Q2 2020 Upland Software Inc Earnings Call
[music].
Yeah.
Okay.
Thank you for standing by welcome to the Upland software second quarter 2020 earnings call. At this time, all participants are in hey, listen only mode.
Leader, we will conduct a question answer session.
Instructions will be given at that time the conference call will be recorded simultaneously.
And simultaneously webcast on uplands Investor Relations website at Investor Day, Upland software Dot com.
And the replay will be available there for 12 months by now everyone should have access to the second quarter 2020.
Earnings release, which was distributed today at four pm.
Eastern time, if you've not received.
The release it is available on uplands website, I would now like to turn the call over.
Two.
Scott Mcdonald, Chairman and CEO of upland software.
Please go ahead Sir.
[music].
Thank you and welcome to our Q2 2020 earnings call.
I'm joined by Chemetics, our President and Chief operating Officer, Rod grown, our President and Chief Commercial Officer, and Mike Hill, our CFO.
Going to summarize today, our results as well as some recent sales and product and operations highlights following that.
Mike will provide some insights on the Q2 numbers as well as our guidance after that we will open the call up or today, but before we get started.
Mike will read the Safe Harbor statement.
Thank you Jack during today's call. We will include statements that are considered forward looking within the meetings of the securities laws. These statements are subject to risks assumptions and uncertainties that could cause our actual results to differ materially as detailed discussion of these risks and uncertainties are contained in our annual report.
On form 10-K as periodically update it in our quarterly reports on form 10-Q.
Filed with the SEC. The forward looking statements made today are based on our views and assumptions and on information currently available to upland management as of today.
We do not intend or undertake any duty to release publicly any updates or revisions to any forward looking statements on this call upland will refer to non-GAAP financial measures that when used in combination with GAAP results provide up when management with additional analytical tools to understand its operations upland has provided.
Conciliations of non-GAAP measures to the most comparable GAAP measures in our press release announcing our second quarter 2020 results, which is available on our Investor Relations section of our website. Please note that were unable to reconcile any forward looking non-GAAP financial measures to their directly comparable GAAP financial measures.
Because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort with that ill turn the call over to Jack.
Thanks, Mike.
As an incredible acorda massive deep on revenue, we had super strong organic growth.
So let's review that.
First in background on what we're seeing in the market.
Digital transformation remains top of mind in mission critical the organizations at a time when they have to adapt to remote work and digital engagement, even more quickly and in this current environment now more than ever we're seeing companies place a greater emphasis on time to value. This is where upland Barry.
Well positioned the plug and play pragmatic nature of our products means we can quickly plug into customer organizations and deliver rapid time to value our cloud tools address digital transformation pain points without the need to everyone platform for to build from scratch and we add.
Add to our portfolio of apps with every acquisition we make.
Our customer base is well diversified across industry verticals as a reminder, our total revenue exposure to travel and hospitality leisure retail and energy, it's only 7%.
In addition to that we've got a sticky enterprise customer base with approximately 1600 1600 major accounts, averaging $160000 per year in recurring revenue and driving 90% of our total recurring revenue.
And of course, we are now building real enterprise sales distribution to further serve and expand these great customer accounts.
What has become abundantly clear through the Kogut period busy incredible resilience of our business model, we have seen accelerating usage during cohmad upland CX Sam has been a perfect example of that where we have seen strong upticks in CX down and mobile messaging usage in particular.
When you consider the breadth and diversification across the up when portfolio, we provide high value solutions for digital transformation across the front and back office and across a diverse range of industries and across both b to B and B to C use cases Andre.
Lying all of that is the mission critical nature of our solutions and our customers operations.
Now the results.
In Q2, we had a strong quarter that beat guidance and consensus for both revenue and adjusted EBITDA.
35% total revenue growth, 24% adjusted EBITDA growth. This is our 24th consecutive quarter of meeting or beating guidance.
Thats every quarter since going public in here in particular on the revenue side, we believe the doors off in terms of that beat.
