Q2 2021 Yext Inc Earnings Call
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Thank you Andrea and good afternoon, everyone welcome to yet fiscal second quarter 2021 conference call.
With me today, our steel Howard Lerhman, CFO, Steve cake, Brad and revenue team leader as Jim Steel, David Rignet ski and Patrick Blair.
Let me begin I'd like to remind everyone that this call may contain forward looking statements, including statements about revenue non-GAAP net income guidance sales momentum inefficiency expenses hiring market opportunities business performance capital expenditures and other non historical statements that further described in our press release.
These forward looking statements are subject to certain risks uncertainties and assumptions, including those related T X growth the evolution of our industry, our product development and success, including the dancers and general economic and business conditions, such as the impact of the Cobot 19 pandemic. These statements reflect the company's current expectations based on its beliefs assumptions and information currently.
Global to it.
Although we believe these expectations are reasonable we undertake no obligation to revise any statements reflect changes that occur. After this call descriptions of these and other risks that could cause actual results to differ materially from these forward looking statements are discussed in our reports filed with the as you see.
During our most recent quarterly and annual reports and our press release that was issued this afternoon.
During the call. We also refer to non-GAAP financial measures reconciliations with the most comparable GAAP measures are also available in the press release, which is available at investors thought JAKKS Dot com.
With that I will turn the call over to Howard.
Thank you you go.
No. It in 2016, we held our first user event and we hosted Mark Kelly and you May know that Mark is a current Arizona Senate candidate and that's foliate alone and distinguished career as a navy aviator an astronaut.
Location World and 2016, he shared a story about 22% attacked plane, where his focus was flying the plane in dodging missile.
It was partners job to successfully hit a target with a bomb.
Each person had a job to do and focused solely on that job and that's he told US we called that quote compartmentalisation focusing on the stuff and you can control.
Not worry about the stuff outside of your control.
New though advice would be so relevant for years later stuck in my head we are living in a highly chaotic and unpredictable time.
In Q2, we weren't that as a company we can accomplish great things when we focus on what we can control.
First.
Focused on topline growth, we reported $88.1 million in revenue $2 million above the high end of our guidance range next we are focused on efficiency and especially sales efficiency.
We reported seven cents non-GAAP loss per share in the quarter, which is the worst scent bead to the high end of our guidance range and finally, we're focused on our mission to help every business an organization around the world deliver official answers every time people search and we saw 30% of our enterprise North American New went up so bookings.
This answers what in the Q.
We've now got over 150 answers customers' lives.
And in fact, if you follow some Twitter you will see our D., we showcase some brands, it's kinda like our daily Doodle like Verizon business Cox Communications Krispy Kreme audits are they all upgraded their site search with the next official answers engine.
Let me take a minute to explain what exactly I mean by the official answers engine.
We are witnessing a massive shift in search from keyword based documents search to an era, and which computers understand what people were asking and that the ruda. This is a brain like database called a knowledge graph, we've been building that for over 10 years.
The very sensitive our S. One says quote yes is the knowledge engine. It's a couple of years ago, we started to build our own search technology based on natural language processing and last fall and onward, which by the way it feels like a decade ago, but was only three quarters ago. We launched the answers that is our because site search.
Engine that sits on top of the company's knowledge graph.
And so what an end user wants official information about a business. They visit that business is website, but when the sites searches so poor that a business can't deliver official answer on even the most basic query that user bounces back to Google to seek the answers they couldn't get directly from the business and when this happens the company loses control of the customer journey, It's got a bid.
On AD words on their own branded keywords to win that customer back again, the same customer who is trying to find organically.
We saw a better way.
With the full power over 385 million facts now contained in the ex knowledge graph, which by the way is a 71% year over year increase we lost her own site search engine with answers were as we'd like to call. It the world's first official answers engine in the second quarter, we expanded answers to be available in French and Italian.
In in German in Spanish So, we're helping now more and more web sites around the world official deliver official answers to every customer question.
Using an LP.
It's our founding principles that the ultimate authority on official information about a business at the business itself and with our official answers engine powering the websites our customers can drive higher conversion lower customer support costs and they can receive amazing customer intelligence about what people were asking in fact in the quarter, we answered overtime.
11 million searches.
Remember these are all commercial valuable.
Questions searches for customers on the company's live website looking to transact and also it turns out when you give people a great customer experience. The first time, they remember it and they come back and it becomes a habit you can train a user to come back time, and again by simply delivering official answers to their questions.
In fact early adopters of answers on adverse.
See a 60% increase in flight search volume within just 60 days of putting the next official answers engine on their site. When you give someone a great experience they come back and we can show that quantitatively.
Every customer journey starts at the search and it's our vision to make a businesses website be the first and the largest please people look when they have a question about that business and that's what the official answers engine is designed to do to give every company in the world a Google like experience on their own domain.
The most exciting part is we are only in the very copper the first half of the first thing and realizing this huge division.
That's the first area we are focused.
Next we are laser focused on sales efficiency.
