Q2 2020 Five9 Inc Earnings Call
[laughter], ladies and gentlemen.
Welcome to <unk>.
Second quarter fiscal year 2020 earnings call it's quick.
Program recorded.
I'd like to turn the floor.
Please go ahead.
Thank you for joining us on today's call are rolling Trollope, CEO, Dan Burkland precedent and bears watching carefully certain statements made during the course of this conference call that are not historical facts, including those regarding the future financial performance of the company industry trends company initiatives and other future events are forward looking statements.
Within the meeting of the private Securities Litigation Reform Act of 1995.
Such statements are simply predictions should not be until we relied upon by investors actual events or results may differ materially and the company undertakes no obligation to update the information in such statements. These statements are subject to substantial risks and uncertainties that could cause.
Could adversely affect its effect Fivenine feature results and caused these forward looking statements to be an accurate, including the impact of cobot 19 pandemic.
The other which I discussed under the caption risk factors and elsewhere in five nights annual and quarterly reports filed with the Securities and Exchange Commission. In addition management will make reference to non-GAAP financial measures. During this call a discussion as to why we use non-GAAP financial measures and information regarding the reconciliation of.
Non-GAAP.
GAAP results is currently available in our press release issued earlier this afternoon as well as in the appendix or burn duster jackets and available on the Investor Relations section on five nights web site at investors Dot Fivenine dotcom and now I'd like to turn the call over to five nine CEO role in Charlotte.
Thank you Lisa and thanks, everyone for joining our call. This afternoon.
I couldn't be happier with our second quarter results with revenue at $99.8 million accelerating 29% year over year growth and 5% sequential growth.
Both year over year closet sequential growth work you to records for Fivenine.
Enterprise subscription revenue grew 33% on an LTM basis.
On the bottom line adjusted EBITDA margins of 18.3% one of our strongest Q2 showing.
I also want to highlight that we're experiencing booking strength on all fronts for book commercial enterprise add for both new logos, an installed base, what QQ being our most challenging seasonal quarter and our kids contending with the cobot disruptions fees are truly exceptional results I'll go into more detail shortly but there are four factors driving ARPU.
First there are two trends that have been building for some time a shift from on premise to cloud.
Fourth of digital transformation, both of which Carbonite team, it's potentially colder.
And.
Our increased go to market investments are clearly paying dividends, most notably with systems integrators and they PMP.
Third our has an expanded engineering leadership and the increased investments, we Barnes them, what does resulting in faster and more product innovation and finally fourth transcending all of that our team is executing like Clockwork. My Thanks go out all the Fivenine partners and especially the entire 519, who just keep on delivering.
We truly have an amazing team whatever happens with the macro environment will strive to continue delivering the superbowl execution.
Oh sure for details on each of those four drivers starting with recent market dynamics of the contact center space as I mentioned earlier, we believe the migration of on premises to the cloud is steady if not accelerating due to covert 19, so customers not recognize the critical nature of business continuity plans for their contact centers and there's an increased depreciation.
For the fact that cloud solutions can address these needs far better than on premises solutions.
In addition in the current environment customer service and customer attention had become even more critical.
Contact center engagements are moving to the forefront of customer experience.
A couple of 19 has effectively converted jobs for brick and mortar retail sales and service people to contact center agents, making contact centers, the new front door for many businesses.
We've also heard from enterprise customers that they see this is an opportunity to dispersed through agent geographically for risk management purposes and to access the wider talent pool.
While we don't know the extent to which companies will shift back to the way things, where there are indications. The cobot 19 is permanently changed the way that we work and that customers will continue to implement the work from home model to some degree.
Five nine has consistently proven we deliver on us and we're well positioned to take advantage of this trend.
Now, let me provide an update on our go to market initiatives and highlight a key factor in our success, which is our clock work like execution.
Execution has played a massive role in driving our strong Q2 results and the pipeline.
Well, we still feel the effects of the pandemic on many aspects of our lives I, particularly proud of our management team and our entire workforce for their relentless effort to maintain the high standard for the liability. That's why that is known for.
Even while being 100% remote.
Financial guidance in today's earnings press release, which Barry will touch on shortly is indicative of our business being fully operational and on track.
I'm pleased with the progress we've made on each of our go to market initiatives, including our new enterprise coverage model and our strategic shift with commercial but let me focus today on the partner fronts.
Our partners have been very key to the results you see today.
And our investments on that front are paying off big time.
I'm happy to report that not only were bookings from global that size more in Q2 that all up 2019 combined but also represented an all time record.
As we continue to strengthen our partnerships with Deloitte I'd be slalom you bought at Accenture.
This momentum validates the number of large enterprises embarking on digital transformation and cloud migration project.
In addition, our master agents and resellers continued to execute for us with an increase of 53% year over year in bookings and strong pipeline growth.
Now I'd like to Theres, some terrific news with you I'm very very pleased to announce a strategic partnership with CDW one of the largest technology providers in the U.S.
The CDW team is really great to work with and they've got a dedicated contact center team supporting hundreds of CDW sales reps I couldn't be happier to be increasing our investment, but CDW and I look forward to working more with the team there.
Finally, I'm thrilled with the progress of our ATM T. partnership as our key initiatives are taking shape with say open implementations progressing and accelerated pipeline training of several hundred go to market personnel and the advancement of our OEM integrations and customization.
