Q1 2020 Earnings Call
[laughter] please standby.
Okay and welcome to the five lines.
You one fiscal year 2020 earnings Conference call do these conference is being recorded.
At this time I like from the conference over to Miss Lisa locking and he's going to have ma'am.
Thank you for joining us today on today company color <unk> <unk> <unk> <unk> <unk>.
Certain statements made during the course of this conference call.
<unk> historical fact, including notes regarding the teacher financial performance of the company industry trends company in Michigan. Another future events are forward looking statements within the meaning of the private security for litigation Reform Act of 1995.
Statements are simply forget shrink should not be unduly relied upon by investors actual events or results in a different mature at lake and the company undertakes no obligation to update the information or touch statement. The favorites are subject to substantial referring I certain keys that credit bursley effect.
Nice feature results and causing forward looking statements to be inaccurate, including the impact of the cold. Good 19 can damage and other <unk>, it's got onto the caption risk factors and elsewhere in five ninth annual and quarterly reports filed Lucas Securities and Exchange Commission.
In addition marriage right, we'll make reference to non gap financial measure string it's called a discussion area of why did use non gap financial measures and information regarding reconciliation of our gap versus non gap results is currently available in our press really issued earlier this afternoon.
In the appendix <unk> unavailable when the index to relation section applied ninth website, that's like nine dot com now I'd like to turn the call over to five nights Yeah <unk>.
Thank you Lisa thanks to everyone for joining our call. This afternoon.
Our thoughts today are with those affected by the current a virus.
<unk> unprecedented times, we've been laser focus on taking care of our employees. So they were able to continue delivering for our existing and new customers. As a result, our company is fully operational but 100 per cent of our employees working from home.
We're continuing to execute on our key priorities.
First quick summary of the results we are boarding today.
Do you one revenue was a record $95.1 million.
28% your every year.
Q1 record growth rate as a public company.
Enterprise subscription revenue, 33% on an L.P.N. basis.
Just to keep it down margin was 14.9 per cent.
His record results demonstrate the teams discipline and execution during a challenging time and our focus on commitment to our balance growth strategy.
Whatever happens in the macro environment, we will relentlessly maintain this focus as we navigate through 2020.
Now, let me address the issue that front and center in everyone's mind the impact of Kobe 19, upon our business and we've adapted.
We are not immune to cover 19 headwinds and certain parts of our business have been adversely impacted we've had increased levels of reductions and cancellations in our commercial business. Although after an initial burst they have slowed somewhat.
In addition, some enterprise customers, most notably in travel and hospitality and consumer discretionary have also been reducing seats.
At the same time.
We've experienced a surge in demand to deliver the work from home model in recent weeks our customers are transition their agents to work from home across the globe without a hitch.
Five nine age and only need the computer headset in an internet connection.
Customers now recognize the critical nature, a business continuity plans for their contact centres and there's dramatically increased appreciation for the fact that cloud solutions can address these needs far better than on premise solutions.
We believe that through this experience cloud adoption will accelerate as companies seriously consider shifting to a more flexible model, allowing agents to work from home.
I think benefits such as providing agents with more flexibility and better quality of life, which get utterance improves customer experience.
Expanded coverage with remote agent across different time zones, and meaningful real estate cost savings from reduction of office space.
For enterprise customers salesmen implementation dark continuing despite covered 19.
Almost overnight meeting on video with tools like Jim is now the expected way to interact building relationships and conduct business with customers of all sizes with respect to enterprise implementation, our native cloud platform allows us to complete all work remotely.
Now while on the subject implementation.
You really pleased with our fast track program, which was launched in April in response to cope with 19 demand.
Program enables accelerated onboarding with a 48 hour turnaround although in some cases, we've got an emergency response hotlines running in as little as three hours.
[noise] Fastrak program also features affordable monthly pricing and flexible contracts to accommodate the current uncertain business conditions.
I'd like to turn now to expense control.
In January and February as business with strong and about plan, we stepped up our hiring in some areas most notably in sales.
However, as it became evident in March how serious the situation was becoming.
We stopped all travel and postponed events.
Addition, we slowed hiring during the course of the current quarter and we'll continue to do so based upon our tried and true disciplined approach of managing expenses, which is to have evidence of revenue increases before increasing fixed costs.
That said, we want to emerge from this crisis with our leadership position further enhanced and so we may end are making incremental investments in key strategic areas, most notably channel.
Strengthening our W.F., okay, the ability and expanding getting into the public lab.
[noise], Hi, Dan and Barry will be providing additional comments on the effects of covered 19 in a few months. So let me turn now to sharing progress on some of our key initiatives as you know we've been intent on significantly expanding our channel presents are new leadership team had decades of experience and beep relate.
Ships with channel partners domestically and internationally.
We've also maybe associated investments in areas, such as marketing training and systems for channel expansion and enabling.
Now the tiny here was good as we've been seeing channel interest in C. cast dramatically increase as the understanding of the importance of having a cloud offering has really sunken.
Let me illustrate the progress we're making some data points first we didn't more business with global S.I.'s. In Q1, then in all of 2019 combined.
Second over the past two years are channel business through master agents and resellers has more than doubled.
So far this year, we have trained more than 2000 people from our channel partners as compared to just a few hundred a year ago.
Did you can see we're making concrete progress on this channel investment.
That progress is best demonstrated by a brand new strategic partnership we are sharing today.
