Teamviewer Se

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the team viewer Q2H1 2023 results call and webcast. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchdown telephone. Please press the star key followed by zero for operator assistance. And I would now like to turn the conference over to Ursula Kehret. Head of Investor Relations, please go ahead.

Good morning, everyone, and welcome to TeamViewer's Q2 2023 earnings call. My name is Ursula Caret, and I am pleased to host today's call. I am joined by our CEO, Oliver Steyl, and our CFO, Michael Wilkins. Oliver will kick off the presentation by updating you on the business and financial highlights of the second quarter of 2023. In the second part of today's call, Michael will guide you through our Q2 financials in detail. As always, the presentation will be followed by a Q&A session. Please note that, as always, you can find the important notice and the APM disclosure on slides two and three. And with that, I hand it over to our CEO, Oliver Stein.

Thank you for the introduction, Ursula. Good morning, everyone. Thank you for joining our Q2 2023 earnings call. As always, let me start with a glance at the second quarter of 2023. I think after a solid first quarter, we continue to make progress in Q2 in many different ways, not only in terms of business growth and financials, but also in terms of our product offering, the use cases, our go-to-market approach, and just in general, our overall leadership in the marketplace. Let me start with the numbers first. We saw double-digit top-line growth with revenues up 12% to 154.2 million euros and billings up 13% at constant currencies in the second quarter. And our adjusted revenue EBITDA margin came in at 41%, despite additional investments in R&D and marketing, underlining that TeamViewer is a highly profitable company. A strong driver of our success in this quarter was once again the SMB business, that showed a strong billings growth of 14% on constant currency. And it's great to see that our core business is so resilient. To further strengthen our leadership position in the SMB space, we recently launched TeamViewer Remote, which is the next generation of our remote access and support product. And due to the dedicated communication campaign around the launch, we were able to generate additional awareness for the product in Q2. And since our last quarterly call, and also since some of you met Michael, Peter, and Hendrik in London, we've received very constructive user feedback that we are building upon to continuously optimize the product and improve the offering for our SMB customers. Not only SMB business showed a strong performance in Q2, we also did well in the enterprise business that had a slower first quarter, if you remember. Despite a difficult market environment, we were able to close some larger deals within the quarter, and we successfully replicated use cases across regions and initiated and executed several measures to increase the traction again and to end the quarter with 9% enterprise billing growth on constant currency. Given the challenging market in the enterprise software industry in general, we believe this is a good achievement, even though we saw much higher enterprise growth rates in the past, of course. In addition to remote connectivity, we are also well positioned to benefit from an increased augmented reality momentum in the market. With Apple recently presenting their new Vision Pro device, we believe that we will see further adoption of AR and mixed reality technologies across use cases, regions, and different industries. And the whole industrial metaverse space is an ongoing innovation play. certainly takes some time and will happen in phases, but we are ready to capitalize on that development. According to our verticalization approach in the last quarter, we have focused on increasing our footprint in the logistics sector with a dedicated go-to-market strategy for a frontline vision-picking solution. And then lastly, we've added new experienced leaders to our management board and senior leadership teams. May Dent will join the management board as new chief product and technology officer at the end of August, clearly strengthening our focus on product development and innovation and centralizing all technology responsibilities at management board level. And Constanze Backhaus joined our senior leadership team as chief human resources officer in mid-July, so she's on board already. Both are, from our perspective, fantastic additions to the team and will help us doubling down on a variety of strategic initiatives and further increase our innovation capabilities. From my perspective, to sum it up, we achieved double digit growth in Q2 while focusing on improving TeamViewer across the board with many different activities. And we see that our investments into people, product and marketing are paying off. Let's have a quick look at the development of our SMB business, which was driving our growth in Q2, similar to Q1 actually. And I will be looking at billings on a constant currency only here. Michael will share the full picture, including revenues later. But as you know, billings are rather an indicator of current trading and business momentum, while revenues are the result of past successes. So you can clearly see on the left-hand side that after a difficult phase for SMB last year, at the end of 2022, SMB Billings came back and continued to grow stronger than actually I think a lot of people in the market had expected. But we have worked all the time on our SMB product offering on sales and all the marketing channels and on our website. And we are now happy to see the results of these ongoing efforts. And as previously mentioned, plus 14% Billings growth on a constant currency in Q2 is really strong. On the right hand side, you see the increase in average selling price in our SMB business within one year. Plus 12% in ASP underlines once again our strength in up and cross-selling to our existing customer base, as well as demonstrates also our pricing power. If you go to the next slide, a quick look at enterprise, you can see the development of our billings here. As said before, We see plus 9% growth on constant currency in Q2 as a success, given where the market for enterprise software is at the moment. We told you in Q1 that this low performance in enterprise was a temporary weakness, and we worked thoroughly on a number of measures to be able to turn the growth rate around again. What I explicitly want to highlight is the nice increase in the enterprise subscriber number. Within one year, we were able to win 29% more customers, enterprise customers, and are now close to 4,000. Another important topic is upselling from SMB to enterprise. So if we take a closer look at the billing split for Q2, Looking at the chart on the left-hand side, you can see our increased growth momentum in the SMB segment with LTM billings in Q2 2023 up 13% on a year-on-year basis to almost 530 million euros. With the largest SMB bucket up 28%, this may come as a slight surprise, but I'd like to take a moment to highlight the development of the smallest SM bucket here as well. The bucket containing customers with annual contract values below 500 euros has developed from a development of minus 6% in Q4 2022 to minus 1% in the first quarter of this year and now actually evened out. This is a very good development at the entry level where we have seen increased competition in the last years after the COVID spike, if you remember. Before I continue with the enterprise development on the right-hand side, let me point out that we once again managed to record A great net upsell from SMB to enterprise amounting to 22.3 million euros. Enterprise LTM billings increased by 21% on a year-on-year basis and amounted to 132.6 million euros. The bucket containing largest deals with annual contract volumes of 200,000 euros and more returned back to growth from an LTM perspective after decreasing by 6% in the first quarter. And enterprise growth in general was fueled by some larger deals coming through after we had seen some deal slippage in the last quarter. And as always, let's look at two recent enterprise deals from the upper bucket and why they are relevant in the grand scheme of things on the next slide. One example from APEC, we've been able to close a tensor deal of more than 600,000 euro in volume. One of the big four, quote, banks in Australia and New Zealand is using our enterprise connectivity solution to streamline IT support for their more than 40,000 employees. The main reason why they decided for TeamViewer is our leading security posture and our compliance with all relevant security and privacy requirements. This means that we are well positioned to serve demanding customers from highly regulated industries such as financial services or the healthcare sector, where security of sensitive data is absolutely key. And the other example I want to share with you is NADRO. It's the largest Mexican wholesaler for the healthcare industry. NADRO operates 14 warehouses across the country and recently optimized its product picking using TeamViewer Frontline together with SAP's extended warehouse management software. This led to an improved logistics performance of up to 30%. We were able to win NADRO as a joint customer based on our SAP partnership by the end of last year. And now in Q2, we saw similar pilot projects with frontline vision picking and SAP integration taking place across all regions. And that shows while the sales cycles are quite long and it takes some time, but it's clear that our investments in the SAP partnerships are really starting to pay off now. And let's now have a dedicated look at our regional performance on the next slide. Billings and revenues increased across all regions in the second quarter with the strongest operational performance in APEC, where billings were up 20% year on year at constant currency. A good sign that the recent investments in the organizational structure in that regions are paying off. The Americas regions, where reorganization of the sales team setup has been initiated in Q1 2023, showed the lowest billings growth rate. This also leads back to longer procurement cycles in the current macroeconomic environment. But clearly, we are driving the reorganization at full force to lead the region back to previous successes. If you look at revenue, the Americas region showed the strongest growth rate with 16% year-on-year. Clearly, this can be explained by currency tailwinds from previous periods, the links converting into revenue. EMEA reported the strongest Q2 billings growth at nearly 79 million euros, up 14%, and the region contributed 52% of total billions in the second quarter. Looking at growth drivers, all regions' revenues benefited from successful up and cross-sell measures. targeted monetization campaigns and an increasing number of multi-year deals stemming from a well-developed and loyal customer base. And with that, I'd like to hand over to Michael for the financial highlights.

