Q1 2021 Vonage Holdings Corp Earnings Call
Yes.
Yeah.
At the conclusion of our prepared remarks will be happy to take your questions.
As referenced on slide too I would like to remind everyone that statements made during this call may be forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements are based on management's expectations depend on assumptions that may be incorrect or imprecise and are subject to risks and uncertainties. It could cause actual results to differ materially.
More information about those risks and uncertainties is highlighted on a second page it slides and contained in our SEC filings.
We caution listeners not to rely on duly on these statements and disclaim any intent or obligation to update.
During this call we will be referring to non-GAAP financial measures a reconciliation to GAAP is available in the first quarter earnings press release for the first quarter earnings slides posted on the <unk> our website.
So with that I'll turn the call over to Rory.
Thanks, Hunter and good morning, everyone I hope you are well and staying safe.
The rate of digital transformation continues to accelerate for businesses everywhere.
Companies are accelerating their e-commerce and E support plan and industries like telehealth remote education at virtual events have seen unprecedented increases in growth rates.
New forms of customer engagements are driving a communications revolution.
Digital transformation a business communications is becoming a critical driver a business outcome as highbred work environment and work from anywhere or the new standard and customers expect to interact with businesses across any channel based on what day prefer.
Enabling this transformation are cloud based communications solution.
This is where we have that unique and differentiated value proposition on.
B C C.
Our growth coupled with disciplined expense management drove V C. P first quarter adjusted EBITDA.
Although negative $2 million ahead of expectation and a $19 million year over year improvement.
These results reflect the initial efforts of our business optimization and strategic alignment work to improve efficiency and execution, while defining our business plan to drive faster growth.
We are pleased with our initial progress, but there is more work to do to fully capitalize on the market opportunity in front of us.
With the business now on a solid foundation.
We are well positioned to accelerate investments in product innovation go to market, our people and potential acquisitions to drive long term durable growth.
Moving to first quarter highlights byproduct API revenues increased 47% year over year to $126 million.
Key driver on a pro forma with dollar based net expansion, which increased to 135% in the quarter.
Continue long term growth.
Now moving to unify communications in contact centre products service revenues group, 4% ahead of expectation.
Within the micro in small business cohorts I renewed focus and discipline investments are making a positive impact on our pipeline and wind right.
We've now moved from high touch, mostly human interaction across sales provisioning and support too inefficient nearly all e-commerce experience for this customer segment.
We're also leveraging Bonnie Jay I, and our customer care effort, which is enhancing the customer experience as a result, we've lowered the cost of acquisition and decrease sure. We will continue to ramp up our investments here.
Within the channel we're encouraged by the results of our focus and investment in infrastructure support training an incentive programs.
Our platform strategy and products are resonating well within the channel per.
Wipe line is building as expected and nine of our top 10 deals in the quarter where partner related.
At the end of March we launched Vonage accelerate a strategic growth initiatives that includes significant investments into improving our overall partner experienced an incentive programs, including a fully redesign channel program and are re architected partner portal.
With this strong commitment to the channel.
We are seeing positive result, and a strong engagement and our partners value the ability to automate the entire life cycle of deal from lead to quote to cash within this new portal.
Based on the success of go to market enhancements and are improving you C. N. C. C pipeline. We are confident in return two year over year bookings growth in the second quarter and reaching high single digits revenue growth in the fourth quarter across this product portfolio.
During the quarter, we continued to innovate across the vantage communication platform to strengthen our differentiation.
At least we are leveraging our native video API per embedded video chat within Vonage contact center, and we're enhancing our omni channel capabilities with native web chat, which routes request directly to appropriately skilled agents within the organization.
Both enhancements enabled better agent and customer interactions.
All problems faster and help our customers create better more personalized experiences for their customers.
Our work is being recognized by industry analysts just this week, we were named the leader in Idc's see pads market scale and in the first quarter. We were named a major player in Idc's Ucas market scape for SMB and enterprise of note all three reports highlight the strength.
The Vonage communications platform, which provides us with the ability to better serve our customers' ever evolving needs through a complete control of our product roadmap. Additionally, in the Gardner peer insights voice of the customer Ucas worldwide report published in April Vonage received the customer.
Choice distinction for North America, and recognition in several categories, including the highest rating in the valuation and contracting category and the second highest rating in the integration and deployment.
Service and support and product capability categories. We also received the second highest rating and the willingness to recommend category. This report is based on end user customer reviews of technology providers and the business cloud communications space and reinforces our belief and our customer first.
