Q1 2023 LivePerson Inc Earnings Call
[music].
Standing by.
Welcome to life persons first quarter 2000 twenty-three earnings conference call. My name is John 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 team from live 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 ups.
As a reminder, this conference is being recorded.
And I would now turn the conference call over to Mister Chad Cooper Senior Vice President of Investor Investor Relations. Thank you. Please go ahead.
Thank you John .
Good afternoon, everyone and thank you for joining us today on the call with me today, <unk> five persons founder and CEO and John Collins, Chief Financial Officer.
Please note that during today's call, we will make forward looking statements or predictions projections and other statements about future results.
These statements are based on our return expectations and assumptions as of today and are subject 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 and 10 case tend to use in other reports <unk> file from time to time.
With the S. P C.
We assume no obligation to update any forward looking statements.
Also during this call we will discuss non-GAAP financial measures reconciliations adapt to non-GAAP financial measures are included in today's earnings press release, and the supplemental slides where applicable both the press release and supplemental sides, which include highlights of the quarter are available on the Investor Relations section the 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 2023.
As you may be aware of shareholder has announced its intent to nominate candidates for election as directors at the company's twenty-three annual meeting stockholders. The company intends to file a definitive proxy materials related to the 2023 annual meeting in due course stockholders. The company are strongly encouraged to read the company's definitive proxy statement.
And the accompanying proxy card and all other documents filed with the S E C carefully and in their entirety as they contain important information.
Information regarding the identity of the company's participants and their direct or indirect interest by security holdings or otherwise, we'll be set forth in the definitive proxy statement and other materials filed by the company with the S. P C.
Stockholders may obtain copies of these documents for free to read the company's website or through the S. A t's website at S E C Dot Gov.
We will not comment further on this matter on this call. We appreciate you keeping your questions focus on lie person's performance and results.
With that I'll turn the call over to Rob Rob.
Thanks, Chad good afternoon, and thank you for joining us for our first quarter of 2023 earnings call.
<unk> person had a really good quarter generating revenue of 108 million why narrowing our EBITDA loss to 1 million as we continue to execute on our profitability goals total revenue was at the high end of the range.
And adjusted EBITDA was well ahead of the guidance range, we continue progressing on the business initiatives crucial for our next.
Phase of growth.
Including a narrow focus on our b core and right sizing our expenses.
We are reaffirming total revenue adjusted EBITDA guidance for the full year and John will provide more detail on the financial shortly.
But the company our employees and our customers may 2nd.
Was the start of the next leg of our journey with the large for a new generative AI products and platforms.
The changes we implemented over the past five quarters, including removing non-core revenue.
Divesting of our consumer business.
This is a solid operating foundation to support our growth and focus on the opportunity we see.
From the core business.
We've always completed we also completed the consolidation of certain go to market functions, which will meaningfully improve our P&L going for a company is at an inflection point.
With the changes we have implemented we are poised to accelerate possible growth and.
And the periods ahead.
We have set our sights on becoming one of the largest and most effective enterprise a I companies as.
As we have the advantage of our early entrance into a I five years ago, we believe that generative AI will significantly accelerate our existing traction and delivering high quality automation.
And business outcomes to the enterprise.
Most AI models are trained with tens of thousands of AI generated conversations label by employees are freelancers.
Lie person host a billions of conversation.
With our.
Enterprises and consumer conversations.
With the input of 350000 live experts on our platform Cup.
Coupled with 250000, a P I N points that enable not only engagements, but also transactions. This.
This approach is imperative to enable generative AI and the enterprise.
Are generally I advantages are rooted in our precision dataset three.
350000 customer service agents on our platform generating the quality data are secure guard rails, protecting our customers and their data and integrations into our customers back end systems, which allows us to do transactions and outcomes.
Those are you joined our product launch event last week saw that life person could customize Intel responses to suit the situation reflect the branches voice.
With the largest customer <unk> conversation dataset and a very strong platform for handling the data. Additionally, the voice based acquisition has been a key accelerate.
Two driving the efficacy of our data and allowing it to be prepared to scale with the new AI large language models.
Fly person as a global leader in Conversationally I hundreds of the world's leading brands, including HSBC Virgin media <unk> use our conversational clout you.