Thank you, Oliver, and good morning and a warm welcome to all of you also from my side. I am happy to guide you through our financials for the second quarter of 2023. On slide 12. You see our Q2 revenue of 154 million euros and our Q2 billings of 151 million euros. As expected, revenue is higher than billings after a strong Q4 and respective billings converting into revenue this year, supported by currency tailwinds also from last year. Oliver already mentioned the Q2 growth rates, 12% revenue increase and 13% constant currency billings increase. Our reported billings increase was 11%. Other than last year, we now face headwinds from currency, but we are well prepared. As you know, we hedged part of our adjusted EBITDA and we based our guidance on last year's average exchange rates. For the US dollar, for example, this was 105. Applying these on Q2 revenue and billings both would be slightly higher as shown in the footnote. The ARR, which is an LTM figure and annualizes the billings value of active contracts, increased by 13% year over year. Our LTM net retention rate remains strong at 109% on group level and is up 8 percentage points year over year. Compared to last quarter, it is up 2 percentage points. This is clearly a sign for sustained high customer satisfaction with our products. I'm aware Some of you pointed out that this number is influenced by our multi-year deal activity, so we adjusted the multi-year deal effect, which leads to 103% NIR on ARR for Q2 LTM buildings. In Q2, the adjusted EBDA increased by 7% to 64 million euros. This translates into an adjusted EBDA margin of 41%, which is well in line with our guided full-year margin of around 40%. Let me assure you, While we invest into our growth, we manage our cost base prudently, and we told you in Q1 there would be some catch-up effects in Q2. I will talk about cost in more detail later in my presentation. In Q2, our levered free cash flow grew by a strong 68%, which resulted in 47 million euros and a consistently high cash conversion rate of 74%. The adjusted EPS grew by 26% to 22 euro cents year over year. Let's first have a closer look on quarterly sequential developments globally and for SMB and enterprise. I already explained our global revenue, billings, and margin growth and the influence of currency. Let us have a closer look at the bottom right side of this chart, new business. the development of which needs to be seen in the light of still challenging macro environment and our ongoing sales reorganization in the Americas region. New business activity in Q2 was slightly below Q1, although in percent of total billings, it increased even from 8% to 9%. Let me remind you, our definition of net new is quite strict. We only count a customer as new when there were no billings in the prior LTM period. For example, the large Australian deal, which Oliver just mentioned, derived from an existing relationship, although with a very small ACV before the renewal. It goes without saying that we are not happy with our new business development yet. We have initiated several measures for re-acceleration, to name just a few. Our intensified engagement with general partners through TeamUp, a stronger verticalized sales approach, and the replication of successful use cases with new customers. Let's move to the next slide, please, and look at our core SMB business, where the strong momentum from the last quarters carries on, as Oliver already highlighted. Slide 14 depicts a strong SMB business with a nicely growing subscriber base over the last quarters, while churn remains rather stable. The ASP continued to grow to an average selling price of €840 per SMB customer as of Q2 2023. Besides cross and upsell, this development also reflects our price change motion, which we started in Q4 last year. We are currently assessing which follow-up measures we will take starting in Q4 this year. The quarterly revenue and billings, or more specifically, the respective growth rates, well reflect a re-accelerated SMB business. With the recent launch of TeamView Remote, we underpin our leadership position in that space even more. SMB revenue grew by 9% to 125 million euros in Q2. Billings were up 12% to 122 million euros or 14% on constant currencies. Please be reminded that the SMB billings also include multi-year deals. By the way, since start of this year, the effects of multi-year deals are considered more precise in our revenue split calculation. The comparable figures in the respective growth rates were adjusted accordingly, which is already reflected in the upper left charts. You can find a more detailed description of our refined revenue split methodology in the appendix. Next slide, please. Of course, the refined split also applies to the enterprise revenue, which grew by 25% to 29 million euros in Q2. As you already saw, in Q2, we executed well in our enterprise growth plan again. after a slow start to the year and despite a difficult market environment. So, billings were up 7% to 29 million euros or 9% on constant currencies. And I can tell you that we are all pushing hard to accelerate that growth in the months to come. The fact that our enterprise customer base increased by 29% in the last 12 months is a positive sign in that context. Before we turn to the next page, let me draw your attention to the enterprise NIR, which well reflects our current situation. While in Q2, it was lower year over year at 111%, it increased over Q1 by 2 percentage points. Let's have a closer look at our cost base. Recurring costs consisting of cost of sales and total OPEX increased by 16% in Q2. Around half of the absolute cost increase of 12.3 million euros was mainly personnel related, but let's have a look at some of the cost drivers in more detail. As a significant portion of our sales force is based outside of the Euro area, sales costs benefited from currency effects, which overcompensated the effects of increased FTE costs and higher bonus levels. Like in Q2 2022, the largest portion of the marketing costs was made up of sponsorships. As expected