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spk03: Thank you for standing by. This is the conference operator. Welcome to the LiveVox Holdings first quarter 2022 earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Alexis Watt, Vice President, Head of Investor Relations. Please go ahead.
spk00: Good afternoon, and thank you for your participation today. With me on the call are Louie Summey, Chief Executive Officer and Co-Founder of Libox, and Greg Clevenger, Executive Vice President and Chief Financial Officer. Before we get started, I would like to remind you that comments made during this conference call and webcast contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. Any statement that refers to expectations, projections, or other characterizations of future events, including financial projections or future market conditions, is a forward-looking statement. The company's actual future results could differ materially from those expressed in such forward-looking statements for any reason, including, without limitation, those listed in the risk factors section of our SEC filings. LiveVox assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. Certain information discussed on this conference call was derived from third-party sources and has not been independently verified, and accordingly, the company makes no representation or warranty in respect of this information. During this conference call, the company will discuss non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP financial measure can be found in the earnings press release, which is available on the Investor Relations website, investors.livebox.com. A recorded replay of this call together with related materials will be available on our investor relations website, investors.liveox.com. LiveVox's earnings release and Form 10-Q for the period ended March 31, 2022, will also be available on the company's website. With that, I'll turn the call over to Louie to begin.
spk06: Good afternoon, everyone, and thank you for joining us. My name is Louie Summey, and I'm the CEO and co-founder of LiveVox. Today, I'm pleased to share with you our strong start to 2022, as well as our plans for continued success throughout the year. I'll begin with summary financial results. Total revenue for Q1 was $32.1 million, which was at the high end of our guidance. Contract revenue came in above the high end of our guidance, up more than 21% year over year. Usage revenue came in at the middle of our guidance range. Gross margin came in above guidance at 60.4%, and our EBITDA results were at the mid-range of guidance as we continue to see benefits from completing the migration of our platform and 100% of our customers to the public cloud. As a result of our go-to-market investments and positive dynamics in the CCaaS space, our pipeline is up over 40% versus this time last year, and for Q1, New logo wins are up more than 25%. Bookings are setting records as well, with year-to-date bookings up over 30%. We continue to see strong momentum in the number of full enterprise opportunities, which we characterize as customers taking 10 or more of our products, now comprising more than 15% of our customer base. The number of products taken by new customers in Q1 is up 30% year-over-year, which we believe is a testament to our easy-to-deploy, seamless omni-channel approach. Net revenue retention improved significantly to 113% in Q1, up from 105% last quarter. And lastly, our differentiating digital and AI products continue to be in high demand. Digital revenue now represents 20% of our business, up approximately 50% year over year, and we signed four new AI virtual agent deals in Q1. Let's pivot to sales and marketing. And today I want to focus on two key areas of our go-to-market strategy. First is our continued traction building relationships with master agents. As a reminder, Wybox primarily grew in the past through direct sales efforts. Over the past year, we've signed agreements with seven master agent organizations. More importantly, the seasoned team we brought on board to grow these relationships has made significant progress. We're a top five CCaaS partner at our two largest master agent partners, and the number of partner-driven demos has increased over 60% year over year. We recently announced the launch of Activate, our purpose-built channel partner platform that easily enables access to current and prospective partners to sales enablement materials, technical guidance, and competitive incentives to help market and sell Livox's blended omnichannel capabilities to new customers. I'm excited to share that we continue to see positive momentum from these efforts. While last year's bookings from master survey agent opportunities were approaching 10%, they now represent nearly 15% of our pipeline, And based on recent activity, we anticipate that number to continue to grow. The second key go-to-market point I will share, which is essentially the next phase of our strategy, is our expanding partnership ecosystem. This includes systems integrators, VARs, and strategic alliances, many of whom are technology resellers. Livox is in a unique position to become a preeminent partner with resellers looking to add CCaaS