Five9 Inc (FIVN) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Five9, Incorporated, third-quarter 2015 earnings conference call.

Today's conference is being recorded.

At this time, I'd like to turn the conference over to Mr. Tony Righetti. Please go ahead, sir.

Thank you operator. Good afternoon, everyone. Thank you for joining us on today's conference call to discuss Five9's third-quarter 2015 results. Today's call is being by Mike Burkland, CEO; and Barry Zwarenstein, CFO.

During the course of this conference call, Five9's Management team will make projections and other forward-looking statements regarding future events or the future financial performance of the Company. We caution you that such statements are simply predictions, should not be unduly relied upon by investors, and actual events or results may differ materially, and the Company undertakes no obligation to update the information in such statements.

These statements are subject to substantial risk and uncertainties that could adversely affect our future results, and cause these forward-looking statements to be inaccurate. A more detailed discussion of certain of the risk factors that could cause these forward-looking statements to be inaccurate, and that you should consider in evaluating Five9 and its prospects, is included under the caption Risk Factors and elsewhere in our filings with the Securities and Exchange Commission.

In addition, Management will make reference to non-GAAP financial measures during the call. Management believes that this non-GAAP information is useful, because it enhances an understanding of the Company's ongoing performance. Five9 therefore uses non-GAAP financial information internally to evaluate and manage the Company's operation.

This non-GAAP financial information should be considered along with, and not as a replacement for, financial information reported under GAAP, and could be different than the non-GAAP financial information provided by other companies in our industry. The full reconciliation of the GAAP to non-GAAP financial data can be found in the Company's press release issued earlier this afternoon, and available at www.five9.com.

Now I would like to turn the call over to Five9's CEO, Mike Burkland.

Thank you, Tony. Welcome everyone to our third-quarter 2015 earnings call. We're very pleased to report results for the third quarter that once again exceeded our expectations across all key metrics. Total revenue for the third quarter was $32.3 million, up 25% year over year, the third consecutive quarter of mid-20%s growth. This revenue growth is all organic, and is a blend of our faster-growing enterprise business, and our slower, but steadily growing SMB business.

Our solid top-line growth was complemented by a significant improvement in our EBITDA margin of nearly 1,600 basis points from a year ago. Bookings were another key highlight, as we set a third-quarter record. Given our strong results, we are increasing our revenue and bottom-line guidance for the year. In addition, we are pulling in our EBITDA break-even target from Q4 of 2016 to Q3 of 2016.

My focus today will be on our faster-growing enterprise business, since it is where we are concentrating our investments and generating most of our growth. The enterprise market has significant ongoing growth potential for Five9. Cloud penetration is under 10%, and it is a huge market opportunity; huge in the sense that there are 14.5 million agents around the world, with an estimated available market of $22 billion in annual recurring revenue, the vast majority of which is in the enterprise market, which again is our focus.

Now let me share with you three key metrics that highlight our increasing traction and success in the enterprise market. Number one, our win rate against two key cloud competitors was once again over 70% in the quarter. Number two, our LTM enterprise subscription revenue growth has grown 35% year over year. We believe that this is a key metric that reflects the payoff from our ongoing investment in enterprise sales capacity. We will now be providing this metric quarterly going forward. Three, our enterprise revenue has grown to 63% of our LTM revenue, continuing a trend of 3% to 4% increases annually.

There are four key reasons for our tremendous progress in the enterprise market. First, we offer an end-to-end solution that enterprise clients demand, including ACD, IVR, dialer, in-bound, out-bound, blending, multi-channel, WFO, full enterprise reporting, rich APIs, and a fully redundant network connectivity offering through tier-one carriers.

Second, we continue to focus on and deliver an enterprise platform adhering to the highest standards of reliability, security, compliance, and scalability. We are extremely proud of our up-time performance, averaging 99.993% over the last 12 months, which we now post on the Trust section of our website. In addition, our operations team has delivered a highly secure environment that continues to be the audits of our most demanding financial services and health care customers when it comes to security and data protection.