In Q2, we did have some impact to bookings in churn relative to pre cobot periods. However.
That was more than offset by the strong performance, particularly in CX dam and mobile messaging as a result Q2 organic growth in reported recurring revenues came in at a strong 8%, 8% so above our target range of three to seven fish present initially.
Driven by a bump and see XM usage across verticals ranging from election year political campaigns and advocacy.
To media and retail and it was an impressive.
Result, probably creates a tough compare.
Your next year.
But as we sit here today, we see continued strength inorganic growth for the second half a year.
But as always we will maintain a conservative outlook.
Outlook.
We believe the strong results that we saw in Q2 are validation of our approach of delivering our customer solutions that can accelerate.
Enhance their digital transformation efforts both in the front office.
In the back office in this close alignment we have with our customers investment priorities is driving continued growth and resilience in our model in spite of cobot 19.
On the sales from Q2, we expanded relationships with 241 existing customers 50 of which were major expansions. We also welcomed 118, new customers to occur in Q2, including 34, new major cost.
We also continue to progress well against our enterprise sales strategy on derive tag revenue leadership.
We're still in the early innings of our account base sales and cross sell strategy. So we are seeing progress and runway against this opportunity.
As we adjust to a prolonged remote work era upland as focused a large portion of our product development.
Which included five major releases in 29 feature pack this quarter on that continued enablement of distributed Workforces to for example in our document.
Workflow cloud solution, we introduced the ability for customers to scan documents utilizing the camera on their iOS and Android mobile devices, and we added additional in signature capability and our CSM cloud again by way of example, we added clearly support for cloud telephony deployment within Salesforce.
And within Microsoft dynamics 365, providing additional resources for remote teams as mentioned we are pausing M&A for the short term while nurturing.
And active pipeline of deals and my guess is that 2021 will be a great and a busy year for acquisitions and who knows we may start things back up in the fourth quarter of this year.
We've got a very active pipeline of opportunities.
On the operations front, we're continuing a range of integration activities that are proceeding.
As planned.
So I couldn't be prouder of this team and our business model. It just show resilient.
We're seeing early positive signs for continued strong organic growth in the second half of this year, but of course, no guarantees and we're going to maintain our conservative stance on outlook given the macro uncertainties flowing from Kogut 19.
So with that I'm going to turn the call over to Mike.
Thank you Jack I'll cover the financial highlights for the second quarter and our outlook for the third quarter and full year 2020.
First for the income statement.
Total revenue for the second quarter was 71.3 million representing growth of 35% recurring revenue from subscription and support grew 39% year over year to $67.7 million.
Professional services revenue was 3.1 million for the quarter, a 16% year over year decline, which was expected due to the cobot 19 travel impacts.
Overall gross margin was 67% during the second quarter and our product gross margin remained strong at 69% or.
We are actually 73% when adding back depreciation of equipment amortization of acquired intangible assets, which we refer to as cash gross margins.
Operating expenses, excluding acquisition related expenses, depreciation amortization and stock based comp were $29.4 million for the second quarter or 41% of total revenue all as expected.
Also as expected acquisition related expenses were approximately $5.8 million for the second quarter and as I mentioned on last quarter's call.
These costs will continue to dramatically decline without further acquisitions to around 3 million in Q3 into around 1 million in Q4.
A final note on the income statement I would just like to remind you that when comparing the second quarter GAAP net loss a non-GAAP net income to Q2 of 2019, we had a significant onetime noncash tax benefit included in last year's results.
Now for adjusted EBITDA cash flow, our second quarter 2020, adjusted EBITDA was $23.7 million or 33% of total revenue up 24% compared to 19.1 million or 36% of total revenue in the second quarter of 2019.
For the second quarter 2020, operating cash flow was point 8 million normalizing Q2 operating cash flow for temporary acquisition costs and timing differences in the working capital accounts adjusted operating cash flow would've been around 50% of our reported $23.7 million of adjusted EBITDA or around 13.
