Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the same desk anyone 2020 earnings call.
This time all participants are in a listen only mode. After the speakers presentation there'll be a question and answer session ask a question during the session you'll need to press star one on your telephone.
He advised that today's conference is being recorded.
If you require any further assistance please crestar zero.
I would now like to hand, the conference over to your speaker today Mark hobby. Thank you must go ahead Sir.
Oh, Thank you David welcome to our first quarter 2020 on each call.
We're doing it virtually from our homes today and what seems to report our results.
Joining me on the call today are Mikel, Spain, our founder G.O. ensure the board.
And Alina Gomez, our Chief Financial Officer.
During the course of today's call. We may make forward looking statements such a statement regarding our future financial performance product development.
Prospects ability to attract and retain customers.
<unk> ability to compete effectively.
Assumptions risk factors that could affect our actual results are contained in our earnings press release in in the respect your section of our player and subsequent Follies with the Securities and Exchange Commission.
Including our annual Port on for 10 K. for the year ended December 31, 2019, and our upcoming quarterly report on foreign trade queue for the quarter ended March 31 2020.
We undertake no obligation to update these statements after today's presentation or to conform these statements to actual results or changes in our expectations acceptance required by law. Please refer to today's earnings release for more information regarding forward looking statements.
During this call we will present, both gap and non gap financial measures.
Gap financial Messrs should be considered in addition to but not as a substitute or in isolation from our gap results.
You could find additional disclosures regarding Nissan get financial measures, including the reconciliations with comparable get financial measures in today's press release.
The shareholder letter and for certain non get financial measures for prior periods in the earnings press releases of those such prior periods. All of those are available on our industrial website.
With this intro I'm gets run the call over to Mikel.
Hey, Thanks, so much Mike who might come true, yeah clear loudly and.
She.
We couldn't do this or he's called I assume but.
But apparently not I thought that would have been very appropriate. This is how we spend most of my days now.
He meetings I would assume so.
Oh shuffle lines are inviting on basements into our home offices motivation great.
Anyway, I can't since I've been actually bought a comfortable has changed.
<unk> told the the <unk> just swapped it daily life.
<unk> created a lot of uncertain she thought it'd be singled pistons out that.
We focused on 10 best on immediately responding to the crisis on a cost accounting for the future it's new world.
We recently responded October night cream to <unk> something on cost a Muslim helping our communities to this disruption.
Oops mutually to remote what globally within a few days, we assemble a cost of my response to help costs to manage good <unk> customer service needs and in the basement challengers.
Also dorms.
Oh that boy and to assist essentially you keep your too.
So we ran Bob nonprofit access to our products and.
<unk> extra tooth aches. It you know to pull kind of recovery efforts and we also had a number apartments to help us with these initiatives.
I'd been what's been most impressive seeing our costs. The most respondents it's more important.
That accompanied two two nets with that customers globally and across the channels that cost of my expecting to use today. So we've seen I mean costs. So much terms volumes from many all my <unk>.
Dramatic rise in the phone support lot segment of our customers.
We've also seen much more with my hands on self service on automated reflection on an increase in messaging check conversations and <unk> shareholder matter, but like one customized <unk>.
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Through all the Sunshine thoughts on that help but help people <unk> mind can chips and.
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<unk> servings, Paul government track and trains are applications.
How are the costs on the product voice product is helping.
Multiple health care providers, managing medical conversation to tree House cat. So a lot of activities and we really been on the forefront of trying to help our costs smokes coping with this from situation.
<unk> and I'm convinced we are not going to go back to be truth as usual anytime soon we expect and we <unk> financial impact the net and the media term truck sales of course to the world around us.
And also believed that where the world. It's going to do is try to condemn it's also where send that excels companies will she.
And to value into investments.
<unk>, they're not going to do with <unk> implementation complicated products and like very slow tend to value NIST truly play troop strength somebody could see that in the response in the market place all strengthened beep simple to do good some sort of being.
Easy to use and didn't even any thoughts themselves. So we're going to plant Dublin down on the strength to come out of the <unk>.
Even stronger distinction, helping businesses all over the world, we sponsored that customers in the most convenient and most <unk>.
And the foreground certainly don't want to I mean, I want to think.
