Q1 2024 LivePerson Inc Earnings Call

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Judith Van Rieter: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to LivePerson's first quarter 2024 earnings conference call. My name is Judith Van Rieter, and I will be your conference operator. At this time, all participants are in listen-only mode. After the prepared remarks, the management team from LivePerson 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 call is being recorded. I would now like to turn the conference call over to Jon Perachio, Senior Director, Investor Relations. Please go ahead.

Good afternoon, ladies and gentlemen, and thank you for standing by.

Speaker Change: Welcome to nice Christmas fiscal 'twenty 'twenty four earnings conference call.

Jon Perachio: Thank you, Judith. Joining me on today's call is John Sabino, CEO, and John Collins, CFO, and COO. Please note that during today's call, we will make four forward-looking statements, which are predictions, projections, and other statements about future results. These statements are based on our current expectations and assumptions as of today, May 8, 2024, and are subject to risk and uncertainty. Actual results may differ materially due to various factors, including those described in today's earnings press release and in the comments made during this conference call, as well as in 10-Ks, 10-Qs, and other reports we file with the SEC.

Speaker Change: My name is students don't read it.

Jon Perachio: I'll be your conference operator.

Jon Perachio: At this time, all participants are in listen only mode.

Jon Perachio: After the prepared remarks, the management team from lock person will conduct a question and answer session and conference participants will be given instructions at that time.

Jon Perachio: To keep everyone the opportunity to participate.

Speaker Change: Please limit yourself to one question and one follow up.

Jon Perachio: As a reminder, this conference is being recorded.

Speaker Change: I would now like to turn the conference call over to John Iraqia Senior.

Jon Perachio: Senior to make too.

Speaker Change: Investor Relations. Please go ahead.

Speaker Change: Thank you Judith joining me on today's call is John could be announced CEO and John <unk> CFO and CLO.

Jon Perachio: Please note that during today's call, we will make forward looking statements, which are predictions projections and other statements about future results.

Jon Perachio: These statements are based on our current expectations and assumptions as of today may eight 2024 and are subject to risks and uncertainties.

Jon Perachio: Actual results may differ materially due to various factors, including those described in today's earnings press release and.

Jon Perachio: And in the comments made during this conference call.

Jon Perachio: As well as in 10, Ks 10, Qs and other reports.

Jon Perachio: Filed with the SEC.

Jon Perachio: We assume no obligation to update any forward-looking statements. Also, during this call, we'll discuss certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release. Both the press release and the supplemental slides, which include highlights for the quarter, are available on the Investor Relations section of LivePerson's website at ir.liveperson.com. With that, I'll turn the call over to LivePerson CEO, John Sabino.

Jon Perachio: We assume no obligation to update any forward looking statements.

John Sabino: Also during this call well discuss certain non-GAAP financial measures a reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release.

John Sabino: Both the press release and the supplemental slides, which include highlights for the quarter are available on the Investor Relations section of life persons website IR person back home.

Jon Perachio: With that I'll turn the call over to Leigh Pressman CEO Jon Zaffino.

John Sabino: Thank you, John, and thank you all for joining us today. Before providing a detailed update on the business and our strategy, let me briefly preview where we are in our transformation journey and what we have delivered since the last time we spoke. One of my first priorities in coming into the company was to establish a clear and transparent plan to align our efforts and people with the key focus areas necessary to improve our business performance and deliver profitable growth.

John Sabino: Thank you John and thank you all for joining us today.

John Sabino: Before providing a detailed update on the business and our strategy. Let me briefly preview where we are in our transformation journey and what we have delivered since the last time we spoke.

John Sabino: One of my first priorities and coming into the company was to establish a clear transparent plan to align our efforts in people with the key focus areas necessary to improve our business performance and deliver profitable growth.

John Sabino: We formalized and launched this plan in February and are measuring and tracking how we are progressing with our plan across the business. Another priority was strengthening our capital structure. As we discussed during our last call, giving the market and our customers confidence that LivePerson is a long-term partner by proactively addressing our debt profile remains a top priority for the company. In our first quarter, we were paid in full the outstanding $72.5 million principal amount of the 2024 net.

John Sabino: We formalized and launched as planned in February and are measuring and tracking how we are progressing with our plan across the business.

John Sabino: Another priority was striking our capital structure.

John Sabino: We got discussed during our last call, giving the market and our customers confidence that life person is a long term partner by proactively addressing our debt profile remains a top priority for the company.

John Sabino: And our first quarter, we repaid in full the outstanding $72 5 million principal amount of the 2024 notes and.

John Sabino: In addition, we have spent a great deal of time on the topic of the 2026 notes in recent weeks and currently expect to have an update with respect to these efforts this month. The last priority I will briefly discuss is how we are improving our go-to-market. I've now met with well over 100 customers, having discussions consistent with what I shared with you on our last call. Customers continue to value our products and are excited to partner with us in their digital transformation.

John Sabino: In addition, we have spent a great deal of time on the topic of the 'twenty 'twenty six notes in recent weeks.

John Sabino: And currently expect that an update with respect to these efforts this month.

John Sabino: The last priority I will briefly discuss is how we are improving our go to market capabilities.

John Sabino: I've now met with well over 100 customers, having discussions consistent with what I shared with you on our last call.

John Sabino: Customers continue to value our products and are excited to partner with us in their digital transformation. Additionally.

John Sabino: Additionally, I have learned that there are a number of customers interested in partnering with LivePerson in a bundled offering with voice. And to that end, we will soon be announcing a strategic partnership with our major global CCAS player, which I will detail later in this call. Lastly, we continue to revamp our go-to-market efforts by instituting processes that provide greater visibility into our customers' health and adoption. We're rolling out new pricing and packaging, and we've hired a new chief revenue officer.

John Sabino: Additionally, I have learned that there are a number of customers interested in partnering with live person and a bundled offering with voice and to that end. We will soon be announcing a strategic partnership with a major global <unk> player that I will detail later on this call.

John Sabino: Lastly, we continue to revamp our go to market motions by instituting processes that provide greater visibility into our customers helping adoption.

