Q3 2021 LiveVox Holdings Inc Earnings Call
Good afternoon, and welcome to the Lightbox Holdings third quarter 2021 earnings call.
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After todays presentation, there will be an opportunity to ask questions.
Please note this event is being recorded.
I would now like to turn the conference over to Alexis Wallace head.
Head of Investor Relations. Please go ahead, good afternoon, and thank you for your participation today with me on the call are Louisa Me, Chief Executive Officer, and co founder of Black box, and Greg Clevenger Executive Vice President and Chief Financial Officer before we get started I would like to remind you that comments made during this conference call and webcast contain.
We're looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties any statements that refers to expectations projections or other characterizations of future events, including financial projections or future market conditions is a forward looking statements the company's actual future results could.
Differ materially from those expressed in such forward looking statements for any reason, including those listed in its SEC Filer lives lost assumes no obligation to update any such forward looking statements. Please also note that past performance or market information is not a guarantee of future results certain information discussed on this conference call was derived from third party.
Sources and has not been independently verified and accordingly, the company makes no representation or warranty in respect of this information.
During this conference call the company will discuss non-GAAP financial measures as defined by SEC regulation G. A reconciliation of each of these non-GAAP measures. The most directly comparable GAAP financial measure can be found in the earnings press release, which is available on the Investor Relations website investors that Lightbox dotcom.
A recorded replay of this call together with related materials will be available on our Investor Relations website investors Lightbox Dotcom Lightbox its earnings release and Form 10-Q will also be available on the company's website with that I'll turn the call over to Louis to begin.
Good afternoon, everyone and thank you for joining US my name is Louis Tommy I'm, the CEO and cofounder of <unk>. This is our second earnings call as a public company and I'm pleased to share very strong third quarter results. We had record revenue in Q3 of 35.
$5 million above the high end of our guidance range and up 20% year over year.
Contract revenue was $23 1 million just above the high end of our Q3 guidance range and up 26% year over year.
I'm also pleased to share that we are on track to have our strongest bookings here.
In fact, Q3 was our best bookings quarter in company history, and more than 60% of those bookings were from new logos.
We also booked our largest new logo deal ever this quarter with a R. R a $3.3 million.
The tail winds that are fueling this growth of the <unk> market and its expansion toward a tam of $80 billion or as powerful as ever.
Interest in our next generation <unk> platform is being driven by technology refresh mandates from both legacy on premise solutions as well as first generation cloud platforms.
This opportunity is largely driven by disruption in the marketplace that was triggered by the pandemic while E. Commerce club was already driving increased demand for contact Center services.
The pandemic has served as a significant accelerator, creating a new new that is likely here to stay however.
However, just as the need for services is increasing contact centers are facing labor shortages and hybrid workforce demands all while trying to meet increased consumer expectations for strong service. This fall for this new reality is to lean in on technology.
As a result, the industry bar has been raised contact center solutions and demand today require sophisticated modern technology that seamlessly works together, including blended omni channel communications digital and AI to help facilitate self service and automated workflows modern workforce engagement.
Pools to help support the new reality of hybrid onsite and remote workforce and unified customer data that is optimized for omni channel engagement.
These demand drive the need for a comprehensive integrated solution.
She is a hodgepodge of vendors that constraint I T resources.
<unk> cost increased time to market and create further complexities for contact center leaders clearly a converged <unk> platform is the future of the contact center for clients, who want to work with fewer vendors on a natively integrated platform with advanced features and functionality that are easy to implement and easy to ophthalmology.
Through our public cloud development strategy Lightbox is in a strong position to provide enterprise contact center a roadmap for success now and in the future.
I'm encouraged to share, but the enterprise sales are driving more and more of our bookings for clarity. We're defining enterprise sales organizations that are taking 10 or more of our products.
<unk> voice digital channels AI, our contact centers CRM workforce engagement products and more.
Our two largest deals in Q3 were full enterprise blended omni channel sales with a $3 3 million and $1 9 million respectively. There are three key points of differentiation in our offerings that are driving this first our blended inbound and outbound voice and digital capabilities.
Proving to be a real stretch blended capabilities are core to approximately 70% of large enterprise contact centers and our expertise in this area is proving to be valuable second is our contact center Cri as we've noted before having the ability to unified communication channels and.
