Livechat Software Sa

Ladies and gentlemen, thank you for standing by. And I would like to welcome you to discussion on Tech's Q4 2024-25 KPI conference call. The call today will be hosted by Marcin Droba, VP of Investor Relations. At the end of the presentation, there will be an opportunity to ask questions. So without further ado, I will now pass the line to Marcin. Please go ahead.

Good morning, everyone. I will try to go as quickly as possible over the data trends and events from the past quarter, and then we will move on to questions. Our absolute priority remains the development of the suite. Over the past quarter, we have undertaken many actions related to this process. Some have already impacted our results, while most will only do so in the future. Between January and February, we finalized the long-announced sunsetting of the native ticketing system in LiveChat. It's worth noting that this system was quite basic and had not been developed or supported for a long time. As expected, this had a significant negative impact on the number of LiveChat customers, but at the same time, it boosted the upselling of Helpdesk. We also launched a joint trial of LiveChat and Chatbot and continue making changes to our cloud infrastructure. This is absolutely critical for us, but what may be relevant for you is that the past quarter should be the last one in which costs related to this area increased. Starting from the next quarter, we expect to significantly reduce them. As previously announced, we are changing the way our sales team operates, making it more active offline. This quarter we attended events in New York, Miami and Barcelona. In the coming months, we expect to have a small team operating locally in the US. These efforts are already yielding results. We have secured our first customers with an annual contract value of $1 million. This was achieved through upselling to an existing client already using our product. The contract is for two years with quarterly payments. Responding to customer signals, we are introducing cryptocurrency payments in our enterprise plan, and we anticipate a significant transaction in this area in the coming weeks. This quarter also brought new partnerships, including in our partner program. However, I want to highlight our entry into HubSpot App Partner program, as the official and high-quality live chat integration with HubSpot has been highly important to many of our existing customers. We are still working on COC2 certification, where we may experience some delays. SOC2 largely describes how software is developed and we are introducing changes related to the suite in that area. However, the certification itself is not at risk. Regarding KPIs, our most important metric MRR grew by 6.9% over year to year. To compare a year ago, this growth rate was 4.1%. A quarter ago, many of you were concerned about the level of received payments. But as you can see, they have returned to a high level, increasing by 3.3% year over year and 4.8% compared to the previous three months. Now we will move to our traditional set of KPIs, supplemented with a few additional slides. I'm not sure if these will stay with us long term, but I hope they help you better understand what's happening inside our business. Payment received increased by 3.3% over the year and 4.8% compared to the previous three months. I want to emphasize that the already mentioned large client pays us quarterly, so there is no extraordinary items in these figures. MRR continues to show a 6.9 year-over-year growth despite a just slight quarterly increase. Chatbot and Helpdesk are contributing more and more to MRR with Chatbot alone now approaching half a million dollars. This is the one of the mentioned news slide. And this chart shows the share of customers with RPL above and below $500 as a percentage of our total MRR. As you can see, the share of larger customers steadily increasing. It has grown by 8 percentage point over the past 12 months. This isn't visible yet, but at some point this should start to positively impact churn, particularly revenue churn, since larger customers tend to be more loyal and get more value from our product. These slides present a similar view, but focus on the share of customers using more than one product within our total MRR. A similar trend can be observed here. The share of this group has grown by 9% point over the past year. RPL for customers using multiple products increases significantly. For example, having just two products already places RPL at the multiple of the average for our entire customer base. This is, of course, at the least pleasant slide in today's presentation. The number of live chat customers has dropped significantly. As I mentioned, There was a one-off event related to the sunsetting of the ticketing system in live chat. Customer's churn remains high at over 4%. When looking at the reasons provided by customers, the most common one reason for churn was closing the business or changing the business model. The second most frequently cited reason was lack of charts. Lack of charts historically has been the number one reason for the channel. Price and competition came as the reason much lower on the list. But keep in mind that this data only reflects customers who explicitly provided a reason for leaving. so it's not a complete picture. On this slide, you can see that the positive trend for LiveChat continues as this product added $3.3 to RPL this quarter. This is the result of several factors – successful upselling, acquiring larger customers and higher share among the smallest customers. As you can see, Chatbot is regaining traction in customer acquisition. We still expect more from this product, but as for now, the joint trial with LiveChat is proving helpful. RPL for this product is stabilizing, partly due to promotional pricing for the initial period. Despite this, chatbot added $3 to RPL over the past month, which is a solid result. It was a slightly weaker quarter in terms of revenue from additional charts, not included in reported RPL, which on average added $30 to RPL for this product during a quarter. As you can see, the helpdesk delivered an absolutely phenomenal quarterly results, both in terms customers growth and as you will see on the next slide, RPL. Of course, this is largely due to sunsetting of tickets in live chat, which has been communicated to customers in advance. However, this should not be seen as typical one of events. It is significant that this product a built-in ticketing system within LiveChat and the separate Helpdesk products no longer compete with each other. Customers who have switched to Helpdesk are getting a real premium tool. And as I mentioned, Helpdesk also performs very well in terms of RPL with an increase of over 7% over months. In summary, our top priority remains progress in transforming into a sweet company. Some of this quarter's efforts are visible to you, while others are not, but all of them are important. Even without the effect of this transformation, our business remains secure, stable and growing organically. Our new products are performing very well. Chatbots with 26 MRR growth over the year and helpdesk with an impressive 126%. The current growth rate for the whole company does not match our ambitions. But we have achieved these results in a challenging market environment for businesses. Marked by significant changes, we had uncertainty affecting business sentiment. Morgan Stanley recently released an interesting report on SaaS companies highlighting these challenges. And if you have that opportunity, I highly recommend it to you. Looking at ChartMogul benchmarks, our revenue retention has consistently been in the top quartile and even of the ChartMogul benchmark. So we are one of the best SaaS in the world at this moment when it comes to revenue retention. But even if you check the benchmark for customer retention, we are above the median. This reflects the very difficult market condition rather than any weakness in our fundamentals. Thank you very much for your attention. I will be happy to answer your questions.