Have you stated we look forward to that's contributing nicely to our 2021, rather you add momentum.
So let's go to market now, let me turn to products. We've continued to make considerable progress here, which I can illustrate with a few concrete examples first our summer releases being rolled out right now to dairy positive initial feedback.
It's really is delivers 139, new features including over 20 features for global voice.
And a major up leveling of our support for digital channels, including deep integration into an omni channel agent console supervisor interface as well as CRM workforce optimization and reporting integrations. This allows our customers to be where their customers are and shoes, how they would like to engage without compromising on the rigor of running a class.
XR.
No.
We now for new package workflow automation applications powered by when do are no code platform.
These packages cover operational dashboards and social listening and also emphasize proactive communication through digital channels building on our up leveling there, we're especially proud of the fact that our teams made them available within 90 days. After our acquisition. So these apps are showing excellent early traction.
Finally on our AI initiatives, we've watched fivenine virtual assistant a best in class Ideate Interactive voice assistance that Leverages conversational AI to automate manual tasks and answer common questions on the contact center.
Our virtual assistant provides a natural conversational response to customer inquiries quickly and efficiently, resulting common issues.
We leveraged our when do technology and strategic partnerships with Google and others to accomplish list.
Additionally, we received commitments from 10 customers to implement our agent assist product.
Half of them are expected to go live with production traffic. This month. We also have workshop on integrations with intelligent routing and escalation to an agent now in general availability.
These product launches and enhancements are added reseller partners and increased systems integrator alliances are helping us win more and even bigger enterprise customers.
In conclusion as the migration to promises to cloud and digital transformation accelerate fivenine is in an extremely strong position, especially given our proven execution track record even in these extremely challenging times.
Given this favorable market trend and the proven ability to execute we believe we can maintain thirtys level enterprise subscription growth.
Now I'd like to turn the call over to our President Dan Burkland, then go ahead.
Thank you Roland once again, we continue to execute on Mark larger and more complex enterprises.
Our Q2 bookings set an all time record.
Pipeline continues to grow to an all time high end is again two X what it was a year ago and our ecosystem of partners continues to influence over 60% of our deals.
In terms of sales hiring while we did slow the pace during the initial front of the pandemic, we've since resuming pretty aggressive hiring once it became clear that we have a special opportunity to increase or share in such a strong market.
And now as we normally do I'd like to Shearson examples key wins for the quarter.
The first as a fortune 1000 company and one of the largest mortgage lenders in the U.S. They were using a cloud solution that did not deliver the functionality compliance requirements more the reliability they need it.
Like nine was able to deliver an end to end solution, along with PCR level, one compliance and TCPA compliance for their collections department as well as improved reliability.
[noise], while they are U.S. taste fivenine is providing a global solution to over a thousand agents worldwide.
They also we're leveraging the five nine W. Oh solution powered by parents for quality management and workforce management.
We anticipate this initial order will resulting in approximately $2.3 million an annual recurring revenue to fivenine.
And now I'm excited to share with you two of our largest deals in our history.
The first is the logistics company that helps state governments and managed health care organizations with transportation services.
They had been using in the bias system, which did not give them the automation and the operational efficiencies they desire.
They looked at the leading cloud solutions and selected Fivenine, including our recently announced Ivy I solution powered by Google to fully automate the bookings process for transportation.
Also looks like Nike works, a lot of nation, we were able to trigger automatic booking confirmations.
Tend to SMS reminders give status of rise as well as provides for a whole lot surveys.
But no W. also is also being used for workforce management performance management and gamification.
Yes over 2000 concurrent agents, we anticipate this initial order to result in approximately $4.8 million annual recurring revenue to five not.
Just two weeks after closing that business, we want our largest ever initial order, which was a regional servicing company. The works with some of the largest brands in a little.
They had been using Cisco, which locks the integration requirements to multiple CRM is including Salesforce Oracle ends and us.
In addition to 5 million they considered Amazon and Genesis Fivenine was selected for the robust omni channel solution, along with a full W.S., so suite, including speech and desktop analytics workforce management and performance management.
They also purchase video engagement and our visual customer feedback survey application, enabling them to deliver unparalleled customer experiences. We anticipate this initial order to result in approximately $5.9 million in annual recurring revenue to $5.
And now as we normally do like to share. An example of an existing customer extending the relationship of Fivenine.
Due to call the leading apparel brands, who had been a finite customer for over five years needed to convert their storefront from over 400 retail outlets to one virtual online E Commerce website.
In doing so they experienced <unk> they expanded their contact center to accommodate the additional traffic that comes with processing online transactions and all these so she associated follow up questions and inquiries.
They added several hundred seats, along with W. us to more than doubled their current center with fivenine, bringing their total anticipated spend with us to over $1.5 million.
So as you can see we continue to win and successfully execute on delivering upmarket for larger more complex and more demanding enterprises is a testament to our product and engineering teams as well as our customer first culture from our go to market teams, who are always looking to provide services and programs to help our clients deliver.
Great customer experiences.
So with that I'll hand, it over to you Barry.
Thank you again.
It's all going into specifics I reminded that unless otherwise indicated all financial figures I will discuss on non-GAAP.
Reconciliations from GAAP to non-GAAP results on TV in the appendix, although I guess the presentations on our side.
We had a very strong corridor with both top and bottom line results slightly exceeding our expectations.