All our customers yeah, cos months across more than 160165 compute accountants I want to think every single one of them put philosophy much.
We're doing everything we can to help.
Q because we know that you are across much you obviously chart success.
I also want to say that most important to be of course super great thoughtful.
Can't professional depressed respondents in social workers out map, and especially of course, but no no health care professionals <unk>.
<unk>. So thank you to all of you fall for keeping everything going and alliance and that's also to continue to operate on cutting the tree.
So thank you.
That really now I'm going on and.
One channel to you.
Alright, thank cycles.
I'm going to discuss a few Q1 highlights and how we're managing agenda through the current economic crisis.
Enough on a path to emerge as a stronger business in the first quarter, our revenue increase 31% year over year <unk>.
<unk> every region acceded, 30% as we're making good progress on our international leadership initiatives also proud to say, our new head of amino sales started in April.
Cap gross margin for the first quarter was 74.9% 560 basis points year over year Nongaap gross margin was 70.3% up 480 basis points year over year Cross margin improvement was driven largely by customer succession and she has its and quiet optimization.
Got property merging for the quarter after 680 basis points to Nongaap operating margin improved 360 basis points. This includes 6.5 million expense consisting of a one time stipend for our employees I say transitioned to working from home. The additional costs are rising from cancellation of our flagship.
Prince relate and increase bad debt expense driven by customer collection concerns due to cover it 19 operating cash flow in the first quarter was negative 2.6 million.
Free cash flow and the first quarter was negative 15.6 million.
<unk> was impacted by the amount and timing of bikinis are partnering with customers spacing business challenges in light of covet 19, and the implementation of our new procedure to invoice customers on their renewal date instead of 30 days. Prior this new policy started on March 1st and the cash flow related to those in voices will impact Q1.
Q too.
Cashel was also impacted by the timing of under payment.
And now quickly on our strategy moving forward enter view on her outlook as you're well aware cover 19 has cost massive global disruption were carefully monitoring leading indicators and performing scenario planning to help and former forecasts and plans, including demand generation conversion paisa booking turning contraction.
Product usage, we believe in the fundamental strength of our business model and the resiliency of our customer base. We have important in valued customers in industries that are facing significant pressure, including airlines retail ride sharing and travel one hospitality, but overall, our pocket businesses highly diversified and includes many customers in industry.
Keys that are doing well in this environment, including.
Peter software and services, E., commerce, and learning platforms and remote conferencing.
A feature financial performance will undoubtedly be impacted by the global economic crisis that has emerged starting at the end up to one we began to see higher trend contraction among our smaller customers that trend has continued early in Q2, and while we expect that to improve as the economy's begin to revive we expected to still up pace.
Store called trends were also parking partnering with our larger customers who are undergoing business challenges to help them with modified in Boise Nonsubscription terms. This will happen near an intermediate impact on our business, but we believe absolutely in the principle of protecting them partnering with our customer base and this will be the foundation.
Of our long term grow.
As you would expect we're carefully monitoring our operating expenses in light of the economic crisis, while our balance sheet is and will remain strong we are committed to managing our expenses inline with revenue expectations to that and we have already implemented substantial expense saving measures, including a reduction in our hiring plan that we expect he'll tape.
Over the course of 2020.
Given the macro uncertainty we are withdrawn our full year 2020 financial guidance. We are however, providing to to guidance to give you the best to insight into the quarter ending June 30, 2020 at the midpoint R. Q2 revenue guidance reflects 23% <unk> embedded in our operating income guidance as approximately 8 million.
Good related expenses, including continuing support of our employees working from home and bad debt expense.
We are in a good position to whether that's Christian and emerge as a better stronger company our customer experience solutions are even more relevant in this new environment. We are confident enough. We have a strong balance sheet diverse customer base and a compelling subscription based business.
Now we are in possession 10 vast and we are continuing to invest in our product platform and go to market initiatives and infrastructure. These investments are focused tincher, we I said this crisis with strength.
Thank you to all of our customers now all of our employees alternate back over to Mark.
Oh It takes away now David we're ready to begin the Kunaev session.
Certainly as a reminder to ask the question you will need to press star one on your telephone to withdraw your question.
<unk>.
And by while we compiled the Q. and a roster.
Your first question comes from the line no Winslow with Wells Fargo. Your wine is open.