<unk> point $8 million again, given our forecasted steep sequential quarterly decline in acquisition related expenses free cash flow will climb in the coming quarters and should be nicely positive for 2020 and should be over $40 million on a forward 12 months basis before additional acquisitions.
Okay now onto the balance sheet and cash flow.
This ongoing free cash flow generation is in addition to our existing liquidity of almost a $150 million comprised of approximately $88 million of cash on our balance sheet and $60 million of Undrawn revolver.
With regard to income taxes I will note that upland currently has approximately $353 million of total tax and it will carry forwards and of these approximately 211 million our usable.
As of June Thirtyth 2020, we had outstanding net debt of approximately $448.1 million after factoring in the 87.9 million of cash on our balance sheet.
I will note that the principal payments on our term debt, our 1% per year or about $5.4 million per year.
With the remaining balance maturing in August 2026, the interest rate on our term debt is locked at 5.4%, making our annual cash interest payments, it's approximately $29 million per year.
Additionally, I will point out that our term debt has no financial covenants on current borrowings.
Now for guidance as Jack mentioned, we have seen impact to new bookings and churn, which we attribute to coded.
But also we are seeing strength and our organic growth rate.
As such our guidance incorporates revised assumptions, reflecting this dynamic.
For the quarter ending September Thirtyth 2020, I wouldn't expect reported total revenue to be between 68 and $72 million, including subscription and support revenue between 64.9 and $67.9 million for growth in recurring revenue of 30% at the midpoint over the quarter ended September Thirtyth 29.
Team.
Third quarter 2020, adjusted EBITDA is expected to be between 22.3 in $24.3 million for an adjusted EBITDA margin of 33% at the midpoint representing growth of 13% at the midpoint over the quarter ended September Thirtyth 2019.
For the full year ending December 30, Onest 2020 up on expects reported total revenue to be between 273.3, and $281.3 million, including subscription and support revenue between 259.5 and $265.5 million for growth.
Both in recurring revenue of 29% at the midpoint over the year ended December 30, Onest 2019.
Full year 2020, adjusted EBITDA is expected to be between 92.2 and $96.2 million for an adjusted EBITDA margin of 34% at the midpoint representing growth of 14% at the midpoint over the year ended December 30, Onest 2019.
And with that ill pass the call back over to Jack.
Thank you, Mike and again phenomenal quarter, its strong beat and raise and again, we see early signs of.
Strong organic growth continuing in the back half of the year.
But we're going to as always.
Maintain a conservative outlook in particularly here.
In the environment.
With Cobot 19.
So again, we're now ready to open the call up for Q in AG and please feel free to direct your questions Tim Mike.
Or to 10, Maddox Rod Fab rone.
On the.
Once again in order to ask your question. Please press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q and a roster.
Your first question is from the line of move on through from William Blair. Your line is open.
Hey, Jim Congrats solid results both topline obviously on free cash flow here, which I think is this fantastic.
Jack maybe at a high level first and then I've got one for for Rod to just you know when you are at proficiency and you went through several cycles there during the town downturn.
Some of those were economics on the real estate et cetera, but just talk a little bit about how that compares to what we're seeing now and profession was a totally different businesses. It was people based and this is software based so some differences there, but just sort of what you're seeing with similarity to sort of the experience to bring a table sort of to managed for this positive industry is helpful.
So people trying to understand how is the company navigated this time.
Sure.
Really during the 10 years.
We grew perficient that I was running it we took that business from.
Eight people in 500000 revenue to 1200 people and 250 million in.
In revenue and we've really had to.
Significant crises that we had to manage through the first was the dotcom bubble bursting and the second of course was the.
Great recession in no way no nine.
And in both cases, you really saw I think in contrast to what we're seeing.
Here with co bid and those two earlier cases, you really saw.
App so demand.
And so.
You are looking at.
A significant hits to revenue.
And I think the difference between the winners and losers there was that those folks that confronted reality and adjusted their cost structure.