Your power nearly a billion conversation interactions every month, providing a nuclear reached dataset to build connections that reduced cost increase revenue in or anything but artificial.
We use this dataset and expertise to act as the assembler. So that the responses are grounded and a large language models only use fees to generate high quality responses.
It can't be overstated, how important it is a lie person can leverage the humans in the loop on our platform over 300000 350000 skilled humans are using them a live person platform continually training and refining answers to provide the risk mitigation or guard.
Guard rails necessary to help enterprises safely leverage generative <unk> <unk>.
This ensures that all AI conversations are grounded in facts and relevant to our brands that we reduce what they call hallucinations and I really feel that one day. If we look at the asset value of the company or data set alone has such a tremendous value because of its uniqueness and providing high quality outcomes.
One of the most important aspects of our platform. So that they can find high quality conversation using a large language models and AI actions that generate sales and service outcomes due to our deep integration to the back end systems and our 10 fold acquisition also supports these integrations as a key pillar.
And when we look at working with brands.
Been out with him recently many of them talking about this the biggest part they're looking for is the outcome of the action what we're seeing in most things when it comes to a large language models as we see that the conversation is natural and it gives good responses, but we don't see usually an outcome like a sale or service alcohol and that's where we really shine we have over 250 <unk>.
A P is integrated into our system today.
That provide those outcomes.
So many of you watched on May 2nd you May have also saw that we have plans to delivery AI in a different way in which we call. It an E I a framework.
And the E indicates our commitment to a I that is equal enterprise grade and for everyone.
And unlike what we talk about with open a I just opened this as a general term, we think E. I is much more focused on what our customers want the enterprise it.
It takes the power of generative AI and large language malls, but assembles them with the right data set in training that allows us to deliver outcomes in a safe and responsible way <unk>.
And with the release now Rob voice AI platform, we can integrate all of that into voice platforms, like a genesis or Amazon connect or five nine.
And this will help us accelerate what we set out to do seven years ago. As you know I I fundamentally believe that traditional voice calls with the agents was never the way of the future and now we will accelerate those conversations to get automated a very high rate. It's about 60 billion dollar Tam <unk>.
And what I can see now is I think we can get to a place where 80% of those conversations can get automated that we don't need human beings anymore, taking those calls and I think that'll happen over the next five years.
So we're really excited about the opportunities and obviously all work we did in the last couple of months.
Is really about restructuring the business to be able to focus on this big opportunity and obviously, we had to put a lot of effort into that restructuring, but now we can put 100 per cent of our focus into growth and that's where we are today.
When we look at the quarter, we signed 70 new deals in the court of Queen four seven figure deals 50 expansions renewals 20, new logo deals and when completed the restructuring of our go to market teams. In Q1, we did put a focus on more and higher quality logos then we use.
We do in the mid market and small business, we're shifting in that area because we see with this technology now we can do a lot more transformation. So we're focused on that during the quarter and that'll continue forth into Q2.
We did sign four years seven figure deal with Europe's largest bank and financial services company. Our immediate goal with his past two plan a generative AI strategy that puts L. P. At the core of everything how they engage with their customers and their employees and they serve twenty-three markets today I think what that's what's interesting about this deal. It's our third I believe second or third.
Renewal with them and even the face of everything is going on with generative AI. They wanted to put it on a platform that can allow them to do it in a way that generates the outcome in a safe and secure way and so I think it's just a testament once again of how are we playing in the market with this new shiny object and how do we make it real.
It comes to bringing it to the enterprise. We also signed a seven figure renewal deal with one of the large multinational telecommunications companies in the World. This brand increase customer adoption of messaging with comprehensive use of our AI suite like conversation a builder conversational says and proactive messaging.
We are now going cross care, obviously sales retention complaints, we're expanding our relationship with them once again as we expand using this new technology. We also landed a seven figure renewal deal with a multinational financial services company and the largest bank in Canada.
This brand doubled it's L. P investment in the spring of last year, leveraging our automation services.
And four months or automation already powers, 35% of all their conversations which is climbing deli as we optimize the operation with our dedicated automation team <unk>.
Volume is critical for them, but also the quality of the conversations is what we deliver on a day by day basis, and that's yeah, we beat out Salesforce in Genesis for this engagement pleased what we're doing with them on deployment. So far also important to note. So one of our large fortune 500 health insurance provider.