Yeah.
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<unk>.
The same is true for your your families. A question for a later obviously you flag from from factor too Little impact reported buildings are obviously you already plugged the the trade it in voicing last quarter, but also the just the trade it in voices trips and terms due to Kobe.
Unpack that because obviously, we take the change in short term archeo add that to to revenue.
Good short term.
Numbers up 34%, so what if you're going to I can I help with unpacked.
As far as what the impact was q. on it how do you think about that was going forward and I just wondered yeah sure. So sure. So first of all we're really encouraged by R.P. overall it just demonstrates a commitment of our customers are are enterprising commercial customers to do business with us, but but the other more important thing were seen as shorter and.
Voice duration, even from some of our larger customer. So that's really what what's what's driving that sort of difference between archeo in Belize.
What's your question right.
Yeah.
Maybe think about the the impact there that that the delta.
No Delta, where what's coming from where yup for how much is the the 30 days later and boyfriend versus yeah called the Kobe related changes.
What we were not going to share that the impact of the buildings, but I can tell you that it's going to it's going to impact us over two quarters.
Got it.
For for a nickel, obviously, you talked about working with the customer is one thing that send us had been on for an extremely high renewal rate. Your what do you have in place to yeah, maybe.
Early better potentially impact vertical is going to work work with.
Not for front foot at versus a waiting for renewal.
That's a really good question, we are being really <unk> without cross them up and try to help them through this situation and so that they also so we can help and come out on the on the side stronger too.
And like I could just say that we are still very proud of bottom renewal raised but we are helping customers in any other aspect that we can't of course.
This makes sense.
Got it thanks.
Your next question comes from the line can one with Guggenheim Securities Good lines open.
<unk> touch a a little bit on what.
Earlier.
I'm a larger customers you mention I think we understand the adjusting invoicing, but in terms of subscription terms.
What does that look like is that is that a temporary price reduction is that dialing back on maybe talk to your commitment.
This can kind of what what you guys are doing their debt to bridge the gap.
[noise] yeah. So it's it's really where it's it's unique to different customers. Some of them want a extended payment terms. Some of them want you know, perhaps a one time discounted it's all different flavors that the important thing is we're trying to retain and do everything we can.
Show empathy.
And make sure that we keep these customers for the long haul.
[noise] got it and then.
But maybe one father up.
She guys touched on you know kind of going through a variety of scenarios any color on how you guys are.
Scenarios in terms of potential best and worst case outcomes for for a kind of magnitude and duration of both of the dust in fact.
Yeah and now we're we're running various scenarios we've been started with a a quick recovery, which we all appreciate has not happened, but without being an economist I think we're basically evaluating a couple of scenarios, one which is a longer recovery into 2020, and another one which is a longer recovery into 2000.
21, not sort of the time frame, we're thinking about it but I just want to make sure to clarify it's a super fluid situation and continues to appalled.
Great. Thanks, a lot.
Your next question comes from the line Kirk matter neat with Evercore I outside your lines open.
Yes, thanks, very much I I was wondering because you guys talk about sort of the the need to sort of thread the needle these days with.
Managing expenses, but not one is sort of shifts the car into neutral per se, meaning you know obviously the duty Sass model is that you don't feel it serve as much on the up front, but you know a year from now when things are clearing up if you don't make investments and say sales and already today.
Takes you a little bit longer to sort of get back into motion. So how are you thinking about that in terms of just bouncing that amount of I'm sure.
Some thoughts on that but I'd be just kind of curious about how are you thinking about hiring and those kind of things in this kind of environment. Thanks.
And if I'm starting what we wanted the principles, we started out with <unk> I'll respond to basis like we need to make the organization is very very agile you know like and that means that I really focus on some things would true impact and kind of.
Things, where we can kind of you know whether you don't need to give things the same Congress exactly you forgive the organization.
So we can quickly scale up and down given kind of the conditions in them.
That's very important because as you say oh as as you know, it's a very fluid situation. It's a very bought at cellmark, they're going to be have to cost of the adapt to kind of what we see in the signals were getting from everywhere in the world.
So we have really focusing on giving the organization as much giudici as possible and so we can be very fluid in our emotions and and.
