Q1 2021 LivePerson Inc Earnings Call
Good afternoon, ladies and gentlemen, thank you for standing by and welcome to life per since first quarter 'twenty 'twenty. One earnings conference call. My name is Matt and I will be your conference operator today at this time all participants are in a listen only mode and.
After the prepared remarks, the management from Leiphart person well conduct a question and answer session and the conference participants will be given instructions at that at that time to give everyone. The opportunity to participate please limit yourself to one question and one follow up as a reminder, this conference is being recorded I would now like to turn the call.
For the type of it to MS. Dahlia Rodriguez. Please go ahead.
Thank you Matt.
And good afternoon, everyone. Joining me on the call today is Rob Locascio, life's Pearsons founder and CEO.
And John Collins, Chief Financial Officer.
Please note that during today's call, we will make forward looking statements, which are predictions projections and other statements about future results and.
These statements are based on our current expectations and assumptions as of today and are subject to risk and uncertainty.
Actual results may differ materially due to various factors, including those described in today's earnings press release and the comments made during this conference call and the 10-K's 10-Q's and other reports we file from time to time and C. C.
We assume no obligation to update any forward looking statements.
And also joined this call we will discuss certain non-GAAP financial measures and reconciliation of GAAP to non-GAAP financial measures is included in today's day and expression and so.
This press release and supplemental slides, which include highlights for the quarter all of them.
And the Investor Relations section of life personal website with that I would like to turn the call over to Robert right.
Thanks for Dahlia.
Thank you all for joining like persons first quarter 2021 earnings call over the past years, we've demonstrated lypressin clear leadership and conversational commerce.
This quarter validates another data point showcasing the massive potential of conversational commerce and strength of our strategy execution.
Revenue increased 38% year over year to $107.9 million and the first quarter and grew approximately 6% quarter over quarter exceeding the high end of our guidance the.
And this acceleration of our growth was fueled by a combination of growing wider and deeper with existing customers as well as adding new large brands.
And Q1 2021, we signed eight deals of seven figure annual contract value.
Four of which were new logos for also expanded into target verticals, such as health care and government.
Total annual contract value of signed and the quarter hit a record high increasing more than 120 per cent year over year and the fact that this grew significantly faster than overall revenue is of great leading indicator for future acceleration.
Volume on our conversation on cloud and the first quarter reached an all time high even exceeding Q for 2020 peak volume during the holiday season.
Overall platform volume at the end of March increased nearly 40% year over year, while automation and volume accelerated by almost 50% year over year messaging volume that was partially or fully automated increase quarter over quarter, and reaching more than 70% of the total messaging volume of.
A key highlight I'd like to share about Q1 was our focus on capturing massive opportunities, helping brands create conversational sales and marketing journeys for their customers. You may remember that we prioritize these revenue generating use cases to own the entire customer lifecycle for marketing to sales and customer care and Q1 showed strong execution around.
The strategy.
Our gain share business, driven largely by commerce experienced a solid topline and robust pipeline for upcoming quarters across North America and EMEA.
Life persons of innovative marketing programs also contributed to this momentum has continued to adapt to the virtual selling environment. We've developed new breed of top notch remote marketing events during the quarter. We added a large online event with expert led education on Masterclasses community building activities and peer to peer connection and total.
<unk> hundred 19 executives across 79, leading brands joined the multi day retreat.
We plan to hold these events every quarter and anticipate they will continue to positively impact contract signings and pipeline.
Now I'd like to highlight a few stories about brands leveraging life person's expertise and technology to drive digital transformation across care.
Commerce and additional innovative use cases.
The first is our win of a multi year seven figure contract with huge potential for expansion with one of the top three health care companies in the world.
This company generates hundreds of millions of calls across the key lines of business at the cost of billions of dollars each year and.
And the immediate future, we will assist the brand and reducing operating expenses and raising member satisfaction by shifting cost of messaging and introducing automation at scale over the long term of our proactive messaging and social messaging capabilities will help the brand and build a stronger connection to its and customers by giving them the ability to more proactively self manage their own health.