and shared with you before, marketing costs also increased due to targeted marketing measures in connection with the introduction of our TeamViewer remote launch. Let me give you some additional color on the Manchester United sponsorship. You probably all saw the new kit with Tim Muir on the shirt front. While this was presented at the end of June, the club's focus sales process for a new long-term shirt front partner continues. And we have decided that once such a new sponsor is found and Manchester United exercises its option, we will let 35 million euros of the respective savings drop through to the adjusted EBDA on a full year basis. The remainder of the savings will be reallocated to other marketing measures, which Pete and his team already work on. We also told you before that we continue to invest into our future product offering, which is reflected in the 18% increase of R&D costs. While G&A costs were influenced by the centralization of training and GDPR teams against positive one-off effects the year before, the other item was positively impacted by a gain from US dollar hedges. Next slide, please. The table on slide 17 dives deeper into our different profitability metrics, starting with the adjusted EBDA. I already explained the 7% increase in debt before. Now, deducting a decreased amount of non-recurring items fueled our unadjusted EBDA, which is 13% higher year over year. The decrease in non-recurring items was mainly due to reduced IRS charges More specifically, M&A-related vestings coming to an end. With just slightly increased DNA expenses and a significantly improved financial result, the profit before tax grew much stronger by 79% year over year. Let's briefly look at the tax item. As you can see, income taxes decreased by 88% in Q2 compared to last year. This is due to an improved tax scheme, which we have been working on for some time. With a formal resolution taken in April, we decided to implement a profit and loss transfer agreement by which a future taxable profit at the level of Team U.S.E. is now being assumed. This allowed for a corresponding capitalization of existing tax loss and interest carry forwards for the first time in Q2 2023, resulting in a Q2 tax rate of only 3%. The full year 2023 tax rate is expected in the high 20s And beyond 2023, we expect a tax rate in the low 30s, which is a significant improvement from the low 40s levels we saw in the last two years. Due to this tax effect, the Q2 net income almost drifted year over year to 34 million euros. Our earnings per share increased even stronger from 6 euro cents to 20 euro cents, which in addition reflects the reduced share count following our share buybacks. The adjusted EPS, which mainly adjusts for non-recurring items and PPA amortization, increased by 26%. In Q2, we also adjusted the positive one-off effects from the new tax structure, which relate to prior years. Next slide, please, which reflects our highly cash-generative business model. In Q2, our pre-tax operating cash flow increased by 30% year-over-year, reflecting our growing operations and positive networking capital effects. The pre-tax unlevered free cash flow and the levered free cash flow increased even stronger by 37% and 68% respectively. Reasons are a decreasing amount of capex and lower interest paid plus favorable timing effects in lease payments and cash tax. The resulting cash conversion rates were 93% for the pre-tax unlevered and 74% for the levered free cash flow and hence significantly higher compared to last year. Let's move from cash flow to cash position. On slide 19, you can see that cash and cash equivalents stood at 72 million euros at the end of Q2 2023. This is a very comfortable cash position considering we bought back 77 million euros worth of shares and repaid 100 million euros of debt since the start of the year. Netting this cash position and total financial liabilities brings us to a net debt position of 462 million euros at the end of Q2. Since beginning of this year, we calculate our leverage ratio on adjusted revenue EBITDA and on adjusted billings EBITDA because our capital allocation target was originally based on the latter. With 1.5 times net financial liabilities over adjusted billings EBITDA, we are fully in line with our capital allocation target. The respective revenue EBITDA leverage ratio is at 1.9. I just mentioned share buybacks in the volume of 77 million euros. This indicates that the first tranche of our 2023 program in the amount of 75 million euros was completed within Q2 and the second tranche started. We also canceled a portion of the treasury shares previously acquired, which resulted in a reduction of our share capital to 180 million euros or 180 million shares. The debt maturity profile has not changed since the end of Q1. So let's move to my last slide, where I want to reiterate our guidance. After six months into the year, and despite a difficult market environment, we already have 305.5 million euros of revenue in the books. This corresponds to a growth rate of 12%, which is well in line with our communicated full year growth range. We therefore confirm our annual revenue guidance, expecting growth within a range of 10 to 14% for 2023 and IFRS revenue in a range between 620 million and 645 million euros. This will be achieved on the back of a strengthened SMV business and continued execution of our enterprise growth plan. Combining the first two quarters of the year brings us to an adjusted EBITDA margin of 42% for H1 2023. While we are continuing to invest into people, product, and marketing, we are also confident to reach our adjusted EVDA margin target of around 40% for 2023. With that, I would like to end the presentation. Thank you all very much for your attention. We now look forward to your questions. Operator, back to you.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. So anyone who has a question may press star and one at this time. One moment for the first question, please. And we have the first question from James Goodman with Barclays. Please go ahead.