Set a global goal to ship, 50% of their call volume messaging to achieve further operational efficiencies, providing meaningful upside to our engagement with the client and this is also with we're taking that volume out of one of the traditional Ah contact Center places players we landed seven figure deal with a large health care service provide.
<unk> will begin their journey with web messaging and move quickly into Ivy or deflection and proactive messaging finally, a large retailer in the U K is embark on a five year transformational plan with digital technology, playing at the keep component phase one is to deploy our technology for care focusing on reducing the <unk>.
Contact center costs, and then phase two is to remove one of the you know ticketing platforms and turn that into an asynchronous.
Integration, where we're delivering the large language models and delivering a a better consumer experience than traditional ticketing.
The final restructuring Q1 enabled us to focus on driving profitable growth at a scale that will match the demand now in the market for enterprise AI.
Now that we have that restructuring behind us.
We can return to focusing on all efforts on engaging the growth and bring your new products and platforms to our brands.
We're in a really unique position right now when it comes to generative AI and bringing it to the enterprise because of our history with them and our trust with them and they have used these tools with us. So now they just want to accelerate the use of these technologies when it comes to scaling their operations, especially in the contact center, but it's it's not only limited.
There there's already a bunch of customers are using this for like HR use cases in I T use cases, so I think as we see where we want to go with the with the platform. We will continue to expand into use cases that leverage what we've learned in the contact center to go after other business units.
And with that let me now turn the call over to John who will discuss the financial results John .
Thank you Rob.
The first quarter of 2023 was a transformative alone for that person's financial profile and growth strategy.
We committed last quarter, we completed one of the largest restructuring banks in the company's history, enabling us to enter the second quarter with a profitable run rate and a focused go to market strategy for accelerating growth within the <unk>.
Significantly a restructuring plan did not simply <unk> for the traditional enterprise sales model.
We eliminated redundancies across sales and customer success and combine those rules with products and engineering talent to ensure the needs of our customers can be efficiently solutions by bringing customers cause closer to code, we reduce the meetings ticketing and scoping that were previously necessary.
In addition, we sharpened our focus on <unk> by providing transparency into recurring revenue and winding down non core business lines, including the rest of <unk>.
Which was the business underlying our consumer segment since 2007.
We also strengthened the balance sheet by retiring at a significant discount $157.5 million in principle amount of 239 and convertible notes maturing in the first quarter of 2020 fours.
Discuss our market is evolving rapidly driven in part by the transformative capabilities of January .
The strategy in piano changes that I. Just described I've also enabled us to reallocate resources in this direction to significantly enhance our broader platform and immediately deliver better business outcomes for our customers with the generally very products, we launched last week the rate at which we can automate the consumer experience and reduce costs for our branch in both voice and messaging.
Channels is incredibly exciting.
Turning to first quarter and Ah results in in the first quarter, we generate revenue of $107 79, which was within our guidance range of 106 nine 209 months.
Never discussed last four and and Roger marks we divested Cassandra.
The business underlying the consumer segment on March 20th which.
Which means we did not recognize a full quarter of revenue for it to stop as contemplated in our prior guidance had we recognize a full quarter of December revenue or total revenue in the first quarter would have been 199 at the high end, regardless range given the <unk>. The divestiture, we will discuss expectations for the year on a normalized spacious but is without the.
Impact from Cassandra.
Excluding revenue from cause, but we recognize 100.5 million consistent with the high end of our normal I was studying French which would have been 98.42 100.4 million <unk> recurring revenue was approximately 82 per cent of total revenue in the first quarter and also consistent with the high end of our expectations.
The improvement in revenue was primarily due to higher <unk> professional services I'm certain one time contributions.
Adjusted EBITDA was the loss of $1.3 million, which was better than are expected loss of 8 million to 6 million.
In addition to hardly to be revenue the Overperformance and adjusted EBITDA was driven in part by the timing of expenses for sales and marketing and cloud of migration, which we do expect to incur in future quarters. There was also driven in part by solid execution of a restructuring plan.
Before turning to our standard reporting segments for the first quarter note that these segments still reflect declining revenue contributions from non core business loans with.
With a b b core revenue and expense trough in the first quarter and a restructuring plan fully executed we expect an inflection point in the second quarter sequential improvement for the <unk> for the remainder of the year.
