Q1 2022 LivePerson Inc Earnings Call
Yeah.
Good afternoon, ladies and gentlemen, thank you for standing by welcome to live persons first quarter 2022 earnings conference call. My name is Kyle and I'll be your conference operator today at this time all participants are in a listen only mode.
After the prepared remarks, the management from life person will conduct a question and answer session and conference participants will be given instructions at that time.
To give everyone the opportunity to participate please limit yourself to one question and one follow up.
As a reminder, this conference is being recorded I would now like to turn the conference a conference call over to MS. Jamie Goldstein.
Thank you operator, good afternoon, and thank you all for joining us today on the call with me are Rob Locascio last person founder and CEO and John Collins, Chief Financial Officer. Please note that during today's call. We will make forward looking statements, which are predictions projections and other statements about future results. These states.
<unk> are based on our current expectations and assumptions as of today.
Object to risks and uncertainties actual results may differ materially due to various factors, including those described in today's earnings press release and the comments made during this conference call and in 10-K 10-Q, and other reports we file from time to time with the SEC, we assume no obligation to update any forward looking statements.
During this call we will discuss non-GAAP financial measures reconciliations of GAAP to non-GAAP financial measures are included in today's earnings press release, where applicable.
Both the press release and supplemental slides, which include highlights for the quarter are available in the Investor Relations section of Black person's website.
Finally, I'd like to remind everyone that we are here today to talk about our first quarter of fiscal year 'twenty to 'twenty two.
You may be aware, a shareholder has announced its intent to nominate candidates for election.
Our actors at the company's 2022 annual meeting of stockholders of.
The company intends to file a definitive proxy materials relating to the 2022 annual meeting in due course.
Holders of the company are strongly encouraged to read the company's definitive proxy statement the accompanying proxy card and all other documents filed with the SEC carefully and in their entirety as they contain important information.
Termination regarding the identity of the company's participants and their direct or indirect interest by security holdings or otherwise will be set forth in the definitive proxy statement and other materials filed by the company with the SEC.
Stockholders may obtain copies of these documents are free through the company's website or through the SEC's website at www Dot FCC Dot Gov.
We will not comment further on this matter on this call. We appreciate you keeping your questions focused on my first one's performance and results.
And with that I'll turn the call over to Rob Rob.
Thanks, Jamie and thank you for joining <unk> first quarter 2020 earnings call.
We had a very strong quarter and what you will hear from John and myself will reinforce the progress and improvements we are making to the overall business and our focus on profitable growth goals or our continued leadership in the AI space, we'd be both top and bottom line guidance for the first quarter.
Revenue and adjusted EBITDA exceeded the high end of the guidance range with revenue growing 21% year over year to $130 2 million and adjusted EBITDA loss of $17 6 million $4 2 million better than the top end of our guidance range. These strong results were driven by both higher revenue and greater operational efficiencies.
We signed five seven figure ACB deals plus two additional eight figure <unk> deal.
Overall deal count was solid up slightly year over year. Many of these deals were very large upsells with existing customers driving <unk> to increased 32% year over year.
As we continue to execute on our successful land and expand strategy.
These achievements illustrate the strength across the business and a clear proof points of execution on the key strategic and operational priorities, we announced heading into 2000.
22, including our profitable growth plan, which had been focused on since the beginning of the year.
We are confident that our laser focus on these priorities will help us maintain our industry, leading position strategically deploying capital to generate shareholder value and get more leverage on the business model.
As John will cover in his remarks, we're also improving our Q2 and full year 2022 guidance for adjusted EBITDA.
Reapply to reflect operating cost realignment.
And we now have line of sight to generate free cash flow by Q4 2022.
John and I are excited to share more details about the progress on our Q1 priorities and our plans to you executing on them through 2022 and beyond.
We continue to see robust platform usage during the quarter with conversational cloud growing 34% year over year for AI based messaging conversations and 27% year over year for told him messaging conversations.
As platform usage grew so did our brand relationships.
As noted at the beginning of the call. The first quarter of strong execution reflects the great progress, we're making as we focus on the key strategic and operational priorities, we've talked about on the previous earnings call.
One of these initiatives is our continued focus on evolving and adapting our go to market strategy to align with our goal of profitable growth.
We spent the last few quarters focused on building and ramping.
Ordinary sales team, but I think in the next few quarters, we will see an increase in traction as the team's capacity.
To grow.
Our land and expand strategy continued to bear fruit as we renewed contracts in some of our longstanding brands and leverage existing relationships with new logos.
We closed an eight figure <unk> renewal for care and commerce with a multimillion dollar North American satellite Radio Entertainment company.
During the quarter and 2019, we began our partnership with this brand by providing them with IV, our deflection capabilities to help manage 24 million calls they receive each year. Since then we become an integrated partner leveraging our platform and gain share model to support them in their mission to offer a frictionless experience to the entire customer journey.
With our customer decided for a free trial or transferring an ongoing subscription to a new device.