And who had in fact gone and with the right kind of solid customer base.
Actually came out stronger.
Then the day went in and that was the case for Perficient in fact, the dotcom bubble bursting probably the best thing that ever happened in that business, taking out five or six out of 10 of our competitors men setting us up for 10 years, a great growth.
10 years, which I guess is turned into 20 year. The businesses is still doing incredibly well, which we're very proud of.
By contrast.
With upland and co bid.
We're not seeing a collapse in demand if anything.
We're seeing organic growth here at 8% above our 3% to 7% target range.
As our strong guidance indicates.
We are seeing that.
Organic growth continuing.
At strong levels into the second half of the year I think Thats a testament to the solid.
Customer base, we built 10000 customer account 16 under it.
Major accounts, averaging 160000 a year.
Recurring revenue and.
As a group comprising 90 plus percent of our recurring revenue set of products that.
Deliver.
Real fix for pain points in digital transformation and digital transformation has become more important for our clients for enterprise is large and small thats been accelerated by coded and we've got a very attractive set of products that enable enterprises to address digital transformation pain point.
Thanks, with rapid time to value our products don't require re platforming. They don't require building from scratch they can be plug and play.
And up to.
Speed and delivering value quickly and so that's resulted in some significant uptick in usage, particularly in CX down.
With that.
Across a number of verticals.
So for us, it's about nurturing that customer base continuing to invest.
In those products and also continuing our go to market investments.
Ross background and the team that he's brought and we've made a significant investment in go to market not just six to eight quarter journey.
The overall as you head to head Jack I got questions about that.
No I'm going to let I'm going to let that take a direct whack. It does but I would say that that we're doing here, making those up arguing that those investments for the future.
Let's turn to Rod.
So one obviously, a big being the quarter. So it's up to you what are you on your broad and the new team credit for that which is why was chocolate.
But more importantly, you were just touching on timeframe. So as you talk about timeframe.
For the additional resources to build up sales in 2020, how is the other progressing and then what does a timeline and milestones that we should be looking out over the next 12 18 24 months look like and maybe that's a both of you loved understands it was a be driven by sort of this new sales some of their an immediate impact there and sort of one of the milestones or should be looking at over the next 24 months. Thanks guys.
But let me say this and then.
I'd love for Roger kind of really talk more about this the leadership that rod and his team abroad and on the go to market side were felt immediately in the hygiene and cadence.
Customer outreach the difference is around philosophy on customer success and go to market generally it's been marks.
And extremely positive and show.
We're thrilled to have rod and the team.
On board.
Beyond that let me, let Rob answer your question.
Yes. So my start coincided almost exactly with Covance I'm not sure what that means.
What I, what I will say is that we were very busy in the second quarter made a lot of impacts to the business already.
I think what I've said last time I'll say it again with my initial focus was on the customer base, which was perfect timing really when you walked into this this market we needed to make sure. We were focused on our customers and that that played out in Q2, we expected to have a stronger bookings quarter.
In Q1, which we did and we expected to have a better expansion bookings performance because we focused on our base very.
Very hard during the quarter and that played out too. So I think there was some positive back there were.
We put anyone else renewals motion and.
With regard numerical who runs that part of the business and then we did have we did a really in our customer base marketing.
Program during the second quarter, we call connect if you change, which really engaged our customers I was shocked at the attendance of the Webinars, we put out there for our customers to really talk about how they pivot and deal with the challenges. They were seeing I think that frankly, we exited the second quarter closer to our customers than we walked into the quarter with.
We're really kind of kind of that program. It really helped a lot but to get them more specifics, we said the quarter, enabling our cloud sellers to shift from products. The cloud. So one product to three or four products made a lot of progress on cross selling and building cross sell pipeline.
And a lot of training, we rolled out a new selling methodology called target account selling which you guys know we own part of the I'll define acquisition, we rolled out across the business, we rolled out all defy across the business is now integrated with our.