Accelerate your investments why we say you could make sense, but also be ready to move those investments over too.
Does that make sense.
Yes, it out thanks very much alright.
Want to add anything.
Yeah, No I think he covered a nickel I think the key is you know obviously, we're benefitting from some of the natural savings. We we we have you know no one in the in our in our employee base traveling so we get some of that natural tailwind and then we're as we're looking at higher we're making sure we're putting those hires into areas that will will drive will <unk>.
<unk> first strengthens we'd come out of this and then the last thing I would say is we are really good at hiring sales and Q1, so I'm not super worried about what I have been terms that quota on the street. So.
About that.
That's very helpful. Thanks, a lot.
Your next question comes from the line of <unk> with Jeffrey Your wine is open.
Hi, Thanks.
Thanks for taking my question.
Staying safe again as long as you can in this environment first pay one for free Mikel.
You know on on Sunshine.
And and relate with after virtual I'm just curious if you've seen any unique use cases during <unk> if customers are still adopting sunshine or how we should think about maybe be ramp cycle for Sunshine and then I have a follow up.
Yeah, we definitely yeah, we definitely continues to see <unk> platform. We I also tried to really help our customers making it.
Much faster than for them to use Sunshine and we have some really good.
Really good capabilities and features that in some really interesting things and I broke my gosh, that's definitely what I'd call for most need right now quick solutions. They need time too bad you very quickly and some some of the some of them I would say some of the things we've seen outside of the U.S. really see that in the U.S. and all like this really tight the focus on <unk>.
Value on how you Bury a job platforms and we are helping customers see that the pension and see that that was <unk> like conversations.
I told him that as part of Sunshine has really seem very very strong demand like this is this is definitely a.
Point in time by everybody sees the potential in bed or using these messaging channels over.
Ooh.
Traditional.
Much more.
<unk> when she was being trapped home by than having to sit on the phone waiting for a long time on this very asynchronous.
Conversations over email like like this kind of very intimate relations. This very intimate conversation that works in New York Times and has has turned out to be very very convenient.
Right now and we seeing a V.C.R. take a bath and really believe that this is.
We have time for the full good business rather than the off the Michigan platforms.
That's helpful and then maybe.
Think about the the framework for two Q. guidance. It's a 24% is impressive all things considered what's going on I guess I I'm I'm curious when you think about.
The slight slowdown how much of that is as a result of gross retention declining versus less new bookends activity can can you may parse out those two factors.
Yeah, that's definitely I think that I would say, it's more oriented to the the contraction were seen in our business, which you know continues to be very fluid Ah, but that's definitely a key part of what's included in that guidance and so I would I would oriented more to that.
That's great I.
Squeeze the third one and then just as a follow up so when you think about new booking activity is that more with your with larger customers are with smaller customers just trying to think about wearing your business activity still happening. Thanks again for taking my questions.
I think you're see we're seeing that we're seeing new business or cross.
Different segments really we're we're seen some larger customers that want something up and running very quickly and machine still the usual self service I wouldn't say that it's not been impacted by covered definitely some of our really large customers may say I need I need a little bit more time, I need a double click before I commit but.
The new businesses come in and from different segments as well as as as always the expansion of our existing customers is a big driver and bookings for us.
Your next question comes from the line of arch in body with William player. Your line is open.
But most of my questions first on the go to market was was wondering if we didn't know just want to how bad strategy.
Shifted to kind of adopted us about what are you doing someone must begin perspective are you, leaving with perhaps different different products looking for me see maybe a fast returned the value.
And then to pack onto that <unk>.
Do you think this <unk>, you know kind of coming out of his environment. They will accelerate your new up market at S.M.B.
More cash strapped.
That directing alone.
Oh that'd be great.
And yes, let me give them to answer to that.
So I would say that like it like we definitely like we definitely doubled down on I'll, a unique strings and that if they'd be can we think there's not complex organizations off and running very very quickly and you can give them like we can decrease have time to buy you wouldn't really.
Yeah.
<unk> and that is incredibly better than by now.
Some of our lives just be allowed to deal with these days have very short cycles and it cost to most basically almost up and running before we had negotiated the deal so we'd definitely.
Definitely responding to the environment and like we definitely focused on the qualities that that I've always been part of our vocabulary that is <unk> is all believes that these things are going to these things are going to define the based in the future business climate true you know you're not going to have.