As I mentioned earlier revenue grew 29% year over year, and 5% quarter over quarter. Both the all time highs for Q2 as a public company.
This strong growth was driven primarily by enterprises, it's essentially revenue increased 32% your earlier on an LTM basis.
Enterprise now makes up 82% of LTM revenue and up commercial business represents the remaining 18%.
Note that despite an initial downturn in late Q1, and you allocate to our commercial business, let's come back quite strongly.
And who your other Ya indications.
As a reminder.
In the Q2 revenue guidance that we discussed during our last any school.
We expected higher than normal he gives you called it given payment extensions specifically.
We forecasted receiving $3 million, Chris placed engine and estimated that 1.5 million or 50% will be reserved against revenue.
We also maybe we see maybe larger loans up $4.7 million. It made me the extension liquids due to co the latest challenges however.
The jockey other customers can comment on the head counts, resulting in reserves of $800000, which is it was only 17% of that requests.
Okay got it just doesn't dollars weather headwinds of approximately one percentage point on the Q2 you. Another your corporate wide reported revenue growth.
As you would expect.
We continue to see some industry disproportionately impacted by Kogas 19.
For instance.
Customers and travel and hospitality I'd be guessing teets I'd expect.
That's consumer discretionary I'd be mixed with some customers, including one other decreases seats.
With me folding industry continues to be communications education and technology.
Oh, sorry logic industries financial health care and business services continued to grow steadily.
Recurring revenue accounted for 92% about revenue yeah. The eight because although revenue was comprised of professional services.
LTM DDR includes some to one of 5% I'm going to type of thing for one of the cheapest like last quarter.
A reminder, I continue to kids are winning larger and larger enterprise customers is expected to continue to cause fluctuations as they come onto the classical at different times.
That's a different grades.
Taking a quota adjusted gross margins were 65.7% and includes approximately 70 basis point your earlier.
Second quarter, adjusted EBITDA was $18.3 million, representing an eight do between the logic.
It is a decrease of approximately 30 basis points year over year.
Second quarter non-GAAP net income was $14.1 million or 21 cents per diluted share.
With regard to the balance sheet Encapso highlights.
Yes, so the main activity for days in Q2.
Woman's we are very happy with even to cover related liquidity strains.
Second quarter operating cash flow.
As it used to record of $14.8 million.
And we remain optimistic about all potential for continued cash flow generation.
Given our long term model.
I was essentially minerals and although dsos.
I'd like to finish the they gave them onto the needs discussion, although expectation polluted quota and full year twentytwenty.
He told me the top line, we are guiding to quarterly heading into a midpoint of $101 million.
Terrific was a 1% sequentially increase and it 21% your other young girls.
Well it 2020, yeah, raising the midpoint of a annual revenue guidance, but he has an $82 million to $400 million, which if it doesn't increase year over year growth rate from 16% to 22%.
Both acutely.
And we'll give you guidance closely follow the package that we've established a videos with prudence do allow jobs with a difficult to forecast seasonality in the second half and.
Ongoing macro uncertainty.
As for the bottom line, you're guiding to quoted non-GAAP net income derelict building up $12.1 million.
Which represents a 2 million dollar quota other quoted decrease that is relatively in line with a sequential declines that we had guided to every Q3 for the past six years.
Acutely decline is primarily the back end loaded loaded hiring key strategic areas, particularly you go to market and you know R&D.
As well as would use net interest income driven by the low rate environment.
And by slightly higher coupon.
But there's such a high coupon on the newly issued convertible bond.
Despite leading peak expenses.
We are raising the midpoint annual non-GAAP net income guidance from $49.8 million to $53.7 billion.
In terms of debt net loss, we're guiding to midpoint of 18.4 million two in Q3, and civil and 55.4 million in 2020, which affects the amortization of annuities are convertible bond.
Partially coaches about existing corn, but that's why there's a loss on extinguishment, although I do think on that a detail you're not GAAP to non-GAAP reconciliation.
Finally, yeah, the Kazmi estimates for modeling purposes.
For calculating earnings per share, we expect that live which is to be 69.1 million and basic she has to be 64.9 million for the third quarter 2020.
68.13 to 4.2 million, respectively for the full year 22.
We expect got taxes would you like maybe departed subsidiaries to be approximately 100000 dollar for the third quarter of 20 to 20.
$320000 for the full year, Tony Tony which excludes the 2.9 million valuation allowance tax benefit associated with that vigil observe the acquisition in the second quarter.
[noise] I capital expenditures for the third quarter 2020 are expected to total approximately $5 million to $6 million.
For the full year, we expect our capital expenditures to be between 23 and $25 million.
In conclusion, we are very pleased with our second quarter performance.
We continue to execute against a massive opportunity and remain nimble in order to navigate effectively through this uncertain macroeconomic environment.
While investing in key areas to capitalize on accelerating locker druthers.
Operator, Please go ahead.
Okay.
Sorry, I myself on mute and ladies and gentlemen.
You do have any questions, we signaled by pressing star one.
Keep pets.
He just make sure that your mute function that's turned off last to receive that signal.
Once again at this time any questions. Please press star one.
My first question is going to come from Sterling Auty with JP Morgan.
Yeah. Thanks for taking my question, it's just like NATO and pursuing.
I think my first question is on the large deals I think you know buried you'd mentioned we're expecting some.