With that said within total revenue for the first quarter to be to be poor recurring revenue component of hosted declined approximately 4% year over year <unk>.
<unk> for the total will be to be segment decline 17 per cent in year over year on revenue from hosted software declined 25 per cent.
As discussed last order the primary drivers of these declines are non core business line, including COVID-19 testing danger labor and pandemic driven venture variable revenue.
Professional services revenue grew 38 per cent you over your driven in part by the diagnostics project for the JV that we discussed last quarter.
Finally, the consumer segment declined 21 per cent how.
How do we recognize a full quarter of revenue from Cassandra revenue for the consumer segment, what a decline 6.8% year over year.
Given the divestiture, we do not expect to report on the consumer segment in future quarters again, we will discuss expectations for the year on a normal basis without the impact from concern about in the first quarter note that a full reconciliation is provided in the press release.
From a geographic perspective, you asked revenue.
Declined.
You must revenue declined 21% year over year and international Rosemary decline, 9% year over year again, the primary drivers for these declines are the non core business lines that we were winding down <unk>.
Net revenue retention was below our target range of 105 per cent to 115 per cent due in part to our focus on restructuring the first quarter and increase <unk> N. R. S M B and NMB market segment.
Again, we expect sequential improvement in the second quarter and going forward.
R P a decrease 18%.
You have a year to $368 million due primarily to the wind down of non corpus lines, including professional services for security.
Average revenue per customer was 665, K up three per cent year over year.
Note that this metric is based on total revenue. So the sequential decline from last quarter is again attributable to the wind down of non core business lines, including to ensure labor and professional services for the J D.
In terms of guidance, we achieved our expectations for the first quarter and we remain on target for the year give.
Given our current visibility into the macro environment, we are reaffirming pull your revenue guidance range.
Inclusive of Casaba revenue the guidance range for the four year is $394 million for an eight or a decline of 23 per cent to 21% year over year note that this growth.
And compares to a full year for samba revenue last year, However, normalizing for samba in both periods removing its impact Ah revenue guidance range is 387, nine 401 million or a decline of 90 per cent to 60% year over year. We expect you to be core recurring revenue to be approximately 86 per cent.
To 87% of total revenue for the full year.
For full year adjusted EBITDA, we are reaffirming our previous guidance range of 15 million to 32 nine.
As a reminder, part of the overall performance in the first quarter was due to the timing of certain expenses that we expect to recognize later in the year.
Additionally, it is not necessary to normalize our adjusted EBITDA arrange for the impact of <unk> because no material contribution was originally expected.
As for the second quarter or guidance range for revenue is 90, 592, $99 or a decline of 23 per cent to 20% year over year note that the recurring revenue component of total revenue.
In the second quarter is expected to be approximately 87%. This implies a 2% positive growth sequentially from the first quarter.
As a reminder of sequential decline in total revenue from the first order is due primarily to professional services revenue for the J D. But is not expected to continue in addition to lower danger Labour revenue.
As for adjusted EBITDA in the second quarter or guidance range is 39279 or margin of three to seven per cent.
Once again with restructuring behind US we have reached an inflection point in the second quarter and expect sequential improvement and profitability for the remainder of the year.
Finally, what health <unk>.
Growth right from the first quarter was consistent with the expectations. We set last four for its core revenue to double for the full year of 2023.
Before taking questions I'd like to emphasize several key themes solid execution of the restructuring plan that we discussed last quarter has enabled us to reach an inflection point for the <unk> revenue and profitability. After troughing in the first quarter, we expect profitable growth in the second quarter and sequential improvement going forward.
Line of sight to profitable growth is a function of three primary factors first Ah narrowed focus on our <unk>, coupled with rapidly growing enterprise demand for AI driven transformation.
Second and more efficient and capable sales and marketing organization with integrated product and engineering support to deliver hands on air <unk> expertise to our customers.
And third generative AI enhancements across the platform, including in both voice and mastering channels with the necessary guard rails back and integration to deliver <unk> business all comes with enterprise today.
And with that operator, I'll pass it back to you for questions.
Thank you Sir at this time, we will be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation Tamil indicate that you're lying as in the question queue. You May press start to if you would like to remove your question from the Q, Frank participants using speaker equipment and may be necessary to pick up your handset before pressing.