Steel represents an expansion with the brand across multiple core conversational cloud capabilities, including.
In addition, our voice analytics products.
It's a great example of the product synergies and market traction we are already seeing as we execute our strategy for the voice assets, we acquired towards the end of last year.
We also expanded our partner led relationships with one of the largest automotive manufacturers in the U K. This Brad is deleveraging the conversational cloud to enable a high quality messaging spreads through almost every channel to manage conversations among brands and retailers and customers.
Q1, we added an AI virtual assistant to assist retail technicians by suggesting message to resolve vehicle issues immediately rather involving human agents from the Oems.
Going forward. We're also working to help increase engagement with an efficiency of their HR processes as we evolve their HR fhe chatbot Intuit AI powered virtual agents provide $24 seven assistance to their employees.
This expansion is a great example of execution on our strategy to drive greater leverage in our go to market model with continued focus on our indirect distribution channels.
We also secured a renewal with one of the largest biggest standing gained share customers the quarter renewal, which converts about 90% of the customer spending into recurring revenue for a live person was driven by the volume messaging with support for the brand with strong customer satisfaction, there see them using our platform and our.
Our automation capabilities.
We continue to make headway in the growing wet three space quickly become the go to messaging provider for customer care in this vertical including having one of the largest web three exchanges.
And also one of the largest went through wallet providers as a customer during the close quarter, we closed a three year renewal with consensus.
And our powering their customer engagement offering for their met them asphalt.
As a matter of basketball grew from 5 million monthly active users to over 30 in just one year. They were looking to accelerate customer support capabilities to meet consumer needs.
We started with a consumer support bot to help users quickly access content to help resolve their needs faster without back and forth on email.
Personally consensus teams continue to collaborate on optimizing AI automation, which now reduces support wait times by 93%.
Consensus is quickly expanding.
To use our product.
Higher product suite into some of their.
All lines like out a few platforms and leveraging other bots are beyond what theyre doing with the wallet.
We also expanded our relationship with the largest crypto exchanges. During Q1, we are now expanding into new international markets. We should see continued growth from them over the next few years.
Some of our international markets, especially in Latam and APAC are also seeing more traction with new logos Latam.
But the distribution partner, we closed an exciting new win with a government agency in Argentina. The government has he built an online portal to help at citizens access education.
And reduce the country's unemployment rate to increase traffic on the portal they've been using our messaging capabilities to set a 300000 proactive outbound messages per month via Whatsapp and enable citizens to continue the conversation over whatsapp to rents educational courses as of now close to 60% of the proactive messages are reaching their target audience a number.
With the government to be a huge success story, along with many others highlights on this call represents incredibly wide span of use cases and projects that can be built on the conversational cloud.
In addition to these wins highlight that we were thrilled to have hosted the return of our popular in person executive community events last week in New York City when it close to a 100 participants from many of the leading consumer brands in North America.
Approximately two thirds were new prospects and one third existing customers.
All of our top brands in the health care retail software hospitality space is presented on stage about their successes and working with live person and how they're leveraging our AI platform to drive automation across many different powerful use cases. It was our first large customer events 2019, and these events in the past are proven to drive.
Meaningful deal flow, we're hosting another one in London in a few weeks and will add events during the year in alignment with the impact in sales pipeline.
Beyond our achievements with strength in our core messy business. We're focused on two main areas of platform expansion. The first is in extending our platform to include voice and voice AI as you know branded consumer conversations take place today across both messaging and voice channels.
We are executing on our strategy and bring a powerful unified AI based consumer experience across both voice and messaging.
Been organically building the foundations of voice natively into our platform and then made the acquisition of voice base to accelerate high quality voice analytics and natural language understanding our Mou within our platform.
The power of the combined life person voice based solution as demonstrated by a global technology and business services client. They use voice space conversational insights to increase conversion rates by 104% and informed real time agent assist and coaching and reduces even interest in attrition by 39% in just four months across both voice and messaging.
Okay.
The second area of focus is extending our platform. So that it can be fully integrated into critical third party systems that exist in the enterprise today.
With the acquisition of tenfold and our integration hub, we can now help companies connect with the conversational clout with hundreds of integrations.
And we're leveraging 10 folds flexible user interface to extend our core messaging capabilities into other agent workspace and CRM platforms like Salesforce and Microsoft dynamics.
The focus of this acquisition is to integrate across a myriad of technology applications. So that we can greatly expand the amount of use cases, we can automate for brands.
Good example is a fortune 100 software company that Leverages tenfold across their global services operations to integrate Genesys, Microsoft dynamics 365 in service now, but connecting customer communications into their consumer data and case management systems, they eliminated 30% to 57% of manual steps across dozens of common call scenario.
As for thousands of agents, leveraging 10 folds conceptual UI and work for workflow automation capabilities. Another benefit of the 10 fold acquisition and so we have strengthened our team's expertise in developing a strong technology partner ecosystem.
<unk> 10 fold or cofounder Council is now heading up this team globally.