Okay, thank you. Thank you very much for the presentation. So we are now opening the question and answer section. If you are connected at the telephone and you would like to ask a voice question, please press star 2 on your keypad. That is star 2. If you are connected via the web, you may also ask a voice question or send your question as a text. We'll give a moment or so for the questions to come in. We have received a bunch of text questions. The first question comes from Piotr Basiński from Hermes. Will there be any impact of new US tariff on text business?

As I believe, these tariffs are on the product. I don't think that there will be any impact as for now. We'll observe situation, we will learn now. So I'm home that right. I hope this trade conflict will not expand to new areas. But if I'm right, according to my best belief, this tariff is on product. So it shouldn't affect us. Of course, you definitely will be observing the situation.

OK, thank you. Thank you very much. Moving to the next question from Henry Reiner from Enismore Fund Management. What are the key drivers of churn for the LiveChat product and why has it worsened over the last latest quarter?

Hello, Henry. I'm very, very happy to have you here. So for the last quarter, definitely we had this one-off situation, one-off event, sunsetting ticketing systems. So some of our customers decided to buy Helpdesk. instead of, in place of a censored ticket system of the life card. But a lot of them decided to quit because they decided that without that value they don't want to pay more and we lose them. So that was something we expected definitely. So I think in that quarter we lost, for that reason, a few hundred customers additionally, simply because of that decision. Of course, at the same time, we get a lot of new customers for the helpdesk. So that's what happened in that quarter. Quarter-to-quarter customer churn look very similarly, above 4%. And I mentioned the reasons during the presentation. So if you have some more detailed questions, if you want to jump in, of course, we are open to that discussion. So thank you for that question.

Okay, thank you. Moving to the next, we have a couple of questions from George Weckham, Weasley Digital. Can you explain how high switching costs are for your software suite and whether they are rising over time? And another question.