Third, our deep integrations with leading CRM providers such as Salesforce, Oracle, Zendesk, and NetSuite, and others, allows us to bring tremendous complementary value to enterprise customers. These relationships, along with our SI partners such as Deloitte, PWC, and several specialized SIs in the contact center and CRM ecosystem have brought us visibility and success in some of the largest and complex enterprise opportunities.

Fourth, we continue to out-execute our competition by delivering our solutions to enterprises with the industry's most thorough implementation process, from discovery and design through testing, implementation, training, and optimization. This proven high-touch process, along with our unique premium support offering, which includes a dedicated technical account manager to act as an extension of the customer staff to deliver ongoing optimization, fine-tuning, call-flow testing, customer reporting, and analysis of customer KPIs, helps our customers continuously improve the efficiencies of their operation.

A further validation of Five9's leadership role in the enterprise market was the publication on October 15 of the Gartner Magic Quadrant for Contact Center as a Service in North America. Five9 was named a leader in this magic quadrant, and positioned highest for ability to execute. We believe this is a core attribute that enterprises are looking for.

As these four key differentiators are increasingly being recognized by the market, we delivered yet another record-breaking quarter for enterprise bookings, driven in large part by our strong ecosystem of partners, with more than 40% of our enterprise deal flow being influenced by these partners.

In addition, the pipeline for future business has never looked better. I will now share with you highlights from some of our third-quarter enterprise wins. The first is a Fortune 500 global pharmaceutical company employing 39,000 people that was looking for an end-to-end cloud customer service solution. Five9 will be rolled out initially here in the US, followed by several international locations, including Canada, UK, Germany, and Japan.

In addition to sales force integration, Five9 is delivering our powerful Virtual Contact Center with ACD, skills-based routing, IVR, in-bound and out-bound SMS, our WFO solution for QM and WFM powered by NICE. After looking at several other providers, none of whom could deliver a pure cloud solution with the scalability they required, their global SI suggested they look at Five9. The initial roll-out includes our MPLS Agent Connect service, which is designed for optimal call quality for agents worldwide. We estimate the initial order will generate $1.3 million in annual recurring revenue, and includes a full-time on-site resource through 2016.

The second example is a global 3-D printer manufacturer with 2,900 employees. They selected Five9 for their in-bound customer care operations throughout the US, Europe, and Asia. As the company has rapidly grown through M&A, they turned to Five9 to replace several other cloud and premise solutions to consolidate their contact center technology, and integrate to Salesforce.com. We are also providing this customer our high-touch Premium Support service, as well as MPLS Agent Connect designed to ensure the highest call quality for their global resources. This is another deal that we estimate will generate over $1 million in annual recurring revenue to Five9.

The third is a peer-to-peer lending company with over 2 million members. This enterprise was looking to replace their legacy solution so that it could perform in-bound, out-bound, and true blending, while integrated with Zendesk CRM. Prior to Five9, they lacked the routing flexibility, as well as real-time and historical business intelligence to manage their multiple contact centers.

Five9 is enabling them to perform complex skills-based routing while gaining the visibility to monitor and track performance across all sites. With Five9 WFO powered by NICE, they can more effectively manage performance through quality management, and optimize their agent staffing through our work force management solution. We estimate that the initial order size will generate over $650,000 in annual recurring revenue for Five9. This deal excludes usage revenue, given that this customer will continue to purchase long-distance directly from its carrier.

In addition to adding new enterprise logos, I'd like to share a couple of examples of expansion deals that we closed in Q3. Our land and expand success is a testament of our unparalleled ability to execute for our customers. The first example is a Fortune 500 bank with over 66,000 employees that has been using Five9 for a single department. The bank recently issued an RFP for four other departments to evaluate an alternative to their premise solution. Due to the bank's success using Five9, along with our deep integration with Salesforce, we were awarded the additional four departments, which included several hundred additional contact center agents.