I am thrilled to announce that we have entered into an exclusive agreement with H.T.N.T. business and wish to five nine platform well underpinned, it's new H.T.M.T. cloud contact center.
The H.T.M.T. club contact centre launched today, and we're committed to help H.T.N.T. business customers rapidly and cost effectively transform their customer experience freeway superior omni channel solution.
Although you will have seen our joint press release with zoom issued a short while ago announcing the launch of an agent expert consultation experience. This solution seamlessly enables contact centre agents to identify Jim users, who are subject matter experts and engage with them one on one or connect them to a customer.
As a result agents are equipped to answer questions more quickly and accurately with the goal of resolving customer issues. The first time every time.
We would also like to mention that Eric you, one C.E.O. and founder of zoom and myself will be hosting a web in r. on Tuesday may 12th at 11 O'clock Am Pacific Standard time, where you can learn our thoughts on how cobin 19 will change the future of our work environment and accelerate the adoption of cloud communications.
I'm incredibly proud of the progress and momentum with our partnership organization and the World class companies like H.T.M.T.N. to Jim and more who have chosen five nine.
[noise] for sharing my final thick ways I'd like to return to where I opened and talk about our team I couldn't be prouder of what we've accomplished.
Sure to Apple's out of many of our team I stepped up.
As you know reliability is critical in a contact centre. Your platform can have all the features in the world. If the system is down none of that matters. It's so important that reliability is quite literally the name of our company five nine.
Delivering a service with that kind of up time is no small fee and it's something that makes a huge difference to our customers I pleased to report betting Q1, we achieved the highest up time in the history of the company. Despite transitioning to work from home and Onboarding record numbers of customers at agents.
And for all those customers, we onboarded R.P.S. and C.S. teens continued to receive unparalleled not promoter scores, reflecting the reliability attention professionalism and dedication. These teams that delivered no matter to be external conditions now while on the subject of our team.
Not to mention that we're paying a covert 19 relief bonus totally a $1.8 million to employees at the senior director level envelope.
I feel this is entirely warranted given the dedication and support the needs very trying personal times for all.
I'll leave you now with the final take a ways.
And before we are maintaining a vigilant focus on balanced gross.
Continuing our disciplined approach of managing expenses.
We're proceeding with the most prudence until we have a better sense of the puts and takes affecting our business.
Remember that we operate <unk> in a huge market at the beginning of a transition to cloud.
Transition of legacy on premises systems to the cloud only stance to accelerate given the crucial need for business continuity and the benefits associated with agents working from home.
Bluffed five nine is not immune to macro economic impacts the contact center is mission critical to business operations and customer retention, which gives an advantage it any environment and especially one in which more and more interactions are done online rather than in person.
At five nine we've attracted some of the best talent in the industry, who are aligned on the values and the vision of our company.
We've built a world class management team that has managed to downturns before and has demonstrated a long term track record of value creation.
With our teams an hour leadership in place I'm confident we've got the right folks to navigate five nine through these unprecedented times and support our long term growth strategy.
Now I'd like to turn the call over to our President Dan Burkland Dan.
Thank you Rowan.
Once again, we had record bookings for two one at our two one pipeline approximately doubled that she wanted to 2019.
Sustained sequential growth for the last four quarters.
Additionally, over 60% of deals were influenced by our ecosystem a partners.
Four I turned to keep ones for the quarter I wanted to share something that was truly remarkable at the end of two one.
Well our customers were all in the process of moving their workforce to work from home model are teens were also adjusting to our own work from home transition and it's wrong mentioned they didn't miss would be.
This was reflected in our Q1 bookings performance as well as achieving our largest quarter ever for street turnips by our World Class professional services tea.
And now I'd like to share since she wins for the court starting with what you may have seen in a recent press release from us where Buffy jumped into action in the able to hotline for the S.B.A. loan program.
Some of those calls go directly to Outsourcers using five nine and others are about it to non slide by based Outsourcers.
We also set up hotlines for New York Detroit in Orlando, just just these cities and counties with their code that inquiries.
Second example was an online page, which had been outsourcing of the majority of its interactions to a B.P.O. operating on a bus which gives them very limited visibility in control over their operation.
Chose to bring all of their contact centres in house looked at all the various club contacts ever options and they chose five nine which now gives them complete visibility in control, while also giving them a comprehensive Ami channel solution, including trap email deep integration to their c. around.
We anticipate this initial order to resulting over 2.6 million annual recurring revenue to fight night.
The next example is the children's hospital health system, which was using an on premises legacy system Francisco.
They watch a digital transformation project, including a modernization of their context.
After evaluating various God contact center solutions. They chose five nine due to our deep Salesforce integration comprehensive W.S.. So sweet powered by virtual observer as well as the ability to create custom work flows to improve communication an outreach to the parents the children being treated.
Dissipate the Finnish order to result in over 1 million annual recurring rather did cycling.
Another g. went for the quarter is global images in electronics company.
They were using a fire nearing its end of life, along with a legacy promises space to W.S. also we shouldn't from mice and required a significant upgrade or replacement both.
They looked at several called options.
Ideally eliminated two of them as they did not have the staff budget or luxury of time to build much of the functionality themselves.
And they chose five nine for the full Ami channel solution.
Of U.S., so sweet with QM Supreme recording and speech analytics covered by parents.
Deep integration, what workable sales class C.R.M.