Other we unified the consumer experience across channels to develop a more intimate and long term connection between the brand and its members.
Life person's expertise and asynchronous messaging, our robust suite of conversational AI capabilities and the fact that our platform is turnkey ready.
For transforming large enterprises, where the key factors and.
And winning this new logo another.
Another new logo win of the quarter was a seven figure deal with one of the largest automotive automotive manufacturers and the U K like many other companies. The brand was challenged due to head count churn as a contact center.
And the shutdown and customer satisfaction ratings were hurt as well as revenue life person's conversation of cloud will operate at the brand central hub for messaging and creating a holistic experience for every stakeholder, including Oems and over 3000 global retail the.
Yours, and the brands employees and customers across channels.
First will transform their global contact centers to help them with customer care retention and expand into Congress use cases with our highly differentiate two way prior to the messaging, which has generated customer response rate as high as 35 per cent for several brands already using it for example, whenever vehicle recognize that's breaks need to be fixed price.
The the outbound message will be sent straight to its owner, enabling to self serve and book service from anywhere with the dealership.
This kind of use case truly represents and large revenue generating opportunity for the brand, especially when they have millions of connected vehicles globally.
Key drivers of this would include Lypressin eating and navigate user interface outstanding AI capabilities, and the ability to take payments and scale with automation across all channels.
I'd like to share. An example of an existing client of global multibillion dollar jewelry retailer that is taking full advantage of AI powered messaging of potential drive to sales we.
We signed our first deal with the customer and Q3 2020 expanded this quarter, we started by launching both web messaging and a QR code of experience that lets customers message with their jewelry consultants from any device.
The basic start achieved 70 million messaging, driven sales and just $70 million and sales and just a few months to date over 900000 messages conversation of taken place with daily average sales conversion rate of 15% with.
And with our new deal, we're expanding into new and points proactive messaging and conversational ads.
This expansion will also meet the retailers' demand for full and value capabilities payment within messaging and direct IV, our deflection and.
Incredible results. The brand has achieved proof AI powered messaging is not just about customer care, but also marketing and sales journeys that give customers the power of the purchase when they want.
Speaking of expansion in Q1, 2001, we signed one of the large expansion deals and our history with the multibillion dollar and North American satellite Radio company.
They started their journey with live person and late 2019 with IV, our deflection for their customer care operation over the year, they've massively expanded with their service with us multiple times for a gain share model not only and customer care, but also by moving into commerce to enact and proactive messaging.
With this latest expansion, we will fully migrate their current technology on to lie persons platform. We envisioned the consumer experience with AI powered messaging and replacing costly and voice calls.
Well the person exciting product roadmap combined with our AI expertise and scalability for key factors for us to expand the deal within a matter of weeks.
One of my favorite product launches of the quarter is the loyalty program for Dunkin' and one of the biggest fast food chains and the U S. The brand was looking for new ways and new channels to build continuous connections with customers.
They're adding QR codes on food packaging, giving customers the ability to easily scan the code download their app and sign up for the loyalty program via and and automated SMS message sent from the Bot and the free done at this.
This program and packaging and starting to rollout and over 9000 Dunkin' stores in the United States.
We can hear and innovate not only of the AI sphere, but also and extending our platform into new channels, including social.
We believe social messaging and will keep helped meet the strong demand from our customer care for fully integrated messaging experience brands can now message social conversations, including public and private messages at scale, increasing the surface area of automation and touch points and.
And the other capabilities when the conversational clot currently enabling brands to match customer care and social within our platform and our long term visions fried and NDA and social solution for care and marketing powered by AI and automation.
Several of the world's largest brands of sign on to use our social capabilities or plan to use as part of joint Roadmaps.
Our partner ecosystem also continues to expand both in terms of go to market and introducing new joint solutions with industry leaders. We will soon announce the tech Mahindra has joined other Lypressin partners, including T Tech emphasis and IBM global business solutions and strengthening our go to market reach and sales distribution and in fact, one of the seven figure deals and our.
Good government vertical was driven by a partner.