This is important to us as we execute on our strategy to empower brand and partners to extend the conversational cloud with integrations and interoperability with a broader care and commerce systems.
We are starting to see demand generation momentum with strategic technology partners, a new source of opportunity for live person consistent with the strategy. We've discussed previously to drive more leverage in our go to market motion through distribution and technology partners.
As we announced last year, we have executed on our strategy to bring together the expertise and technology of voice space, a tenfold with our own voice offering we're creating uniquely unified deeply integrated voice and conversational AI platform.
We successfully launched the comprehensive global sales enablement for tenfold in voice space, which we expect to accelerate pipeline growth in Q2 and beyond.
A key voice win for the quarter. It was a seven figure multi year deal with a telco there's already the expansion discussions with US to include other parts of their business, there's widespread demand for unified consumer experiences with a clear preference for brands that connect across channels and kept the history of their interactions.
87% of consumers prefer our brands they connect voice and messaging together, we've already been leveraging voice space and 10 fold to help brands gained complete ownership.
Disability over engagements across all these channels.
And drive scalable profitable growth for live person as we are cross selling and up selling into these opportunities.
I want to turn to health care another.
Another strategic priority has been continuing to build out the health care vertical our conversational cloud S.
I would say, it's our third largest vertical behind banking and telco.
Third Party research estimates that American telehealth, Mark inspected this grow to over $43 billion by 2026 at a CAGR of over 28% for software and services and just like customer care and Commerce. We view the application of conversational AI to the health care vertical is a natural extension of our core platform.
We've been expanding our position in this space over the past two years signing four of the five largest health insurance providers in the U S and the leading consumer health solutions company to build conversational AI services and when can you continue to see a substantial opportunity to dive deeper into health care vertical given the strong relationships with our customer.
Base.
Demand for conversational AI.
In order to accelerate our health care offerings, we acquired a company called Wildfowl. During Q1, while health was founded by a group of medical professionals and technologists, who built an underlying AI based medical data platform called clarity, which uses machine learning algorithms and secure and compliant way to gather consumer health insights spot.
This platform is intended to underpin our overall health care offering so that insurance companies and other medical professionals, who are key clients and prospects for us in the BTB health care vertical can use our core conversational AI platform to scale patient interactions.
See huge growth potential in this business are excited.
To play a part in what we believe is the scalable technology driven platform for the future of the health care space.
In order to service the health care space I cannot overestimate overstate the importance of having a leadership team with vertical IP expertise like wild health has today.
I believe it will give us a path and becoming the best AI platform, both for health care providers and insurance carriers. So.
So that they can use AI to drive a fundamental change in the broken flows of pages and patient engagement.
In line with the broader group with this broader vision. Our continued focus on the health care vertical during the quarter led us to expansion with a major online marketplace for health insurance in the U S as well as one of the top three health insurance providers in the U K.
We're helping bupa global cut costs by converting some of the 430000 customer service calls they receive each year related to referrals medical guidance and claim information to messaging conversations via their website and mobile apps.
This expansion was driven by the excellent messaging experience reported by other brands in the group of family, particularly in the Australia region.
In closing the strength of our company can be found in our culture and the people who work here each day I'm really proud to announce a lypressin was recently named SaaS companies number one most innovative AI company in the world as.
As well as this number 21, most innovative company across all industries.
Black person was also recently ranked as a leader.
Out of 19 vendors in the quadrant spark matrix for digital first customer care solutions, we were ranked number one well.
We also kicked off 2020 with a Golden Stevie Award for Best contact Center solution.
And we were honored to once again be recognized on built and built inks built into 2020 best place to work list, earning eight awards countrywide and for our hub locations in New York City and Seattle. These.
These are incredible accomplishments and testament to the work that we've done to maintain our industry leading position pushed.
Pushed to pushing the cutting edge of conversational AI and empowering brands to build entire businesses on the conversational cloud. These awards are also on the back of US winning Newsweek's top 100 places to work last year reinforcing the strength of our company's culture, a rep, saying another proof point in our ability and.
And agility to focus our investments in our people and our products.
We continue to make progress and improvements in the overall execution of the company.
We're excited about what happened in Q1, and what we're seeing coming up in the next couple of quarters and with that I'll now turn the call over to John If you could do a deeper dive on the financials and our guidance.
John .
Thank you Rob.
In the first quarter, we executed on the plans, we previously announced to adopt a balanced approach to growth and profitability.
And we delivered $130 2 million.
In revenue or 21% growth year over year, which was $3 4 million better than the top end of our guidance range as for profit adjusted EBITDA was $4 2 million better than the top end of our guidance range. Despite absorbing the fully loaded cost of our fourth quarter acquisitions and go to market investments.
The improvement in adjusted EBITA was driven by both revenue over performance and optimization of our cost structure, including realizing post acquisition cost efficiencies and narrowing the focus of R&D to prioritize core growth drivers, including messaging AI and analytics and post acquisition integrations.