All these big complicated.
Oh, Yeah, you know I t. onto infrastructure, we need to be more <unk>.
Not just enough I can systems, but as a population you know to calm probably food isn't to make sure. We can get the economy up and running again them to make sure that'd be can come out of the stronger not just companies, but as a population. That's that's a world you know and like send this this 100% the highlands and we believe that that's that's that's why we.
That's why we need to bring while so we don't know each other bag of so we can ask quickly so that could be at Johnson, we can keep up and leave off to the expert patients no <unk>.
Makes sense.
Yes.
And.
A quick follow up for you I remember reading mature holding better that you know interactions that increasing and volumes are increasing people or maybe scaling up their their service operations. One of the page I want to ask them no I know portion of your business is usage based you might be small the answer back in Congress.
Stations.
I'm wondering are you seeing a red meat impact on that or is that not we don't dare call usage increases come again.
Actually what's interesting is we're seen some customers increase their usage. During this time to be honest. So wish it were seen both but we're really seen a encouraged by a team some customers who actually are needing some desk more an increasing their usage. So it's not I'm not seen dampening.
Much there I would say in our pro circ, rather new to the extent, they're attached to very large enterprise deals that's definitely a a place where paying attention to because that has led a little bit but in terms of our usage I would say it's it's.
Quite the contrary were actually seen more uptake.
Yeah.
Your next question comes from the line of Alex second with RBC capital markets Your lines open.
You guys think strict my question I'm glad to hear your your sense save maybe just a a couple a later maybe can you talk on what.
Go through maybe the exposure the that you guys see how to troubled sectors versus healthier sectors of the economy. If you can <unk> you know give us sizing is it you know 20% of the business is 50% of the business then I got a quick follow.
Yeah, I am when we when we look at our numbers 15 quid all of the the typical ones people talk about whether it's traveled rideshare.
Forgetting somewhere keep me on us on what they are but but it tend not 20 per cent range for us.
And it's a cross and then you know all of our if across all of our segments to it's not just.
<unk> in our price, it's really across when I say that it's across our entire book of business.
Understood and I guess, so if you if you could help us understand where you're seeing most of the degradation in the not maybe the the dollar renewal rate or is it in the S.M.B. part is it in the enterprise and if you can help us understand you know where those rates retreading because on the one hand <unk>.
It sounds like current R.P.O.
Bookings or buildings was a better you know grader kind of some of that new E.C.V. behavior versus buildings, but yet yeah, you're you're you're you're pulling the guy. So I just want to understand is that the retention is kind of or the turn spiked that that's driving that are so if you can help us understand though.
Yeah I mean.
<unk>.
The the the market conditions are Super Volcom fluid I think the the key for me I studied guidance was really thinking about the contraction, we're seeing in our customer base and just being thoughtful about that but the impact were seen in terms of the highly impacted industries is a cross.
Both S.N.D.N. enterprise, it's not only <unk> some be customers with the contraction were seen like I said is is mostly oriented cities highly impacted a industries.
Yeah, well, let me yeah, I just want to clarify that most the that is construction oriented you think about many travel related company. They have you know their businesses down, 80% or or or more sometimes and so we've been working with those customers can make sure that we can keep them in a in a place.
Where they come back to us one travel conditions and hospitality industry conditions come back.
Under certain and maybe just that I could sneak one more in <unk> can you talk about contractually are these customers with multi year contract you know that you're proactively going in and and changing their contracts or how how's that working exactly that and renewal.
Alex I'm not sure hold on let or you'll see that we made a statement there are times, where we will work with companies on their subscription turns from help them managed through this period, especially if they're in one of those heavily impacted industries.
Got to think if.
The next question comes from the line of Chris <unk> with Goldman Sachs. The line is open.
I think some extra taking my question I just wanted to ask about the product portfolio and particularly I guess in these conditions, where are you seeing more resilient demand is it in court support just given the importance of companies engaging with customers sometimes through online channels for the very first timer, maybe with analytics as customers trying to think through some new.
Challenges, they're they're facing just just curious in general where you've been positively surprised with resilience of certain products and perhaps other areas where that more of a temporary challenge.
Mm.
