ServiceSource International, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the ServiceSource fourth quarter and full year 2020 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question at that time, please press star then 1 on your touch-tone telephone. As a reminder, today's conference call is being recorded. I will now turn the conference over to your host, Ms. Elise Brassell, head of portal communications, and you may begin.

Thank you, Operator. We appreciate everyone joining us today and welcome to Service Sources Earnings Call to discuss our results for the fourth quarter and full year ended December 31st, 2020. On the call today are Gary Moore, Service Sources Chairman and CEO, and Chad Line, our CFO. As a reminder, our SEC filings and the earnings release we issued yesterday after market close are available on our website at www.ir.servicesource.com. In addition, we have posted earnings slides to accompany our comments today. Shortly after this call, we will post an audio replay and a copy of our prepared remarks to our website. Before we begin, I would like to remind you that during the call, we will make projections or forward-looking statements that involve risks related to future events. All statements made during the call reflect our views as of today, February 25, 2021, and are based upon the information currently available to us. All projections and forward-looking statements should be considered in conjunction with the cautionary statements in the earnings press release and the risk factors included in our SEC filings, including our report on Form 10-K. These documents contain and identify important factors that could cause actual events and results to materially differ from those contained in our projections and forward-looking statements, and we disclaim any duty to revise or update any forward-looking statements. In addition, during the call, we will also be discussing certain non-GAAP financial measures which we believe provide additional information to enhance the understanding of how management assesses the operating performance of the business. The reconciliation of the GAAP and non-GAAP measures can be found in the earnings release that accompanied this call. And with that, I'll turn the call over to Gary.

Thanks so much, Elise. And welcome, everyone, to our earnings conference call for the fourth quarter and full year 2020. As we reflect on the accomplishments of 2020, it's important to first appreciate and acknowledge the global service source team. Your perseverance, drive to perform for brands we serve, and determination in the face of significant disruption caused by COVID-19 allowed us to deliver for our clients and meet our commitments. I have led companies through many economic cycles and external shocks. yet this has been a year like none of us have ever seen before. And while our teams have not been physically together for most of the year, our company continues to demonstrate our values of dedication, collaboration, trust, and caring. As a team, we enter 2021 stronger and better positioned to fulfill our vision of transforming the B2B customer journey experience. In the fourth quarter and over the course of 2020, our teams delivered for our clients during a time of wide-ranging disruption. Through this period, we grew closer to the world-class brands we serve and improved the health of our partnerships. We fully committed to a virtual-first operating model that will define how and where we deliver our solutions going forward. And importantly, we demonstrated the strength and resilience of our people and our business was solid operating and financial performance. Throughout the uncertainty of last year, market-leading technology companies relied on ServiceSource to preserve the value of their existing customer relationships and enhance the return on their go-to-market investments. Literally overnight, the customer journey experience for B2B buyers and sellers went remote and digital. As marketing events were canceled and sales pipelines dried up, we saw customer success and renewals become board-level priorities. Customer retention quickly became the de facto growth engine for many technology companies. At the same time, with corporate travel costs and field sales teams grounded, digitally enabled virtual selling became the dominant form of B2B customer acquisition and engagement. These shifts have been underway and talked about for some time. But the rapid disruption caused by COVID-19 accelerated several years' worth of digital transformation into a couple quarter span for many companies. Longer term, we believe these dynamics will play to our favor, and we are well positioned to capture a large and growing market opportunity. Two years ago on my first call with the investment community and service sources CEO, I laid out my vision and strategy to reposition the company on a path to growth and improve profitability that would drive long-term value for our stockholders. I was also transparent and offered a candid assessment that the journey would possibly be measured in years, not quarters, and that the trajectory would likely have some ups and downs and not be linear. Since then, and despite the macro headwinds encountered last year, we have continued to make disciplined progress across the business. You can see this in our performance in the fourth quarter and for the full year 2020. On the financial front, the operating environment adversely impacted many of our clients, and ultimately the revenue we realized from outcomes we generate on their behalf. In the face of this top-line pressure, we took swift and decisive action to enhance productivity, rationalize certain programs and engagements, improve spans of control, and simplify our cost structure. The results of these actions are clear with meaningful year-over-year expansion of non-GAAP gross profit margin in both Q4 and the full year, and adjusted EBITDA that