And our ability to customize it with our World class professional services team. We anticipate this initial works to result in number 2.6 million annual recurring revenue at five.
And now as we typically do I'll share, an example of an existing customer expansion.
It's a fortune 100 health care provider, who has been a five nine customer since 2014 further in home care until the medicine divisions.
They launched a project to modernize three additional business units.
Shows five nine not only for the flexibility and innovation they could achieve with our solutions, including chat. That's so nice <unk>, but also due to the high touch services model and experience. They had with five died in the other business trips. We anticipate this AD on order to increase their annual spend with five nine from approximately 1 million.
1.8 million.
As you can see we continue to win unsuccessfully execute a deliberate market for larger more complex and more demanding enterprise and this is a testament to our product in engineering teams.
Well it was our customer first culture from or go to market teams, who are always looking to provide services and programs to help our clients deliver great customer experience.
Which I handed over to Barry.
Thank you dad.
Before going into specifics reminder, that unless otherwise indicated all financial figures I will discuss or non gap.
Reconciliation from gap to non got results are included in that Bendix of odd visit presentation.
Website.
We had another strong quota, but but top and bottom line result exceeding expectations.
Revenue group, 28%, you're on Ya given primary by enterprise business.
<unk> revenue increase 33%, yeah, yeah on an L.P.M. basis.
It'd probably not makes up 81% of L.C.M. Avenue and not commercial business.
The remaining 19%.
<unk> in and around 10%.
Recurring revenue accounted for 91% of our revenue.
<unk> said about revenue what's comprise the professional services.
As a reminder, I continued success in winning large yet I like the enterprise customers.
Has introduced more fluctuations.
Onto the platform at different times and rent at different rates.
There's a game was it privately driver of L.P.N. enterprise subscription revenue growth rate cut me I'd I'd say, 3%.
34% dot quota.
An L.P.N. data base attention rate coming in at 103%.
105% not caught up.
<unk>.
64.1% increase.
Proximately 70 basis point your other yeah.
So it's good adjusted EBITDA, what $14.1 billion, representing a 14.9% margin.
This is a decrease of approximately 100 basis point your will be.
Which affected continued investment.
We have been making and go to market and already initiatives.
<unk> net income was $11.1 million a year over your increase of $1.1 million.
What's your God did that and she didn't catch the highlights.
E.S.L. 34 days and Q1.
Operating cash flow like $10.4 million.
Well you may not good mistake about potential for continuing cast generation given a longtime model.
Essentially I know l.
Hello Dsos.
No I've forgotten.
Rather than reading you the guidance number that basically says I normally do.
Oh really explain how we arrived at our guide.
Essentially we have to guide environment.
It's what I see the current quota.
Which is partially collapsed and is taking place in a well understood macro economic environment.
Yeah. The is of course, the second pass.
Coming up with a second have guidance that'd be cautious.
Not because if you need inherited weakness in our business.
But because of the extreme uncertainty about the second time macro economic conditions.
These uncertainties the only partially mitigated.
By the following full advantages we enjoy in terms of predictability I visibility made me that.
Almost all of our revenues occurring.
Secondly.
Older than a recurring revenue in the near Tony's from existing customers.
Thirdly, we have high visibility into these existing customers <unk> relationships and finally.
We have minimal customer concentration.
Well this background, Oh, not specifically to second quarter revenue Guy.
But pay the revenue guidance with escorted we did the following.
But they spoke directly with customers that a cop over 90% of I recurring revenue.
<unk> contraction plot.
Additionally, today, we have agreed to extend payments. So it's it's stroking revenues toting $2.2 million well 51 customized.
And based upon current trends and ongoing discussion with customers. We estimate that payment extension will increase to approximately $3 million in total by June 30th.
Oh these payment extensions, we are assuming that customers only half the total will not be able to meet their revise Tim.
Therefore, we will need to me is the $1.5 million against second quarter revenue.
Based upon Allison.
Considering that the second coding seasonally I'm most challenging quota.
We are guiding revenue to come in at $91 million at the midpoint.
This represents at 4% sequential decline and 18% your other your growth.
Mostly following the type and we have established over the last several years.
Plenty now so the second quarter bottom line guidance.
We have guiding to midpoint gap mid loss of $16.2 million and <unk> income up $10.3 million.
I would like to remind you definitely eat a lot five.
We have got it too I think quite to decline in second quoted yep and non gap net income.
That's just flex set the second call. It is like I mentioned seasonally toughest quota.
Yeah, we got into a low.
Until declined then we would have normally guided despite the 1.5 million dollar reserves I mentioned, a few months ago.
There's this time they use a covert net expense settings, mostly from t. any any of it.
<unk> <unk> they didn't come reconciliation for the details I didn't making up the difference.
Cutting out to the second hot.
Oh this projection, we assume that l. shaped recovery I took the following steps.
But they gain predicted expansion and contraction.
As a customer input for the second half was it limited use that customer themselves Oh I'm sure other second house, he's not as he and the cover it impacts.
So instead, we wait top down.
But by customers for all of our logic customers and May projection take into account the business stick to the outbreak in and a continuation of the salary cool seasonal uptake that takes place in the second half.
Additionally, we are assuming that our customers and find actual duress boy requesting payment extensions in the current quota well not snap back.
<unk> the second half revenue by do so $3 million.
On top of the 1.5 million, we have four cats injuries.
In a second call it.