John Sabino: We're rolling out new pricing and packaging and we've hired a new chief revenue officer.

John Sabino: So now that I've shared a quick summary of our progress since the last call, let me update you briefly on our first quarter results. Revenue in the first quarter was $85.1 million, above the high end of our guidance range, driven by successful efforts to retain at-risk customers during the quarter.

John Sabino: So now that I've shared a quick summary of our progress since the last call. Let me update you briefly on our first quarter results.

John Sabino: Revenue in the first quarter was $85 1 million above the high end of our guidance range driven by successful efforts to retain at risk customers during the quarter.

John Sabino: And adjusted EBITDA was $0.5 million above the midpoint of our guidance range as a result of the actions the company has already taken to reduce costs. John Collins will provide more detail on financial results in his section, but I wanted to briefly highlight that we achieved what we set out to do this quarter. Additionally, the cost actions taken in the first quarter allow us to maintain our full-year guidance.

John Sabino: And adjusted EBITDA was quite 5 million above the midpoint of our guidance range as a result of the actions the company has already taken to reduce costs.

John Sabino: Carlos will provide more detail on our financial results in his section, but I wanted to briefly highlight that we achieved what we set out to do this quarter.

John Sabino: Additionally, the cost actions taken in the first quarter allow us to maintain our full year guidance.

John Sabino: These financial results and the maintenance of our four-year guidance represent an important first step in the execution of our strategy. Now I'd like to take some time and detail the three key focused areas of our transformation strategy that were laid out in our fourth quarter call. First, let me discuss our capital structure in combination with the cost reductions made in the court. As discussed earlier, in the first quarter, we completed the first step in improving our capital structure by repaying the outstanding $72.5 million principal amount of the 2024 notes.

John Sabino: These financial results and the maintenance of our full year guidance, representing an important first step in the execution of our strategy.

John Sabino: Now I would like to take some time and detailed the three key focused areas of our transformation strategy that I laid out in our fourth quarter call.

John Sabino: First let me discuss our capital structure in combination with the cost reductions made in the quarter.

John Sabino: As discussed earlier in the first quarter, we completed the first step in improving our capital structure.

John Sabino: Paying the outstanding $72 5 million principal amount of the 2024 notes.

John Sabino: Going forward, we are actively focused on addressing the 2026 notes as a pivotal part of strengthening our capital structure. And we currently expect to have an update on that front shortly. I want to be clear that giving the market and our customers confidence in LivePerson as a long-term partner remains a top priority to support our return to growth and delivery of shareholder value. In addition to these efforts made on our debt, an update we hope to give you soon, we have continued to lower our cost structure to further improve the financial profile of our company. Driven largely by a reduction in force, over $30 million of in-year costs were removed from the business.

John Sabino: Going forward, we are actively focused on addressing the 2026 nodes as a pivotal part of striking our capital structure and we currently expect to have an update on that front shortly.

John Sabino: I want to be clear like giving the market and our customers' confidence in my person is.

John Sabino: Long term partner remains a top priority to support our return to growth and delivery of shareholder value.

John Sabino: In addition to these outlets made on our debt and update we hope to give you said.

John Sabino: We have continued to lower our cost structure to further improve the financial profile of our company.

John Sabino: Driven largely largely by a reduction in force over $30 million of in your costs were removed from the business.

John Sabino: These sustainable cost actions still allow us to execute our strategy, continue to innovate, and improve our financials with the right size cost structure for our company. Second, let me update you on our go-to market. On our fourth quarter call, I discussed the need to bring in new talent with experience in managing these types of turnarounds at scale and the appointment of a new chief customer officer and a VP of sales operations.

John Sabino: These sustainable cost actions still allow us to execute our strategy continue to innovate and while improving our financials with a right sized cost structure for our company.

John Sabino: Second let me update you on our go to market motion.

John Sabino: Fourth quarter call I discussed the need to bring in new talent with experience in managing these types of turnarounds at scale and the appointment of a new chief customer officer, and a VP of sales operations.

John Sabino: Today I'm excited to communicate that we have hired a new Chief Revenue Officer, experienced in scaling commercial capabilities and engaging with larger-size partners. We will formally announce this person later in the month.

John Sabino: I am excited to communicate that we have hired a new chief revenue officer experience and scaling commercial capabilities and.

John Sabino: And engaging with larger size partners in Hyperscale.

John Sabino: He formally announced we will formally announce this person later on them up.

John Sabino: With our new Chief Revenue Officer on board, we will have a streamlined go-to-market that puts our commercial organization in a position to execute both on expansion and retention while also focusing on generating new business. Now for a quick update. I want to reiterate that it will take time to see improvement in results, but I want to be clear that operational improvements have already been made. We now evaluate our customer health at a more specific and tactical level than we have in the past, allowing us to better serve our customers and retain them.

John Sabino: With our new Chief revenue Officer onboard we will have a streamlined go to market team that puts our commercial organization in a position to execute bolt on expansion and retention.

John Sabino: Also focusing on generating new business.

John Sabino: Now for a quick update on the launch.

John Sabino: Want to reiterate that it will take time to see improvement in results, but I want to be clear that operational improvements have already been made.

John Sabino: We now evaluate our customer health and.

John Sabino: Any more specific and tactical level than we have in the past, allowing us to better serve our customers and retain them.

John Sabino: In addition, we have implemented rigorous structure and forecasting into our customer success organization, refocused resources on our most impactful accounts, and launched success planning to create more value and better outcomes for customers. We are already seeing improvements in retention and expect them to improve in subsequent quarters.

John Sabino: In addition, we have implemented rigorous structure and forecasting into our customer success organization refocused resources onto our most impactful accounts and launch success planning to create more value and better outcomes for customers.

John Sabino: We are already seeing improvements in retention and expect them to improve in subsequent quarters.

John Sabino: John Collins will provide more detail on this later in the call. Next, I would like to discuss the pricing impact. Last quarter, I shared that we would be introducing new pricing and packaging strategies to make it easier for brands to purchase our products. I am happy to update you that we have begun rolling out this new strategy as a pilot. With more than 30 accounts tagged to participate, an active discussion is already underway with several customers and prospects.