to their capabilities or offerings. as there are numerous advantages our platform brings to the table. First, and I shared this on our last call, the LiveOps platform and our customers are 100% in the public cloud. More specifically, Amazon Web Services or AWS. This gives us and potential partners a number of strategic advantages. It enables us to offer best-in-class reliability through AWS availability zones and an active-active architecture. and it enables us to quickly and easily scale horizontally to support the largest contact center organizations. Second, as a result of being born and bred in the financial services industry, Livebox's security and compliance protocols and features and functionality are unmatched in the industry. This is becoming table stakes for larger enterprises migrating to the cloud, as we have seen with our financial service clients. Third, Livebox is an out-of-the-box platform. Comparatively, it's easy to implement, easy to orchestrate, and easy to optimize with a rich feature set. Perfect partners seeking a platform that's easy to demo, sell, and support. We believe this additional phase of our go-to-market strategy can have significant positive impact on our bookings and revenue as we move into 2023. In fact, in the next few weeks, our Salesforce connector will be available in the Salesforce AppExchange where we've already seen new revenue opportunities. And we recently signed a partnership agreement with NuStar Inc., a transunion company that we believe will be mutually beneficial. It's important to note that as we've scaled our sales and marketing effort in the past and invested in increasing our overall awareness in the marketplace, we've experienced a clear uptick in partnership interest. As these opportunities continue to emerge, we're poised to leverage our sales and marketing effort to support growth in this area. As mentioned, we continue to add significant new customers to the platform, and I want to share a few examples. The first is a large vacation resort management and rental organization. They outgrew the capabilities of their previous vendor and moved to our platform to improve the experience of all three of their contact center areas, including property management, sales and marketing, and receivables management. Their omni-channel solution includes our native CRM as well as our quality management and ticketing products. Next is a state mental health hotline and 911 service. This was one of our fastest deal closes ever. Livebox was brought in to replace an on-prem solution which did not offer our full functionality. The omnichannel solution they required includes our native CRM, scripting, call recording, and speech analytics. Of note here is how quickly we were able to implement this customer through our Smart Start initiative mentioned on a previous earnings call. Next, and this was brought in by a channel partner, is an outsourced marketing and lead generation agency who needed our platform for greater reliability, compliance, and to maximize productivity. And finally, we had three significant upsells in Q1, expanding our relationship with three global BPOs with a combined agent population of more than 50,000 agents. We're excited about these and other wins to date as they validate our full platform omnichannel offering across multiple use cases. As noted, our pipeline is more robust than ever, and we're very excited for the coming weeks and months as it relates to bookings. I'm also pleased to share that our platforming capabilities continue to advance and make digital and AI ever easier to adopt. Most notably, our U17 product releases that I shared last quarter went GA on schedule. As a reminder, this release offers several new capabilities, including an enhanced speech and multichannel analytics platform combined with quality management capabilities. That incidentally won best innovation in customer experience at Enterprise Connect this year. U17 also includes enhanced ticketing and CRM capabilities, more robust customer and operational analytics, and enhanced digital messaging capabilities to help agents optimally communicate with customers on their channel of choice. We announced the launch of LiveAux Knowledge Center, a powerful self-service and collaboration tool that enable agents and their customers to quickly find answers to product questions while providing valuable insights into customer service trends and opportunities. And one of the improvements I'm most excited about is the continued reduction in our implementation times, down by 35% year over year. Speed to market means speeds to value for our customers and the speed to revenue for us. In summary, I'm very pleased with our progress year to date. I believe our burgeoning pipeline, strong bookings, 100% migration to the public cloud, and intensified interest from potential strategic partners are validating our product and direction as a company. I continue to be optimistic that we're well positioned for a strong 2022 and beyond and look forward to our next communication. I want to thank our team for all their hard work, our board, and of course our customers. I'll now turn it over to Greg Clevenger to review Q1 financials and provide guidance.