Potentially disrupting the due due to tobin, but signing up to the largest initial deals and the company's history, certainly doesn't sound disrupting or do you feel actually maybe part of the pipeline and they were.
Good because if they conditions out there.
Yeah. This is Dan thanks for the question Yeah. Both of those deals we are ones that we've been working for sometime.
Pipeline already prior to covert absolutely.
There is just a quick follow up I mean, a good.
Did the environment, having expect.
Other accelerating these decisions.
None of the deployments to get to get up and running bear Stearns.
Oh.
Yeah, it's hard to say you know where they afforded more time to really focusing on this and you know pull the trigger so to speak earlier than they would have otherwise I think one of the two certainly.
Have popped out into effect, but again as we've talked about was organizations the size the rollout schedule on the ramping up of those seats and so.
Several months or several quarter processing of itself. So I'm not a whole lot of acceleration due to difficult, but it's just simply the in these cases it was digital transformation and really driving their behavior that leads to the cloud, which they get embarked on you know I think in one case.
Well, we're a year ago and the other one was about nine months ago, but again most of those sales processes.
Understood. Okay. Thanks for taking my question.
Good.
And moving on.
From the Middle Marshall with Morgan Stanley.
Great. Thanks, and congrats guys just wanted to.
A couple of questions for me just understanding maybe.
On a like same store or like same reseller partner, so basically trying to get a sense of if you saw that same acceleration in partners like the lawyer or was the acceleration mostly due to the addition of new partners a and then they stuck it would be.
You know any investments that are needing to take place. It professional services are kind of handle this accelerated volume of new deals. Thanks.
Yeah, that's a great question and it really harchandani spend across the board or when you look at our existing partners and I think as Robin mentioned in the outset. The outsized once again had a quarter that was larger than the entire 2019. Your combined so you could say, yes don't like if you can.
Scitor, the I.B.M. slalom, Eli and Accenture business newer she wears into light, but not branded partners to us, but they're a they're all contributing which is great they've all recognized to.
See you know it but just to look to the cloud as well as digital transformation projects and more and more enterprises are hiring them to help them with SAP to without effort.
So the size or certainly helping hit on all cylinders, we're seeing increased pipeline from ATM, t. and others and it just feels that it's a it's happening across the board.
And meet on your second question. This is relevant yes, there are incremental investments made it could and professional services and then that will be making those but not out of the.
Sort of run rate.
Not different than what we've been doing but certainly we expect that continue to increase our investments NPS to handle these large large customers.
Got it thanks.
Yeah. Thank you.
The next it looks like from Canaccord, we have favorite high.
Hey, Thanks, guys.
Congrats an order so well in one of the topics that comes up but am I caught customer conversations is just how much of the change we're seeing in industry is structural rights I I'd be curious are.
Your perspectives from your customer conversations right. So for those that have lots of bodies that personal contact center. What are you hearing in terms of what the back to work model is going to look like and of course Caldwell.
Yeah, Weve from so I have some anecdotal or not and you know there's been others. Some other studies that have been done on less I think it sums up as we're not going to go back to the way things. We're we're not totally sure exactly how much of a shift that will represent a by customer and I think it really depends on the on the cost.
Summer type so we've heard everything from.
One customer in Salt Lake City, who just recently signed up with US about 500 agent, who said that they were going to.
Lead those agents working from home three or four days, a week and it affected their real estate build out of their new contact center, because they said luck.
We're only going to aberrations in a couple of days a week or one day week, we can stagger them out and save on real estate costs, So and we've heard everything from that which is sort of somewhat you know kind of balanced in the middle to <unk>, 80% of my agents will stay working from home and this is a brand new model for us a and then onto.
Some of the more conservative industries have said, though we'll probably see most of our agents go back to the office so.
We're not sure how that all going to play out at the end.
David.
You know certainly we think it benefits cloud or just any any and incremental work from home benefits cloud because there's so much easier and ER and we'll just have to continue that to stay close to our customers and see what they need us to do and candidly. The other thing I think I would point out is.
You don't get 100% work from home model or even if you're just leveraging it in a in a small way.
There are new capabilities needed to manage a contact center and frankly, you have to begin more technology to operate that way so you'll get some savings on real estate obviously.
But.
You will Ah you will need to deploy more technology. So we've had increased interest in our virtual observer a platform that we acquired and and that's I think in that game being increasingly important component of any work from home solutions. So we're well set up for this transition however, because.
Yeah, they're not that that's helpful color and then and then Dan maybe a follow up for you. Just what are you seeing in terms of sales cycles inside of the AG channel.
So I mean, certainly channel you know not that different really they bring us into opportunities, we anticipate that they're likely to condensed slightly because they have an existing contract in place with h. energy, but they still want to go through the rigor of evaluating the solutions understanding the capabilities and going through their process.
We do see them, providing quite a bit of lead flow in the commercial space and so naturally those are shorter sales cycle.
No nothing to significantly different but certainly we're seeing a build up of the pipeline and not that's extremely healthy and.
We're excited about what's in front of us.
Perfect. Okay. Congrats on the momentum thanks.
Thank you.
All right moving onto the next question, we have Michael turn with Wells Fargo Securities.
Hey, there it's exit good afternoon.
Maybe with the guidance raise here to start off maybe just remind us what you typically see in terms of the the shape of second half activity in seasonality and then as there is there anything you've seen her observed that would lead you to believe that that she could play out somewhat differently. This year, given sort of the macro changes and it varies puts and takes either make that seasonality more or less pronounced than in prior years.
