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spk_0: good afternoon and welcome to the yaks the second quarter of fiscal two thousand and twenty two earnings conference call all participants will be in listen only mode should you need assistance signal a conference specialists by pressing the starkey followed by zero after today's presentation there will be an opportunity to ask questions to ask the question you a press star than one on your telephone keypad to withdraw your question please press star then to please note this event is being recorded i would way to turn the convert over to jeff houston vice president of investor relations please go ahead
spk_1: thank you gary n good afternoon everyone welcome to the yet fiscal second quarter two thousand twenty two conference call with us today is ceo our luhrmann president and chief revenue after officer david runescape see about seed cake bread and dump shell senior vice president before we begin like to remind everyone that this call may contain bored looking statements including stevens about revenue non gaap net loss operating cash flows operating margins product roadmap and time in demand for a new products net dollar retention capital expenditures and other non historical statements as brother described in a press release these forward looking statements are subject to certain risks uncertainties in assumptions including those related to get roof the evolution of our industry or product development and success including answers in general economic and business conditions such as the impact of the coven nineteen pandemic we undertake no obligation to revise any statement to reflect changes that occur after this call descriptions of these and other rift that could cause actual results to have material difference from the forward looking statements are discussed in our reports filed with the you and or most recent earnings quarter
spk_2: an annual reports
spk_1: and or press release that was issued this afternoon during the call we also referred a non get financial measures reconciliations with those most comparable gap measures are also available and press release which is available at investors that the dot com with that i will turn the called over to howard howard thank you jeff
spk_3: i'm pleased to report we had a thought second quarter revenue ninety eight million dollars exceeded the high end of are guided by two million dollars driven by new customers and obstacles now gabby be i think he did our guidance by one cent as we continue to increase operating efficiencies while maintaining a strong cash position and we continue to build momentum with answers the cornerstone of our a i searched platform during the second quarter we closed seventy answers heels compared to thirty eight in queue to
spk_4: of last year and we increase the answers average new logo he be by nineteen percent compared to que one of the year
spk_5: last quarter we expanded our platform in the customer support with our support answers offering during the second quarter support answer driven up top kit first innocent bag and new logo deals with frontier communications first national bank and revlon the poor answers continues to drive larger deals and it's helping to it spanned our relationship with existing customers and a lot opportunities the new industries in fact support answers has helped our pipeline a digital companies grow beyond our traditional base customers with many physical locations we've also want to support answers business over legacy search players are golia prevail and lucid worse
spk_4: proving that are continuously innovation is helping different yet when the competition
spk_3: and further scale support answers opportunities we announced and integration with them death it's an able to our mutual customers the act and gender together to strengthen their overall customer support offerings are integration enables businesses dad in a i powered search engine to their existing help side so that customers can more easily get accurate answers to
spk_4: their questions directly from a brand knowledge graph and by needle in customers to more efficiently self serve support answers helps reduce ticket volume and save and operational costs batra there are issues that require a more hands on approach and support answers help agents for their customer actions yak a i searched directly on accompanied internal then death agent help desk with that agents can access relevant answers in real time with customers are going out the details of their issue isn't me yeah and agents are more empowered and more fission reducing friction in the customer experience which lead to higher customer sat scores then that integration falls are successful cooperation with adobe which contributed to the frontier communications most recently we announced yet a i search for still for service cloud on the field for stack exchange our collaboration brings the best of our platforms together as it enables or mutual quiet to augment their existing sales were service called power help sites agent console can support for would support answers were excited about that integration with fail for just as highlight the large market opportunity that exists for support answers in addition to scaling are solutions to new product relationships is notable companies like than desk and bills worse we continue to innovate or platform to unlock more opportunities are some release introduced many cutting edge features including an updated data connect your framework enabling businesses to extract of data from multiple news sources and connected to that knowledge graph for example with these connections yet customers can integrate with there's than death count in only about fifteen minutes we built multiple connectors and played a significant increase that number by the end of next quarter
spk_3: in an effort to make our searchers old even more powerful we updated our search algorithm to enable dynamic rewriting that mean search results would be delivered in order of what users have previously engaged with since that with a strong indication of preference
