Q1 2020 Earnings Call
Good day, ladies and gentlemen, and welcome to the partnership first closer to talk too much on three earnings conference call.
For your information based coldest be recorded.
At this time I would like to turn the conference on June So Mr. Hunter Blankenbaker. Please go ahead there.
Great. Thank you Julie and good morning, welcome to our first quarter.
2020 earnings conference call.
Speaking on the call this morning as Alan.
Chief Executive Officer.
They Pearson Yep.
Also joining us.
Your food.
I'd 80 odd platform.
But also quite a neutral taking it would be applications.
I will discuss our strategy in first quarter results, Dave will provide more detailed view.
First quarter in 2020 yards.
Slides that accompany today's discussion.
Our available on the IR website.
At the conclusion about prepared remarks.
Happy to take your questions.
As referenced on slide two.
I'd like to remind everyone that statements made during this call.
Forward looking statements.
During the meeting private Securities Litigation Reform Act 99 clock.
These forward looking statements are based on managements expectations.
10 assumptions, maybe incorrect or imprecise.
They are subject to risks and uncertainties.
Could cause actual results to differ materially.
More information that those risks and uncertainties.
Highlighted second page of the slides.
And contain nursing seen filings.
We caution listeners not to rely on duty on these statements and disclaim any intent obligation to update.
During this call will be referring to non-GAAP financial measures.
Reconciliation to GAAP is available.
First quarter earnings press release for the first quarter earnings slides posted on the IR website.
Vishal.
In prepared remarks today.
All comparisons to prior periods in Europe or year over year.
Unless otherwise noted sequentially.
So with that.
Turning the call over to Alan.
Thanks Hunter good morning.
The first like to offer best wishes to everyone.
I hope you're safe.
Help me.
Taking all necessarily cautions.
World are critical.
<unk> video A.P.I. traffic has grown dramatically based on the growth of remote lead delivered services.
These services again like tell a health distant learning and others.
Require that video beep programmed into the overall solution as an embedded component.
We believe bondage is the market leader in the embedded video market, which we deliberate through our programmable A.P. eyes.
Intel and health alone in the month of March video A.P.I. usage increased more than 700 per cent versus February.
Second.
And then more remote world where workers are distributed.
Cloud based communications are critical.
We believe that cobin prioritizing the business continuity concerns of all businesses and in doing so we'll [noise].
Salary to move from premise to cloud based communications.
Importantly, we think this trend will accelerate even for enterprises with large workforces in single locations, because again business continuity concerns will catalyze decisions to move to the clouds.
So.
While we see long-term benefits coming out of this we are not immune just short term <unk> headwinds.
For example, we saw traffic declines in a pack early in the first quarter.
And while a pack traffic began to recover somewhat in late March.
We saw volume reductions in the U.S. and Mia at the same time.
Also we continue to see softness in impacted verticals, such as travel hospitality and consumer discretionary.
Importantly.
We did not mean elevated customer care.
In fact business segment churn in the first quarter improved to 0.8%, which is a record low.
So while churn improve.
We have had to provide relief to certainly customers will be a one time credits and extended payment terms that some customers and those impacted verticals.
Lastly.
Sales pipeline is heavily dependent on in person events with partners.
Including over 100, each year with sales force.
As these events have virtualized, we haven't seen some softness in the pipeline, which has been exacerbated a bit by the lengthening of some cell cycle and install cycles.
But when we take into account these various put pen takes <unk> related impacts.
Nonetheless have very good visibility into anticipated second quarter results.
Well full year guidance, we're trying to be cautious.
Because in any long term weakness in our business, but simply due to uncertainty about second half macro economic conditions.
Okay with that let's review first quarter results.
The A.P.I. platform delivered gap revenue growth of 44%.
Reflecting followed execution of our strategy.
I'll highlight three specific drivers of growth.
First sales of high evaluate the eyes.
Foods programmable video voice and I'd be messaging and it grew nearly 70%.
As mentioned video and tell a health showed exceptional Frank we won dozens of tell a health customers in the quarter, including the fourth largest nonprofit health system in U.S. and a large publicly traded health care provider.
We help existing customers like Doctor <unk> the largest he helped start up in Europe handle massive increases in teleconsultation.
We enable doxie Dot me, a U.S. and tell tell a health leader add 139000, new health care providers in a single week.
Driving at seven that increase in their video obsession.
A second lead driver is strong revenue growth from existing customers.
Smaller bayes net expansion in the first quarter was 138%.
Up from 134% and Q. for and it's our highest rate in more than two years.
It's only the third P. driver grow.
Is our ability to successfully sell for large enterprises, because we have the sales operations and network infrastructure that those enterprises require.
For example in the first quarter, we won the world's largest international health and beauty retail, helping them integrate communications into their online ordering process.
We help one of the world's most influential lifestyle brand roll out a new streaming service.
Importantly, this company was already a bondage contacts and our customers and we were chosen because of our ability to integrate R.A.P.I. directly into their sale for system.
And then third and we want a significant European government Health project and also helped the Spanish National Health service build an A.I. based conversational assistant to reduce calls into health care hotlines.