Yeah.
Yeah, Yeah I'll take this one if you don't mind or really the debt so.
Typically in the past the H one age to spirit has been either 48 took it to 47, 53% other totally as revenue.
This year.
We don't really know for sure because it has a compounded complexity of not just seasonality, we know there's going to be technology, but we didn't know the extent, but also the macro environment.
We at this stage, Oh, assuming something similar to prior years because.
If you look at the guidance that was given.
Tool Q2, three or that is very similar to the guidance easier than in prior years.
21% year over year growth, which is within the range of the 70 up into the range of 17 to 23.
Most of the times. Its you know it's been like 21 at the highest so very strong.
Guidance for Q3, Q4, with the being further out and being more seasonally affected because it's really being a tad more cautious at this stage and has a 13% year over year growth, which is reflective of that macro I didn't get the seasonality uncertainty and.
But in line of what we've done over the past years, which had been 13% to 17%.
Appreciate the color there and then just a quick follow up the retention rate looks like it ticked up nicely here, even with all the moving pieces any additional commentary you cannot around some of the key factors driving up.
Yeah. So the improvement is mainly as you would expect on a enterprise side.
And we've seen a number that larger customers.
Light or two in particular that benefit from co. Good that have ramped appreciably and we saw that improvement how spot rate to they food Q1 to keep too and that manifested itself in the corporate wide right.
Great. Thank you.
Yeah.
The next question will come from Scott Berg with Needham.
Hi, everyone, congrats on great quarter, and six or taking my questions or Dan I want to see if you could expand upon do you see the CDW partnership.
In terms of maybe how they're selling your projects as a private label products. Your suppose white label, but maybe trace year to year then.
As you look through these new sales channels over the next couple of years, how much of their bookings do you think I guess what percentage of bookings you expect these partners to contribute say, maybe three to five years down the road I know you've given the data points on influence percentage deal. So historically, but this is kind of a different angle, where there's always sold them. So.
Stages.
Yeah, Yeah, they shot and it's definitely is a different angle as well be talking about.
60%, we're talking about you know all of our partners, including you know master agent resellers exercise and our CRM and other items to be partners, even our technology partner. So just maybe in a deal endorsing less when it comes to CDW I'm very excited there you know there a huge global technology provider.
No. This is not a white label scenario like 80 Mg is for US were added to the portfolio, but we wanted to the very first cloud based solutions. So they may have a half a dozen other offerings that they could bring to the table.
But most of them are the legacy on premise assistance and now they have a market leading cloud solution. So we look at it very promising I like the pipelines already building rapidly.
And it's really because those two factors one is they have hundreds of sellers out throughout the world that sell all sorts of technologies, but they have a contact center overlay teams that specializes Justin contacts and we've been highly educating and training them as we you know as we signed on and.
They signed up [laughter] and and got them going so we've already seen our first deals and I'm looking forward to big things ahead. So.
Hard to say when you talk about the three to five year My Boy I wish I had that crystal ball, but I can't tell you know we're extremely bullish on the the market, making this transition to cloud and the fact that where you know by estimates anywhere from 15% give or take a penetrated the opportunities here.
So companies like CDW and 80, a t. they can walk us into many enterprises are only bodes well for us. So we're excited about that.
Got it is helpful. Then from a a follow up perspective Rollins you talked a lot. So limited product releases summer I think worst we've all been waiting to understand what the impact of some of your neutral AI initiatives will look like but how do you think about pricing impact with the new product going forward, obviously some of the new feature.
Functionality enhancements are just built into the general price, but you know new modules, obviously, we'll expand that over time do you think sort of the new products that you released here this year or you're looking to release, maybe by the back how do they increase their speeds over time, maybe 10 or 15% or should we just thinking about the differently but.
Yeah. Thanks, Scott, we're definitely thinking about them is incremental to our existing products that were pricing all of the says you know add ons, particularly the idea that we just announced and launched and Ah. You know there are there I was established pricing for idea is in the market already so I think we can.
Probably close or get a close approximation of that from an agent assisted perspective, you know we've got our first five we've got a handful these customers actually in production now and I, taking life calls so we're starting to see the real results and <unk> and you know.
Good being able to measure their expansion to pizza. They see the technology is valuable. So I think the jury is still out on what kind of pricing that will drive you know as I think Scott we talked before he goes there's one or two other companies out there are talking about this kind of technology. So there's some established market pricing.
That we've shared before I I'd I'd hesitate to put any kinda number on an A.S.P. uplift yet until we get a little more experience, but now what's great is we now have your products out there.
You know both sort of selling the telling the idea and in production systems and testing for our customers.
On the agent assess sites I think we're pretty quickly pretty quickly surface season results and give you some more insight into that that was our key goal for 2020 as we had talked about was dead set. This it's early technology into production and ER and get to get a product into market. So really really happy with the results will well keep you posted.
On how we're seeing the pricing unfold, though.
Excellent. Thanks for taking my question cigarettes yet.
Thanks, Thank Scott.
And moving on looks like we have a Matt vanvliet from BTG.
Hi, guys. Thanks for taking my question.
I wanted to could maybe digging a little bit on the tempo of sales and pipeline build both through the quarter and then through July.