Darkies and as a reminder, in the interest of time, we ask that you. Please limit yourself to one question and one follow up with a thank you.
And our first question comes from the line of C. D. Pontiac dry heat with Michelle Huh. Please proceed with your question.
Hey, this is actually down on for city can you just provide some additional color on the magnitude of the expense timing impacting Q1, and perhaps what that relates to.
Yeah. The the restructuring event that occurred in the first quarter was the largest over the course of the last 12 months.
You May I know, we've been rationalizing our cost structure since we entered 2022.
And that culminated really in the first quarter.
The key areas of consolidation and expense reduction we're in our go to market organization and in part our technology organization as it relates to areas of the platform that we no longer need to support the effective.
Run right for us.
And the second quarter again, as a result of that restructuring flipped us from a lost to a gang going forward.
Gotcha, and I guess just on the.
Go to market.
<unk> is it possible to find more detail on that and maybe your sales capacity, you're going forward and and if that'll allow you know reaccelerate revenue growth.
This transition period.
Yeah, I mean, I think Bradley.
Rob.
No go ahead Sir.
Broadly the restructuring.
Allowed us to right side of the organization and we have.
Come away with a more efficient.
Sales and marketing organization coupled with.
Our product and engineering resources that allow us to be more responsive to the demands of our base today and I think as we look forward will hire we'll hire according to the the rate at which we continue to build Python and in response to demand. So I think we're well positioned today to be responsive.
Yeah, and we also because of the nature of where the businesses and and our focus on the acceleration day I. Obviously, we did messaging that five years ago, we added the automation, but now it's it's all I I and I can double click on what that really means is for us the company, but we did a heavy restructure around the customer successful ward.
We ended up creating a new.
New word.
It's called L. P. One.
And it's it's led by product.
And engineering and so when the past we have more relationship managers, our customers want experts around AI.
And automation. So we did this big restructuring and removed a lot of those pieces and we took.
Product heads.
You know really key to the company, but now they're running customer facing operations, then work pairing that with client partners that are really instrumental in driving revenue. So I think we're gonna have a much better you know resolved in driving usage on the platform at the bottom line is if you're going to show up as an AI company you Gotta show up with product in engineering.
Folks verses the.
The traditional customer successful.
Okay. Thank you.
Thank you.
And the next question comes from the line of Peter Levine with Evercore ISI. Please proceed with your question.
Hey, this is <unk> Peter Levine. Thanks, so much for taking my question.
I wanted to ask how you might be thinking about capital allocation for the remainder of the 2024 convertible notes as well as the longer term notes you have thanks, so much.
Sure again, we retired all about about 73 million of the 2024 notes.
We as we discussed in the prepared remarks, we expect to continue to accelerate profitability going forward and be catch the positive exiting the year. So the balance of cash that we expect to engineer with will be more than adequate to both satisfy the remaining.
73 million and and notes and of course have ample operating capital to run the business.
Okay. That's all I needed you have <unk>.
Okay.
No. That's thank you so much.
And the next question comes from the line of Jeff Van re with Craig Hallum Capital. Please proceed with your question.
Great. So a couple of questions for me I guess, Rob one of the questions I get quite often I know you're focusing more on the core businesses and trying to get away from distractions and one of the businesses that I I think most people I speak with don't find a tight fit with his wild health. So when you look at that business. You know different end users different sales model et cetera, I didn't hear a lot in the prepared.
Ripped here this quarter, but just talked about your thinking and how that remains a core product given the differences between that and say the core messaging <unk> customer care offering.
Yeah, I mean, we have a large group of health care companies and our core and if you go back to what that is it's a it's a platform play and as a matter of fact, they're working on some larger deals with health care providers to use that platform to drive scale in health care outcomes. So it was.
Always looked at is like you know if you Wanna go into health care, there's a lot of expertise you need in that area, especially around regulatory and things, but they felt pretty tremendous platform <unk>.
And and now we've incorporated all the large language models. So we can scale you know have a doctor or health care coach Ken Service, you know customers at a different scale the normal so for us. It's obviously, it's growing it's growing very very large health care and AI. If you look at any other company out.