I'll elaborate on shortly we expect the cost reduction program, we initiated in the first quarter, which we're continuing to execute in the second quarter to significantly alter our full year profit trajectory by improving non-GAAP gross profit margins of at least 70% and by moving adjusted EBITDA into positive territory.
Beginning with our reporting segments within total revenue <unk> grew 22% year over year in the first quarter and revenue from hosted software grew 27%.
While revenue from professional services declined 3% year over year due to the timing of several important projects, we expect a significant sequential and year over year increase NPS revenue in the second quarter.
From a geographic perspective U S revenue grew 27% year over year and represented 67% of total revenue.
International revenue grew 10% year over year and represented 33% of total revenue.
Growth in the consumer segment was approximately flat at 1% year over year.
<unk> with past quarters, expanding our partnerships with existing brands is a key theme in the first quarter, we signed five deals worth at least seven figures and ACD in the quarter four of which were expansion.
As Rob noted, we also signed two additional eight figure T. C V deals these large wins, including the eight figure health care deal that we discussed on the last earnings call drove our appeal to a record 448 million, which was an increase of 23% sequentially and 35% year over year.
Revenue retention was within our target range of 105% to 115%, marking the 19th consecutive quarter. This metric was within or above that range.
Average revenue per customer improved 645000 to 645000 up 32% year over year.
Driven primarily by deep integration and sustained expansion in our enterprise base.
Total messaging volume on the conversational cloud increased 27% year over year, and AI powered messaging volume increased 34% year over year.
On top of an extraordinary days one year ago. The continued growth was driven primarily by <unk>.
And travel and hospitality financial services telecommunications and healthcare.
Moving down the P&L adjusted EBITDA in the first quarter was a loss of $17 six nine.
Driven primarily by the fully loaded cost of hiring and acquisitions in the fourth quarter with a focus on profitable growth in the first quarter, we made meaningful improvements to our cost structure of that contributed to the $4 2 million improvement relative to the high end of our guidance range cost reductions in the first quarter were primarily attributable to reducing noncore R&D and really.
And post acquisition cost efficiencies through the consolidation of general and administrative sales and marketing and research and development functions. In addition to shared hosting and infrastructure with our newly acquired companies.
We expect these improvements to our cost structure to be themes that continue to unfold over the remainder of the year and to be the primary drivers of positive adjusted EBITDA that we now expect for the full year.
Terms of cash we closed the quarter with $481 million of cash and cash equivalents, a decrease of $41 million from the previous quarter, which was driven primarily by capital expenditures and operating expenses, both of which we expect to reduce over the remainder of the year.
I'd like to take a moment to provide an update on two variable lines of business that have had a significant influence on our growth and margins over the last two years, beginning with gain share as discussed on our previous earnings call over 90% of the portfolio is now recurring revenue and primarily secured by multi year commitments, enabling greater control and visibility over the business.
And its impact on the broader piano.
As we indicated previously we expect to gain share revenue would be 10% to 12% of total revenue in 2022, and this aligns with our first quarter results and our current full year outlook.
As for dangerous impact on margins, because there was a ramp inherent and the gain share model due to the reliance maybe labor to build bots and automation for customers, which is heaviest in the first nine to 12 months. Following deployment, we are targeting a long term gross margin of approximately 60% for the gains for the portfolio compared to greater than 70% for the broader platform.
Regarding the other variable line of business last quarter, we forecasted a deceleration in our COVID-19 testing business due primarily to the January 2022 Supreme Court ruling blocking osha's anticipated testing mandate for employers as discussed last quarter. We saw an abrupt end to our sales pipeline for this particular product line and anticipate.
That testing revenue from our last material customer for Covid testing city would exit the P&L in the second quarter of 2022 we're reaffirming there've been no changes in this regard and that the guidance I will discuss shortly fully reflects the step down from this revenue source.
Considering the lower margin profile of the COVID-19 testing business, we expect gross margins for the broader P&L to improve going forward.
I'll note that we're extremely proud that the platform health one of the largest banks in the world safely reopened its branches and offices during the tender and that the technology innovation and relationships. We built to deliver this solution are now enabling us as Rob described to drive expanded opportunity and the key vertical of digital health care.
I'd also like to spend a few minutes expanding on.
An update for voice.
From an operational standpoint, we're leveraging our newly acquired voice and integration capabilities.
From voice patient temple, and after enabling our global field with the knowledge and tools required to qualify and clothes reports related opportunities, we're observing a meaningful impact on pipeline and expect this trend to continue for example in the first quarter, we closed a multi year seven figure deal with a fortune 500 telco for voice analytics.
Banning their initial use case with workspace from Standalone redaction services to the full suite of analytics products. Further we also expect voice analytics to enhance a large multiyear renewal with one of life for some long standing telco brands in this quarter.
Building on the top on the building on top of the 10 full platform.
And it's flexible embedded agent workspace, we're also launching an embedded messaging experience with leading CRM platform in the second quarter. We expect this strategic integration to enable brands to benefit from the power of the life for some platform without changing their preferred desktop experience, we expect similar integrations to rollout in the coming months, adding leverage to our go to.
