LiveVox Holdings, Inc.

Afternoon and welcome to the LiveVox third quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press start then one on your telephone keypad. To withdraw your questions, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Alexis Wadick. Please go ahead.

Good afternoon, and thank you for your participation today. With me on the call are Louie Summey, co-founder and former chief executive officer of LIVOX, Greg Clevenger, executive vice president and chief financial officer, and John DeLullo, appointed CEO of LiveVox, effective November 1st. 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. LIVOX 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.liveox.com. A recorded replay of this call together with related materials will be available on our Investor Relations website. investors.livevox.com. LiveVox's earnings release and form 10-Q will also be available on the company's website. With that, I'll turn the call over to Louie to begin.

Good afternoon, everyone. Thank you for joining us. My name is Louis Sami. As you may have seen in our prior November 1st earnings press release, this will be my last quarterly earnings call as LiveVox CEO as I transition into the vice chairman role on our board. I will continue to be focused on the technology and product aspect of our business as I have been since I founded Labox over 20 years ago. As well as assisting in the transition and advising our new CEO, John Lulullo, this is an exciting time for the company. And I'm pleased to introduce John later in the call to share his thoughts before handing the call over to our CFO, Greg Clevenger. Now I'd like to share with you our Q3 results in progress. Overall, While the macro environment has lengthened new logo sales cycles, LiveAux does have a number of secular tailwinds driving balanced growth, including increasing usage from credit cycle normalization, increasing digital revenue, increasing AI revenue, and margin growth resulting from our public cloud infrastructure. And you'll see this reflected in our financial results. Total Q3 revenue came in at a record $35.3 million, up nearly 16% year-over-year and within our guidance range. I shared on our last call that we were beginning to see the expected second-half increase in usage as the credit cycle begins to normalize, although at a slower rate than originally anticipated. Data from the New York Fed and Moody's Analytics are showing a more steady gradual increase in first party delinquencies that will ultimately flow through to third party defaults and ultimately benefit us. I am excited to share that our non-GAAP gross margin was 66.3% and our adjusted EBITDA came in at negative 1.5 million, both significantly ahead of guidance. As noted previously, much of this can be attributed to moving 100% of our customers to the public cloud. Further, we believe our gross margin will continue to increase in the quarters ahead as we use auto scaling to lower compute costs and automate infrastructure operations to reduce indirect cost sales. Another significant advantage to our public cloud infrastructure that I think it is important to point out is that it brings our capex spend to de minimis levels. In contrast, others in our space have capex spends as much as 10% of revenue. This is ultimately a key competitive advantage for us on both cost and performance. I'm also pleased to share that our digital revenue continues to expand. Digital revenue is up over 54% year over year, and messaging revenue is up over 58% year over year. Additionally, our AI virtual agent bookings were more than double quarter over quarter. Non-voice revenue continues to trend at approximately 25% of our revenue. Also of note, our pipeline has increased more than 34% year over year, buoyed by enterprise deals and customers looking to expedite their digital transformation through increased digital channels, automated agent workflows, and AI virtual agents. While this increase is encouraging, and we continue to see more opportunities, It's important to note that the economy appears to have lengthened the sales cycles for new logos, consistent with what we have heard from industry analysts. During our last call, I shared that we optimized our organization and pivoted to a balanced growth strategy, as have been demonstrated in the numbers we're sharing today. As part of that strategy, I also shared that we're focusing our go-to-market efforts on continued development in the channel and our partner ecosystem. as well as the tremendous opportunity for growth within our existing customer base. I'm pleased to share that this strategy has had a positive impact on our business. First, while our pipeline has grown 34% year over year, channel opportunities now represent a much larger share of that number. We continue to see the channel as an important part of our new logo growth and expansion. Second, I mentioned last quarter that we see an approximate $2 billion in upsell opportunity with our existing customer base. And that number continues to grow as we add new customers and roll out new AI and digital products. In Q3, we closed several large existing customer upsells, some that I'll share more about in a moment. As noted last quarter, we're excited about our continued growth in new logo opportunities. but we're laser-focused on closing existing customer upsell opportunities, as it is a faster, more cost-effective sale and tends to convert to revenue more quickly, which has helped expedite our path to profitability. I'd now like to share a few new logo wins and notable existing customer upsells. The first new logo is a subprime auto lender that was on a legacy platform that will soon be unsupported. It was imperative to them to be with one vendor and to be able to deploy their 100 agents rapidly. They purchased 13 products, including our compliance tools, WFM tools, and our Salesforce connector. Next is a new large BPO customer with 10,000 agents globally that deployed Livox for 180 of their agents focused on sales and customer retention. They migrated from a legacy on-prem system Our competitor for the opportunity could not equal our offering, especially because the customer needed to be up and running in five weeks. We are excited by the potential to expand into the remaining 10,000 agents with this customer in the quarters ahead. One of our largest upsells for the quarter is in the travel and tourism sector. They're currently with an on-prem provider, but find our product so compelling, they've moved to us prior to the expiration of their existing contract. They have multiple care groups. They started with one group with approximately 140 agents and have just added their fourth group, bringing the total number of agents to over 500. They're running nine products on the platform and have plans to continue to add LiveAux capabilities as they roll out to more groups next year. And finally, one of our largest customers added four more products for a total of 19 LiveAux products purchased. Of note, they are in the early stages of deploying our AI virtual agents to their platforms. Key to them was the differentiation advantages of our virtual agent approach. More specifically, our ability to monitor virtual agents the same as human agents, providing a much quicker path to optimization. And our ability to seamlessly transition from the virtual agents to a human agent without losing the customer info already provided in the call. A huge customer experience advantage. Now I'll provide a brief update on our technology and platform. As mentioned during the past couple of earnings calls, moving 100% of our customers to the public cloud continues to have the positive impact on gross margin that we expected. Not only is it a significant contributor to our expedited path to profitability, it is a significant investment that most of our peers have yet to undertake. 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 benefits from our latest platform release that we're very excited about is how it's helping our customers substantially improve and automate their agent workflows. This refers to the ability for a contact center agent to quickly and easily navigate their applications and systems to efficiently address customer needs. Essentially, LiveVox's agent desktop orchestration capabilities eliminate the complexity and burden of pulling together multiple systems and data streams, through an easy to create, easy to modify workflow solution that helps contact center leaders more effectively optimize their operations while enhancing both the agent and the customer experience. This is appealing to both mid-market and enterprise customers. It's helping drive additional product sales for us to existing customers and proving to be an excellent strategic lever during prospect conversations. In summary, I believe we continue to make strong progress in Q3. Through the combination of migrating to the public cloud and pivoting to a balanced growth strategy, we've significantly improved both growth margin and EBITDA while posting a record revenue quarter through both new logo and existing customer upsells. And as I mentioned earlier, while the macro environment has lent the new logo sales cycles, Labox does have a number of secular tailwinds driving balanced growth, including increasing usage from credit card normalization, increasing digital revenue, increasing AI revenue and margin growth resulting from our public cloud infrastructure. Further, there's an estimated $250 billion of labor spent in the context in our market that CCaaS providers like us are driving to automation through AI. LiveAux is very well positioned to capitalize on this opportunity. I'm exceptionally proud of what we've built and continue to believe in our ability to succeed and drive shareholder value. I want to thank everyone at Livox for their hard work and dedication, our board, and of course, our customers. I look forward to my new role as vice chairman of our board and helping the company for years to come. Now, before I hand the call over to Greg to go over our financial results in more detail, I would like to introduce John DeLulo, our new CEO at Livox. John has a compelling mix of relevant technology and commercial industry experience and is well equipped to carry Livox into the next phase of growth. John?