There on the tech side, they've got an investment in health care, almost all of them and and it's important as an investment and I think in the future, we'll see some pretty massive returns with that part, but once again, it's it's Ah we should look at as a vertical <unk> play today I think later on the year will be able to give.
Some perspective on doing deals with these larger health care providers, which I think will allow the shareholders to get a better sense of how it plays until overall strategy.
Mhm, Okay, and then on the core business around the Corby to be understanding you're you're really lenient on the AI side, but until that takes hold in is if I look at it as I look at like the Q1 performance talk about the competitive landscape for the core beta be messaging offering you know you were early to get there with automations it looks like the.
A I slash automation rates were relatively flap this quarter that for awhile. It felt like you had clear sorta best in class platform, but the momentum on the bookie side revenue growth I think he gave the enter our was below the 105 to 115. This quarter just talk more in detail about what's going on.
[noise] with that are you winning you're sure you're just not getting enough skills why is that business not growing more.
I think it comes down to our focus you know if I could go back in.
Change things, obviously, the things, we our customers got us into and we unwound and the restructurings that we did to get profitable. It's a focus you know to take out you know the the amount of expenses, we took out in 12 months to be here and the team did a great job at that and that wasn't easy.
Obviously the focus now is gross again, we're still sang large logos of large banks and all of that we sign renewals with some of the largest banks in the world even though we're in the middle of January They I and you know, it's because they trust us. So I think what we need to just show the world is that we'll get back to growth but.
We shouldn't marginalize all the efforts of took to restructure the business over the last 12 months and the focus it took to do that and to execute on that and so obviously the court is going forward will be the judgment you know.
How we can execute and grow the company, but I think we're in the right place and that we still have the gold standard of that platform and now you know, adding in all that technology, we just launch which is G. A.
Will help us sort of grow so that that's our focus now that's all one focus we don't have to worry about restructuring anything anymore. We're done with that that's behind us.
Okay, Jeff I, just want to add to the N R. A comment that while we're below the range. The primary reason for that was increased detrition down market and small business in mid market segments in particular, as we restructured and focused on the demands of enterprise and of course made it through the.
Distraction of the restructuring and we think going forward that the Dow market that that lower end of the market would be better served by the enhanced product usability and platform self service that you may have seen we launched last week. So we think there's there's upside there as we move forward.
Downmarket and of course within the core of enterprise It remains strong.
Uh-huh given the scale really lies in the enterprise's would you expect the automation rate the percent of messages being automated too Roger how should we think about that number going forward.
Yeah, that's that's gonna be yeah, that's the victims cause no more bought building like as of last week we.
We don't have to bill box anymore, and the ability to automate conversations, especially the long tail.
Is is is there I think I gave an example, maybe on the last call I did but we had we we looked at all the airlines that we have a we start will use the large language models to look at the conversations that we're happy with agents I believe not they're a bunch of conversation about bringing like an iguana on a plane now you would never build a bot around the intent iguana, but.
On our airlines people asking can I bring an iguana and and we can handle that now with the models because it basically is just looking at the dataset. So the rate of automation is gonna really increase the second part of that is that the actions that we can do on the platform. The automation is are only as good as they do actions and we've got all these.
Integrations already so you know these should be done at a very high rate, especially on the voice side I really I want to finish what we set out to do which is get rid of the traditional voice and and with our voice AI launch that's what's four will be focused on.
[noise], Okay and the last one just John I think you mentioned you're covered a lot of ground there really quickly, but I think you mentioned there were some one time items that affected revenues and and I think you were talking about <unk>.
Yeah in general if those are pretty small the largest contribution for the first quarter was really corby to be professional services being up.
And then in terms of them one time items, there's some some ketchup normal too big enterprise deals.
That we also recognized in the corner.
Ah got it okay. Thanks for taking my question.
And as a reminder, if you would like to ask a question. Please press star one on the telephone keypad, a confirmation tome will indicate that your line is in the queue. You may press start to to remove any question from the queue for.
Using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
And our next question comes from the line of Zac Cummins with be Riley. Please proceed with your question.
Hi, good afternoon. Thanks for taking my questions I'm, John could you talk a little bit more about the adjusted EBITDA upside you in queue and it sounds like there were maybe some cough syrup that were delayed versus when you're previously expecting.
Sure is.