Best SaaS companies today use freemium or free trial acquisition model and so that's why we rolled out in second quarter in form of our answers free trial in the quarter. We received thousands of answers free trial requests and accepted as many as we could support and the next phase is to make JAKKS totally self serve for answers to that anyone can integrate.
Our answers engine into their own website and see the power and positive ROI opportunity for themselves and we're already seeing the positive results from this new sales motion in terms of sales efficiency GAAP sales and marketing as a percentage of revenue went from 72% in the year good quarter to 64% in the second quarter. This year, where do we focused on both.
Sales efficiency and growth and are excited about the results that were already seeing with this new model.
Now none of this would have been possible without the incredible leadership, Jim steel and I want to thank him for his amazing contributions Tx.
Four years ago, I recruited Jim to the board and shortly after that so that was my recruiting technique and then shortly after that.
Document it assuming an operating ROE is our president.
Jim came in he built a world class sales team and he laid the foundation for future success with incredible sales executives, including Dave Barinskiy and Patrick Blair.
Now for those of you who know Jim He is not just a salesman, but he is a tremendous human beings and I have learned we all have so much from him.
Fortunately continue to learn from him as he will continue on it if you acts as an advisor for the next year and I'm also Super excited to promote the next generation of sales leadership, it JAKKS with David Husky, and Patrick Blair, serving as co chief revenue officers, David who joined US nearly four years ago, well keep leading enterprise.
As North America, and Patrick who joined US a year and a half were going to meet RCB you at international businesses, Jim has trained them, well and I am confident and Dave and Patrick's ability to work with me and to continue building and leading our world class sales machine now it is my.
Measure to turn it over.
To Jim for final sign off take it away Jim.
Thanks Howard.
Howard mentioned it was almost four years ago, when I joined the board JAKKS.
And then it was only a few months later that Howard and the Board asked me to stepped in as President and Chief revenue Officer.
Never.
Excited the joined by former colleagues Salesforce with the opportunity to help JAKKS go public and to build a world class revenue organization.
I recruited might go to team they've written it <unk>, whom I've worked with for 20 years four years ago and also Patrick Blair two years ago to help me on this endeavor.
Tremendous respect and confidence in this team and I'd leave knowing that companies in great shape and has a bright future.
And I'm honored to stay on this journey to help you Act as an advisor. This is the perfect time for me to turn it over to David and Patrick who might so much respect for any weapons. So critical building the sales team to what it is today.
They will walk you through our strong quarter Dave.
Jim Thank you very much for your Mentorship partnership.
Most importantly friendship over the last 20 years.
Through your leadership I'm, certain you're leaving the sales organization in great shape.
I wish you and your family the best of luck wherever the future takes you.
Needless to say I'm very excited to take over this role is co COO.
Partner with Patrick and Howard and continue to move the business forward I certainly feel prepared for.
And now for a review of Q2.
The sales organization had a solid Q2, given the unprecedented circumstances.
Momentum in new and Upselling CV picked up throughout the quarter.
We're seeing more customers engaging again, either working on new projects, we're picking up on temporary pause projects.
In Q2 next overall close to 114, new and renewal deals with <unk> with at least $100000 of total contract value.
This includes nine deals with more than $1 million of total contract value.
The total number of VX, Midmarket and enterprise customers increased 27% year over year to nearly 2200.
This excludes our SMB in third party reseller customers.
Our quota carrying sales rep count for the company was roughly similar to last quarter, we continue to target ending in this fiscal year at 255 quota carrying sales reps consistent with our original plan.
Specifically for the enterprise expansion deals this quarter included T Mobile Metro Pcs, yes.
CNO bankers life.
The U.P.S. store, the medical University, the South Carolina and in talks or.
Enterprise New logo signings include a guaranteed rate and cinemark.
Bandwidth answers is driving significantly more opportunities for the enterprise sales team.
As Howard said, 30% of Q2 enterprise, new and up sell bookings ACB. We're answers, let and there are many answers led deals we are working on now that weren't in the pipeline at the beginning of the year.
We believe there's a huge attach rate that comes with answers. It's a product that inherently brings along with it a lot of other revenue opportunities for listings pages and services.
We're helping enterprise customers solve complex problems.
And our solution based offerings leverage all of the ex innovative products.
I want to tell you about a big expansion deal we had in Q2 with a major U.S. financial institution.
This company has four subsidiaries.
And we started working with one of them insurance company a couple of years ago.
They were customer for listings pages and services for its branch locations and some of its ages.
As their COO mentioned in a shareholder letter.
They're going through a customer centric transformation.
End customers today expect to be serviced in all channels and across all access points.
We play right until the heart of this digital transformation.
We show them, how yes can drive value and ROI.
This culminating in an upsell deal in Q2 that expanded within the insurance subsidiary and into the Companys. Other three subsidiaries more than doubled the CV and included listings reviews pages answers and services. We think this is a great example, how you XCOM provide a broad sold.
Lucian against an enterprises need to accelerate digital transformation efforts to solve business problems.