John Sabino: John Collins will provide more detail on this later in the call.

John Sabino: Next I would like to discuss pricing and packaging last quarter I shared we would be introducing new pricing and packaging strategies to make it easier for brands to purchase our products.

John Sabino: I am happy to update that we have begun rolling out this new strategy as a pilot.

John Sabino: With more than 30 accounts tags to participate and after discussions already underway with several customers and prospects.

John Sabino: LivePerson's new pricing and packaging is extremely simple and streamlined, with good, better, and best packages that showcase our innovation. Services will be bundled into the price, along with key features, analytics, and integration. Unlike most other vendors, LivePerson will only have two pricing meters, with almost no add-on costs, so that contracts will be easy to scope with no surprises.

John Sabino: Five persons new pricing and packaging is extremely simple extreme bond with good better best packages that showcase our innovation.

John Sabino: Services will be bundled into the price along with key features analytics and integration.

John Sabino: Unlike most other vendors like person, who only have two pricing meters with almost no add on costs. So that's a sort of contracts will be easy to scope with no surprises lie.

John Sabino: LivePerson also orchestrates other conversational technologies and allows brands to bring their own LLMs and third-party AI without incurring additional costs. I am very excited about this strategy and have confidence that it will drive velocity into our sales cycles and increase win rates and also improve retention. We plan to make this pricing and packaging generally available to the market in the back half of Q3.

John Sabino: Life person also orchestrates other conversational technologies and allows brands to bring their own L. O labs in third party AI without applying additional cost.

John Sabino: I am very excited about this strategy and have confidence that it will drive velocity into our sales cycles and increased win rates and also improve retention.

John Sabino: We plan to make this pricing and packaging generally available to the market in the back half of Q3.

John Sabino: Lastly, at GoToMarket, we shared our strategy to drive partnerships at greater velocity, specifically with the desire to integrate with voice providers to give our customers a 360 view of conversational data. I am proud to say that very soon, we plan to announce a strategic partnership with a major global CTAS player to power a unified, best-of-breed, omni-channel suite like nothing else in the market today. Unlike surface-level partnerships common in our space, the intent of this partnership is to include deep integration of the products at all levels through alignment of our field and customer success teams and activation of our joint partner networks to maximize reach and client value realization on a global scale.

John Sabino: Lastly in go to market, we shared our strategy was to drive partnerships like greater velocity, specifically with the desire to integrate with voice providers to give our customers a 360 view of conversational data.

John Sabino: I am proud to say that very soon we plan to announce a strategic partnership with a major global Sea task player to power a unified best of breed Omnichannel suite like nothing else in the market today.

John Sabino: Unlike surface level partnerships common in our space intensive. This partnership is to include deep integration of the products at all level.

John Sabino: True alignment of our field and customer success teams and activation of our joint partner networks to maximize reach and client value realization on a global scale.

John Sabino: We believe our joint partner offering will leapfrog the competition in terms of innovation by enhancing the entire product suite with marketing-leading digital, AI, and conversational intelligence capabilities. LivePerson will gain an integrated, enterprise-ready voice channel to enable a complete omni-channel experience for our clients, as well as access to an installed base of contact center agents nearly 20 times the size of our current footprint, and a network of more than 5,000 channel partners in a scaled GTM operation in several key regions around the world that are untapped today by our existing geographic footprint.

John Sabino: We believe our joint partner offering will leapfrog the competition in terms of innovation by enhancing the entire product suite with market, leading digital AI and conversational intelligence capabilities.

John Sabino: Life person will gain an integrated enterprise ready voice channel to enable a complete omnichannel experience for our clients.

John Sabino: Well as access to an installed base of contact center agents nearly 20 times the size of our current footprint.

John Sabino: And the network with more than 5000 channel partners and a scaled G. T M operation in several key regions around the world that are untapped today via our existing geographic footprint.

John Sabino: We are very excited about this opportunity and this partnership, and we will be able to discuss more about it in the near future. This brings me to our third area of focus that I discussed as part of our transformation strategy, extending our advantages in product integration and orchestration.

John Sabino: We are very excited about this opportunity of this partnership and we were able to discuss more about it in the near future.

John Sabino: This brings me to our third area of focus that I discussed as part of our transformation strategy.

John Sabino: Extending our advantages in product integration and orchestration.

John Sabino: On the last call, we discussed four products... Voice Integration, Extracting value with technology that customers already have, the ability to orchestrate all bots on the platform, and improving the messaging experience in our top channels. First, in addition to the CCASP partnership, which we will announce very soon, we are continuing to provide AI and automation through voice. In Q1, we went live with Voice AI for a leading airline and a leading provider of solar power.

John Sabino: On the last call, we discussed four product initiatives voice.

John Sabino: Voice integration extra.

John Sabino: Extracting value with technology that customers already have.

John Sabino: The ability to orchestrate all bots on the platform and improving the messaging experience in our top channels.

John Sabino: First in addition to the <unk> partnership, which we will announce very soon we are continuing to provide AI and automation through the voice chat.

John Sabino: In Q1, we went live with voice AI for a leading airline and a leading provider of solar power. We also released our voice capture capability, which allows customers to easily ingest voice calls into our conversational conversational intelligence platform.

John Sabino: Just areas for efficiency and improvement with Boise.

John Sabino: We also released our voice capture capability, which allows customers to easily ingest voice calls into our conversational intelligence platform and suggest areas for efficiency and improvement with voice AI. Second, extracting value with the technology customers have today. LivePerson continues to be one of the few companies deploying generative AI at enterprise scale. We are seeing strong progress in both new logos and renewal. We were one of the first companies in our space to market generative AI in May of 2023.

John Sabino: Second on extracting value with the technology customers have today.

John Sabino: By person continues to be one of the few companies deploying jareth AI enterprise scale, and we are seeing strong progress in both new logos and renewal deals.

John Sabino: We own one of the first companies in our space to market with generative AI in may of 2023, and since that launch nearly half of both renewals and new logo volumes have included our general survey icon.