also exceeded prior year results. Although the year unfolded much differently than we had assumed coming into it, our commitment to our longer-term playbook did not change. Our vision and values brought clarity of purpose for all of our employees, and our strategic pillars of inspire success, impact scale, ignite sales, and innovate solutions kept us aligned as a team on the metrics and priorities that mattered most. We all had to find new ways of working, interacting, and engaging in 2020. I am really proud of how our sources around the globe leaned into this new world of work. As I've shared with you in the past, my leadership team and I have been very focused on the culture of the company, ensuring that we offer a rewarding and fulfilling employee experience to a diverse and inclusive workforce. The outcomes we are seeing here continue to be encouraging. Our employee net promoter score improved more than 12 points in our last global survey, with our people indicating they feel more motivated, appreciated, and cared for. This positive tone carried over to our employee retention rate, where we had more than a 20% point year-over-year improvement, reaching the highest level we have seen in more than six years. Importantly, our clients benefited by having this more tenured, experienced, and motivated team on the front lines engaging daily with their prospects, customers, and end users. For the vast majority of our clients, the pandemic has had a more pronounced impact on their mid-market and SMB customer base. IT budgets were frozen or cut back. Multi-year maintenance contracts were reduced in scope or duration. purchase cycles were elongated, and companies pushed for more aggressive price concessions and discounting from our clients. Our representatives and managers did an amazing job of handling these tough conversations on behalf of our clients, helping to preserve the value of their customer base and mitigate the risk to their revenue as much as possible. While a bit hard to measure, I firmly believe our flexibility and responsiveness to best support our clients through these times has generated a great deal of goodwill. In my conversations with our executive sponsors, they increasingly see us as a strategic partner and enabler. They may initially work with us based on our customer journey experience domain expertise, global scale, multilingual coverage, and two decades of process excellence. But what our clients truly value are the market and customer insights, industry best practices, and tactical recommendations we uniquely provide, which enable them to accelerate their own go-to-market strategies and digital transformations. Bringing this value to the forefront for both existing clients and new prospects is helping to bring better results and greater velocity to our land and expand efforts. After a disappointing first quarter of 2020, our new bookings from Q2 through Q4 increased more than 25% compared to the same period in 2019, while the fourth quarter alone was our best Q4 since 2017. We were thrilled to onboard two new logo clients in the fourth quarter. The first was a digital operations management platform provider and a high-growth market leader. We are now live with a proactive customer success and renewals management program that is designed to help this client drive higher ARR retention rates and minimize churn. The second win was with Nextiva, a unified communications as a service company that is growing more than 30% annually. We have now launched a customer acquisition and conversion program that will allow this client to improve their pipeline coverage and enhance the ROI on their marketing spend. In total, we had six new logo wins in 2020, double the number we achieved in 2019. We anticipate continuing to build on this momentum, particularly in the cloud and software vertical, where we see greater growth opportunity and where our value proposition is resonating very well. On the expansion front, we were awarded new business from seven of our current top ten clients during the year, demonstrating the value of the investments we have made in our global account management and outside sales teams. And finally, on the renewals front, we renewed or extended approximately 81% of the annual contract value that came up for renewals during the year. In aggregate, While our full-year bookings and churn results were not at the levels we planned for, we feel we executed well against the macro backdrop and did not lose business due to performance or things more closely within our control. As I wrap up here, it's worth revisiting what we spoke about with you last quarter. We shared how COVID-19 had time shifted out by several quarters, our expectation returned to growth. With another quarter behind us, we are encouraged by signs of market optimism and improving forecasts for global technology spend. However, we still see difficult operating environments within many of our clients' businesses. We expect these dynamics will continue to impact the books of business and customer opportunity sets that we manage on our clients' behalf. While this will create some pressure on our financial results over the next couple quarters, We anticipate that we will see improvement in the back half of this year, putting us in a position to return to growth. Notwithstanding these factors, which we believe are market-specific and shorter-term in nature, we continue to have high confidence that we have the right strategy, team, priorities, and focus to build a growing, profitable, and more valuable enterprise. We have made, and will continue to make, substantive changes in the business to continue to improve our execution and accelerate our path forward. We are proud of how we closed 2020 on a positive note in many areas, and we look forward to these areas of progress showing up in our results as we get further into 2021. With that, let's turn to Chad to cover the financials.