Another key expansion occurred with one of our online university clients that already generates over $1.4 million in annual recurring revenue to Five9. This client recently acquired another college, and will now bring that college onto the Five9 platform.

Before turning it over to Barry, I'd like to share a few comments regarding our path to profitability. In Q3 we had another sequential improvement in adjusted EBIT, driven by higher revenue, further improvement in gross margins, and continuing operating leverage. Over the last year our adjusted EBITDA loss was narrowed significantly, from 19% of revenue in the third quarter of last year to 3% in the third quarter of this year. We continue to deliver on a strategy of driving solid top-line growth while making significant progress on our path to profitability.

I will now turn the call over to Barry to provide more color on the third-quarter financials.

Thank you, Mike.

Revenue for the third quarter of 2015 was $32.3 million, up 25% from the third quarter of 2014, reflecting the strong growth in our enterprise business. Recurring revenue accounted for 96% of our revenues in the third quarter of 2015. Recurring revenue is made up of monthly software subscriptions, which are based upon the number of agencies plus usage, which is based upon minutes. Please note that we enjoy a high retention rate on these recurring revenues.

In the third quarter of 2015, our annual dollar-based retention rate on recurring revenues was 95%, up from 94% in the second quarter of 2015, driven by meaningful increase in the enterprise component of the calculation. As a reminder, this retention rate is a blend of the high retention rate from the enterprise business, which is over 100%, and the lower retention rate from the SMB business, which is less than 100%. The other 4% of our third-quarter revenue was comprised of professional services fees generated from assisting clients in implementing and optimizing the Five9 solution.

Non-GAAP gross margin adjusted to exclude all non-cash charges was 59.4% for the third quarter of 2015, compared to 53.3% for the same period of 2014. Adjusted gross margin improvement was driven by both subscription and usage. Subscription margins continue to improve due to the benefit of higher subscription revenue growing against a base of largely fixed or semi-fixed cost, and usage gross margins continuing to expand from our ongoing success with implementation of least-cost routing.

Please note that we have increased gross margins sequentially in 13 out of the last 14 quarters. Building on this trend, we remain confident in our ability to reach our long-term model for gross margins of 65% to 70%. It is important to point out that while usage revenue generates gross margins below our subscription margins, usage revenue accounts for very minor incremental operating expenses, and therefore generates considerable bottom-line leverage.

Please note that a reconciliation of GAAP gross profit to adjusted gross profit, as well as other reconciliations from GAAP to non-GAAP results, is provided with our earnings press release, and in our investor presentation on our website. The investor presentation also provides details of the non-GAAP adjustments to operating expenses.

GAAP R&D expenses for the third quarter of 2015 totaled 17% of revenue, compared to 21% of revenue for the third quarter of 2014. The year-over-year improvement reflects our continued success in growing our R&D investment at a meaningfully lower rate than revenue. We plan to continue to do so as we drive to our long-term model for non-GAAP R&D expense of 9% to 11%.

GAAP sales and marketing expenses for the third quarter 2015 totaled 33% of revenue, compared to 36% of revenue for the third quarter of 2014. This year-over-year improvement is due to increased efficiency from our enterprise sales organization. Our long-term model for non-GAAP sales and marketing expenses remains 28% to 32%.

GAAP general and administrative expenses for the third quarter of 2015 totaled 19% of revenue, compared to 31% of revenue for the third quarter of 2014. The third quarter 2014 GAAP G&A included a $2-million, one-time charge. Excluding this item, G&A was 23% of revenue for the third quarter of 2014, compared to 19% of revenue for the third quarter of 2015. We do not anticipate any step-function increases in G&A, and therefore remain confident in our ability to reach our long-term model for non-GAAP G&A expense of 6% to 8%.

