Q2 2019 Earnings Call
Ladies and gentlemen, this is the operator todays conference is scheduled to begin momentarily until that time your lines will again be placed on music hold we thank you for your patience and ask that you. Please remain connected.
My name is Ian and I will be your conference operator today at this time all participants are in a listen only mode. After the prepared remarks, the management from life person will conduct a question and answer session and conference call participants will be given instructions at that time. Please limit yourself to one question to allow us to accommodate all questions. This evening.
As a reminder, this conference call is being recorded.
I would now like turn the call over to Matthew Kempler, The company's Vice President of Investor Relations. Please go ahead Sir.
Thanks very much he is joining me on the call today is Robert Locascio, Livepersons, founder and CEO and Chris Greiner, Our Chief Financial Officer.
Please note that during today's call, we will make forward looking statements, which are predictions projections and other statements about future results. These statements are based on our current 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 in the comments made during this conference call hitting 10-K, 10, Qs and other reports we file from time to time with the FCC.
We assume no obligation to update any forward looking statements.
Also during this call we will discuss certain non-GAAP financial measures a reconciliation of GAAP to non-GAAP financial measures is included in todays earnings press release, both this press release and supplemental slides, which include highlights of the quarter are available in the Investor Relations section of life persons website.
With that I will turn the call over to Rob.
Thanks, Matt.
Thank you for joining Liveperson Q2, 2019 earnings call for the last year, we've been demonstrated Liveperson leadership and conversational commerce.
We see conversational commerce as a means for brands to build a direct lasting relationship with consumers.
But people connect by natural language using text messaging or voice command.
It replaces the disconnect experiences waiting on hold for transactional call with the phone agent.
For browsing and search and then clicking on an AD and be redirected to a landing page, which lacks personalization.
We expect conversational commerce to profoundly change, how leading brands deliver care sales and marketing experiences to consumers.
That is why the largest technology companies in the World are also participating in this shift.
We're not looking to just participate in this market we are aiming to win it and from our recent results. We believe we are doing just that.
We're moving fast and staying focused in order to close the gap from where we are today to reaching our mission.
During this quarter, we definitely achieved a new inflection point.
Here are a few highlights a showcase what underpins a positive inflection point.
Total revenue of 71 million in the second quarter exceeded our guidance range accelerates, 15% year over year growth.
Total contract signings in the first half of 2019 were an all time high increasing approximately 75% or the first half of 2018.
Impressive growth was fueled by our enterprise sales team, which closed a record nine seven figure contracts.
This is three times more than previous periods.
Our mid market team also set a record closing 10 six figure contracts in the quarter.
Similar to previous periods. The majority of the top 10 deals signed in Q2 were multiyear contracts. This is key to providing high visibility into future recurring revenue.
Virtually all new deals are falling with a blend of human and our maven power automation services.
We've always had a vision for how the conversational commerce market would unfold and based on the activity in front of US. We're now seeing an opportunity to drive even faster adoption and more rapidly monetize new platform capabilities.
With this momentum in mind, we are raising our revenue guidance in 2919.
And increasing investments to keep up with the demand.
I'll walk through the key points that support how we arrived at this conclusion.
And Chris will provide more details on our guidance shortly.
In 2019, we front loaded our expenses in both field and product with the anticipation that we would have a good measure of their potential impact by midyear.
We're seeing a faster than anticipated ramp and the strong ROI from those investments.
We are now going to pull forward another set of investment nor to add more quota carrying reps marketing events and product teams to meet this increased market demand.
We are starting to deliver on the next set of major platform capabilities that will fill in the white space of conversational commerce.
In Q3, and Q4, we have four to five major platform capabilities coming out around marketing.
In store retail social and new agent console in AI analytics.
We feel that the most efficient use of our capital right now is in building product versus acquiring it.
And Alex and team are doing a great job in increasing the momentum of our overall platform capabilities.
Another momentum driver it is coming from the established consumer messaging players who are delivering the front end consumer demand for conversational commerce, even faster and to our benefit.
Example, Apple previewed a new feature called shot suggest which will give the consumer choice when they doubt any phone number two instead of two method to instead of calling the brand the message them directly.
This would basically be flat call, even before they get to the brands IDR.
We expect chats just to help millions of consumers discover messy as a communication option, which in turn will drive higher platform utilization and ultimately revenue for Liveperson.
Subsequently, Google and many global telcos are now aggressively rolling out their Rcs services. A next generation messaging standard that offers a native Android experienced comparable the Apple business chat.
With Android accounting for approximately $3.2 billion of the estimated 5 billion handsets in the world.
Rcs will be immaterial conversational endpoint.
We have built Rcs connectors into Liveengage and are working alongside Google and individual telcos to drive adoption of Rcs.
Our sales teams are capitalizing on the drivers I just outlined as we further tap into the $60 billion total addressable market opportunity.
Sales pipeline is up nearly 120% versus a year ago and up approximately 75% since the start of the year.
I wanted to outline some notable customer wins in the quarter.
And a groundbreaking when we will be powering one of the first at scale conversational food ordering systems for one of the largest quick casual restaurants in the United States. They selected Liveengage to power automated food ordering through messaging using our maven AI engine and conversational builder platform.
The thesis is that we can reduce the ordering that happens in third party food apps instead create a direct messaging relation with the brand that generates more loyalty and greater margin for the restaurant.
The next example is from another win back of a former chat customer who left us during the migration and this time, it's one of the largest telcos in the us.