Simultaneously after a quarter of ramping and developing the pipeline we close import we closed important new logo deals with Infosys and Q1.
We also announced the partnership with medallion offering brands, the ability to seamlessly and a great conversations and customer engagement analytics to help the measure and respond to customer and employee signals in real time, we consider these collaborative partnerships significant indicators of our leadership position and conversational AI.
Finally in Q1, we were approached by city, one of our longstanding conversational cloud banking customers.
To help bring and help bring and at home rapid testing option for COVID-19 to its employees. They asked us to build and App called Bella that would take the power of our conversational AI that they use and their contact centers and see if we can apply to at home rapid testing the goal was to have and AI.
And that would take of the employee through of conversational AI Guy the experience every day that can boost home testing confidence create.
Create positive user experience and provide the digital enablement that can help the city create an additional level of mitigation and their offices and returning their employees back to office.
Working closely with the city team and a matter of weeks, we launched the Bella App on the conversational cloud I'm really proud of what the team delivered and he and proud of say our platform has been instrumental in providing and additional measures of create a safe work environment for thousands of employees.
Who would feel more comfortable of getting back the physical workplace, we're looking at other opportunities with our within our corporate customers and we'll keep you updated on our progress with the COVID-19 testing program.
Given all of them of the momentum and opportunity. We continue to experience. We entered Q2 laser focused on retail and e-commerce and sales and marketing use cases, while continuing to innovate and customer care and we're committed to bringing our complete vision for conversational commerce to life for our customers through our industry, leading AI and messaging capabilities are large and growing.
Partner network comprehensive revenue generating and gained share offerings.
And compassion and trusted Conversationally I remain key pillars for our strategy as we lead conversational commerce and Q2 and beyond.
And with that I'll turn over the call the John to provide an operational update and more color on our guidance John.
Thank you Rob.
And the first quarter, we continued to build on and the momentum we generated throughout 2020, we signed eight seven figure deals four of which were for new logos overall seven figure deal counts increased 400 per cent.
Year over year and annual contract values across all market segments increase of 120 per cent year over year, we materially expanded our reach into large target verticals, including health care and government, where we're setting the foundation for future growth our international business continued to grow and and accelerating pace and is now on track to match the U S growth on a year over year basis, and the second quarter.
As for strategic partners, we signed deals with medallion and Tech Mahindra and we've only just begun closing opportunities with an emphasis is growing pipeline and.
In terms of operating metrics, we once again exceeded the high end of our guidance range for both of the topline and Bottomline.
Continuing to enhance operating leverage while delivering the highest quarter of growth in our history.
We operate at the rule of 40 for a third consecutive quarter and improved on a wide range of key metrics, which I'll discuss shortly.
Significantly and billable platform volume also continued to accelerate reaching a new high and March all considered the data clearly signals that we're capitalizing on a robust and rapidly growing market for conversational AI.
And the first quarter total revenue grew 38% year over year, $207 9 million, which exceeded the midpoint of our previously issued guidance by $4 4 million and marked our fourth consecutive quarter of revenue growth at 25% plus the.
The material sequential increase in revenue and the first quarter of 2021 underscores accelerating demand for conversational AI generally and expanding applications for conversational commerce and particular.
The primary contributors to upside and the first quarter were overdue or demand based revenue for of CPI contracts over performance by our consumer segment and the at home and COVID-19 testing solution that Rob described.
Gain share also performed above our internal plan.
But the magnitude of the year over year growth and the first quarter was heavily influenced by last year's relatively soft pre pandemic comparable period.
Dynamic also accounts for expected growth change between the first quarter to the second which I will discuss with guidance.
Further unpack and the first quarter results and beginning with new logos annual contract value has increased more than 100 per cent year over year and for new logos were seven figure deals.
While the new logo growth was led by enterprise annual contract values were also up significantly year over year for new logos across mid market and small businesses.
As for the gain share of business, we signed a seven figure expansion and a record number of new logos, because we've optimized and proven playbook for winning agent labor deploying automation services and guarantee and financial results. Each new logo win that's up a multimillion dollar expansion opportunity and the first quarter gain share was 13% of revenue.