Data seamlessly throughout the customer journey is a game changer for both the agent and customer experience and third is our ability to provide all of the essential capabilities at an enterprise contact center needs out of the box easy to deploy and easy to optimize its also interesting and important.
To note that while we've historically talked about winning against on premise providers. In Q3, we had multiple instances of displacing incumbent cloud providers.
We view this as further proof that an out of the box competitively priced all encompassing solution such as la box is highly desired in the marketplace.
Given the market opportunity in front of US we continue to invest in our go to market efforts, our sales and marketing head count continues to grow with seasoned industry professionals and we remain on track to meet our hiring targets, which will be important drivers of revenue in 2022 and 2023.
We've also continued to make significant progress in the channel as a reminder, our go to market strategy was primarily direct until earlier this year our relationship with Master agents is meeting expectations. We recently signed a third channel partner, which we'll announce soon and now have a strong leadership.
Marketing team in place to support our channel partners future growth.
Q3 was also another milestone quarter for product innovation.
Our latest product release, you 17 significantly increases our ability to deliver a full enterprise platform for both new and existing customers, which of course also drives our ability to increase revenue per customer.
Some of the new features in this release include advanced ticketing.
Our robust business intelligence back office and branch locations support and increased workforce engagement tools, all integrated into our purpose built contact center CRM.
Of note the adoption of agent desktop tools and our contact center CRM was across more than 70% of new logos in the quarter.
Delivering an exceptional customer experience in today's environment requires properly, enabling all customer facing employees.
Quoting back office and branch locations, driven by AI automation and customer data you 17 provides all the necessary applications needed for all stakeholders involved and providing an exceptional seamless customer experience and through our recently announced smart start master portal new customers now.
Have the ability to be up and running days not months through better integration and customer training tools, which are available on day. One. This is of course significantly increase the speed to value for our customers.
Currently these innovations and advancements continue to enable our enterprise customers the ability to deploy a complete customer service platform to solve customer problems create brand awareness and drive revenue, while providing a superior customer experience now I'd like to share some of our key Q3 customer wins.
But I think demonstrate the enterprise success that we're having the first is a large U S automotive tire retailer they have a vision to completely transform their contact center strategy.
Patchwork solution provided by their existing three cloud vendors cannot accomplish their objectives.
Their vision required a blended inbound outbound solution to ultimately provide complete communication capabilities across their customers lifecycle. They purchased a suite of 18 products, including our contact centers CRM business intelligence and WFAN, enabling the performance of their hybrid.
Workforce and facilitating future new product offerings.
The second is a large national financial services company.
They partnered with us on a multi channel solution and 550, physical retail stores as well as their hybrid context.
Purchased 10 products anchored in blended omni channel voice and digital as well as AI and analytics folks out. This enterprise wide solution displaced 13 technologies supplied by 10 vendors, including two key cloud competitors and finally, an existing customer a global digital paint.
Its provider serving over 200 markets was using a lot of box and another vendor for blended communications. They signed a large deal this quarter to consolidate all of their inbound and outbound communications on La box and they had a speech analytics and business intelligence capabilities for a total of 13 five occupied again.
We're very pleased with the quarter and we remain excited at our prospects of a strong finish in Q4. Thank you and I'll now turn it over to our CFO, Greg Clevinger active review of finance.
Thanks, Louis and good afternoon, everyone.
I'll start with our third quarter revenue results and a reminder, that all non-GAAP financial figures that I discuss are reconciled in the Investor Relations section on our website.
Our total revenue for the third quarter was $30 $5 million, 20% higher than the third quarter of last year, and 6% higher than last quarter underpinned by continued strength in our contract revenue, which was $23 1 million for the third quarter, 26% higher than the third quarter of last year, a 3% higher than last quarter.
Contract revenue remained strong and predictable underpinned by strong new sales bookings and our continued healthy net revenue retention, which improved to 107% for the quarter versus 105% last quarter.
Our new sales bookings, which are new added annual revenue commitments under contract and are driving our strong contract revenue growth and are confident outlook in that regard continues to be very strong on the back of record bookings in this quarter.
We continue to see strong momentum in our pipeline, which we believe will continue to drive sustainable growth in our contract revenue going forward.
The average number of products signed up for by new logos in the quarter was five eight on average higher than last quarters average of five four and overall, our new logos. So far this year have signed up for more than 25% more products on their first land deal than the same period last year, even more exciting the average annual contract.