Market motion.
Given the secular trends driving demand for analytics and automation. We're also focused on addressing what we perceive to be a critical gap in the market and omni conversational analytics platform.
Combination of analytics capabilities across 40 states and the conversational clock, we are providing a unified platform for consumer based conversational analytics across the broad spectrum of channels.
We're already working with a leader in back office automation to unlock process automation for the front office by combining their platform with our rich structured consumer engagement data and analytics.
Turning to full year guidance, while we over performed on revenue in the first quarter much of the over performance was attributable to the timing of revenue.
Between the first and second quarter for this reason, we believe that the guidance range, we provided last quarter still appropriately captures the business and market dynamics visible to us today as a result, we are reaffirming the full year revenue guidance of $544 8 million to $563 3 million or 16% to 20% year over year growth.
As for guidance on full year, adjusted EBITDA consistent with the strategy to deliver profitable growth that we announced last quarter.
We have already taken action to optimize our cost structure and materially improve our profit trajectory.
As a result, we are raising our guidance for adjusted EBITDA to a range of 1 million to $10 million or margin of zero to 2% and we now expect to generate positive free cash flow in the fourth quarter of 2022.
In addition, we are raising our guidance for non-GAAP gross profit margin to a range of 67% from a range of 67% to 70% to a new range of 70% to 72% for the full year.
For the second quarter, our guidance range for revenue is $132 5 million to $135 5 million or 11% to 13% year over year.
Note that this year over year comparison and growth rates for the second quarter is a function of near record growth in the same period last year.
As our full year guidance implies we are expecting accelerating growth in the second half of 2022.
As for adjusted EBITDA in the second quarter, our guidance range was a loss of $9 5 million to a loss of $5.
Or a negative margin of.
7% to negative 4%.
As implied by our full year and second quarter guidance, we expect to generate positive adjusted EBITDA in the third and fourth quarters of 2022.
Finally, consistent with our full year guidance, we are targeting a non-GAAP gross profit margin of 70%, 72% for the second quarter also.
Before taking questions I would like to summarize several strategic themes that drove the first quarter's results and that we expect to continue to shape our performance for the remainder of 2022 and beyond.
We are executing on the profitable growth plan, we announced heading into 2022, we exceeded the high end of our guidance ranges for revenue and adjusted EBITDA in the first quarter and set in motion plans that we expect to drive meaningful improvements to full year adjusted EBITDA gross profit margin and operating expenses.
With an anticipated return to positive free cash flow in the fourth quarter more.
More specifically during the first quarter, we executed on plan to achieve post acquisition cost efficiencies enhanced leverage of our go to market motion and reduced noncore R&D strategically realigning our cost structure, while preserving investment in messaging, AI and analytics and product and platform integrations, which we believe our core drivers of future.
Okay.
With successful post acquisition integrations driving improvements on both sides of the P&L building momentum across our core including rapid expansion and our growing digital health vertical and a new outlet to generate positive free cash flow in the fourth quarter and positive adjusted EBITDA for the full year. We're excited to continue focused execution on our strategy and we're very thankful.
To the broader lypressin team for their agility and commitment to excellence.
And with that operator, we can proceed to Q&A.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Information tone will indicate your line is in the question queue.
You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
To give everyone the opportunity to participate please limit yourself to one question and one follow up.
One moment, please while we poll for questions.
Our first question is from Ryan Macdonald with Needham. Please proceed with your question.
Hi, Rob and John Thanks for taking my question.
Great to see the return of the in person marketing events and some of the I guess good pipeline generation that so far as we think about the remainder of the year what should we expect in terms of marketing events and and you know what what confidence do you have that this can start to sort of rebuild the pipeline of new logo wins.
Rather than just existing expansion. Thanks.
Okay.
The event last year last week.
I was at the event I'm, saying opened it up and it's pretty amazing events.
You know if you've been with him in the past having.
Having our customers up in front and talking to each other and presenting what theyre doing just accelerates, especially the new logo and three quarters of the <unk>.
In the room, where potential new logos.
So I think it'll definitely do what it did in.
In the past or has the potential to do that I think obviously, we're going to have one in London, a few weeks and then from there we'll keep going.
Covid doesn't prevent it but you can see that there when people come out of these conferences.
Have a reassurance that working with us can enable them to do successful things. So I think we'll have the same impact as long as we can roll. These out at one point, we were doing it I think close to one one a month or so.
And in 19, so we were using them as definitely a strategic weapon for go to market and we'd like to return to that but we'll see how it goes with everything with Covid.
Maybe just as a follow up Rob you talked with more detail about the health care opportunity in and being a large vertical for you I mean first on wild health I think are familiar from the website. It looks like they had more of a direct to consumer go to market motion can you talk about the investments you need to make to sort of shift that's been more of a b to b.
Offering over time, and then now what sort of demand are you seeing from some of the large.