On one Salesforce instance, and we trained all our sellers on that so were a lot more disciplined and how we're selling and and running our deals.
We changed our we put out we put in Salesforce forecasting so we changed our forecasting methods and we move to a monthly close cadence versus quarterly close caves in sales and we did all that in four months I'm really proud of the amount of work. The team did that being said, putting those any being great at them or not the same thing. So we've got real time here as Jack put a this is a journey that we're going to.
Beyond for awhile, and really making that part of our muscle memory is sort of what we got it started in the second quarter, but really a lot more work to do so I think it like I was a good start but.
Jack said, our our product usage really drove the quarter sum up some of the products that.
Really or digital engagement products really had a big quarter and so.
That really helped a lot.
Gotcha and the color was really helpful. In terms of sales processes, what you've done even though the granular level and I think thats fantastic and thank you for the transparency I guess, we're looking at milestones and I'm glad to answer as you'll see in revenue, but is there a set of milestones that we could think about seeing is it dollar retention is going up as inorganic growth rates I think I'm not asking for time like is it.
Over the next 24 months, but how do you think you measure the success of what you put in place.
Yes, you certainly mentioned two of the metrics, obviously, we would look at organic growth and we would look at at the retention part of the business.
And internally, we look at at cross sell I mentioned a lot we had.
Spansion sales are very important to us as a business, obviously selling more into our base and we're better at selling more of the same product.
And we are working very hard it across selling additional products and internally, we're measuring that success and I feel like that we're going to see a lot of that over the next couple of quarters as far as really driving the cross sell part of our business.
Awesome. Thank you guys congrats again.
Okay, operator do we.
I have the next your next question comes from the line of Brad Zelnick from Credit Suisse. Your line is open.
Hi, This is Marco on the line for Brad Congrats for the quarter guys and thanks for taking my question. So just wanted to ask about the strong topline guidance obviously.
Wanted to ask some of the assumptions you guys are making around.
New bookings retention rates renewal timing on specifically versus the first quarter and maybe as a follow up how that looks between your different calls as well.
Sure.
Strong raised guidance for the second half of the year.
Reflects the performance of the business that we saw in Q1.
We saw strength, particularly in our CX Jim.
Cloud suite.
And some of that was driven by.
Election year, political campaigns and public advocacy and both of those drove usage, but we also saw a strengthened media.
And in retail so we're looking at the trends we're seeing in the business.
Around usage around renewal rates in bookings and Thats whats really.
Informing the guidance for the second half of the year this raised guidance, which again reflects.
The signs that we're seeing of this strength continuing in the back half of the year.
At the same time as we.
Pointed out in the earnings release.
We're trying to maintain a conservative stance and we're mindful of potential.
Impacts.
From the this code at 19 environment.
And and so that informs our maintaining a degree of conservatism around that guidance.
Okay got it thank you.
Jack just just as a follow up so I understand you guys have paused the M&A strategy, but curious about.
What are you seeing real time uneven throughout the quarter in terms of that M&A pipeline I'm just curious if.
You saw any heightened seller interest or assets that you would have considered pre cobot and again going forward. How do you see that that pipeline evolving as you as you start to resume M&A.
That pipeline is strong we are seeing seller interest.
We've got a lot of call activity.
Both our M&A team at that time involved with personally in terms of nurturing.
The pipeline that we had in place pre cobot so.
I think 2021 is going to be a banner year.
For acquisitions for us.
Lord knows who got the pipeline to execute against and who knows we might start up in Q4 here.
So I'm feeling very good about it.
Pausing was the right thing to do.
Based on the environment as we found it and earlier part of the year.
Right.
As things continue to improve.
We are ready to get back.
On the on the horse with respect to.
M&A and again, we've used this time productively to batten down the ashes to solidify systems to complete integrations. The last few acquisitions. We made so we're really ready to to get moving again on M&A.
Okay, great. Thanks, Thanks for taking my questions and congrats on the quarter.