Our partner network contributed several new logos as well, including a seven figure of government win which adds to our momentum and this large target vertical.
The deal will help build the relationships and technology infrastructure that we expect a survey of the foundation for many other government related applications and conversational AI.
And as mentioned emphasis also began closing deals and the first quarter and continues to build the significant pipeline.
In terms of of our reporting segments within total revenue <unk> grew 38% year over year and host the software grew 37 per cent year over year professional services revenue grew 41% year over year.
And along with that momentum and the B to B, our consumer segment posted record growth of 44 per cent year over year.
From a geographic perspective U S revenue grew by 42% year over year and represented 64 per cent of total revenue.
International growth accelerated from 18% year over year, and the fourth quarter to 32% year over year and the first driven by growth in both EMEA and APAC.
And total international revenue represented 36 per cent of revenue.
Average revenue per customer grew approximately 34 per cent year over year, reaching a new record of 490000 and the strong relationships. We forged over the years helped drive both expansion and revenue retention.
Which once again significantly exceeded the high end of our target range of 105 to 115 per cent.
In terms of industry trends year over year of growth for retail and E. Commerce was more than double the growth rate of our next fastest growing industry for niche services driven by the compelling return on investment for conversational commerce applications.
Billable platform usage continues to accelerate in 2020, one increasing 40% year over year and surpassing the high watermark set during the fourth quarters of seasonal peak.
In terms of the bottom line for first quarter, adjusted EBITDA of $13 3 million or 12, 4% margin exceeded the midpoint of our previously issued guidance by $7 3 million.
These results marked our fourth consecutive quarter of double digit margin and our third consecutive quarter of operations of the rule of 40.
More than half of the upside was driven by over performance on the top line and the remainder of is due to the pace at which we've made investments.
We continue to add and go to market capacity through our partner network.
And total quota carriers increased slightly relative to last quarter, and we continue to focus on increasing the numbers.
As for cash, we generated $14 6 million and free cash flow and the first quarter, driven primarily by higher than expected adjusted EBITDA.
We closed the quarter with $668 million of cash on the balance sheet and increase of $14 million from the end of 2020.
With continued strength and our business, we are raising guidance for 2020 one revenue from our previous range of 458 million to $466 million to a new range of $460 million to $468 million for 25, 5% to 27, 5% growth year over year.
The guidance range for 'twenty, and 'twenty, one and adjusted EBITDA remains 33, and a half million of 41, and a half million or 7.3 to eight 9% margin.
As for the second quarter of 2021 our guidance range for revenue and $112 million to $114 million or 22% to 24% year over year and the range for adjusted EBITDA is $5 2 million to $7 2 million or four and five to six 5% margin.
Note that the guidance for the second quarter is the function of lapping the pandemic induced acceleration and our business. The commenced one year ago and continuing to invest in the range of growth drivers include and go to market capacity.
And on that note I want to underscore the implications of our full year guidance that we expect to accelerate growth on top of such a transformative period last year is the strong testament to the staying power of our platform conversational AI is solving fundamental business problems that have a clear and recurring return on investment for our customers in terms of both cost savings and increasingly.
The incremental revenue.
Now before taking questions.
Want to touch on several key themes that were key to our success and the first quarter and that we expect to continue throughout 2021.
The depth and breadth of our conversation of cloud and the ease with which developers can adopt the platforms products and services to new use cases have enabled us to rapidly diversify and grow revenue streams conversational commerce, AI assisted telehealth innovations and customer care of like social media management are all growing sources of revenue that reinforced our leadership position and the market for conversational way.
Uh huh.
In addition, we've optimized our gain share offering and go to market motion narrowing in on a repeatable model the resonates with brands and that we execute with machine like precision inter.
International revenue growth continues to accelerate and is on track to match the U S growth within a quarter.
Our expanding partner network helped extend our reach into new verticals and continues to build integrations with our platform.
Annual contract value for new logos, and all market segments from small business and enterprise grew more than 100% year over year.