Oh, so we have as soon as we would have incrementally quite so confessions various phone. So I think $1 million in the second half, bringing the total revenue reduction estimate for the second half two $4 million.
$5.5 million for that I three quarters.
On the new logo side that on the team <unk>, especially hog taking into account factors such as customer distraction budget constraints and project too late.
Oh really upset by acceleration work from home scenarios <unk>.
<unk> that mentioned to you.
Strengthen any that did not all time high.
However, we estimated only a small populating pack from the new logos Jot second to have revenue you have an implementation and rent cycle.
As a result of this data with believe it just put it in for no.
To keep a Angela maybe 20 revenue guidance at $382 million, well, 16% <unk> the same level as I've probably gotten.
With respect to <unk>, we took the following steps.
But what do you use that bottom line by $5.5 million. Please it's broken revenue that we estimate will be lost from customers unable to another payment plan.
Okay.
<unk>.
Second we further reduced bottom line by $3 million for the key strategic investments rolling talked about earlier.
We believe what position did admit even stronger from this crisis.
Good interest income is projected to declined by $1.7 million for the next three quoted you said recent rate reduction.
But actually we have 50 is by $1.9 million from expand saving.
But flowing through the $1.1 million non got net income Beacon Q1 to the annual Guy.
In summary, the net indicated above so that we call. It is total $7.2 million gets out probably guidance.
Taking into account this reduction and various items details <unk> reconciliation.
Regarding to like 2020 mid point gap that loss.
<unk> net income 43.9 million and $49.8 million respectively.
Concluding comment on our guidance.
Those are you, hoping falling five nine for some time know full well that we've always be prudent without guidance.
Merrily to allow for the difficult before cat second half eaten all happy.
Do the best about better D., we have suddenly maintains its food and approach.
When developing the current got.
Especially given no if there's a huge added uncertainty surrounding the second half macro economic environment.
Finally.
Yeah, the cost me estimates for modeling purposes.
Alkylating H.P.S., we expect I knew that she has to be 57.4 million and I basically has to be 62.5 billion, but the second quarter 2020.
67.5 million 62.9 minutes, respectively for the full year 2020.
We expect that Texas, which would I made to <unk>.
Approximately $90000 for the second quarter of 2300 $65000 for the full year 2020.
Capital expenses for the second quarter 2020, I expected to total approximately $8 million to $9 million somewhat higher than normal.
It includes spending public infrastructure.
For the food you know 2020, we expect capital expenditures to be between 22, and 25 million dollar lower than upright guidance Oh goodie.
$233 million as a Standalone headquarters Bill Dot is more likely to take place at the beginning of next year.
In conclusion, we didn't make prudent and vigilant navigate through these uncertain time.
Relevant mention we are lazy to focus on continuing I cried into disciplined approach of managing expenses, which is the have evidence revenue increases before increasing fix caught.
At the same time.
We will continue investing and keys when she could priorities.
It's from this crisis even stronger.
Operator, Please go ahead.
Yeah.
Thank you.
If people would like to ask a question. Please signal by pressing start one on your telephone keypad.
I think the speaker phone. Please make sure your mute function is turned off to like a signal to reach our equipment.
Please limit yourself to one question.
Let us start one to ask the question.
We'll take our first question from a Sterling audio J.P. Morgan.
Yeah, Thanks, Hi, guys, here's our hopes where everyone's saying help you through this quarantine situation just in the surgeon enterprise is is that you talked about can you give us a sense what portion of that.
Perhaps it would be temporary so things like special programs that yeah. The government might be rolling out that you belted can go away versus what portion of it you think are permanent sticky seats that stay with you well beyond the work from home situation.
It certainly helps me out and for that one.
Yeah, I certainly thanks, and that's a great question you know as we as we came through the end of the Q1 entered into cute too. We did see some very specific code projects as we mentioned in the compared calm that C.S.T. a loan program, we jumped into action and we set up a few hotlines.
We're a handful of folks that came to us instead of taste stand up something quickly. So that we can get through this we were very conservatives in how we booked to those are getting books as permanent.
Anticipated revenue. So we just goes in the two to three months type of cycles that you expect them to stay online and again that was only a handful of opportunities. So Q1 was very very strong.
From the bookies perspective.
To keep it very well through the through the last few weeks as a as this exactly this and that included some puts and takes what I'm seeing a great great build to the pipeline as I mentioned and the people are strongly about fundamental because it doesn't.
God. Thank you.
Sterling.
The next question comes from Terry told me to with such Trust Robinson Humphrey.
Yeah, I think so protected my question and appreciate all the inside a lot of color. It's really helpful to us I guess I'm just going to focus on A.T. and T. that seems interesting today you guys are building out channel relationships and blowing up ecosystem.
Seems like more points on the board, but with a T.N.T., maybe just the background on because they have a contracts that are factored in the past what their customers you know kind of how it was that a formal play golf and how do we think about that in terms of becoming a new growth drivers. So I did that is one question, but <unk>.
[laughter].
[laughter] I'll I'll take that last part of your three part question first yes, definitely going to become a growth driver for us not currently I'm big into the 2020 number. So you know that's upside we in terms of the first part of your question, Yes. They have had a cloud contact centre offer whereas the new we're now selected.
To drive this a new product I think that they're launching but they have had <unk> <unk> and offered other contact centers. I. Previously you know we're going to be powering their 18 people have contacts enterprise offer like which is their lead off or for contact center in the market and it's the lead offer for.