Payers that you are currently have as customers for sort of additional opportunity or our selling motion there. Thanks.
Yeah, they're they're already today provide their platform to other medical professionals. So they have a platform that they license it out and so that that platforms, there and that's the platform called clarity. So we know we have this platform that takes the disparate data that comes off of a person's body and we can put all that into a single store.
Or and then create connections before that as the connections between that data and then provide conversational AI consumer experiences. So you know when you get into health care as probably many of you know it's a different vertical than any other vertical we have having the right platform for the consumer data having a way.
To bring that data together and do actionable insights into it.
It is really at the heart of what we're doing there is a direct to consumer play.
As part of that and that's how they've learned.
You know how to build the technology, they have but that platform will be used as a core data platform.
Using machine learning to correlate the data the consumer for the entire health care vertical. So we're very excited about it.
Thank you.
Our next question is from Mark Chapell with loop capital. Please proceed with your question.
Okay.
Robert.
Start off with a question on your international business for a couple of years now you know the company has been trying to raise its overseas growth rate.
With that of the U S. Yet.
International rate continues to lag the U S probably about half and I was just wondering if you could just give us a sense of why you think that is I mean would you attribute this slower growth just due to internal issues or matters or would it be more of a structural issue with with the overseas markets.
I think it's just investments are our largest market is still the north American market and we put a lot into it if we look at even what we're doing in Latam, we fired that market up two and a half years ago, we have about.
And that entire market now we have partners there.
We have a robust group in the U K.
We made an acquisition of you bought seven that gives us feed on feed and on the continent in Germany, France, and then we've got what we have in Australia, Singapore, and Japan, So I, it's really investments.
Into these areas in the North American market continues to be a focal area of ours. When it comes to return on investment we're.
We're seeing a lot of volume in South America, So like Brazil.
The country is on Whatsapp country, and Theres a lot of opportunity there on Whatsapp messenger to power than we were doing that we saw that the.
The use case with the Argentinian government and what we're doing there. So I just think it's a it's about a focus on investment and we're probably going to hold where we are right. Now once can focus in markets that are big we are investing in these areas, but if it's really about the focus and investment.
Okay, Great and just as a follow up with respect to the sales force if I recall correctly, there were 144 quarters.
At the time of the fourth quarter earnings call. How many quota carriers you have today and where do you see that number going bye bye.
It's a similar amount today.
Oh, sorry, Johnny when they hit that but go ahead Rob.
Right. So it's a small amount today, where we are where it will probably add a little bit more quota carrying capacity because we're looking now into next year and what will need.
For next year. So there are more heads that we'll look to add I'm not not a tremendous amount but.
Enough to cover what we think we're going to need to build pipe.
To get to next year's goals. So we're looking at that right now, but it's pretty much steady state where we are.
Okay, great. Thank you.
<unk>.
Thank you. Our next question is from CD Pany Rohit with Mizuho. Please proceed with your question.
Hi, This is <unk> on for Steve.
Great quarter, just wanted to ask a question about what you are looking at in terms of the competitive environment for life, China, especially as you mentioned looking to integrate lives.
Offering into a large the MRC around this quarter, we see how spot watching my child. If you are a small vendors launching well how are you thinking about it.
In an environment.
Thank you.
Yeah, I mean, we've always had two sets of competitors. We have the call center companies that are primarily voice and then they've added chat or messaging and we still have the best asynchronous messaging platform out there.
Very different than a chat platform, but we are competing with them, we're adding voice capabilities now.
Into the platform to take the voice traffic.
It's kind of a direct.
Going up to him directly at our core businesses and then we've got the AI automation companies, which is Google and Amazon.
And we partner with them and sometimes sometimes they are inside of our platform, we deliver their AI by our messaging platform, sometimes it compete with them. So those are really the two steps I think the big change, though is that in 2022, we actually have 2020, we renamed the platform from live engaged the conversational cloud.
And we really envision that this the conversational.
User experiences would be embedded as a platform in many different opportunities even beyond customer care. So I think this year is really about that how do we open the platform up it's sort of a walled garden. It's a it's got a lot of API is it's got a lot of tools, but our ability to open it up and even our tenfold acquisition was part of that.
Because we wanted embedded in many different other systems like we want to be inside of Salesforce, we would like to be inside of service now and we can have our agent console inside that with the tenfold acquisition. So we're at a place in the maturity of the market, where even our customers just want this stuff embedded in other systems beyond our own.
So there is a big focus right now on extending the platform capabilities. So that we go beyond just a vertical play in customer count per se.
Thank you it makes a lot of sense I appreciate it.
Thanks.
Our next question is from some modest sono not with Jefferies. Please proceed with your question.
Hi, This is Mason Marion on for smart Thanks for taking our questions. So if I'm doing my math correctly guidance implies about 20% growth in the second half of the year for total revenues.
Can you just walk us through kind of the key assumptions and factors give you confidence you can reaccelerate off at 12% you got it here at <unk>.
