Q2 2021 Vonage Holdings Corp Earnings Call
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Yes.
Greetings and welcome to vantage second quarter 2021 earnings.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
Is that could cause actual results to differ materially.
More information about these risks and uncertainties is highlighted on the second page of the slides and contained in our SEC filings.
We caution listeners not to rely unduly on these statements and disclaim any intent or obligation to update.
During this call, we will be referring to non-GAAP financial measures Ah.
Ah reconciliation to gap is available in the second quarter earnings press release, or the second quarter earnings slides posted on the <unk> web site.
So with that I'll turn the call over to Rory. Thanks.
Thanks, Hunter and Hello, everyone. Thank you for joining us today I Hope you and your families are safe and healthy.
It's been just over a year since I became CEO advantage and we are delivering significant progress against our strategic transformation plan and committed business results over the past year, we have implemented important changes to strengthen our vantage communication platform business to drive faster growth at better capture.
The major market opportunities across our product portfolio.
We started executing this transformation by optimizing our business for improved operational efficiency and we are on track to reduce operating expenses by $50 million in 2021 net art strategic investment.
The strategic investments, we have made our focused on driving growth through product innovation and a stronger go to market in areas, where our products bring the greatest value to our customers and where we can win disproportional share of the market are world class leadership team is now in place and our new culture.
Sure. The bondage way has every bondage team member focused on driving execution through accountability collaboration and a customer first mentality.
Today I'll focus my comments on our strong second quarter vantage communication platform results, reflecting improving momentum driven by good execution and on the progress, we're making on a strategic investment Steve.
Steve Lasher will follow with a more detailed review of the quarter and updated guidance.
Vantage communication platform services revenue for $260 million, driven by accelerating growth rate of 23 per cent up from 18% a year ago second quarter B C. P. Adjusted EBITDA improved $19 million year over year, and we reached positive B C. P.
He adjusted EBITDA of $1 million earlier than planned.
As a software technology company, our results are being measured through a progressive improvement of a rule of for.
This quarter a rule of 40 result was twenty-three up from 10 in the second quarter a year ago. This is ahead of the schedule. We covered with you during our Investor Day March.
A P. I revenues increased 40 per cent euro per year to $144 million in the quarter are strong growth was driven by broad based demand across geographies vertical and customer size.
<unk>, so a particular strength in the messaging areas as economies and industries continue to reopen and accelerate demand.
Whether it's receiving medical attention through telehealth tracking a package or food delivery booking.
Booking a ride sharing service, providing fraud protection connecting with the right customer support agent or enabling video and voice communication across thousands of baathist locations bonds does that.
Our global scale and diversity remain key Differentiators, we delivered strong growth across each of our geography, and we are continuing to invest in new markets and industries to further expand our addressable market. Additionally.
Additionally, our API product breath and deep industry expertise provided a significant advantage in these high growth API markets today and well into the future.
1 industry I'd like to highlight is the emerging social media platforms day, where vantage provide services to 8 of the top 13 global social media platforms.
Our growth from existing customers with all so strong dollar based net expansion was 125 per cent on the quarter driven by accelerating usage growth and E Commerce, social media gaming with travel and hospitality showing particular strength.
A great landed expand example, this quarter is America save mortgage company Ah Mayor save selected our messaging product in early 20th 21 to enhance their customer engagement and support in order to simplify the loan profit after a smooth implementation and scaling to meet their business needs.
Amerisafe has now also implemented or verify a P I to help them protect against fraud.
Additional expanded relationships across our API products include among other a major international audio streaming in digital media services provider Ah, leading online travel booking platform and a major China based data center in cloud computing provider.
Our investments and go to market also drove strong new customer growth, where Cree and craft and are good examples.
Free of European based digital health care platform that provides services to more than 3 million patients across Europe chose vantages video a P. I to power its platform to enable patients to consult with clinicians digitally from anywhere at anytime this added functionality for free will remove.