Considering all of those exciting trends, coupled with billable platform usage continuing to accelerate beyond the fourth quarter seasonal peak. It's clear that we are at the center of a rapidly growing market for conversational AI, which is beginning to look a lot like our long term vision.
And with that operator, we're now ready to proceed with questions. Thank you.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up of your handset before pressing the keys if at any time of your question. That's been addressed and you would like to withdraw. Your question. Please press Star then two to give everyone the opportunity to participate.
Limit yourself to one question and one follow up.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from city of pedigree with Mizuho. Please go ahead.
Hi, This is Michael Berg on for city of congrats on the fantastic quarter.
So you mentioned the gain share programs going strong on the <unk>.
Similar note how can we think of the conversion trend from Elas to CPI contracts and what's the percentage of uplift you're seeing there.
So I'll take that at the end of the fourth quarter, we converted about 15% of total gilead the CPI structures.
And at the end of the first quarter, we grew that fraction for about 40 per cent.
So by the end of 2021 and we're expecting approximately 70% to be converted to CPI structures.
Great.
Okay and then in terms of I think you mentioned one of the customer examples that payments was involved and the messaging platform is that your payment solution and that's built into the messaging or and how can we think about the progress of your payment solution that you mentioned last year.
Yeah, that's that's ours that there was two two.
Two part the two examples I had of the Panther, so that that's our system and there right now that's taking the payments on the platform.
Our next question will come from Sterling Auty with J P. Morgan. Please go ahead.
Hi, This is Matt on for Sterling and cause.
And you have to give us a sense of a new on rates and accordingly.
As for now.
The renewal rates and the quarter are on par with and of seasonal expectations for renewals as you may recall, the fourth quarter is typically where we see the most renewals occurring but.
And the first quarter were on par with what it looked like and similar period last year.
Okay, great. Thank you.
Our next question will come from drew Foster with Citigroup. Please go ahead.
Hey, guys nice quarter and thanks for taking the questions.
John can you unpack the assumptions, you're making around the full year guide.
Guidance set up you know you had close to 5 million dollar of revenue upside and in Q1 and only raised the full year by.
Less than that so the appear like any of that flowed through plods on either business was pulled forward or there are other things, giving your caution around the back half of the year can you just help us parse through some of the puts and takes there.
Yeah, I would say you know were obviously above the top end of our guidance by about $4 million. We are executing on the core strategies that we set forth last quarter, and we think it's still early and the ear and naturally but we're seeing the results that we expected from that execution. We also had some upside on the quarter driven by the AI assisted tell of.
Of health experience that we launched with Citi and.
And some of that might've been pulled forward into the first quarter, but altogether. The actual results the continuing trends and the second quarter. The core business all suggest and support our guidance increase and we think the amount that we put out.
Is the right balance.
Okay. Thanks, and then.
You mentioned, the social media management capabilities for one of your key customers could you just unpack specifically of what youre doing for them that sounds like of non traditional sort of light versus the use case and curious to get your thoughts on how you view that as the.
And more repeatable use case that you could replicate within your installed base and and potentially open up new opportunities for you.
Yeah, our customers.
And want us to take all the different communication channels onto our platform.
And social is usually they have it's a handful agents to a couple of hundred.
And so they wanted to bring those agents and all of the capabilities of our platform to automate against all of the social media.
Both the direct messaging and then the public the stuff that happens and the feeds and so we've been building product for a little bit and they're on our platform.
And we've got a good set of features and we're going to continue to bring its an opportunity.
Some very large brand and signed up to move their social media current implementations onto our platform and then the next step is looking at voice and.
And the Digitization of voice and.
That's kind of like for the last channel shall we say that we're bringing in to digitize all of those communication channel. So that's that's that's where we are.
Oh.
Our next question will come from Arjun Bhatia with William Blair. Please go ahead.
Hi, Yeah. This is Chris on for origin. So congrats on the quarter other.
Quick question about <unk> growth and the solid growth and the quarter. So there's this dynamic and part driven by some of the contract migration activity that you saw or is that mostly volume driven or what are some of the kind of the factors at play there.