Yes.
Yes, the 12% in the second quarter is really just.
Just a function of hard comparable where we had record near record growth in the second quarter of last year.
Remember, we had sequential improvement from Q1 to Q2, that's roughly in line with past sequential improvement and considering the ramping sales force that we've discussed previously along with other tailwind that we do.
Discussed in the context of voice, we have clear line of sight today to accelerate from where we are in Q2.
Okay understood and you had a nice step up in <unk> this quarter what were the drivers behind this.
Yes continued signing.
Signing of large deals as we described large renewals large hotels and the eight figure health care deal that we had discussed on the last quarter.
Okay. Thank you.
Our next question is from our June Bacci out with William Blair. Please proceed with your question.
Hi, This is Chris on for origin. Thanks for taking my question just wanted to dig in a little more on some of the strategic rationale behind the <unk> health acquisition. So we've touched on a bit of on the product side, where that fits in.
From a personnel standpoint, or you plan to retain the majority of what health personnel and what role can they play.
Person moves into some more technical healthcare domain like precision medicine.
Yeah, I mean, we were keeping the team it's.
It's a little bit more than half technologists data science engineering.
User experience and all of that and then on the other side you've got.
The pure medical professional science.
Youre looking at the data of the consumer.
So we are keeping anywhere it will be you know continue to grow it and it is growing nicely as a group. It really is about health care. When you think about health care and customer care, they're quite similar it's labor intensive.
<unk> talking to humans, all the time to get advice to get answers on their insurance.
And it's all around a person's personal data and so the system.
<unk> care is consumer personal data their health care data and the most important thing. We can do is have a platform to store that data.
And make use of that and then provide these conversational experiences offset so I'm excited about it it's once getting the verticals are already our third largest vertical we got four out of the five largest insurance providers.
Precision medicine, and what does that really mean, all that is about is the ability to take consumer data or.
A person's data and use machine learning to correlate that data and make recommendations.
Our recommendations on that data and that's at the heart of AI.
And so they have data scientist they got a data engineers.
And pure engineers, and that's why it's interesting to bring it into our platform more than interesting because we're an AI company and if you want to go after healthcare, which every AI companies doing that if you know nuance obviously when before they were acquired by Microsoft One of their biggest place was in the health care space and probably make a case that the reason they got acquired by Microsoft with <unk>.
That was for health care not their old legacy customer care business. It's the same here, we just see it as a second big vertical we can go after and it's important for us to have a foundational a group of people here that understand that because you can't wing health care, especially health care.
Great. Thank you that's very helpful. And then John just one quick one for you you mentioned.
Over performance in the first quarter was a bit due to some deals closing a little bit earlier than expected.
A sense of how much of the beat in the first quarter was related to that and was that the right way to characterize it as you know those deals that were just closing a little bit earlier, maybe right.
The border when Q to Q.
Yeah, there's some shifting in deal closures and as I described there's also the last remaining.
Testing revenue between you and flowing into the first quarter and in terms of the total quantity it would make up approximately the upside relative to our guidance.
The timing component.
Great. Thank you.
Our next question is from Jeff Van <unk> with Craig Hallum. Please proceed with your question.
Great couple for me I am I want to go to the revenue growth and in the sort of the timing around the acceleration, but maybe start with the combination of beliefs piece tenfold in wild health about $400 million of incremental spend in terms of acquisitions and as you know getting a little clearer look at 'twenty. Two what do you think that collection of new names is going to add to the revenue picture for the.
Year.
Yeah, Hey, Jeff our expectation for the year is that the the three assets will contribute mid single digit percentage of total revenue in the year.
And that's approximately the same case.
Case for Q1 as well.
Okay, and then on the gross margin that's a very material.
Revision of the gross margin outlook and if I look at what that implies for Cogs for Q2, three four youre looking for not only stable, but it looks like declining just talk about.
What changed from the prior guide to this guide in terms of how you've been thinking about gross margins.
Just the speed with which we are able to execute on optimizing our cost structure.
You know we've had a.
I look at the P&L and Theres, a general tightening of expenditures and consolidation of vendors, we've reduced noncore R&D initiatives and some of the technology spend that also hits Cogs, We've had post acquisition cost synergies.
As well that that hits Cogs, and a consolidation of hosting and infrastructure. So there's a there's a wide range of initiatives that we delivered on in Q1 and that will continue to hold unfold throughout the remainder of the year that are driving those improvements to both.
Gross margin and of course.
No.
Okay.
And then I guess, just two quick loose ends on bookings I know, Rob you've talked until the new reps get productive you're kind of tapped out in terms of bookings capacity in most quarters had been roughly flat recently I just want to confirm this quarter was in that same category roughly flat year over year and and then John just on the on the numbers side stock comp looks like it was up from 22.
Q4 to 32 million in Q1, how should we think about stock stock comp going forward.
Yeah, I'll take both of those just so yeah, approximately I'm sorry, approximately flat in that regard and regarding the increase in stock comp in general usage of shares that's tied primarily to the upfront all stock the upfront component of the White House transaction, most of which were stock based.