Adjusted EBITDA loss declined to $1.1 million for the third quarter of 2015, compared to adjusted EBITDA loss of $5 million for the third quarter of 2014. Our adjusted EBITDA margin improved by nearly 1,600 basis points, from a loss of 19% of revenue in the third quarter of 2014, to a loss of 3% in the third quarter this year. This significant narrowing of the adjusted EBITDA loss was primarily due to a $5.4-million increase in adjusted gross profit, of which approximately 2/3 came from higher revenue, and 1/3 from higher gross margins, while at the same time continuing to manage growth in our expenses.

Another way of illustrating the progress on the path to EBITDA break-even is to consider the proportion of revenue increases that drop down to EBITDA. Our marginal profitability is high at over 50%. Using the third-quarter numbers, revenue increased year over year by $6.4 million. Of that $6.4 million over half, or $3.9 million, dropped down to the EBITDA line.

Given our EBITDA out-performance achieved this year so far, we are slightly accelerating our guidance around the timing of EBITDA break-even. We now expect to be at or close to EBITDA break-even in the third quarter of 2016, rather than by the fourth quarter of 2016. GAAP net loss for the third quarter of 2015 was $6 million, or $0.12 per share, compared to a GAAP net loss of $11.4 million, or $0.24 per share, for the third quarter of 2014. Non-GAAP net loss for the third-quarter 2015 was $3.9 million, or $0.08 per share, compared to a non-GAAP net loss of $7.3 million, or $0.15 per share, for the third quarter of 2014.

Our DSO performance remains strong, and DSOs for the quarter ended September 30, 2015, were 24 days, compared to 25 days in the third quarter of the prior year. As of September 30, 2015, our cash and short-term investments totaled $59.5 million. Cash out-flow from operations for the third quarter of 2015 was $3.2 million. Capital spending was $2.1 million, of which $1.8 million was financed by capital leases, and the remaining $300,000 was paid for in cash.

Free cash out-flow, defined as operating cash out-flow plus capital spending paid for in cash, for the third quarter of 2015 was $3.5 million, compared to $6.5 million in the third quarter of 2014. As of September 30, 2015, our debt total is $37.8 million, made up of a $12.5-million revolver, and $25.3 million in term debt. The term debt has extended maturities, with only 1/3 coming due by the end of 2016, another 1/3 due in subsequent two years, and the final 1/3 not due until 2019.

I would like to finish today's prepared remarks with a brief discussion of our expectations for the fourth quarter of 2015. The following outlook reflects our prudent approach in modeling the further seasonal up-tick that is typical in the fourth quarter, with customers' industries such as retail, health care, and education. In addition, we are continuing to ramp investments relating to the enterprise business: in particular, in the enterprise sales personnel, marketing programs, and implementation and support staff.

Given our strong performance in the third quarter, we are again rising guidance for the full year. Specifically, we expect revenue in the range of $125.3 million to $126.3 million, compared to an August 3, 2015, provided range of $122.5 million to $124.5 million. GAAP net loss is expected to be in the range of $28.3 million to $29.3 million, or a loss of $0.56 to $0.58 per share, compared to an August 3, 2015, provided range of a loss of $31.1 million to $33.1 million, or a loss of $0.62 to $0.66 per share. Non-GAAP net loss is expected to be in the range of $18.7 million to $19.7 million, or a loss of $0.37 to $0.39 per share, compared to an August 3, 2015, provided range of a loss of $21.5 million to $23.5 million, or a loss of $0.43 to $0.47 per share.

For the fourth quarter of 2015 therefore, we expect revenue in the range of $32.5 to $33.5 million. GAAP net loss id expected to be in the range of $6 million to $7 million, or a loss of $0.12 to $0.14 per share. Non-GAAP net loss is expected to be in the range of $3.8 million to $4.8 million, or a loss of $0.07 to $0.09 per share.

