Q2 2020 Earnings Call

Thank you Andrea and good afternoon, everyone welcome to our second quarter fiscal 2020 conference call with me today are Howard Bilerman C O VX Teekay bread, CFO and Jim Steel President and Chief revenue Officer before we begin I'd like to remind everyone that this call may contain forward looking statements, including statements about revenue and non-GAAP net income guidance margin Revvy rep retention market opportunities capital expenditures this performance financial outlook and other non historical statements. As further described in our press release. These forward looking statements are subject to certain risks uncertainties and assumptions, including those related to ex growth evolution of our industry product development and success market opportunities in general economic and business conditions, we undertake no obligations to revise any statements to reflect changes that occur. After this call descriptions of these and other risks are discussed in our reports filed with the SEC. During the call. We do also refer to non-GAAP financial measures reconciliations.

And with the most comparable GAAP measures are available in our press release, which is available at investors Dot U.S. dot com with that well begin by turning the call over to Howard.

Thank you Conrad Hello, everyone.

And welcome to our second quarter earnings call. We are pleased to report another solid quarter for JAKKS done excited to share our quarterly highlights driving these results revenue grew 32% over the second quarter last year and it exceeded the high end of our guidance.

Honor in revenue during the quarter grew 42.4% year over year and the number of structure facts, which is an indication of engagement and usage grew more than 60% from the year ago quarter.

We continue to see some of the best known brands in the United States, Europe , and Japan choose your next during the quarter, we sign contracts with leading brands like travelers Liberty Mutual you see L.A. Hill Mack Big lots.

For Saatchi and Lloyds pharmacy.

We also signed expansions and renewals with big customers like Fedex, He TNT Baskin Robbins.

Metro Pcs and BBB a compass.

In fact last week, we signed a contract with my favorite Broccoli Cheddar soup maker Campbell.

This is the first time in our company's history that we've closed the contract with the CPG company, that's consumer product goods that doesn't have any physical store locations.

How are we able to sign a CPG company with no physical store locations, one simple word search.

Search is changing from links to answers and because it is people were being retrained ask longer questions. Instead of just typing in simple keywords, there not only asking longer questions are also asking questions in more places. The fact is that today's customer journey starts with the question.

And if a brand doesn't answer question someone else will.

So what do you need to answer question. What you need is the knowledge graph and this is a structured database that contains facts and their relationships in a way that can efficiently be surface to answer your question.

Turns out JAKKS powers, the knowledge graph for every one of our clients and collectively these contain more than 200 million structured facts and that gives us a huge head start and be able to deliver a breakthrough new search product, which we call yet answers, let's take a step back to the site search products are not that smart and they're not that useful most sites. When you see that magnifying glass you type in a query and you get junkie result.

Right for example go to.

He procter and gamble's websites PG dotcom.

The very first search result for their popular products. If you search for tied just type in tied it gives you a Vietnamese result, you can't find what you're looking for and when the user gets a result like this they just go back to Google and it means tied lost control of the customer journey and that the users unlikely to see a competitor at.

Your next answers is a breakthrough new site search product that delivers a Google like experience for every company. It gives you. The answer is no links the user types and a question on the company's website and yet answers. The question kind of like Google Dot excepted, all controlled by the brand and built on a brands knowledge graph, it's simple to install.

Every single business with the website can use it we're already seeing strong demand. It's an early access right now but already by the end of Q2, we sold eight answers led deals and that's pretty impressive considering we are still in early access now like Campbell, we signed a large health care company to answers. The number one use case in visiting a health system website to find a doctor and these are the kinds of questions that you have to answers.

Answers is the latest expansion of our platform with answers we've got three products that didn't the knowledge graph answers listings and Peter we've got answers. We just talked about that delivers a site search experience on yet customers websites, where customers can search the knowledge graph and get answers pages lets you X customers create a page for every answer which is the best practice for ensuring the right information shows up in a search engine.

And listings integrate the data into knowledge gap directly into 150 voice assistance map App third party services, like Google and Amazon being Facebook and many more.