Approach and our commitment to delivering innovative solutions and services that build trusted partnerships foster loyalty and enhance customer engagement.
I want to thank our team members around the world for their continued dedication to our customers, we're creating a culture based on accountability and execution every bondage team member has clarity on what's expected of them and how their work fits into our overall company goals. This is fundamental.
Two executing our strategy and delivering on our commitments to our customers partners and shareholders.
In summary, we continue to make steady progress our go to market initiatives are showing initial signs of success.
We're accelerating innovation across the vantage communication platform to enhance and expand our market. We are seeing increased demand across our portfolio product, which is resonating with customers of all sizes in a time, where digital transformation and intelligent communications are.
Fundamental to their success.
We have more work to do but we are confident we are on the right path to achieving our long term goals of our rule of 40 to be in the mid twenties range for 2022 and above 30 in 2023 as we continue to realize our vision of accelerating the world's ability to connect.
I look forward to updating you on our continued progress throughout the year now I'll turn it over to Steve.
Thank you Lori and good morning, everyone.
I'll start with a review of the first quarter results and then discuss the second quarter and updated full year guidance.
Beginning on slide nine our team executed well in the first quarter.
Each of our product areas, including API, UC and Cc delivered on our commitments, while we continue to improve the operating leverage and profitability of the business.
Turning to slide 10, consolidated revenues increased 12% to 333 million driven by a 21% increase in D. C. P revenues offset by an 11% decline in consumer DCP revenues now represent 77% of consolidated revenue up from 71% in the first quarter.
Of the prior year.
First quarter consolidated gross margin was 53%.
Down slightly due to the faster growth of relatively lower margin ECP revenues.
Consolidated operating expenses were $167 million.
<unk>, 1% year over year.
Our expense to revenue ratio improved by six points as we continue to optimize the business for faster growth and improved profitability.
Consolidated first quarter adjusted EBITDA of $48 million was up $9 million year over year due to higher revenue and improved cost structure, particularly in D. C. P.
Moving to BCP on slide 11.
<unk> revenues increased 23% to $240 million.
Service revenues exclude product access circuits, and USF fees, which totaled $15 million unchanged from the first quarter of the previous year.
DCD revenue churn was 0.5% in the first quarter down from 0.8% a year ago.
API churn was near record lows, while you see churn was also lower due to improvements within the micro and SMB cohorts as well as D. B E.
Monthly service revenue per customer increased 23 per cent to $582 from $475 a year ago due to increases in the average customer size across the V. C. P platform.
On slide 12.
Revenues, all of which are service, where a $126 million in the first quarter up 47%.
High value Apis grew 112% year over year with particular strength in video voice and IP messaging.
I value a T is represented roughly 20% of the total API revenues compared with 13% in the first quarter of the previous year.
API revenues now represent 53% of total service revenue compared with 44% in the first quarter a year ago.
Unified Communications and contact Center service revenues were $114 million in the first quarter up 4% year over year.
DCP gross margin in the first quarter with 47% flat sequentially and down year over year on accelerated revenue growth.
Let's move to slide 13.
DCP sales and marketing expense for the first quarter was 78 million or 30% of DCP revenue down.
Down from 39 in the prior year.
Our business optimization and go to market enhancements drove efficiencies in sales and marketing while positioning DCP for growth.
BCP engineering and development expenses were $20 million up 16% year over year, reflecting increased investments on the DCP platform, including voice and messaging functionality and contact center enhancement.
D C. P M D plus capitalized software totaled $33 million, which represents 14% of Dcp's service revenue.
D C P general and administrative expenses for the first quarter was $41 million up $4 million year over year, primarily driven by increased stock based compensation.
G&A was 16% of total BCP revenues the high end of our targeted 14% to 16% range, we expect G&A as a percent of revenue to be closer to 15 per cent for the remainder of the year.
DCP adjusted EBITDA was negative $2 million, improving by $19 million from the first quarter of the prior year V.
<unk> adjusted EBITDA benefited from our efforts to drive greater operational efficiencies, while growing revenue.
On Slide 14 consumer segment revenues were $77 million in the first quarter, an 11% decrease from the prior year.
<unk> adjusted EBITDA was $50 million in the first quarter down from $60 million in the prior year.
On slide 15, we ended the first quarter with $504 million of net debt down $64 million from the prior year.
As of March 31, net debt was two eight times last 12 months adjusted EBITDA.