For modeling purposes, we would like to provide the following additional information. For calculating EPS, we expect our shares to be 50.7 million for the fourth quarter, and 50.1 million for the full year. We expect our taxes, which relate mainly to foreign subsidiaries, to be approximately $80,000 for the year. Our capital expenditures for the fourth quarter are expected to total approximately $2 million to $3 million, which will bring our total full-year capital expenditures to approximately $7 million to $8 million for 2015, same as the guidance provided on August 3, 2015.

In summary, we are very pleased with the third-quarter performance. We will continue to be focused on driving solid revenue growth and making significant progress on our path to profitability. Lastly, before we turn to your questions, I would like to remind you that we will be presenting at the Barclays Global Technology Media and Telecommunications conference in San Francisco on Wednesday, December 9.

Now we would like to open the call for questions.

Thank you.

(Operator Instructions)

Michael Huang, Needham & Company.

Thanks very much. Good afternoon, guys. Just a couple questions for you.

In terms of the record Q3 bookings -- great to see that -- was wondering, what ultimately is driving that? Is that just the ramp of enterprise sales? Or were there any elephant-size deals out there that helped contribute to this?

Hi, Mike. Great question.

Yes, we had a record Q3 from a booking standpoint, and it is being driven by enterprise bookings. I highlighted earlier on the call a couple of large wins that we had that were over $1 million in annual recurring revenue. We continue our move upstream, upmarket, and doing larger and larger transactions with very large enterprises. I also mentioned those employee counts for a reason: to help people really understand the size of these enterprise accounts we're closing.

Great. I can infer from the commentary that the average deal size and maybe the average seat counts for some of your enterprise deals is continuing to grow. Just for help trying to quantify that, is there any way you can help us compare, either from a seat-count standpoint average, or a deal-size average, what it is now versus what it was a year ago?

Yes, I would point back to the metric we gave at the end of 2014, Mike, which was our average deal size for all of 2014, which was $350,000 in annual recurring revenue. We will release that metric on an annual basis.

Okay, got you. Great. I'll turn it over. Thanks.

Sterling Auty, JPMorgan.

Yes, thanks. Hello, guys.

Drilling further in on that enterprise piece, you mentioned the win rates in terms of the cloud providers. But just any sense of, has there been a change in the competitive dynamic -- maybe some of the traditional on-premise players not faring as well in some of the new RFPs, et cetera, that's allowing you to have a better hit rate? Or just the cloud providers as a whole maybe picking up incremental traction in the opportunities that are out there each year?

Yes. Hey, Sterling, great question.

I would characterize the competitive landscape a couple ways. First of all, the premise vendors are actually doing less than we expected them to do at this point. The Avayas and Genesises of the world have had a really hard time moving to the cloud. Quite frankly, they're just not there yet. It's showing in our wins against those guys, and our ability to rip them out and replace them in large enterprise deals, which for the most part are a majority of the enterprise wins that we have.

I would also say that on the cloud side we continue to extend our leadership position. We've got a couple of key competitors in the cloud that, quite frankly, have stumbled from an execution standpoint. If you look at how they've stumbled, it really comes in a couple of flavors in terms of not being able to deliver latest technologies, and also tripping up in terms of implementation and support. We have won a lot of deals recently because of those two elements against those key cloud competitors. As I noted earlier, our win rate against them, against each of them, was north of 70% in the quarter, and we feel great about where we are competitively.

When you look at the -- you mentioned the total opportunity, the 14 million. When you think about the number of agents that each year see their systems come up for renewal, upgrade, et cetera, how would you characterize where we are in terms of what percentage of that installed infrastructure has at least made a decision within the last year or two to either continue with on-premise or move to the cloud? What might be there in front of us for the next year or two, in terms of the opportunity?

Yes, really helpful questions, Sterling, for everybody to understand the size of this market.

14.5 million agents around the world. Analysts estimate that cloud penetration is still under 10%. There is a technology refresh cycle that's under way that is typically seeing most of these on-premise solutions turn over about every eight to ten years. Quite frankly, it's just a huge opportunity, and most is still ahead of us. We view ourselves in the first inning of a nine-inning ball game.