And now I'll turn the call that a patch or who will share color on what he's seeing with his team. Thanks, Dave I'd losses also like to take them and then thank Jim for his Mentorship support and friendship over the last 10 years I know stay close to JAKKS and I wish him. The best of luck in this next endeavor I'm also thrilled to continue building the sales team, Dave and Howard.
[noise] in terms of results, we just strong quarter in both the Cebu and international business in Q2, given the circumstances.
Because of the fast sales cycle and CVU. Those teams contributed most of the answers free trial conversions, we signed new logos, including cubes smart and pet I Q and had great expansion deals like this is always an empty and allergy associates as they begin to embrace our full platform.
Answers is a great solution for Uxc view accounts, well enterprise accounts have multiple teams and their organization focused on their website commercial accounts generally have a more nimble decision tree and a shorter sales cycle, we have hundreds of companies participating on our answers free trial program and everyday we're implementing and turning on more of those trial.
Yes.
One example of the fast sales cycle is tower alone a loan company headquartered in Mississippi.
As Corona virus it the U.S. This spring tower saw spike in website visits and customer service calls, creating both an opportunity and a pain point, we quickly work with them to launch and answers free trial.
Just six weeks after we launched answers on their website tower could see the value of deeper customer insights higher lead conversion and lower support costs and they became a paying answers customer.
In EMEA, we saw business activity begin to pick up from the covert night shutdown and for us.
We didnt expansion deal with Philip Morris International and we signed a Master service agreement with Louis Vuitton, We also signed new deals with Pratt and Super dry in Japan, We signed new deals with Geo Holdings, and our Corporation had an expansion deal with you Moto transport and had a renewal with SMBC.
At a time when so many companies are searching for solutions to provide their customers with accurate reliable answers. It's motivating for our sales team to be able to provide a solution that can show a measurable return on investment.
More excited than ever about our ability to capture this expanding market opportunity and with that I'll tell that turn the call over to Steve.
Hey, Thanks, Patrick our second quarter revenue grew 22% year over year, so $88.1 million unearned revenue increased 20% year over year to $147.
Annual recurring revenue or they are at the end of the quarter was $338 million going up 22% year over year on the $277 million in a year ago quarter.
Trailing 12 month, what dollar based retention, which excludes our SMB customers was 105%.
And our trailing 12 month that dollar based retention for direct enterprise, which excludes our SMB and third party reseller customers was 106%.
It's slightly lower than last quarter because of the impact you saw from you that upsells, but we saw our retention rates and upsells start to improve during Q2.
Before turning to margins on expenses I'd like to point out that I'll be discussing both GAAP and non-GAAP results.
Provided a reconciliation of GAAP to non-GAAP financials in our earnings release.
Q2, GAAP gross margins will 75% this quarter, that's compared to 73.4% in the year ago quarter.
Q2, non-GAAP gross margin was 76.5% and compares to 74.7% in a year ago quarter.
The change in gross margins pipe, primarily driven by leverage on higher revenue, what's on higher data center costs. So what's your costs remained stable.
Year to date non-GAAP gross margin was 76.6% and that compares to 75.9% a year ago.
Q2, GAAP operating expenses were $90.3 million and that's up 8% from the 83.4 million every year ago corridor.
Q2, non-GAAP operating expenses were $74.4 million or 84% of revenue compared to the $67.8 million or 94% of revenue will be able corridor.
Compared to the year ago quarter, the primary job versus vis vis where the increase in overall headcount was offset by reduced spend on travel and other events.
Year to date, non-GAAP operating expenses were $151.6 million or 87% of revenue.
That compares to $126.9 million or 90% of revenue a year ago.
So if you ever not certain business conditions, we're continuing to be thoughtful with respect to our operating expenses.
Making investments to deliver Tam stabbing products generate revenue growth and drive sales efficiency will continue to be conservative with our hiring while keeping our goal of 255 quota carrying sales reps by the end of the fiscal year.
Q2, GAAP net loss was $25.1 million that compared to 29.3 billion a year ago corridor on the basis of 118.4 million weighted average basic shares outstanding net loss per share or 21 cents. This quarter compares to 26 cents loss a year ago on that.
Add on the basis of 111.8 million weighted average basic shares outstanding.
Q2, non-GAAP net loss excludes stock based compensation and $7.9 million. This compares to 12.7 million dollar loss of the year ago corridor, and our Q2 non-GAAP net loss per share of seven cents compares to an 11, some loss a year ago quarter.
Cash and cash equivalents were $223 million at the end of the quarter and we continue to believe our balance sheet is strong and positions us well to whether the current economic environment.
Net cash flow from operations for Q2 was a negative 15.6 million and that's compared to negative 11.4 million a year ago corridor.
Capex was 18.8 million compared to 3.6 melanoma deal gold corridor, but we continue to make progress with our building projects and New York, Washington, DC, Tokyo and tariffs, we expect remaining capex related to these projects to be about $32 million and based on updated schedule.
We expect nearly all of this amount to occur within fiscal year 2001.