Good morning. Thank you. My main question is just on the H2 outlook and whether you can talk us through a little bit your thinking there around the phasing Q3 to Q4. I guess there's a couple of sub-questions in that. You mentioned already pricing that you'll reconsider as you get towards the end of the year what you're going to do there. But if you can help us with the parameters of what you might do given how much pricing has helped so far and given that that annualises I think at the end of Q3. And then secondly, within this, the enterprise performance, much better this quarter, but I think it was an easier comp. And I'm wondering if there's, in your view, a real underlying stabilization there or not, whether you've seen slip deals from last quarter close or, you know, what really the implications are there for the enterprise business as we go through the second half. Thank you.

Yeah, James. Hey, let me start with the first question on the H2 outlook. As you said already, pricing was, of course, very strong in Q4, as Q4 last year was a super strong quarter anyhow. So we have not decided yet how we move into Q4 this year. And the Q3 pricing is well underway as we speak. Of course, we don't see also not very much increasing churn rates. However, in total, if you balance H1 versus H2, H1 should be looked at as a little bit more stronger given the very strong performance in Q4 last year. With regard to the enterprise, yes, indeed, we see stabilization. A couple of slip deals from Q1 came in in Q2, which is nice. We also saw some slip deals now in Q2. into Q3 where we are working on and we are confident. So the pipe of Q3 and Q4 is building up nicely for both of the quarters. Very important to mention, as we all know, enterprise is always back-end loaded. We obviously also work and we see very nice development in the pipeline building from our partnership, especially with SAP and Siemens. And this is building up. Of course, in the end, it's all about the execution. And a very, very important point is our overall AMS turnaround, which we mentioned. And Georg at least needs two quarters. He started in March, so he needs another quarter. But he has now done a lot of changes already into the business. He's working way more collaborative with the other regions. So we believe that because of many, many changes are now being taking place and ongoing, that we will also see even more strength and pipeline as we walk. This would be my answer.

Yeah, just to add a thing. Just to add a thing in general, if you look back at the last years, we have a tendency in the business to have a, not just because of enterprise, but a slight seasonality towards the second half of the year. Typically, We have tough comms in Q1 and then the first half of the year is always a little bit slower organizationally. Q3, Q4 mostly stronger, especially when we come back from summer. And I think with all the trends, initiatives and indications that Michael just mentioned, I would be surprised if that's not again the same story this year.

Yeah, understood. Thank you for the detail.

The next question is from the line of Mohamed Mouaballah from Goldman Sachs. Please go ahead.

Great. Thank you, Mourninger, Oliver, Michael. Two from me. Firstly, when you think about sort of the second half and the SMB, when do you start to expect to see some of the impact of TeamViewer Remote? Is it more likely to be in the back end of H2 or more incremental in 24, 25 years? And related to that, obviously on SMB, you're going to start to sort of lap some tougher comps. But the good news is the drag from the lower bucket seems to be going away. So how do you sort of think of the SMB growth, particularly into the second half and next year? Can these kind of levels be sustained? And then the second question was just on the multi-year billings contribution. I know it was a little bit higher than what we were thinking for the quarter. So is it still on track for $50 to $60 million for FY23, or could it be more kind of towards the upper end of the range? Thank you.