The telco signed a three year multi million dollar commitment to digitally transform their customer communication across care sales and marketing.
Real replacing their incumbent chat and social offerings with messaging and automation across numerous conversational endpoints.
We won the contract because of our unique ability to provide a holistic transformation that delivers best in class outcome across human agents and AI for inbound and outbound conversations.
The final example, highlights the growth opportunity, we see with existing customers as to progress along the transformation journey into new messaging endpoints in these cases.
Starting with a six figure chat contract four years ago. This financial services customers steadily expanded first deploying in that messaging and then wed messaging.
Most recently began testing conversational builder.
In a relatively short amount of time, they created automations that contain.
Approximately 20% of all inbound messages.
While closing conversation three times faster than their human agents.
Following on the heels of the success in the second quarter. The company signed a multi million dollar multi year commitment to drive even more automation and to add I've yard and messaging deflection.
This is a really exciting time to be a live person as we are in a very unique position leading this emerging market with a clear vision of what we must do to create execute and win the conversational commerce space.
Our strategy has worked well so far and because of that we're now seeing an opportunity to accelerate the time between where we are today and our long term vision.
Ill now hand, the call over to Chris who will do a deeper dive on our overall financial outlook Chris.
Thanks, Rob.
After a strong start to the year, our execution accelerated in the second quarter pacing US ahead of our initial 2019 plan as it relates to contract signings.
Sales productivity ramping and pipeline creation.
Before we get into each of those areas I'll quickly run down the number of big picture highlights.
First on a total revenue basis growth accelerated to 15% year to year, and 7% quarter to quarter exceeding the high end of our guidance range.
We saw very strong renewals and upsells in the period once again driving revenue retention well inside our target range of 105% to 115%.
For the fifth straight quarter, our trailing 12 month ARPU growth increased by at least 20% to a record 310000.
Continuing to demonstrate the increasing size of new wins and cross selling activity.
From a revenue perspective.
The telecommunications and financial services verticals. Once again continued to lead overall growth climbing faster than 20% year over year.
In terms of our geographic revenue the U.S. accounted for 58% of sales and accelerated year over year for the third consecutive quarter to 16% growth.
Our overall international growth also came in at double digits growing 14%.
The U.S. center to enterprise team led growth, increasing 30% year over year on the heels of seed investments, we made last year, which are now approaching full productivity.
In 2019 were expanding these investments in the U.S. and bringing the same blueprint to our other regions.
Consumer segment execution was very strong.
Growing at a record 24% year over year.
With sales and marketing productivity metrics exceeding our expectations. We took advantage of a strong sales candidate funnel and hired above our Twoq you plan.
This impacted profit in the period with GAAP net loss per share of 38 cents and adjusted EBITDA and adjusted operating losses of 9.1 million below our guidance.
And adjusted EBITDA loss of $5.3 million was within our guidance range.
Finally on the balance sheet perspective, we remain very well capitalized with total cash and equivalents on hand of $225 million.
Deferred revenue reached a record $70.1 million and on a trailing 12 month basis increased 42% year over year.
On the back of this increasing momentum and ramping sales productivity, we're seeing multiple opportunities to drive even faster platform adoption.
Along with new ways to monetize liveengage.
The combination of which is translating into increased revenue guidance in the second half and opportunities to pull ahead investment.
Aimed at capturing surging pipeline demand.
Toward that end.
I want to discuss three areas in greater detail.
First the powerful ROI and sales productivity attributes propelling our strong execution.
Second.
For criteria, we're using to step up product and go to market investments.
And third how each of these tailwinds are reflected in our updated guidance.
First.
We built our 2019 plan anticipating a market inflection based upon what we're seeing in our opportunity pipeline in late 2018.
To capture it we front end loaded investments, calling for very aggressive first half hiring pipeline forget pipeline generators quota carriers, along with impact global marketing event schedule.
In each of these areas our execution was flawless.
In the first half of 2019, we increased quota carriers by nearly 80% from 50 to 89.
Versus our target of 75.
Total sales capacity, including sales development Rep.
And partner managers increased over 100% as compared to our target of 90%.
And our marketing events connected over 510 executives to live person in cities, such as Manhattan, Milan, Tokyo, Sydney, London, Chicago, Madrid, even Shanghai in Moscow.
Our past events or any indication of the future. We can continue to we can expect to convert approximately 40% of all opportunities coming out of these events.
In order to quickly ramp and scale. The sales force, we created a rigorous onboarding and training program.
We also armed our sales teams with productivity analytics, providing real time insights into best practices for progressing opportunities quickly through the pipeline.
The early impact has been material and climbing.
In fact, just their first several months onboard these newly hired sales reps have already created 70 million of qualified pipeline opportunities.
In total.
The opportunities created by our pipeline generation teams, which include sales development reps and channel partner managers now account for half of the aggregate pipeline.
Since January .
Nearly 100, new starters in our field organization have enrolled in training.
And are in the process of completing their multiple certifications.
And our training programs are contributing to bending the curve on sales cycles.
With the average number of days for closed one opportunities improving by three weeks as compared to a year ago.
The culmination of investments in marketing.
Sales resources and training have been part translated into the record results we saw in the second quarter.
To put things in further perspective, the nine seven figure deals we signed in the second quarter is equivalent to the total of all seven figure deal signed throughout the entirety of 2018.
Even more encouraging to us the sales activity was widespread across our hunter and client partner team.
Total deals signed in the quarter increased 50% year over year, with 72% growth from new customers and 33% growth from existing customers.