Your next question comes from the line of DJ homes from Canaccord. Your line is open.
Hey, Thanks, guys and congrats and they set of numbers here.
Maybe one for for Rod.
We think about the account based sales model and and the breadth of kind of your four main products functions.
How many different buyers do you typically target inside of a major account and I guess the question is like is there volume gain those folks talking to each other how do you do that just just trying to think about kind of the dynamics that could push that cross promotional board.
Yes, that's that's a great question, we spent a lot of time in the second quarter I would say defining our buying groups a little bit tighter.
Obviously, we have a set of.
Value propositions for the for the CIO, we have OSAT for call Center in service leadership, we have a set for sales and marketing and for that and for sort of digital engagement, there sort of fort by buying centers within depending on the vertical in the industry, there's four or five buying centers within an enterprise that that we're going we're focused on.
And and we've done it I think a really nice job of.
As we train our cloud sellers to sell a.
A wider value propositions and as we bring our global account team in which we got started.
The quarter ended our first sort of global account owners.
You know what the both the marketing motion and the selling motion is to those buying groups.
There are for our solution sets and so there are four or five that we're very focused on with different sets of products.
Yes, okay.
And maybe a follow up.
For Mike.
On the CX sound the mobile usage.
Side, obviously, it sounds like lots to strengthen the quarter. Just we're just remind me the business model. There is that is that a utility based or about a metered model and how significant is kind of exposure to.
That revenue framework these days.
Yes, DJ so that is a usage model.
We typically structure annual contracts based on a set amount of usage. So think about the old cellphone plans, where you had a certain amount of usage that you subscribe to for a year and then if you go over that than you paid extra.
You know extra minutes in this case extra.
Mobile messaging for example, so it's typically annual contracts, but we do have some on demand and overage.
Got it got at such high visibility on demand makes sense. Okay. Thanks, all the color guys. Congrats.
Your next question comes from the line of Scott Berg from Needham and company. Your line is open.
Hey, guys. This is Josh on for Scott Congrats on the strong quarter.
Building on the acquisition theme question.
Hi, Steve talked about the likelihood of not making an acquisition here in 2020, except possibility in Q4 restarting, but when 2021 comes around here.
Does that look more like 2018 with kind of once a quarter piece of acquisition or is it something potentially more active.
Like what we signed 2019.
You know its with M&A, you can never predict precisely and and it's always I think better to maintain a more conservative stance, because we don't ever want us feel like.
Pressure to get an acquisition done.
You want to have a measured approach to it but.
Those those sort of caveats said.
I would say.
Yes, we want to see at least what we did in 2018 and the goal would be to get closer to 29 team.
Okay, Great and then that kind of switching gears, a little bit or have you seen any changes in gross retention.
During the pandemic and then is there have you seen any meaningful differences between the product suites in terms of retention.
You know the retention that we're seeing is consistent with.
What we expected coming into this the business is incredibly.
Resilient.
And.
Any impacts that we've seen from co bid.
Relating to retention or to a new logo bookings have been more than made up for a by the strength we've seen.
In RCM vertical in some of the usage there so.
That's what we're saying.
Okay, Great and then I'll just throw one more out there.
How what were the sales trends like exiting June versus April and then where these trends in lot inline with your expectations or.
We're thing it sounds like things are stronger than what you expected, but I'm just trying to curious on on your take at this point here.
Well sure I mean, if you are they were considerably stronger than we had.
When we had guided Q I mean, if you look at.
The guy that we put out for Q2 once we were.
In side it is cobot environment.
It was significantly lower in terms of.
Bookings.
And.
And now they are our than than where we came out so.
Clearly the businesses resilient.
The results came in.
On the on the revenue and EBITDA outlined above expectation blew through our our guidance revenue I think frankly blew through our pre coated.
Implied revenue guidance for second quarter.
And as Roger indicated we're seeing a lot of activity on the sale side. So.
Thus our raised guidance for the second half of the year.
And our statement that we see this strength.