spk09: Thanks, Louie, and good afternoon, everyone. I'll start off by reminding you that all non-GAAP financial figures that I discuss on the call today are reconciled in a presentation posted on the Investor Relations section on our website, in our press release issued just prior to this call, and in our 10-Q, which was also just filed just before this call. Our total revenue for the first quarter was 32.1M dollars, 15% higher than the first quarter of last year and 1% higher than last quarter. And at the high end of our guidance range of 31.1 to 32.1M dollars. This was supported by continued strength in our contract revenue, which was 25.2M dollars for the first quarter, 21% higher than the first quarter of last year, 4% higher than last quarter and above the high end of our guided range of $24.4 to $24.9 million. Our excess usage revenue in the first quarter was $6.9 million, down 4% year over year, and in the middle of our guided range of $6.7 to $7.2 million. Our net revenue retention as of the end of the first quarter climbed to 113% after running between 99 and 107% throughout most of the pandemic, as the stronger pre-pandemic quarters became less of a factor in this LTM over prior period LTM measure. New sales bookings have been strong year-to-date, up over 30%, with our current pipeline up over 40% compared to the same period last year. Our adjusted gross margin for the first quarter was 60.4%, an increase of 140 basis points versus last quarter and our previous guidance for this quarter. driven by cost efficiencies we are driving now that we have made the full transition to our public cloud platform on AWS. Our adjusted EBITDA for the quarter was in the middle of our guided range at a negative $8.3 million, down $1.3 million from the last quarter, driven by $1.9 million of increased operating expense offset by $600,000 of improvement in adjusted gross margin, all consistent with the construct of our previous guidance. Our GAAP earnings per share for the quarter were negative 14 cents per share on both the basic and diluted basis versus a negative six cents per share in the first quarter of last year. Our CapEx for the first quarter totaled $500,000, $300,000 higher than the first quarter of last year and higher than normal due to the additional $400,000 of refurbishment expense for our office in India that, as you may recall, also impacted our fourth quarter CapEx expense. And lastly, we ended the quarter with $54 million of debt and $80 million of cash and cash equivalents and current marketable securities. With that, let's pivot to forward-looking guidance, and I'll start first with the second quarter revenue guidance. We expect second quarter total revenue to be between $33.2 and $34.2 million, 15% to 18% growth over the second quarter of 2021. We expect contract revenue to be between 26.3 and $26.8 million, 18 to 20% growth over the second quarter of last year. And we expect excess usage revenue to be between 6.9 and $7.4 million, 5 to 13% higher than the second quarter of last year. We expect our adjusted gross margin in the second quarter to be around 61.5% for the quarter, about 110 basis points higher than the first quarter. and we continue to expect that this will trend towards the mid-60s by the fourth quarter of this year as we continue to optimize our AWS costs and scale in the public cloud infrastructure. We expect our adjusted EBITDA to be between negative 6.7 and negative $5.7 million in the second quarter, a $2.1 million sequential improvement over last quarter based upon the midpoint of this range, and we continue to expect a trend towards adjusted EBITDA breakeven by the beginning of 2024 as we laid out on the call last quarter. In terms of full year guidance for 2022, we are now reaffirming all aspects of our previous guidance except adjusted EBITDA, which we are improving by $2 million. So to recap, we continue to expect our total revenue for the year to be between $140 and $142 million, or 17 to 19% growth over 2021. We continue to expect contract revenue for the year to be between $109 and $111 million, and our excess usage revenue to be between $29 and $34 million. We continue to expect our adjusted gross margin to be in the mid-60s percent by the fourth quarter of this year. And with the $2 million increase in our adjusted EBITDA guidance, we now expect to be between negative $22 and negative $24 million for the full year. and to trend towards adjusted EBITDA breakeven by the beginning of 2024. With that, operator, can you please open the line for Q&A?
spk03: Yes. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause for a moment as callers join the queue. The first question is from James Fish from Piper Sandler. Please go ahead.
spk05: Hey, guys. Great quarter. Thanks for the questions here. I did want to go back to something you said, Louis, on those three significant upsells into BPOs. I just want to get a sense to what share you have of the plus 50,000 agents of those versus what you had before, just to try to understand kind of what upsell you're getting with some of these large contact centers, essentially, as you move towards getting a greater penetration over the next couple of years.
spk06: Yeah, thanks, Jim. I would say that our market share with these larger BPOs is still relatively small, and our expansion with them is is incremental, but consistent. And these are large organizations, so it's a nice additional source of growth for us.
spk05: Understood. And you've seen some other contact center vendors report, including Avaya this morning, and you're seeing larger contact center opportunities refreshing to the cloud over the next few years, especially in the financial services vertical. And it's something, Louis, you were alluding to in your remarks. Yes, how is Livebox looking to go after these larger opportunities when historically it was more of a departmental sale and kind of expand from there, or are we now kind of decoupled from that and moving into a full let's go get the entire piece of the pie at this point? And specifically, what are you also seeing with large contact center pipelines for Livebox specifically in regards to that up 40% pipeline you're discussing? Thanks, guys.