We expect to continue to pay down debt in 2021, ending the year below two five times.
Moving to guidance on slide 16.
For the second quarter, we expect Vonage communications platform revenues in the range of $260 million to $264 million.
We expect Vonage communications platform service revenue growth of approximately 16% to 18%.
Embedded in this guidance are the following trends.
In API, we expect second quarter year over year growth to be in that 28 to 30 per cent range within API messaging growth will continue to provide lift.
Value growth will moderate in Q2 as we wrap on strong video results from Q2 2020.
With regard to unified Communications and contact Center, we expect service revenue growth in the mid single digits.
We expect second quarter BCP adjusted EBITDA to be in the range of negative $4 million to breakeven.
Within consumer we expect revenues in the 73 million dollar area and adjusted EBITDA of approximately $46 million.
On a consolidated basis, we expect total revenues of 333 million to $337 million.
And adjusted EBITDA in the $42 million to $46 million range for.
For the full year 2020, one we are raising our revenue guidance to reflect the Q1 strength early positive trends in Q2, and an improving macro environment.
We expect DCP revenues to be in the range of $1 62 to $1 71 day.
UCP service revenues are expected to be in the range of about $1 10 to $1 20, representing an increase of $21 million at the midpoint and growth of approximately 18% to 19%.
We expect API revenue growth for the full year to be approximately 30%.
Full year, you see service revenue growth to be low to mid single digits.
We continue to expect fourth quarter, you can see service revenue to be in the high single digits.
We expect DCP adjusted EBITDA to be in that breakeven to $5 million range. Our updated full year adjusted EBITDA reflects accelerated investments in our go to market and product development to continue to drive topline growth.
For consumer we expect 2021 revenues in the $285 million range and adjusted EBITDA in the $185 million to $189 million range.
We expect total consolidated revenue to be in the range of $1.347 billion to $1.356 billion and adjusted EBITDA in the 185 million to $194 million range with that I will turn the call over to the operator to start the Q&A.
Yeah.
Okay.
Yeah.
Thank you if you would like to register a question. Please press the one followed by the four on your telephone you will hear a three tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration. Please press. The one followed by the free one moment. Please for the first question.
Yeah.
And our first question comes from Ryan Macwilliams Stephens incorporated. Please proceed with your question.
Okay.
Great. Thanks for taking my question and great to see the API strength in the quarter, even before return of travel and hospitality.
To hear some more color on the growth here, especially around from the drivers behind the improving net retention.
Sure Ryan Hey, Ryan It was a it was definitely a good start to the year no question about it in terms of.
All of the business and all of the product areas API in particular showed real strength across all geographies. We saw it in a lot of industries from what was good we saw it across multiple sub product areas like verification boys, obviously strength in video obviously strength in messaging, which are.
Core bases is for our business, we saw it in each and all geographies.
Across all industries. So it was really nice I'd like to see the balance I think that's one of the strength of our portfolio is that we have a really balance set of revenue across geographies and across industries and went on.
We're also seeing it across sub product area and a P. I the key for us.
Is it now or that second quarter or whats the big jump last year sequentially, we're well positioned with velocity going into the quarter to have a good quarter, we gave guidance and.
In the prepared remarks, a couple of minutes ago that should give you the sense of that we see that continued momentum even against that big jump last year, which was the largest sequential growth quarter to quarter last year, so like the setup.
So we're seeing a really clean set of API demands, we're seeing an expansion in our existing customers across multiple areas.
Which is nice that's the net dollar expansion kind of phenomena and then we're also seeing it in terms of new logos I'll ask Jay if he could add a couple of points just any additional color he'd like to give you Brian John.
Yes, Thanks Marc.
Just like to hit right on to two of the products that we already talked about the continued strength with video, but I'd like to just comment quickly on on verifying message here is we all know fraud. It is becoming the single biggest issue in online transactions and really whether it be about ensuring that real humans are not bots or download.
And Simon you know apps or securing online transactions are ensuring privacy of data, we're seeing as more businesses and consumers come on line that that's top of mind. So we're seeing really good opportunity as it relates to our verify API, we have a solution that's resonating well with the market.
And related to that increase participation by consumers and businesses on back to the point on messaging again very strong outlook for the year when it comes to messaging and a big part of that is because more and more business.
Interacted and executed on social channels. So we're seeing this is becoming more and more popular in terms of how businesses and customers want to communicate and that's leading to increased usage of our messaging API and then you look at social channels like Whatsapp. So we see continued strength both in second quarter.