John Sabino: And since that launch, nearly half of both renewals and new logo volumes have included our generative AI product. We have nearly 60 customers using generative AI today at scale, with nearly a third powering 50% or more of their conversation volume. We only expect these numbers to accelerate as enterprises become more comfortable with the technology.

John Sabino: We have nearly 60 customers using generative AI today at scale.

John Sabino: With nearly a third tower in 50% or more of their conversation Bob.

John Sabino: We only expect these numbers to accelerate as enterprises become more comfortable with the technology. We also believe that our pricing and packaging strategy further accelerate this.

John Sabino: We also believe that our pricing and packaging strategy will further accelerate and allow more of our customers to experience the benefits of the technology. Now, I would like to turn my attention to our efforts regarding orchestration. We understand that most enterprise brands are already using several LLMs, and increasingly, the challenge is how to integrate, orchestrate, and optimize those models across the business with consistency. So we have introduced new functionality to our Bring Your Own LLM capability. Brands are already able to integrate third-party chat bots with LivePerson.

John Sabino: And a lot more of our customers to experience the benefits of the technology.

John Sabino: Now I would like to turn my attention to our efforts regarding orchestration.

John Sabino: We understand that most enterprise brands are already using several L. L M and increasingly the challenge is how to integrate orchestrate and optimize those models across the business with consistency.

John Sabino: So we have introduced new functionality to our bring your own L. O M capability.

John Sabino: Brands are already able to integrate third party chat box with live person, but this release allows them to integrate their preferred L. L. M providers from open AI matter cohere and Google into their life person box.

John Sabino: But this release allows them to integrate their preferred LLM providers from OpenAI, Meta, Cohere, and Google into their LivePerson box. This mitigates the risk of AI vendor loss, and by consolidating with the LivePerson platform, it ensures greater control over the customer experience. Our new pricing strategy will also make it more affordable for brands to use their chosen LLM providers with LivePerson and grow the return on their AI investment across the board.

John Sabino: This mitigates the risk of AI vendor lobby and by consolidating with a life for some platform ensures greater control over the customer experience, our new pricing strategy will also make it more affordable for brands to use their chosen L. O M providers with live person and grow the return on their AI investment across the board.

John Sabino: And while we continue to make investments in generative AI and train our own models against customized use cases to address specific customer needs, we believe the bigger opportunity for LivePerson and AI is managing, optimizing, and orchestrating all LLMs, no matter the vendor, within our product and alongside our generative AI capabilities that we provide today. In addition to bringing your own LLM capability, we have launched AI Rewrite, which allows agents to generate improved responses with a single click.

John Sabino: And while we continue to make investments in general.

John Sabino: Train our own models against customized use cases to address specific customer needs. We believe the bigger opportunity for live person and AI is managing optimizing and orchestrating all L. O N no matter the vendor, but then our product and alongside our generative AI capabilities that we provide today.

John Sabino: In addition to bring your own L. L. M capability, we have launched AI rewrite which allows agents to generate generate improved responses with a single click.

John Sabino: Customers using this feature have seen 10-point improvements in NPS, with over 95% of messages sent having better outcomes with this capability. And lastly, we launched social orchestration for Amazon Lex, continuing our goal to allow seamless handoffs across any channel and any bot platform.

John Sabino: Customers using this feature had some 10 point improvements in NPS with over 95% of messages sent having better outcomes with this capability and.

John Sabino: And lastly, we launched social social orchestration for Amazon Lex continuing our goal to allow seamless handoffs across any channel and any bought platform.

John Sabino: We're confident that these capabilities will ensure that LivePerson remains a market leader in the next generation of AI capabilities for its customers. The final initiative in this focus area was to improve our messaging experience within our top. And in Q1, we made fundamental architectural improvements to our web channel that resulted in customers seeing up to 50% performance. This has created a strong foundation for future innovation and improvements in this channel. And it paves the way for key renewals by some of our largest enterprise customers.

John Sabino: We're confident that these capabilities will ensure that live person remains a market leader in the next generation of AI capabilities for its customers.

John Sabino: The final initiative in this focus area was to improve our messaging experience within our top channel.

John Sabino: And in Q1, we made fundamental architectural improvements to our web channel that resulted in customers seeing 50% performance improvement.

John Sabino: This has created a strong foundation for future innovation and improvements in this channel.

John Sabino: And it paves the way for key renewals with some of our largest enterprise customers.

John Sabino: So to summarize, we are extending our advantages in all areas of product orchestration and integration capabilities. We're improving our voice integration, increasing functionality to bring your own LLM, and improving messaging performance. And this is just to highlight a few.

John Sabino: So to summarize we are extending our advantages in all areas of product orchestration and integration capabilities, we're improving our voice integration increasing functionality to bring your own L. L and improving messaging performance and this is just to highlight a few.

John Sabino: In addition to all the announcements I just mentioned, I welcome you to join us virtually on May 23rd for our Spark product launch, where we will unveil even more functionality we are bringing to our product. Finally, I wanted to share that, in spite of the headwinds and challenges we have faced, LivePerson continues to be recognized by analysts and the media as a relevant player in digital customer service and conversational AI. We were named a strong performer in the Forrester Wave conversation automation solutions for B2B in Q1 of 2024, which marks the eighth time that LivePerson has been recognized in Forrester's research over the last 12 months, and LivePerson was named to Fast Company's prestigious list of the world's most innovative companies for a third time. We will recognize this in the Applied AI category, which honors companies embracing AI to reinvent how business is done.

John Sabino: In addition to all the announcements I just mentioned I welcome you to join us virtually on May 20.

John Sabino: For our spark product launch of that.

John Sabino: We will unveil even more functionality, we are bringing to our pop.

John Sabino: Finally, I wanted to share that in spite of the headwinds and challenges we have faced.

John Sabino: Person continues to be recognized by analysts and the media as a relevant player in digital customer service and conversational AI.

John Sabino: We were named a strong performer in the farthest away conversation automation solutions for beta be Q1 of 2024, which marks the eighth time that like person has been recognized and parsers research over the last 12 months.