And over the same period, our Twoq sales pipeline has increased 120%.
Well ahead of our growth in quota carrier capacity.
This strong demand means that even with the nearly 40 quota carrier hires this year.
We still have insufficient capacity to address the opportunities in our pipeline in fact, the average number of deals per enterprise quota carrier remains unchanged from six months ago at 15.
Finally, we remain an entrepreneurial product led company.
Choosing to leverage our balance sheet to extend Liveengage is technical leadership position organically over the near term.
As evidence of this.
We successfully built out one of the industry's most advanced AI development team.
Recruiting more than 100 machine learning data science and automation engineers over the past 12 months.
This team launched my persons groundbreaking conversation bought builder in the first quarter and demand has been impressive.
Nearly 20 enterprise customers and an additional 40 mid market SMB customers have already deployed the platform and are building AI automations as we speak.
In the second quarter, they launched our maven assist solution with a leading airline and large cable company.
Maven assist features next best action Automations and content to human agent.
Our product development machine is running and an entirely new level of productivity and as Rob detailed is a robust pipeline of new products coming in the next few quarters.
When you combine record contract signings ramping sales productivity.
Surging pipeline demand and leading product capabilities, it's a recipe for strength.
In this case, it's translating to an accelerated view of revenue in the second half.
Even greater confidence in the timing and achievement of mid and longer term growth models and conviction to step up investments in proven areas of return.
In that setting, we're raising 2019 revenue guidance to $288.5 million to $292 million.
With the midpoint of guidance, implying a second half growth rate of 17.5%.
In high teens to 21% growth in the fourth quarter.
As mentioned.
Because the number of pipeline opportunities has once again exceeded our sales capacity models. We're pulling forward planned 2020 spending into 2019.
In all we are targeting approximately $10 million of incremental investments.
Revising our adjusted EBITDA guidance to a range of zero to $5 million.
The spend is allocated across the following categories.
Approximately one half of the spend is tied to higher quota carrier and marketing capacity to meet increased demand.
We ended Q2 with 89 quota carriers above our target of 75.
And plan to end 2019 with well over 100.
Approximately one quarter of the spend is tied to engineering investments to support emerging product opportunities such as social payments and proactive sales.
In approximately one quarter is tied to higher consumer segment marketing spend given the positive year to date returns.
You can refer to our earnings release for additional details on our third quarter and full year 2019 assumptions.
Now let me bring all of this back to discuss how the positive forces unfolding today relate to our broader aspirations.
At our Investor day in May we outlined our strategic vision and how we plan to execute on it.
By every growth measure we're running ahead of plan.
Our execution is underpinned by a company wide commitment to drive the achievement of key metrics with the same rigor everyday as we would for the quarter or year and you're seeing that play out in our results.
And finally.
Every dollar of invested capital undergoes an arduous ROI Betty.
And competes for future funding based upon payback models and proven outcome.
Our decision to pull ahead investment from 2020 into the remainder of this year stems from data.
That demonstrates that we can ramp those investments effectively.
And a belief.
That the pipeline opportunities in front of us are right for the taking now.
With that I will hand, the call back to the operator to take your questions Jim.
Ladies and gentlemen.
If you would like to ask a question at this time you may do so by pressing star followed by the number one on your telephone keypad. Once again, we please ask that you ask only one question. So we may get to everyone. Our first question is wanting to some on some mono from Jefferies sum up.
Hi, good afternoon, and thanks for taking my questions and congrats on the nice quarter. So one for you Chris and then maybe a follow up for for Robert.
But just as I think about the pull forward of the $10 million of spend how should we think about that driving either incremental leverage or the impact to 2020 guidance that you gave at the analyst day I believe you guided for 7% to 10% EBITDA margin for 2020 and should we also think about that 20% growth for next year, having a kind of an additional tailwind given those investments are being pulled forward and you'll start to monetize those how should we think about the 2020 guidance.
Yes, I think we want to be careful not to give 2020 guidance or updated long term Mama guidance every 90 days, but I appreciate the points. Let me let me spend the time on the answer talking about the areas that we're investing in the ROI characteristics that they have.
So first you beat the inflection that we're seeing right the first half contract signings over 75% growth.
The growth in our pipelines are compelling us to add capacity right. We talked about the enterprise deals per rep right now back to where it was six months ago. It was something we were trying to alleviate.
Get down into the nine.
Eight to nine area.
We're investing in three areas right and go to market side first on marketing in the events.
Let's take one just from our Investor day, where we held one in Manhattan.
On May eight when you look at the Manhattan event.
We had 85 attendees 51 distinct customers 15 million in new pipeline created from there and already six deals close.
So it's it's already generated over a two X return on the investment for us.
Sales development Rep perspective, the other area that we are looking to invest and have invested we're actually finding that those sales development ramps are able to ramp up much quicker than we had modeled back to closer to three months than the six months that we were anticipating.
When you look at North America, as an example, where we seeded those investment first I talked about the North American enterprise growth rate being over 30%.
We have SDR is that have created more than a third of their pipeline right now.
And contributing to over 13% of their close deals and then finally from a quota carrying reps perspective, our data showing us that it takes about 12 months to ramp which is about what we thought and what we expected.
But were bending the curve on the sales cycle. The training that we're giving them we've been able to cut three weeks out of the sales cycle in the year, which we think is pretty impressive so.
We think the combination of all those areas of investment the higher demand that we had the inflection in the market that we're seeing now is the time to be investing in and as I mentioned in the prepared remarks.