There is as well as the rest of the year and those key product areas as well as some of the others were already mentioned.
Yeah, and I think Ryan Theres No question were going to see this kind of accelerated trend in API continue for the next three 712 quarters I mean, we're at the beginning of a fundamental shift here and we.
We see it continuing to grow alright.
Let's go to the next question.
Hello, Ryan on another point, Yeah, just real quick in tandem with these growth opportunities and I. Appreciate the color. There. Your presentation noted capex moving higher for some additional V. C. P investments and it looks like full year V. C. T. D. C. P. Adjusted EBITDA guidance ticked down so could you just provide some color around this guidance.
And maybe how youre thinking about areas of investment.
Yeah sure Yeah, I'll have Steve just give a couple of points in just a second but these are relatively minor adjustments. What we're doing is we're accelerating our product development.
Investment to create differentiation with 70 day, Barry coming on board working with Jay Joy Corso, our CMO across the team, we're really starting to get clarity on.
Real customer pain points that can open up new markets to us, we're going to accelerate that investment to make sure that we have that strength.
On the opportunity to capture it so you'll see a little bit of the capitalization on software I.
Mention that the dollar net expansion increase to 135 per cent, how does that number compare to prior years and the historical trends there.
Sure. Thanks crew and say Hello to Sterling for me drew the the the the 135 is up sequentially. Historically, that's a good range for us to be in when we saw the original bumping COVID-19 on my jumped a little bit higher and then we've seen quarters and at 115 one.
The team on 19 kind of range. When we're in that you know 135 range 137 range. That's a good range, we'd like to be in that range. We see that is a really good indicator other expansion.
And then Italy, that's at the upper end of what we generally see most of the time we range between say.
You know the one 110 to 135 140 kind of range.
Okay got it thank you.
Thanks drew appreciate it.
Next question.
Our next question comes from the line of will power.
With bird, Okay, great Yeah.
Alright, great. Thank you I'll try to slipping I guess to hear if I can I actually I want to follow up on maybe the previous question are are some of the a P. I commentary I mean, obviously really strong trends I'm just curious on on the full year revenue growth guidance for a P. I you know given the strong growth in <unk>.
You want a dollar based on that expansion right yeah. It feels like it's pick conservative give.
Given the current trends, you're saying so I just want to understand any other puts and takes that you're taken a do a cap on the second half of the year, whether whether the things we should be thinking about perhaps from from a cop perspective versus you know conservatism.
As we see two to rollout.
Okay, and then I also just wanted to ask quickly about the the channel program and it sounds like you're seeing some initial success. Given you know 90 day 10 deals coming out of the channel mix I don't know how many of that is tied to the new new program, but I'm just curious.
Any additional or you know.
Kind of near term disruption risk on on that front as you implement these changes or has it been pretty smooth.
Thus far given the benefits of Vonage accelerate and in any additional early feedback you can share from what channel partners are telling you.
Sure, Hey, well a great question.
My entire career has leveraged the channel throughout there's a multiplying effect of the channel and Rodolfo Jay all come from that heritage in terms of really understanding the power of the channel on what it brings we can hire X amount of feet on the street herself, but when we.
Have the channel behind us that gives us real momentum and since I came on board last July working with <unk> and Joy J. We've now started to really emphasize that channel focus, particularly in the top of small through mid and into enterprise.
Vonage community volume vantage, our accelerate program is really important it's a concept of more for more as our partners deliver more opportunities together with us and we win in the marketplace. There's benefits for everyone and we've created a technical back.
Back architecture to support that growth. The portal is much improved all of the technology has improved the documentation has improved and you'll see we continue to roll that out from April across all of the next three quarters to enhance that program customers on a million partners can now track.
From a lead all the way through to quote to cash. This is a big change in the feedback that we're getting from them is really positive they want us to win they want us to be a strong leader in the space and they can see the differentiated approach that we're taking we believe in the channel we VAT.
The channel and so do our customers you're going to see this improve its already over 50% of our pipeline volume in.
On the UC and Cc space and it's only going to continue I don't know Jay do you want to add any additional color there.
I would just add that on one of the trends, we're seeing is more and more of the <unk>.
Customers are looking to our partners to have one stack so to speak so back to <unk> point about BCP, whether it be the <unk> side, we're seeing more and more cross selling of those products and that's resonating very well with the marketplace and I think thats another bolt of energy around this whole space and why the channel.