John Sabino: And life person was named the fast company's procedures list of the world's most innovative companies for a third time.

John Sabino: We were recognized as the plot in the applied AI category, which honors companies embracing AI to reinvent how business is done.

John Sabino: So, I want to extend congratulations to everybody on the LivePerson team, and I want to thank all of you for your commitment and dedication to our customers and companies. So, in summary, as I sit here today, approximately four months from the day I joined, I've only gained confidence since the last time we spoke that the transformation strategy we are executing on today will lead to a future of profitable growth for LivePerson.

John Sabino: So I want to extend congratulations to everybody on a live person team, but I want to thank all of you for your commitment and dedication to our customers and company.

John Sabino: So in summary, as I sit here today, approximately four months from the day I joined I've only thing confidence since the last time, we spoke about the transformation strategy, we are executing on today.

John Sabino: Lead to a future of profitable growth for life person.

John Sabino: In the first quarter of our new strategy, we delivered on the guidance we provided and right-sized our costs. We are progressing with our efforts towards improving our capital structure. We currently expect to have an update on that later this month. As we go to market, we've made substantial operational changes by bringing in new leadership, simplifying pricing and packaging, and we plan to imminently announce a strategic partnership with a major global CCAS company, in addition to increasing our strengths with product orchestration and integration.

John Sabino: In the first quarter of our new strategy, we delivered on the guidance we provided.

John Sabino: Sized our cost structure.

John Sabino: We progressed on our efforts towards improving our capital structure and currently expect to have an update on that later this month.

John Sabino: And go to market, we've made substantial operational changes by bringing in new leadership.

John Sabino: Simplified pricing and packaging and we plant imminently announced the strategic partnership with a major so global Sea gas company. In addition to increasing our strengths with product orchestration of integration.

John Sabino: As we have outlined, we are rapidly executing in each area of that strategy, and I look forward to updating this audience on our execution and positive trajectory in future earnings calls. So now, let me pass the call to our CFO and COO, John Collins. John, over to you.

John Sabino: As we have outlined we are rapidly executing in each area of that strategy and I look forward to updating this audience on our execution and positive trajectory in future earnings calls.

John Sabino: So now let me pass the call to our CFO and COO, John Collins, John over to you.

John Deneen Collins: Thanks, John.

John Deneen Collins: I'll begin with a brief operational update, followed by a discussion of our financial performance and guidance. First, I would like to emphasize John's remarks on our capital structure. Deleveraging remains a strategic imperative for the company. As planned, we fully repaid the $72.5 million remaining balance of the 2024 notes that matured in March.

John Deneen Collins: I'll begin with a brief operational update followed by a discussion of our financial performance and guidance.

John Deneen Collins: First I would like to emphasize John's remarks on our capital structure deleveraging remains a strategic imperative for the company.

John Deneen Collins: As planned we fully repaid the 72 and a half million remaining balance of the 2024 notes that matured in March we.

John Deneen Collins: We have also spent a considerable amount of time and effort on addressing the 2026 notes, and we currently expect to provide an update on these efforts later this month. In terms of deals and customer wins, we signed a total of 40 deals in the first quarter, including 12 new logos and 28 expansions and renewals. First quarter deals included upsells with a large Australia-based bank and a fast casual restaurant chain. New logo wins included a global digital entertainment company and a global distributor of electrical products and services.

John Deneen Collins: We've also spent a considerable amount of time and effort on addressing the 2026 months and we currently expect to provide an update on these efforts later this month.

John Deneen Collins: In terms of deals and customer wins, we signed a total of 440 deals in the first quarter, including 12, new logos in 2008 expansions and renewals.

John Deneen Collins: First quarter deals included Upsells with a large Australian based bank and a fast casual restaurant chain <unk>.

John Deneen Collins: Other wins included a global digital Entertainment company, and a global distributor of electrical products and services.

John Deneen Collins: Consistent with the plans we shared last quarter, we embarked on a significant rebuild of our go-to-market operations in the first quarter. Hiring new leadership, restructuring teams, and improving processes has a short-term cost. While we mitigated some expected customer churn in the first quarter, midstream changes to our go-to-market operations translated to below-average deal counts and values in the first quarter. In total, deals were down 43% year-over-year and 35% sequentially. To reiterate some of the critical changes, we installed new leadership, including a new chief customer officer and a VP of sales operations, and we have hired a new chief revenue officer.

John Deneen Collins: Consistent with the plans, we shared last quarter, we embarked on a significant rebuild of our go to market operations in the first quarter.

John Deneen Collins: Hiring new leadership restructuring teams and improving processes has a short term cost while we mitigated some expected customer churn in the first quarter midstream changes to our go to market operations translated to below average deal counts and values in the first quarter.

John Deneen Collins: In total deals were down 43% year over year and 35% sequentially.

John Deneen Collins: To reiterate some of the critical changes, we installed new leadership, including a new chief customer officer.

John Deneen Collins: As VP of sales operations, and we've hired a new chief revenue officer.

John Deneen Collins: Collectively, these new leaders, coupled with industry-standard processes and greater clarity in roles and responsibilities, establish a solid foundation for our return to profitable growth. For example, we can now evaluate customer health across technical and strategic dimensions five quarters into the future, giving us greater specificity on potential frictions and the lead time to address them. Similarly, we have strengthened the rigor and repeatability of our sales operations at each stage of the sales cycle.

John Deneen Collins: Electively these new leaders, coupled with industry standard processes, and greater clarity and roles and responsibilities, establishing a solid foundation for our return to profitable growth. For example, we can now evaluate customer health across technical and strategic dimensions, five quarters into the future, giving us greater specificity on potential friction and to lead.

John Deneen Collins: Time to address them.

John Deneen Collins: We have strengthened the rigor and repeatability of our sales operations for each stage of the sales cycle in parallel as John described we also initiated the rollout of a radically simplified pricing and packaging strategy that we expect to increase the velocity and wins.

John Deneen Collins: In parallel, as Jon described, we also initiated the rollout of a radically simplified pricing and packaging strategy that we expect to increase deal velocity and win rates. So, in a very real sense, we needed to slow down before we could go faster.

