ServiceSource International, Inc.

Good day, and thank you for standing by, and welcome to the second quarter 2021 earnings conference call. At this time, our participants are on a listen-only mode. After this speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Elif Brassell, Head of Corporate Communications.

Thank you, Operator. We appreciate everyone joining us today, and welcome to ServiceSource's earnings call to discuss our results for the second quarter and to June 30th, 2021. On the call today are Gary Moore, ServiceSource's Chairman and CEO, and Chad Line, our CFO. As a reminder, our SEC filings of the earnings release we issued today 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, July 28, 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 10Q. 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.

Thank you, Elise, and welcome, everyone, to our earnings conference call for the second quarter of 2021. It's a pleasure to be speaking with you today and to update you on the progress we are making. Our second quarter results highlight areas of acceleration in the business, and we expect our trajectory to continue to improve in the coming quarters. We are confident in our strategy, our capabilities, and are squarely aligned to our clients' most pressing challenges and opportunities, and our focus Execution is driving stronger outcomes. Last quarter, we spoke about the lingering headwinds caused by COVID-19, and I would be remiss if I did not acknowledge that it continues to have an impact in particular markets and geographies. Uncertainty persists, particularly in foreign markets, but on balance, the tone, commentary, and outlook from our clients has shifted more to the positive. And within the small to midsize segment that we primarily address for our clients, we are seeing encouraging signs that companies within this tier appear to be on relatively stronger footing compared to the start of the year. We believe we stand to benefit as our clients and their customers continue to regain confidence the work we have done over the course of the past two years has improved our ability to be more responsive to the needs of the markets we serve. We've enhanced our solution suite and go-to-market strategy to be more focused and effective. We've transformed our delivery model to be virtual first and more digitally enabled. We've streamlined our organization for greater speed and accountability, And we've invested meaningful time, resources, and capital to strengthen the foundation of the company to allow it to grow and scale more efficiently over the long term. The impact of these changes is now becoming more evident in our results. Our year-over-year and sequential revenue comparisons are moving in the right directions. Our sales engine is becoming more consistent and predictable in landing new logos and expanding the install base. And our unwavering commitment to a clients-for-life culture is creating an environment where our clients increasingly view us as a strategic partner and trusted advisor that can help them succeed on their own go-to-market transformations. Across the technology sectors we serve, and the clients we support, we see and hear a recurring theme. In an era of premium valuations, intense competition, and rapid disruption, it's no surprise that the top of mind priority is growth. And not just faster growth, but also smarter growth. Growth that puts the customer at the center. Built on a relationship and not a transaction. Our integrated customer journey experience solution suite assists our clients in achieving this growth mandate more effectively and efficiently. Our digital inside sales solution allows for identifying, qualifying, and converting more new customers, ensuring our clients recognize maximum ROI on their marketing and sales investments at a lower cost of acquisition. Our customer success and renewal solution enables our clients' customers to recognize faster time to value, ensuring they use, consume, and buy more from our clients over a longer period of time. And our channel management solution supports our clients' indirect routes to market, ensuring their ecosystem of partners and resellers are equipped to help our clients win and retain market share. Regardless of what solution we deploy for a client, we bring the power of humanity and personalized engagement to their B2B customer relationships. At a high level, that's what our team of sourcers do every day at ServiceSource. Allow me to spend a few minutes sharing some recent client stories. I think this will help make what we do a bit more tangible and better illustrate our ability to drive results in areas that are strategic to the health of our clients' businesses. As covered in a recent press release, we brought on board a great new client in the second quarter. This company is an industry pioneer and category creator, and is widely recognized as a global leader in the cloud-based team collaboration and communication space. For born-in-the-cloud SaaS companies like this, growth rates are often 40% to 50% annually or higher. But maintaining that growth often puts tremendous stress on the post-sales organization. Focus naturally shifts to serving and supporting larger enterprise subscribers, which typically results in higher churn and lower retention rates in the SMB tier over time. this client was facing a similar dynamic, but recognized the strategic imperative of better engaging with the smaller subscribers that had contributed to its initial growth and success. Over the course of a multi-quarter pursuit, we assessed the Renault's performance baseline and structured an innovative solution with a compelling ROI. Signed earlier in Q2, we are