And because the market opportunity. So large we think that answers is going to be a natural entry point for many companies potentially available to any company with the website no longer limited to physical locations. This will significantly increase our total addressable market.

We're launching answers in general availability at AMR I am so excited to share more details.

About answers on our next earning call.

With our mission to perfect answers everywhere you Act is leading brands into the future of search we've been doing this for more than a decade, we always have and we always will.

And with that I will turn it over to Jim Alright. Thanks, Howard we continue to build momentum across the business in all geographies vertical market enterprise in mid market. We continued to win new business. This quarter closing over 90 deals with at least $100000 in contract value and 10 deals that resulted in at least $1 million in total contract value, including new logos and renewals of existing customers versus seven deals the same period last year.

International did exceptionally well in Q2, and our investments in Europe , and Japan are starting to pay dividends.

In Europe , we added big logo names, such as Caledonia, Versace, Ted I, Arcadia group, and DRG show and significant expansions at I.W.G. Regis Philip Morris in bar media.

Japan's most impactful deal the quarter was planted.

One of the largest foodservice companies in Japan.

With international revenue only 17% of total revenue in the quarter. There is still much to go after.

Along with our international investments, we continue to build and invest in enterprise and mid market sales teams commensurate with the opportunity we see ahead.

Total quota carrying sales reps increased nearly 35% year over year to 203.

And under Patrick Blair's leadership, Weve made significant progress in building out our mid market team, where we're attracting the best people in the business to build a solid foundation.

And speaking of attracting the best to the team.

I'm pleased to announce that we hired my former colleague from Salesforce, Mary Fratto ROE as our new SVP and Chief customer Officer.

Mary will lead our global client success professional services and consulting and client delivery organizations. She will be responsible for the entire end to end client and partner experience with the text.

In marries most recent role at Salesforce. She was senior Vice President of the customer success group responsible for the Americas professional services, where she oversaw a team of more than 1300 people.

During her more than 13 years at Salesforce Mary was responsible for more than 1000 customer implementations globally and work directly with the company's largest and most complex customers.

She also led the global Advisory services Division of the Salesforce success cloud advising customers on the most strategic solutions for their businesses.

I worked with Mary for more than a decade at Salesforce and obscene marries incredible impact on customer success first hand.

We are so excited with the upcoming answers product launch and the customer energy enthusiasm going into onwards. So now I will turn the call over to Steve to walk you through the quarter in more detail.

Hey, Jim It was a solid quarter and a quick note before we get into the numbers I just want to remind you that we adopted a FC six so six in the fourth quarter of the prior year and AMC 842 for lease accounting last quarter.

Our second quarter revenue grew 32% to $72.4 million that's above the high end of our guidance our small business revenue just for reference was $3.2 million for the quarter.

Unearned revenue, which we formerly reported as deferred revenue prior to our adoption of six so six increased 42.4% from the year ago period to $122.7 million.

Due to the Lumpiness of our enterprise business will see variability in this balance throughout the course of the year and as a reminder, last year. Our unearned revenue was high due to our largest initial deal ever signed Morgan Stanley .

As of July 30, Onest, we had $259 million in remaining performance obligation or ARPU, which is relatively unchanged from Q1.

And our backlog includes another $32 million of revenue that's under contract, but subject to accounting exclusions on that basis, we have $291 million and estimated future revenue under contract.

Our overall net revenue retention dropped about to about 108% and thats below our traditional 110%, but it was driven by some mergers a partner in Europe that was closing business and one of our other European partners, who serves a very small end of our business line reduce or license count as renewals to their solution slowed.

We do expect overtime to return to our more traditional levels.

Gross margins were 73.4% this quarter, a slight decrease of 100 basis points over the second quarter last year, and that's driven primarily by the timing of some onetime publisher fees. We remain comfortable that gross margins will continue to be in the mid 70% range.

Total opex increase from 60.3 million last year to $83.4 million. This quarter. The primary drivers of this increase was the overall growth in headcount, including the increase in our quota carrying sales rep count along with the new leases in New York District of Columbia and London.