spk_4: we we also added semantic search this surfaces pictures and get to the already rich text base result in these key enhancements are just a few examples of how we're helping to move the enterprise away from outdated index b keyword search to more intelligent dynamic way a deliberate answers to custom request in using natural language and from a knowledge graph in summary we navigated quarter well i'm proud are keen for their focus in execution while full global reopening remain difficult to predict i am confident that yeah will continue to play a critical role in helping businesses accelerator growth with a i search now going to turn the color call her to david risky our president and she'd revenue officer to share more quarterly information on the second quarter
spk_6: banks our thanks how are we had a solid second quarter as we continue to win new logos and upshot customers or answers platform is leaving the competition our expansion into customer support was support answers combined with there's and def conceals for strategic partnerships
spk_1: i have given a even more opportunities are product pain continues to innovate at a remarkable speed and are messaging around how ai search can immediately transform a business is really starting to resonate i'm pleased with what we've achieved and i couldn't be more excited for the road ahead
spk_6: i'll take you through the details it share some the i like to the last quarter the total number of bx direct customers excluding smb and third party reseller customers increased twenty three percent year over year dover twenty six hundred our direct excluding smb and resell it customers would they are over one hundred thousand dollars total five hundred ninety two at the end of two to up to seventy percent year over year reflecting continued success with larger customers such as mainline health frontier communications and wells fargo we continue to see momentum with the answer search platform with seventy answers lead deals closed in the second quarter up from thirty eight deals in the second quarter last year
spk_1: i'm also happy to share the average answers new logo deal size increase ninety percent quarter over quarter as we continue to build momentum with answers
spk_6: new logo signings included world class brands such as you and c l jackson hewitt giorgio armani prisma help attack our we continue to make solid progress selling support answers which has only been in the market since the first quarter
spk_1: as i noted back then enterprise support is a big ticket item and we're starting to see larger art piece for support answers
spk_6: in the second quarter first citizens frontier communications first national bank your revlon all signed support answers deals
spk_1: notably were quickly evolving from a product driven sale to a platform focus sale as we expand our offerings across multiple solutions to sign new customers as well or to renew existing ones in uppsala others
spk_6: notable renewals included fedex liberty mutual insurance company mariette international mount sinai hospital tiffany company rental company enterprise holdings and mortgage service provider guaranteed rate we also renewed a number of technology companies such as cellular south for to send vodafone as we continue to expand in the sector up fell during the quarter included well known luxury brand christian dior couture healthcare providers such as miracle ear milky university of south carolina and united healthcare services
spk_1: in addition to financial services companies such as broadridge goose said insurance and the toronto dominion bag we did they some challenges in parts of the world with the resurgence of covert due to the delta barrier
spk_6: the international markets became challenge in july particularly at the end of the month
spk_1: this delayed some contracts in europe and we experienced similar obstacles in japan however we focused on what we could control during the quarter and deliberate results that beat our guidance this is because what we offer solves big problems and delivers big are why which would lead to high activity levels and in many and
spk_6: to engaging in sea level conversations
spk_1: overall i'm happy with our navigation and que to looking ahead we have a solid pipeline entering the second half of the fiscal year and i'll look forward to delivering our best in class a search platform to new customers with that altering the call over to steve steve
spk_7: beer can you might be a new yeah i think he were a good quarter revenue about guidance is fantastic addition and continued operating a patient she's were making meaningful progress building the answers platform and increasing awareness while reopening have been inconsistent around the world stage describe the tripoli a sudden said that and europe when a good position to help our customers when they start reopening or second quarter revenue grew eleven percent year over year to ninety eight million dollars on or revenue increased twelve percent year over year to one hundred and fifty five million dollars a year or with three hundred and seventy eight million dollars an hour up twelve percent year over year our total trailing twelve month that dollar based retention which excludes us and be customers with ninety eight percent and are trailing twelve months that dollar based retention for direct which excludes up ambient third party resellers was the hundred percent as we mentioned last quarter never retention that the trail and twelve my number and similar to que one to two comparisons include the ongoing impact with a pandemic computer last year that the reopening be an elongated and even now turning to not gap results were to reconcile the gap in our press release to to growth mar agents were seventy five point two percent this quarter and up compared to seventy six point five percent in a year ago quarter the decrease in gross margin was primarily driven by higher employee cost