John Deneen Collins: So in a very real sense, we needed to slow down before we could go faster and I'm excited to report that we're already seeing significant improvement in pipeline generation and deals in the second quarter.

John Deneen Collins: And I'm excited to report that we are already seeing significant improvement in pipeline generation and deals in the second quarter. Finally, before I move on to our financial results, I want to emphasize the significance of the partnership that John alluded to. Consistent with our prior commentary, this strategic partnership is founded on meaningful shared economics and robust technology integration. By partnering with a major global enterprise CCAS provider, we have repositioned to meet the number one demand of our customers, an AI-powered single pane of glass for customer service and support across voice and digital channels. We look forward to sharing additional details at our SPARC event in two weeks, and we encourage everyone to tune in virtually.

John Deneen Collins: Finally, before I move onto our financial results I want to emphasize the significance of the partnership to Jon alluded to consistent with our prior commentary. This strategic partnership is founded on meaningful shared economics and robust technology integrations by partnering with a major global enterprise <unk> provider, we have repositioned to meet the number one.

John Deneen Collins: <unk> of our customers and AI powered single pane of glass for customer service and support across voice and digital channels. We look forward to sharing additional details of our spark event in two weeks and we encourage everyone to tune virtually.

John Deneen Collins: As for our first quarter financial results, total revenue was $85.1 million, above the high end of our guidance range, but down 21% year-over-year, or 15% excluding the contributions from the consumer business. The year-over-year decline was driven by customer churn in the first quarter and the exit of non-core business lines a year ago. Note that, in the first quarter, Wild Health contributed $1.5 million to total revenue.

John Deneen Collins: As for first quarter financial results total revenue was $85 1 million above the high end of our guidance range, but down 21% year over year or 15%, excluding the contributions from the consumer business.

John Deneen Collins: The year over year decline was driven by customer churn in the first quarter and the exit of noncore business lines, a year ago looked at in the first quarter, while health contributed $1 5 million to total revenue.

John Deneen Collins: Adjusted EBITDA for the first quarter was half a million, which was above the midpoint of our guidance. Despite having a significantly lower revenue base, adjusted EBITDA was better than the $1.3 million loss in the first quarter a year ago, driven by rigorous rightsizing of our cost structure. Revenue from B2B hosted services was $71.5 million, down 11% year-over-year. B2B core recurring revenue was $77.6 million, down 6% year-over-year, driven by the expected customer cancellations and downsells we discussed last quarter. Professional services revenue was $13.7 million, down 33% year-over-year, driven largely by the completion of the engagement with declared JV in the first quarter of 2023. Excluding revenue from the JV, professional services revenue declined 17% year-over-year.

John Deneen Collins: Adjusted EBITDA for the first quarter was half a million dollars, which was above the midpoint of our guidance range. Despite.

John Deneen Collins: Having a significantly lower revenue base adjusted EBITDA was better than the $1 $3 million loss in the first quarter, a year ago, driven by rigorous right sizing of our cost structure.

John Deneen Collins: Revenue from BW hosting services was $71 5 million down 11% year over year BTB core recurring revenue was $77 6 million down 6% year over year, driven by the expected customer cancellations and <unk>, we discussed last quarter.

John Deneen Collins: Professional services revenue was $13 7 million down 33% year over year, driven largely by the completion of the engagement with declared JV in the first quarter of 2020 through <unk>.

John Deneen Collins: Excluding revenue from the JV professional services declined 17% year over year.

John Deneen Collins: From a geographic perspective, U.S. revenue was $60.5 million, and international revenue was $24.6 million, or 71% and 29% of total revenue, respectively. For the first quarter, average revenue per customer was $625,000, up 12% driven in part by expansions with our largest customers. Consistent with my earlier update on first quarter deals, RPO declined 7% sequentially to $297 million in the first quarter. Net revenue retention was 89% in the first quarter, compared to 95% in the fourth quarter.

John Deneen Collins: From a geographic perspective U S revenue was $65 million and international revenue was $24 6 million or 71% and 29% of total revenue respectively.

John Deneen Collins: For the first quarter average revenue per customer was 625000 up 12% driven in part by expansions with our largest customers.

John Deneen Collins: Consistent with my earlier update on first quarter deals RVO declined 7% sequentially to $297 million in the first quarter.

John Deneen Collins: Net revenue retention was 89% in the first quarter compared to 95% in the fourth quarter, considering <unk> as a function of in period revenue. It is a lagging indicator of progress against our strategy as.

John Deneen Collins: Considering NRR as a function of in-period revenue, it is a lagging indicator of progress against our strategy. As discussed last quarter, given the size and timing of cancellations in the first quarter, which have a full year revenue impact, we expect revenue to decline sequentially throughout the year to the fourth quarter, though the rate of decline will lessen as we progress toward the fourth quarter. However, we also expect new ARR, that is the net of annualized bookings and annualized turn, to improve throughout the year and turn positive beginning in the fourth quarter.

John Deneen Collins: As discussed last quarter, given the size and timing of cancellations in the first quarter, which has a full year revenue impact we expect revenue to decline sequentially throughout the year to the fourth quarter, though the rate of decline will lessen as we progress towards the fourth quarter. However, we also expect new era that is.

John Deneen Collins: Of annualized bookings and annualize it annualized churn to improve throughout the year and turn positive beginning in the fourth quarter.

John Deneen Collins: Finally, in terms of cash, we ended the first quarter with $127 million in cash on the balance sheet following the full settlement of the 2024 notes I mentioned earlier. After further reducing our cost structure through actions taken in the first quarter and current quarter, which will yield over $30 million of in-year savings, we expect our cash balance to be near the current balance by year-end. In terms of guidance for the second quarter, we expect revenue to be in the range of $76,200,000.

John Deneen Collins: Finally in terms of cash we ended the first quarter was 127 million of cash on our balance sheet. Following the full settlement of the 2024 notes I mentioned earlier.

John Deneen Collins: After further reducing our cost structure through actions taken in the first quarter and current quarter, which will yield over $30 million of in year savings, we expect our cash balance to be near the current balanced by year end.