Yeah, the the the changing contract structures and expansions are clearly part of the growth and Arthur I would also say that the intentional strategy, we have to move up market.
And mid market is another factor, so where we're landing deals at a higher level than we have and the past and as we've noted there are fewer accounts on a year over year basis, and the mid market but.
Values are up significantly there so that's contributing to the growth.
Got it thank you and just as a quick follow up you might have touched on this earlier, but can you give us a sense for what the average per cent ACB uplifts looks like on this contract conversions.
Okay.
Yes, I will say more generally and we haven't provided that level of granularity, but on average we certainly have up sells and when we do the conversion.
And.
Our next.
And will come from Zach Cummins with B Riley. Please go ahead.
Hey, guys.
As the.
And so as the easing of the COVID-19 restrictions has.
Yes.
Is that had any impact on the consumer oriented verticals like retail and in particular.
No I mean.
And there was obviously a major shift but.
And we're very focused on the retail and marketing use cases sales use cases so.
They're not going back there is still doing really well like I talked about one of the largest George public company. They have 3000 stores, but we've created the whole digital experience that rivals the store and consumers love It and they are buying diamond rings, and high and jewelry and all of that so we continue to see of push and everyone's asking about it.
Now, even though once COVID-19 were vaccinated and people get back but consumers.
Consumers like it and the brands really like it so I don't I don't see it going back it seems to be just consumer behavior of that continues for it and we were really surprised is post the holidays, we always like if I look at 20 years of traffic and get this big bump in in Q4, and then we come down off of.
And we didn't come off of it again.
So we bumped up and we're continuing where higher now than we were at the holidays. So that tells US it's really the concern of behaviors changed.
And they're just they're just using these.
This way of of Commerce.
And then what they were doing and the past.
Got it and I guess like going back to one of the earlier questions about the guidance I guess, we're a little surprised that the.
EBITDA guidance, what do you guys kind of blew it out of the water and this quarter I guess, we might have expected.
The guidance to move up as well and I guess is that of function of the.
Investment cadence or.
And you guys mentioned the revenue earlier, but I guess like why why wasn't the interest the EBITDA moved up significantly.
And it's indeed, because of the investment cadence and the growth opportunities, we see on the horizon, we expected too.
And invest more and the first quarter. So a big part of the upside on the bottom line was just due to the pace at which we can deploy capital and.
And part of that impacts the number of quota carriers that we brought on board. We certainly intend to continue focusing investments in that regard and the second quarter and beyond so the.
We think.
We will still spend what we expected.
During the remainder of the year.
Our next question will come from Mike Latimore with Northland Capital markets. Please go ahead.
Alright, thanks, guys great quarter.
Just on that sales head count or are you I think he was expected to get that to about 110 by year and I guess is that still the goal I think there was also some thought you would invest a little more heavily in the mid market and is that still the idea.
Sure.
Yeah, and both are still the goal of most of the additional quota carriers and we intend to bring on and up to the 100 and send marker throughout the year would be and the mid market.
And why why focus on mid market enterprises going to the other.
But we have a good engine for for enterprise right now we have a lot of support from the partner network and.
And of course, we've refined the playbook for gain share, which is also landing deals and the enterprise, we see an opportunity to move upmarket within mid market and.
And that's what we're pursuing.
Our next question will come from Steve Enders with Keybanc. Please go ahead.
Hey, this is Jack on for Steve.
And what kind of adoption are you seeing on the payments opportunity within your customers, So far and how do you plan to monetize these capabilities.
Yes, as I mentioned and I gave two examples of it so yes, so we're rolling it out and the.
And on the pure.
Monetization, it's tied right now too.
And interaction for our CPI pricing. So that's it's just driving more usage on the platform and.
And it's also just a great experience for the consumer and the brand and used to be the clunky secure forms and now it's a very integrated way to take of payment within the messaging powerful, but it's going to burn down doors and on the CPI pricing.
Okay, Great and then one follow up how are you how are your recent channel initiatives with emphasis and.
And tech Mahindra progressing and.
How do they evolve the types of customers that you can target.