We have a high degree of confidence that we're running ahead of a longer term plan.
Great Thats helpful. And then maybe Rob as I think about the large deal activity in particular is very healthy in the quarter.
I'm curious are you starting to see kind of an inflection and what I would describe it looked like deals as well aware when you sign somebody like a delta or T. Mobile logos, you've called out before are you starting to see companies that are their peers in their respective industries look at them moving to liveperson in that bringing new customers to the table as they see potential competitors and how do you think about that impacting kind of this inflection in very large deal activity that we're seeing.
Yes, I mean, if you look at.
The first customer go lives as T mobile and if you look at we just signed one of the four major telcos go into three now with T mobile combined with spread but.
Obviously, we took down another one there we have a lot of activity in that space, we're seeing a lot in the airline space with obviously with Delta and we have some others in the pipeline.
We're just at the beginning.
Globally, when you think about telcos.
Airline banks.
We still have a lot of runway and so yes definitely influences. It once they go live and the competitors who use the opportunity that now like with Delta I don't know if you've used it but you can literally message to Apple business shutting off the call and be put on hold if your airline you see that you want that and you're going to need to do that and we have the best platform for it. So definitely is driving those use cases and references and if you've been to our events those companies and the speaking at our events as references in front of their peers also so.
And our next question is from line of Steve Anders from Keybanc, Steve.
Hi, Thanks for taking my question.
Just wondering what you're seeing on the on the consumer side, that's leading to the pick up in investments there and what's really driving the strength there.
So the consumer side as you can see is doing very well.
You know like small the smallest of small business people want to message.
With these experts we found this is.
Millennial population that wants to message and get expert advice, whether it's.
Health care advice legal advice and spirituality whatever it is we're finding really good demand there and so we funded more activity into that into that operation over the last couple of months and they're doing great. I mean, they have a lot of runway also in their business.
But we did add some funding until the last couple of months to grow that business.
Okay, and then just want to touch on.
Kind of what you're seeing in other messaging channels, we hear a lot of talk about.
Hello, and Android ramping just kind of wondering what you are saying from customer adoption of Facebook messenger, and Whatsapp and kind of this other channels out there.
Yes, so I mean in Europe , we're seeing a tremendous activity with what's up.
I'd say, they're really getting a lot of momentum in that region South America also.
The us we see still a lot of activity in the end what Apple's doing now as I mentioned apples about to launch shortly in the new iOS release chat suggest so basically what it is.
As you know when you click on a phone number off of a website or and you get a little wind little window Pops up says camp for call. It's now going to say capital call. Our message. So think of that every phone number that's clicked on can become now text enabled and then I'll send you write the Apple business chat.
I think it's going to have a huge impact on the industry.
And what we're doing and also it cuts off calls before they even hit the IDR, which is which will be a major major change in the contact center world.
And then the last part obviously, we've got Facebook and.
Facebook messenger in the US is doing okay.
We see more of whats out because of the security elements is encrypted and all that but we are doing pretty good with Facebook here and then you've got all the Rcs implementation globally that are rolling out with telcos that is SMS is now going to become a rich communication service and there is brand ability for brands to connect into that and we are in the middle of wiring into the telcos directly and then Google also has.
Their platform and we have a very tight partnership with Google. So we're doing that we've got we chat we got a couple of customers lost on we chat we got line in Japan, We launched so basically all the messaging front end globally are now available and but once again I think they are at the beginning.
There is.
There are like thousands and thousands of brands on these platforms, yet and there will be millions of brands one day and that's why we're pretty excited about what we're seeing there, but they are driving volume for us and adoption for us.
And our next question this line of Brett Knobloch from Berenberg capital markets Brent.
Yes. Thanks for taking my question just one on the new features that you guys are investing and on the R&D side, specifically with the outbound marketing and in store features can you just expand on that a little bit and how do you really expect that to drive new deals.
Bring more customers to the table maybe in the end of this year 2020, however that rolls out.
Yes, so if our strategy has been up to now its really beachhead in Ontario, and then sat out from care, but when you start sending out from care in sales and marketing and retail.
You've got to have a certain amount of features so if we put the sales and marketing.
To put them in the bucket today.
Thats really about outbound how can we create campaigns that we can send outbound with intelligence. So it's really two parts. One is gathering conversational intelligence that we can say here's a consumer who may want something later on so maybe the inbounded originally with care after care question and four or five weeks later, you outbound to them with some sort of marketing or sales message. So we need the capabilities to how the sophistication to group consumers.
Something to them based on data it could be system data, we know we've been testing some stuff with like.
One of our cable companies in Europe that when those outages happening in an area. They can outbound based on system data to consumers to Tom We know there's an outage were audit you don't have to call us or is the message us of capabilities like that so thats. The outbound the the second part is retail we are in the middle of Rolling.
A couple of thousand stores here in the us with one of our customers in which.
When a consumer inbounds.
It could be cells or even care that can be redirected to a store and then as a store rep, who has rebuilt now aging called an agent console that sort of on an iPhone or an iPad.
And then they can message right from their own devices in the store. So you can imagine we really want to tie that store experience that you message then or even as the outbound marketing campaign that Dennis has come into the store to do something.
And so we're sort of tying the retail marketing and now care operations altogether.
We're also there'll be an addition of social.
Because we've heard a lot of our customers don't want to keep the social.
Monitoring and messaging on a separate group they want to bring it into our platform. So we have.