Barriers to patient care, such as long wait times busy phone lines to help those in need of essential health care crap.
Craft and incorporated a south Korean video game holding company known for player unknown Battlegrounds, often referred to as pub G.
Wanted to prevent excessive game addiction, among minors. They chose Bonnie just verify a P. I authentication services to differentiate adults from minors to monitor minors playing time.
The importance of security and compliance is critical to our customers and we will continue to invest in HIPAA P. C. I Fox 2 compliance to increase our market opportunity in the second quarter, we enhanced compliance certifications for our messaging a P. I with the addition of HIPAA compliant and.
Edit regional media zones to our video a P I.
R. A P I products continue their strong momentum in the second quarter and we expect this to continue for the balance of the year.
Now moving to unified communications and contact centre product.
Service revenues grew 7 per cent ahead of expectation or go to market and product initiatives drove solid positive Bureau for your bookings growth for the quarter as we expected.
Our revenue growth increase to mid single digits in the second quarter and based on our pipeline bookings and improved execution, we are well positioned to accelerate revenue growth of the high single digit in the fourth quarter and double digit growth in 2022.
10 of our top 15 wins this quarter included an integrated unified communications and contacts then or solution. We believe this will be an important driver moving forward.
I'll highlight 2 examples.
The London Borough a pack me selected Vantages U C. N C C solution to move more than 3500, you see seat at 170 contact centre seats to the cloud from an on from solution to Modernise employee collaboration and provide better experiences for the boroughs more than.
300000 residents.
Another key when was a fortune 1000 global consumer goods company that needed to integrate its sales force CRM with its internal business communications solutions in contact center.
[noise] Vonage is deep integration with sales force and our ability to provide an integrated you C. N C. C solution with advanced features reporting analytics and Eh I capabilities were key Differentiators and this win.
Within the channel the additional resources support and training we have implemented through Vonage accelerate are driving early positive results channel bookings increase sequentially and 5 of our top 10 deals, including our 2 largest deals in the quarter came from the channel we will continue to invest.
And it's critical route to market.
And the contact centre product space, where you will continue to partner with sales force to drive growth, where I believe we are a leading early partner in sales Force service cloud voice partner telephony program.
This represents an important opportunity for.
Fun is contact centre brings automation intelligence and global calling capability to service cloud Boy, combining boys digital channel and CRM data into 1 central view for a unified agent and digital channel experience.
Vonage contact centre has a 4.9 out of 5 rating based on more than 800 reviews on the sales force Appexchange Salesforce also recently named vantage the 20th 21 cross industry independent software vendor partner of the year and email for the second.
[noise] consecutive year.
We will invest and execute captured this unique opportunity per bondage with their powerful partner sales force.
In summary, second quarter results were strong continued to improve this is demonstrating our operational execution and delivery against our strategic transformation plan over the past year, we're showing material progress on or go to market initiatives and we're innovating faster to provide differentiated experiences.
And solutions for our customers.
We are clearly operating in a very large and growing market, which is expected to reach $80 billion and 2024, driven by secular tailwinds like cloud migration digital transformation and more recently Highbred working models.
We believe vantage is in a unique position to offer comprehensive unified communications contact center and programmable a P. I's through our vantage communications platform customer needs a rapidly growing across their communication and engagement platforms and we will continue to see an inquiry.
Just need per combined U C. N C C solution and the continued strong growth of embedded a P. I program a boat communications market.
We are encouraged by our momentum and are confident in our ability to grow and gain scale in this rapidly expanding cloud communications, Marc I would like to thank our talented team members around the world for their support over the past year and for their passion and commitment to our customer.
We are building a culture of the execution and we will continue to deliver this year marks vonage is 20th year and business and we believe the best is yet to come with that I'll turn it over to Steve.
Thank you Rory and good morning, everyone I'll start with a review of the second quarter results and then discuss the third quarter and updated 4 year 2021 guidance.