John Deneen Collins: In terms of guidance for the second quarter, we expect revenue to be in the range of $76 million trailing node.

John Deneen Collins: This is a sequential decline of approximately 7 million at the midpoint, which, as discussed, is primarily driven by the full effect of customer cancellations in the first quarter, along with below average heel counts that we expect to improve in the second quarter.

John Deneen Collins: This is a sequential decline of approximately $7 million at the midpoint, which as discussed was primarily driven by the full effect of customer cancellations in the first quarter along with below average deal counts that we expect to improve in the second quarter.

John Deneen Collins: B2B core recurring revenue is expected to be approximately 92% of total revenue in the second quarter. As for adjusted EBITDA in the second quarter, we expect a range of $0 to $5 million. For the full year, we are maintaining our revenue guidance range of $300 to $315 million. Again, this range is heavily influenced by the concentration of cancellations in the first quarter, which has a full year revenue impact. Considering the progress we've already made in rebuilding our go-to-market operations, we expect to improve deal velocity and wins and materially reduce the impact of cancellations and downsells in subsequent quarters, enabling us to generate positive new ARR in the fourth quarter.

John Deneen Collins: <unk> recurring revenue is expected to be approximately 92% of total revenue in the second quarter.

John Deneen Collins: As for adjusted EBITDA in the second quarter, we expect a range of zero to $5 million.

John Deneen Collins: For the full year, we are maintaining our revenue guidance range of $300 million to $350 million.

John Deneen Collins: Again this range is heavily influenced by the concentration of cancellations in the first quarter, which have full year revenue impact considering the progress we've already made in rebuilding our go to market operations, we expect to improve deal velocity and wins and materially reduce the impact of cancellations and dunhill in subsequent quarters, enabling us to generate positive new era in the fourth.

John Deneen Collins: Quarter.

John Deneen Collins: As for B2B core recurring revenue, again, we expect it to be approximately 92% of total revenue for the full year. Finally, we're also maintaining our adjusted EBITDA guidance range of $15 million to $26 million, and we continue to expect the B2B business to be free cash flow positive for the full year. Now, I'll turn the call back to Jon for his final comments before we proceed to Q&A.

John Deneen Collins: As for BBB core recurring revenue again, we expect it to be approximately 92% of total revenue for the full year.

John Deneen Collins: Finally, we're also maintaining our adjusted EBITDA guidance range of 15 million to $26 million and we continue to expect the BTB business to be free cash flow positive for the full year.

Jon Perachio: Now I'll turn the call back to John for his final comments before we proceed to Q&A Josh.

Jon Perachio: Thanks, so much John.

John Sabino: Before turning the call over to Q&A, I want to emphasize to this audience that everything we told you we were going to do during our last call has been done, or we're executing imminently. As I have said before, it will take time to see the results of these operational groups. But the changes that drive the results we seek are happening today and will continue to happen as we transform this company and progress on our journey to profitable growth. At this point, I'd like to hand the call over to the operator for Q&A. Thank you so much.

Jon Perachio: Before turning the call over to Q&A I want to emphasize to this audience that everything we told you we were going to execute.

John Sabino: During our during our last call, we have done or executing imminently as.

John Sabino: As I've said before it will take time to see these results of these operational improvements.

John Sabino: But the changes that drive the results. We seek are happening today and will continue to happen as we transform this company and progress on our journey to profitable growth.

Speaker Change: At this point I'd like to hand, the call over to the operator for Q&A. Thank you so much.

Speaker Change: Thank you Sir.

Operator: Thank you, sir. Ladies and gentlemen, we will now be conducting the question and answer session. If you would like to ask a question, please press star then 1. Only telephone keypads.

Operator: Ladies and gentlemen, we will not be conduction a question and answer session.

Speaker Change: If you would ask answer Christian piece with Tau and one on your telephone keypad.

Operator: A confirmation tone will indicate that your line is in the question queue. You may press star 2 to leave the question queue. For participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Jeff VanRee of Craig Helm Capital Group. Please go ahead.

Speaker Change: A confirmation tone will indicate they turn it on easing the question queue.

Operator: You May press star two to leave the question queue.

Jeffrey Lee Van Rhee: All participants making use of speaker equipment.

Jeffrey Lee Van Rhee: It may be necessary to pick up your handset before pressing just talkies.

Chip foundry: Our first question comes from Chip foundry.

Jeffrey Lee Van Rhee: Craig Hallum Capital group piece.

Jeffrey Lee Van Rhee: Please go ahead.

Jeffrey Lee Van Rhee: Great. Thanks for taking my questions, guys. Maybe the first one for Jon is, Jon, in terms of the, you know, you've been out talking to a lot of the customer base. Just take a minute and expand on what you've learned in terms of the common traits of those that churned off the platform. I know you had some suspicion last time we spoke, but I imagine you know a lot more now. Yeah.

Jeffrey Lee Van Rhee: Great. Thanks for taking my questions guys, maybe the first one for China as John.

Jeffrey Lee Van Rhee: In terms of the you've been out talking to a lot of the customer base, just take a minute and expand on what you've learned in terms of the common traits are those that churned off the platform. I know you had some suspicion last time, we spoke but I imagine you know a lot more now yeah.

John Sabino: Yeah. Some of the customers that have churned were looking for enhanced functionality that we did not plan to provide on our roadmap, specifically the ability to completely customize or build custom interfaces on our agent workspace. So, you know, there are some that fall into that category where they are looking for enhancements that we are not willing to bring at this point in time. That's definitely one category of customer. The other ones are very similar to what we spoke about before, which is that we're seeing consolidation around CCAS and digital, and this is where this partnership that we're referencing, I think will be a very, very important way of going to market in the future to counteract that churn.

Jeffrey Lee Van Rhee: Yeah.

John Sabino: Some of the customers that have churned or looking for enhanced functionality that we did not plan to them.

John Sabino: Provide on our roadmap specifically the ability to complete.

John Sabino: Completely customized.

John Sabino: Or build custom interface on our agent workspace.