Maybe just walk us through kind of what the initial reaction was for a lot of your customers and potential central customers as they sent you know all their employees home in March and April and then a baby throughout the quarter had a little more clarity in terms of the longevity is that this was going to persist through much of the year and.
How about impacted both deals getting close but then also pipeline build up to today.
Yeah, Matt.
Sure Great Great point on.
Initially you're exactly right. There was an immediate you know panic of you know hunker down.
Shuttered the business and a lot of our customers suffered for you know a few weeks or at least days and what we saw following that in April and May was a lot of the organizations really figuring out how to change their business and pivot to you know more of an E commerce, a web based solution whatever there.
Products and services work and I think it's time for consumers to to coach about immediate paralysis to okay. We've got to figure out how to continue living our lives and what we found was more of our customers. Then they took one or two pads either they shrunk slightly and went into kind of a hold mode, where they pivoted.
And like I talked about an example earlier they had to figure out how do we go from a retail business too you know and online ecommerce business and you know many of those that we thought would naturally softer when you look at retail and frankly, there overall revenues I'm half [laughter] suffered but the percentage of the amount of business.
We're doing through their contact center has gone through the roof. So in many cases, we've seen you know many of those adding hundreds of seats and lots of traffic into the business and it's slowing mentioned earlier a lot of 'em will likely retain a portion of that are yet to be seen so as far as closing business. You know I had anticipated that we would get down to crunch.
Hi, I'm near the end of the quarter for large businesses and they would say well too much uncertainty, let's not let's not placed the order for you know millions of dollars of commitments for contact center and I thought we'd have some pushes and we didn't you know certainly we had a couple of it always push push if we had a couple of it accelerate it should be.
Got it had an offsetting factor there as far as the enterprise business, but Tom as far as looking at you know moving forward the pipeline continues to grow.
As to our bookings, we haven't seen a change to that momentum.
As you said as we as we move into Q3.
So we're very bullish as I've mentioned, we're continuing to higher against that.
You know increased demand if you know and against that increase in pipeline that comes from let's say two different factors. The first factor being that the two items that Roland mentioned, which is the market right digital transformation and move movement to the cloud could accelerate the timing of companies, saying what's embark on.
That process, it's no longer a question of if they're going to go to the cloud. It's a question of wet and I think more business is now are saying, okay. Let's take a look at just because of what's occurred because of that moved to the work from home.
And the uncertainty of what percentage the combination and the uncertainty lends itself very well to the cloud right. We get the flexibility you hate you can work.
Shifts that rotate you can put some people at home some people in the office you can have you know the small office home office or remote office and the fact that companies are now recognizing they can draw on talent from you know not just within a 30 mile radius of a contact center, but you know anywhere in the world.
Old and still leverage that talent.
So that's that's exciting to them as well and then as we move into Q3 and beyond.
Seeing a strong momentum the second factor is really the partnership's right. That's the channels to become more and more feet on the street, representing Fivenine naturally seeing more demand and a increase in pipeline and we're staffing accordingly.
Great and then I'm curious if there's so much in terms of maybe non traditional business, but that kind of environment and broke the change or for larger enterprises, whether that's the stepping up something like a internal employee experience hotlines her contact centers.
Or even you know areas that have been traditionally direct selling needing to have a more formalized process. I know you mentioned the retailer that kind of stood up a more complex contact center, but curious if you saw much in terms of there's something completely that new that might be a longer term driver.
For you as I was kind of a new use cases.
I think I'll answer kind of the end of that serves that kicked to the best new use cases.
Because more companies we've had technologies you would allow work from home for for.
No more than a decade and a lot of companies were reluctant to do that because they felt that they would lose control and visibility of those agents right. They wanted to have them in a in a brick and motor center, where they can walk up and down the halls and you know.
Listen in on their calls and manage their behavior really understand what was going on they felt a lack of controlling they moved from home and what they sound was the technologies are now available to observe your your agents. If you think about it today I cannot only observe and monitor those the voice calls the agent I can know monitor and their cord their desktop.
<unk> session and see what they're doing on the desktop where there are browser is going even in between calls and with you know technologies like you know video meetings. Like soon provides you can now period and use the camera to observe the environment, where that Asia has to make sure there they're in an environment is suitable for being a.
Contact center agents. So the flexibility I think is one and that lends itself to cloud being Oh. This is an option we want to have that flexibility and I think the second one is business continuity and you really look at companies that say, we went through a very painful process to move our agents home if they were on a premises.
Solution.
That's because most of the premises say solutions, that's sitting within that office building that your evacuating somebody's got to make managed to maintain that that set of servers and manage that that hardware and you've got also figure out how to give agents from home do they have a hard phone at home. They now convert to a soft phone do they have to go.
Right security to access that system, that's sitting in the office that they used to be tethered to right within the local area network now they've got to be tethered to it from from Afar and so there were a lot of difficulties. We have some customers that still had a combination of cloud with five nine and their premises stay solution and they struggled with.
It was really easy with five nine it wasn't so easy with the other premises. They solution. So I think that's a new use cases, we'll see moving forward that might accelerate thanks.
Great. Thank you.
Yeah.
Ladies and gentlemen, we would ask if you could limit yourself to one question and then not for any follow ups move yourselves back into the Q on next from Craig Hallum.
We'll hear from Japan right.
Got it. Thanks, Thanks for taking my questions guys. I guess, just if someone try to stick to one here you know the work from home shift, it's certainly premises proven vulnerable overtime to the cloud for a lot of reasons, Ian and I think you would just touching on it but maybe just expand a bit further in terms of.