Beginning on site 8 our team executed well in the second quarter delivering strong results as companies continue to move to the cloud or their digital transformation initiative.
Each of our product areas, including a P. I U C. N C C delivered on our commitments, while we continue to improve on the rule of 40.
Turning to slide 9 consolidated revenues increased 13 per cent to $351 million driven by at 22 per cent increase and vanished communication platform revenues.
V C. P revenue now represent 79% of consolidated revenue up from 73 per cent and the second quarter of the prior year.
Consolidated second quarter, adjusted EBITDA of $49 million was that 7 million year over year due to a higher revenue in improving operating structure within D. C. P.
Moving Divineness communication platform on Slide 10, BCP service revenues increased 23 per cent to $260 million a head of expectation.
D C P revenue churn with 1 per cent and the second quarter basically flat from a year ago.
Monthly service revenues per customer increased 24% to $632 from $509 over the prior year.
D C P gross margin in the second quarter was 46% down here every year due to the higher growth of our API product. We expect DCP gross margin will be in the mid Forty's range for the full year.
V C P. Adjusted EBITDA, what's positive $1 million, representing BCP first profitable quarter and improvement of $19 million from the second quarter of 2020.
So I had 11 API revenues were $144 million in the second quarter up 40 per cent driven by continued growth across all product areas and geography.
Unified communication and contact Center service revenues were $116 million in the second quarter up 7 per cent year over year.
Let's move to slide 12.
V C. P operating expenses totaled $167 million, which represent 60 per cent of total BCP revenue and improvement at 12 point year over year.
D C P sales and marketing expenses, which are 30 per cent of total BCP revenue with $82 million down 6 million year over year as a result of our business optimization efforts from last year. So.
Sequentially sales and marketing was that 4 million due to investments and sales head count and targeted demand generation.
V C P engineering and development expenses, which represent 8% of total ETP revenue was $22 million.
This is 4 million year over year, reflecting increased investment on the V. C. P platform, including boys in messaging features market expansion and B B C. N B C T functionality V.
V T. P E D expenses, plus capitalized software totaled $32 million, which represents 12 per cent of VEB service revenue.
BCB general and administrative expenses, which is 15% of total BCP revenue was $41 million up $2 million from the prior year.
On slide 13, consumer segment revenues, where $75 million in the second quarter and 11% decrease from the prior year.
Tumor adjusted EBITDA was $48 million in the second quarter down from $59 million in the prior year.
A side 14, we ended the second quarter with $476 million of net debt down $67 million from the prior year and down $28 million from the first quarter.
As of June 30th net debt was 2.5 time last 12 month adjusted EBITDA.
We look to reduce our leverage ratio to approximately 2.25 times by year end as we continue to pay down debt in 2021 and generate higher adjusted EBITDA.
Moving the guidance on 515.
For the third quarter, we expect Vonage communication platform revenues in the range of $276 million to $280 million we.
We expect vantage communication platform service revenue growth and the low 20% range embedded in this guidance are the following trends.
An API, we expect third quarter year over year growth to be in at 35% to 37% range.
With regard to unified communications in contact Center, we expect service revenue growth to be in the mid to high single digit.
We expect third quarter BCP adjusted EBITDA to be positive in the range of 1 million to $3 million.
Within consumer we expect revenues and the 69 million dollar area and adjusted EBITDA of approximately $45 million.
And a consolidated basis, we expect total revenues.
$345 million to $349 million and adjusted EBITDA in the $46 million to $48 million range.
For the full year 2021, we are raising our revenue and adjusted EBITDA guidance to reflect our second quarter performance and stronger second half outlook.
We expect DCP revenues to be in the range of 1.095 billion to $1.106 billion BCP service revenues are expected to be in the range of $1 billion 38 million to $1 billion $49 million representing growth in the low twenties.
We expect API revenue growth for the full year to be in the high thirties, and we expect full year U C. T C service revenue growth in the mid single digits.