Revenue for new logos. So far this year is $330000 per year versus $180000 per year over the same period last year, demonstrating that our new customers are getting larger and they are finding value in more of our products.
Excess usage revenue totaled $7 5 million for the quarter, 4% higher year over year, and 14% higher than last quarter.
The usage multiplier for the third quarter and remember that's total revenue divided by contract revenue was 1.3 to ask well that's lower than the 1.39 X in the third quarter of last year and of course lower than the 155 X pre pandemic norm. It was a little higher than the $1 two nine X measured last quarter.
This measure has fluctuated from month to month, and we still remain cautious about when and how quickly we'll see it improve from here.
Our adjusted gross margin for the third quarter was 59, 5%.
A decline of 220 basis points versus last quarter, driven primarily by some lower margin implementation revenue as well as higher AWS cost as we continue to build capacity to migrate the last of our customers from our own data centers to our public cloud platform on AWS.
Our adjusted EBITDA for the quarter was a negative $6 $3 million versus a positive $2 $7 million in the third quarter of last year, and a negative $2 $6 million last quarter continuing to reflect the aggressive investments, we're making across the business to drive new sales bookings and contract revenue growth.
Our earnings per share for the quarter were at negative 12 cents on both the basic and diluted basis versus breakeven in the third quarter of last year again, reflecting our aggressive spending to drive topline growth.
Our capex for the quarter totaled $600000 now totaling $1 $2 million year to date.
And lastly, we ended the quarter with $55 million of debt same as last quarter and $105 million of cash remember, while we ended last quarter with $161 million of cash on the balance sheet I pointed out on the call last quarter that we were still holding about $36 million of cash at.
At June 30th related to the spec deal, but still had to be paid out and I bridged you down to a $125 million of pro forma cash as of the end of last quarter for this quarter. In addition to cash consumed from operations working capital in servicing our debt, we paid about $7 million as final consideration for the business phone acquisition that we can.
<unk> earlier in the year.
Finally, our forward looking guidance overall, we're maintaining both our implicit fourth quarter revenue guidance and our 2022 preliminary revenue guidance that we provided to you last quarter.
More specifically, we expect our contract revenue to land between $23 9 million and $24 4 million for the fourth quarter, 19% to 22% higher than the fourth quarter of last year, which was higher than a typical fourth quarter as a result of political dialing associated with the 2020 presidential election cycle.
This would result in contract revenue for the full year between 91, and $90 6 million or 25% to 26% higher than the full year 2020.
We expect our excess usage revenue to be between seven 3% and $7 8 million for the fourth quarter again, consistent with our implicit fourth quarter guidance from last quarter, which would result in excess usage revenue for the full year of 28, and a half to 29 million six.
6% to 7% lower than 2020 as a result of the continued impact of the pandemic on that component of our revenue.
So that all gets to total revenue of 31.2 to $32 $2 million for the fourth quarter and $118 six to $119 $6 million for the full year, 16% to 17% higher than the full year 2020, and higher than the full year guidance that we provided last quarter of between $117.
$19 million.
For the full year 2022, while we're still not providing formal guidance, we do reaffirm our minimum year over year growth rate and contract revenue of 25% based on our recent bookings momentum and we continue to take a wait and see approach to the excess usage revenue.
And with that operator can you. Please open the line for Q&A.
Thank you.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your touch time fun.
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To withdraw your question. Please press Star then two.
Your first question comes from Mike Latimore with Northland Capital market. Please go ahead.
Great Yeah. Thanks, Thanks, very much and.
Congrats on the nice bookings momentum in the big deals in the quarter here.
Thank you in terms of Uh huh.
You gave you gave a little more description about those two large deals and there were other you know.
Cloud providers present, I guess relative to those cloud providers as long as the main reason you think you won kind of these two big deals.
Well I think that our blended omni channel capability is is really starting to be kind of more known in the market as a clear differentiator for live ops and when I say blended what I'm, referring to is both inbound and outbound workflows as well as both voice and <unk>.
<unk> channels, putting all that together really kind of.
Frankly place a lot of oxy strength, we've got a lot of experience doing that and I think people are more starting to recognize or our skill and our expertise there.
Great and then it sounds like you're on track for sales head count hires.
How's the.
Productivity of salespeople kind of evolving this year.
You know hey, Mike by the way.