Yep. Let me start with your first question on remote and when it's kicking in. So first of all, we mentioned that there was also for us a follow up on what competitors did. This was super important that we got this remote play into our overall equation. And we are very happy with the development. We, by the way, also receive a lot of very constructive customer feedback where we work on and release also new features there. very happy, but as you, as you indicated in your question, I think that we will see positive impact in our numbers rather in 24, 25. This is, this is this one, the SMB part, especially on the lower end. Yes, we are happy that the drag is going away. That is important. And as we also did in the past free-to-pay campaigns, we should assume now, since we are continuing with those, but on a way lower dimension, that this is now obviously paying off all the investments that we did into marketing, into our webpage. Customers obviously understand us better. The simplicity of the product explanation is obviously helping. And of course, also some price motions help here and there. That is important. And to your third question on the multi-year deals, we are in line. However, this may increase a little bit. So if you would ask me today without full confirmation, but it could end in the rather higher end of what we think for the full year.

Sorry, maybe to add on the team view remote, it will also be, honestly quite difficult going forward to single it out i mean we make this product available as a new ui ux with new functionalities for all our customer base step by step which is which is obviously very important um as as you point out at the same time though we now have peter with this new organization that he has strengthened quite a bit on board for more than a year so we see significantly more marketing activities better campaigning better user flows We also see a positive, clearly very positive impact on the brand from our partnerships. So this is also adding. So it's the whole marketing product mix and positioning in the SMB has improved significantly over the last 12 months. And that's what you see. And we always said we want to reinvigorate our positioning there and our growth. And this is coming into play. And we feel confident that we're on a good track there. But yes, there will be tougher comp quarters and it will not always be at 14% for sure.

That's great. Thank you, Oliver. Can I just think in a quick follow-up? In terms of the price increases within the SMB ACV of 12%, how much was pure pricing versus mixed pricing?

Pricing was from the top of my head rather around 6 million, if I'm not mistaken. So the rest is in the mix.

Got it. Thank you.

The next question is from the line of Daria Ioana Sipos from JP Morgan. Please go ahead.

Good morning, and thank you for taking my question. Two for me, please. Firstly, is there anything we should consider on the cost side in the second half, given the EBITDA strength that we've seen now in Q2 and also in Q1? And my second question is around the new business development. You mentioned the few measures that you're taking, including engagement with partners, a stronger verticalized approach, more successful use case replication. Can you give us a bit more detail around what you think the main driver of that is, and if there are already sort of early signs that that will be able to drive an acceleration quarter on quarter in the new business development. Thank you.

Yes, happy to start with the first question, because on the second half, so first of all, we have given the guidance around 40% for the full year, and we are at 42 in the half year, but you saw 42 first quarter, 41 second quarter. So even if we would end the year with 41, this would be in the range around 40, number one, number two. We have some salary increases now kicking in as of July. So this is for the entire FTE base. We must not forget that. And we will obviously also continue to invest. Also what you have seen from our change in R&D and product may coming on board. We will continue to invest into more R&D features as we did in the First half, this is for us important also to underpin the growth and the healthy development for 2024. So with all being said, we feel very comfortable with what we see right now with the cost, despite us obviously managing it, the cost piece very well.

Yeah, maybe second question, new business development. What are we concretely doing? I mean, if you think about the way we run or what we have for the market in terms of enterprise, On the one hand, we have connectivity of devices in the IT space, but also in the operations space. So connecting machines everywhere across the operations of our customers, which is embedded into the tensor products. So it's actually called tensor embedded on the one side. And then we have the augmented reality and mixed reality proposition with frontline to support workers. So we keep pushing the development of both very clearly together with partners also. The AR mixed reality piece is integrated into SAP and into Siemens, and we do co-marketing, co-selling with them. We visit the respective events to go specifically to certain verticals, so logistics, manufacturing, service after sales, and the likes. We also position Tensor more strongly even into the embedded space, the OT space, There's also an integration underway with major partners, including also SAP, to position this more. And what we do by this, we have an end-to-end offering to enterprise customers to either support workers or support machines or a combination of both. We do the selling motion together with partners, and we do it more vertical than in the past. And that leads to the build up of enterprise pipeline that Michael was mentioning across industries and across use cases. And that's what's continuing as we go through the year. And we do see the first successes. These projects, especially the frontline enablement project, they mostly start with a proof of value, proof of concept, or a pilot, and scale from there. And I think Nadru is a great example where we landed the pilot or the proof of value late last year and we're now in rollout stages. And as we see already that we're winning more of these smaller pilots with SAP and specifically SAP, we also have quite some likelihood that there will be converting and scaling deals in the remainder of this year and then also next year.

Thank you. The next question is from the line of Victor Cheng from Bank of America. Please go ahead.

Morning, and thanks for taking my questions free, if I may. I guess, first of all, on the team build remote, can you give us some color how it's performing in terms of user metrics, how it attracts more account creation or usage in general? And then secondly, can you provide a rough split across enterprise and SMB on multi-year deals? And certainly you talk about free to pay monetization, um, shrinking over time on, on, you know, due to other initiatives. Um, should we still expect roughly 5 million per quarter?