We will be incurring double lease expense in New York until the completion of our new global headquarters in 2020.

Second quarter net loss increased from $19.4 million, a year ago to $29.3 million this quarter.

On the basis of our 111.8 million weighted average basic shares outstanding net loss per share of 26 cents. This quarter compares to a 20 cent loss a year ago.

non-GAAP net loss, excluding stock comp stock based compensation increased from $8.4 million a year ago to $12.7 million this quarter.

Our non-GAAP net loss of 11 cents per share this quarter compares to nine cents in the year ago quarter and was one cent favorable to the high end of our guidance.

Please refer to the press release, we issued this afternoon for a reconciliation of GAAP to non-GAAP results.

Cash cash equivalents and marketable securities totaled $274.2 million as of the end of July 31, 2019, net cash used in operations for the second quarter was $11.4 million as compared to net cash used in operations of $4.4 million in the year ago period.

The biggest drivers again, where the increase in head count and our new leases.

We've demonstrated over the last fiscal year, our business model is capable of generating healthy cash flow.

As such we decided to accelerate our investments in people and facilities in 2019.

We've already begun to build out the mid market sales team, which will start to come online next year.

The ramp in sales cycles for a typical mid market seller about half the time of an enterprise seller and these faster ramp times in overall size of the Midmarket opportunity should help smooth the revenue Lumpiness, we experience from land in larger size deals within the enterprise channel over the next few years.

As to guidance in the third quarter, we expect revenue to be between $75.5 million and $76.5 million and in the same period, we anticipate non-GAAP loss per share of between 18 cents and 19 cents, which reflects investments we need to make in facilities people and Oh by the way onward is an event in Q3.

This assumes a weighted average basic share count of approximately a 113.6 million shares turning to the full year. We are raising the revenue range that was 297 million to 300 million. It's now guided to 299 million to $301 million were tightening our existing non-GAAP net loss per share range of between 41 cents and 43 cents. This is based on an assumed basic weighted average share count of approximately 111.9 million shares.

Let me turn it over to Howard about onwards in October .

Alright, and just nine week over 1600 marketers in search technology leaders are going to join you exit the Marriott Marquis in times square for onward 19, and this years theme is the future of search it's October 29th in Thirtyth.

Our attendees are going to hear from Magic Johnson from Seth Godin from experts in today's leading technology, and then search, including Google Amazon being trip advisor and so many more as we discuss the paradigm shift in search firm Caddick results to brand verified answers and we're going to launch answers. There onward has sold out every year and we hope to see you there and with that operator, we will open up the line for you today.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then too.

At this time, we will pause momentarily to assemble our roster.

And our first question will come from Koji I Quito of Oppenheimer. Please go ahead.

Hi, nice quarter, guys and thanks for taking my questions.

I had a question here on sales capacity, so the business increase in sales head count 35% year over year.

And that's really great considering we're hearing the hiring environment is really really tough out there I was wondering to comment a little bit about the head count between the enterprise and the mid market segments, and maybe comment a little bit on that 35% growth was that target or was that on target with the plan or maybe it was that a little bit ahead of plan, we're behind behind plan and other follow up for you.

Yeah, So koji a couple of things here.

Obviously, we continue to focus on enterprise and we've been hiring a number of enterprise sellers, but the the big growth is obviously in mid market. We've got Patrick Blair here. He is world class is building out that kind of business and a lot of the sellers. We hired over the last couple of weeks have been midmarket sellers.

But we are on our targets I mean, we're hitting our numbers we feel good about it the recruiting environment, you're right. It's hard but we are being with the leadership we have in the business model that we have we're able to attract great talent. So.

Feel real good about where we're going and the sales capacity needs to get built up.

So you will talk about productivity and I'll sit there and say Gee I am not in a 32 NFL markets. You've heard me say that before I keep encouraging Jim to go to more markets, but New York Chicago, San Francisco, Dallas, That's a start but we need to be in a lot more markets. So we are going to continue to recruit into as Howard described some really exciting products coming up in the future.