We continue to expect fourth quarter U C. C C service revenue growth to exit in the high single digit.
We expect VEB adjusted EBITDA to be in the 4 million to 9 million dollar range for the full year, we expect our BCP rule of 40 result to be in the low twenties up from our original guidance of 16% to 18% driven by stronger than expected growth in our a P. I N U C C C.
Day.
For consumer we expect full year revenue and that 288 million dollar area and adjusted EBITDA and the 185 million dollar area.
We expect total consolidated revenues to be in the range of 1.383 billion to $1.394 billion and adjusted EBITDA and the 189 million to 194 million dollar range.
With that I'll turn the call over to the operator to start the Q&A.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.
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Our first question comes from the line of George sudden with Craig Hallum. Please proceed with your question.
Thank you nice results Uhm, Rory I have to give you credit back to your analyst day, we pushed you to explain your extreme confidence in a turnaround and frankly at the time it wasn't clear looking back at that you were spot on so now you're suggesting an acceleration of service growth.
From this mid single digit level to access to your high single digits in double digits next year can you can you kind of walk through what you're seeing in the pipe to come to that conclusion.
Yeah. Thanks, George Hey, there's no question that business in the U C. C. C space does the traditional waterfall business that software portfolio.
You can see the trajectory of it there's no question, we've seen a building pipeline over the past several quarters that begin last year with the work that rodolpho. When his team did to really generate and focus the go to market in a tailored way where does the product best fit we targeted tactic by.
Customer segment, and we saw that pipeline build the pipeline Bill we saw the lead strength <unk> turn into actually.
Qualified leads and then we saw him turn into bookings and now we see them into installs and rabid as we talked about last time last quarter, we thought that we'd go positive bookings growth in this court we did.
We absolutely did and we see that for the balance of the year based on that we can see the flow of install we can see the flow of revenue through the end of the year that will get us high single digits, a double digits. In 2022, just so you know the cloud based products are already in double digit growth in our store.
Frank really is in that small mid market and Multilocation Multilocation enterprises, that's where we're really getting the the the lift and as we build out next year 2022 is what we call the year of the progress we're making the investments we've increased our investments over 20 per se.
<unk> overall and engineering and product at the same time, improving our profitability and then our high growth areas. We've actually increased it more than 50 per cent, that's going to enable us to deliver more functionality more product next year, even in the second half of this year that will open up more time, we're gonna see the same thing and you see.
C C and the way, we're gonna double down on the work that we're doing with sales force and service cloud Boy.
I think we have a real chance to lead there I mean, Lee and if we can lead that'll create even more opportunity. So I'm pretty bullish on that trajectory. We can see it you know things change always but there's no question you can see it in terms of pipeline progression you can see it in terms of leads you can see it in terms of bookings and obviously.
Skull and revenue.
So that's what we're seeing.
Super what 1 other thing you mentioned in your prepared comments that you continue to invest in the channel and mentioned that bookings that increase sequentially I. Just wondered if you can give us a little bit more detail on both those statements.
Yeah channels, an important strategy for us there's no question that if you think of how we tailored the go to market for you see see see we basically looked at the groupings M. S history vantage with the what what had been done was all our direct sellers covered all cussed.
Per segment, that's not efficient that's why the cost structure was out of whack and with it with a lot of competition. What we did is we created it E Commerce E support solution for micro in small we leveraged and built out a better channel program with vantage accelerate that we continue to invest in over the next several quarter.
<unk> better training better portal better solutions, better incentives that will that will allow us to win and that you know small mid and and beginning of enterprise and then we're gonna put all our direct sellers on the top of mid and then top of enterprise that's definitely translating into.
Better results, we saw growth across all those segments, which is really important and we made sure that we did the analytics on all our demand Jen and marketing tactics with that had been much more efficient on our Tac and in terms of our you know return on investment channel is a big deal for US. There's no question it's been in.