Summarized A.P.I. platform results reflect our success as a global multi modal communications platform.
We are winning customers across diverse industries geography is sizes and use cases.
We also ended the quarter with more than 1 million developers registered on our A.P.I. platform.
Now moving complications.
Service revenue growth in the first quarter gap growth was 10%.
This growth rate reflects our focus on mid market and enterprise customers offset by the micro second.
Brookings from mid market and then apply its customers.
Which we defined as those with greater than $12000 of A.R.R. group, 39% versus the year ago quarter.
And comprise 64% of application booking in the first quarter.
Service revenues from mid market and enterprise customers.
14% in the fourth quarter.
And service revenues from pure enterprise customers again to find his those with greater than $120000 of A.R.R. <unk>, 21% in the core.
So would that as a backdrop, let's review three key highlights of our mid market in enterprise progress.
The first is our success with channel partners.
In the first quarter with channel originated 60% of all North American field sales.
Also we are expanding our distribution coverage with bars disappears and systems integrator.
Incoming quarters, we expect to add to cheer reseller partners significantly expand our channel and geographic coverage.
The second highlights is the success of our go to market and product in bed strategy would sell for.
In March we were awarded summit status by itself.
Summit status is reserved for the top 25 salesforce.
Software vendors and this is out of more than 3000. So we are one of the top 25 out of more than 3000.
Bondage is the only ucas.
<unk> or seep has supplier to reach some it's that.
The third elements of mid market and enterprise progress is improvements, we continued making our platform to enhance its scale ability.
For example in March we saw a 300 per cent increase in mobile App installs.
And 80 per cent increase in message volume and a 20% increase in <unk>.
We launched varnished meetings.
Are fully integrated video solution built from our own videotape yeah.
In March bondage meetings usage increase 450% and the product was give them. The 2020 internet collect any product of the year Award.
We also launched greater integration between bondage business cloud are you cast solutions and bondage contact center.
As it is now integrated <unk> and agents share single sign on.
Common call control present indirect or anything.
Separately, we launched R.A.I. virtual assistant product. So live agents can focus on specialized customer request.
International from.
Vonage World Office now supports those U.S. based multinational in 15 countries.
Recent additions include Denmark, Sweden, Belgium, Italy, Switzerland, stain, Austria and Portugal.
We are excited to announce the integration of bondage contact centre now with with service now.
Which is then in limited availability and we'll be commercially available next week.
Finally during the quarter, we closed 41 enterprise deals, including 15 seven to your.
P.C.B. deals total contract value deals, let me highlight three of those 15.
First we won a highly strategic ucas plucked seek has to deal with one of the largest mortgage mortgage servicers in the U.S.
This clients competitive positioning is to build and commonly strong personal relationships with customers.
So for them to move to a new contact center and unified Communications solution was a rigorous process.
We want against our major competitors due to our beep Salesforce integration.
Second we mourn another highly competitive to deal with a nation bleeding online marketplace for investment problems.
Initially a contact centre focus deal the deal turned into a c. cast plus you cats based on the strength of our integrated product experience.
Third.
We renewed a multi year contract with a beep in <unk>.
Began as the contact center for care agents, only but has expanded into telesales I t. help desk and field sales with the result of doubling in A.R.R.
So the close.
The first quarter reflects strong performance highlighting the power of our programmable platform strategy.
And while we anticipate some short term impacts from coded.
We believe Vonages long term prospects have never been better.
I am confident we will emerge from this crisis better position company.
Deeper customer and partner relationships, a stronger <unk>, a stronger product value proposition.
<unk> ever more United employed days.
Before I call them beforehand, the call today.
They use to announce today has delayed his retirement through Choo Choo earnings while we continue to search for his successor.
Thank you for that day.
<unk> past the call to you.
Yeah.
Thanks, Allen and good morning, everyone.
I can't write a review of the first quarter on flights seven.
First quarter advantage business total revenue was 210 million for 206 million X.U.S.S., which was a head as guides represented 71% of total revenue and a 20% increase.
I would note that they're getting in this first quarter. He began recording us out as a separate line item on her income statement.
Her to highlight are operating performance.
U.S.F. revenues continue to be a pure pass through.
Generate no for us margin.
These past three revenues fit declining chew on that for positive reasons as we concluded a study that determined.
Offering is mostly software.
Meaning lower U.S.S.P.'s charged to our customers.
From slide paid business service revenue increase 23%.
Service revenue growth is our focus this week de emphasize access circuits. So if you work desk phones.
He P.I. platform revenue all of which is service with 86 million and the first quarter up 44% gap.
First quarter total revenue from applications, plus 124 million for 120 million X.U.S.F.
This 110 million bus service revenue, which increased 10% yeah.
Moving to slide nine finance business segment revenue Shurn was 0.8%.
Positive versus 1.2% in the prior year and your ago corridors and.
Monthly service revenue per customer 16% to $475.
Speech K.P. eyes are consistent demonstrating <unk> tough market.
[noise] on flight can business service margin in the first quarter was 53% sound, 3% here every year, but flat sequentially.
This was the fourth street corridor, a flat for fat or fitness service margin.