We've successfully completed the exit of our one Madison Avenue headquarters location saving formats of lease expense relative to our original leaves on our operating expenses going forward will no longer have the impact of lease expenses of one Madison Avenue.
Turning to our outlook, we expect Q3 revenue to be between 86 and $88 million, we anticipate non-GAAP net loss per share between seven and mindsets, we expect a weighted average basic share count of approximately 120.4 million shares.
Q3.
We're excited about our progress into team all of the business environment remains uncertain and as such we will continue to provide only quarterly guidance not full year guidance. We're still in early days with answers free trials, we have a growing group of customers moving through their 90 day trials. We expect these trials to begin to convert towards the.
Ended the year, however, we're going to be appropriately conservative when reviewing these opportunities drop things up I'm pleased with our performance for the quarter. There are early signs that answers is driving additional opportunities.
Faster sales cycles, and greater sales efficiencies.
Also pleased to have executed on our plan to manage costs effectively.
One more thing.
All the best it's been great working with you yet again and I agree with Howard the team we have in place has the knowledge and experience to take us to the next level with that I'll turn the call back to Howard.
Thank you Steve.
We had a strong second quarter and our land with answers sales motion and our focus on sales efficiency are already showing promising results. We've got new logos using gets to power their site search with our official answers engine everyday and that means we're getting closer to realizing our vision to make every business in the world the official sources in.
Permission about themselves. Thank you all for your continued support and we are looking for updating you on our progress next quarter and make sure to follow us on Twitter. So that you can see it live and in real time.
Thank you Howard Andrea can we please open to questions.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
And our first question will come from Ryan Macdonald of Needham. Please go ahead.
Yes, thanks for taking the questions that good afternoon, Howard Stephen team Congrats on a great quarter, Yeah, we've definitely been following along with the Twitter feed and definitely some interesting logos that are that are popping up on their for answers great see Howard can you sort of frame for us sort of the success that you're seeing with answers versus in other areas.
For your business and maybe help provide a little bit more context on the topline guide for third quarter now represents a bit of a deceleration in the growth rate there. Despite some really positive commentary that you're seeing in various parts of the business. Thanks.
Thanks Ryan.
Answers is really an amazing new product for us because it opens up our Tam significantly the number of verticals that we can go after but as it relates to answers every business can needs to answer questions and that's not necessarily the case for the previous product, which we lead with which is which is liftings. It's all still built on the knowledge graph.
And I think quantitatively the most encouraging thing was that we saw 30% of in North America Enterprise New deals of our HCV was led by answers. So this is already beginning to have an impact as we also said thousands of free trial request, we saw in the quarter of which we took those that we could put up and we got them up and we are we're.
Looking towards making this totally self serve that's the next generation here. The first stage was making this free trial, but today, we still have to set them up with our hitchhikers with our JAKKS guidance going forward, we want to move towards a a free trial model I'm sure a complete freemium model where.
Customers able to set them up in self self serve and then we'll go from there. So we're feeling really good about the inbound demand for this and we saw quantitatively. Some results. We have a 150 customers live the brands that you see you're going to answers that horizon Dot com, that's a pretty amazing set of sort of first initial customers and the results are.
Our from a user perspective amazing human that you put up and answers box and all the sudden your site search volume on your own site goes up 60% it'll be intelligence at the customers can see from what people were asking is nothing short of extraordinary as it relates to the guide you know, we're we're cautiously optimistic about answers about our business.
And the opportunity to put official answers everywhere at the same time, we continue to take a conservative approach given the uncertainty we see in the world as it relates to the pandemic and the economy.
Excellent and then as a follow up when you talk about the funnel of interest to interest in free trials as you're seeing that come through can you talk about the role that the Adobe partnership is playing in that hows that progressing and I know you're sort of train. The you Adobe salesforce sort of the during the quarter just give us a sense of what the progress is there.
If that's starting to contribute at all thank you.
We have an active pipeline with Adobe just as context, we've agreed partnership with Adobe the sunset their search and promote product last year. That's their site search product. There's a lot of excitement in that you know, they're the best company and digital experience with their customer experience in their experience clouded I think they're more than 3 billion of air.
Our as is a huge percentage of their revenue and the in their product offering don't offer a site search right now.
That's our opportunity to partner with Adobe to provide a totally different way and as contact they're searching for mode product with Sunset. It was eight document based keyword keyword based documents or just the search of the old way. When you want to think about what that looks like that's think Lycos think altavista think Yahoo, and 1999, that's what keyword base.
Searches.
Our site search the ex divisional answers engine.
Is.
Our knowledge based search using MLP that gives answers and so the ability to combine that with the Adobe experience offering is very powerful because every customer journey starts with the question every customer journey starts at the search we're able to complete that.
We have an active pipeline with Adobe, we have great connection points to them over the globe and we have closed deals already some significant ones that we've been working with them on it.
Okay.
Our next question will come from Spencer Tam of RBC capital markets. Please go ahead.