<unk> tapped in kind of a several false start you know, let's watch that over a 4.6 quarter trend I think we can really makes sure that that's really powerful we're seeing that progression in terms of pipeline, we're seeing that progression in terms of volume and we saw some of <unk> fastest.
Growth in terms of the channel no question about it but will continue to vest to support it.
Great details. Thank you.
Sure.
Oh next question comes from alone of some <unk> some honor with Jeffrey. Please proceed with your question.
Hi, This is Nathan Marion on for some odd thanks for taking my question is so I wanted to go to the to the API segment Caresses Oddest thing very impressive but on a competitive environment I wanted to ask what you're seeing here uhm, how is pricing trending and then if you'd call. It any specific geographies that are <unk>.
It's doing better than others.
Sure. So mason. Thanks for the question I'll have J give a little bit of color in a second we're in a secular change here. There's no question. It's communication Revolution is at the beginning it's Y a came divided we're gonna see kind of an increasing penetration in this market space over the next.
357 years $80 billion by 2024, a P is and the way they're used by every industry. Every app every work flow, we're gonna see it everywhere and that's gonna continue to drive growth. It's a huge market lots of opportunity 1 of our strength. This a diversity of our.
Are are are geographic footprint, our industry footprint. So we were strong and grow in every industry. We were strong grew and every geography and I think this is going to be a important kind of technology wave as I mentioned for the <unk>.
3.5 even 7 years. This is a fundamental shift in the way people will interact with their team members with their customers and with their partners I think we're really uniquely positioned in this space is a big market. So there's more than enough to go around and I think we can grow at a disproportional.
Right here I mean, maybe J you want to add a little color about why we went in to say P. I space and while you're seeing some of the progress, we're seeing particularly messaging and across the a P. I.
Sure Mason the way we look at it is we've got a certain programmable a T. I's in his worry alluded to our growth with large root beer driven by the broad base demand across the Geography's verticals I don't think there's a vertical we don't touch and a customer size. We play in all sizes right. If you know she was incredible push it started before cause.
But we COVID-19 it was a very different market, but now we're seeing this new hybrid working environment, but it doesn't matter. The diversification price is gonna continue to help us balance the business and ultimately always be in a position to meet our customers, where they are now and where they need to be moving forward and.
In particular is where he said you know messaging we saw a particular strength by this accelerating usage specifically to eat an e-commerce, social media gaming and we started to see travelling hospitality coming back a bit and we're hopeful that that will happen in the second half as we all know with the new variant, we don't know what's gonna happen, but again, we've got.
That balance and my last point I'd make is just on the growth across each of the geography. So it's been strong I want to reiterate that we're continuing to invest a new markets and industries to further expand our addressable market and the value we can drive to our customer someone particular this since January we've established presence in Brazil, Malaysia, Mexico, and we're gonna continue.
You to go deep in Indonesia, Somebody's other key geography, So all said and done it's the balance and diversification that will continue to propel our growth.
I understood. Thank you for that Uhm, and then I just wanted to touch on your your <unk> Your V T shirts.
L T at 1 per cent.
Can you provide any context here around.
Between.
You see your contact from your account.
Your API customers is there any convergence between us.
So I didn't hear that perfectly clearly Steve did you hear that 1 perfectly clearly.
Yeah, I think you're just asking how does our churn represent based on what we've seen previously and I think that when we take a look at our turn we think it has improved as we've as we move forward it to the quarter and I think that that representative having you know quality products.
That are resonating in the marketplace and we we think that that is stable level for us going forward.
Yeah, and I I break it down I mean, and you see see see we've seen turn at the lowest levels. We've seen in a long time I think that's reflecting the kind of solution that we're delivering to the customer and we see that consistent kind of performance, it's been trending down in terms of improving churn and the D. B a knee.
Yeah, you know at 125 per cent I think is we weren't run that D. B and that 120 to 131.35 range. That's a great spot I think it's really important that we keep that focus on D. B N E that would that 125, I think that's reflecting the strength that we're seeing in turn.