Uh, let me start with stevia remote maybe, and then Mike, you can do a two and three, um, or across it. quickly cover the free to paid monetization TV remote in general. I mean, it's obviously early days. It's a phase rollout of the product for different segments. The stats. So what we're tracking obviously is the usage is people choosing the new product. Some quite a few customers need to toggle between the two because they have the older versions installed on many devices out there in the field. And in order to avoid discontinuity or disruption, they need to manage that in a proper way. We do have a very high number of daily active accounts. We have a good share of people using TeamViewer Remote already. Lots of feedback. New customers obviously like the modern UI, the modern user flow, which is more in tune with other products that you find out there in the market. Existing customers sometimes need to find their way through the functionalities because they have been using TeamViewer since maybe 10 years. So for them, it's quite new. And that is sometimes also post grading challenges. Quite honestly, there's commentary Also on the product where people felt we left out or we changed things and flows which are not optimal for them anymore. So we take this very seriously. We work on that. But I think generally we feel it's a good uptake if we compare to what other companies have done and launched in over time. You mentioned one specific metric which is important, which is account creation. Very important to note that TeamView Remote is also the beginning of an era where you need to have an account, a registered account, in order to do outgoing connection, which is very important to increase traffic. the security for all users. And obviously that's a driver behind account creation. So this like for like comparison wouldn't tell you anything because we're really moving customers to create accounts and everybody who wants to use the new UI, UX for outgoing connection by definition has to have an account. So that increases, it is a huge number of accounts that are being created, but naturally so. Um, uh, I think this one team, your remote, uh, quickly on, uh, commercial blocker. Yeah. It's part of the business. Um, Michael can quantify the impact, um, as, as in the past, we use it in certain phases. Uh, we make sure the ecosystem, uh, stays more or less stable now with the account creation that I just mentioned that has any way an impact on the ecosystem, but in general, we try to. let people onto the platform, use the product, get sticky, and then drive the monetization that gives us a few million contribution in one quarter and maybe a bit less or a bit more in the next quarter. But we try to level that out across the year, pretty much like you know it since years. And maybe Michael can get into the numbers and also the multi-year question.

Yeah, quickly, the second part of the... free to pay question on the numbers. So this was in Q2 four point ish million and to your question, hey, outlook for the remainder of the year we expect because of the information what Oliver just has given because of the account creation that this this will come down a little bit. But it's for us also in a kind of a normal course of business. So getting getting customers in and then developing them as they are with us. And on the multi-year deal for the split, we don't disclose the split on SMB and enterprise. But what is important for us is this has become, as we mentioned very often now, this has become a normal course of business. It's in all of the segments, multi-year deals, which is for us also positive and helpful. And there's also demand in the SMB space for multi-year deals. We have inflationary times. So if customers can for themselves create planning stability, which for us is also planning stability. They do it, we do it. We actually love it. And we also believe that this will continue. So we are de facto happy also with the continued multi-year deal development.

Thank you. Very clear. Maybe one quick follow-up on the point on account creation. With account creation now, does that create better ways to monetize given you have more you know, user data to work with.

Over time, we expect that we will also have more user data to work with. Yes, for sure. But one important part is obviously also security for the customer.

Got it. Thank you.

The next question is from the line of Ben Castillo Bernals from BNP Paribas Exane. Please go ahead.

Good morning. Thanks for my questions here. Just a couple. Firstly, on the costs, running at roughly 90 million euros a quarter, if you maintain that through H2, you'd end up on your margin at sort of 42, 44. So I'm just curious, what deliberate maybe R&D or marketing projects do you have in the pipeline for H2? Perhaps you could share some color beyond just the general salary increases you mentioned in July that would keep you around that 40% margin for the full year? And the second question is around on slide eight on the sort of mix within the enterprise buckets of the deal value ACV. We're just seeing sort of the slower growth in the high end, which I think is unusual. How much of that is just the current selling environment being a little bit more challenging to sell those larger deals, or is this a kind of deliberate perhaps repositioning of your enterprise solution, maybe targeting those lower ASPs for now?

It'd be great for some color there. Thank you. Yeah, let me start with the first question on cost. And then we continue. So first on the cost, as I said, we have the salary increases kicking in now first of July. So that is for the entire FTE base. And this is why cost will run. And we continue also with our investments, especially marketing and R&D. This is where we see the development, which is important for the second half. And this is When we set the full guidance around 40, then 41 is also around 40. And this is why we are for now also a little bit cautious, right? The year is not over and we want to stick to the guidance where we have been. On the second part of the question, I'm not sure whether I understood everything. I think you asked about the higher bucket of the enterprise, the 1%. yes, we see some deals also in bigger sizes kicking in. Oliver mentioned it too. There are a few more, but it's obviously also a longer breath in order to make it back to the full equation where we were before, which is maybe normal in the overall challenging times which we are facing.

Yeah, maybe I'm also not sure I got the question correctly, but I think the general motion out there at the moment is There are certainly companies that are innovators and they keep investing. They have a sound business model. They are very profitable. They are embarking on new solutions. And with these companies, you can have larger deals, also larger multi-year deals and very innovative use cases. And that's coming through. For example, the example I gave with the large Australian bank. And obviously, that's an industry where innovation has to happen and funds are available. So we were successful there and there's many other examples. But there's also the flip side of it. It's like companies being increasingly focusing on cost and cautious and not trying to overcommit and not committing for longer cycles, longer term. So that's the day-to-day kind of struggle we're going through. And it's on that backdrop where we got back to growth. So that's why we're saying it's quite a good achievement given where the market is at the moment.