Is off to a good start in terms of this redesign and why we see.
A strong outlook as we look to the rest of the year, because we're seeing that traction with being able to cross sell more and more.
And you're on a really good point about cross sell we're also seeing a lot of traction in the U C. C C space across and cross sell which is shown on the power of the Vonage Communications platform. We're also seeing the cross pollination across API and UC cc.
That we'll see more of as we go out through the year.
And I think that's again, another differentiator and gives us that diversity of revenue like our diversity across geographies across products.
It gives us a real base to work from thanks, well anything else.
No that's great. Thank you.
Thank you our next question.
Thank you. Our next question comes from meta Marshall with Morgan Stanley. Please proceed with your question.
Hi team. This is Erik on for meta congrats on the quarter and thanks for the question, maybe just picking back up on that last point you made on cross sell between Cc and kind of API business.
It is.
You're seeing customers come to you you know how often are they looking for maybe one piece, where you're cross selling in versus choosing vonage. Because you have the full solution have you noticed kind of the preference for a for a multipart solution increasing.
Yeah, I think thanks, Eric and say Hello to meta for US Hey, the main point here is cross sell opportunity.
We've said in a number of oral and participated in a number of world, whether youre doing UC and cc.
Or youre doing a.
API, we're seeing more of that cross pollination, and we moved away from a structure of quote be use and that was not the right structure. We have moved forward on a vantage communications platform strategy, we have sellers now selling and understanding pipeline of Cros.
All product areas and we have shared selling across UC and cc. It's a differentiator. There's no question in the contact center base combined with our highly integrated you unified communication solution is really differentiated and it's kind of cool and I think Jay will add some color on debt.
I also emphasize the integration we have with <unk> with Microsoft teams as well as service now and some of the other products. Obviously, we work very closely with sales force. So the point is when you're having these discussions it's largely about whats the business problem, we're trying to solve and so it might be a contact center and there might be from integration.
Needs with our sales force, but then they extend to say well, what if I need to extend this capability and maybe employee video voice to better connect with my customers in and then there's some thoughts working closely with maybe the marketing teams about more outbound.
Functionality and making calls out via voice. So it really starts with just really understanding where the clients at and meeting them, where the customer wants to go and so in these last couple of oral <unk> that I participate in and there's obviously many more but it fundamentally is coming back to the first part is the Houston.
Integration is a big plus from we're hearing that time and time again from our channel partners who's bringing us into a lot of these opportunities and then the second point is back to the API connectors and in how we pulled out and it really comes back to extending those base set of UC cc capabilities and in better engaging with the customer.
So that again is.
A good reason why we remained focus will work on a Saturday and the product team as well to continue to enhance the product set as we move forward, but that's been a a very good opportunity for us to date and we see that expanding and then when you think of some of the industries like travel and hospitality coming back hopefully in the second half no one knows exactly when.
But we also see some opportunities there as well as we move forward with some of that UC cc integration with API.
The other cool spaces that we've got to continue to follow and that we're going to build on is the AI space you know with the over AI acquisition. A couple of years back we've been embedding that technology in the U C. C. C. That's going to really be a key driver and that that ability to create integrations across tier.
<unk> service now sales force and then on our unify it.
Unified contact center, and API vantage communication platform solution.
The ice space, it's going to be very important, particularly as you get into 'twenty, two and 'twenty three you'll see the early velocity this year, but that's going to be a differentiator again.
Thanks, Eric.
Yeah, that's really helpful color on if I can kind of sneak one more in you did mentioned potential acquisitions as part of the effect on.
The strategy to drive growth and you know you do have a broad portfolio on a lot of capabilities. So I guess just wondering if there's anywhere you have identified that you could be focused whether it's from a product capability or even scaling perspective.
Sure Eric the real the real opportunity in that acquisition type space around partnerships and acquisitions is really across a couple of key areas. There's definitely the aqua hire kind of capability to add technology and technology skills to build out the platform further in there.
There's a number of areas that you could continue to build on in that space and then there was obviously targeted opportunities around the UC cc and API space and the core velocity philosophy revenue driven segments, we're looking across the portfolio.
We have a tire team that works on that and we are going to continue to opportunistically look at all of those opportunities, but really focus on alcohol higher technology and the building in differentiated velocity revenue in our core product areas of API.
Video messaging and then UC cc.
Alright, thank you.
Thank you Sir.
Next question.