Got it thanks for that and as a follow up just how should we thinking about the pace or maybe the cadence of hiring for the rest of the year. Thank you and great quarter. Thanks. Thanks for taking my questions. Yes, no cause you. Good question I mean, it is a process and so it does take a little bit of time and we are doing global because we are also hiring people in Europe as well. So we have goals we've been on track on those goals and I don't see any reason why we won't continue to be on track with those goals till the end of the year.

Our next question comes from Novid Khan of Suntrust. Please go ahead.

Yes, Thanks a lot.

Maybe a quick quick clarification on the on the sales headcount.

I guess, it's a pretty robust pace of hiring but if I had to think about if it's if you are leaning more towards.

Mid size versus enterprise.

Yeah that is it more on the midsize head count, that's making up the new hires or how should we be thinking about that.

So I think a couple of things here. One is we've never had a mid market. So the numbers you're going to see obviously show. The fact that we're starting from zero in building that but we are still hiring enterprise sellers and putting in regions and like I said, we're not enough cities in the US let alone Europe . So there is a there is a conscious balance there it just looks like and you're going to hear the numbers look grand because mid market as you know our smaller deals with more people, but they turn quicker cycle. So that we're looking at both and obviously, you'll see numbers that will keep coming up so I don't know I don't know other than to say when we fire grades when we find great sellers were going to hire them and it's not going to matter, whether its enterprise or mid market.

Thanks, and then.

Thanks for breaking out the end.

The legacy SMB revenues.

Can you talk a little bit about the growth in this enterprise how.

I think last quarter you said.

Enterprise had gone close to 40% is empress because growing somewhat in the high Thirtys is the right way to think about it.

Yes, I think if you look at our Q2 there is a couple opportunities that we had one is we had a monster Q2 last year. So our compares our if you will for this quarter bit challenge because when you drop a big deal like Morgan Stanley and it's tough to replicate that in right right now, which is enterprise business, which is timely and deal driven so I wouldn't read too much into the changes in our growth rates in enterprise. The team is doing a great job. They are hitting their overall marks and we feel comfortable about where we're at with that it's just that we had a monster compare last year and we feel really good about pipeline and where were going for the rest of the year.

Great. Thanks, guys.

Our next question comes from Brent Bracelin of Keybanc. Please go ahead.

Hi, Great couple of questions if I could I'll start with Howard. This is more of a technology question, but it does look like.

Google did announce changed their core algorithm I think that was back in June can you remind us when Google makes big changes to the algorithm how does that impact customers and then how does that impact your business as well and then couple of other follow ups. Thanks.

There is no real impact because we do Brent is help customers organize all the facts and their knowledge graph and build pages and also think them into map. So there's there's been I think dozens of changes all the time and.

And there were focused on is getting the right answer to the end user when someone asks a question about Burger King we want to make sure that the correct answer is there and googles algorithms are going to always try to help the user get the right information. So we don't see a business impact from from algorithm changes and Google.

As we're focused on getting the right answer is out there.

Super Helpful. And then I guess shifting gears to Jim here on kind of the answers product I know how it sounds excited about it we'll learn more about it but I was just trying to understand as you think about just a packaging pricing how should we kind of think about answers is the intent to lead with the answer suite.

And that becomes the main product.

Bundle walk us through kind of packaging pricing and positioning around kind of the answers product.

You know it certainly seems like there is a lot of interest there, but just want to understand the go to market around it.

First off the go to market is fundamentally a little different because the Tam for answers. It every single business that has a website every single business and as the ones that need to be able to answer a question and that's our opportunity. So instead of being limited to accounts that had physical store locations or had physical people at a place now we have significantly increased the number of accounts that we can go after and that change is how you think about doing marketing and doing some demand Jan in doing thought leadership and how you get out there to drive inbound demand. So those are all opportunities to do more on top of what we are doing now to to get our reps bigger territories into get than doing more stuff. That's the first thing now in terms of the pricing and packaging you will have to come to onward and stay tuned for what thats going to be I'm not ready to announce that the prices are going to be but you can think about it being almost exactly like.

We sell pages in listings today, where a customer is guided by our knowledge graph platform price per entity per year.