<unk>, the customer buying and the value we're creating for them.
Thanks Nathan.
Thank you.
Our next question comes from the line of Willpower with Robert W. Barry. Please proceed with your question.
Okay, great. Thanks, Yeah, Uhm, congratulations on the nice resolved some great to see the improving trends.
I wanted to ask you on on the U C. C C side of things it feels like you're seeing nice traction on contact center overall, but I I'd love to understand really kind of 2 parts I mean, a what are you still need to invest in there to kind of make it fully enterprise grade or the other features omnichannel capabilities.
You still need to add and clearly already making progress there and I guess be I know a lot of the success has been driven in tandem with.
<unk> sales force integration go to market. There what are you seeing beyond that and and are there is there an intention to you know <unk>.
Continue to invest in other contact center brought up contact center capabilities beyond that Salesforce integration.
Yeah, Thanks, well, Hey, there's no question that that that our contact center and the partnership that we built with the powerhouse sales force has played out very well over the past years and with service cloud voice and us being my opinion, a real early leader in that space I see the pipeline there there's a <unk>.
Big opportunity I think we can do.
Uhm important leadership type growth rate leveraging that partnership at the same time, there's definite opportunities across the integrations with the other productivity solutions teams et cetera. These this is really a space where with a.
Targeted focus where we best play there's no reason, we can't grow a better than market rates were already in that space doing very well and with these kind of focused in partnership we're gonna see that continue we see that through the first day, we have pretty good visibility through the early part of next year based on pipeline install.
And trajectory I like that in terms of investment so I'm in your Barry and his team are working across the Rudolph was team with the customers and we're building out further capability enhanced billing to enhance scaling to build out additional omnichannel capabilities. We are definitely go.
Going to move from you know just a 1 trick pony in terms of that productivity to continue to move up that scale, but that's going to occur over the net.
368 quarter, and we're continuing to invest there.
In the meantime, make hay leverage where the product fits well use that Taylor go to market to capture more than our fair share and we're seeing good trajectory there we're going to build on it well.
Yeah, well that sounds great, Okay, and maybe just 1 follow up perhaps made it for Steve just cause you're looking at the Q3 guidance any seasonal impact to be aware of or think about I mean, that'd be incorporated in the guidance, but I guess, particularly with respect to the the API businesses are moving to Q3 from Q2.
Yeah, I think well as far as with Bacon and the Guy didn't look we we had really strong performance for the first half of the year, we expect that to continue but as the as the Barry start to you know <unk> Porpoise I guess you should come through you know where where we feel that we have areas that are wrapping it a really strong.
Market from last year, especially when we look at our video product, but when we also get into other opportunities opening is J mentioned earlier or travel and hospitality continues to start to see that come back I believe it's bacon. So so again I think you know from a seasonality perspective, we have it baked in a P. I is a.
<unk> is a usage based business as you know and and really for US it's continuing to make sure. We put a quality product out there is already mentioned or D. V. D. At 125, it's showing that we're continuing to grow with our customers as well as they build new use cases, we continue to expand on them and and the and we're seeing it in a result so.
Again as as we looked at the guidance for next quarter, and we did great. It for Matt or 3 Q and and we feel pretty confident that we're we're we're gonna be able to hit that on the back end.
Yeah, and you know when you think about it when we talked about at the analysts day in terms of transforming the business right. Now. We're ahead of that track. There's no question, but the real power of our portfolio is the diversity of it both geography based industry based in product base with Steve variant.
Variations not variance variations from quarter to quarter and different products for for example, this quarter. We had a lot of messaging growth other quarters will see video growth other quarters will see voice growth, but it's the diversity of our portfolio that allows us to participate as the industry's ebb and flow as we go kind of.
Through this unprecedented time as <unk> as economies and industries reopen kind of moderate and then reopened again I like the diversity of the portfolio and that gives us some protection against seasonality or 1 particular tower.