Their their positioning it for customers of all sizes. So we're really thrilled candidly to be able to have.
This relationship established with then they signed exclusively with US. So it's a it's a huge huge opportunity A.T.N.T. is is absolutely one of the market leaders here. They they also have a ucas offer that's powered by being central.
And so you know.
That will be sitting right along side that says he has offered for making tea, so very exciting for five nine.
Sectarian we'll take our next question from made up our full with Morgan Stanley.
Great. Thanks, just a couple of questions for me just in terms of usage as a percentage of revenue.
That trend during the quarter and were there any spikes that we should be mindful well as we had with a year and then maybe rolling just for you you know how do you see kind of sales cycles poses kobe's, either do you see them kind of shortening that people are more aware or two or like to tell thanks.
Mm.
<unk>.
Shows Ah.
That's just part of the question I didn't hear it because I'm on a cell phone.
I sort of just odd usage as what percentage of revenue would whether there was any spike higher that.
<unk>.
<unk> no. The it was you seek revenue continues.
Relation to us description.
What's happening is that more and more about fitness is due to prizes you know 81% now.
Those enterprises out various factors in July.
<unk>.
And I speak so many hours a day and and so it stays reasonably Constance.
Enrolled and they've done it made it yeah <unk> met I'll answer the the the second question you asked which is about sales cycles. I think you know going into this we there was a question around you know hey would enterprises be willing to do deals essentially.
You know with different meetings and virtually or do you need to go and.
Press the flashing is that something that sort of a requirement I think that that's something has been answered in badly to US you know business continues on zoom and other messaging meetings products were able to close deals you know customers are still operating especially in the enterprise you know, we'd see and frankly, even in our in our [noise] commercial segment.
Businesses are continuing to do business with us into signed big deals are not happen you know at the end up to one that it's happening through the beginning do too so we're not seeing any issues.
With operating our sales organization in closing deals very large deals are very small deals across both segments of our business and so really pleased to see that you know folks at adapted to that in terms of sales cycles lengthening you know towards the end of two one we saw some acceleration of deal so the opposite of that as as customers who.
Actually who are already in our pipeline said, Okay. You know this is gonna be easier for us to just make this decision and switched to the cloud now rather than.
Oh wait and try and take our existing on premises product into a covert environment, where agents needed to work from home. So we did see some acceleration we are being you know prudent as we always are for the back half we already have good visibility into two two so we giving you the guidance there for the backpack, we're we're being prudent in the.
<unk> and you know, we're not anticipating specifically sell cycles lengthening, particularly however, you know given the macro and what might happen from a recovery perspective. Since we just don't know we're kind of just being very <unk> about the guy so but as of right now we don't see any specific.
Adults have covered that are sort of drawing outsell cycles or anything else.
Garlic. Thanks.
Mm.
I'll take our next question from David Heinz with Ken Accord.
Hey, Thanks, guys, maybe begin on themselves much in a bit and maybe this is for for dad damn how would you characterize the mix of expansion bookings versus <unk>, you've seen kind of post cobras.
Yeah.
Good question I think what we've seen.
Both in the commercial and the enterprise face that we're we're executing with her installed base very nicely sure. We'd have talked about some industries that are vulnerable being impacted negatively from the the code crisis, you know along the lines of travel hospitality retail. We're we're we have very.
Little or install base in those sectors thankfully.
We're seeing other sectors that are actually increasing and looking a lot of additional business. When you look at.
Nature's like healthcare financial services and other solution. So we took a very the benefit that we talked about earlier of having direct support relationships with our customers. Thanks to that we were able to do a very deep in section of our case, especially on the intercourse accounts.
To each of them and not only analyze them by the industry good for them, but actually speak to them. While I was I guess, they're feeling for one of their business is going to expand or contract.
That's allowed us to do is really break it down well we found across the 19 different industries that we sell into.
You know 50% of our business comes from three talk industries that I mentioned financials health care and business services, mostly with many very solid we have another 15% that come from.
Communications technology in education, and they're they're standing to benefit as well and only 15% come from travel consumer discretionary. So so we feel very fortunate that we've kind of been able to sidestepped.
Negative that's happening across all industries.
Cross all type companies like us that they that they do business with it's a very small part of our here.
So that's good.
But yeah, but if you look at the.
The mix there you know net new we continue the as running just mentioned a few moments ago. We continue that's too low surprisingly or <unk> commercial businesses.
Yeah.
New business as well as install base business through this that was actually a a bit of a surprise to me as we entered into the to the lock down I figured it would be much more difficult for us to to bring on a new customers and.
Otherwise.
<unk>.
Across or go to market strategic initiatives. We are in three areas. If you look at what we've done there with broken out or enterprise group, but into segments within the other Christ team or strategic team is executing extremely low.
And continues to exceed expectations.
<unk> wanting being double what it was a year ago. This time or commercial leadership changed that we made no last year as proven to really take cool I lose exceeding expectations. There as well and then really are channels and the partnerships is probably the one factor that's getting on all cylinders some of the new partnerships as you mentioned earlier.
Just like one that they're going to us most the most and the channel partners as well so global that size doing more into one when they had done the entire year of 20 lighting and that that momentum is continually so all <unk> hitting on off.
Perspective.
That's super helpful. Well, maybe you want just like once the if I could speak again.
Environment.
Change the timeline or expectations for a second pass roll out of your A.I. agent <unk>.