Once you have an entity they could see a doctor in the knowledge graph then you paying additional license fee. If you want to put him in listings you pay in additional license fee. If you want to build a building the page and if you want that entity to show up and answers you'll pay an additional licensee for that too. So it's going to be all built on the knowledge graph platform to know the answers is our third product that you can now buy on top of knowledge graph. In addition to listings in addition to pages.

Got it Super helpful. And then Jim as you think about a much larger opportunity around answers.

Are you rethinking kind of go to market at this point.

How are you.

You broaden the reach.

Well definitely as Howard mentioned in any company that has a website, we talked about CPG and use the Campbell's example, it it opens up a whole new set of opportunities for us and many many more accounts that we.

In the past if we were looking at our market opportunity like we described in the S. One and when we went public a couple of years ago. It was all about well within Google maps are a 100 million companies in Google maps, and we looked at that as about a 10 billion dollar Tam now completely changes because you have all these companies that don't not location based necessarily they but they have customers consumers that are getting on the website that want answers just like they go to Google to fine and we want to give them that seem experience that they have when they are in these third party search engines. Once you get to websites. So that it improves that customer experience and ultimately has a higher conversion rate to close revenue for that company. So our.

Our market in part of why we're adding a lot of salespeople as we see tremendous opportunity.

In our existing market with with listings and pages, but now we're basically adding a third.

Major application on top of the platform that knowledge graph and all all leveraging the same kind of dataset.

Got it helpful color there just a couple of quick ones here for Steve here, obviously, if I wanted to start with calculated billings. This has been a pretty volatile metric if I look back over the last couple of years hasn't been all that indicative, but it is the lowest growth rate. We've seen in a couple of years. So was that just tied to tough compares.

Was linearity a little different this quarter or was it the partner driven staff walk me through the factors that impacted billings kind of this quarter.

And then just could you touch on gross margin that also fell I think below 75% for the first time in a while so just walk me through those two issues. Thanks.

So as you know I'm not a big fan of year calculated billings number because we have a mix of billings between quarterly semiannual monthly etcetera. So it's not really reflective and interestingly enough every time, we beat your number it's been great. In every time, we Miss your number it's a problem and I don't think Weve had any problems with billings. This quarter were on our plans we feel really good about what's going on I. Just think that metric is very volatile for a small business of our size, primarily when it's driven by large enterprise deals that they in of themselves timing is everything so by how to deal last quarter or this quarter that moved a couple of days. Your account number would be very very different. So I don't really focus on that count billing, but I do look at making sure we're generating growth in deferred or unearned revenue as a new thing and we did that and ARPO. Our backlog continues to look solid so I can't help you on the calculated billings issues there, but I think we're on track for where we want to be in terms of gross margins.

We've always said that.

We do pay R&D fees for some of our new publishers into Tim depending on the timing youre going to see that number move up and down I still feel really comfortable that we are in the mid seventys as a gross margin it's going to stay there. We brought on some interesting new publishers and made some payments this quarter and they'll manifest themselves as you see it in the in the ongoing in future years for this stuff, but there is no fundamental change in gross margin assignments, a timing issue in terms of payments.

Very helpful color and ill cede the floor. Thanks.

Thanks for asking the question.

Our next question comes from Mark Mahaney of RBC. Please go ahead.

Alright, two if I could just keep following up on that gross margin so Steve but it did sound like there was something one time ish is it at one time ish publisher fee issue is it just a timing issue just clarify that and then I want to get back to I know somebody asked about the answer is yes dancers and package and pricing and I guess, you're going to hold off on providing a lot of detail on that but I think you said there were eight x. dancers deals in the recent period or in the last quarter. So maybe let me try this would those two were those add on sales to existing customers are those were those lead sales to customers you would hadn't had before and would one of those have been was the Campbell's.

Soup company was that one of the customers since that would be more natural for them. Since they don't have the retail locations anymore color you can give on what the market opportunity I get the market opportunity, but what the what the what the go to market strategy or the success has been so far with that thanks.