Hi, everyone. Thanks for having the on correct. Congrats on the quarter just wanted to see kind of your thoughts on what needs to be done to get to your sales quota carrying reps have 255 by the end of fiscal year and then also last quarter, you hinted on kind of having exposure to 25% to 30% have kind of.
Heavily impacted industry is just wondering if this allocation has changed this quarter and how you're thinking about adding new account under this environment through the rest of the second half. Thank you.
Thanks for that Spencer.
First off you know, we're constantly recruiting to build their quota carrying headcount up I still believe we can get to our target of 255 by the end of the year I'd also like to remind you that those reps that we have right. Now is the most tenured set of reps we've ever had tenured really does matter when it comes to productivity inefficiency I'd also like to point out we did see an incredible.
Prudent inefficiency year over year, 72% to 64% of revenue went to sales and marketing, which which we feel really great about in large part due to this new motion due to the tenure of the reps and due to our improvements in in our new product a big part of answers is going after new industries and new verticals.
Yes, the tale of two cities that we talked about last quarter as it relates to the air our from different industries. It's about the same this quarter.
And so yes, we had that base. It still there that said with answers. We can really go after new kinds of customers and I do expect that mix to continue to evolve over time, as we target new new verticals and get out there to be able to bring answers to industries like education, we never can sell listings too.
A university yet if you follow us on Twitter, you'll see that there's education.
Universities that have put JAKKS dancers up and that's a big opportunity for us there's all kinds of new industries that weve never been in before.
BG, Yeah, we could never work with the Campbell soup on listings yet now Dave you know if you look at their site you can see like they're they're using answers and we're answering questions about them. So we've used our new product to help shifty industries in our proactive sales approach can help us do that as well.
Got it thanks very much.
Our next question will come from Stan Zlotsky of Morgan Stanley. Please go ahead.
Hey, guys Hamza Fodderwala for.
<unk> for third congratulations.
Jim on the on your next chapter I wanted to dig in a little bit more on.
The Coke zero structure, which mean.
Patrick and David.
How's that going to work how are the role is going to be split up because obviously you know coty our structure that is unique.
Within software. So just curious how that all that structure is going to work on.
Thanks for your question I'm pretty confident that this is a structure that we've seen in other companies before Patrick's got the international and the Seaview and Dave's got North America and the E U.
This is really a just continue to rins cycle and repeat you saw the improvement last quarter and I believe that with the team that we haven't plays we're going to continue to do that continue to go forward also Dave and Patrick do you want to talk about your experience in working together and partnering yes, hey.
Stan.
So this is Dave or Netscape.
We've done this at scale before both of US a spend quite a few years at Salesforce I have responsibility for the M. A good part of the enterprise Patrick for the CVU.
And I think as you look at how we segment our business, it's pretty clear as to what our responsibilities are and how we're going to go after each market segment, yeah I'm. The only thing I would add to that as Dave said, we work together for a long time, we collaborate everyday I've been here for a year and a half and Dave and I talk every single day. So we're both very excited about this.
Next chapter in our transformation and are really looking forward to it and I think the way that weve divided things up gives us both the ability to concentrate on the businesses. We have but also collaborate in a way that she is going to make this company even more powerful.
That's helpful. Maybe just a quick follow up it seems like from a commentary the demand really picked up.
Throughout the quarter and I'm wondering if you could give any color on.
We're seeing.
The pipeline going into the back half of the year actually.
Some of the restrictions around the pandemic start to go back to maybe those impacted verticals start to see some improvement in demand as well. So any color you could give there'll be really helpful.
Thank you.
Yeah, I mean, I think you heard us say that our business momentum picked up throughout the quarter. We finished with the Super strong July.
You know no major changes in August except typical seasonality. So I think look overall, we're seeing companies. They are adjusting to changes from remote working business environment. There. They are having conversations there is demand.
And we look forward to seeing what we can do for the back half this here.
Yes, Hello, if I can jump in here too little bit like Howard said, we've seen a lot of strong now that kinda back to Brian question at the start of outside of the growth rates look like they're slowing in Q3 Q4, well that made me mathematically true I just want to remind everybody. Our are good business comes in Q3 in Q4 last.
Last year was not impacted macroeconomically. So they have very strong quarters last year. So I think your naturally going to see some of them out in a macroeconomic challenged environment reflect more that then the strength of our business and I think all of us feel very good about where we're going here, but I'd just caution you to look at the growth rates in the second.
Wow, that's a challenge the economy versus one that we just booms in Q3 Q4 last year.
Okay. Thank you.
Our next question comes from Koji Ikeda.
Please go ahead.
Hi, guys. This is Chad shading on for Koji, Thanks for taking my questions.
We've seen kind of the official branding of the ex search bar on line something you guys talks about and probably some free marketing so to speak but you could take a bit deeper on that in terms of branding and kind of customer awareness wondering if you guys have shifted or reconfigured your marketing budget at all during the pandemic and how does that shift more towards getting the word out on kind of.
Answers free trials or just thinking about where those dollars are being focus. Thanks, well you know, Jim It and Steve and Patrick are amazing salespeople amazing but.