Okay. Thank you.
Thank you.
[noise] Oh next question comes from the line I've met the martial with Morgan Stanley. Please proceed with your question.
Hi team. This is Eric on for me to Thanks for taking my question and congrats on the corner, maybe touching specifically on the health care vertical you noted another health care when in video a P. I is clearly benefited from telehealth usage over the past year.
I think we see that was you know a vertical where you do pretty well, but wondering what do you see as the opportunity to extend beyond video a P. I as in how does HIPAA compliance and messaging and kind of that announcement have any impact on that.
Thanks, Eric and thanked me that Hey, no question that health care is an important segment again, it's the diversity of the products that that gives us that strength. When you look across that that that portfolio <unk> as we were in the you know.
The the pandemic, we saw video usage kind of explode through that have telehealth scenario, what we're gonna see now is an opportunity for us to expand those api's and that's why we really are a tracking that that dollar based expansion rate is that saying hey.
We have an opportunity with better more than 50 per cent of our customers to add more a T. I's 2 of them just on cross so that's a great opportunity for US we already have a relationship I mentioned the 1 about amerisafe, that's a big deal where we implemented the messaging to help with the long loan process and they immediately then because.
Have a great implementation and scaling they took on verify yeah.
Yeah, we have that opportunity and probably almost better than 50 per cent of our customers, where we can expand on the current base. That's a really important segment or opportunity that we can turn leverage and the and the health care space.
With improve with innovations around HIPAA compliance and then an pincheck around socks too we can open up a whole new swaths of Tam for us to attack. That's what we've been trying to systematically do look at the market look where we play well Taylor I'll go to Marc.
<unk> and then systematically look for those big Tam spots, where we can innovate through sobbing as team and our engineers, which I mentioned earlier, we been significantly invested in that area. So that 22 was the year of the product that we can capture it that's what we're doing in health care, we started and we've already.
He started seeing the beginning winter already in the third quarter, where because of HIPAA compliance. We can capture more messaging. It's just the idea there's lots of communication modes and lots of opportunity for us to expand thanks, Eric.
Thanks, So telephone if I could just you know touching on the the dollar based on that expansion read when we think about the 125 per cent how much of that is you know.
Just scaling usage of existing installations, you have versus some of the newer expansion opportunities in and then you know is it more scaling today, but expansion moving forward or are you already seeing some of it being impacted by by kind of the cross sell.
It's a combination no question and I'll have J give some you know overview in terms of what he'd seen with each of the customer and some ideas and examples about how that's driving of course, we're seeing you know usage in terms of our current customers expand but also expanding into other a P. I.
I think that's a huge opportunity when you already have a relationship with a customer and over 50 per cent of our customers. We have identified opportunity to sell additional a P. I.
That's a really good target, we should yield at a much higher percentage with existing customers than just you know out in the wild customers I think that's gonna be a big driver for us over the day, you know for 6 quarters, but anyway J do you want to give a little feel for what you're seeing in terms of our usage per.
Patterns, particularly around a P I.
Okay, 2 additional points I'd make the first is just on the messaging maybe any you know it was particularly strong given the increasing traveling hospitality. We spoke about earlier, obviously, we've seen some moderation of usage and health care and education, but all of a sudden done I would come back to the bigger point and that is the diversification of the business. So as you would have.
Free shape, we're always looking to grow and expand as you know we announced earlier in the year or go to market transformation, a big part of that is how we service those customers and that whole CSM function right that customer success. So we're gonna continue to do that with their existing base, but there's so much opportunity to cross cell or a P. I from you seem more and more of a.
That we talked about and merits a mortgage earlier and we're seeing we saw it in second quarter more and more of our customers coming back to us if they continue their digital transformation summer accelerating your move to the cloud. So that served as well that's really in our our our sweet spot in terms of being able to to land those clients and then have that wide range of.