are cute you operating expenses for seventy nine point eight million or eighty one percent of revenue and it is down from eighty four percent in the year ago quarter we remain focused on cost management and efficiencies and once again drove margin leverage in sales and marketing and you know with sales and marketing expense decreased three percentage points or the percent of revenue from fifty five percent in cute you a fiscal year twenty one to fifty two percent to to fiscal year twenty two and she inexpensive decreases the percent of revenue from eighteen percent and cute you it's clear twenty one to sixteen percent and cute you have this year we continue to focus on improving selling tackle productivity with systems and profit improvement while into thin and revenue generating opportunities in the second half of the sheer such as marketing events and product launches are cute you know of seven point one million dollars compared to seven point nine million loss and the year ago quarter and are cute you know loss per share of six cents compared to seven said last last year cash and cash equivalents were two hundred forty million dollars at the end of the second quarter we continue to have a strong balance sheet and positions as well turned up and growth expect going forward net cash flow from operations for the three months and july was a negative thirty two point six million and hour compared to a negative fifteen point six million for the three months and a july twenty twenty on a six month basis we generate a two point four million of net positive cash flow from operations and that's up from a negative sixteen point three million for six months into july twenty cap with three point one million and a three month for the july twenty one and that compared to eighteen point eight million in the three month and a july twenty twenty two million of that three was for facilities build up for fiscal year twenty two we continue to expect total capital expense to be about fifteen million dollars at the percent the revenue we expected to return to more normal life and you'll run rate closer to historical levels going into next year
spk_8: turn into our outlook
spk_7: we expect you three revenue to be between ninety seven point five million and ninety eight point five million and we expect non gaap net loss per share between six and eight the have a weighted average basic share count of approximately one hundred and twenty eight point six million shares and que three for for your fiscal year twenty two expect revenue up between three hundred and eighty six million to three hundred and eighty eight million or non gap law per share expected to be between twenty and twenty four cents and this assumes a basic weighted average check out of approximately one hundred and twenty seven point nine million shares hey look i'm excited about our continued innovation o'clock the answers platform had a potential are solutions offer were encouraged by the uptake that the man had conversations were having in the marketplace lol the macro picture continues to develop and remains difficult to predict we are investing into the opportunity to best position ourselves or when reopening a curse in summary things are good we're just waiting for things to get better with the reopening going slower do to help liberia employment supply and demand alignment issues persisting we are well positioned as macro economic continued conditions continue to improve or improving our product the birth fine our customer base as you heard today improving our processes i'm working on the things that are under our control without alternative dr howard with them closing remarks before cool howard thank you
spk_1: in closing in serve our annual cop or onward a that that we bought the how we decided to host forty events for our customers and prospects across the globe over the next several months were referring to the these reunions are recent brand campaign was deemed around or union for the class of ninety ninety nine and it also feel like it's been about twenty years since we've go got together with our professional colleagues and friends so we will be activating the experiences and local markets over the coming weeks and look for to see our customers there and also join us on september fourteenth we're hosting web whether art with one of our first support answers customers technology provider sam
spk_5: some for customers and prospects to learn about how samsung is preparing it support solution for the holiday
spk_9: operator we're ready to open up procure name
spk_0: we will now begin the question and answer session to ask a question you may pressed star than one on your telephone keypad if you are using a speaker paul leath pick up your handset before pressing the keys to withdraw your question please press star than to at this time we will pause momentarily to assemble a roster our first question comes from that cause with jp morgan please go ahead
spk_7: good afternoon thank you for taking my question quick question on answers i know it's very early but are you seeing any nps scores or other success metrics improve your customers have implemented support answers i i know you might not have a data quite yet but i'm just trying to get a feel for the
spk_10: tangible or a white customers might be sharing with you after the than using answers for little bit
spk_5: matt thanks to the question your customers usually implement yak support answers for three parts of their our our ally the first has increased transactions as you know we've got your language search when a customer runs a question after question they're going to be getting maps back and customers over or other types of transactions and customer
spk_11: you can
spk_4: create whatever transaction button they want to trim increase transactions is the first second is reduced support tickets and yeah i'm friendly with a number of the word support platforms see you in executives and they tell me that right now the their customers are being crushed with a number of support tickets are we