As part of the platform come September we'll be delivering the ability to bring all the social interactions from Facebook and Twitter into the platform also outside of messenger that is straight out from the social feeds.
Okay. No that helps and then just one more for me on just the nine 1 million plus deals that you guys signed in the quarter.
Well for the first half of 2019. This is this ahead of what you previously expected. When you first gave 2019 guidance or how how are you performing on the large steel front compared to what you initially expected going in 2019.
They are definitely ahead, if you look at the just the sheer volume of deals and not just the aggregate value of them, but it was the highest.
On my sheet here the highest I can go back to when you look at the total number of deals signed but.
Is really nicely mixed between our farmer team. So those those sales leaders that are going out and hunting for new logos I was up over 70% and then up over 30% on the existing side.
So it was it was a nice mix of small and large deals I think as Rob mentioned importantly.
The deal durations are getting longer longer. These are now multi year deals on average that are happening versus if you have 12 18 months ago. They would have been 12 months in duration.
So we're definitely ahead.
All right. Thanks, two questions really appreciate it.
Thank you and our next question is from line of Raimo Lenschow from Barclays Raimo.
Hi, Thanks for taking my question.
Can I get the investments and it makes total sense given the momentum that's in the market. Chris can you talk a little bit about the so we should be seeing we took 10 million out.
Why don't pick up more and are all like what's the what are the chances in Q3, you come back and just say, we'll exceed 15 Robin and Tim just told me through your thinking process. There. Thank you.
Sure Hey, Raimo good to talk to again.
Everything that Weve done now for the pulling ahead of 2020 into 2019 was based upon.
All of the models that we put in place for the first half of the year.
And we look at various different metrics, we look at what is the ratio of sales development reps to quota carriers and we have a ratio in mind that we want to hold too.
We look at the number of deals in our pipeline per rep.
And we have ratios that we aspire to get to that because our opportunity pipeline grew so fast and faster than we were able to hire even though we did a great job on the hiring front, we're back to where we were six months ago.
We'll look at the.
The payback both on a pipeline created basis, how many of the deals are being created how many of them are making into late stage. How many are being closed we look at them on individual per rep basis, and we're getting an idea for how quickly reps can scale interestingly, we employed a new analytical capability that has accelerated our understanding of how long. It takes a rat to scale. So we were waiting six to nine months before to see that first deal closed we now have the ability to detect in weeks based upon the pattern of activities.
And that so we feel like we can be much more fluid in much more dynamic.
It's a rapidly moving market right now if you would have asked US three months ago. If we saw the pipeline growing as much as it did just in the last quarter.
I don't think we would have guessed it would have grown 120% year over year. So it's based upon data it's based upon our experience in the first six months and we're fortunate enough to be able to look back at North America, and see with full productivity looks like that was the area that we first ceded investment as you recall, we put SDR is in the quota carriers in new client partners in.
And that that region of the world for enterprise just posted a 30% growth rate. So we feel like in total we've got the formula figured out and in terms of what it means for the rest of the year, it's largely going to be dictated on the demand environment and if that continues to grow as it is.
Perfect. Okay. Thank you and then a follow up question for Robert them on the Isight. So I'm one of those delta messaging customers and the like where are we in terms of.
On the spending and giving us the right answer from what you see from your clients in terms, maybe let's try and things like where it was like where where are we on that journey.
Well I mean, we designed conversational builder, so that a normal contact center agents, who has conversations can create the automation deploy it and manage it so as I've said in previous calls since we launched it in the beginning of the year is.
When you when we launch and automation, it's about a 70% completion rate and over about a four week period of time with the agent behind if we get into the nineties.
So so basically we are still needs to be human hands to get afford we are releasing.
Vertical template for basically intense to goal. So we've taken our data set and look to verticals in financial services telco and retail and were releasing into the platform that there's like pre pre preset intense and that is the best conversations to get that intend to goal you can still modify it but at least we'll get started on something that we know is based on the data that we have.
I don't think were any place close where things is run on their own.
And you just business like Magic machine that just figures out intense and processes to them, but we have the mechanism to scale very quickly that's why half of our interactions are ready our automated in a very short period of time. So so we have definitely the way to do it.
Perfect. Okay. Thank you.
Great. Thanks.
And our next question is from the line of Richard Baldry from Roth Capital Richard.
Thanks.
Without getting into guidance for 2020, I'm sort of curious if you can think about seasonality now because you typically haven't seen sort of the second half hiring acceleration like you're going to see this year some of the spending coming in in the second half at higher levels. So do you think it materially changes your thoughts on how the patterning on either revenue or expenses comes in 2020.
Particularly maybe on the revenue side, given the faster closings.
And then maybe as a follow up.
Can you talk about these large number of new seven figure deals, how you're seeing the patterning and deployments of those.
You know, it's a it's much more of them coming sort of sooner quicker together get their resources to support that.
There any change to durations of deployments today. Thanks.
Hey, rich I'll take the first and Rob can take the second we're not seeing anything.
In terms of timing or seasonality change in the business.
If you look back at the pipeline right and the close date to the pipeline. There is nothing that would indicate it's.
Heavy back end loaded or front of the year loaded so we're not seeing anything there that's changed.
Over what Weve.
Observed over the last several years.
And on the deployment side, we are part of our hires is deployment, we need more deployment people.
Conversational designers.
So we are hiring more people in the deployment area.
So we do have obviously.
Methods and frameworks to deliver based on what we've done over the last two years or so, but we definitely need more people here to help as we ramp.