Understood. Thank you.

The next question is from the line of Gianmarco Conti from Deutsche Bank. Please go ahead.

Hi there. Yeah, thanks for taking my questions. I have a couple. So maybe we can start talking about what perhaps is the main driver for the lower ASP in the quarter in enterprise, you know, given your client base in absolute terms actually went up. Is the mix going to slow down as you ramp up more volumes of enterprise customers in terms of the ASP? And my second question is, are you actively pushing for larger, more peer deals in enterprise? Or is this simply a byproduct of customers requesting it?

Yeah, maybe I take that. Thanks, Jonny. So main driver, enterprise, lower ASP, it goes back to My previous answer it says the market is not in a great state in terms of people Investing into technology. So there's many customers That are aware that they need to invest in digital transformation. They are aware that security is increasingly important and they try to cope with this in a way which is requiring the less funds and therefore I I think if you go back already in Q3 last year, we started to have a dedicated proposition to take the tensor product, uh, and make it available with less integrations and less features for, uh, enterprise entry-level enterprise customers. Uh, and that is, um, influencing the ASP, uh, and therefore the ASP in over the last periods, uh, is smaller than it was before. If you go back when we were before interest rate increase and before recession trends, we were actually was the opposite. We were winning more on the upper end of the enterprise buckets because we were moving customers into this 3, 4, 5, 600,000 euro deal size, which happens still occasionally, but not as regular anymore or not anymore at the moment, I should say. I think this will turn around. This will revert when the markets open up more, especially in the Americas. We've always seen this, that once we get positive momentum going, customers want bigger deals, and they want certainty, and they want the long-term output. So in this sense, in good markets, Customers want longer term, bigger investments. Budgets are available. In difficult markets, customers want price stability. So if we're able to land a bigger deal, yes, it's mostly the customer on enterprise asking for some price stability. But we also take it very clearly. I mean, we like the effect of lower churn and predictability of our business as well. And we try to position longer-term deals to customers and then secure them. Ideally, multi-year secured with annual payment, but that's an equation which doesn't often work because then customers go to their budget and use the budget that they have available to secure the deal for longer.

Okay, so just a follow-up. I guess given that you've had a if like if i recall correctly in europe you were sort of like targeting to grow your enterprise space you're targeting some customers um on the lower end with fewer functionalities which could be driving the asp down um which is why you know you've mentioned that for this quarter um and if i understood that correctly you're trying to emulate that same uh you know sales tactic in america's so should we expect asp basically to be going down because you're trying to do the same thing in america's i.e targeting those customers that perhaps don't want the full functionalities, but want an upgrade. And so you'll still be an uplift in terms of what they're actually paying, but the ASP event of the enterprise bucket will be going down.

No, it's over-interpreting, to be honest. So we started this movement of Tensor with lower functionalities already last year. If you remember, if you recall, Q3 and then especially Q4, and Q1, we had a different business mix. It's very simple. The market out there is more difficult. We come in with more kind of mainstream aggressive offerings that changes the mix of ASP. And that's what you see in the numbers. So, and then in Americas, all of what we're discussing is even more emphasized because of the kind of higher volatility of decisions there. So I wouldn't expect any negative ASP trend from here because we're already living in a world now since one or two quarters, where we have a different campaign and offering mix and we don't have the big deals. in that number that we had in the past. And if you put all of that together, you get a certain view of ASP. I cannot see why this is going to get weaker from here. I think if markets will open up, it will probably more come back to where it was in the past.

Understood. Thank you.

The next question is in the line of Florian Streisch from Kepler Schiphol. Please go ahead.

Yes, thank you very much. Good morning, gentlemen. Two questions I have. The first is again on the lower ACV bucket in SMB and the respective billings growth of flat year over year in Q2. You mainly mentioned from my point of view, like internal optimization, as you mentioned, a leaner, better setup of your homepage. But looking at the kind of competitive landscape, in my impression, at least, the key peer of you is now more aggressively monetizing. Is it also, first of all, a positive cross with us that competition is less intensified than it was, let's say, a year ago? The second bit, is it fair to say, looking at regions like Asia outperforming now again, which is typically a tough market when it comes to price sensitivity, that now the client is kind of finally accepting that there is a need for the product and that they are willing to pay for it? And the second question is around here, your comment around the menu deal that you want to let a 35 million filtering through the ABTA line. The question to me is why not a hundred percent? So you have available funds you can spend on marketing. So does it mean in kind of turning around that you're underspending today and do you need the funds? So I'm just struggling a bit. Why not just a hundred percent? Thank you.