[laughter].
Yeah, one of the things that we've been very focused on through this covert initiative has been or sister discovered crisis has been.
Really focus on the basics for our customers getting them up and going moving their agents home. So to be honest you know we've had our hands full.
And our plates just completely overloaded with with urgently getting agents moved at home. So we haven't I think customers or not that's not going to be very top of mind right now that being said you did achieve our milestone that we had sat by we had said milestone for ourselves by may to get five customers actively.
Signed and and agreeing to use R.A.I. technology, which we've done. So you know we're not changing the release plan, we're still going to be launching the products that we that we talked about and those are entering the market and you've got the five customers now that have agreed to.
It better than or piloting the technology, So maybe hit our milestones on that front, but I think you know if I have to spend my time somewhere in my field right now, it's not going to be sort of.
Necessarily on the more fancy stuff, that's going to be on just doing the basics for our customers and and there's so much opportunity there right now that's that's what we're spending our time, but I think that's going to pick back up given the R.R.Y. savings that are available yeah, we have a very large.
Enterprise customer were speaking with tomorrow and this is a big part of what they're interested in is our our psychic techno R.E.I. technology. So yeah, I think it's there, but not a huge focus I'd say for customers. During this crisis.
Yeah of course makes perfect sense. Thank you guys.
Next David.
Thanks.
I think our next question from a remote Munchau with park place.
He things to take my question, Okay resting healthy as well the.
Christian on on the discussions with enterprises around moving towards the cloud and here, we did should be like you want the main events.
Like you know like really trick or their lunch.
We've been talking for low level of adoption of for clout for a long time, but the now you don't like computer we <unk> everyone should see you like you know you should be in the cloud what are your hearing in terms of like I know Wow, what a strategic versus whereas toxic old and what do you see in terms of enterprises believe Mr. Go higher up in terms of seed count.
To be comfortable to run the Niklaus now.
Well, we've been thanks roommate Raimo. This was rolling we've been on the second part of your question. We've been on a steady increase in terms of a larger and larger customers enterprises, you know with many thousands of seats moving onto the platform and so we're seeing that that number continue to wrap it up and and seeing break.
Good success there on the first part of your question.
Remind sorry can you go back to the first part of your question.
I was just seem like in terms of like a if you do a toll recline to the more like what's the how much of the close got too many strategic over in strategic <unk>, Oh, we already in that strategic mode or are we still tactic.
I think but it's it's it's more strategic I think there's but there's a dirt there seems to me to be more of a recognition and especially as a result of this event that okay cloud wasn't inevitability, maybe we could maybe folks thought they could wait longer and I think people are now starting to recognize Oh no.
You know now is the time and I I've certainly seen that messaging, Microsoft <unk> said that you know we've seen two two years of digital transformation happened virtually overnight and I've seen other I.T. sort of leaders, making the same claims so it feels to me like this is a a big change in.
Terms of the it's going to drive a big change in terms of the acceptance of cloud and you know potentially an acceleration of that now remember without with with with contact centres I'm like say for examples in meetings or other software.
Not an upgrade that happens overnight so while the best metric, we can give you as our pipeline, which again is double just in in your doubles with double the size and this Q1 versus last do you want to last year that represents just two x. the opportunity for us to go after and you're also seeing that for example with A.T.N.T.
Whose cloud contact center is their lead offer so while they have you know historically offered on premises.
The leaders now cloud so I think yeah, there's a lot of signs pointing towards more acceptance of cloud as the default option and you know knock on wood hopefully, we'll start to see even more acceleration of of of that penetration happening in.
Thank you.
Right.
Our next question comes from Matt.
Then delay with V.T.I.T.
[noise], yeah, thanks for taking requests and I guess, taking it on on the channel a little bit further obviously getting global outsized food to sort of find would make the jumped in and get behind the product is a is a huge step.
I'm, just curious bigger walkers through sort of what was happening at the end up to the 19 that was really pushing those companies to get in there and how that process does.
Presumed to be accelerated over the last couple of months and the value that they that they find it investing in your platform.
Yeah I know this is Dan I'm happy to take that one as you may recall from previous earnings cost as much into the white partnerships that we've had for several years and so it it came into full one was the market.
Figure out marketing enterprises, we're starting to turn to the global S. license to help us with digital transformation hopeless make this migration to the cloud and helpless assess the market.
Bring to bring the players to bear and the second was our investment. So we took concerted effort to say, while we've been very successful with a very small team working with the boy imagine what we can do if it really doubled down with with the blind swallowing looks I'm sure others I did the same thing.
Those relationships like time to develop they're going to build a practice and you could get home their skills to be able to go to market and help their clients. We've helped invest in those relationships and so that one performance that we have not seen you know the same with greater than what we've seen over the last entire year was partly due to those.
Relationships and touring that's what we're starting to see a regular rather business come from the others. You know it'd been primarily the lawyer prior to a few months ago and now. It's then Oh, you know five or six of them hitting hitting on all cylinders and do deal. So it's really helped a smoker, but I don't see that.
Changing it all on the negative corruption whatsoever talked with anything we should see increasing meant to especially for what Roland just mentioned is more companies come out of this and start realizing they got to build for business continuity.
Build a a way to be able to have flexibility of their workforce to work from anywhere maybe you know this one was a work from home natural disaster could just me displacing agents and sending them you know two other location.