In the first quarter, we had previously expected more marketing expense for example, which ended up not being necessary for variety of reasons that we fully expect to deploy later in the year. That's a significant component and then as we continue what is a complex migration too.
The cloud there is expense that we expect to it later in the year as well that did not occur in the first score. So those are the two primary drivers.
Got it I understood and and Rob just from your your launch event of all your new a isolation it sounds like some pretty interesting opportunities. If you can expand into a jar and itu's cases. It sounds like you have a few customers that have gone down that route can you give any sort of early feedback that you've gotten from customers at a U.
Expand beyond just customer my current with with your AI platform.
Yeah, one of the the there's two parts to our platform one is called <unk> and the other one's obviously, the the large language models and the ability to generate the outcomes, but we now have the ability to put in my P. D. F documents knowledge base. We've had this previously but we enhanced it for the models. So you can take in all that data it could.
Be an employee handbook it can be all of that and you can put it into our platform and then instantly he gets prepared for the models and I.
When you look at all the tooling that you have to do to make Geraghty I work, it's it's real tooling and especially around the day decided if you just put the data in and the data can be formatted in a way that the amount of one understand it. So we built the process for the model to understand that so it opens up those use cases, and we already have a handful of large customers who use it for that <unk> built onto my auto.
Nations on that.
But I think the power and and if you were watching the the event last week the journey to be an AI company from a Conversationally I company is is one and the first thing we're gonna release in about eight weeks from now is a new interface to the dataset.
And this will allow anyone in the company to ask questions of the conversational data that we store so imagine a person in marketing can say like tell me why people are not happy with this <unk> today tell me like what's the best marketing campaign that I could build to sell this type of product <unk>.
And that access to that data and then what we're hearing is our customers want to put more data inside there maybe medallions surveys and other things this kind of shifts us into a different place when it comes to art to doing AI and the enterprise, but that that can be in the <unk> to be in the I T helped aside so obviously.
We have a focus on continuing down the path of customer engagement, but <unk>.
That dataset is important and the ability to put more data into the platform to go out there use cases also important so that's what they can do today and that that's what's exciting about our strategy and what I think is very different from what people are trying to do out there.
Understood well, thanks for taking my questions and best of luck with the rest of the corner.
Alright, thank you.
And the next question comes from the line of origin about here with William Blair. At please proceed with your question.
I think Chris on for hours and thanks again for taking my question. The first one for me wanted to get your take on the evolution of the competitive landscape going forward with generative AI, becoming more and more common.
How to think about that person's source of compatible.
A competitive advantage as always make interacting with businesses through chat natural language more accessible than ever.
Yeah I I. So if you look at how it's I think it's gonna play out to pick. The next couple of months and then years, what the enterprise's looking for right now is safety and security and.
And so they want to start using this stuff tomorrow, what they needed on platforms that will allow them to adhere to the the ideas of of data sovereignty and security around that we we've already provided that so for us it's kind of like one click and we're guaranteeing that using these models are are <unk> are going to be done.
In a way that adheres to the principles of the of the enterprise, especially around data.
So that that's that's that's the one part the the second part is what is the enterprise a I company and what is it going to look like and.
Someone is and I think that play is is interesting which is that there'll be these desktops in the entire organization and they're gonna use this technology to generate business outcomes.
What I believe when would I believe could win the day and this is our strategy is that it starts with the data sent.
Opening I gives you the data set of the Internet and that's there.
But the most valuable data said to the enterprise is the customers and the customer conversations we go to work to understand our customers better and so what I see in the upcoming years is the dataset.
And if you want a judge who could potentially win this horse race, it's who's got the best dataset to generate a business outcome.
And so for US we're sitting on one of the best data sets you can ask the customer's questions. It's it's interesting like a real time, you say like ask the customers what do you want from me.
And I think that has a power to it and it's unique to us. So there's other that you have salesforce out there now obviously you know using it what they're doing with their data set which is CRM data. They have a lot of that they do have some customer care, they're very limited conversational data like we do.
They're a voice companies out there and and I think they're the most susceptible for change because they have a voice data some of its transcript it but a lot of it just remains in the in the voice voice files. So I think you Gotta think about the language models become not commoditize both of <unk>, we'll have our own.
Soon we're using others I think the brands will create their own depending on the dataset and then the datasets themselves become the competitive weapon.