spk_3: really want to help them with with our support answer solution is reducing the number of tickets they come through and there's a different number different ways you can do they have a one of them for a kate the question is the ability for yak the answers the scanner ticket as it's being written and as a customer as one of their customers typo ticket if we can find a potential answer will surface that using yeah search was a show that that same answer to the help that agent within the agents help desk and then death cursors go out and and that reduced to support tickets and then your as you said obviously better customer satisfaction there's two places search can happen it can happen your own site can happen on google and google doesn't answer support questions about your brand as well as you can and everytime you can answer a question you're keeping that customer journey engaged with you and not letting them go back to gamble
spk_10: that's helpful our thank you and steve in i know you've been enjoying your we're going to marketing leverage and you know the be sales marketing it's percent of revenue has been fairly steady recently i know at some point you'll get back to that traveling into a lot more person new customer visit among yourselves force is your chance to some of the sales marketing leverage erode our or should we sort of looked you
spk_7: gradual leverage their yeah i think you'll look to you know a little bit slower obviously improvement in the sales and marketing number but our goal is to continue to improve that year over year and quarter over quarter so if my flat not a little bit as we get back in and get our ego on here which is really important that our had to get out and front meet our customers again but i don't feel gone backwards
spk_10: i thank you very much
spk_0: the next question is from ryan mcdonald with needham please go ahead
spk_3: i did you pick him my question lincoln growth and on a quarter just be curious to hear you know what an update on the lifting the offering and and in what you're seeing with customers in terms of you know we're starting to see foot traffic bad get domestically obviously you're deltas creating some uncertainty but but how how your customers are starting to think about expansion up
spk_7: kennedy and and would that mean for for good thing billing doesn't walk into the back after this year
spk_3: thanks and we had a pretty good quarter and in north america in particular i think of dave that we encountered some challenges in the last month of the quarter in europe with regard to lifting your we continue to the google maps transaction you go on their way back to two twenty nineteen level and yo the the reality is that listings is the fuel for answers and so we thought solution to our customers and many customers that are purchase listings are able to yo the are able to get going with the answers because all the data that fit in there in their knowledge graph and yeah we continue to believe that with you can be a good business for us going forward
spk_4: in north america was pretty good this quarter and you know europe got challenge by the delta in july
spk_7: like that and and maybe a follow up with he called outta on gross mark the gross margin impact from sort of higher costs for for labour just curious you know what this is a trend we're starting to hear you know for more and more organization your house we think about that that continued impact of high or low labor costs as we think about the back happened here as it relates to gross margins yeah that a good question i did most of our increases yeah we did to some wage and salary increases his past quarter but it's also were hiring more professional services people and that of course impacts the margin a little bit till they get up to speed and get college or i expect our margin for can be continue to be in the mid seventies as we talk about my think this is more about ramping up our professional services group a little bit than it is a fairly thin wage inflation at this point no doubt though there's competition for workforce of the marketplace
spk_12: thanks very much a hop back in you
spk_0: the next question is from know that kahn which are with securities please go ahead
spk_7: yeah this is nick and on front of that they take like question and are you said reopening so been inconsistent across geography is maybe can you get a sense of our sales trans changed in august person second quarter navy also
spk_13: in august or is july
spk_14: gave you want to take that
spk_6: sure
spk_15: so a next favorite nephew we did see things got a little challenging towards the end of july and old sending start picking up again in august
spk_1: and we've got
spk_7: fair amount of activity going on some of those deal that we thought were little bit more challenging towards the and so you don't we can't declare victory in terms of what's happening right now but it's certainly look promising covenant august
spk_1: got it and then maybe just a follow up how much of a driver to gross do think that the sales force integration can be
spk_16: in well a you know it's brand new but when i look at it with you think about how big that service cloud is and the footprint they have and they get your be significant
spk_0: god that's awful thank you
spk_17: the next question is a margin body with but william blair please go ahead perfect and thank you very much
spk_10: i want to touch on maybe the delta variant impact again i know you mentioned that that most of the impact was in europe and then japan but obviously we're seeing that impact in north america as well with
spk_18: you know clinton's reopening is delay back to work delayed a little bit naff mandated that i'm i'm wondering if that's coming up in your customer conversation that all here in in in the us as you look at your domestic customers are up it
spk_6: moral just an international issue at this point gave you wanna take that yeah so here's what we're saying you know we still have a very high level activity