Continuing.
And again, putting up 8% organic growth for this business really beyond the top end of our 3% to 7% range is significant.
Great. Thanks, guys.
Your next question comes from the line of Jeff Van Rhee from Craig Hallum. Your line is open.
Great. Thanks.
My congrats as well several from you guys. The the organic real nice uptick there to be clear ex the usage benefits, particularly on the messaging side would that have been enough to move the needle or would it still have been 80%.
Well I mean, I think that we don't really break out the organic growth rate by segment, but I think the totality totality of the business.
Which is the way the things should be viewed.
You know incredibly resilient and we saw a great trends in terms of.
The activities, we've got going on but go to market and customer outreach.
As Rob indicated we came out of this quarter, having strengths and a number of significant.
Customer relationships in this.
Continuity through change Webinars series so.
Yeah, we look at it overall feel great about the business and again, that's why the strong outlook for the second half of the year.
On the cost structure the cost structure, that's implied in Q3 Q4 anything unusual in there and I know, you're not obviously, giving 21 dogs, but outside of acquisitions anything obvious to think about I mean, obviously, you've you bulked up rods rods really that's momentum and got some more resources, but anything to think about in that Q threeq.
For implied cost structures that a good baseline going forward.
I think it is not only little higher.
Hi, Matt.
Yes, I would just going to say that yes, I think it is a good baseline go ahead Jack.
No I was just going to say the investment that we're making which is built into these numbers.
This new senior go to market team.
Our first group of global account.
Managers these global account execs to really Ethan and build.
Relationships with our top customer accounts that were going to be adding a significant.
Additional number of those global account executives, what we've got that budgeted and.
And then.
We just think this is the right time to do that and that is six to eight quarter journey right.
But we got a set of products here that are.
Powerful that directly address digital transformation pain points that are plug and play that a quick.
Time that value that don't require replatforming or.
Building.
From scratch and that deserve frankly, a better kind of go to market motion and so we are making that investment.
And I think the opportunity that we had just within our own.
Accounts, you know, we've got 10000 customer Sixsix hundred major accounts, we add additional.
Major logos with every acquisition, we do and.
Today, we still got one point X ray products in their 1.21 0.5 pick your number.
You know a less than two products per major account and so the opportunity here to grow that through cross sell a significant we've never really had the team or the motions in place to get that done historically, but I think with rod and his team onboard now that's really it.
Game changer, and again, we want to be measured and conservative and we know this six to eight quarter journey.
But the potential is there we see runway there.
For sure.
The two last brief ones than.
Cash flow from operations in the quarter did it meet your expectations for internal expectations coming into the quarter and then just lastly on the pipeline, maybe just a little more comparing contrast, and kind of curious what stands out as being deferred in terms of the composition of pipeline now versus the pre coal that make up.
And Jeff, It's Mike I'll take the cash flow, yes that.
The operating cash flow free cash flow number for Q2 came in really exactly as we had expected.
You saw the acquisition related costs dropped significantly from Q1 into Q2.
And as we talked about those will continue to decline.
In the coming quarters, and we should see continued.
Increase in operating free cash flow as we move sequentially quarterly forward here.
Till we get to some new acquisitions.
Hi, This is Ron I'll take the pipeline question I think relative to pre coated.
It's pretty strong we had surprisingly the digital engagement in the second quarter, where nobody could go to events anymore. So we did a lot of virtual events and we shifted to webinars and we shifted to other.
Ways of building top of funnel.
So we continued to strengthen the pipes throughout the quarter and we break it down into multiple pieces, but.
Really all three that sort of new logo, the same product expansion and cross sell it all improved.
It's pretty coated and it's a little bit counterintuitive, but I think that.
Buyers working from home working remotely might it might have had a little more time to top onto Webinars. We had some of the past attendance at top of funnel activities that we've seen.
During the second quarter. So so I would you say not dramatic change pretty covered but.
Fine still in a really solid place.