Maybe touch the first part. Now I'll answer the first part. the first questions. How switching costs are for your software? If you mentioned this cost of making changes in our cloud infrastructure, if you are mentioning that, At this moment we are forced to doubling the expenses of the cloud infrastructure we are using because at this moment we are using the infrastructure of two providers and this quarter will be this quarter we will be discussing quarter ended in march will be that quarter when the this cost will be at its peak and then from the from the from the current quarter from the quarter we just begin uh we will be should be able to significantly reduce this cost as some migrations are done, are finished, and we can proceed. Comparing quarter to quarter in Q4 of the financial year, the cost-related to cloud infrastructure can be growth by some one million zlotys plus. And from the current quarter, from the Q1, we should be able to reduce that position, the cost related to that position by some three million zlotys.

Okay.

And you can go to the next question.

The next question from George is why are you introducing crypto payments? Are you aiming to hold a crypto reserve?

So thank you for that question. Actually, we are introducing these crypto payments because our customers, our prospective customers were asking for that. So that's the only one reason. And we will not see actually the crypto on our side. So actually, from our point of view, that would be dollar transactions. And so for us, it will be US dollars. So no crypto reserve.

Okay, perfect. Moving on to the next question from Bartosz Rechciński. Could you please share any updates regarding team chat development during the quarter.

So thank you. Team chat will be very important part of our suite. And I think all going well with that product, but sorry, no update on that. There is nothing new really on that matter. And there is another question. I can see that's a very similar question, the same question about workflows. I would say, no, nothing new. We are very focused on the suite. We are pushing with the suite. both team chat and workflows will be very important part of the suite and some update on how suite is going will come in the next quarter but But I think we are quite happy with both projects. Team chat is being tested. Workflow is used by a group of our customers. So it's daily work. Products are developed. So sorry for nothing really new, no exciting news. And the focus is on the suite and we are really pushing the suite on.

Okay, perfect. We are now moving to the question from Maximiliana. Thank you for adding the new metrics on the suite progress. And the question is, you mentioned the sunsetting of live chat ticketing and the transfer to help desk. I didn't acoustically hear you. Did you say the increase in Helpdesk should or should not be viewed as a 1-0?

Presumably... Okay, maybe gone with the whole question, sorry.

Presumably not 100% of live chat ticketing customers move to Helpdesk. How many customers did you lose on a net basis?

Okay, so... Yes, I would say yes, it's one-off. I mean, don't expect the same results from Heldesk next quarter. So in that perspective, there is one-off. At the same time, the effect of that change of sunsetting tickets is still not fully visible, as some customers are still testing helpdesk on trials. So we will see some effect will be visible also in the current quarters. And it's not one of uh if you think about the fact that help desk is no longer competing with live chat that and we will be able to to show the value of the help desk better to to to live chat to new live chat customers So, it should improve. So, this is something which should also help DESK in the future. So, the answer is yes, it's one-off. And it's not entirely one-off if you look at the other perspective. I hope that that's clear. Net results, on the net results, yes, we definitely lost some more customers. I think on the... If you look at the results of that quarter, when we lost 100, 1,400 customers on the net level. There is like definitely few, in that number there is like extra few hundred of live chat customers who decided to quit because of the fact that we sunsetted ticketing system. And we were ready for that. That didn't surprise us. prepare for that.

OK, thank you. Another question from Maximilian is if you could explain the company thinking why are you not doing share buybacks?

At the time of the day, at least in Poland, it's general meetings decision. So it's shareholders decision. Of course, we have important shareholders in management and the board, but at the end of the day, it's the decision of all shareholders. We don't have this. General meetings didn't agree on that. So this decision belongs to all shareholders at the end of the day.

Okay, thank you. Another question from Maximilian is, as you move to larger clients and are building out sales teams, what impact on your margins do you expect as a result of higher costs?