Thank you. Our next question comes from the line of Michael Rollins with Citi. Please proceed with your question.
Thanks, and good morning.
If you could talk a little bit more on the API business in terms of the durability of the revenue once you get it.
Whats the competitive risks if someone comes in and can say, okay, having a 50% off sale on pricing and can you just take volume from you or even from some of your other competitors.
And.
In terms of the growth of this video.
What are you seeing there in terms of the breadth and the depth of communications, that's driving that thanks.
So Michael the first question was around the API durability Hey.
API is a usage based technology now the key point of this is it's a technology driven technical implementation.
Embedded into your application.
And yes.
On the higher value Apis for sure. There is a more program driven implementation where people are implementing inside of that so there is a defensible moat there because it takes time an issue to make changes the key for US is to create a great product continue to enhance it.
Do it at a competitive price and deliver on our commitments to our customers every day, that's how we grow.
You said, that's how we grow routes, that's how we grow countries and we're definitely seeing that over the past several quarters and we continue to see that opportunity. There's always a risk that someone can go to the old.
New Jersey based to Electronics company Crazy Eddie type sales right. Our prices are insane mm mm that doesn't last that's not sustainable what wins, it's good to really strong technology, great people delivering on your commitments and then showing that your company.
That people can trust and that's what we're building with our customers that we're gonna be competitive I don't want to make sure that we deliver what they need and we're going to put our customers first every day in every way and that's going to allow us to continue to expand share of their sales threats out there you got to earn it every day.
Buckle up your helmet get out on the field and you show the customer exactly what youre going to do every day that the key and then your second question was around video.
Yes, more details on the breadth and depth of the usage that you're seeing in the verticals and how.
How youre seeing that growth.
And maybe the priority shift a little bit during this reopening process.
Yeah, and what I like about that question Michael is that they're definitely what were trying and what we tried to do for example going into to Q of this year is to build velocity into the business, which we did in <unk> on <unk> to set us up for that.
Quench will compare from last year, where there was that big jump into queue on I think we did a good job on that on video strategy has been diversify the portfolio don't get just tied into one or two verticals get a broad base set of video solution and then embed that into the vantage communications platform in there.
U C. C. C. You might have saw some of the announcements around that I'm sure Jay can give a little bit of color there, but it's the diversity of industry that gives us comfort there and then the diversity of the implementation of technology.
You have to continue to invest in differentiation. That's why we're making those investments to grow video as a differentiated solution for us theres number of competitors there what we do with what we're doing is continuing to invest leveraging a broad set from.
Online events to education to medical sure you know those but we're seeing it and support and all of those areas and now we're embedding it into for example, our C. C. J you want to add a little bit of color around video.
Sure.
Just had two quick points.
Coming back to the first point on.
The differentiation and the other thing I would just add as we alluded to right price is important but quality is very important as well and that really linked to I think what we do very well on that is the reliability and scalability, including our retail knowledge and expertise from some other vertical.
When you look at the country specific regulations and compliance knowledge.
You fast forward that to the second question around the video I think it's a it's a.
Cross, a geo understanding and expertise and a lot of these regions and its understanding these industries and as Rory alluded to we're seeing more and more of these use cases, whether it be on boarding collaboration but theres a lot of cross pollination across these different verticals not just on one deal but across.
The globe and that's really helping us as it relates to growing out our video capabilities and we'll continue to work with our customers as well as partners as we Cody I Cowen and co create together, because that's where you're going to really drive that bottom line value and also create the outcome. Our customers are looking for more and more because they're.
For an outcome that can integrate the BCP capabilities and that's coming back to the earlier points about the other features and you see we're really leveraging the <unk> platform to help deliver those business outcomes.
Great. Thank you. Thanks, Jay Thanks, Michael next question.
Our next question comes from the line of Samad Samana with Jefferies. Please proceed with your question.
Hi, everybody. This is mason Marion on for <unk>, Thanks for taking our questions.
On the UC and Cc growth start inflect upward in a very good thing to see.
Are your efforts to reinvigorate the micro SMB segments, starting to take hold or was something else, causing that inflection.
Yeah, Nathan one of the key things in U C. C. C is it to traditional kind of waterfall business you see pipeline you see leads you see pipeline you see validated leads you see conversion signings bookings than you see installs and revenue. So we can see that business.
Moving that's what gives us confidence in terms of the trajectory into the high single digits by the end of the year, we see it we will see positive year over year bookings growth in second quarter, that's really important we've seen a really.