I think it's it's a little bit across the board and I would save that for they've got a quarter like this like there's there's too many different sick most Boston point anything I do want to say bad like one of the old old trends it'd be seen and that is truly being generated right now I always he adopts you know kind of up to you.
Messaging oriented channels that that has turned out to be very convenient for a lot across the most.
Yeah, you can be put a lot up like in unison slash them too much.
So this is definitely my B.C.
This doesn't she had friends that and but like <unk> oil.
We'd like.
Baseball products across the board.
Great. Thank you just wouldn't quick follow up with an R.P.O.. Obviously, you know it's already been asked about the R.P.O. gross or current R.P., a great, which was which is really strong long term or pure great. Yeah, just celebrated a little bit still very strong growth rate in was up a little bit sequentially. I mean anything you can say just about the diversion.
So in in in trend for those yeah current on long term or P.L.
So we're we're content I mean, we're really encouraged by R.P.O. and really proud of it especially in this time I mean, I think the fact that customers are still continuing to commit to us something we're encouraged by poor multi year contract then we're seeing that even turn this.
The sort of stressful cope at times. So I think it's it's it's important to be.
He proud of that for us and I think that it's a testament to what the sales organization has done in terms of making sure. They they I'm sure the full value and send us so like I'm pretty proud of that I think in terms of how it relates to billing and so on I think it really goes back to during this time or also working with customers to make sure.
That they need different payment terms et cetera, more really pumping them through that and this is coming from you know even larger customers.
Got it thank you.
Your next question comes from the line stands Lucky with Morgan Stanley Your lines open.
Hey, guys. Thank you so much for taking my questions and I I hope, you're right and everybody's staying safe and I'm healthy obviously, maybe just help us characterize what you're seeing through the first you know let's call. It you know.
Four weeks of the current quarter and what you're seeing through April because obviously have I'm sure March end of March was was pretty terrible, but what are you seeing a quarter to date and then have a a quick file.
Yeah. So we're.
I sat on a script, where we're still seeing contraction, mostly especially with R.S.M.B. customers I'm encouraged that we're not seeing as much turn but more contraction and I think that's really important sign for us because we believe this the economy comes back we'll start to see some of these customers come back and I think.
We talked about it earlier, but also a lot of that is coming from our customers. In these industries that are that have you know that are highly distressed at the moment and so we're really trying to work with them. We'll see I mean, we're looking at T. signal faintly weekly honest that changes, obviously that would be a positive but right now we're seen still.
Same kind of tone, we saw the late part of March into early April.
Okay, perfect and then maybe just to change the tone a little bit you know because there's so much negativity overall it but you know looking at the positives right. <unk> you guys are giving the way. This this remote working bundle a and you know you almost giving away the product to start ups working coby 19.
Could there be yeah. When we all are coming out in the other end of those an increased uptake of things like the explore product or maybe just a greater adoption of zendesk within some of these newer start ups popping up <unk>, we could start to see the benefits as we get into maybe the second half of the air into 20.
And 21.
<unk>.
Let me, maybe <unk> and to try to win.
You know I I don't want to.
I I want to be very realistic about the situation, we I'm young certain t. in the market and uncertainty about the global market well, we we we and we have we have kind of being very humble to what's going on with our customers on the situation right now because it it's a costs everyone.
Right.
But I, but I do want to say that like we didn't need that <unk>.
Yes, a company we have a responsibility to kind of help cost as much food is and come out to talk on the other side that that also we're doing that because if you want to basically know relationship and then I'll toss that these companies and we we have exhibitions, we've always than the kind of comedy that's got 'em every morning, and try to earn but trust of our company all of our customers and this is.
<unk> joined that we can really do that and that will you know it without speculating in the future here that will lead to from all all believers I've moved to <unk> multiprocessor in Austin.
Bucks and understanding of the value that I'll consequences that businesses as a high level, yeah she'll right, even though you know when I tried to take advantage of a bad situation.
It does that make sounds great.
Yes of course makes a lot of alright. Thank you so much.
Thank you.
Your next question comes from the line Grad filled with you they securities your lines open.
