LiveVox Holdings, Inc.

Thank you for standing by. This is the conference operator. Welcome to the LiveVox second 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.

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 factor 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 GDPR. 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 Investors Relation website, investors.livebox.com. A recorded replay of this call together with related materials will be available on our Investor Relations website, investors.livebox.com. Livebox's earnings release and form 10Q will also be available on the company's website. With that, I'll turn the call over to Louie to begin.

Good afternoon, everyone, and thank you for joining us. My name is Louis Summey, and I'm the CEO and co-founder of Lawvox. Today, I'm pleased to share with you our Q2 progress, as well as our plans for continued success for the balance of the year. I'll begin with a summary of our financial results. Contract revenue came in at the high end of our guidance at $26.8 million, up nearly 20% year over year. Usage revenue came in below guidance, resulting in total revenue of $33 million, up more than 14% year over year, but slightly below guidance. While contract revenues continue to grow as expected, we've consistently noted that we expect usage revenue to return to growth toward the back half of this year as the credit cycle returns to its inevitable more normal state. I'm excited to share that July usage is up significantly over June to levels that we haven't seen in nearly nine months across a wide range of customers. This usage increase throughout the month and throughout our customer base gives us optimism that we're beginning to see the growth in usage revenue that we anticipated. I'm also excited to share that our non-GAAP gross margin was over 64%, and our adjusted EBITDA came in at negative 5.6 million for the quarter, both significantly better than guidance. I want to thank our team for all their hard work and focus on improving margins. As noted previously, much of this can be attributed to moving 100% of our customers to the public cloud. Also of note, our digital revenue continues to expand. Messaging is up 14% sequentially, and all digital products are up 15% sequentially, and now represent approximately 22% of revenue. While our key financial metrics continue to improve, I do want to share with you an important adjustment to our business strategy. Given current macro and market conditions, we believe it's prudent to accelerate our path to profitability, adopting what we consider a more balanced growth approach. In past communications, we've indicated we'd reach EBITDA neutral by Q1 2024. Our plan now has us reaching EBITDA positive by Q4 of 2022. and EBITDA positive for the full year 2023. Over the past several months, we have taken decisive actions to optimize our business to ensure we return to EBITDA positive. Starting in 2021, we made significant investments in our go-to-market activities. As part of our go-forward balanced growth approach, we've analyzed each investment and have reduced or eliminated investments that have proven less efficient and maintained or increased our investment in the areas that have been more productive. There are a couple of key areas I'd like to emphasize. First, we're maintaining our investment and building out the channel and our overall partner ecosystem. We continue to see this as a strong source of new logo acquisition and future growth. Second, we see tremendous opportunity for growth within our existing customer base. And this will be an increasingly important area of focus for us. We continue to see an approximate two billion in upsell opportunity with our existing customers, and that number continues to grow as we add customers and roll out new AI and digital products. Furthermore, our customer acquisition cost for upsells is 50% of what it is for new logos. In addition to potentially adding new seats, we're seeing significant momentum adding new products, such as messaging, virtual agents, our knowledge center, speech analytics with quality management, and much more. As are most contact centers, our customers are looking for ways to increase productivity and improve the agent and customer experience. Livebox offers numerous out-of-the-box solutions to do exactly that. For clarity, we continue to have a very strong pipeline for new logos. However, our near-term growth is likely to be more weighted toward existing customer expansion. The macro environment has led to a somewhat longer sales cycle for new logo sales, whereas upsells to existing customers have shorter cycle times. This strategic approach may temper our overall growth slightly, but our growth will be much more cost-effective. The net effect will be a faster path to positive EBITDA and a more balanced growth operating model. I'd now like to share some examples of new customer wins and notable existing customer expansions. The first is a new logo national Medicare agency that is an enterprise deal through the channel. Once onboarded, it has the potential for 400 agents. This customer is heavily focused on customer service and satisfaction through high-touch education. They contracted for 12 products including blended voice, UCRM, speech analytics, and workforce management solutions. The next new logo is a 250 agent insurance provider that works with auto dealerships. In addition to inbound service capabilities, they're using our platform to drive lead generation to grow their business. The next example is a significant client upsell for one of the country's largest non-bank mortgage and servicing companies. This customer who has 1,200 agents is migrating its IVR to our AI virtual agent capability. They anticipate a significant decrease in their agent cost as a result. We will see a significant revenue increase. This is one of many such migrations we're seeing with existing customers in the past quarter. And finally, we had another significant upsell to an existing BPO customer with 600 agents. While this customer was already using Livox for outbound services with their clients, they had an opportunity to pitch a new client with 100 agents focused on inbound customer care. By leveraging our virtual agent technology to show reduction in agent cost, they were able to win the business by offering better pricing by using fewer agents. Again, We're seeing significant traction in both new logos and customer upsells with our digital and virtual agent products, as well as our full omnichannel platform. We're excited about these wins and continue to have a robust pipeline for the balance of the year. Next, I'd like to provide a brief update on our technology and platform capabilities. As I've mentioned before, but it's worth emphasizing, Moving 100% of our customers to the public cloud has had the positive impact on expense and gross margin that we expected. It's a significant contributor to our expedited path to profitability. This is in addition to the benefits of faster development and deployment cycles, and even more importantly, the increased reliability and uptime of our platform. One of the technology achievements I'm most excited about is the continued evolution and customer adoption of our AI virtual agent and digital messaging capabilities. Virtual agents are increasingly becoming an essential component for modern contact centers as they improve productivity and create a better experience for the customer. A great example of this is an auto parts distributor who recently enlisted our virtual agent platform to help customers find the right location and the right parts without having to speak to a live agent. Another example is a large BPO who is turning to our virtual agents to deliver important disclosures before the customer reaches a live agent. Not only is this ensuring compliance, but it's doing so at a third the cost. We believe our 100% plus quarter-to-quarter growth in this area is driven by our relative ease, cost, and deployment time, resulting in an expedited time to value and ROI for our customers. Messaging also continues to grow as a vital channel in the contact center. While not new, messaging has grown in complexity as it can be used as both a conversation and campaign tool. Our recently released messaging products help improve deliverability while helping customers navigate TCPA and other regulatory requirements, which continues to be a core strength of our company. Our clients have found numerous use cases where these channels have been tremendously helpful. Clients focused on improving sales have seen an increase in their opportunities to convert, as well as further promote self-service tools like chatbots. Leading retailers have adopted our messaging tools as a preferred customer service channel, improving servicing needs speeds and net promoter scores. And several financial service customers have converted traditional mail expenses to a digital format, helping them reduce costs up to 80% while improving speed of delivery and payments collected. As mentioned earlier, AI virtual agents and advanced messaging continues to contribute to our overall revenue growth while becoming a larger percentage of our overall revenue. While we're very happy with customer response to our latest U17 release, we're even more excited about our upcoming U19 release. It will feature more collaboration tools, additional messaging features, and even greater platform reliability and uptime through an enhanced active-active architecture. I'll share more details on our next call. In summary, I believe we've made significant progress in Q2. Through the combination of our public cloud migration and refinement of our go-to-market strategy, we are on a clear path to deliver balanced growth and profitability to our shareholders. We're already seeing evidence of this through improved gross margins and improved EBITDA performance. I continue to be enthusiastic about LAVOX 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 our CFO, Greg Clevenger, to review Q2 financials and provide guidance.