There is no better sales person than your own product.
And that is why we proudly put our logo right in front as I go to Krispy Kreme Dotcom just go right. There what do we don't necessarily by too many doing that's I only had it doesn't yesterday.
When they brought them into the office my personal favorite as the Strawberry ice donut. It was just off the hook.
That is the best marketing, we can we can have and that's part of our product.
So.
When the user gets a great experience theres really two fold. There there is trained to consumer that when they see the ex the official answer seal, they're going to get the official answer not a link they're not going to get a lycos like altavista 1998 experience off of the site, they're going to get a Google like experience off of a site I think a good way to think about this.
Just like Shopify has given every company their own Amazon, what we're trying to do it JAKKS does give every company their own Google.
[laughter] used to be you'd go to a site and you see a Google search box on the site, but you don't see that anymore, because they exited that fate search business in that way, that's our opportunity to go in and put the X. box up there to help the consumer get a great answer agreed experiences they stay with that customer and they don't bounce out so that customer has to buy them back and from.
Our marketing perspective, putting that up there is a great way for us to generate free trial since the great way for us to generate awareness among consumers and our target audience, who are really marketing and digital experience folks within a company.
Super helpful. Thank you.
Our next question comes from Mark Murphy of JP Morgan. Please go ahead.
Yes. Thank you Jim we we'll Miss you and I wanted to say best wishes for everything in the future and it's also a great Q knew that you have someone and talented as.
Dave stepping in and a and also Patrick So Howard following up on them well [laughter], Yes, you did trend you've trained everyone well.
Howard.
What you were just talking about.
The question is crossing in my mind is when a customer deployed answers what is the search technology that they are replacing what is the incumbent.
Technology that they're pulling out.
Well, there's a lot, but you know you've got Endeka, which is an Oracle technology you have often a custom in house solution, which has been built this is sort of say searches in existing market that has a bunch of legacy players and we've just taken a totally different approach in showing up with it.
Answers based technology that starts with having a structured knowledge graph, where they used where the customer puts in their knowledge of the structured way as opposed to a technology focused on crawling and ingesting and then generating document links that magic keyword. So the fundamentally different approach often you're replacing something that the ITC.
Built, but we've got such a different unique way that starts with you know the knowledge graph and in many cases for our customers isn't up so we already have a ton of their information in the knowledge graph right. So we might have a banks locations or they're easy answer their advisors. That's all sitting in there I think we said we had was 385 million facts.
And then all its graph, which is 71% year over year increase that is the structured knowledge that makes this.
That makes the search possible that makes it easy to kind of get going and we're just taking a new and unique approach leveraging that huge differentiator.
Okay.
And so I guess Howard as they're doing that I think the reason historically, they've had the calling and adjusting it matching document.
Because it leaves it pretty open ended right. They don't have to define what can be asked then sort of can't handle a huge your array of questions on the website and so I guess I'm just wondering what happens to that element of it when they when they put it yes dancers.
Well, if you run a search on the site that uses the JAKKS dancers engine.
But you will see are the result set will have on the top there'll be tabs kind of like Google Scott. Their main results and then maybe they have tabs by entity like a map for let's say, it's doctors or let's say, it's a different type of tab for a different type of and.
Links that is the old search it's so when you use the extra answers just like when you search on Google Google is a blend of knowledge base dancers and keyword based documents search the keyword based documents or the third.
Party sites that they send you too, but the knowledge base dancers are the answers that appear directly into Google search from their own knowledge graph were that first part for every company and then we'll either blend whatever they're using today with the links part of our experience on the backend so that it's always able to.
Catch that sort of as you pointed out long tail question, if it's there, but remember mark what we mainly C are for most of these companies there's.
The intelligence that they get from putting up your next answers, they're able to the for the first time really get and be able to see what are people asking right now and the volumes are huge the search volumes are huge people ask a ton of questions when they when they when they can get an answer and as we see questions pop up the admins at that company if their own and.
Third we will simply add the answer to the knowledge graph. So that the next time someone asked that question Theres, a beautiful feedback travel and they will get that answer. So the most commonly asked questions quickly get populated quick we end up in the knowledge graph and if something pops up out of nowhere they'll see that pretty fast and make sure that that question has met that that answers there.
Okay and then one final one thank you that's a great explanation Howard.
The I guess I wanted to ask either for a Jim or David Patrick the thinking through what Steve was just describing I'm just it just kind of a.
A little dose of just economic reality, and then and then having the tough comp in Q3 in Q4 when's. The next opportunity to grow your net new a our year over year in other words to grow the bookings a year over year is there do you see that opportunity around the corner, maybe by the by the April quarter.
Sometime or around next summer.
Steve will let you take that question.
Yeah No markets. That's a good question, it's really a function of macroeconomics right now I mean every country every city isn't some different stage of opening big businesses or more advanced than some smaller businesses. So yes, we can't really answer that I will say that when you look at our pipelines and then Bell Creek.