Great great well, great execution, the tough environment guys. Thanks.
Your next question comes from the line of Brian Peterson from Raymond James Your line is open.
Hey, guys, Kevin here on for Brian Thanks for taking my call.
I know you a pretty minimal exposure to some of the more impacted verticals, but curious if you're seeing any changes in the behavior of those customers and maybe did you see any change the cadence there or the tone of those conversations over the past several months.
Jack.
Yes, I would you take that one please thank you sure you bet.
No I.
I have to say, we we expected to hear a lot more than we heard just because you do you see the affected companies can you read the news.
But I would say the sort of customers, calling in who were in.
Really difficult situations was was just such a small number.
Relative to our base and now we've obviously talked about our exposure to certain industries and the good news on that obviously, but but I would say we havent you know, we sort of expected to have to deal with more than we've done and frankly, it's been it's we haven't had a big influx of.
Customers, calling and doing things out of character because of cobot. So it's it's been pretty solid that you would not have as we said earlier in the call not a big change in the renewal situation year over year really.
So if you wanted it just add one.
Point to that you know just looking at overall exposure right. So if you look at highly impacted verticals. Our exposure is only about 7% of revenues so that would be.
Travel hospitality.
Energy.
Retail that that whole group.
Together comprise about 7%.
Agree to have a of revenue so relatively limited exposure.
Sure Okay like curious on up on any updated thoughts around rolling out the work center product what does the adoption looked like there and what has been some of the early feedback on that offering.
Well the core of work center has been the shared analytics engine.
And that's already been rolled out and well received and we are looking now through a product portfolio review that rod is initiated.
At a what the next phase should be for rolling out that technology, so more to come on that.
In the next few quarters.
Alright, thanks, guys.
Again, if you would like to ask your question. Please press Star then the number one on your telephone keypad. Your next question comes from the line of Terry Tillman from Truest Securities. Your line is open.
Hey, guys. This is Nick on for Terry Thanks for taking my questions.
So first wanted to dig a little deeper into sales right. So I guess are you guys currently seeing more strength from the new business side or an expansion sales.
And then as your ability to provide quinton value with their solutions kind of enabling you to maybe mitigate any potential coven 19. This disruption you might be sand and on the new business that thanks.
Well I do want to take those.
Sure.
If we look at mix of bookings I think it was slightly stronger for expansion in the second quarter.
And I think thats sort of as expected like I said, we we spent a lot of time, focusing on our base and making sure our customers had what they needed to kind of get through co bid and a lot of our products frankly, they used to do things like service their clients remote helping their employees work remotely. So we sort of did a very much a very much a focus on the base.
During the quarter. So we had we had a bit more sales and.
In the base as a mix, but but up but honestly as we as we forward look I think the both the new new logo, new business pipeline across all pipeline and the sort of same product expansion pipeline or are all strong and we you know I don't think we saw a huge change.
And in any of those cycles.
Got it that's helpful and then.
Just follow up for me, so I guess, considering the breadth and depth of your overall portfolio an individual cloud suites.
Do you believe you could potentially be benefiting from somewhat of a vendor consolidation deem as well or are you seeing that play out in the market.
Thanks.
No I do think that's a potential benefit for us and as we.
Execute on our acquisition strategy, we are staying focused and.
The areas, where we're currently playing.
We see a lot of potential.
Physician activity and CX and enterprise sales and marketing, but also in our other to cloud suites and I think as you continue to build up that adjacency.
It just gives you a stronger and stronger position and now with this.
Team a global account manager is being built.
We have.
The ability I think for the first time to.
Really get in there and make the broader case to these great clients as to how we can serve them even better.
ER and bring more value to those accounts and also increase our footprint in those accounts. So again I would say watch this space as we roll this out.
Over the next few quarters here.
Got it thanks guys.
Mr. Mcdonald that was our final question.
Great. Okay, well. Thank you all for participating and we will see you on the next earnings call. Thank you.
That concludes today's conference call you may now disconnect.
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