Oh no. Thanks for taking my question I I wanted to ask about net revenue retention you know held into that kind of 115 level this quarter and I'm hearing that there's some increased activity it costs for his which could lead to more seats I would imagine, but other hand use you're seeing obviously contraction in other areas of the business. So I guess, what's your expectation or.
What have you seen even in the the the first month here the quarter with regard to never attempt to get ready to retention I'm kind of the grow side and then the up cell and and where do you think that could trend over the year.
So I won't comment on the full year I'll be hobby, because the situation so fluid, but you know consistent with what I, what I just talked about we're definitely seeing contraction across these industries, where we have or seen distress the pace of our our bookings isn't you know.
And started the quarter is pacing, okay, but I think we obviously look at everything Holistically and so we have to to look at us together and and right. Now we're seeing you know contraction that that's that this could change very quickly as quickly as it came I could change and so I don't want to predict what what this will be but we fact.
Bullet this'll, what the trend will be for the fault fourth quarter, but we took all of that into consideration in our guidance.
Got a thanks very much and then just just one on the global or by channel I know that was a big that was increasing focus here in developing some of these global aside partnerships. How does this situation impact that I I know that you mentioned that some of the bigger expand deals.
I've seen a little bit of pause there I I assume that's focused a lot in the global aside channel just any update on how that is progressing in the midst of all this thank you.
We.
<unk>.
I I.
You know like.
<unk> you can system and they got continues to be <unk>.
<unk> like.
Like the the the the big globally as I said, the most that right now, but like I think Liberals are comedy too well known and.
And and be bad.
Oh partners is a big.
Maybe at some.
Yeah, I think Fred our partners will be an important part of our ecosystem in this most recent quarter, we actually saw some partners bring in these quick when deals where companies. We're looking to make adaptations to what they were doing we were we were able to serve that and so I think in the near term that's what you should explain.
From my partner activity and then you know as market conditions improved we we have a product they think that people will want to work with overtime.
Thanks, guys.
Your next question comes from the line, Steve Coning with what Bush Securities July so.
Hey, thanks send that protecting my question.
You know so you've talked a little bit about you know the impact your financials.
I can't be over the sort of medium term.
You're you're obviously appropriately uncertain because the environment, it's on certain I'd like to try to understand a little better, though how that how that contraction plays out with respect to the mechanics of your buildings terms and your total contract duration. So you know if I have it right I know that you've got you know a mix of my.
Shorter than annual and annual and even some multi year contracts and their buildings terms haven't moving more towards and now I think with a goal of getting 70% annual <unk> does the construction to happen Oh when are only when it customer news or is it is it happening are they asking for concessions when.
When a bill hits them and they and you can't collect and then does this is this going to extend into multi year contracts as well. So kind of helped me understand how that plays out with respect to these contracts getting more nerd and and the buildings periods as well.
Yeah. So if I understand that complex question, but I think if I understand you correctly you're asking.
When duties contraction tap and do that happen, yeah, <unk> or do they have an off cycle. So it's important to understand we have both annual and monthly customers, obviously and so a monthly customer theoretically could you know every every month review, but some of it has happened.
Enough cycle, but.
Typically you're seeing it and it it depends on the sides with the customer the customers that have annual contract that they're in a in a distressed industry. There may be a handful of those that are coming before their renewal to to look for a different payment terms in other cases, it's hot renewal. So it's a little bit of pellets, it's not it's not one or the other.
Mhm and.
Quick follow up laid out when when you do have some multi your contracts I believe and you know would would you would you expect that you know the concessions your granting them then stabilized when you get to another year or the contract or it could use medium term you know could it be longer than a year or does it just totally depend on the environment.
It depends on the environment it depends on on the customer and what their needs are you know there there with with larger customers everyone's needs are a little different in terms of their cash position and whatnot, but.
But we're we're trying to to think about you know what is this customer look like over the long haul over a multi year contract. What we're trying to avoid obviously changing contract terms. That's that's something we prefer not to do but rather really think about docking which helps I'm in the short.
Medium term so that they come out of it as they grow then we're back in a good position with them.
Got it okay, great. Thank you very much.
Sure.
Your next question comes from the line Derrick would with talent in company you lines open.
Great. Thanks, it's and run for Derek Hope, you're all well.
You walk down business travel pretty early in the in the Covitz Psycho any color and how this is affected close rates interrupt behavior, and however ups adjusting to selling virtually.