We're right on track with the with the overall hiring plan and and and ramping up salespeople were getting great contribution from people that are that we've hired over the course of the year and are bringing them up to speed. So we feel really good about it it's really translating into a into bookings and as we said you know we had the biggest the biggest quarter we've ever had.
In terms of bookings in the third quarter.
Great and just last one what percent of revenue was professional services.
Okay.
I believe is about 2%.
You were saying okay yeah.
Right Yeah. It implementation services, you know kind of broadly speaking or whatever revenue, we get out of out of our implementation services, mostly professional services.
Yes.
Great. Thanks, a lot.
Yep. Thank you.
Thank you.
Your next question comes from James Fish with Piper Sandler. Please go ahead.
Hey, guys nice quarter, you know you guys keep getting record bookings and it was another record bookings quarter. Here can you just remind us all know for how long. It takes until you typically get deployment post finding and at what point the customer is actually fully deployed to their books contract.
Yeah typically.
It is all over the map, depending upon the size and complexity of the customer and the booking how many products, they take et cetera, but but.
In general we assume a 90 day implementation from booking until until.
Until revenue unusually.
With limited exceptions, we are billing on that 90 day, let's say when the contract period starts at the minimum so theres not really a ramp period.
And and like I said, you know some or a lot faster and some are a little longer than that but on average that's kind of how we're converting bookings to revenue.
That's that's very helpful. Greg and all of that goes to record deals or at least the $3 3 million. One was I assume one of the deals that we talked about was that $3 3 million dollar deal is that right and any way you can kind of point to which one just so we understand kind of where you're seeing the strength.
With the larger deals.
And can we also understand you know how many seats you know who you guys actually backed off against the replaced them at a higher level just as a lead indicator for all of US what does it actually grow this quarter in full.
Yeah. So.
Yes, the largest scale.
Largest steel Jim was a financial services company and again I think the primary reason they came to US was once again for those blended omnichannel capabilities. The inbound outbound the voice of the digital capabilities all kind of synchronized.
As we mentioned in the call. We did we did defeat a a cloud competitor in that scenario and that that actual that particular, one it was in contact.
Hum.
You know I think.
Did that answer that no no that answered part of your question. You asked about are our also we actually have not disclosed what the what they are is as a as an ongoing metric.
Okay, Great last one for me is just can.
Can you guys talk about linearity in the quarter.
Can you elaborate.
[laughter] Alright, you know.
How how is the quarter in terms of winning those newer customers was it or was it more in the front end of the quarter I'm kind of July.
On the back end in September.
Yeah look.
As as you would expect like most software companies. They are the bookings in general come in.
Towards the end of the quarter are with.
With that said, we do we do have a you know bookings that are starting to flow in by by the middle of the quarter, but I would say that as we as we look forward, we simply see a sort of a constantly constantly expanding pipeline. So our pipeline is growing.
Bigger every quarter and that's really what's driving the <unk>.
The bookings up but but in general there theyre coming in in the back half of the quarter as you would you would expect.
That's helpful. Thanks, guys great quarter.
Thank you.
Thank you again, if you have a question. Please press Star then one.
Your next question comes up.
But do it with Stifel. Please go ahead.
Yeah.
Hi, everybody. Thank you for taking my questions and great results I appreciate it.
So Louis I guess I'll I'll go to you on the first one I mean, we're talking about you know pretty substantial sized deals now you're over $3 million on what are our type of deal, but also the average number of products here I think Greg you might imagine ticked up from five four to 5.8. So what we're seeing here is pretty clear traction that the solution sale is working.
So I guess my question to you is.
Does that change the nature of how you sell with the types of salespeople that you want on your platform does it elongate. The sales cycle are we just kind of like to hear the approach that you want to see the the go to market take as is as you're landing larger and larger deals.
Yeah, you know look I think I think that's a great point it does actually encourage us to hire.
Salespeople that have a little bit more experience and are a little bit more familiar with these with these bigger types of deals.
As far as the sales cycle goes, though we don't necessarily see a huge difference in the sales cycle.
Depending on on size Interestingly enough you know so we haven't really seen the sales cycle.
As a long game as a as the deals is growing bigger.
Excellent.
Excellent. That's helpful. And then you know Greg for you just kind of looking at this usage multiplier I think stability seems to be you know the name of the game here after some downward trends.
Behind that just on the collection side.
What are your customers seeing what are they talking about them and then you know you had some pretty good you know.