Reflecting the moved to our own higher margin products.
Hoping to slide 11, consumer revenue with 87 million for 77 million excluding yourself.
Churn at 1.8% less favorable year over year, despite targeted price increases implemented in the first quarter, which increased average monthly revenues per line.
92 cents from the prior year.
We ended the quarter with approximately 1 million consumer subscriber lines.
To hear plots tenured customers now represents 92% silver <unk> consumer base and find here plus customers are 74%.
Turning dislike 13.
Solid dated revenues for the first quarter, where 297 million.
Presenting a 9% increase X.U.S. stuff.
Yeah, I'm moving to income statement cost items on 514.
Consolidated sales and marketing expense for the first quarter with 86 million down 10 million.
This is primarily due to moving brand to spend to later in the year.
And the cancellation of in person events folks do to cope.
Engineering and development costs for 19 million up 3 million.
N D expense plastic capitalized software totaled 29 million.
Which represented 15% business service revenue.
General and administrative expense for the first quarter was 41 million up 5 million.
These increases primarily reflect the impact of a full porter noncash stocks compensation associated with new voice media employees.
Turning add the slide 15.
<unk> net loss was 4 million lower than the 1 million and the prior here.
And adjusted net income for the quarter was 12.
Five cents per diluted share down 3 million.
<unk>, where primarily due to the stock compensation related tax benefits.
Prior year Court.
First quarter adjusted either I was $39 million, a feat million euro over here.
Well it into slide 16.
X. for the quarter was 13 million 2 million due primarily to the out for mentioned development new functionality on the Phonics communications platform.
Thing and adjusted either minus cap X. $26 million.
[noise] from slide 17.
Ended the quarter $567 million isn't that sad.
Up sequentially do our customary annual bonus in fact, what are your word tax settlement.
All of which are made in the first quarter.
As of March 31, cash balance was $43 million.
<unk>, a 3.4 times L.T.M. adjusted either.
Thing else approximately $150 million of liquidity under our borrowing coveted.
We intend to reduce snapped at S.A. year progress.
Moving on to guidance on slide 19.
Notice.
Waiting 2020 guidance to reflect estimated impact because at 19 crisis.
We are seeing positive catalyst from gross same remotely delivered services <unk>.
Hi product utility is evidence face floating video usage and lower logo churn.
Upset by elevated levels of payment deferrals.
End credits and temporary demand declines in hospitality and travel related sectors.
We are seeing some customers accelerate their moved to the cloud.
Others put their decision to shift to the crowd on hold.
On their own operations.
But the visibility we have today.
Project. The net effect of these dynamics to result in 2020 gap business revenues and the range of $855 million to $880 million.
Within this number <unk> business USS 17 million.
For consumer are outlook is increased slightly as we project 2020 revenue and a 325 million dollar area.
U.S.F. you use a 34 million include.
As with the business second we are not currently saying it churn impact in the consumer segment and home phone <unk> usage has gone up during coding.
We expect full year 2020, adjusted either of between 150 million and 155 million.
We can maintain this high level of adjusted EBITDA, because super efficient to overall revenue is a modest 3%.
And our costs are highly variable, particularly with controllable expenses like T.N.E.
It's regarding the second quarter, we expect business segment revenues in the range of 213 to 216 million.
In U.S. after 4 million.
[noise] consumer revenues in the 82 million area.
Putting us half of 8 million.
And adjusted either in the 36 million dollar area.
To be clear our earnings guides reflects continued investment.
Long life assets like engineering sales capacity.
Necessary marketing to ensure we can quickly rebound from macro economic weakness caused by Kobe.
In the short term we've shared with you the visibility we have.
Putting the benefits a significant subscription based.
Experience with the impacts of probing into one.
Long term confidence that our strategic positioning is stronger as we emerge from this crisis.
Well now turn the call ever to Hunter to initiate <unk>.
Okay. Thank you day Lane, if we completely turned into a question.
Mm.
<unk>.
Gentleman he'd like to ask a question of time K. supposed to start off to heat fun affected she's one then you kind of stuff.
Taking chances to new functionality of times trying to think yourself to now you'd think not to be chocolate hmm.
If you find that your question has already been on thank you may remove yourself from the key.
<unk>.
Once again please.
We must take effect question today, some Tim <unk>.
He's kind of like.
I think skies and things for the calling the guidance <unk> I'm meeting. This this but can you talk a little bit more about the knicks, so percentage or when you can get sent which maybe even a restaurant business or travel business and.
Secondly, you know the A.P.I. businesses real strong to me just talking about you know how those trends progressed here in the school three you know that anywhere near sustainable and then lastly, it sounds like down you know obviously you can get some very positive longer time, some the negative impacts fishing, you're watching b. major.
<unk> 18 months or so but through this can you talk about longer term in next maybe two three years from now where you hope they just service revenue stepped to thank you.
So thank them. They want you take the first and then I think home or you can speak to.
The eight guys strengthen all things problems for the long term do.
[noise] absolutely so.
See.
Difference in A.P.I. revenue relative to how we saw the year on baked into the guidance. We just gave is in the mid teams billions of dollars.