These customers and I think.
More importantly is on the hiring side, we have the the client partners and Cps that work with our existing customers and they're currently at a ratio of I think one to eight.
But if you take like a Delta airlines.
Kind of Rep really handle more than one delta or to delta's, let's just say two airlines.
So we are seeing is that.
No we're going very deep with these customers and start just care its conversational rising and automating the business.
So were trying to bring down the ratios for the Cps could be more focused on more of one to four.
One to five ratio, even lower when you see that go deep into the big Big Enterprise, maybe just by work one account for the next three or four years, because they have so much upside.
So that's part of that team that's doing the implementation and we're landing and expanding in those in those very very large enterprises.
Great Congrats on the acceleration.
Thanks, a lot.
And our next question. This line of Ryan Macdonald from me Jim Ryan.
Yes, Hi, Robin Kriss, guys and congrats on a good quarter I guess, just two part question here I guess first.
On the additional or incremental marketing spend perhaps for Chris.
Previously a lot of the customer segments, which you've obviously had some nice conversion data. It seems like the purpose for that was really to help educate the marketplace. Now that you are seeing increased demand in sort of an increased velocity. There is the goal to lessen those number of events or lessen the investment in those events as well as you sort of increased quota carrying sales there and then Rob from a technology perspective, you know with this Apple chat suggests.
Our deflection has been a very popular seller I believe for Liveperson, just wondering what potential impact that has on sort of adoption for that moving forward. Thanks.
Oh, Hey, Ryan good to talk to again on the on the marketing front side. Our team has done to an extensive ROI analysis not just on the head spin on the marketing events themselves and.
Educating the market on the category I would say now they evolve to where their progression and they're closing events.
And they're not just all large scale anymore right, we're increasingly starting to take them.
Directly to customers, giving them their own custom events.
So do I see us decreasing the number Vince no.
I think right now we're we're starting to figure out a formula for what our pipeline looks like how many attendees, we can get there and at what stage in the pipe, they're in and using them as closing in progression events.
And then Rob.
So when it comes to Chubb suggests I.
It's it's also I mean, we do have a lot of deflect would want to call comes in we then offer up press one instead of taking the phone call proceeding phone call get message.
But if we can just take it right that when somebody dials embraer right and Caballos Chattanooga right on our platform. We don't even have to have that step of press one it's kind of like Advair, it's built into the Io into the operating system into iOS. It's just.
I keep thinking what brand in the world is not going to be there, but youre going to start seeing every brand you're going to call.
Or lot of brands recall, you going to see okay, they're letting me do something else.
Ceos are going to see that has a marketing or see that has the carriers are going to see that going like what is what do we do that.
So just from that standpoint that you think about the billing to people with a $100.
That have iOS devices.
They are all going to have access to this I think it will just drive greater adoption in the market in and once again, we're wired and obviously to Apple business chat to handle those type of those types of ramps in flows.
Got it thank you very much.
And our next question is one of Mark Schappel from benchmark arc.
Hi, Thank you for taking my question.
Rob a question for you in your prepared remarks, you noted that you are seeing more opportunities to build a new products and capabilities, rather than going out and buying them.
And I was wondering if you could.
Just give some additional color on what what you see out there thats driving that decision.
Well I think there's two parts to it one is.
Well I think we've taken a leadership position I think we've taken a position on building Liveengage early.
And we've got great talent here that continues to add features to that and I. Just think that talent is some of the best in the industry for what we want to do in conversational commerce. So as we've looked out into the market for other features or whether we're doing an outbound feature we just don't see anything that's compelling to buy based on even valuations that are out there. There's also like the valuations of private companies are fairly high right now and it doesn't make sense to US you know I'd, rather put the money into our people, it's less risk it's going to have a higher return it's fully integrated into our platform and so right now we decided obviously raised.
Over 200 million a couple on February and we're like we should use this capital not all of it obviously, we don't need to but we should use it to deploy and build the things. We know we need to finish in car and to get the conversational commerce, where it should be and even the commerce Angola payments were starting to look at the payment side of the platform.
And all the ability to do payments in messaging, which doesn't exist today.
So we are really focused on how do we bring payments onto our platform because hundreds of millions of dollars.
Is transacted on our platform every year and we're not we're not capturing those on the platform they sort of go off platform.
So there is some big things we're working on.
Without leading that team and.
Many of you met met him and his group.
People are doing a great job globally on the platform.
Thank you that's helpful.
And our next question is from the line of Zach Cummins from B. Riley FBR Jack.
Hi, good afternoon, Thanks for taking my questions and congrats on the strong quarter.
I'm interested in hearing more about the automated food ordering system that you did for a large QSR customer can you provide a little more color around that solution and maybe the potential interest that you would have from other customers within that market.
Yes. So it's this is lets I think pretty cool about what we're doing is that we didn't envision right food ordering.
We envisioned customer care at the beginning if I go wind it back to five years ago. When we start thinking about this concept of this platform.
So we.
We approached one of the quick casual.
Restaurants actually came through all in acquisition, we did with the Congress of convertible they had a quick casual Fridays like on that platform doing a lexus stuff with PGS Friday's and things so through that acquisition, we found a customer that.
We're sticking a little differently, which they're kind of looking at most people just walking in the door and buying there's usually lines.
There is because they don't have an app or they have to have.
Limited use.
And obviously a lot comes through the third party.
I agree as a seamless and stuff like this so.