To being pervasive so I think over the next five years or so the winters could be these people have these data sets and I also think.
The acquisition model there may be M&A in the future around datasets, where do we get our hands on better data sets to generate those bruises outcomes and so that that's kind of how I see it playing out.
Yeah, Chris I, just wanted to underscore a key point that Rob married which is that today. There's billions of dollars spent by Orange fries brands on agents to feel voice calls and that's often the case because the the intense the the desire to the consumer.
That ticket resolved with the brand is in the long tail not easily automated on yesterday's technology, that's no longer the case and we're very well positioned given our platform that's heavily integrated into the back end systems of the branch today to deploy Jenna.
To drive business outcomes today to to kind of transform the cost structure that our brains.
Currently have to run the.
Service centers, and and even to provide support them on sale. So the the the positioning we have at this moment in time, if the data is Rob said, but also the the integrations and the processes that we've been refining for decades to help brands.
Cos out of their contact centres and and that's something that we can deploy him have deployed alrighty.
Last week.
Got it.
And then just one other thing I want to touch on the <unk> topic.
Where do you expect that you would see kind of a a short term tailwind show up in the business and your last quarter, you talked a little bit about uptake in demo volume just kind of as customer attention has shifted towards things like open a I have you seen that translate to increase dealflo or sustained my finger.
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Yeah. The the the the short term wins I see is that obviously the the the the the one we're turning on like immediately is what we call you know the the make any age is more efficient. So the the agents don't have to type anymore and that's that's actually the easiest safest way to deploy this technology and we're opening that up that's on the platform now and.
Every customer can can do that also there's like summarization of conversations normally it's a manual process. So now it automatically happens so that the agent spend 45 minutes to an hour a day <unk>.
Basically summarizing the conversations they had we already have this technology, but it's enhanced with the large islands models. So that that's the easiest one second one is automating the conversations fully and so that's the next part and that's also there's some low hanging fruit in there and then I actually think the the <unk>.
Greatest low hanging fruit, which will be out in a couple of weeks is this concept that more than it is the platform. We're putting out we called dollar for business, which is.
The ability for the organization to ask questions of their data and.
And that's that's a a safe thing.
Thing to do like you can just ask questions and get outcomes and a marketer could ask questions of their conversational data to understand how to market better and that's that's an easy no brainer. So I think there's some sort of base hits that we can get ultimately the the home run is we automate the.
The contact center like an 80% volume in his nose is only 20 per cent of that's with humans are humans in the loop and then the other part is we become very pervasive in providing the generative AI platform that every organization can use to do business outcomes like H R and all that that that's where that's where we're playing for right.
Now.
Mmk and at the end of our call today, and I was out and the call back over to Rob the Casio for any closing remarks.
Yeah. So you know obviously I started a company in 95 and 97 invented chat and.
You know obviously, it's <unk> E P T N and everything is around this interface and the vision of the company has always been around that these conversational interfaces with power commerce care and everything out some we've been singularly focused on it.
For many years or.
Time to sort of calm and I I know, we're all trying to figure out we we I wish we were here without all the restructuring.
And that creates a certain noise and uncertainty, but we're here and we bet to be here and there's probably a handful of us in the world. When you think about is probably 10 of us in the world that actually can say that they can deliver this technology in this.
This revolution into brands <unk>.
And like I said in one way I wish we didn't have to do the restructuring and a lot of companies went through this because it would be a cleaner story, but we're here and we're here with one of the best products in the world and platforms. We've always been a leader at that so right. Now you know when I think about our focus it's really into areas. One is we need to finish up.
What we started I talked about killing the 800 number and all of that and we need to complete that mission and we will now with our voice say I products and the second is we need to take this platform and use our dataset as a way to leverage and apply it to other business areas like marketing and sales even.
H R. So that that's what we're focused on as a company.
The large language models are generally I just gives us an accelerant, but we always had the vision.
We're not chasing something right now we were one of the pioneers and how this could work. So are shareholders I'm excited for the next couple of quarters and how our company will get focus back on growth how will get focused on continuing on our missions of providing conversation Y AI and then generate.
Hi to the enterprise and ultimately I think that leads us to being you know the largest enterprise AI company in the world.
And that's the bet, we were making right now so.
Thank you for the support and we'll see you next quarter. Thank you operator.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.
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