Broad base set of reaction to our channel program in this space, we've been adding technology under <unk> direction of where the differentiations.
Our needed like video into the contact center solution. These are some of the cross pollination, we've seen some really nice size of wins come into this space. So we're seeing good term in terms of pipeline pipeline looks up again quarter to quarter.
So that's a good trend bookings year over year growth in the second quarter, we see installs picking up nicely through March and April and we're confident that will drive the high single digits.
Through the end of the year on the UCC business.
On across the board and that that debt that the opportunity for us to go further is get that channel with Vonage accelerate on side focused and then sovereign yea and his team deliver Rodolfo and J the technology that they need.
To expand the marketplace I think theres a lot of opportunity for us there.
Help me.
Yeah, absolutely and then just let me sneak in one more here and to really beat a dead horse on the API segment on the <unk>.
And he was obviously impressive is this more a function of increased volumes per customer or is it more upsell and cross sell of additional API products.
It's both it's both it's new customers it's.
It's lower churn.
It's new routes in countries with existing customers and it's really expanding into customers across the vantage communications platform. It's all factors.
And again the.
The market the broad based portfolio that we have of API multiple G hours with a nice diversity of revenue split gives us that kind of insulation. So there is a pressure on one industry or one geography, we have the opportunity to grow we're seeing good uptake in terms of existing cut.
<unk> new countries and routes were seeing the velocity on some new.
The wins and pipeline and we're seeing the opportunity for us to do the cross sell it's across the board makes them.
Alright, thank you.
Thank you.
And our next question comes from the line of James Breen with William Blair. Please proceed with your question.
Thanks for taking the question can you just give us some color around that.
The number of deals youre getting invited into and versus your win rate. So how that plays out in terms of growth going forward.
I think from our standpoint.
Across the funnel, we've done a lot of work with Joy course, so on.
Our CMO to really understand the funnel from lead to validated lead to engagement to book.
Booking or design win to an install to a ramp and what's really important around that space is really to understand exactly what your conversion rates are across enjoys kind of targeted specific tactics at each part of the funnel could match.
Maximize the win rate. So for example, what's the conversion from market validated lead to a point, what's the conversion rate from appointment to win or design win we have specific targets on each of those because we're doing a credo analysis on all of them.
The defects where are the escape and we've highlighted across each product in the portfolio, where we are seeing escapes. So do we have enough pipeline at the top of the funnel, yes or no. Most of the time, yes, why are we getting that converted into.
A validated lead are we getting the engagement, what's our win rate we've seen win rates improve there is no question because we've seen a better focus on the data and information, but it's not that simple I mean, you really want to look at every one of those conversions and we're looking at that across the funnel.
To make sure that we are seeing that hotspots right. So if we're not getting the right conversion rate on for example leads to appointments then we go in and we pull that apart to really understand why isn't that happening how can we increase it by 10 and we can get so much more.
Out of our existing pipeline by just mining it more efficiently and nurturing. It joy has been working with GE on this Jay did you want to add any color on that.
Worry I would just add one point.
You said it well in terms of the overall approach I would just double click on on the existing base as we talked about at the Investor Day, we looked at how can we streamline how we work with our existing customer base. So we've done a lot of work with with Joy and the team and we have this whole nurturing experience is very important back to the D day.
Any question earlier and so that's another reason when we look at the quality.
Redesigned how we service those customers and I think that's it's been a very good thing in terms of creating more opportunity in having a higher quality in terms of our close rates on the existing base and as Rory alluded to we will continue to go through and look at every motion with the net sales cycle.
And make sure that quality is consistent throughout and when we have a hotspot we will take the appropriate action and we're already seeing.
Good progress on that.
Yeah.
Thanks, John is there any noticeable difference is there any notable difference in the win rates.
On the deals that include C bachelors.
That's an interesting question.
I think we're gonna have to take that one off line items I.
I don't have that right at the top of my head I would think is there a notable difference between cheap has not.
Not that jumps out on me I won't take a look at the data and we'll jump back at you Jim.
Definitely.
We're seeing much more of that discussion and it definitely adds in the U C. C C space.
Probably.
My intuition is that it probably has some positive impact on win rate.
Think probably.
Let me get the data because I don't want to just give you a hypothetical the real point here is that we're systematically looking at the information and data all parts of our business, whether it's how we structure a go to market how do we invest our dollars in marketing where do we leverage the channel everything is becoming much more.