We feel good about it and like as we noted.
Go ahead Rob.
John.
We feel very good about what's going on with and we also like we opened up some consumer packaged goods companies, which is non traditional for us, but as traditional for them.
And there's some internal help desk staff that once again is not traditional for us is traditional for them. So we're seeing some good traction.
Out of the gate with them so of the more of than out of the gate and and we're focused on it. So we feel good about where we are with them, but they are opening up different opportunities and the normal and ones. We are traditionally of going after which is which is really good and as I kind of outlined.
The like the Dunkin', the Dunkin' staff and what's happening now is.
Conversational AI.
Is being adopted beyond care.
And it's being brought into many different use cases, even stuff that we didn't really envision back for and a half years ago, and we launched it for the the first company out of the gate.
So it's kind of it's kind of understand and they've got all of these other different mix of of companies that we do.
And that they are going after and they're doing really well with and then also outside the U S. So it's quite I see.
He is quite and.
Impactful over the mid and long term.
Yeah.
Our next question will come from Jeff Van <unk> with Craig Hallum. Please go ahead.
Yes, two for me real briefly on in terms of the competitive landscape just how has it changed and I'm, particularly interested and the fundamental differentiators. When you get to the final is the final final stage of the bake off the had a book.
Will it down to one key feature function of the platform. What is it that gets you over the threshold and gives you the win.
It's.
It's automation is the AI.
Capabilities and automation and that's what brings value obviously, we still have the best messaging platform in the world and it.
Connected to every message and front end and it's truly a synchronous.
But it's really the ability to automate conversations because most of the engagements we're doing right now they're all AI led they all want to automate conversations they just don't want to do human and.
Human to human conversation.
Got it and then on the deal counts I mean, obviously, the rfps are surging and and the customers that are getting on board absolutely seem to love the platform from your numbers and from our checks did the the offset to that is the deal counts are down I know the prior marketing model was the big you know weekend event set of referral based customer and I think you mentioned some.
Of the new initiatives starting to kick in I mean, how do you balance of the rise and the ARPA and and drop in the customer accounts.
What's fundamentally driving that is it is it that change and lead Gen that you have yet to mature to drive more leads and that mid market is it a conscious focus really to stay at those fewer deal counts, but much larger deals what's what's the balance there.
Hey, Jeff, it's really driven by strategic changes to our go to market motion for mid market and small businesses.
Within mid market, we're seeking higher entry point and so as I mentioned earlier, and that's resulting in higher annual contract value, but also lowered the deal counts and so that dynamic would increase our true increasing the numerator and.
And reducing the denominator for small businesses as we discussed last quarter, we launched the marketplace the strategy to efficiently deliver the competition on cloud to literally tens of thousands of small businesses at scale and and that's taking place today and when we signed these deals.
It's really with a single marketplace entity not the tens of thousands of of of businesses that are actually getting value from the compensation of cloud and it's a similar dynamic with our partner network you know the.
The deal counts generally will reflect the agreement with the partner rather than all of the end customers that they sign up. So all of these factors are contributing to the the art through dynamic as well as the accounts versus the total annual contract values.
I will I will add that I do think we're leaving money on the table in the small business and so where we're seeing such demand for large scale and.
And it's exciting for US. These these messaging implementations and AI that we want to do.
Hundreds of millions of volume.
On a platform and the years and.
So I think we're leaving money on the small business and so I mean, I think we're going to start to look there. There's definitely there's a lot of demand everywhere right now on especially like messaging.
So I.
I think we're going to get a little bit more aggressive there, but right now we're optimizing for growth and big slugs of revenue and big Big implementations that have an impact on our customers and the world at large and.
And that's kind of our focus but I will say, there's definitely opportunity down and the small business. We moved our mid market up I mean, our mid markets could be of $1 million deal.
And so our mid markets are not $10000, a year and a 100 Grand a year there are some of them, but we've moved it up because they are good sellers, but the really good sales folks and.
And they're able to go after these larger opportunities, but theres still mid market for us because then the enterprise went up even bigger so that everyone's who's sort of moving up but I think there's there's money on the table on the small business that we should go after.