John Sabino: So there there are some that fall into that category where they.

John Sabino: They are looking for enhancements that we are not willing to bring at this point in time, that's that's that's definitely one category of customer.

John Sabino: The ones that are very similar to what we spoke about before which is we're seeing that.

John Sabino: The consolidation around CCAR and.

John Sabino: In digital and this is where this partnership that we're referencing.

John Sabino: I think it will be a very very important.

John Sabino: Way of going to market in the future to counteract that churn. So it falls into two central categories, one being feature and functionality that.

John Sabino: So it falls into two central categories, one being features and functionality that a specific customer might want and need for their business. That's not really on a roadmap at this point. And the other being platform consolidation, which we've discussed in the past, and we feel that this partnership that we'll be announcing very shortly will definitely assist us in counteracting.

John Sabino: Specific customer might want.

John Sabino: Need for their business, that's not really on our roadmap at this point and the other being a platform consolidation, which we've discussed in the past and we feel that.

John Sabino: This partnership that we'll be announcing very shortly we'll definitely.

John Sabino: Assist us in counteracting.

Jeffrey Lee Van Rhee: In the quarter, I think you commented on the, obviously, it's in the deal counts, but you said your bookings value also missed expectations. Just talk about the disruption to Q1 sales cycles and bookings, and maybe, with a lens of losses, your win rates maybe declining, versus maybe changes you made that disrupted cycles, possibly buyer reluctance due to the balance sheet. What you saw, because obviously, I'm sure you'd want to leave deals in flight and not disrupt those deals if you could help it, so just talk through what led to the weaker bookings in the quarter. Yeah, correct.

John Sabino: Mhm.

John Sabino: In the quarter, you think you've commented on on the obviously, it's in the deal counts would you say your bookings value also missed expectations just talk about the disruption to Q1 sales cycles in bookings and maybe with a with a lens of losses youre win rates, maybe declining versus maybe changes you made that does.

Jeffrey Lee Van Rhee: <unk> cycles, possibly buyer reluctance due to balance sheet, you kind of what you saw because obviously I'm sure you'd want to leave deals in flight not disrupt those deals. If you can help it so just talk to what led to the weaker bookings in the quarter.

John Sabino: Correct. So the commercial headwinds around the debt, of course, played a role. Customers are waiting to hear back from us on how we're progressing on that debt discussion, so some of the booking opportunities have been pushed. And then, you know, we've retooled the front end of our go-to-market, everything from restructuring the team, bringing in new leadership, establishing new processes, and this has had a disruptive effect. And as John Collins stated, you know, it really was essential to slow down and put these changes in place. And we're starting to see those green shoots bear fruit in this coming quarter.

Speaker Change: Correct. So the commercial headline wins around the debt of course played a role.

John Sabino: Customers are waiting to hear back from us on how we're progressing on that that discussion. So some of them some of the bookings opportunities push.

John Sabino: And then.

John Sabino: We believe as I discussed before we've retooled the front end of our go to market.

John Sabino: Everything from restructuring to the team, bringing in new leadership.

John Sabino: Establishing new processes and this has a disruptive.

John Sabino: The effect.

John Sabino: And as John Collins stated it really was essential to slow down put these changes in place and we're starting to see those green shoots bear fruit in this coming quarter. Additionally, I've said in the past they customers have felt at times, it's difficult to do business with us.

John Sabino: Additionally, I've said in the past that customers have felt at times it's difficult to do business with us. We definitely have turned the corner, I think, in our pricing and packaging in a way that will allow us now to start experimenting with what I spoke about in my prepared remarks. To simplify the actual process of closing deals with our customers, give them more economic value, and have a competitive price in the marketplace.

John Sabino: We definitely have turned the corner I think in our pricing and packaging in a way that will allow us now to start experimenting with what I spoke about my prepared remarks.

John Sabino: To simplify the actual process of closing deals with our customers give them more economic value and have a competitive price in the marketplace. So these pieces of puzzle were not in place in Q1, we had a lot of work to do we worked very rapidly on it and now we have now we have most of them in place and we're doing well on the pile.

John Sabino: So these pieces of the puzzle were not in place in Q1. We had a lot of work to do. We worked very rapidly at it, and now we have most of them in place, and we're doing well on the pilot side of it as well with the new pricing and packaging. And again, we're starting to see some positive results.

John Sabino: Outside of it as well with the new pricing and packaging and again, we're starting to see some positive results there.

Jeffrey Lee Van Rhee: Okay. The, I guess last for me then, you gave the revenue number for wild health. Can you give a sense of where it was for the quarter, loss-wise, annualized, expected loss? Just wondering how that's impacting the bottom line.

John Sabino: Okay.

Speaker Change: The I guess last for me then you gave the revenue number for Wild health can you give a sense of where it was for the quarter loss wise annualized as expected loss, just wondering how thats impacting the bottom line.

John Deneen Collins: Hey Jeff, yeah, so in terms of losses from wild health in general for the full year, as we discussed last... Last quarter, we're expecting, you know, well under, well, under 10 million for the year. And we further reduce that through the actions we're taking right now with respect to the decision to sell or wind down the business. And I expect to have more of an update on that topic later this year.

Speaker Change: Hey, Jeff Yeah. So in terms of losses from from Wild health in general for the full year as we discussed last.

Jeffrey Lee Van Rhee: Okay, I got it. I'll leave it there. Thank you.

Jeffrey Lee Van Rhee: Last quarter, we are expecting well under well under $10 million for the year and we further reduce that.

Jeffrey Lee Van Rhee: Through the actions, we're taking right now with respect to the decision to sell or wind down of the business and I expect to have more of an update on that topic. Later this month.

Jeffrey Lee Van Rhee: Mhm.

Speaker Change: Okay got it I'll leave it there thank you.

Jeffrey Lee Van Rhee: Okay.

Speaker Change: Thank you ladies and gentlemen, we have reached the end of the call. Thank you for joining us and even now disconnect your lines.

Operator: Thank you. Ladies and gentlemen, we have reached the end of the call. Thank you for joining us, and you may now disconnect your lines.

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