For Grandma Boy P is where we can move with them because in a lot of cases just use video as an example, we we talked about the prior question, we still see that being a major driver and communications, but as we look at a lot of our customers that are going deeper than that customer journey and so they're using video in different ways and Furthermore, I should go through that.
Customer journeys when you think of those workflows and to and we're starting pulling verify messaging and other key areas that are gonna come from at that because in the end we need to continue to deliver the value our customers have grown have grown to expect from us and and we're very very positioned in terms of where are we.
Want a bit.
Thanks day, thank Eric.
Oh, that's question comes from the line of James Brain with William Blair. Please proceed with your question.
Yeah. Thanks for taking the question just as we've seen things open up a little bit here, yeah from pandemic perspective, any changes you are seeing in terms of the size of companies coming into the sales channel or a larger company starting to move in hours you know 8 months ago 12 months ago, they were sort of frozen.
Yeah James.
We've really seen particularly in the a P. I space, just a very diverse that of customer sizes geography. The region I think that again as we've talked about I think 1 of the powerful advantages that signage has is that we're basically a third a third a third across the 3.
Big geographies, and then really 12.15 really strong industries customer size, we saw growth as Steve mentioned across every segment.
Definitely definitely a lot of energy out there there's some momentum in the market and we're seeing as you know a fundamental shift in the way a P. I's and communication modes are used across productivity and customer engagement applications and workflows. So now we're seeing it.
<unk> the board, obviously, some of our products fit better and you see see see in that small mid and multi location enterprise, but now we're seeing across the board and that's good because the diversity says if 1 gets a little bit slower choppy or 1 industry. We've had really good flexibility kind of give.
Some installation across to any of those smaller variations.
Great and then just any any thoughts on competition given zone 5 names with what's going on the market.
Yeah, I I, you know I think the that that acquisition kind of validates what we're trying to do with the Vonage communication platform. We've we've been on this strategy for 5.6 years, we put the right assets together for where the market is going and I think that acquisition in particular kind of validates this I'd.
D. A that were I think we have been a first mover in the space to put these together in a platform that allows our customers to get these.
Broad base of an a P. I first kind of engagement platform and then to build you know a purpose built applications in contact Center and then you know unified communications on top of that a P. I flow no competition I you know I've been in this industry from 38 years.
There's always competition I've heard about everybody you know so and so I was gonna do this and they've already won the Miss whatever I think where we are is this isn't it amazing market, we're seeing a fundamental technology shift around how communications or use it to engage customer.
As partners, you know and <unk> and team members on a broad basis and depend demick as awful as was clearly accelerated that improved it out. The next 3 to 5.7 years, it's the culmination of Internet cloud and mobility all coming together.
To create this kind of perfect storm for communications embedded in all of those activities. It's a huge market I don't care what the all the competition does we're gonna focus on our customers. This as a customer first base culture, but we understand our customers and.
You know give them the best care nobody else can so take care of those customers and they'll tell their friends and that'll open up more opportunity that's our opportunities sure there'll be competitors and there'll be this 1 this quarter and the next 1 next year. It doesn't matter. This market is huge it's a fundamental change.
And how the technology is used them being implemented it's gonna go on for several years and per US focus on our customer you got 2 years and 1 mouth listen more than you talk and listen to that customer and create them value. If you take care of them better than anyone nobody can get in there and you can expand.
That base, that's our future.
Great. Thank you.
Thank you.
Our next question comes from the line of Sterling Howdy with J P. Morgan. Please proceed with your question.
Hi, Michael.
Okay.
Uhm ketchup goodbye from my color.
Corner.
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Why products.
Change.
Thanks Drew Hey, Great question Yo I, I'm really I'm really proud of the fact that the improved Yo adjusted EBITDA in the V. C. P. M. B C. P. E is basically vantage at this point and we saw adjusted EBITDA improved $19 million year over year in our <unk>.
Sure it's positive quarter ever we're gonna run that adjusted EBITDA net low single digit range, we don't want to stretch it out we want to use that margin and that.