Fed data that you've looked at that gives you a pretty I think decent leading indicator into what that multiply it looks like you.
Do you feel that you feel like stability is in fact, the right word for what we're seeing there and maybe marginally ticking up as we are continuing to move forward and in the new economy here.
Stability, yes. We are we are seeing that you know we're kind of hovering around the you know what kind of a similar range here for the past couple of quarters.
We do see the leading indicators as you mentioned the federal reserve data.
Round.
The new credit originations and things like that that we that we fully expect youre going to translate like they always do into increased servicing activity, that's that will make its way into collections activity.
Which as you know is 30 plus percent of our of our revenue stream.
That has particularly been impacted by by Covid.
So so you know that that spillover into collections is in is not materializing as we would not expect it to because you look at at the growth in origination and what that means for first party servicing it's.
It's about 180 day lag from from.
<unk> from <unk>.
First party servicing until it goes to two collections and and so we're still within that period and that 180 day period that we've been seeing.
Upward movement that would indicate to us that that activity is going to pick up. So we are you know we're still hopeful we believe the you know the past to where we were pre Covid is is where this is ultimately going to go like we said you know, we're not I'm not going to predict when and how fast it's going to going to get there.
But I think your initial observations were good that we feel like we're at kind of a stable range right now and and and yeah. We're hopeful that it's going to move up from here.
Excellent last quick follow up just on that point. So I think last quarter, you talked about collections revenues driving our collections business drive at about 30% of revenues last year of 37% last year. How would you encourage us to think of a trend line I mean, it seems pretty obvious that is multi multi channel and and the broader platform takes off.
That number is going to come down will it come down quickly how often we update that just would love any directional thoughts on the collections piece.
Yes.
Something that we will update them all.
On a on an annual basis kind of look back on on an annual basis.
37% that we had last year going back five years before that 2015 that was 63% I think yeah. So it it.
It moves.
But it really depends on the mix of bookings between collections and and and non collections and and you know our deals that we're doing in our pipeline is very heavy enterprise right now as we had expected. So we do believe that that that that.
And that percentage of our revenue is going to continue on a you know kind of past that it's been on in terms of its overall contribution to revenue.
Fantastic really helpful I'll jump back in the queue. Thank you.
Alright, thank you.
Thank you.
Next question comes from Kurt G I cut out with Bank of America.
Go ahead.
Hey, guys. Thanks for taking my questions and congrats on that congrats on that big Big win in the quarter I just have a quick just one question here with such a big win and it sounds like the bookings momentum is really heading in the right direction here little bit surprised that the 22 outlook remains 25% growth on the contract side is there anything we should be aware.
Embedded in that outlook or maybe I'm, just reading into that 25% a little bit too much here. Thank you.
Oh no it's.
We've been very consistent in in our view that that contract revenue is on a 25% growth path in and we've been investing for for growth on the bookings side and and that's materializing. So so.
You know it's.
The playbook is playing the way that we had expected it to end at this point.
We still feel very good about the 25% in.
I don't feel the need to change that at this point either way.
Got it got it thanks for that and just one last question for me from a big picture perspective, what are you most excited for heading into 2022. Thanks for taking my question guys.
Well look I think the the blended omni channel is really kind of a very exciting area.
For live ops, and that'll certainly be an important part of our.
What we're talking to our customers about because you know I mean, what what's.
<unk> of course is <unk>.
As people start to look on the other side of the pandemic. They are seeing that the market's still asking for a lot of.
Contact center services and the labor shortages.
As challenging in acute and so that drives up demand for for digital it drives up demand for self service that drives up demand for AI and keeping all those new technologies synchronized and kind of in a coherent workflow that really delivers a strong level of customer engagement just requires.
A a kind of a well structured well blended platform and so that's kind of where we are and that's what we're excited to talk to the market about really help them adjust to kind of this this new new that they're that they are facing.
Thank you again, if you have a question. Please press Star then one.
We will now pause a moment to allow any final question it to register.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to Lee for any closing remarks.
Thank you and thanks, everybody for joining really appreciate it and a special thanks to our employees that really put a lot of hard work and effort into driving the results that we delivered this past quarter and I'm certainly grateful for their contributions and definitely looking forward to doing more of the same as we move forward. Thank you all very much.
The conference has now concluded. Thank you for attending today's presentation, you may now too.
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