Cloud is key and or or that's why partners are certainly, meaning it and helping us a position that look larger enterprises, so oh, good or whatever.
Hi Tech your her prevalences healthy and sort of.
Thank you.
[noise] X. question comes from Alex Kirk for T.V. capital markets.
Yeah, I think so thanks for taking the question and hope everyone is a stupid healthy.
They want to go back to some degree or commentary on.
Think about.
You know.
The current quarter and the second half in the in the give and take here. So.
I think there was did you come from something that this work from home.
Yeah environment that would this surge in need for it gets a little customer service resources.
The the critical.
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Larger customers.
<unk>, maybe you can help kind of better you know.
That out for us right, because I think that maybe it'd be a but yeah now that I've always yeah football you adopted frame by little bit anymore.
It can be employed and that means more seats per customer that I guess weighted that's again.
Retail and traveled sectors and maybe with one <unk>.
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One was that would be more with the T.L., one disk sorta outplayed out near the remaining 2020 guidance.
Sure so.
We.
We definitely are seeing an uptick from you know the work from home and the awareness of cloud as a sort of a great option for that and I feel and this is anecdotal, but you know we're seeing his dad mentioned, you know quite a bit of strengthen our commercial side, which indicates to me that you're seeing smaller businesses, who perhaps in place.
You know who have maybe they relied on you know more retail presents and now they recognize that to keep operating their business. They need to have agents working from home to continue to service our customers. So we're seeing surprising strength from martial segment on the enterprise segment definitely we've seen you know in been in healthcare and in parts of the financial.
Services space, you've seen adding folks, adding more and more seats. So that could be an indication of Ah you know of their business as being a relatively stronger or up there you know need to surface or business into fundamentally different way with with with with contacts in arrangements. So we definitely are coming back.
But there have been as we mentioned and this is sort of what what drove the overall guide for the full year. You know, we did also see productions and and payment term extensions and so bit hard to to balance. It all out I think you know for Q. wanting you to do a second to slide positive for US and you know it's reflected in the queue to guide.
And it's reflected in the queue one performance for the back half were being prudent so fundamentally I think we're in a place where we're very confident in our strategy. We're very confident in the approach. We're also very confident that.
You know this latest macro environment has created more awareness of the need for cloud and that's being reflected in our in our bookings, but we're being cautious for that full year guide around you know not getting ahead of our skis on that and just that's what we've always done we've always been putting their ads, we get more visibility into it you know we'll.
ER will continue to drive the business and and make the right changes so.
That's why I think we are right now.
Well take our next question from Jeff Van re with Craig how.
Oh, great. Thanks, a couple of from you guys just well maybe to follow up on that last question, maybe from just a slightly different angle, but if I look at a large enterprises that was <unk> with a legacy solution. Yeah. They were forced to describe assisted moved to work from home model I guess just two questions is.
Using your customer like that as an example, the evidence some some <unk> you know what percent of little seats. You think ultimately we'll stay at home and second in that transition from would be a centralized location with apprentice solution to work from home. What did you observe in terms of you know the opportunity to pick off customers like that.
Maybe I need celebrated pay some you can display some premise for awhile, but but what is that what is that ultimate discussion with that customer trying to get home from a legacy punish solution like from your vantage point.
Yeah, Let me, let me start with the first one watched it let me back up and just say.
What we've seen was on premises and the work from home move is that if if the business already had their environment set up and configured in such a way to make it easy for ages to work from home those folks were able to transition and I've seen you know reports in the news media about <unk>.
Vendors thing they moved hundreds of thousands of agents for their customers home and so on and so forth. So I think it's not you know, it's absolutely possible to take it on premises environment and set up that at work, but it is not easy and that's the key that that I think is to keep in mind here because you as an enterprise then have to manage all of.
The infrastructure for agents first and foremost.
Think about the client if the on premises agent was already using a soft client that's one of the hurdles. So that that's okay, but in many cases on you know on premise agents are actually using physical desk phones that makes it much harder it makes it much harder because now you'd have to either switched them to us often or.
The hard phone home much more difficult required additional hardware at home to handle the special P.P.N. connections for for hardware based voice over I.P. telephone. So you know and then you've got the V.T.N. infrastructure in the security edge, which gets harder and harder to figure you get you need to maintain a very very robust security infrastructure to allow those.
Since the connected to your network. So, let's just say, it's not easy to make that happen for at home agents.
Now that's doesn't mean, it's impossible. It's just not easy. So I think you know if you were just in a position hasn't gone from you know customer and you said the only thing I need to do as my agents home.
You might not that might not be <unk> that wouldn't necessarily be enough to say, okay find them to throw out this whole on prime thing and just go with the cloud. However, if you were already considering the cloud or if you talk to anyone else in the industry about you know how easy it is to make this transition happen you would pretty quickly conclude oh gosh, it's way easy.
Here to do if I moved to the class because then all that stuff gets you handled by the cloud vendor and the security is built in and but use the connection is all handle and all that kind of stuff and so we've just done a a great job now for example, we saw customers in our pipeline who were already considering cloud who when they had to stand up response hotlines for.
Example, for coded decided to go with us so they short circuited the process and the accelerated the deals and set up you know dozens or hundreds of agents.
For sort of signing the bigger contract with US we have other large enterprises, who we've won you know parts of the business and you know today. We did this morning, Dan and I run a call with one of those companies all of our sales team and they had basically said you know part of the company ask the other part this large enterprise who were already using five nine hey.