Then, last question: when you talk about the seasonality for the fourth quarter, their retail, higher education, et cetera, is there some additional color you can give us in terms of what part or what percentage of the business is represented by those types of industries that will have the seasonal up-tick, so we also frame the right expectations for the March quarter as you go off of that seasonal high?

Yes. Barry, correct me where I'm wrong here, if I misquote this. We've talked about this in the past, Sterling, in terms of the percentage of health care, for example -- the percentage of our business that comes from that industry. It's typically in the mid to high single digits as a percentage of our overall revenue. When we talk about seasonal patterns in our business, I would say health care is one of the bigger drivers of that. That's pretty much the majority of seasonal fluctuations in our business. I hope that captures it.

Yes, that's pretty much spot on.

All right, great. Thank you, guys.

Raimo Lenschow, Barclays.

Hey, guys. This is Harry Heyer on for Raimo. Thanks for taking the question, and congrats on a good quarter.

Digging a little bit more into the enterprise, which obviously is a focus for this quarter with some solid results there. You talked a little bit about better results, but from putting competition aside, would you say that you have seen a palpable improvement in the broader demand environment for cloud contact software in that segment? Is there better acceptance? On the flip side, you talked a little bit more about the enterprise sales effort being more efficient -- actually when you were talking about expenses -- but would you say that maybe you're just doing a better job of penetrating the existing willing enterprise customers, for lack of a better term?

Yes. Good question, Harry.

We are definitely seeing acceleration in the overall demand for cloud by large enterprises. The best evidence of that is the size of a couple of those deals that I mentioned earlier on the call. We have climbed the ladder over the years, and are just doing larger and larger transactions. To me, those are all additive. As the higher seat-count opportunities open up to cloud, that accelerates the adoption of cloud in the enterprise market overall. All in all, we see a great trend. We see an evergreen opportunity ahead of us for multiple years. But it's getting better and better each quarter, which is great to see.

Great, thanks.

Nikolay Beliov, Bank of America.

Thanks for taking my question.

Very nice to see an uptick in the retention rate. Historically, it used to be -- 95% now; historically used to be 100%-plus. What will it take to get it back to those historical levels?

Yes. As we've explained in the past, Nikolay, the decline that we did report in previous quarters on the dollar base retention rate -- to simplify, it was largely due to two factors. The first one is, we had this large customer who is still a great customer of ours, who took their international revenue elsewhere. Second of all, the Affordable Care Act, which has now become considerably neutered.

Both of those are out of the base, and you have seen an inflection point this quarter. Given that our dollar-base retention rate is a blend of the enterprise, as I mentioned in the prepared remarks, of over 100%, solidly over 100%; and SMB, which is below 100%, you over time -- not maybe every single quarter -- are going to see dollar-base retention rate start to increase, and then get back over 100%.

Thank you. Mike, can you please talk about the Freedom release -- why this [theory] is important? Give us more specific about increasing functionality, and how that is helping your competitiveness in the market place?

Yes, Nikolay, Freedom has been a great milestone for us. It really is centered around the agent experience. Our core belief is that the customers' -- the end customers' -- experience is driven by the agent experience. Our Freedom release allows agents using our system to really have one single application, one single desktop, instead of swivel-chairing between different applications, with all the information they need at their fingertips -- contextually at their fingertips through all the -- sorry, all the communication channels that gives them a full view of the customer's entire history. We also guide the agent through to solutions to help that customer resolve issues.

In the end of the day, what we deliver is a better customer experience for our customer's customer. The Freedom release is all about delivering on that promise. It's been a very innovative release for us, and a big milestone for the Company.

Okay, thank you.

(Operator Instructions)

Brendan Barnicle, Pacific Crest Securities.

Thanks so much, guys.

Mike, you mentioned one of the big new enterprise customers were still going to go direct to their carrier. Is that a trend that you guys are seeing more? And will that remove some of that variability out of those enterprise contracts?