spk_1: we have a lot of interest we have a lot of customer engagement folks are talking about it but have you think about will through rewind a year ago
spk_6: i would say most every software vander was better prepared for work from home our customers weren't most them didn't have set up at home my the how to navigate the challenges of having children at home how to get themselves set up weren't accustomed to working remote the world shane they are used to it
spk_1: and i think what's happening now with the let the resort have a high level of engagement a lot of it is in person they want to get together
spk_2: and i will tell you that we have this gorgeous brand new building we opened up our with our headquarters and we've got
spk_6: several really really important meeting that we've been having their we have this executive briefing center we've had a number of customers come in they can't wait to get in there the level to jasmine terrific and so we've seen as engagement quite a bit are they talking about it yeah
spk_19: but i haven't seen them hesitate in terms of engaging with us wanting can be quite frankly using our headquarters as it then you to get together and have some of the not have some these conversation so it's been pretty encouraging but yeah they do talk about in we're not out the woods yet in terms of what the world's face with but i but i certainly have seen a lot of momentum build
spk_20: me up in terms of engagement
spk_10: perfect a is there any kind of
spk_18: the bifurcation that you you can do between answers deals and and was listening to the of gravity you know that the answer deals you know someone to make an argument that there might be a little bit of a tailwind because it has a all
spk_6: it is a digital project product for possibly get all name or yeah at all the companies radical school physical portrait well i can tell you that you know and i spoke about this and priority schools we've orient that ourselves around in a platform company
spk_2: and so more than fifty percent of our pipeline is answers live now so answers is is an integral part of how we position ourselves it's an integral part of the platform
spk_6: and so it's very much part of what we you know it's part of our normal course it is
spk_17: the to look at it as a solution a platform oriented sale versus a product fail
spk_0: i predict very helpful thank you thank you
spk_21: again if you have a question please press star than one the next question is from rohit kulkarni with mkm partners please go ahead oh hey thanks for taking my question some nice quarter their your legacy doctor would support on
spk_3: historically your buck about dog popular the word tickles me marketing and than double up on source and are ecommerce on serves any more color on how are they were to go all resolutions to specific will become progressing any
spk_4: new mean sort of that amount you into the country
spk_3: right thanks yeah the customer journey starts with the question and that question can either happen on your own
spk_1: save your own help save your own website one of your own app store can happen on google and are our marketing answers and support answers solutions are designed to help companies engage with their customers regardless of a where they might be and so the support answer solution is unique
spk_22: retailer to be sold to the head of support that is it all the a little bit of a different use case in that we can integrate with gender or now filled force service cloud to point to help side to put all the help articles into a knowledge graph to make sure that they're at the owed and then be able to put a true ai search box
spk_4: on top of the accompanied help they'd in order to meet that customer at their exact moment when they might have a question in the results that israel is reduced tickets increase see that horse and one single knowledge graph could power answers on company help site on their own
spk_1: marketing site and even in google one single knowledge graph to do all that as opposed to keyword based index church which simply look for literal shrink quibble the matching in document and don't help really truly answer a customer's question
spk_5: the ecommerce solution
spk_4: we have technology to be able to help companies give their products in and do that but really our main focus right now and we're we're seeing momentum deals are in marketing in supporting answers as though with are fully focused on the customer journey we also are working on workplace answers were quick answers enable a company to end
spk_3: and have a have a knowledge graph of back across their enterprise and bring in
spk_21: data from various systems connected and be able to offer employees inexperienced but we're we're not quite ready for that yet and were totally focused on the answers platform serving the cheap digital officer in helping companies manage their customer journey with our answers today
spk_7: oh okay great up and the know maybe a question for steve on that sir almond around bad be they had contracts with the europe and japan are as in any way that you can qualify or even know qualify how you thought about the kikuyu and second hardly white guide with got her mean know what you see recently gather if we get a dataset we thought i'm pretty significant slow down
spk_21: and have and july it's i guess where people are they case and certain people around my particular view is that sometimes poet fun sometimes push out from that out so we don't really see any major been going forward right now either up or down harm but it that it is what the everybody been
spk_0: working from home on gym and others it has a bit challenging sometimes to take down the stuff but i think our customers get more experience working with that and i'm pretty sure as we get ourselves teams back in front of customers and my person if you're that's gonna help it out but there's no real up or down here that you're thin in terms of that right now
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