spk06: Yeah, yeah. So I think that we're happy to get a departmental sale. We obviously would rather have a full enterprise sale, but we often start the conversation on a departmental level. And then in the course of the demo, more people get involved, more people see what's there, and it starts to spread across the organization. So as the market starts to look more and more as a cloud-first market, And as Labox's suite of products become broader and more robust, then the situations where people pivot from a departmental sale to a more of a full enterprise sale increases. And so when you look at our pipeline, which I mentioned was up 40% over last year, there are a number of large companies inside of that, a substantially more number than there were last year at this time. So I think that the maturity of the market and the maturity of the product are driving that.
spk03: The next question is from Parker Lane from Stiefel. Go ahead.
spk02: Hi, thanks for taking the questions here. I wanted to look at the XSATS usage revenue guidance for the year. Obviously, there's a little bit larger range there than on the contract revenue side. It's a two-part question here. One, when you look at the full enterprise deals, is there any larger or smaller share of usage revenue that's associated with those customers? And then, two, when you look at that guidance for the year, how have some of the dynamics that drive excess usage for these customers been playing out here, and how much confidence do you have at that ending up at the higher or lower end of that range? Thanks.
spk06: Yeah. There's not really a meaningful distinction between the departmental level sale and the full enterprise sale in terms of the split between contracted and usage. That could emerge in the future, but that's not something that we've really seen as a distinct trend as of yet. As far as what our projection is or what our forward view is around usage revenue, I mean, I think you can see in our numbers that we haven't really received a strong usage recovery. And I think that people that have followed us know that our usage is connected tightly to the credit cycle. And as we look at information and data points from the Federal Reserve and from Moody's, just to name a couple, on how credit originations are going up and how service activities are flowing into the credit cycle, we definitely see that there's a lot of activity picking up in the early stages of the credit cycle. But we have not yet seen that flow into the middle or back part of the servicing activity yet. So we think that's still... in the future and possibly something that we would experience in the back half of 22.
spk09: Yeah, and just to add to that, you can see that the multiplier in the first quarter, 1.27, and that's what we've guided to basically at the midpoint of the range for the second quarter. So we're not assuming that we're going to have a recovery here in the near term, but like Louie said, we You know, all the things that we monitor will tell us that we do expect a recovery more in the back half of the year. We're hearing it from customers that we talk to as well and how they're preparing for their business. And so that's, you know, what's reflected in the full year number as well.
spk02: In terms of our guidance. Makes sense. And looking at the enterprise business, you know, pipeline seems to be very strong right now. Obviously, the macro is very uncertain. Is there anything from your conversations with your sales teams and customers to suggest that sales cycles could potentially elongate, or are you seeing a lot of consistency from where we were, let's call it 90 days ago? Thanks.
spk06: You know, I would say that, you know, a year ago or, you know, a couple of quarters ago, you know, there was more talk about the pandemic and more talk about how the pandemic had interrupted and changed operations. Obviously, that's less of a conversation now, and people are getting back to more of a new normal. However, with that said, the new normal definitely is a cloud-first market, and people that are looking at their contact center infrastructure, they're not thinking about if they're going to move to the cloud. They're thinking about when they make their change, they will move to the cloud. And so because that's kind of the dynamic, the pipeline has remained strong and is up again for over 40% year over year.
spk02: Thanks again.
spk03: The next question is from Jacob Staffel from Goldman Sachs. Please go ahead.
spk01: Hey guys, this is Jacob Staffel. I'm part of Cash's team over at Goldman. Thanks for taking my question. I wanted to ask a couple questions here. First one being, I believe one of the goals mentioned was to double direct sales headcount by the end of this year from 35 to 70. So one, where are we at with that hiring? And two, any color on... how doubling that headcount is going to relate to operating margins and how it might affect operating margins come end of the year?
spk09: Yeah, we still expect to be, as we have said, doubling our go-to-market quota-carrying heads by the end of the year. That's still in the plan. That is factored into the guidance that we've given. And so, you know, it all remains consistent with what we have guided to previously in terms of how we're going to ramp the go-to-market.
spk01: Awesome. And then one more, you know, excuse me, sorry. Any color on, you know, I think that you all mentioned that you expect customer engagement to account for 73% of revenues by 2022. So any color on where we're at there, you know, is that consistent or has that been adjusted or, you know, whatnot?
spk09: We have not adjusted that. We, what we talked about in the last call was, was collections, which had been, you know, 36, 37% of our revenue in 2020. in 2020 being 33% last year. And that's a trend that is continuing. It's a trend that's been going for a very long time. And the proportion of our new bookings that is driving that evolution is continuing. So collections is just a much smaller proportion of our new bookings.