We just kind of came up with the joint strategy with them that we could do for food ordering with automation. So you know the menu comes up.
You basically you can automate it and buy it and you can have a delivery you walk in and get it and.
It's going to create a more direct relationship once we get people food ordering through that then we can proactively go back to them, we've got something new how about something special for you.
How about a reorder we find like on we found with the TG I'd Fridays in the Alexa.
A lot of Reorders like huge amount of Reorders high return on investment with those so so much more we can do once we're in the pocket of the consumer and there is nothing in between them and the consumer they're not having somebody taken through a third party app.
So that's that's really where we started and these guys are the top 30, they're very larger big brand, we would all know them, but they're like in the top 30 of quick cash flow in the United States. You know they are really well known.
And I just think of one through 29 like we can get a 129 I often think like you walk into a Mcdonald's and.
Have those kiosks and stuff and you're waiting on line and you have to go to a kiosk and the whole thing doesn't make sense.
You should be messaging and we walked in foods there, it's kind of like the Rudy you model in the stadiums that we do you order your stuff comes to you.
So thats the type of thing that we're doing so we'll see how it goes.
They're very excited were very excited I think it will launch in about a month or so.
But we'll see how does.
Great. Thanks for that and a best of luck in the second half the year.
Thanks, a lot thanks Zack.
And our next question is from the line of Jeff Van Rhee from Craig Hallum, Jeff.
Great. Thank you.
A couple from me abrupt so.
On the I guess it is.
Hi live we get a lot of questions about differentiation from peers is a very very noisy landscape everybody is jumping on messaging certainly you're there early.
His tons of noise about bots and automation a lot of it coming from very big brands with deep pockets.
You talked about a lot of the features but maybe just give us a quick pitch on what what are the defendable barriers to entry where where are your biggest advantages when you sit down to pitch a deal what are the core fundamental differentiator is where people just non say got it we're buying from you.
But if I look at the platform first were at where we are integrate into every endpoint out there on the third party endpoints like Apple and Facebook and all that.
We have I think very special relationships with all those front end and we are co developing with them and doing a lot of things I think strategically versus other smaller players or even some big players you will find like an apples case, they've been removed now from the program because they were not bringing customers.
To to the table like we have and so so I think thats a big part is having that strategic relation with the next thing is that.
We know how to take a lot of conversation and automate maybe conversation and make it happen at scale and if you look at our automation capabilities. There were all these startup bought providers, you're right and so noisy for about the last year or so and it's really died down because a lot of branches like pick stuff up and start playing with it and it couldn't deliver on any real scale with it we saw a lot of bad box in the world. We've all seen them, we played with them.
With our technology, it's really about we have a great way to design deliver deploy and manage the bonds at scale and we're able to do with these the agents who normally have these conversations.
We have a lot of integrations with that technology, and so we're able to use AI and Bob I think it a different way that allows us to automate now 30 million conversations a month and then on top of that we have this dataset.
And so having this dataset of hundreds of millions of messaging and chat conversation gives us and our data science grooves away to create more and more value out of that.
As I was saying we got these pre.
Prebuilt intent several that were delivering shortly we have an analytics now.
Part of our platform Thats all intent based so people could like building an intent based business. So all that data and managing it and making value out of it is something I think is very unique to us and creates a strong ROI for using our platform over someone else's and that's why we're I think scaling the way we're scaling today.
Yes, I appreciate that.
Okay, and then just one other sort of area I want to dive a little deeper on the nine seven figure deals in the quarter.
From a number of angles, how many of those were new versus existing customers.
And what was kind of the distribution of use cases.
Looking at left to do the math on the new versus existing but just kind of going off top my head pretty evenly split I'd say.
But to use cases.
Ran a spectrum of care and sales and marketing.
Also is there.
Evenly sorry go ahead, Chris and I was just say also pretty evenly split.
Yes, and where the.
And the and the ultimate use cases.
In the service side, I mean, where these what were the primary pain points with a bulk of these coming in on IDR deflect where the in App was it driven by some inbound messaging.
Whatsapp, Facebook and kind of a little more on the core drivers.
It depends on which market we're in but I view Artiflex is still a big point because people are calling and now they have a way to get out we can move.
Pretty much 30% of call volume will move immediately.
When we implement on the IB our deflect Thats, just people and 30% of the population, saying like I like to take a message that a phone call then behind that.
In App is also pretty big.
A lot of big the telco brands here, we feel a lot of volume over in Europe , though whatsapp huge like we're seeing what's out actually soaking up.
In App and also against other third party messaging platforms Whatsapp in certain countries has 90% penetration, 80% penetration and so the consumers prefer that and they're using that instead.
Got it and so and then if I could also on those deals sort of a typical I'm assuming that there are but I want to just clarify that seven figure our nine seven figure deals and then in terms of the composition of a deal and say you one how much of that is I mean, you've got a heavy recurring revenue model how is that different in year, one how much of the Sps versus recurring subscription revenue.
In most of the subscription it's a small portion 15% or so over the lifetime of the car every year would be PS. It's.
We kind of evenly split the PS hours across the year.
But it's predominantly all recurring revenue are mostly recurring revenue. So no matter if you havent, even even our professional services component has a high subscription piece to it because customers are signing up for our teams that may help them optimize and move them along the transformation journey.
And our next question is one of Koji Ikeda from Oppenheimer Koji.