So mark it's kind of funny when you think about what answers. It structured serves every other product in the World Index based search which gives you document back when you search for something Thats actually how Google works, where theres two parts. The Google If you search for Mcdonald's. The very first thing you see might be maps and knowledge cards that structure to answers powered by knowledge graph and then under that you see links which are powered by their index. The search they blend them together to give the user.

Certain experience and so with all the existing sites or step out there. Its all index based or document search and we're yet has an enormous.

Advantage in a head start is in the isn't structured search which are all powered off a knowledge graph for every single one of our existing customers. We havent knowledge graph that contained collectively more than 200 million facts and so the ability to give an answer back from structure comes from having all that structured data so for any of our existing customers, it's pretty straight forward for JAKKS to spin up and answers.

Instance, and be able to answer questions about their business because we already have their knowledge graph, we already have their data, we're putting into Google we're putting it and all these other places and so we can sort of do a demo with answers kinda almost I don't want to say totally done, but a pretty good working demo and say hey, let's let's run a quick say third challenge run if your PNG go ahead and search for tied on your own site and you're going to get Vietnamese and all these weird results back Thats. Your number one product, it's kind of a weird Brazil for your end user and by the way your website featuring prominently your search about could threaten the mill now let's flip this around and run a search that gives you. The actual answer gives you information about the product and availability that the product. It gives the end user that customer the the answer there and that is index search versus structured search and so in our case because we already have all these knowledge graphs, we've got a huge head start for any existing customer of JAKKS.

Getting answers that's going to be a core part of our go to market without question, but in addition to that you have the potential new logos here is.

You've heard Steve say, you've heard Jim say, it it's a significant amount more than than we've ever been able to go after before and of the deals. For example, Campbell soup is an entirely new logo, we never had any relationship or the ability to you know they don't have physical store locations. As you have this category CPG. It's endemic of the fact that Oh My Gosh every single one of these brands is the website and people are hitting on all the time and they're searching for stuff and getting junkie answers and when they get a junkie answer they go right back to Google and then Google So as a competitor and the Companys lost control of the customer journey. They might have lost the customer and that's not a good thing and so we can show up with something that just works is simple to install now when it's a new logo, we've got to get the information into the knowledge graph for an existing customer we don't have to do that although a core part of the packaging here is hey go ahead, let's take a large hospital system. They may want to start with with doctors and then as they see the services that are.

Are coming in that they are not answering it people are searching for example for symptoms. They may want to add that to their knowledge graph they'd have to pay for additional NDS any licenses in the knowledge graph and it answers and there will be a whole program around how that how thats all going to work. So we see a great feedback cycle here between the ability for someone to to within a company to see a question being asked and to put entities into answers and into the knowledge graph and I think you may have asked also asked a question about gross margin yes.

So on the gross margins Mark these are onetime engineering payments that we paid a new publishers timing is sometimes uncertain because it's it's when they completed and so we had a we had some one time publisher payments that came in at this point in time, and they're new they're new publishers and you're going to have to come to onward to see who they are we are very excited about it yes.

Okay. Thank you Stephen Thank you Howard.

Yes, yes.

Our next question comes from Mark Murphy of JP Morgan. Please go ahead.

Hi, Good afternoon. This is Matt costs on behalf of Mark Murphy. Thanks for taking our questions any update you can provide on billing term distributions.

Yearly semi annual or monthly and if you can't get too specific what does the percentage of business billed annually look like.

Today, perhaps versus a year ago.

Yes, we don't really get into that because it does move around I mean, we try and get everybody on the annual but it's also true that some accounts will take quarterly for the first year move to annual so I'd, rather not get into the details because it moves around a lot based on our deal flow.

But I'll just say I appreciate the challenge you have the calculated billings is probably not a good indicator of what we're how our business is doing at the moment.

Okay, That's fair and I know you have.

A few insurance companies as customers that you've talked about in the past they tend to have thousands of seats can you update us on some of the things. These customers are doing maybe the ROI theyre getting additional products that are adopting what the expansion rate those multi thousand seat customers look like.

Sure. This is Jim steel.