Okay alright, thank you.
Thanks, Jeff.
Our next question is from Zach Cummins with B Riley Securities. Please proceed with your question.
Yeah, Hi, good afternoon, Thanks for taking my questions and congrats on a solid quarter I just wanted to start off by asking about the gain share program.
You mentioned in your script that you converted most of those programs to 90% recurring now is that a meaningful change from from what we've seen in the past and does that present any sort of kind of near term impact versus.
It's a long term benefit we could see from from an increasing recurring portion.
Yeah, It's a it's definitely a departure from what we've seen in the past, but in a good way right in the past most of the portfolio was entirely variable revenue, which increased variability of our broader you know now with over 90% of it being recurring and a function of committed multiyear.
On tracks that it gives us a lot more visibility into the business, while not reducing growth potential. There is still variable upside. In addition to the strong base of recurring revenue that we have today. So in that sense, we'd really just improve the overall structure of the gain share business.
Understood and then my second question is really around.
Updates on your go to market strategy, specifically at the mid market I know that was previously expected to be a bigger driver of your returning to more meaningful growth on the new logo side. So any sort of update you can provide on that front would be helpful.
Yeah, we focus I'm sorry.
So I brought it up.
So we.
No.
[laughter] go ahead, Jeff.
We're both.
In a different room exactly okay.
You know clearly you know the physical event that we just held marketing events for the first time since 2019.
As a new and very welcome addition to our go to market strategy, which we expect to drive incremental pipeline and new logos as Rob said, there was a substantial contingent of the audience at the event that were new logos and depending on the the metrics that we see coming off of that event.
It's more going forward, which of course is a tool that we have not been able to deploy in past years. As you know we did invest even though we didn't reach 200 quota carriers, we invest substantially increasing our total quota carrier China.
Last year many of them are ramping as we speak some.
Some of those investments included.
Increasing our total SDR team and they have contributed meaningfully to pipeline generation in the first quarter and in the second the other component here is the leverage we're gaining on our go to market motion through strategic partnerships, we've talked a lot about how tenfold right out of the box can.
Kind of port our core platform into other platforms, which of course is what many customers demand. Today. So these are all relatively new levers for our go to market motion that we're seeing traction with.
Understood well great. Thanks for taking my questions and best of luck with the rest of the quarter.
Thank you.
Thanks.
We have reached the end of our call today I'd like to turn the call to Rob Locascio for closing remarks.
On the Q4 call we are very clear about our goal to deliver sustainable profitable growth and I'm proud of our progress and execution of this to date and the team is laser focused on delivering on those goals over the long term if we step back for a moment.
What has made this company unique is we have the agility, even at our size and maturity to adapt as we see market conditions change.
With the short term view, it's easy to confuse our adaptability and agility is inconsistency, especially during the past two years.
<unk> global macro shifts.
To clarify how these abilities have unlocked shareholder value over the years enabled our evolution of being named recently fast company is number one.
In the world.
Our strategy since the founding of the company has been to power digital conversations at scale and.
In 1997, we invented web chat and progressively evolved it to lead the industry as a feature rich and mission critical platform for the world's leading brands. We delivered another major innovation in 2016 with the creation of our asynchronous messaging system for brands and then in 2018, we moved quickly to capture an even broader and deeper.
Maturity is conversational AI company.
Which we now have over 1 billion conversations per month running on our platform with over 70% of those powered by AI.
So we went from a chat company to an AI company in short order and.
And leading requires an operating model that enables quick access into new markets. The agility opening closed down new initiatives and experience of knowing how to balance growth and profitability.
Today over 95% of our investments are put into customer engagement care and the core platform and we spend around 5% a year on new innovations, which were all intended to leverage the conversational cloud.
So everything that we do connects back to growing conversational usage on our core platform and markets that we believe have high growth potential for most of our 26 year history, we self funded our technology initiatives through our own cash flow and only recently do we raise capital. So we can accelerate the development of our AI capabilities, we dipped.
Floyd that capital into both organic and some strategic acquisitions.
Acquisitions of 10 fold voice base Wild help provide us with core technology to accelerate our leadership in core markets and business processes that would benefit greatly from better engagement automation and insights powered by our AI platform. Our focus will be integrating these acquisitions now versus looking for new M&A opportunities.
<unk>.
Doing big things like winning the number one AI company the world in multiple best places to work recognitions, even against the Googles and Amazons of the world require a strong team and a strong culture to support the 700 talented and dedicated people who are focused on constant improvement and progress with like person.
I want to thank everyone at live person and the leadership team during these unique times.
For staying focused on executing on our short medium and long term goals and for delivering a beat on both the top and bottom line.
During Q1.
And with that thank you everyone and we'll see you on the next call.
Have a great day.
Everyone else has left to come.
This concludes today's conference it looks like no one else is going to join this competition.
Goodbye.
Okay.
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