Optimizing around that data driven fact based decision making system, where we can optimize our results systematically across each of the businesses and that's why we're seeing better performance better growth better profitability better ability to make more investments I think theres a lot of opportunities there.
Let's go to the next question. Thanks.
Thanks Kim.
Thank you. Our next question comes from the line of Steve Enders with Keybanc. Please proceed with your question.
Hi, great. Thanks for taking my question I, just wanted to touch on all of them on on what you were saying on the <unk> side, it sounds like Youre, saying zone.
Debt acceleration, there and some positive bookings momentum, but I'm wondering what it would take I guess longer term to.
Get that business back into the double double digit growth range and say some further acceleration is it more on the product side or is it.
More on the go to market and the partner relationships that need to be built out to to help drive that longer term.
Yeah, well as we talked about on Investor day, we're looking at a double digit growth in it.
Next year, we'll exit this year on the high single growth that's.
Confident making that commitment. So you can count on that what we really want to drive on and that's our expectation that we can do it and obviously things can change, but we are confident that thats the right view.
We see double digits in 2022, I think the opportunity for US is a combination it's a combination of product enhancements, we get on a lot of interaction between Salmonella and Rodolfo Reggie the team to really understand Joyce Joy's work in terms of the market analysis.
It is giving us better indication of what are the specific change it than the channel the channel definitely as a key player in this space. It gives a multiplying effect we're off to a good start with vantage to accelerate and you're going to see us continuing to invest in that throughout the year and then from the standpoint of the go to <unk>.
Market, we tailored the go to market, we have that e-commerce self provisioning solution in micro and small then we're leveraging the channel from small all the way through enterprise and then we have a really powerful and talented direct team from the top of small and really mid through enterprise. This is giving us.
On the right factors to really play that space again look for us in that high single digits at the end of this year and will grow double digits next year.
Okay, great. Thanks for taking my question.
Thank you Sir.
Yeah.
And our next question comes from the line of Andrew King with Colliers Securities. Please proceed with your question.
Hey, guys. Thanks for taking my question you called out the strong cross sell between <unk> and <unk> could you guys just give us a little bit more color into our new logo generation in that segment.
Specifically marketing, how you see that trending across the year. Thanks.
Yeah, and Andrew that was on UC cc.
Correct.
Yeah, Okay great.
Jay will give a bit more color on that but we've definitely seen it across all sizes of customers from small to mid to enterprise got some really interesting enterprise wins, where enterprise is growing at the fastest rate, we kind of the company had deep focused a year and a half ago on that micro.
Small segment, we definitely have revitalize that I think we'll see that continue to pay dividends in the second half.
And into next year definitely mid is the sweet spot for the product that we have and the capability of combined U C. C C capability and having those teams work more closely together gives us a multiplying effect and then of course the.
Hum.
And then across the channel partners.
There's definitely new customer acquisition is definitely and we see a stronger pipeline in <unk> and then a stronger pipeline again and again positive bookings growth in second quarter, Jay any additional color you'd like to add there for Andrew.
Rory I just had two points one is back to the point on the verticals, where you see continued strength in health care clinical services. Some of the technology areas. So we're going to continue the assumed I think a very diverse set of industries and verticals that we're focused on and I think one of the things that's helping propel US is the fact that we can cross pollinate.
Use cases.
So we're going to continue to invest the resources.
In driving that out the second point I'd make is just.
Rory alluded to it in his opening remarks, but you look at some of our recent wins.
Our customer base in a lot of it may start with they have a need for visa as soon as the contact center and it might be a sales force integration and they also have a need for BBC with Microsoft teams. So we're seeing a lot of that type of cross selling and as it relates to the first quarter and some other wins.
We're going to I think see increased amounts of those types of wins.
Could provide separately some of those highlights.
Hunter at a later point.
Great. Thanks again.
Appreciate it Andrew.
I think that risk arena definite yes, we have no further questions. At this time I will turn the call back to you. Please continue with your presentation or closing remarks.
I just like to say, thank you to everyone for joining the earnings call today, please be well and be safe out there we're focused on creating a culture around accountability and execution. We're pleased with the start to 2021, we have more work to do but we're confident we're on the right.
Pat Vonage Communications platform strategy is the right strategy, our cross sell upsell and opportunity to build an API first architecture is winning and working we'll see and look forward to continuing to give you updates throughout the year and appreciate your interest in.
Bondage. Please have a good day and thank you for joining us today.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your line.
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