We showed I think during the S. One kind of a cohort of a typical actually was an insurance company and we find this across the board where they might start with kind of a base package and then as they look for additional regions.

They expand both geographically as well as upgrade too.

Ultimately, our ultimate package, which includes reviews.

First it's kind of crawl walk run with a lot of these customers they like to start see what the value is they can track the number of clicks. They can see the conversion rate. They know how many phone calls are getting driving directions, and it's a very clear set of key KPI is that they can track to see what that value is so yes, thats a typical I mean, we were very focused on not just insurance companies, but obviously financial services is one of our very biggest industries.

Healthcare is very big as well and.

Food.

Retail and many of these companies start with the base package and they they grow from there the up sell we up sell them too.

Greater value package and they also had the the additional.

Licenses as they expand and now you with answers that gives us a whole new opportunity to go back to these customers and say Hey, you care about providing brand verified answers everywhere not just in the third party ecosystem, but also on your own website. So let's leverage that knowledge graph that Howard was talking about every one of our customers has knowledge graph to power listings and and also.

Pages. So now we can go back and say Hey, we can also help you get the same kind of experience for your customers in the same kind of conversion rates if we.

Provide this answers product.

Our next question comes from Tom White of da Davidson. Please go ahead.

Hi, this actually philbrick be on for Tom Thanks for taking my question.

For Campbell did answers displacing another vendor Campbell's or is this a whole new feature for them.

I don't know the answer to that specific question, but one of the coolest things about site search is that the way we're going about this remember Google blends together documents search and structured search sometimes structure serves can answer the question directly or give you all the information right. There other times, maybe it's better to link to a document that you might have to read for more context. So when you search for many results and Google give you back a blend of both structured search index search together, we are completely and we design our products to be able to integrate with most other sensors vendors. Please answers are structured search on top of indexers. So that we can coexist with another index. The search vendor. So that the end user can get a answer and get links to the documents back without necessarily displacing another vendor, but with significantly enhancing the customer journey, where they started and by the way when someone searching on your own brands website. Those are your best customers.

Those are the people that are looking for the most specific questions that are hunting for the deepest details that when you've got to really give them the answer that they're seeking otherwise if you don't answer their questions somebody else will.

Great. Thank you and appreciate all the color you gave on the Europe and Japan any other.

International countries or regions, you want to give us a little bit more color on.

No I mean, it's been it's been strong for us.

So our northern or UK business has been outrageous a lot of the.

Logos that Jim talked about are names were from northern Europe . So.

So southern Europe , Italy, and France have been very strong with.

Yes, Versace obviously.

Great talent brand we.

How is the donia like Weve.

We've really been strong in Europe , and Japan has really been terrific as well. So we keep trying to get all the men's fashion line because we're hiring so many sales reps they got to get new clothes.

Thanks, guys.

Yes.

Our next question comes from Stan Zlotsky of Morgan Stanley . Please go ahead.

Hey, guys. This is hamza fodderwala in for Stan Thank you for taking my questions.

Just wanted to follow up on the.

On the international question so.

Can you give us any more color as to what percent of revenue.

Is coming internationally.

Today, how fast that growing and you mentioned.

Europe outside of the UK are there any other markets that you're particularly bullish on.

So.

We mentioned before in the second quarter, 17% of our revenue is international.

And yes, definitely the UK is very strong, France, and Italy, and Germany as well we have customers in.

Austria, and Switzerland in other parts of Europe .

And Japan really we opened in Japan, just about a year or a little over a year ago and.

We hired the CEO of Salesforce for for.

Our Japan business and he just did an amazing job in the past year, plus just building that business up so that's the.

That's where we're looking at we don't we haven't really focused on going to other countries. At this point because we have so much opportunity and now with the answer is we've just opened up a whole lot more tam in the existing countries that we do business in and of course, Canada is very strong for us as well.

And of course, we have we have customers who have locations throughout the world I think we talked about a 100 and some odd countries 150, or so countries that.

Have you next.

It is driving there.

Local listings in those countries, but we don't have necessarily operations and all those countries.