You know I I've actually been really encouraging impressed with our sales team and actually with all of our employees to pivot.
Almost overnight to working from home and send US time, devalue and all the all the things that we talk about I think we'll do well in this environment I don't see that necessarily being challenged unless it's a really huge deal of course. Some of that is you know potentially slipping, but not not in.
The material way I think we can still do business and continued to close deals and we've proven not being Q1 and continued to prove that you're cute too in a virtual environment.
Great and then a laino, maybe what percentage of your revenue or billings come from new verse existing customers and what are you assuming around growth in each cohorts a year.
So we don't really give distinct.
We don't break out or bookings or bellies between you and expansion, but obviously the expansion machine as a big part of our our gross and you guys know that is looking at our net expansion rate.
But we are continue to to deliver on both new and expansion bookings, but we don't break those out.
Great Thanks to occur.
Okay. If you would like to ask a question <unk> on your telephone.
Your next question comes from the line, Jeff Van <unk> with credit Hell Your lines open.
Great. Thanks, just a couple for me I think from a geographic standpoint can you just talk tickets to two aspects churn variance.
If he if you've noticed any and then also within the selling motion the ability to get cycles, you know over the finish line. If you will maybe just talk to things sorted through the geographic lens. If you can call. It any notable differences.
You know we haven't so in terms of.
Terms of you know contraction, it's I haven't noticed any particular.
Trying to such an outlier. That's that's you know something we would mention here, but of course every region is experiencing a this differently. So we may see pockets of countries come back sooner than others were paying attention to that but I wouldn't say that there's a stark complete difference between <unk>.
Or a pack at this point.
Okay.
And then on the the cycles I think nickel called out some leave seats emergency some cycles had been fairly large and come in with great urgency. When you look at the deals that have come in with the urgency wants to know the make up of the deals in terms of what feature function capabilities. They were most focused on what what were the driver Sir.
I think that much similar question about before like it it's really across the board here like it it's really about <unk> can gauge should respond to the to the cost of most communities to that say colors.
Yeah, we definitely have drive <unk> towards like more by cussing could like the the the messages on chat channels over the traditional channels not really the the demand is across the board and you know even.
Sales products, you know, but their habits broke off.
Yeah. Good enough okay. Thank you.
[noise]. Your next question comes from the line, Jennifer low with U.P.S. your wine so.
Great. Thank you I wanted to Atlanta, just a circle back quickly to to hit on for the things that I've Kinda got discussed earlier.
Talking about some of the the adjustments and but the concessions that are being made to customers to help them through challenging times. It's fair to think that that will be a killings impact, but shouldn't be something that that affects our P.O.C.R.P.L. or could it be thier appeal, but not an R.P.L. impact you need keys.
Help us understand for what's cash versus contract.
Yeah, I mean, I think I think that most of the orientation has been on payment terms, so far but it's early to tell we're still going through you know I'm talking that customers actively but I can I definitely say that.
Payment terms has been a big big topic with customers.
Say that we bought a change contract terms, but definitely the the orientation huh.
Payment term and in some cases, you know as customers are needing fewer agents in this time, we're we're seeing that come through the.
The flip side as we expect that to come back as the economy starts to revive.
Okay, Great and then just looking at you know the puts and takes on buildings and a quarter and you know again. He mentioned there you can change their stays payment concession. They think you said that you'd expect this to last for a two quarters, but just thinking of you know sort of the magnitude there because it seems like the invoicing <unk>.
And it would be.
It would be relatively contained in Q1 is.
Would you expect a similar degree of Headwins in Q2 buildings, you know just any kind of qualification there would be helpful. If you're trying to think about what you're like I think the one thing to just think about is even though we fill we don't always so so the billing impact is we.
The affectively had to to mine so [noise] filling instead of three so that's sort of the the impact there. What I mean is we should expect cash flow for q. to to have <unk> impact as well simply because obviously, we're collecting some of that billing and cute too.
Okay that makes sense.
That makes that's great. Thank you.
There are no further questions at this time I will turn the call back over to the presenters.
[noise] well, we'd like to thank you for joining us on our virtual call and we will look forward to speaking to you next border.
Have a great Dane Stacey.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating in the now disconnect.
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