And that is primarily comprised of customers in the travel and hospitality industry.
What we have seen is a drop off in usage from those companies upset by two things in that that is almost entirely s. in Massachusetts, and that's been offset by the exploding video usage that we saw.
And higher usage from primarily U.S. customers.
Of the S. en masse product to interact with their customers and those happen to be global digital leaders just not in the travel and leisure space as it relates to asked us to expand the concept on exposure.
We haven't given many credits.
And the ones that we have given do tend to be concentrated in the hospitality and and restaurants space, but those are customers that were in very close touch with and we take into our guidance their request that they made.
The request that we think we're going to get.
For credits.
And I want to keep the <unk> the impression on for ongoing sprinkling of sustainability place to go through it.
Yeah, I think you Alan Hi, everyone, I hope euro well [noise].
That's to the long term sustainability I think what we're seeing if you just refer to Allen's opening remarks that <unk>.
What this crisis has it's really accelerated a lot of digital transformation spending it I think what you're seeing for a lot of companies and we're seeing this all over the world.
Obviously, the the the the industry's affected the most like travel hospitality to sort of set them aside for a second but we're seeing a ton of interest in a ton of activity and real activity basically these projects that way that we've seen them even.
Long term.
Long term prospects.
This goes on their list now this is on the top of their list. These digital transformation initiative.
And so we're we're.
On the A.P.I. side, particularly we're seeing a lot of that so I think that bodes well for the long term.
Thanks, homework and Tim do a formal point about the long term [noise].
The way to think about this in my view is the trends that we highlighted.
We believe or permanent.
Meaning that remote work is here to stay does not mean equal or not gonna returned offices.
Trend of Virtualizing your workforce will swallow raid.
Permanently.
Exact same thing exists remotely delivered services tele help distance learning does not mean people are not going to go physically back to the Doctor will physically back from school, but those trends are going to be harming me change positively they're going to continue faster growth than before.
<unk>.
So we'd see permanent inside and then we see the temporary and so on the temporary side clearly impacting industries are going to rebound.
The challenge for all of US you don't have specific clarity as to win but they're going to rebound into normalcy in those impacted vertical to travel hospitality consumer discretionary.
When you think about long term growth.
We are simply we're going to be the beneficiary of those trends on the one hand, where you keep continued strength as Omar was talking about the chip, we an A.P.I.R. around digital transformation, but really on both sides and then we are going to continue to beat out what I refer to this u. shaped recovery.
As we reap position on the application side.
Are the beta bar revenues from down markets upmarket, so you're in the corridor booking 64% of bookings, we're mid market and enterprise booking that's up birds and 62% in the previous quarter N.T. for the growth itself was 39%.
So the composition of our revenues will change as the shape of our booking just changing going forward that will also be an accelerants to the business going both so thanks to those questions with move up.
<unk>.
Pink cadillacs questions come from Catherine Chapnick off topic.
<unk>.
Nice <unk>. Thank you for taking make question sound mind, it's hard for a little bit the entire failed. Thank all you know we're in two two right now and and trying to get it going to understanding you didn't pan out prepared remarks of things where you now.
Cycle slowed down at one.
Honey in person called.
Your new video meeting application. It seems to me that you would have a better opportunity to close sales with that and give them more proof concept online. So can you parse set up for us and and it helped me out I understand that that isn't going to be a permanent thing then you can adapt to this new world.
Thing.
Let me start an alternative would also.
All go to market traditionally as I mentioned in my remarks.
Have been dependent on in person events like Palm ended on a hug group so sell sports events, but there is.
Several hundred beyond that and other partner events that we participate at.
All of that is obviously birch alive and so in our world.
That has you know maybe a bit more challenging now our products work really well in this environment, but that smells costs that has created some softness on the front end.
I think that this office is not that great on the one hand.
Our our tools and the need for dismal chance nation, we benefit by on the other and over some period of time, obviously pose Tobin. These events are gonna be restored but.
Let me turn up Rudolph, where you can get sort of more more color on this.
<unk> sold out what we saw in the very beginning post cold need lots of course, a lot of companies were shuffling of bomb on trying to understand how to engage I'll be doesn't help lead gauge of the sale cycle sold and also how to manage the sales view.
<unk>. So we had you know being <unk> cycles in the beginning help it by our own technology and actually demonstrating old technology to engage me about costs <unk>. We approve of the concept about that that can always be blue, but the concept, albeit a unified communication we call send a building.
The <unk>, we bought customers are now I think of the single cycle and of course as almost sad we move up from seems to seems engagements that <unk>, but we bench and all my we are almost normalize it I would say from a single cycle perspective, a bomb in terms of.
<unk> cycle.
<unk>.
<unk>.
Oh.
I went more to your consumer strategic review, where are you on that.
They wanted to take that.
Yeah, absolutely that it's going according to the plan that we laid out in February there is no covert related.
The way to to process, nor the hypothesis behind it so.
So the phase rain right now it's the one that we outlined which is working intensively with our consultants in advisers to understand.
What's the asset actually would be to divest stuff should we decide to confirm that path and exactly what the options are for how to do that so it's a lot of operational items and that is going according to plan.
And you know well, we'll update as we go.
Oh, but you can't keep up with where appreciate that.
Thanks cap and banks that.
<unk>.
Thank you. My next question comes some some odd to my math can't Faith. Please go ahead.
Hi, good morning, each taking my question to help everyone is doing Wow, maybe on just on you mentioned that there's puts in case in terms of vertical exposure.
He just help us understand maybe what percentage exposure and you have to industries like hospitality retail from humor travel et cetera, just just for us to think about it on a go for basis.
They want to to take that.
Absolutely so on the A.P.I. site.
Normal course, it's about 20%.
Exposure to a travel and hospitality.
I think that's pretty standard in the A.P.I. business remember that they're offsets even to that for instance ride sharing companies.
Obviously based on their own statement spending less ride sharing but they're also doing more food delivered so that's the that's the exposure there.
We do see that as a temporary you know they're offsets and then we also have we believe that the softness there is temporary it's hard to say exactly when it comes in and I I'd say that we took a cautious approach.
To how it does come in the on the A.P.I. side I would just remind people that you know we are very geographically diverse and in terms of the timing of how <unk>.
Has affected.
Different regions you know, we we have been diversification has helped US obviously, it's affected every geography, but infecting it at different times on the application side are exposure to those industries is rubber.
We clearly do have customers in retail.
Customers in a in a restaurant business.
And you know that's where.
And those types of customers tend to be bigger so we know exactly where they stand.
Terms of likely credit where credit requests, but it is a smaller percentage of what we do on the application side relative to the number that I gave on A.P.I.
Grain that's really helpful. And then Allen I think I heard you mention a new innovation with service now clearly there you know one of the best on companies and Enterprise software I'm curious if you could just maybe double click on that and just help us understand what their relationship there is and if there'll be any.
Any joint go to marketing efforts et cetera.
Thanks, My let me ask would also to take that.
Well they showed US is yes, we we will have on both the market engagement with them. The the relationship that we developing within service now these very similar to the relationship that we'd have a bit with their sales force about call about who the sheer EM now so what we are developing.
We have do think that makes you can say do smiled up on C.S.M. now.
And as you know some of the costs from some of the C.R.M. costs. Much. There are also C.S.M. costs more so from service now and I. We are intended to engaging people maybe.
We do have a goal to market.
We have a more announcements Max weekend and I follow up on back.
Right, it's exciting add things campaign.
I think a quarter.
Thanks month thing.
[noise]. Thank King Hi, next question comes from Rich, but now I've meet him and company takes go ahead.
Thank you good morning, and graduations on on a nice print and challenging environment to say, the least and he's hoping you ride a little more color on the <unk>.
The percentage of total A.P.I. business that comes from the kind of high value applications kind of weird that is today and.
Could give any kind of thing where you think Mecca gold their time since it's clearly a faster growing cohort of that business.
When you have to gain dance with up.
Yeah, absolutely you know Mar certainly provide some color so high value right now is in the mid teens per cent of R.A.P.I. revenue base and again, that's that's growing dramatically faster.
S en masse and and most any other product.
That we have the other thing I'd point out is that that is high value is a much more U.S. oriented product if work's everywhere.
Yes, we're having is disproportionately in the U.S., whereas R.R.S.M.S. base has historically been disproportionately and eight pack. So if you think about our strategy.
Moving to more high value products, and blue and being bored geographically diverse which includes a bigger base in the U.S.
This trend that we're seeing right now is is helping us execute on on both parameters of that strategy.
Yeah, that's very helpful.
Then you have in terms of the <unk>.
Near term headwinds you guys, you're seeing I'm wondering if you could in any way try to quantify a little more what you're seeing in terms of booking swore pipeline changes as you then <unk>. The second quarter you know the bumper. They told relative to you know can can ring you know the first quarter of the year I'm just.
Give us any any sense of how those business conditions have changed you know over the last quarter.
They didn't we have to take that as well.
So whenever golf okay.
Color, but I just you know I I talked about <unk> you know if we think about the quarters to truth for I talked about to make teens kind of difference on A.P.I. versus where we saw the here you know, which is which is quite modest in the non subscription business.
On on the application side.
Had it in our guidance is a kind of high teams difference from what we saw that the story of year and that that difference is is basically to buckets. One bucket is installing bookings simply being well we're.
And the other bucket is churn, which I would call down so which is primarily down sell churn. So we're not seeing elevated logo churn. We are seeing some people say, okay. You know I planned on adding five seats, but I'm not going to do that or take five seconds. So it kind of suburban take five seats away temporarily.
And credits.
So to buckets of consulting buttons on one hand down sell turning credits on the other account roughly equally for that hi, Tina difference that I think that in our guidance for talking comment kind of on on the bookings environment specific.
Yeah, Yeah, my call multi <unk>, just walking sound, we they could be Nabih thing guidance now what about me. She is challenge environmental due to go into the business School dreams and ambitions, although that are not up enough for us out people being so but he's <unk>.
True, but we abandoned cooking up from up to one because we are actually harvesting <unk>.
She didn't know Q1, but two two is going to be a challenge one soul Dan are we we golden cute before but he but not bad or good for Davies sloping cute to do it to the cold you need a a <unk> opponents since.
[noise], great that's very helpful.
More if I could prepare you Dave can you say how much access in product revenue is baked into the two q. business guidance in the 15 year.
[noise] it is a I'm not going to give a specific number for it it is going down ratably.
First of all.
Those numbers I talked about in my in my prepare comments would be going down anyway.
And they are simply kind of go down at this fair.
Decline rate will be a little bit greater than it would have been anyway, because the impact on overall service revenues and customers.
But we don't see a any sort of a massive shift their disproportionate shift.
Since we're not seeing people say, hey, you know take down five seats and then you know also take my access away.
Or something like that so it's very closely tied.
Side.
Side I think it it will decline.
Faster because of kopec, because many of the installs we're doing at this point.
Involve desk phones.
And so that dynamic is is back into our our guidance as well.
Okay. Thanks for the clarification excess.
Thank you.
Hmm.
<unk> case miniature questions too long and one fumbled off.
Okay. We take our next question I like cut off Keybank. Please go ahead.
Thanks, guys I guess, no three or four questions for me.
Up your own different healthy.
Thanks for your guidance why why provide that I mean anything.
Clear that a lot here a lot of your peers log your competitors are pulling full year, or so new little bit of context or not.
And then then the A.P.I. outside the right thing in the marketplace and so we've been a discussion point about your platform relevant to your large competitor and and how you're thinking about margin and pricing going forwards to the rustier. Thank you.
They will ask you pick that.
Yeah, absolutely I know, marking ticket A.P.I. pricing on that's relates to giving full year guidance.
You know our guiding principles going into this where number one you know we think we do have decent visibility on our business you got a subscription business on the application side and we're we're living in the eyes, a storm as it relates to bookings and a lot of the effects that occur.
In the second quarter.
Affect the rest of the year.
A lot of the sales things that you do in the latter part of the year.
2021, so good visibility there because of because of the subscription nature of the business.
P eyesight and by the way our our comparable so at least the ones that have reported.
So given guides the ones, who are and subscription you see unceasing businesses.
On the A.P.I. side, we know that one of our comparable pulled annual guidance and this is not a subscription business, but for US you know we feel like we we do have appropriate visibility to give a range and you know it was was a fairly wide range, reflecting the fact.
But there is there is uncertainty in the world.
Given that geographic diversity that we're seeing and the fact that we're now we now have four months under our belt.
We felt comfortable putting that number out and as a guiding principle. We also felt like conveying what we're saying in our our best view.
What's the right thing to do in this situation.
[noise] elaborated on.
Yes, I see I think your question was how we're thinking about margins on pricing for the remainder of the year. What we have seen so far I think even let's use Asia Pacific as a as an example, so we can pretty good let's just make the generals didn't we feel pretty good about not only marginally good pricing through other means of a year.
And part of what gives us that confidence gives me that confidence and be a campsite is.
Sort of going through going through what.
What what we saw in Asia Pacific.
And it [laughter], that's kind of trucks to what we see happening in the rest of the world I think we didn't see for example pressure on margins are pressure on pricing there and we're not seeing it so far out here either.
That's currently argue for this year for the rest of here.
Okay, thanks them or.
Thank you accessing come from the timing, Okay <unk> <unk>.
Hi, guys is not on for Sterling. Thanks for taking the question in terms of the possible implementation delays what parts of the product portfolio D.C. higher than the greatest risk in what is happening on on the average hmm teaching time frames. Thanks.
The adult but once you take that the that your your question really limited just to be application side, because the some extra been cell, which is done exist on the yeah, if you outside without them.
Yeah, and what we see now himself Elmo <unk> lagging, especially the calf. So we're that accompanies article meeting to us. So we have signed your depaul jokes, but they are waiting for get D.C. stuff <unk> or to reopen to stop the installation. So let me see Malibu.
Installations that they liking that we saw before which was a more of a professional service or or <unk> outside of the beaches now, it's more about kobe or or the opening I'll <unk> also bacon blob I'll I'll people get enough guidance.
It that makes sense and then just one follow for me in terms of headcount <unk>, where are you guys trembling in terms of your plan for the next couple of corridors has not changed you know relative to what you had previously thanks.
<unk> <unk> now and I'm glad you asked that question didn't simple answer is our head count as a headcount plans are.
Virtually unchanged so it'd be very specific we're making no close good related layoffs.
There is no rowing along employees anticipated.
We have.
At last count some.
I think it's around 225 open positions that we've continued to recruit for immediate spread across the organization in the key point here.
Is that.
Embedded in our <unk> in the either done guide and they provided.
Is he continued investment.
And when I referred to as long lie about them, which is you know plotnik engineering and sales capacity and if it's same time investing in the marketing side.
<unk> working media, but it's people as well so that we can swings shell out of coding.
And that's exactly how we've set this up.
And that's reflected in that either <unk>.
Great. Thanks, so much going to appreciate cone.
Thank you.
I came here next question is something that 10 myself of Morgan Stanley taste.
Hi, This is Eric on for me to thanks for taking our question, maybe just going back to the <unk> <unk> <unk> margin on more complex than our functionality are there other drivers that were more impactful there.
Eric Thanks to the question to me I would also to take that.
Didn't go by <unk>.
Huh.
<unk> both of them Eric both of them, we had a very due to water email contact centre, especially need some about that we close 41 enterprise meals and <unk> larger then I wouldn't even bother to <unk> <unk> big.
<unk> when I, we blew the port for me when we have a U.C. plus and see what we know when we all for C.C.R. phoned up Santa and we pulled she she that's big strength of of the solution M. I should say a bad now both of them out when we may 4th Formula a game there.
Think I'm a little hopeful.
Thank you and then maybe just on phones, there is where you have managed cause.
Yeah, I know you noted that a large number. The then largely just do the variable cost in nature, but I've never been in the areas, where you've maybe need more permanent changes and found efficiencies, but we should be mindful.
Well, let me comment on that as well the.
You know our adjust to debug guidance reflects what I guess sure before with Matt.
Continued hiring.
<unk>.
But the structure of our organization is our cost structure is highly variable so for instance.
We are unique among particularly the application providers that our infrastructure is all public club days much much less extent private club. So what happens is that cost that infrastructural cost become entirely variabilize.
And that sort of enables though that's just one example, what is that has enabled us to.
Preserved profitability in the midst of again, you know guidance some softness in the back in revenues, obviously, we're seeing a good benefit in P. a knee simply because people are just not able to travel and the like but it's a combination of of Variabilized.
Cost structure and reductions in I would say to lower calorie areas like T.V., there have been able to <unk> I'll make the point again.
Is that.
Cogan is going to be a.
Short term live blip, the long term trends for business or undeniably positive.
So we do not want to pull off foot off the accelerator relative to investments in long why baskets, which again is investments measuring aquatic and tell capacity.
And the marketing required the sling shot out of code that sort of the organizing principle that we've had a as we've gone through and we budgeted ourselves we sort of created this new outlook for a year.
Oh, thank you.
I can't you take on next question. Some Ryan My point, then I'll stay thin thing <unk>.
Next taking the question just wants to me today.
Unimpressive to see business turn declined the quarter electric comments on the long term pool, Florida cloud absorption across communications.
From your point of view heighten seems increase the men playing out for customers have so far than hesitant to move to the club.
You can't even see stronger initial doctors contact center and would you expect this before it happened quicker with us and be customers compared to the American price.
Ryan Thanks, Great question.
The long term trends.
That I cited.
Oh really very positive for cloud communications in general and bonded specifically because they chew trends are again.
Remote work in remote with a little bit services.
In my view [noise].
The remote work side.
Clearly, there's gonna be greater demand from employees.
Well the opportunity to work remotely <unk> this crisis isn't going to sort of undeniably [noise].
Accelerate that trend, which existed <unk>, but it's going to accelerate that trip.
But I think the business continuity concerns or what are gonna be really interesting, particularly among the large enterprises and I mentioned this is my comments.
As those in club communications, we've played with large enterprises.
Well it has been the most successful in large enterprises that have very distributed Workforces, we'll distributed locations. So take for example, a 5000 person company, but it's a retailer and so maybe those 5000 people are spread across 500 retail stores in that.
Scenario cloud, it's absolutely necessary and at the far lower cost of ownership them from.
Now those 5000 employees, which sitting under a single room.
In one location, that's been really where the premise bayes competitors have focused.
In my view is cogut is going to be a tipping point or even those concentrated large enterprises because a business continuity concerns you can just imagine the audit committees, particularly a public companies looking to their management teams and saying are you prepared God forbid this ever happened.
Again, whether it be pandemic or natural disaster like a hurricane I think we've hit that tipping point, where things are going to move to the clouds.
And again I think the broader topic about remote with a little bit surfaces, I think that the tipping point as well, where you're going to see again the needs a program in communications I didn't examples around video and leaned in hard to tell l., but we'd feed it than the education market tutoring this everywhere.
<unk> globally, we think this trend is going to be an ongoing permanent trend as well. So we fundamentally believe the world going to be a change to play and the way worse structure of the company as with Clog communications platform able to address both trend I think we're uniquely set up to benefit from it.
<unk>.
Thank you.
Pankisi take our next question.
<unk> <unk> <unk>.
Okay. Good. Thanks, Yeah, just a couple of you know quick follow up questions. No I don't think a Allen Dave probably both in the engine as you.
Up on some of the customer <unk> payments is that principally.
Yeah allocated or related to the application serves a segment or are you seen that that on the A.P.I. side as well. So I just want to get a little more <unk> sorry.
They want you take that.
Yeah, absolutely that when we refer to credit instead of specifically on the application side.
And typically a customer will say, okay can I you know my my restaurant as close for this month can I have a credit.
And it's it's pretty much that's simple and again, we baked and not only the known but also what we believe.
Could come down the pipe.
In addition, we also took a 1 million dollar bad debt charge in the corridor.
Which is across the complex, we obviously carry a fat cat cruel at all times.