Got it that's helpful and obviously macros.

Very top of mind for a lot of companies and investors are you seeing any.

Maybe maybe signs of.

If no weakness like longer sales cycles or anything unusual.

Either internationally or domestically at all.

Yes, I'll take that this is Steve you know our business has been so strong and I think we're doing very well no macro influences at all other than some of us have to watch CNBC and lots of stock market go up and down but that doesn't influence real business. So nothing on our horizon, we feel very comfortable about where we're going and the business that we're talking about and sales cycles are not getting longer obviously, we bring in mid market. We address a whole nother market sell saw sales cycles are actually shorter. So we feel really good about where we're going and these particular markets regardless of other influences outside of that.

Got it and just one more question Steve.

On the ARPU metric you mentioned that it was.

In line with Q1.

Yes.

Year on year growth for that metric.

Sure if I got it yes no.

We did adoptive method that didnt provide year on year growth that you'll start to see that obviously next year, we needed to implement it fairly quickly because we became an accelerated filer. So.

All we can do is provide you that now.

Okay. Thank you.

Yes.

Our next question comes from Brett novel of their burn capital. Please go ahead.

Hi, guys. Thanks for taking my question.

The person's for Howard I think in your prepared remarks, you talked about how you're seeing an inflection point in that business and in particular going from.

Product specific company to more of a platform solution you talk about the benefits efrain.

Sure.

With our new answers products.

It sits on top of the knowledge graph every time, a customer signs up or buys one of our three products moving pieces or answers they have to buy the knowledge graph platform. They have to put the entities into storage to be able to power those entities and then by an additional license in listings are pages or soon to be answers the more knowledge their customers, having the platform the more valuable each of those products are number one and then also it's easier for us to come up with new products like we just did with answers and with answers we have a huge head start and be able to sell that to all of our existing customers that are already on our platform.

Okay. Thank you and then just a I guess a clarification question. His answers the same thing as you think when you first announced that.

Correct Thats to the official brand think was our beta name.

And after we get out into the market.

We have coined it ex dancers.

Okay. Thank you and then maybe just some commentary on on word could you compare maybe the pipeline you have coming to onward versus the pipeline you had coming last year.

I don't know if you can give specifics or not.

And I know Theres a lot more people.

It's a bigger I'll tell you what were you there last year.

I was.

Yes, when we killed off Jim.

It was so popular a number one I'm going to be the biggest conference in Germany to Mexico has asked us to repeat that exact keynote in a week in Cologne in front of 10000 German marketers. So if anybody's in Cologne next week, we'll see there but about onward.

Couldn't do it the same facility, we yes, we actually did.

We are asked not to come back. So we'll be doing is the Marquis, which I love them could Marriott the customer yes.

What I really just don't like the carpet there despite the carpet, which looks a little bit like import code right now we're going to be.

I think.

Having a bunch more people relative to last year. It is capacity is a lot bigger.

Okay got it helps.

And then maybe one for you.

Can you just talk about your view on where do you see that retention going towards the back half of the year.

Yes.

We've had no problems in our enterprise and mid markets, obviously, just getting going so it's hard to comment on that but I think we'll build that back up like I said, we had one of our partners. Just go out of business. That's that's going to take some location. We've continued to have some mergers and acquisitions go on it took some locations down keep in mind, we have a trailing 12 month count so it'll take a little bit of time to move that back but feel real comfortable there's no systemic issues here. It's just kind of the normal course of business when you're dealing with large companies.

All right. Thank you guys. Appreciate it look forward is interesting.

Yes, she had onward downward.

Well. Thank you guys that includes our call for today, we will continue to conversations throughout the quarter operator.

At this time, we will now take you back to the onward 19 Peter.

Oh Oh.

[noise] our goal with bomb were.

Next you.

Fire you.

Mhm.

As we are sure in a new era of Intel.

Powered by knowledge.

[laughter] future, where every one of you in this room well have a smart database the answers questions in a structured way.

[noise].

[laughter].

Oh, yes.

The conference is now concluded. Thank you for attending today's presentation you may now disconnect.