The you know do sort of the relative impact on bookings would rates deal cycles. In terms of is I guess is premised increasingly vulnerable based on its in flexibility. We're in a build you accommodate the work from home how well did they move home and have you seen that reflect in national subs.
To win rates.
You know in the pipeline in yet in the market.
Yeah, I'll take a bit about let that comment as well if you want that anything.
Josh so.
We have seen it land with customers. So those you mentioned prime sort of showing its a showing the gaps in the and the cracks in the solution. When it comes to work from home and while it is possible to move your contact center through a work from home model. If you have the premises based solution, it's not easy and that's what cut.
There is definitely saw one example is that insurance company that we serve and they've got where in one division and not in another Andy The division that it was sort of evaluating cloud I had to go through that painful process of setting up the p. on the top clients on their other agents desktops, and so on and so forth and recognizing that.
That's not easy for them to do they talk to their peers, who are on the cloud at who basically said you know like what migration to home I think we didn't really have to do anything you defend the agents help with their computers and that was that so I think that recognition is definitely seeping in and that's just one more straw on the camels back if you will.
That sort of as is it's going to eventually break it is beginning to an outbreak that back of that Campbell.
Of the promise of capital that's what's happening and this is one more of those things of course as many others. It's not just the configuration of the agent. So I would also say look if you're maintaining your own infrastructure. You know that means you've got your own data centers. If they got I T stop they have to configure those they have to it there have to scale them you map the ordering more hardware plugging it in with a cup.
There are like five nine or any other cloud solution you don't have to worry about any of that so it's just much less of a headache much less management.
Far left to go wrong.
The other thing that we noticed drink covenant this definitely drove some of the.
Some of the deals.
It was the need for companies to scale up or down really quickly of course. This is another well known benefit of cloud we had some customers come onto the platform with tens of thousands of line in days that would be virtually impossible for those customers to configure and on premises solution.
In that amount of time, if not impossible.
And.
And then also scale down some of our customers.
Active industries are by their weren't that many of them. We were lucky in that sense. A you know they didn't have to continue to eat the cost of that additional on premises hardware and bandwidth and everything else. So I think that again my view is it's another straw on the back and it and that back as breaking out that's how I view it.
Dan Let me think attitude.
Yes, just one thing that I think a lot of companies. We're afraid it has now been forced to do the work from home and recognized and delight went on for me I, we can get productivity out of work at home agents and they just didn't want to believe before it was a risk factor there that I think they make solved in many cases and it's for all the.
Reasons, we've talked about but also.
What Gartner has indicated to us is you're not only can draw on a broader workforce, but you can draw on a more educated workforce and a higher level of Egypt.
And what they've indicated is often times. They can you can pay those agents less for the convenience of allowing them to work from home and have flexible hours. So a lot of agents if they can have flexible hours.
[noise] someone are doing that for that reason and it allows you to open up the workforce to special needs.
People with disabilities. Other people that were other than lies limits that are challenged by being able to go into a a formal contact center every day.
So we're seeing that opened up as well and companies are recognizing that opportunity.
That's helpful. Thank you.
<unk>.
And then ladies and gentlemen, not moving on from summit in Science Group, we have Jonathan Kees as the next question.
Great. Thanks for taking my question, Yeah, Congrats on a quarter I guess I'll make my question to be up about a the regions were you've seen the.
The openings happened I know you're more domestically focused but you have some international just curious in those areas you know even as domestically like you know in a tri state heaters in New York area.
Were they they'd been opening up have you seen a.
A deceleration that demand and you've seen it going back to more normalized levels in terms of growth versus that free covert spike in the area when hunkering down, saying, we need you you know yeah work from home and Judas Asap.
With that no.
Yeah, Yeah. Thanks, we had really haven't seen at slowdown.
Pipeline fill at record highs and growing and I think a this is kind of like one truth, you can't UNFI and so from a customer perspective, it's like okay doesn't matter, if they're going back to the opposite cloud as is recognized and increasing their thing more superior. So you know again most of the.
The vast majority of the acceleration of the business, but we thought it was not really related to cobot at all and while it could've been a soccer in some of it.
Where we're just continuing to see the business be on fire. So.
I don't think as we open up that's been really change our business.
Got it thanks.
Yep.
And moving on next question will come from Willpower with Baird.
Hey, guys. Thanks for taking my question. This is actually charlier or talk for will.
I wanted to ask about routine to partnership sounds like some really good early signs I'm. Just wondering you know in terms of the speed request the pipeline built so far no how's that tracking relative to your expectations at the onset about partnership and.
Has that speed of the pipeline, where it seems that thinking around the timing of the magnitude of any potential meaningful revenue contribution.
Yeah, Dan do you want to talk about there but that one.
Yeah.
I couldn't be more excited about the momentum were seeing what they TMT, they're building a pipeline and the beauty there is.
They've got so many sellers and teams that we've trained and they're bringing us deals of all sizes. So this should help us close with the enterprise business as well as our commercial business and and yeah I like we talked about before that's just starting that shows the pipelines building up and start to have more of a significant impact to the.
So the revenue numbers 2021, rather than maybe at the very under 2020, but most likely 2021.
It's all going great and exceeding our expectations and on the product side, we're continuing to.