What about experience been like getting your agents set out to work from home and the answer was well the agents went home and they logged in and that was it was like no complexity at all so I think that's that's a factor now in terms of the percentage of agents that might stay working from home that is very good question frankly I.
Believe that's going to be a new trend I think but this isn't going to go away one of our our largest customers is actually a a a gig economy contact center beep Yo called next route they have thousands of agents working from home they get flexible hours. They can work you know they have the ability to schedule and pick blocks of time when they when they are going to actually.
Log in and take calls and they can be assigned to a given customer. So I think that I work from home agents not only I think that that's going to I think a percentage of them are going to stay home I think it's better and I think frankly, when you look at the real estate, but typically exists for contact center agents. They tend to be very large rooms, with you know close quarters.
And I, just don't see that being the way forward or at least not for the next couple of years until we have a vaccine and so therefore I think this is going to be here to stay on I think it's going to make a change it's going to change the way to people think about how to build a contact center and frankly I think are so many benefits of work from home that those are going to be hard to like.
And it's going to be there for a a trend and that's that's an idea for their driver on adoption. So it's a great question and but it's it's it's a big part of the the backing of our strategy, but says we're on the right path here.
Yeah, I agree everybody small thing for kick my question.
Yeah.
The next question comes from Scott curve with need.
Hi, everyone can grab some do quarter. Thanks for taking my question.
I guess wanted to focus on the incremental investments that rolling called out to very I think you said was about a 3 billion dollar incremental expense for the for the bulk of the rest of the year.
The question there is can use a little bit more color on on what those additionally, I'm kind of areas investment are sexually why make the investment today I think you're specifically, calling it out which means to me probably seeing something that's a good opportunity that might be unique your versus and Betty listen to the guys just three months ago from here.
Yeah. Thanks, God. So the vast majority of bad investment was actually made into one in the beginning of the two two so it was essentially it's mostly head count and it was staffing up for things like 18, T.R. Channel organization, where we're seeing progress our sales organization, where we.
Dan talked about the three colors of that a transformation he's been making suddenly enterprise side, you know, bringing new enterprise sales rep. So.
The vast majority of the hiring what's happening at at at the moment. It with we saw the momentum into one and for for a bunch of those hires we actually have to start date set to April 1st so that the vast majority of the 3 million is already happened as we saw the code that.
Ah pandemic upon full we dramatically ratcheted back and so we're we're not in a place right now we're we're sort of continuing to open tons of new racks and do all kinds of hiring it slowed to a trickle since since this thing unfolded, but we will see the full year that it's actually the full year effective.
Vast majority about hiring a adds up to almost 3 million and that's that's what we're that's what we're seeing in the numbers does that make sense.
It does like.
Thanks Gothic our next question.
I think I've pressure from well power with their.
Okay, great. Thanks, Yeah, I would the action circle back on a T.N.T. It seems like it could be you know significant opportunity overtime, a real casual take some time to.
To wrap up I noticed that yeah, but in some respects me a better question for that but Luckily your perspective, but I guess, what I'm trying to understand is you know what what what kind of set you apart from the previous cloud contacts that are solution is I think.
You know that they were off or what was you know aboard unique or what you know what kind of guilty. That's what the deal for you so to speak on that front, hey, there be I.
How do we get a sense and so you know confidence to help blog like this will be you know push within H.T.N.T.'s different view that.
Process would be enterprise et cetera. Thanks.
Yeah, I think you're absolutely right, it's a significant opportunity for us and it's a huge validation of our technology and innovation.
But one of the things A.T.N.T. gave us feet back on.
Was our ability to execute a just ran circles around to everybody else I think that came as part of our go to market organization are professional services organization.
Andy Dignan, the Guy that works for Danny works and bands or Dan hired him to run his channels and P.S. Org, Andy and his team just ran circles around the competition when kids execution and so I think that's one of the areas ability to execute speed is was a big part of it.
Addition to having you know what I believe it's the best technology in the marketplace. It's not just about that it's ability to executing frankly danced on an amazing job of hiring up a team.
People that have worked in the service provider space before so it's you spout stop a channel organization working with <unk> service providers isn't very different than working with other types of resellers and channel partners. It's a very specific skill set and understanding as you mentioned you know it takes a little longer because.
When you're driving these very large scale.
Partners like service providers. It just takes a while but once they get rolling they can be absolutely massive and so we're super excited about it and Dan and his team along with Andy had then that's the nominal job so.
Thanks, Thanks, well for the question.
It's.
And that's all the time, we have for questions that I'd like to turn it back to management for additional are closing remarks.
Well, thanks, operator, and thanks to everyone for joining us today, and and trust of your all saying staying safe and healthy in closing look I'm I'm really pleased with our strong first quarter performance and our number one priority right now is to take care of our employees. So that we can continue to serve our customers to the best of our abilities.
And while we're taking a prudent stance on the impact of the macro on our business and the second half.
We want it today to make sure that we gave you incremental transparency into the business I think band, Dan and Barry at that a a great job of giving you some of the underlying metrics around bookings at borders and on the strength, we're seeing there.
Longer term the fundamentals of our business are strong and you're going to continue to execute in the discipline way that we always have at five nine so with that I, just like that they stay safe and stay healthy. Thank you all very very much.
I bet. That's concluded his conference we thank you for your participation you may not this connect.
[noise].