spk08: And so we expect that that trend is going to continue the way that it has been.
spk01: Awesome. Thank you so much. It's all for me.
spk03: The next question is from Brett Knobloch from Cantor Fitzgerald. Please go ahead.
spk10: Hi, guys. Thanks for taking my question. First, any update as to what you guys referred to as headwinds last quarter with regard to the new regulations that went in place for your debt collection customers and how frequently they can contact, you know, I guess, their users. Has that been a headwind in Q1 as well? Have you had to renegotiate additional customer contracts? Any update on that?
spk08: I wouldn't say it's been a headwind, no.
spk09: It's been a consistent kind of recovery since it happened. And I don't recall us having any contract negotiations that took place since our last call. And we are seeing volumes picking up for most of those customers and also a diversification away from voice and a greater utilization of digital as a channel to reach out and contact creditors. So, you know, it is evolving in basically the way that we alluded to, you know, a couple months ago in our last call. It was kind of a fast and furious impact.
spk08: and is largely back to normal now.
spk10: Perfect. And then just on the headcount, I see a decline in kind of go-to-market headcount and total headcount. Was that just kind of employee attrition, or was that a more focused kind of streamlining of costs or rationalization of costs in the quarter?
spk09: It's a little bit of both, I would say. I mean, attrition has picked up like it has for you know, everyone across the board. We still are well below what, you know, industry averages are, especially for tech, but it is running higher. And we are being, you know, very, very diligent about how we backfill and how we add new positions. We're very actively involved, Louie and I, across the whole executive team and their teams around ensuring that when we do backfill, when we do add positions, that it's justified across the entire business. And so I would just say we're just being a lot more hands-on about headcount than perhaps who are in the high-growth phase that we've been at in the past year or so.
spk07: Understood. Thank you. Really appreciate it, guys. Yep.
spk03: The next question is from Mike Lattimore from Northland Capital Markets. Please go ahead.
spk04: Thanks. Yeah, nice to see the strong bookings and gross margin outlook there. On terms of the – I think you said there were four deals in the quarter with IVAs. Was that an anomaly, or is there a general trend here, and how does the pipeline look for IVAs?
spk06: Yeah, the pipeline looks strong. I would say that that's the progression or that's the trajectory. I mean, it's kind of become a standard part of pretty much every conversation. Now, by the way, just because people are using it to some degree doesn't mean they've used it in a broad way across their operations. So I think the conversation with the AI virtual agents in terms of getting started with them and testing them is mature. A lot of people wanna do that. As far as really tapping it in terms of its full potential and spreading it across the operations, I think we're still in the early stages there.
spk04: Okay, that makes sense. And then the revenue expansion rate was up nicely. Should that continue to sort of inch up throughout the area, the expansion rate?
spk07: On that revenue. Oh, yeah.
spk09: I would think so. You know, we've been saying for a while that, you know, the pandemic and what's happened particularly on the collections has been – is what really took us from where we had been in the high teens before the pandemic. And now we're at the point where those early – data points are kind of rolling off, you know, the pre pandemic quarters. And so we're comparing against, um, uh, as every quarter goes by, by a, a pandemic impacted, um, set of numbers. And so, um, yeah, we, we do expect that that's going to continue to trend up.
spk04: Right. And then I guess just last on the sales hire hires, it sounds like you're confident of, you know, hitting your goals. Um, You know, I mean, how is the pipeline of talent? You know, where are you getting it from? You know, are you having to pay them a little more to get them on board? Just kind of some color there, if you're right.
spk06: I mean, actually, we're doing pretty well there. We continue to recruit people that are experienced selling into the space. And we're, I would say, refining our profile a little bit. I mean, I think that as we've made a lot of go-to-market investments, we're able to focus the AEs kind of more on the specific account development models and competencies. So I think that, yes, it's absolutely competitive, but our go-to-market investments are frankly giving us an opportunity to refine our profile where where we can be more successful. So I think we feel pretty good about that.
spk07: Thank you. Thank you. Thank you.
spk03: This concludes the question and answer session. I would like to turn the conference back over to Louie Summey for any closing remarks.
spk06: Great. Well, thanks, everybody, for joining. I really appreciate it. And again, thanks to our employees and thanks to our board and thanks, of course, to our customers for all of their support in pulling together our quarter. And I look forward to future communications with all of you. Thank you.
spk03: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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