Yes, Brendan. We don't see it as a large trend; but it's the exception, not the rule, so to speak. Our attach rate for long-distance service or usage revenue, as we call it, with our subscription or software revenues, is approximately 90%. But as we continue to do large enterprise deals, sometimes those enterprises are going to opt to continue to buy long-distance service from their existing carrier. There's a little bit of a silver lining here in that. Our gross margins on subscription are obviously well higher than the gross margins we get on usage revenue.

We do see it. We don't see it in a large percentage of deals, but assuming it happens more as we move upstream into larger and larger enterprise deals, that will gradually shift the mix more toward subscription and less towards usage.

Great. Mike, tonight we've also had a bunch of other SaaS companies report. Everybody had good numbers -- nice [beat and raises], a variety of different sectors and verticals. Is there anything you guys have been seeing more broadly around apps purchasing, or interest in applications beyond typical seasonality that might explain this real resurgence and strength we're seeing across everybody tonight?

Yes, we agree. We see the same thing. I think again, if you look at our ecosystem of partners, the CRM vendors like Oracle and Salesforce, most specifically. Their momentum in the market in terms of taking enterprises off of legacy solutions and moving their CRM to the cloud -- as you know, our contact center solution is tightly integrated with those CRM solutions. It's a great driver of business for us. We're just seeing an uptick in activity in cloud CRM adoption. We're getting pulled into more and more opportunities by those ecosystem partners like Oracle, Salesforce, Zendesk. I think overall, the cloud and SaaS -- the traction in the industry is really good, and we're benefiting along with everybody else.

Terrific. Thanks a lot, guys.

D.J. Hynes, Canaccord.

Thanks, guys.

Mike, I wonder if you could talk a little bit about what you're seeing in terms of implementation and time frames. Time to live is obviously a strength for you guys. I think historically you've talked about less than 90 days getting customers up and running. We've had a string of quarters here with record bookings, so have you been able to keep up with that strength? Then maybe specifically, you can talk about this Fortune 500 pharma win -- what the expectations are on that front with them?

Yes, happy to do so, D.J.

Our implementation times, we monitor it very closely. They have continued to be in the 60- to 90-day range, which, as you pointed out, is a key strength of ours compared to some of our competitors, even our key cloud competitors.

When you look at the Gartner Magic Quadrant that recently came out for Contact Center as a Service, it was the first report by Gartner on our space, if you will, on the cloud contact center space. We were positioned as a leader. But not only that, we were positioned as the highest vendor on ability to execute. A big part of their recognizing us for our ability to execute is just that: our ability to implement and support large enterprise customers -- not just from a timing standpoint in time to revenue, but just doing it successfully. We have out-executed the competition in this regard, and I think it's a great validation of that track record.

Yes, got it.

Then I guess maybe on how you're thinking about international expansion? It's been coming up on a year since you guys put your data center in the UK. Where are we in terms of putting sales feet on the street in Europe? And how are you thinking about that as 2016 comes into view?

Yes, internationally we've now put our first pod, if you will, of sales folks and supporting cast into the UK office; and it's going very well. I will say this: if you look back at the prepared remarks that I commented on earlier, a couple of those large deals, a lot of our deal traction is for multi-national presence by enterprises that are even based in the US. That international presence is really geared towards two things: one, which is penetrating that local European market; and two, supporting our multi-national US-based enterprise customers. I would say we are executing very well on both of those fronts.

Got it. Great, thanks for the color.

Thank you.

Ladies and gentlemen, we have no further questions in the queue. At this time, I would like to turn the conference back to Management for any additional or closing remarks.

Well, thanks everyone for joining us. Another exciting quarter for us, and we really appreciate you being with us today. We're extremely enthusiastic about our continued momentum in the enterprise market as we march into 2016 here. Thanks for the time today, and we will be in touch shortly.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation.