Q1 2020 Earnings Call
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And your conference operator today at this time all participants are already in listen only mode. After their prepared remarks, the management from Liveperson will conduct a question and answer session and conference participants will be given instructions at that time to give everyone. The opportunity to participate please limit yourself asking one question and one follow up as a reminder, discount.
We're just being reported I would now like to turn the conference over to Mr., Matthew Kempler, The Companys Senior Vice President of Investor Relations. Please go ahead Sir.
Thanks very much in.
Joining me on the call today is probably kafeel like persons founder and CEO and John colleagues, our Chief Financial Officer.
Please note that during today's call, we will make forward looking statements, which our predictions projections and other statements about future results. These statements are based in our current expectations and assumptions that the today and are subject to risks and uncertainties.
Actual results may differ materially due to various backers, including those described in today's earnings press release in the comments made during this conference call and in 10-K's 10-Q's reports, we file from time to time of the FCC, we assume no obligation to update any forward looking statements also during this call we will discuss certain non-GAAP financial measures.
Reconciliation of GAAP to non-GAAP financial measures is included in todays earnings press release, both this press release and supplemental slides include highlights for the quarter are available in the Investor Relations section Livepersons website with that I will turn the call over to Rob.
Thanks, Matt and thank you for joining Livepersons Q1, 2020 earnings call.
Well I person delivered strong first quarter results and we'll continue with strong results into Q2.
Despite macro uncertainties that emerged starting in the first quarter revenue within the top half of our guidance range and increased 18% year over year.
$78.1 million.
Our adjusted EBITDA loss of 4.6 million was 2.8, probably better than guidance.
Like person ended March with a 171 billion.
I was in cash.
Decrease of only 5 million over the past quarter.
As we highlighted on the last quarter's call one of the key reasons, we promote John to see I'll call. It was the ability to leverage automation.
Crease productivity and capture caustic.
I'm glad to see the John's really hit the ground running started off very strong.
I'm really proud of strong execution of my teeth.
Especially in a world that we're dealing with today over the past few weeks and all the changes.
Obviously to protect the helpful employees.
Trick to travel and we bought all of our employees into a work from home situation.
Although the new normal work from home as required some adaptation.
The digital things have gone to the cloud.
We had very few changes and how we operate on daily basis.
Also very proud the fact that weve chosen by fast company.
The third most innovative companies in the world.
Also Forrester license in the upper right quadrant as a leading company its new report on new ways Digital first customer service solutions.
That's just what defines a great work that our park teams have been doing can extending life person.
Not only having the best messaging platform.
But also be one of them <unk> companies now in the world.
Good planning for future Worboys contact centers go away.
A replacement dusting based digital conversations powered by he I had humans.
Expected out of your take five to 10 years for traditional call centers to disappear.
Overall, we see three weaker in March.
The majority of call centers for now closed.
Although many call center agents shifted to work from home.
We estimate that the industry is only at about 50% capacity.
But those that are working remotely.
Answering your voice calls in your home presents a plethora of challenges.
The shelter in place to cold and Mark.
Conversations on Liveengage surge bought approximately 20% month over month.
We're continuing to see growth off that new base.
With that in context.
And all 2019, our conversations clean both messaging and shot for up about 21% year over year.
Messaging bonds being up at a far greater rate.
One office workers, what remote corporate world turn to do.
And other video copsync platforms to maintain productivity and keep operations running.
Contact center agents, which typically represents the largest portion of the employee base for bank Telco Heck healthcare insurance company also need a cloud based platform to work remotely.
Liveengage filling that point, helping leading brands maintained business continuity, let's stay connected with their consumers by rapidly transitioning to remote work increasing step efficiencies with messaging and they are.
Some of all my years, providing the company I've never seen such demand go up.
In the business on the usage site and demand for the company.
There's definitely was a a great shift or with what's happened. The last couple of weeks and many brands have been really scrambling.
To try to.
Hold on to the boys contact center agents in the past.
And now however, there are major challenges, having an agent at home taking voice calls for example, some popular contact center geographies like India, Philippines agents, they don't work and live in homes.
That they have bandwidth today of connectivity to the internet.
Okay. So even tried to put them in hotel rooms.
And that even those that have connectivity needed cloud based solution and then they need to invest in high quality headsets and laptops and all of that has been happening in the last couple of weeks.
But even if the brand you know Gothic <unk> in the home and the ramps in called their children, a dogs and all the noise is probably normal home.
And then the last part is really about data privacy or agent is talking on the phone.
And talking to a consumer about their private banking information that's all sensitive information that's being shared with other people in the home.
All of these.
Issues or solved by have eaten at home messaging.
Quite.
Personal it's in the cloud and allows for the skill set of customers look for once again that was what drove that massive surgeon volume month over month.
The impact of.
Staffing.
Challenges in capacity today.
We're seeing now everywhere, whether it's your favorite banker airliner retail or what you're seeing on their web sites for the rest is it because you're going to be on hold a long time, even my my back which is chase, they're not a customer of ours yet but.
They have up on the website our call centers have limited hours temporarily and we're experiencing high called down volumes do you think about how long can a banco without answering its fault.
If I didn't issue with my count balance how long can they go but not answering the call it's not too long, but that's been the rush.
To the Liveengage platform.
And even we know some of our customers try to keep the contact centers open with social distancing, you're running at about 30% to 50% capacity, which is not a sustainable.
Model for running a contact so just put the physical.
Distancing in though no sense.
Our successfully powering these virtual workforce the best few today I believe the best solution is actually not bringing the agents back online at all and just replacing them with me I based solutions.
This is where we see the greatest demand in our business right now.
And we've been preparing for the shift in folks you know park resources and building powerful AI based tools like in 10 analyzer conversation builder and 10 analytics and all the awards. We won a one recently just reinforces our focused on <unk>.
Well I can help illustrate.
After the future conversational commerce.
And highlight one of our customers, who one of the largest telcos in Australia.
We signed this customer after they came to the T mobile summit or in the fourth quarter 2018 in Charleston.
They quickly embraced both messaging and the operating model does he was experts in which a group of agents on the PML on the fixed group of customers.
Oh. This is all may, possibly causally asynchronous capabilities that messaging on liveengage.
And today already over 50% of their entire contact volume.
It's on messaging.
Now they virtualized because cobot their virtualizing all the front end.
So that includes service sales and even a retail agents.
And now they're targeting 80% of all customer contacts to be put onto messaging, leaving only 20% in boys.
And the goal is to take the majority of those conversations and messaging and automate.
This telco there was an article written from the person who runs all of consumer experience.
And he said that I just came out a couple of weeks code that they will not be returning the physical contact centers that they will be keep maintaining the virtualize workforce concept.
These touched transformation taking place across our entire customer base for example of European Airlines saw a 9% year over year Spike in messaging in March report that metric agents were three and a half times more efficient than voice agents.
While delivering a 95% customer satisfaction rate.
One of our retail customers doubled their labor hours, a messy one week onboarding new agents in less than 48 hours, 95% them, who are working for now also built automation to address their top 10 broader buyers related intense.
Quickly achieved nearly 60% containment great.
One of our banking customers triple the number and that's huge called Liveengage removed the coal block.
From the Android and iOS apps.
They tend to play like 10, our operations platform the trucks real time, all the reasons consumers are reaching out to the grant and how well that brands handling those Uh huh.
Once armed with this data became turned to conversation builder and they can rapidly build automations and that's one thing saw and the last couple of weeks use of our hey, I told especially conversation fill that to rapidly.
Build conversation.
Even they were using other <unk> technologies principal to larger tech companies, but we made it very easy our platform to scale those automation and react what was happening in the market.
As many more examples I can share about how all this is fueling usage on our platform and how we've now compressed down a years of go to market into months.
So were immediate benefits from a demand specifically in our usage based models like Gainshare, which is now expected decrease more than 50% year over year over year in the first half a 2020.
We're also seeing brands rapidly embrace automation to address imbalance between fewer agent. That's the capacity issue I was talking about and more inbound conversations nearly 100% of our enterprise machine customers now and are using our automation platform.
Approximately 80% of the messy conversations in March relied on automation, that's up from 57% just in January.
Given our long term contracts with enterprise customers, obviously, not all this usage immediate translates into short term revenue, but it's a very strong leading indicator of future upsells renewals and overages.
When we look to the second half of 2020 rebalancing enthusiasm, we have four role as a beneficiary of these massive industry changes with the potential macro environmental risks the unknown.
No. We think will take at least a few months until anyone has a very clear view, how the effects of chronic bars to dynamic will play out in the global economy.
Therefore, we army our high end of our guidance range at 22% growth, we're going to widen it a little bit and bring our lower end of our guidance to 17 in order to accommodate for some of the uncertainties the current environment.
The benefit of being a public company.
Running one for 20 years gives us a perspective on how did that vicki through macro environment the changes.
She the dotcom bubble in 911 got to the great recession.
What we see as the flexibility in our cloud based recurring revenue model is really powerful it at this point.
No I spoke about the vision of using AI and automation, even on our own operations and that's why I brought Johnny and as a result, we're on the path towards enhanced profitability cash generation, while continuing to invest our core growth drivers of AI sales capacity production product innovation.
Therefore, we are raised.
Our freely full year guidance for adjusted EBITDA.
It's a range of three and a half million to tenant at night from previously issued guidance of negative 3 million casinos, John will take you through more details about this.
In closing Oh, I'm, sorry, three point over the last 20 years why person that's successfully navigate past macro shop.
We're rapidly applying pass lessons learned to the current environment.
Adaptability combined with the strength of our business model have enabled us to raise profit guidance target strong revenue growth in 2020.
By potential economic headwinds.
We're seeing strong used to trends on our platform as brands turned away from voice and close their contact centers.
We expect us to represent a permanent shift that's our platform enables brands roughly virtualized contact center work from home, making agents more efficient.
And providing unlimited scalability with automation.
Companies like Sumant, Netflix or transactional beneficiaries of how shelter in place is changing our lives.
Lets users down rather apps to me it shows in the results. We believe Liveperson is a transformational beneficiaries.
Customers aren't barking on generational shifts that will materialize in our results for years to comp.
We will emerge from Cobiz pandemic, a much stronger company.
With that I'll turn the call over to John to provide an operation update more color on our guidance John.
Thanks, Rob.
As ruptured Liveperson had a strong first quarter and is executing well in this new environment.
We are tightly managing the bottom line well actively positioning our product development and go to market organizations to support customers during the crisis.
Buying these dynamics are accelerating the adoption of our platform and our path to profitability.
My commentary will center on a review of the first quarter, how the current of ours is factoring into our revenue growth outlook and our strong execution on initiatives to enhance productivity profitability and cash generation.
Starting with the first quarter revenue increased 18% year over year to 70.1 million.
We were pleased to land in the upper half of our guidance range, despite the difficult environment.
B to B revenue increased 18% and consumer grew 50.
Within B to B hosted suffer grew 18% well services grew 14.
The U.S. grew 26% year over year and accounted for 62% revenue International grew 6% near <unk> and accounted for 38% revenue.
We signed two seven figure deals in the first quarter and 130 deals and total an increase of 10% year over year.
Existing customer deal counts increased 42% well new deal counts fell 15.
You accounts reflect several stalled sales cycles in March, particularly for new logos as contact centers when is it into crisis mode and focused on trailing operations rather than deploying platforms.
However, we have already closed several of these delayed deals in addition to a seven figure up so in the first week of April.
As Rob detailed our platform can bring immediate benefit to brand struggling to respond to the crisis with a virtual workforce.
Order to maintain business continuity with remote agents and address broken caucused, leading brands are rapidly, adding new messaging and points shifting agents to liveengage expanding use cases and widely embracing automation.
In turn conversation volume surged, 20% month over month in March and we're continuing to build off injectors.
From an industry perspective volume increases were led by financial services, followed by consumer retail.
And then telco.
Retail and E commerce within consumer retail is the fastest growing set industry.
Rising demand translated into a continuation of the strong trends, we've been saying you metrics ARPU for example increased greater than 20% to approximately 365000.
Revenue retention for enterprise mid market customers was once again within our target range of 105% to 115%.
Moving on to the bottom line the adjusted EBITDA loss in the first quarter 4.6 million was better than our guidance of 6.7 million to 8.2 million.
We also executed well on the balance sheet, bringing dsos down from the 100 days, we reported in the fourth quarter 272 at the end of the first quarter, which is back in line with our historical average.
We ended March with cash balance of 271 million, which was only 5 million reduction from last quarter.
The improved loss in the first quarter represent steps taken my life person to accelerate its path to profitability and cash generation, while continuing to invest into core growth drivers of sales capacity AI and product innovations.
In total we're on track to reduce our 2020 expenses by 7.5 to 60.5 million.
Where we fall on the expense savings range will align closely with where we land within our revenue range for the year.
Approximately one third of the savings will be from lower TNT and marketing spend.
Travel was halted and events turned digital.
Approximately two thirds of the savings are tied to lower planned headcount, which has two primary dimension.
First we slowed recruiting and non growth areas like DNA.
Deferred some innovation spend and consolidated overlapping marketing and professional services teams.
Second since I joined I personally in October I've been streamlining operations through automation.
And we're seeing some of the fruits of this work our data science and engineering teams have already introduced nearly a dozen tools that increased productivity by enabling our teams to do more with fewer people new automations are wide, reaching ranging from pricing commissions calculators biplane analytics and cash reconciliation.
Although we were hyper focus and prudently reducing spend I went to reemphasize that our investments in growth and innovation continue.
Forced or just released a report that recognize life persons leadership in digital first customer service solutions, which is clear evidence of the payback, we're seeing in or product investment.
Yes, we will continue to strengthen or go to market machine. For example in EMEA. We recently brought on a talented new sales leader, who previously ran the immune a service cloud team for Salesforce.
Turning to the second quarter, we entered April with a strong sales type one.
Executing our strategy to add scale to our market reach beyond direct selling capacity by strengthening our partner channel.
We're building a solid pipeline with existing partners like T Chek, India mine and recently closed to new arrangements, one with a global top 10 digital consultancy and another with multi billion dollar defeo.
Accounting for year to date contract signings in the strong volume trends, we're seeing within our usage based offerings. We expect second quarter revenue in a range of 83 million to 85 million up 17% to 20% year over year, and approximately 8% quarter over quarter.
We are targeting adjusted EBITDA in a range of 1 million to 2 million, bringing us to profitability one quarter earlier than anticipated.
When we look out for the remainder of 2020, we're encouraged by the elevated use trends in our business are ramping partner activity and the Brian broad range any discussions, we're having with our customers livepersons ability to help leading brand succeed in this challenging new environment has opened the door to customers embracing transformation at a faster pace than ever before.
We also recognize of course, but there are MACRA stemming from the current of ours, and then that could potentially impact our business sales cycles and customer attrition, particularly with new logos in small business.
In an effort to balance these uncertainties with the positive trajectory, we're seeing in our year to date results. We think it's prudent to widen our 2020 revenue guidance range, two or 340 million to 355 million from previous guidance of 350 to 355.
Taking into account the spend initiatives outlined above we are positioned for improved profitability in 2020.
Even if our conservative growth assumptions plan.
For full year 2020 were targeting adjusted EBITDA of 3.5 million to 10.59 up from previous guidance of a loss of 3 million to positive three minutes.
We're also targeting total cash burn of less than 50 million in 2020, which would habits in the year with at least 130 million of cash on hand.
Please refer to our press release, the supplemental earnings materials for more detailed guidance.
I'll close by summarizing a few key points about her business. Despite the current macro uncertainties macpherson's resilient and adaptable business model has enabled us to raise profit guidance.
And target of 2020 revenue growth that is at least as strong.
As in 2019.
We are successfully streamlining operations and driving enhanced productivity through automation and these initiatives are accelerating our path to sustainable cash generation.
The investments, we've been making and product development and our go to market strategy and not only accelerating growth, but solidifying our industry leadership.
You know validated by Forrester, leading third party research from.
So with that I'll hand, the call back over to the operator for your questions.
Ladies and gentlemen, if you like to ask a question at this time you may do so by pressing star followed by the number one under telephone keypad as a reminder, and to make sure. We can make sure everyone participates we would like to ask that you have one question and one follow up question.
Our first question is from line of Raimo Lenschow with Barclays Raimo. Your line is open.
Hey, guys. It sounded like go beyond four I'm on thanks for taking my question Congrats on a really solid quarter.
So my first question is sort of all real just a point coming on the well sounds like the market opportunity here right. So you guys are obviously, even July using this opportunity it's getting more more recognition among the industry on this oh, we can all see dogs, but I'm just wondering so.
In this world into sort of like unseen Oh Award winner.
People are working from home. There you you alluded to that messaging volumes look we not just because contracts into somebody like think voices, nor do I get a medium I'm just wondering as to how do you see the do stuff like the mark it sounds like excellent traction among the customers to talk about shorter cycle as sort of like one a proof point that the huge so that no.
It's getting more and more one shoot that im just wondering as to your second part about the long longevity and also sort of like the fees.
Market have you shouldn't that this pandemic my to avoid you know to follow up questions surgeon.
I apologize you may be on mute.
Hey, guys can you give me.
Can you hear me now.
Hello.
Metering that runs at home.
Oh, Hi, mom or come home conference call.
The demand in our platform to 20% growth month over month, I think tells a massive story about the need for our platform and you know that would've taken as a couple of years to do you feel if you annualize that that don't take a couple of years to get the type of growth on our platform. We didn't have to add more agents. We didn't have to do anything it's just the demand.
To the platform and that comes in two places one is no messaging is the is the delivery for automation, it's the best way to deliver a and automation within it. So we first had you know that demand because they couldn't fulfill voice and then they went into our platform and then right away the amount of active.
You know Automations building of Automations.
Was pretty extraordinary so I think it just says when all of this is over and I don't believe wherever getting back to fix contact centers and even if that doesn't happen next six months.
Our brands are looking at how can they create now a different way to engage in that was like I was talking about the telco over in Australia, I mean, there they're all in many brands are falling that's I think now short term meat medium term and even when we get through this.
We're gonna be on the other side of capturing a lot of the demand in the market today and we're not a voice platform. It's not about a voice platform in the cloud on skin. There's a lot challenges taking that home, it's about being having a digital connection with your consumers and automating that connection that scale. So I think we're in a great place right now.
Understood and my follow up questions. So Johnson, John if you can just help US bridge so they need to be hard guidance profitability is welcome.
But if you can just drill drilling a bit as to what is driving that so you mentioned about get the high end like 16 million siltech reduce expenses, but.
Last quarter I think you guys also mentioned incremental.
16 million investment than this.
Messaging payments platform. So you can just help us reconcile astute compared to the what the owed on the fourth quarter on these calls I assume.
Outdoorsy investments all fixed it on Friday or are they still big into me Biden, and then sort of like.
But the sort of letters that 16 million Buddies expenses, you can give us any movement denim that are given what do you think.
So with regard to the expense savings I'll reiterate what I said in the prepared remarks that the expense reductions were targeting for this year or primarily a function of.
One TNT and reduced marketing.
And to a lower planned headcount again stemming from a slowed recruiting and DNA deferred innovation span, which I'll, let rob speak to in a moment and consolidation of overlapping teams and marketing professional services.
In addition automation is that we delivered has helped us to make the lives of our reps and other members.
Of the organization either you build a machine to solve a problem there maybe a little more upfront costs and putting a person that problem, but one so you never have to revisit it.
And.
Our next question is flying of Citi Kinda <unk> with Mizuho Citi. Your line is open.
Thanks for taking my question.
Well I just want to up how does your go to market more some changes change in this environment you are expecting some kind of increasing productivity has no child says that you hire late last year.
How does that in fact, the you know cells productivity and I'll be afford Acadia said in this environment.
[noise]. The good thing is there there wasn't much change to our go to market or even product. Obviously, we're just executing on but we put up in Q4, we're focused on partners I mean, obviously our base is very active so our current customer bases like very very active and they need a lot and then our partner.
He also needs a lot. So we're seeing some good activity in the base with those partners. We talked about Q4, we've got we're going to start focusing our partners, but not much has changed on the go to market. Obviously, we're not doing face to face marketing of that there's some those are the savings that John talked about bringing in but the rest of it is sort of we're just focused on the base that there's an.
I think business right now and the base here.
To just take is beyond this year and so we're just trying to.
Keep pace with what our customers demand from US right now and our partners.
Exactly.
No well look to John well first of all congratulation on a good plus two months Oh I'm. The CFO I'm wondering how are they experience there and of course, you're not expecting Corbett 19, especially me.
<unk>.
The improvement you talked about but also what's your expectation now 2021 that you guys talked about not last quarter.
Thank you for 2021, we certainly from an expense standpoint would expect to see some a continuation of TD and marketing spend like we had in 2019, although at a more efficient levels given the strength of our partner network.
In terms of our path to profitability and cash generation I mean, that's the court reason why it was brought onboard and elevated to this position we are focused on generating cash in the business and Automations is a key factor.
That mission.
And our next question. This mine of origin Bhatia with William Blair are John Your line is open.
Hey, guys congrats on the on the quarter its first one.
Oh for John nodes, it's good to hear that your muscles and volumes are increasing.
In Canada, the adoption rate is accelerating but can you walk us through how and when this increased usage might show up in the financials given how your contracts are structured meaning is there an opportunity to upselling expand contracts mid contract or is that something that you'll have to wait for until until renewal tier two capital.
Well.
Yes, certainly it's worth.
Noting that the surgeon volume that we highlighted in his prepared remarks does not immediately translate to revenue across our entire customer base. Obviously, we have a usage based model where that would be true and also a long term contracts, including you'll age where that would not be true on an immediate.
Basis. However, it is a very strong indicator of future increased business, especially in the base with regard to renewals enough cells.
Got it and then a quick follow up.
You know.
Rob you touched on this in your prepared remarks, but the inflexibility of his voice be call Center model is really showing up in this environment.
I would imagine that new Huston, Oh interesting increasing from those that don't have any messaging.
Adopted right now what can you tell us about how that pipeline is changing what you're seeing from oh from new customers potential new customers and what you're seeing from customer get on.
Like met all like shops that have not yet a bucket.
Thank you.
Yes, so we see some indicators we did a we're doing business continuity workshops, though.
It's interesting I think voice is not about messaging be transformational anymore. It's about business continuity in risk. If you have a voice contact center you can see it you've got a risk and staying connected to your consumers.
So I think part of that like we did a call and virtual conference.
Got a week ago, when we had close to a thousand people show up about business continuity in the contact center and how do you maintain that now in the new World order.
I think that that's showing up quite well.
It is has decreased as a volume in the platform, it's down around I think about 40 or something percent from 50.
And it's now more and more shifting into messaging. So we should see more and more of that shipped over from the legacy chat a into you know into the messaging platforms with everything that's going on right now part of is that in order to deliver and automation you need you need to heavy synchronize capabilities and messaging.
And that's what's driving and feeling a lot of the even movement from a <unk> the brands that didn't make the movement yet to to messaging.
And our next question this might have some odd samano with Jefferies. Some on your line is open.
Hi, good afternoon, I'm glad to see the solid business performance and help likewise, you and your families are doing well during this time as well.
Maybe the first question.
I know last quarter. The company gave exposure by vertical and gave some color on this call as well, but you know with consumer and retail accounting for like a quarter of revenue and then some other vertical exposure I'm curious I get the trends through March but as things have gotten a little bit worse in terms of employment what are you seeing in different vern.
Calls at through April and how should we think about.
Dave rise in some verticals, but more usage, but some of the more prolonged impact to like airlines and.
<unk> retail how are you seeing volumes and those end markets now that we're in late April may to as a trend line.
It's not could you speak with you again.
With regard to travel and hospitality volumes were up however, it is one of the areas, we see potential risk in the future. However, I would note that from an exposure standpoint. It was only about 5% of our 20 lighting revenue with regard to retail, especially brick and mortar retail that's a key strength right now and.
Usage based platform we're seeing.
A lot of upside there.
Great and then maybe in terms of Uh huh.
Again after hearing the commentary around new business bookings et cetera, but yeah. If you think about new deals being a deal count falling 15% in the first quarter as I think about.
The new activity.
Through April are you seeing outside of the deals that slipped are you seeing an increase or kind of pipeline building faster than you did this time last year, maybe some kind of comparative commentary around but the pipeline what's been closed in April on what the pipeline looks like going forward.
Sure. So we did have a few stalled deals in the first quarter as I highlighted in the prepared marks that did close in the first weeks of April including some a seven figure upto and another large deal in the usage based model with regard to the pipeline generally.
We feel it's a very strong pipeline for the second quarter, even relative to last year.
And our next question from line of Sterling Auty with JP Morgan Sterling. Your line is open.
Yeah. Thanks, Hi, guys, you partially answered this but I want to put a finer point how would you evolved your go to market motion, specifically around marketing and pipeline development. You know given that you don't have the m. person summit's to rely on and what are you seeing in terms of the pace going which deals.
Moving through the phases of the sales pipeline.
Yeah, I mean, the insist that the the change in the macro environment and the idea of business continuity.
And then automation is now driving a different conversation like.
But oh market go we did this online conference had close to 1000 people show up because everybody is trying to figure out how do I get back to connecting with my consumers. So I think that just the market conditions alone, they're looking for platforms, where not only do they get to have eaten at home but.
I said, let's see what I've seen right now with our large enterprises in our P.P.O. partners. It feels by 50% of the agent never got back to work I.
I don't believe we should bring them back to work and so there what we should do is automate those use cases and those intense so that's where our strength isn't our platform and so part of the go to Mark is also allowing them to get on the platform and a sort of try create great automation and then and then scale.
So that that's kind of what we're seeing today and then working with our partners. So so far you know we have a pipeline that was already there that we're working through that has been as big interest on how do we transform a the connection with our customers with everything around business continuity and and automation.
Got it and then one follow up you talked about the improvement in Dsos when things were consistently hearing out there because the cobot 19, as you know request for flexibility on payment terms now what did you experience, saying it must have tried barton so throughout April in terms of.
What your where customers are around you know the payment side.
Yes.
We're not really seeing a large amount of request for deferred payments.
We see there there may be some risk in small business and troubling hospitality. Although again those are small percentages of our revenue in general so exposure there is pretty limited.
Next we have a question from line of Koji Ikeda with Oppenheimer coding your line is open.
Hey, Thanks for taking my questions that congrats on a good first quarter first question here is.
For John I think it's I just wanted to dig in on the cost savings initiative, that's going on this year, a little bit more so the the seven and I just want to be absolutely clear on that so I understand it conditional 7.5 to 16.5 million in cost savings you announced today it sounds like a lot of that is attributable.
To pivot to a virtual environment and how to deal with what the Corona buyers and all that disruption that's going on right now is that the right way to think about it and then.
Speaking about the in the first quarter, you announced 26 to 32 million in cost saving efficiencies is that mainly attributable to the internal automation and efficiency gains that you were talking about and if that's the case how far along are you in that process.
Realizing those 26 to 32 million in cost savings and then up one follow up.
So on the first it's only about a third so I wouldn't say, it's the bulk of it again see any and reduced marketing.
Due to the code environments about a third of the expense savings that we highlighted.
With regard to the other two thirds much of that is playing out now as planned again, we slowed recruiting and non growth areas like gionee. The deferred innovation spend was marginal and the consolidation of overlapping marketing professional services teams makes up the balance.
Along with the Automations that we're deploying today.
Okay. Thanks for that and just one quick housekeeping question I don't know if you'd given this metric before but I'm going to ask it anyway. What is your thinking about the revenue mix what does the overall exposure to SMB.
That's about 15% until.
Great. Thank you for taking my questions.
Next we have a question from line of Ryan Macdonald with meet him right in your line is open.
Hi, good afternoon, everyone. Thanks for taking my questions. First question is really around the portion of the savings around deferred innovation spend can you give an update on on sort of the progress you're making on building out the payment functionality and.
Does the deferred and innovation spend mean that you're pushing out sort of some of the spend related to that and so we should expect you know maybe that product launch is more of a 2021 would be a late 2020. Thanks.
No. The those innovations are a payment side, but is still on track. So we're not we're going to deliver that this year and it was only a small portion of savings that.
We were able to saved in the in that on the innovation side. So it's not a as much as the other savings that John talked about.
Got it and then and quick follow up in terms of international it sounds like that that business in terms of the growth is decelerating a bit from last year and it sounds like he made a change or in addition to the team. There can you just talked about what you're singing internationally or is there any greater impact from the macro pursue.
Back to give or perhaps not as strong as execution. As you were seeing you know three six months ago. Thanks.
Yeah. When it comes to age is doing very well right now.
Just help in South America, where we expect some good growth on the heels and things like what's out there.
The big market down there and we're doing a lot of work around that area. We just wanted to see more performance out of EMEA and we hired a new leader who ran the service cloud business for Salesforce. So we just felt theres still lot opportunity, there and especially now and so we just want to put some more some new leadership to give.
You know some new energy to that market and obviously North America.
Is doing quite well and you know the same leadership is running that in growing that.
And our next question is one of Steve Anders with Keybanc, Steve Your line is open.
Hi, great, Thanks, Rod daily fashion, and apparel and as a stand safe and healthy.
Just want to get a better sense of you know the ramp activity I know you've been great Big investment last year and they're just you know just now expected to be closing deals and that's a tough environment for that but it just wondering what you're saying from those reps today and their ability to execute and close.
You know it right now it's very strong once again, the the real focus is in the base.
There's just a lot of demand I mean, we're all working really hard right now even from our homes or whether in sales were implementation marketing because we have this demand and most of it a tremendous amount in the base. There's a bunch of new logos that already have pipe that would work you have and then we're ramping our partners you know as me setting.
Before I, even before everything was happening we felt that it was time that sort of put the partner strategy in place and the great thing about that as they have a base.
So we're working with these big P.T. goes or integrators. They already have a day. So we're working with them on their base and I think we could all of all understand that the base will be easier placed to sell because we have contracts and relationships and then we'll see what the new news are gonna be and that's that's coming up in it in a few quarters.
But right now we have a lot of momentum with those sales reps focused in on the base and partners.
Okay, that's great and they just want to get a better sense of any are saying, Sean usage and get caught up 20% in March and I know, it's tough for some of those contracts to to know when they're coming down but.
But that strong usage do you think that the prior outlook for 2021 of.
A 25% growth is still on the table.
Yeah, you know I would I would consider that on the table and when can we widened our range, where we kept the top end of our range even this year.
So.
You know, what's gonna get interesting and it's definitely a quick said is when you grow 20% month over month.
Hmm, even maintaining that capacity on our clubs globally I mean to handle that volume has been extraordinary and it's just a it's a it's a it's a perspective into the future value of the company.
You know, we don't see it coming down at sort of now up at a peak and now. It's it's just continues and then we'll see if we see continued to grow.
Again, I you know, we'll see it grow in April so I think you'd just talks to the short term revenue was gainshare and that's up 50% probably year over year for this this is the month of March.
That's mask too so all those model uses miles you can see it flowing through and then the rest of it really is predictor of future and how we come through this thing.
And our next question flying over that Cummins with B. Riley FBR check your line is open.
Oh, Hi, good afternoon, Thanks for taking my question.
It's really nice to see the strong messaging volumes here, especially the 20% year over year growth in March, but when I'm thinking about professional services I know, it's not a huge portion of total revenue, but have you seen any impact to that organization or are there any services that require being on site to complete the.
No I mean, we work in the cloud where digital.
So you know we're implementing Bob what we're doing a lot about building, we're implementing that we're taking customers' lives taken divisions lives were train new agents.
You know even at how we're bringing employees into the company. We have walk huge were <unk> remote employee base as it goes.
So it really hasn't disrupted or any of that yet.
So our customers just need us.
Like like they do like to have a shop face to face in the previous world, but they just need US right now and we've got to deliver on the thing they need to handle the volume that they're getting to the platform.
Got it that's that's helpful. And then I guess with about 15% of your revenue being geared towards SMB customers are there any concerns about churn towards that lower into the market given the potential economic implications from coping 19.
I mean, I don't I don't know bar or SMB or can be pretty big sort of logos. A they just don't usually have a lot of contact center reps or they could be some retailers and stuff like that so so far or even for Q2. They look pretty good I think the auto business in the dealership side.
Is the little soft and but yet we're on the OEM side, we're seeing some real activity because the OEM the manufacturers and looking at we've got to sell cars.
You know how how do we sell those cars, how do we treat that connection with the consumer, but I think auto dealer, which is very small businesses and and people aren't going to dealerships for say for selling maybe.
Although they are there are there are lot sales happening.
And the service business in the deals is happening are still but that's the only place for us it looks pretty good.
And next we have a question from line of Michael Latimore with Northland Capital markets. Michael Your line is open.
Great. Thanks.
You touched on a non gainshare pay for performance, what what was that as a percent of the first quarter revenue there.
Hey, just reached double digits in the first quarter.
Okay got it Okay and then in terms of the sales head count I believe you're at 100 at the end of.
Last year is that roughly where you are today.
In enterprise, we've kept the quota carriers the same as where we ended in fourth quarter.
Okay, great. Thanks.
And our next question is from line of Brett notebook with.
Baron Bird capital Brent Your line is open.
Hi, guys football as well thanks for taking my questions. The first is just curious for an update on the payment related investments and if your yeah executing that on schedule or I guess opening where we are with that.
Yeah, we're still on schedule for the ended the year and.
Right now.
Obviously, we built because we said the commerce will happen on our platform and we can see even today, but obviously with the increase in volume.
Bill, there's even more demand for a payment platform happening within within our platform. So so yeah, we're still on track and while still investing and building.
Okay. Perfect. Then maybe just you had talked about a new relationship with it up and digital consultancy could you walk us through how you know this relationship works in terms of showing up in the financials, just more or less outsourcing maybe some professional services.
And then you kind of just offset that revenue recognized anymore higher margin kind of cloud based revenues.
Yes, so it's a new deal just just signed I think again, it's it's part of our broader partner strategy to get more leverage on the model. There's obviously, that's with reps, there's a rent phase and so given the strong results were seeing with our existing.
Arrangements with partners, we would expect.
To see the same take place here, it's a little early to say right now though.
Alright, thank you so much.
And our next question is one of Jeff Van Rhee with Craig Hallum Capital, Jeff Your line is open.
Great. Thanks for taking my questions and nice quarter. Your guys couple for me I guess just.
Maybe starting with the guide if you looked at the high to low end of the range talk about the variability sort of the top one or two key unknowns in and how do you think about best case worst case, there to sure going to come up with the bombs that you said that I had one other question.
Hey, Jeff.
So when we think when we think about the guidance range, obviously as we've talked that run at the trajectory.
Through the first half of this year and so the high end it seems that contract we continue as well they seem to traction with usage existing customer demand and ramping partners and but we've gotta because we know there's a lot of uncertainties out there how tied to the macroeconomic rimington. That's why we reduced the low end to the guidance range to between 40 I guess the uncertainty that we don't know that were just.
Only few weeks into what's happening in the called it's Dennis.
And maybe if I could just to put a finer point on it when you look at that lower end of the range what is the most.
Unpredictable factors that bankruptcies of customers is that the spiking usage and how sustainable. It is is it you know doing close new deals like is or is there anything you talked about on that low and that is the key set of unknown.
It's a economy I mean, we're all you know so far usage is things like the tremendous and the business and we see a lot of demand I think 130 million Americans and around the world is another tens of millions of people are unemployed. We just don't know the impact so we'd rather just why now.
And like I said, we feel good about the business, but we just don't know what those impacts will be right now looks like we're a benefactor of this.
Beneficiary of this.
But.
You know, we'll see how it how it plays out.
That's great great to see the volumes and then just one one last one I guess for me as it relates the restructuring in the quarter I.
I think you had trouble over 3 million restructuring charges, just talk about I guess, maybe two things just.
From a from a headcount and departmental level what changes do you make what are the key underpinnings of that.
You know of that restructuring and then if it's not already part of the answer maybe just talk about sales in any tweaks you may have made within the structure there.
Hi, Jeff we haven't really touch the sales organization at least in terms of quota carriers.
As mentioned previously we did consolidate some overlapping teams, particularly within marketing and professional services.
And at this time I'm showing that we have no further questions over the phone lines I wouldn't like to turn it over to Robert Locascio for any closing remarks.
Thank you operator.
I like to end the call with Reemphasizing to see.
A few key points.
Given the current advice and create a new normal for contact centers.
And brands are relied on legacy voice tech for far too long.
And there were unprepared to handle the surgeon volumes and ship to remote work.
And so liveperson is really helping them stop gap right now in the current crisis.
And to transform their operation so there will be ready for the next one I couldn't have a long term view on how to service their consumers.
The investments we've made in our conversational platform over the past really 24 months have uniquely position us to help brands navigate the current environment.
Because we can power every conversation consumer has with the brand across care sales social marketing.
In a greater efficiency the voice and we have the ability to deploy those automations, which is really I think gonna be filling the gap of the supply of the capacity that won't come back.
And they meet with those consumers still are going to want to converse, but I don't believe though the agents will be the ones doing those conversations.
We have experienced imagine you know through financial crisis before the dot com and as a company. You know you can see we're very focused on growth you know, we're still a growth company, we're going for high growth, but I've been through this before and we've we've seen this is that the best thing. We can do also get very efficient and I've spent.
And we started this even entering the year and before all this happened. So we're already on a path as you can see to get more leverage in the bottom line and I think that shows just maturity of how we run the business and our future. So we're very excited I'm looking forward to next quarter coming up.
And thank you for your time in for everybody like always stay safe. Thank you.
Ladies and Jane gentlemen, we thank you for joining us for life persons first quarter 2020 earnings Conference call. This does conclude today's call on you may now disconnect.
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