had.
Customers, who said what I'm I'm, just overwhelmed right now preparing.
For the surge, we're dealing with the surge and they wanted to put some of the purchase decisions in some of the deployments on hold and then at the same time, we had this wave of of urgent orders coming in where they needed product very very quickly and so.
We had to pivot the business is very very rapidly because the dynamics of what we're dealing with is very different from what we experienced in a normal.
Last couple weeks ago quarter, Tom and that kind of continued into the early part of Q2.
Well, we've continued to see.
A strong demand for these urgent shipments and product orders.
While at the same timing some of the longer term strategic deals are being kind of put on hold for the time being until they can get the situation under control.
Say the last kind of two to three weeks of Q1 and flowing into Q2.
Alright makes it makes sense thanks Brent.
And if I heard you correctly the mix of those customers one of the ones who.
We're not shy about ordering damages right away were tend to be existing clients.
And some of those new were bigger implement.
Projects tended to be more of those pushing out is that the way to characterize it.
Yes, I think thats there I mean, we were laughing internally that we've been we've been talking about this migration from the smaller departmental deals to the large enterprise deals with long sales cycles and also to complexity and.
No in the space of about three weeks, we pivoted right back to where we used to sell smaller deals very urgent turnaround.
Solving very specific use cases and proof points and these larger deals are not going away I think the conversations that are sales reps are having with.
Strategic customer accounts, we're working our way through the pipeline remain really positive and all indications we're getting from those customers is that those deals are still going to happen, but the timeframe is just going to be somewhat subject to what happened with the the the crisis and currently dealing.
That makes sense, thanks, and Justin just last one from me in terms of how to how is your recurring revenue per cent.
Evolved over the last 12 to 24 months or so would you say its stayed roughly about the same with the increase in device revenue or is it isn't moving higher as a percent. Thank you.
Over a multiyear period its bet it definitely trended up higher but it's also relatively.
Relatively stable and was in Q1. So you had a recurring revenue, which is mainly made up of our.
Tougher maintenance and support revenue in our suppliers performed a really solid late in Q1 and again that comes from largely existing customers.
Right.
Thank you.
Your next question comes from Vikram tenths of a boat.
With Guggenheim Securities. Your line is open.
Yeah, Hey, thanks for taking the question if I look back last year, you guys made a lot of changes your salesforce. Both in terms of the size of the team, but also that transition towards the strategic accounts I'm curious if the current environment that any impact on your broader approach to managing sales effort overall, both from near term perspective, but also longer term as you think about getting ready for more.
Normalized purchasing environment.
Cater come yet I would say than we are continuing down that path. We feel really good about the progress we've made there and a lot of the strategic hires we've made over the last nine to 12 months.
Our are getting more and more settled into their new jobs and two more coupled with the product line and building their pipeline.
When we added a few more in Q1 and there's a couple additional spots that remain open that we're continuing to hire for attractively.
As Justin mentioned.
Focus on cost.
The hiring of these open sales positions is not one area that we've tried to cut any cost out we want to be aggressive there and continue invest bringing on.
Really high quality high caliber enterprise salespeople.
Because we think thats still the direction businesses going over the longer term and.
We're almost done with this with his transition and feeling really good about the progress we've made.
Great. Thank you.
Your next question comes from Stephanie Davis Demko will.
[laughter] SP Leerink your line is open.
Hey, guys. Thank you for taking my question.
Could you give an update them at all business.
Just on Pakistan in light of mineral that comes along for the IC platform migration project that we did have a big and tall contract.
Our federal business has been really strong we had a particularly strong Q1 in the said both with the Beaumont order, which was obviously on the army size of the side of things.
All from da orders and.
I think the VA is is one of the customer bases that truly understands the value of our solution.
They are in a very very difficult situation I don't know how much you've read but the patient populations that the VA hospitals are dealing with.
Our particularly affected as are the caregivers and.
So the demand coming out of those environments has continued to be.
As a strong demand and we feel fortunate and were able to help with those environments and our expectation is that are fed business will continue to be strong for the remainder view.
Hi, I'm glad you guys. It out and then add one follow up on that the prior southwest question.
Just on given you've had this recent sales rise transition to enterprise sales and now we're pivoting a back for the near term gets smaller departmental sales.
How are you varying some of that training.
And to put that in context, why doesn't mix of new versus legacy spoke tying a healthy.
Well the tenure of our sales force is still quite long.
And we did the swap outs.
As a fairly targeted approach and we talked about being roughly a third of the salesforce that the targeted to up level to this this greater capability over the last call. It 12 18 months.
So the vast majority and team is quite tenured and I think our sale tenure is still measured in year four to five years as opposed to having a ton of new people and.
Those people have the ability to sell near term deal, we'll just as well as they could sell longer term deals I think that in this dynamic changing environment their ability to navigate these complex organizations.
In a real positive and.
The whole team is really coming together very very tight manner.
We've actually had some innovation going on in the field where.
Customers would ask is impossible to do X y or Z and the field working with our professional services team and our implementation team, bringing it back to product management and working with engineering, we've had some really exciting.
Exciting.
New product development around that particularly the patient communication piece that I mentioned earlier in my prepared remarks.
So I would say that the teams are functioning really well and you.
Well positions in future.
Okay. Thank you for taking my question.
Yes.
Again, if you would like to ask a question. Please press star one on your telephone please limit yourself to one question to allow other participants time for questions. Your next question comes from Matt Hewitt with Craig Hallum Capital. Your line is open.
Hi, Thanks for the follow up I'm, just curious Brent I think you touched on this but has the virus.
And the reaction by hospitals.
Has that opened up any opportunities from you from the Tech side I think you mentioned an area that you'd like to more kind of little bit more is on the remote remote deployments, but from a technology standpoint are you seeing any whether its holes or gaps or areas that you could.
Bolster the smart beds in the software in particular to help you for that second way, where third wave as they're talking about it.
Yes, so it's a good question.
Obviously, the most obvious thing here is the hands free capability and I think there's a new appreciation for how important hands free is and wait for that even goes beyond just hands free while you're in a conversation to be able to start a conversation by issuing the hay. Those here command has been something it's really interesting.
Second element I would point to is indeed alternative care facilities, where there literally setting up beds in some cases in convention centers or in sports facilities or.
Practice fields or warehouses.
Those environments are not wired for traditional communication, they don't have a bed board.
The traditional nurse call. They don't have traditional room assignments and so this use cases using the batch to communicate with the patients and literally scrapping of adds to the patients bed rail.
I think is really gotten our craze juices going a little bit in terms of how we can.
Make that more case more of a capability going forward, even the idea of communicating with patient family members. It all indications are right now.
The family members are likely to be restricted from access to hospitals for quite some time.
And the needs to be able to communicate from the patients How's the family member in any environment that particularly in these makeshift temporary environments, it's really accentuated.
In this time and I think our product capability will be really valuable EBIT to serve that.
Okay. Thank you.
There are no further questions at this time I'll now turn the call back over to bank for closing remarks.
Thanks, everybody I really appreciate you taking the time I know, it's it's a crazy tiny and I hope that all of you are happy and well and getting by and we look forward to following up with you individually. Thanks, a lot there is on.
This concludes today's conference call you may now disconnect.
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