Increased out a cruel by a million dollars and that is to cover both at hand, A.P.I. bad debt above and beyond what we already had in you know cruel.
Okay Gotcha that wouldn't just come back on application services, you know the guidance from the second half of the year. The challenges you expect there I wonder if you could just help.
Help us on pack or break that down between what you're saying are expecting us and be versus enterprise. You know you refer in some of the s. and be related pressures, but you also reference lengthening sales cycles, which I suspect.
More enterprise Central she just just wanted to try to get a little more color there.
As to how that breaks down between those two.
<unk>.
Gave 'em Yankee start on that.
Yeah, so as it relates to the split between marketing and down market in Biddulph or should I, which I think it's what you're asking but also should comment on that as well it's really.
You you will have some elevated <unk>.
The S.N. days at that as being offset sinus and now I'm talking logo turn that's being upset by better go go turn up market.
Solution that we talked about which is not logo churn, but kind of services turn we're seeing more than me up market.
And so that the effects of that or we're not we're half projecting many at the credits are also in the up market at least to the larger one so.
Everything we're being affected relatively proportionately between the up marketing down market, while we're in the eye of the storm a covert.
Strategy, obviously continues to be to continue to feed the up market and we think that's where the higher utility that business continuity and they're working from home.
Benefits are are greater.
Yeah, Okay makes sense I feel.
<unk>.
Oh.
Thanking me take my next question from 10 screen. When you play keeps go ahead.
Oh, Thanks, taking a question just a couple in discussions that you're having the channel partners, one you or any noticeable difference and sort of the competitive environment getting attacked me right now or in a plane smokes and so dividers.
Flight and then you know eight d. she showed a pen demand where they're enterprises. Currently game you endemic saying you know we you shake it switched to a by product earlier, we didn't there will be back there in the fall or whenever you know this sort of alleviates <unk>.
There is a little little above a boat here that you know be beneficial to gauge once things normalizes. Thanks.
We don't want you take that on both the competitive Barbara and the likelihood of being there and up demand.
Yeah.
We didn't see much change on the other competitive <unk>. It's about the same what we see a as I said before when she when she opened cute too because of the disclosure little by social do since a a paulson since now but when she as islands 17 inches off.
<unk>, maybe two for that and we are prepared for all we are trying to be bad for do you mean shop wants to be since we probably and that's what have we happy now talking to cost too much and channels over all these that everybody would be bad for these Marshall and food globally by the end up your and when we have.
Depend for that they especially without channels, especially now that we are expanding pen.
So it's now on top of about soon stores. So some additional can better we can offer a into marketing their channels are very oh, jeez don't do that.
Okay. Thank you.
<unk> right I mean.
That's the question.
Mm.
And kinetic [laughter] <unk> of Clay County <unk>.
Thank you, having not been more than a few miles from my house for weeks and having a haircut Sandra <unk> I'm really a bit from your permanence comments, Alan but I get your point, so relative to the channel no one of the issues that we always have is getting close.
To understand the difference differences amongst all the providers and picked up a couple that we thought were important I just want to see if you get addressing and that's smart number capability and suddenly you're security protocols seem to be different chairs in the market and I wondered if she could elaborate on that.
Yeah look I think that.
And I'll start and I'll turn to the <unk> the.
We asked particularly the <unk> the mast raising channel, we always say.
<unk> you can get wrenching, because it's very difficult for channel partner you differentiate paid simple coming you can install let's say 200 employees.
<unk> again is more undifferentiated.
But we have.
Substantial differentiator in contact centre, particularly in itself horse environment. When we find increasingly that is pulling you cast and that's why I talked about we release that integrated <unk> solution. So that you have common call control common side up sign on presents.
An directory think so it doesn't matter, whether you're an agent or or a employee you can operate in the same. So those are differentiations that we need to channel and based upon close rate seem to work.
In terms of you know a better clothes rate.
I'm, sorry, I talked long, but rudolph anything after that.
Yeah, I'm not much about up you know you'll sat at all I think <unk>. So of course, all day and bad about almost made it. So <unk>. We are doing this end with the service now.
We launch now we've been service now so you're going to C.C.R.M.S.G.S.M., we've been bad almost made me the integration into seems similar channels appreciated that the market appreciated bad then of course, the customers appreciated and then of course <unk> eat the way that <unk> as we a motor boats before.
I'm sure it's up for US there are three what we call. It a three cease it's it's a continuity computations and compliance because you mentioned security business continuity computers work of those are the two big things that we got focus on a horse everything a package of with a compliance our data data privacy.
Security that we'd love to our customers very important in the enterprise and that's why we see ugly to adoption mother enterprises.
[noise]. Thanks, Thanks Rudolph Olympics towards.
Yeah.
I can't attack to kind of cool <unk> talking by <unk>.
Okay, great that wraps up look you in a portion of today's call.
Look forward to visit in many of you in coming months at several virtual Lester conferences, which will be left us.
You can follow our comments on bondage best relation to the left.
<unk>.
Please contact us do need any additional details and thank you again for doing today.
Mm.
Thank keys, maybe some <unk> that's cool. Thank you for your participation you may not discriminate.
[noise].