Trials and what's going on it feels very good and if we were a normal circumstances, we now I think much better opportunities here, but so you're asking us to look out into next year. We've got elections coming up clearly this is going to be more challenged so I.
Well, we're definitely going to take a look at things at the end of our Q4, because we'll be into next year, but it's going to take a little bit of tied to see that.
Common it's hard to say.
Understood. Thank you.
Our next question comes from Novid Cohen of Truest. Please go ahead.
Yes, Thanks a lot.
On the on the self serve launch timing, maybe can you give us some sense of when that might become available.
Got it ought to be has.
Well since since.
You can go ahead and signing for now.
Launched late last night.
[laughter].
Understood now, it's not perfect yet, it's not perfect yet, but you if you go and do it is self serve as of late last night.
And maybe.
Let me just a follow up on the on on the on the answers so.
Several here on that a majority of the customer that tried it.
All are opting to begin paying customer Len of those who may not be more than the technical reason is that by that.
Hi, guys.
We're definitely seeing very strong for those that try it a very strong inclination to convert to paying customer as you might expect because the value prop have lowered support cost increase revenue and customer intelligence is super strong and immediately quantifiable within you know for that.
Then first off there's a screen in the account you can log into it shows we use or classifier to classify keywords is revenue generator cost savings and they can see the number of searches and clicks and conversions as customers hook up the conversion tracking to JAKKS and they can see exactly how much money, they're making from the transactions.
And so they're either saving money are making money in invariably usually it looks the ROI is extremely compelling. So we see a continuation of Patrick you had something to add there.
No I think I would agree with everything at Howard said and I think for the customers.
That are turning away, we're not seeing much of that yet we started you know in the in Q2.
Incredibly positive we've actually even seen people moving to paying customers even prior to the end of the 90 days. So so far so good and we're very very excited about how it's been going.
Oh I'm.
I'm going to watch for year I'll watch for your sign up through the self serve right.
[laughter].
Oh, Yeah tend to my name, so you'd have to guess, but.
Okay.
Paul Office team or this on the on the guide themed Oh, sorry, if I look at.
Q2 guide was most of that it came out.
So what I'd think about Q3 the family conservatism in the past that renewal activity is obviously skewed towards the back half and that's reflected in the guide.
Hey.
Okay do you mind repeating the question, we Didnt hear you for a second there must have been a zoom blip.
Yes, so that's on the on the on the outlook for third quarter I'm sure independent the thing of as a as your second quarter guide meaning.
There is obviously macro uncertainty and the fact that.
A bunch of actually majority of that anyone so and the back half of the on the year. So that's one so that's something that died.
Yeah.
Hey, This is Steve sorry, My line got dropped there.
Can you just give me a quick.
We do on your question I, you're looking at Q2 guide versus where we came out yes. We did good Q3 I think it's you know this is where we have a large quarter like I said in Q4. So we're just going to be conservative in how we think about the quarter. The macroeconomic Java big replay of this than our pipeline or opportunities right now.
Got it but in terms of deal activity that you do benefit from any being sort of moving from Q3 into Q2 anything like no no not really I mean can keep in mind kind of all forget this because we had such a strong Q2 that a majority of the trial simply got started.
In Q2, so the manifestation is probably in Q3 in Q4 of those conversions, but macroeconomic headwinds haven't they haven't really cleared and there's still a fog and we've got a lot of things to get through but to Patrick's pointed David's point earlier, our customers are understanding the benefit and I do think.
Over time, we'll continue to.
See increased bookings, but right now we're just going to be.
Service of and thoughtful about what we're trying to do here and make sure we can execute.
Understood. Thank you.
Our next question comes from.
The hottie of William Blair. Please go ahead.
Hi, guys great job on the results in Jim a best of luck to in the future was good working with you. Although it was brief.
Thanks Art Howard.
Yes, absolutely Howard maybe I just want a follow up.
On the answer them and some of the kind of narrative that they you've talked about already but one of the biggest.
Values of answers is that it's going to accenture to new markets that you didn't have access during the past when you look at the customers that are trying to answer a little going through the free trials later in the pipeline or maybe those that have converted already what can you tell us about you know how much of that is cross selling to the existing base versus you know growing the pie.
With your accounts that you didn't have before.
Well our free trial offer is mainly focused on new logo acquisition. The point of the free trial is to be able to get to new accounts. So by definition, we're going for those new accounts, we're going for new logos eat you don't.
Necessarily approaching existing customer for free trial that free trial is trying to get folks to come in that you've never talked to before so that's the point of it Theres no question that when you look at the mix of free trials and answers experience is going live you can see it there's just a different type of business that you see here and by the way that include.
Even the World Health organization in the first <unk> first quarter.
Just sneak depart you know you didn't approached them before and sell them. Your listings product you, but we have this amazing official answers engine as people need to be able to travel around the world or they need to answer questions about where they are allowed to travel. They go to the official source itself and that comes from the exit Vishal answers engine. So there is on.
Questionably a shift in the mix of.
HM.
Higher market not just those that are focused on being able to two levers listings.
Got it Okay and then maybe.