Okay. Let me start with the first question on the first topic, SMB. Okay. Yes, correct. Observation is correct. I think we had in the COVID aftermath, many customers came to us also in the entry level segment. Many customers went away to not using the product anymore or to lower price competition. And we really had to fight hard to keep those customers on board. Uh, with, um, kind of the remote access product, uh, pricing proposition in different markets, we had to improve communication and, and, and so many things, uh, that we had to do, um, to try to, um, kind of create a mode around it, which is tough, uh, because it's this, this part of the market is more commodity as we had said multiple times. But, uh, when you are competing in this space and you start to modify monetize yourself. like others I think also have to do because the market at some point is the market. And if you don't want to have all these free users, then you need to monetize. Then it evens out a little bit more and then customers compare product quality, functionality, security posture. And I think we see now that the easy wins or the customers or users that move more easily, they have probably moved or have gone back to a free product And we keep the stable user base with high quality globally across the board. We always also said that our ecosystem, while not growing massively, it's a more healthy ecosystem now because we actively avoided to have all these free users in some countries without accounts where lots of IDs are machine generated and whatnot and whatnot. So remember, we always said it's a pretty clean base and we are disciplined there. because we've done that and we've been there years ago with lots of traffic from countries like Vietnam or so and others. So all of that has balanced out. Yes, in APAC, you mentioned that we are much closer to the customers now. We have offices in all major markets. We position the product more as a premium product also with enterprise and channel partners. We've stripped out some of these very low end campaigns and free users, as I just said, and that all gives discipline and a better, higher quality customer and subscriber base that we can work with going forward. Second question, Manchester United. My comment and then I hand over to Michael. There was a reason we did the Manchester United deal, which is we wanted to drive brand awareness globally for our products. And we see that working and we will need brand awareness for our products and for our new propositions also going forward. Just a question of how we do the right mix. And that's why we will, of course, use some of the spend that we're now spending on brand proposition on Manchester United in other means and through other campaigns. And I think that's a very normal marketing mix evolution over time.

Yeah, just, I mean, Oliver answered it. Just a few add-ons. When we are not the front-shirt sponsor anymore, please do not forget, and we always mention it, that we become a global partner for the remaining contract duration. And again, we are a very happy and satisfied partner in the partnership with Manchester United and the global partnership then is for us on a lower level, but still super important. And this obviously is not for free. So parts of the today's funds will be invested there. Number one and number two, only to mention again, we will do then of course, other differentiated target measurements and brand building and enterprise and SMB. And this is also something which you would expect from us.

Great. Thank you very much.

Next question is from the line of George Webb from Morgan Stanley. Please go ahead.

Hi, morning. Just a couple of questions to round off on, coming back to a couple of the topics we've discussed. So first question, again, coming back to a couple of questions earlier. You talked about confidence on double-digit growth this year. That's reiterated in guidance. Clearly, we've talked about some benefits being in there from the 10% price increase as you started last year. Keen to hear your high-level thoughts on how you think about pricing as part of the growth mix into the midterms. how that's evolved, or perhaps to be specific, if you look at your user behavior in discussions so far this year, do you feel your user base could theoretically tolerate another high single digit or 10% price increase going into 2024? And then secondly, talking about the cost structure, talking about the Manchester United savings, As you mentioned, the new subscriber billings continue to tick down, have done quite consistently now for the last few years. You are reducing that cost base, including in the marketing piece in particular, as you look to exit that sponsorship. How do you feel or what's the strategy is going to be to trying to get that subscriber base, that new subscription billings number to tick up again? Are there any specific things you're looking at? Thank you.

Yeah. So on the pricing side, midterm, I think what we're seeing is a kind of normalization or harmonization of the customer base subscriber gaze. I would see so many of the pricing initiatives we had this year and will have this year and last year. They are clearly quite segment-oriented because if you remember years ago, we did the subscription migration. We had different customers sitting on different price points. We were very cautious in how we migrated them given on their past purchase behavior and therefore we had subscription discounts which are partly a little bit below street price but in some parts also significantly below street price and The exercises we go through now, we have been going through is segmenting, analyzing, discount, price elasticity, Market pricing usage of the product and based on that we did so to say price adjustments mostly by reducing Discounts and that could be quite substantial for a single customer or it could also be zero So it's a very wide range of things we do Could be a price measure of zero but could also be 20 30 percent I think we were discussing that in the past how that even how that worked out and what the average impact was per quarter going forward If you ask me for a mid-term view, we will have a much more harmonized customer base where customers sit on more comparable price points independent of when they came and how they use the product. And that will then also lead to more general price increases in a smaller order. So I wouldn't see that going forward. We are in double-digit price increase land. but probably more like 3-4%, but more consistently across the customer base versus individual increases on discounts. So that's how I would look at the pricing go forward. So going, I would say, towards a more normal pricing activities and behavior compared to other subscription businesses.

Let me tackle the second question on the new business. So first of all, and I mentioned it also in the speech, we have a very strict definition of what is a new customer. Number one, that is very important. So you must have not been with us for the last 12 months in order to be defined as new, which is very specific. Number two, yes, we have also very sizable growth in our upsell, which of course, and the best example is in today's tech. The Australian bank is now a very big six-digit amount and before it was a very tiny amount. And we have customers, for example, with 1,500 euros of billings and then they move up to 20 and 30,000 euros. And this is why maybe another element of the equation which has to be taken into account. And what I also mentioned is on relative terms, new in share of total billings actually increase in this quarter that is also not to be forgotten will we still work on expanding also our new business yes as oliver laid out yeah thank you ladies and gentlemen there are no further questions at this time and with this we conclude today's conference thank you very much for joining and have a pleasant day you may now disconnect goodbye