Yes, there is also a quote that you mentioned that rising cost will end now. I didn't say that. I didn't say that cost will not be rising now. That was about infrastructure cost. That was about cloud. And yes, we will save some money on cloud infrastructure, because now we are paying extra for that. But at the same time, yes, we definitely will invest in sales team, we will invest in sales team activity. Definitely the whole acquisition process, acquisition of the customers will be more expensive than in history, not only because we have to rely more on sales, but also, you know, SEO is more difficult this time and the market is difficult. So yes, that will be more expensive. And now, honestly, we can't foresee how much it will cost. If someone knows us, if someone knows our DNA, that person can be sure that will be careful about a cost that they really want to be efficient and so on and so on. So definitely we want to be profitable. We definitely want to keep high margins at the same time. Yes, we are ready to sacrifice some of these margins in order to keep growth, but now we are not able to really give you a number.

Okay, thank you. We have a follow-up question from Henry Reiner from Anismore Fund Management. In which quarter will you love the negative effect of removing ticketing from the live chat product?

Definitely, I mean that that effect will be much, much less visible in the current quarter. This is also valid when it comes to positive effects. So, yes, we can expect that in some months or two, some of our customers will decide to quit because they're looking for alternatives for the helpdesk, for cheaper alternatives, which is not so easy, really. At the same time, some of the customers which are now trying helpdesk, which are still trying Helpdesk on three trials will decide to embrace Helpdesk for good. But this effect will definitely not be as strong as during the last quarter.

Okay, perfect. Before I move to the next question, maybe just a quick reminder for the rest of participants. If you are connected via the phone and you would like to ask a voice question, please press star 2. There is star 2 on your keypad. If you are connected via the web, You may also ask a voice question or send us your question as a text. We have another text question from Pudding Porn from Enter. The question is about customer churn rising from transforming strategy. I think this was partially answered already. How long the churn rate will be decreasing?

I cannot foresee that. If you look at the reasons which, as I mentioned, are not giving you the full picture of what is happening, because obviously not all the customers are giving us the feedback. The economic motivation is very strong. I mean, the reason called I'm closing business or I'm changing business model. It was the reason number one and we really cannot foresee what will happen in the current environment. So we are prepared to operate in that situation, in that environment. As you can see, the business is still growing, although definitely not at the rate we like. It's still very, very profitable and we are pushing with development, we are pushing with the strengthening sales team, so we are prepared to operate in very difficult environment and we are not able to foresee how long it will take.

Perfect. Thank you. Our next question comes from Bartosz Rychciński. Could you please upload webinar recording in English version on your IR website as soon as possible as he has missed the beginning of the call?

So this is also something for you, for the Closer team. As soon as we get the file, we upload the recording. Probably we will have to wait with transcript because It will take more time, but the recording should be very, very, very soon.

Perfect. Thank you. And maybe just a final reminder for any remaining questions. If you are connected via the telephone, please press star two to ask a voice question. And for the web participants, you may also ask a voice question or send your question as a text. We have a question from Maximilian. It's a follow up about the share buyback.

question could you share how the management and board voted on share buybacks at the last agm to give a feel for how they view this matter no we didn't we didn't have a voting of that no one bring the mother of course management board didn't do that but any other big shareholder do that and actually you know we we are discussing the matter internally and the shareholders and I would say opinions are very, very split. So I know the arguments, I know that buyback is a very good option, taking into consideration valuation and some other things. And they are good arguments at the same time. other shareholders, a lot of shareholders are preparing dividends and dividends are in our official policy. But they never vote on that. We're not voting on that. And honestly, as a shareholder, I'm not only a shareholder, but I'm personally always registering and I'm attending to the general meeting. I'm not sure. And of course, I'm a very, very small shareholder on my own. But I'm not sure how my vote would be on that.

Okay, thank you. Thank you very much for all of the answers. At this point, we are seeing no further questions. So I will pass the line to Marcin for his closing remarks.

Thank you. Thank you very much. Thank you for all your questions. Thank you for attendance. Feel free to contact us anytime. We are for you, so we will try to answer all your questions. Thank you.

Thank you.

And have a great day. Bye.

This concludes today's call. Thank you and goodbye.

Bye.