A question either for Jamere, Pat or whoever wants to take effect, it's great to see the sales efficiency.
I got here in Q2, you know undoubtedly some of that is due to lower our travel expenses.
But when you think about kind of how your long term go to market motion has been change either as a result of with pandemic or just the.
The introduction of answers.
How should we think about the sales efficiency sticking around you know on the other side the pandemic and into now into 2021 is this a fundamental change or are there some temporary items in there that might come back once a pandemic has subsided.
Hey, ours, it's Dave or Netscape I think couple answers there one it's become pretty apparent that we're comfortable with our sales motion and work from home I.
I think it was more awkward for our clients in the beginning of this in early March where they were more uncomfortable working for how many of my folks, particularly the enterprise have done there's a lot in their career.
And so we we quickly adapt it to but what I'm really happy about is the motion that we have where we can be as productive and I will tell you one thing and I've talked to my leaders about this once we get passed all this craziness and it gets to some solar sense, a normalcy, we don't need to load the bus up anymore. The plaintiff anymore to do our jobs.
We feel really comfortable with it and I think at the other part of your question was in terms of how its changes, particularly with answers were just getting a hell of a lot more that you know I look at my pipeline for the a if teas and it goes across a bunch of industries that six nine months ago on this call we wouldn't be talking about there's a number up professional.
Services companies, there's state local government, there's public sector hardware company software companies. Several professional sports franchises. These are these are targets that we didnt have available without answer so we get more at bats, we have a reason have conversations with industries, we haven't done visit before and as Howard mentioned in the opening comments I've.
Things, along a huge attach rate for existing customers.
The only thing I would add to that on the efficiency side as Howard mentioned earlier, we have the highest tenure than we've ever had and the sales organization. So our team now is you know I've spent a lot of time since I've been year, bringing in team and growing the team and now we have a tenured team we've got an excellent enablement organization and.
So I think the efficiencies are definitely going to continue.
That's very helpful. Thank you guys.
Our next question will come from Rohit Kulkarni of MKM partners. Please go ahead.
Hey, Thanks, and nice quarter guys. A couple of questions I'm now on serves Ottawa and pricing as in can you just talk about what's the feedback you're getting from them.
It was the auto why and how do you feel about pricing on serves as a standalone or looking at on product and new customers with existing ones I know you're mentioning the classic.
Capacity beans, or click based on usage based pricing can you just just walk us through all you're thinking about pricing there.
Sure, let's start with ROI, because I think that's the most important the ROI like I mentioned before what we do is we classify every question that accompany gets as either revenue generating or cost savings. So cost. So one of the ways that companies make a ton of money from answers is by saving money from support questions every time.
Someone calls up customer support it can.
At user by answering your question online without a chat brought by the way you without a without alive person to answer on on live chat by the way, which also has a cost were just talking about catching as many as possible with answers and we can classify a question it as doing so and then ESPN.
I mean, how much they save whenever the user engages in clicks and show a cost savings and then in addition to that we also can classify queries based off of the industry that accompany isn't as revenue generating it's a little bit like add where three you can see how many queries God and you know what you're paying for those but obviously you don't pay for specific keywords here.
We show you those questions and then we asked we show you exactly how many.
Quick so you've got to those questions and then the user can either hook up conversion tracking where they can ascribe direct revenue to a specific query that they see through their ecommerce engine alternately they're able to look in a and to assign what a click is worth and then they can see the total amount of revenue that they believe generated in the addition.
If those two numbers the cost savings plus the revenue generated is the economic impact and the economic impact is typically very very very high relative to the pricing of what we charge for answers, which is the model is capacity base. So its based off of you get a bucket piece off a number of queries that that you want.
To use and for the customer since they get the free trial were able to see how many queries that the user that how many queries that they you search is flat, meaning that when people start using answers. There's a there's a bump it goes up but then they know how many questions that they're going to need to how many sources there need get any device. So it's obvious which bucket they should pick based.
Off of that that's the trial sample what we see usually is between.
Somewhere between three and like 100 acts economic impact versus the cost of keeping answers. It's a it's a very clear cut compelling case and that's just on a on a quantitative basis. It doesn't even contemplate the extraordinary customer intelligence and insights that that Dick that the customer gets by knowing what people were asking them for.
Oh, Okay awesome.
Do you feel that the conversations you're having the budgets will answer is coming from the CR euros office or the Cmos losses, our view transcending.
Budgets that otherwise.
Oh would have been smaller mao's you're getting into the more flow Oh Cmos office budget, but didnt has one engine for upset assumption.
Hey, ROE hit its Dave or Netscape at we're seeing the budget come from off from the CMO a lot from the Cdot the Chief Digital officer answers brings us right to the heart of the conversation about a digital transformation, which is on the top of mind for all of those executives right now.
Okay Awesome congrats guys.
Thank you.
This concludes our question and answer session I'd like to turn the conference back over to.
You got Broderick for any closing remarks.
Thank you for your time, everybody. We're looking forward to updating you next quarter have good day.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.