Hi, Thanks for taking my question guys and congrats on the quarter I. Just a question here on hiring plans and timing so hiring for quota bearing sales reps went really well in the first half in fact, we went beyond the goal, which I think is a good sign for pipeline trends in the future and in fact, you're upping the goal for the year and I think by to around 100, plus and that's a big target and we hear from a lot of software businesses out there that hiring is really tough out there I'm, especially with enterprise reps. So my question is why has liveperson been so successful, bringing on new sales capacity and how should we be thinking about the hiring of the timing of hiring from here on out for the rest of the year and into next year to thanks for taking my question.
And we have had I remember sitting with Rob and some of my colleagues in putting our hiring plan in front of them.
And it was daunting it was daunting on January when we say when do full your hiring of six months and and we outpaced it in may.
And that was because we had a great funnel on Canada Interestingly as just in talking to my head of HR.
A few hours ago and she let me know that on a year over year basis were actually down a million dollars in agency sense. So I think we've built out in internal recruiting engine, that's been able to largely bring on these candidates.
You're right we set a goal at the beginning year 75, we hit 89, and we see ourselves going in excess of 100.
Interestingly.
If you look at North America, and all the hiring that we've done in North America, We've only had one regrettable attrition.
Not only are we being successful in hiring.
But we're keeping that and I think thats a reflection of the onboarding process that we're following the training that we're giving them.
And the continued development opportunities throughout their first 369 months in the company and making sure that they are successful in getting paid but it's like if we get down to its commissions.
These guys because people can make a ton of money like.
Top reps are making seven figures and they've got a whole we I've said as far as the $50 million deal out there there is a $100 million deal out there one day.
And so you have reps that are trying to look at the world like that and that's hard to find and software and then you're in a dynamic market, where you've got coal you've got you know.
Customer, saying, Okay. My competitor went live learn eye on that.
So it just creates a good opportunity salespeople, who want to go where they can make money and ramp and scale themselves and their commissions and this is a good place for that right now.
So.
Simplify salesperson [laughter].
And our next question is from the line of Peter Levine from Evercore Peter.
Great. Thanks for taking my question.
Yes, just to piggyback off of.
The prior questions on the enterprise side, it seems like a pretty attractive proposition for partners to want to work closer to roll size. These deals get larger more transformative. It would seem like you have some currency with implementations deployments that are kind of starting to build up.
You're talking about your conversations that you're having or how are you accelerating those conversations today with the size if not already having them.
We have a good many of the big ones already all partners of ours and joint selling that doing some implementation for us we do have we'd like to get more pushed out.
If we can move more the implementation.
And transformation out to partners, it's our goal.
And so I think we're doing okay job three us I think we are very focused obviously on perfecting things and getting things right for us and then taking that knowledge and getting it out the partners and we are doing we have a lot I think a long way to go.
To get them to scale with us, but that's the opportunity right. Now is we haven't really even turned on the partner network has held on the enterprise side in the Midmarket, they've got hundreds of partners and they are doing really well, especially internationally, but in the enterprise side, they're doing good business.
But there is a ton more to do with them I think I suppose that is done.
Lot of opportunity there so yes.
Great and just a final question here.
Yes, obviously.
It's your expansion is is a focus of yours.
From a number of software companies this quarter that Dave.
What is the slowdown in Asia Pac EMEA, well not so much a slowdown, but just a long dated sales cycles, and obviously would be a mix between execution and some macro issues, but you wouldn't obviously what language, we chat, let's use in Asia, but more of a sanity check just to see how that region is performing.
Versus your expectations. Thanks.
I mean, we feel good about a pack right now.
International operations are doing well.
We have a new leader over in Japan, who took over the reins a couple of months ago has done a really great job.
We have I mean just closed.
A ton of really quality brands.
Retail banks.
Calicoes. So we're seeing some good stuff are actually going to make further investments with what Chris was talking about the $10 million, we're going to put more money into that region and specifically into Japan, right now and the other areas. We have Singapore now we have a person and so you know we're only at the beginning of all of this so its we're not feeling anything right now in markets. It's just it's our ability to focus fund and execute that that's our risk. That's how that's not like macro that it's we have to focus fund and execute on whatever everything we do so each market is is a good opportunity for us to growth.
And that's what we're doing with it.
And we have reached the end of our call today I will now turn the call over to Robert Locascio for closing remarks.
Thank you operator, so just to end with a few key points.
We are seeing unprecedented demand and activity in the conversational commerce space and this is obviously translating to record contract signings and surging sales pipelines.
You know the industry and our business is definitely at an inflection point and were being presented with an opportunity to compress the time frames of how quickly we can deliver on our vision and transform the brand to consumer communication and relationship.
Im really confident that our investments in the increased investments.
And we don't take it lightly.
Making these investments but that.
We need to make them that they're going to things that are known these are things that are salespeople product and things we know our customers want from us.
And finally.
As I was saying before we have five airlines globally and three in the U.S.
But think of those hundreds that are going to need just in that vertical conversational commerce enablement.
And this goes for every industry globally.
And this is why we have such a tremendous opportunity ahead of us and we're working now to just accelerate the overall momentum of the business and just capture the market as quick as we can aligning with our shareholders and obviously all of us even in this from our shareholders.
I think all of us want to get every customer on our platform. We want every airline we want every bank. We want every telco, we want every retailer and that's and that's what we're after right now and we can see we can do this.
We just need to focus fund and execute so with that thank you and we'll see you on the next quarter.
Ladies and gentlemen, this does conclude today's conference call. We thank you greatly for your participation you may now disconnect.