now live supporting this client with a holistic program encompassing subscriber health checks, contract quoting, and renewals and extension services. We are seamlessly integrated into the client's customer success team to help build and protect their recurring revenue subscription stream during their pursuit of above-market growth in the new digital work era. And although our initial deployment is on the smaller side, we are excited about the potential upside opportunity in supporting a company with more than 100,000 customers and run rate revenues in excess of a billion dollars. Earlier in Q2, we also announced an expansion for a market leader in the cloud-based enterprise identity and access management sector. This example highlights that customer success is a global priority. Our initial deployment launched in early 2020 with our team managing an end-to-end customer success program to enhance the lifetime value of North American-based customers with $100,000 or more in annual recurring revenue. Our customer success managers assume full accountability for these subscribers after the point of sale with a robust playbook of proactive engagement touchpoints ranging from week one welcome calls, onboarding calls, and health checks to quarterly success meetings and business reviews. Our building trust and fostering relationships throughout their first year as customers, our teams drove higher satisfaction and generated incremental upsell and cross-sell opportunities, delivering a strong 90-day percent plus net renewal rate across this important customer cohort. Through the practical demonstration of our brand promise of trusted business outcomes delivered, we were asked by our clients to scale our methodology and expertise to support their growth and retention objectives in EMEA and Asia Pacific and Japan, giving the relationship a truly global footprint. Once the expansion is fully ramped, we expect the value of this client partnership will increase approximately 50 percent over the contract's two-year term, providing a great example of us earning the right to land and expand based on our performance. The final example I want to share highlights the market growth opportunity for our digital inside sales capability. Late last year, an executive we had previously supported at one company moved into a new role as chief revenue officer at another organization that was growing more than 30% annually. Based on his prior experience with us and the results we delivered, this executive engaged us to deploy a digitally enabled inside sales motion. This would allow his internal team of sellers to focus on larger opportunities while we would ensure that the rest of the pipeline and leads were appropriately covered. Our initial launch delivered on the mandate to help this client win share and accelerate growth in the hyper-competitive cloud communication space. As we announced in a June press release, based on the rapid success of our initial deployment, we agreed to triple the size of the engagement. With an aggressive implementation timeline, we have now successfully ramped more than professionals to support this client's high-growth ambitions. I share these success stories as I believe they are a direct reflection of the improved execution we are seeing across the business, spanning our go-to-market, client delivery, account management, and other supporting teams. We are operating more effectively using our proprietary high-performance selling methodology, which our clients tell us is a unique differentiator for us in the market. Our client performance targets, which are robust operational KPIs aligned to our client's unique objectives, are at all-time highs. We're also engaging better with our client sponsors and executives using our clients-for-life mentality. This is best demonstrated in our recently completed client satisfaction survey, where our net promoter scores increased 17 points to all-time high records. Our progress in these areas has boosted our ability to launch new programs and expansions in green status and continue in a healthy relationship for the long term. You can see examples of this progress in the business highlights from our earnings release. Our sales on the sales front, we carry forward from the strong results we shared in the first quarter. On a trailing 12-month basis through Q2, our bookings were up approximately 7% compared to the prior trailing 12-month period. Our wins in the quarter were also broad-based across approximately one-fourth of our client base, including expansion wins in excess of $1 million each of expected contract value with three of our top 10 clients. We did have several attractive late-stage opportunities pushing the Q3, and we look forward to publicizing and sharing these with you once we get them signed. With respect to our installed base appliance, through the first half of the year, we had more than $70 million of contract value up for renewal, and our teams did an extraordinary job executing on them. We successfully renewed or extended approximately 97 percent of this value. And when factoring in expansions that accompanied these renewals, our net retention rate was in excess of 100 percent. Client satisfaction and retention has been a key focus area for us, and these outcomes are positive signs that our efforts are paying off. I am incredibly proud of our team around the world for the great outcomes here. In closing, our results through the first half of the year give us confidence that we are on the right path, first, to return the business to growth later this year, and second, to accelerate toward our long-term financial objectives. With that, I'll hand the call to Chad to cover the financials.