Integrate pretty tightly with a with the other offers that 18 and he has as you know they have been Ringcentral you see offering it's critical that that integration be done as well as the OEM portions of our products being able to be white labeled as a as an agency product that is going extremely well so.
Great Thanks, and congrats on the core.
Thank you. Thank you.
Moving on ladies and gentlemen from Stephens, we have Ryan.
Great. Thanks for taking my question, so from our check and seems like the offshore contact centers or even further behind the cloud adoption curve then you what contact centers.
Have you seen cloud demand, you said contact centers or from business process Outsourcers changed a little bit of it.
Yes.
Yeah, not not significantly we I say that and then I turned away [laughter].
If you look at the one example, there that we provided they have they take.
Business.
From many clients in the retail space another stays and they had a need for flexibility in this.
And you know for years. The P.P.O. has had been stuck on a high Cisco and and other premise solutions that just didn't give them the flexibility and so I think there's some change there. It's just those guys can't move they don't move very fast so to say has there been at big shift no has there been.
Continued interest in moving their solutions to the cloud absolutely. So there's there's a there's a shift there that's been happening, but I wouldn't say, if so it's too dramatically different because a cold, but that's been going on for two three years now.
I got it I could just add there little bit Dan if you don't mind, a more broadly speaking we will know there's more than half the contact center agents abroad and we.
We've been making quite a considerable number investments.
Do you feel all the time to take advantage of that.
Moving to the public cloud.
Increased hiring in Europe will partners and the like because there's a focus area full for us.
All right.
Next we'll move on to a Terry Tillman truest.
Hey, guys. Thanks for taking the question. This is David hunger filling in for terrorism Tonight.
He has talked little bit about massive market opportunity economics that you mentioned related retail sales personnel increasingly being displaced by contact center agents and your strategy the ones evolving trends. Thanks.
Yeah, absolutely I'll cover that they've been thing.
The jumping on today.
Think about brick what we've seen with some of our customers who are in the retail space or with the Coca transition is a big acceleration in their ecommerce business.
And a shift essentially of the way that customers are engaging with them from you know walking into a store to calling into a contact center you know off and of course that starts with the recent with a a you know website ecommerce interaction.
But well perhaps involve a you know that's a mass or or messaging engagement with the customers. Some sort of a digital channel first usually but then often you know those customers may have challenges and instead of being able to talk to a brick and mortar retail employee. They they only option for them really is to go to the business directly.
And that is of course, the contact center. So you could see that the analogy here, it's a sort of a like for like transition to brick and mortar retail sellers and brick and mortar retail service people.
Into contact centers, so in the retail space, that's what we've been seeing.
And how.
Yeah, I don't think that the huge you've seen that at a macro level anyways with ecommerce sort of spiking with cobot.
And the question is from a macro perspective as we tell you know as we go back to retail stores opening are you going to see all of that E. Commerce transition sort of evaporate as people go back rates back to run into retail stores and my perspective, I don't think that's going to happen I think certainly retail it's going to continue to be Matt.
So.
But the shift to the get the convenience of online I think once people start to see that with various brands, but yes. It can introduce permanent shifts and that's what we are seeing with our customer. So we'll have to see how that plays out as I folks go back to opening there will be tell shops, and so on but my perspective is this is.
A sort of a one way function, it's it's going to increase ecommerce decrease sort of traditional brick and motor in a variety of industries and it won't go back and they go back somewhat but it will just have essentially come down to Wow that just accelerated the ecommerce transition and we serve to benefit from that because in that world where are you moving into ecommerce contact center.
Becomes the virtual front door to your business and a and hence contact center becomes much more critical.
As an infrastructure piece.
To support your customers.
Thanks, a lot for every detail if that gets.
Sure. Thanks, Thanks, David.
The fast track program you guys provided any any metrics.
That's and I'm just curious if you've invested in sales people are where youre reorganizing the sales people.
To kind of target that opportunity.
No I think this is good.
Yeah, I can talk to that fast track program was really just a notification out to the marketplace that says hey, if you've got an urgent need an emergency to get contact center agents to home, we can do that and we'll do it for you and you know under two days. It was just to mention to the marketplace. So that they knew they couldn't make this transition quickly because a lot of companies.
I assume that Hey, this is a you know two or three month transition to implement new solution and normally it is because we want to take time and do it right into the collaborative Ah planning and design, but time, but by all means Miss was one where.
It was just more of a notification we had a couple you know.
Under a handful of customers. It took advantage that we had a couple of Ur cobot hotlines for the cities and I think between New York in Orlando, We turned up the S.P.A. hotline for the small business loans, but that was not a no sales effort. It was just say, making sure that the marketplace acknowledged and knew that we could.
To that if they need us.
Understood. Thank you.
And ladies and gentlemen that is all the time, we have for questions. Today I. Once again, we do think participating but at this time I'd like to turn the floor back to management for any additional my closing remarks.
Well. Thank you thanks, everyone for joining the call today and.
No look what's a terrific quarter for five nine.
And you know, where we're clearly seeing the benefits of the execution focus we've had as a company.
I'd like to thank all of our employees, who have done a terrific job getting up there and also just bank all of the partners that have really been helping to accelerate the business is gonna be a continuing trend for us and we thank you very much like it.
And once again refer to that that does.
Of course are ones going like zone that does conclude our call for today. We thank you again for joining us and you may now disconnect.
Oh.
And Oh.