Our next question will come from the Ryan Macdonell with meat Ham and company. Please go ahead.
And this is Alex Narum on for Ryan Macdonald and thanks for taking my question and congratulation on the quarter could you talk a little bit more about the mix of bookings that came from direct versus indirect channel.
Yeah.
Yeah. So the the there clearly is some big drivers coming from our channels as we mentioned the emphasis.
Started to close deals within a growing pipeline for the first time this quarter. We also landed.
Seven figure deal through our partner network and.
And the on the direct side, obviously the balance of the seven figure deals so.
And I can give you an index.
And by direct and and partners.
Okay, Great and 87 figure deals for the quarter.
Okay, and then could you talk a little bit more about the strength that you saw internationally.
Yeah.
Yeah. So as of as I mentioned international growth was contributed to both by APAC and EMEA and APAC led growth in that regard within EMEA, though we continue to accelerate beyond the fourth quarter. We also closed two seven figure deals in that region, one expansion and one new logo.
Our next.
And will come from Peter Levine with Evercore ISI. Please go ahead.
Hi, This is Robert on for Peter.
Congratulations on the quarter and I. Appreciate you taking the question I wanted to loop back to the first topic on on on payment are you able to touch more broadly on any updates on the product any initial feedback from beta customers and.
And something about your go to market strategy that you're able to share.
Yes, as I mentioned before it's in the market now and we.
I talked about two use cases.
And when I was doing my initials.
Yes.
Script.
So yes, so we're out there with it we're going to charge the Dar for it as the business models were.
And now working with more customers actually now expanding the voice payments. So we could do a voice conversation take of payments. So we're expanding into outside of the messaging channel into that channel. So yeah, we're continuing to drive that.
Capabilities. We've also as some of you know as we launched a digital bank called <unk>, which is also an extension.
More than the extension of this platform. So we actually have a credit cards in the market right now of visa cards.
And that's connected to a conversational bank debt we built.
And so and then the connectivity of the payments overall so.
We are of vision here that the.
These customers, who and using their credit cards on our platform. It would be also great to have them become of banking customer to us and use our credit cards and so we built more than just the.
The payment system, which is running and we also built the banking platform to support the use of our own credit cards are on savings accounts are on checking accounts.
And so that that's also on the market now two of its been in the market for 90 days low over 90 day.
So.
Okay.
We have reached the end of our call today I'd like to turn the call to Rob Locascio for closing remarks.
Thank you and.
Just to give you a few perspectives as we execute on our vision our financial outlook is obviously sharply improving we've had now four consecutive quarters of 25% plus growth.
For consecutive quarters of double digit margin and three consecutive quarters of reaching the rule of 40 and.
And I think all of this demonstrates our ability of the enhanced operating leverage.
And aggressively growing the business. We're now seeing also and expansion of use cases outside of our beachhead and customer care from Duncan to automotive to health care to even in home rapid and COVID-19 testing, which is a testament to the conversational cloud being the leading conversational AI platform and the world.
And I want to thank the team for.
Just having an exceptional quarter. Obviously this is 38% growth is the highest growth quarter, we've had and the history of the company and.
It's not just that we have an awesome platform, which the engineering team has done a great job with and they continue to do we also have a great go to market.
And our grow organization is really executing quite well and working with our customers and theres just so much opportunity right now it's like every quarter is like a new adventure for the company like Theres, just like the city thing that popped up and.
And they were like look we want to get our employees back to work can you help us.
And you do such a good job with our customers can you get on place to test and and do and bring them back to work and take these tests using of conversational AI and we did it within weeks, we have our conversational bank out there so as the company we're not the one trick Pony just and care care was our beachhead, but we really now are at this.
Inflexion point.
And I've seen this type of technology go everywhere and our ultimate goal is one day to put something in the home.
The thing that will rival and Alexa and and we are starting working on voice and.
And working on how we can create some innovations to make voice automation and some.
And really cool and powerful so with that we will see you in Q2 and thank you for all of your support.
Thank you.
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