LivePerson Inc (LPSN) 2003 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to LivePerson's third quarter 2003 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. At that time, the operator will give you instructions. As a reminder, this conference is being recorded on October 28th, 2003.

Speaking on today's conference call will be Robert LoCascio, Chief Executive Officer of LivePerson and Tim Bixby, President and Chief Financial Officer.

I would now like to turn the program over to Mr. Bixby. Please go ahead, sir.

Thanks very much. During the course of this conference call, comments that we make regarding LivePerson that are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. Any such forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Security Litigation Reform Act of 1995.

It is routine for our internal projections and expectations to change as the quarter progresses. And therefore it should be clearly understood that the internal projections and beliefs upon which the company bases its expectations may change prior to the end of the quarter. Although these expectations may change, we are under no obligation to inform you if they do. Our company policy is, generally, to provide our expectations only once per quarter and not to update that information until the next quarter. Actual events or results may differ materially from those contained in the projections or forward-looking statements.

The following factors, among others, could cause LivePerson's actual results to differ materially from those described in our forward-looking statements. Our dependent on the success of the LivePerson chat service, continued use by our clients of the LivePerson services, potential fluctuations in our quarterly and annual results, risks related to adverse business conditions experienced by our clients, integration of acquisitions, our dependence on key employees, risks related to our international operations, specifically including risks related to our business operations in Israel and the current political unrest in that region, building awareness of the LivePerson brand name, technology systems beyond LivePerson's control, and technology-related defects that could disrupt the LivePerson services and responding to rapid technological change. This list is intended to identify only certain of the principal factors that could cause actual results to differ from those discussed in the forward-looking statements. Listeners are referred to the reports and documents filed from time to time by LivePerson with the Securities and Exchange Commission for a discussion of these and other important risk factors.

And now I would like to turn the call over to LivePerson's Chief Executive Officer, Robert LoCascio.

Thanks, Tim. Good afternoon everyone and thank you for joining us. I'm very pleased with the results for the quarter. During the third quarter of 2003, we generated record revenue of $3.1 million, up 45% from the same period last year and up 11% sequentially from the previous quarter. We surpassed our expected sequential growth from 8% and again achieved break even EPS as low as quarterly [INAUDIBLE] profit. Later in the call, Tim will give you more detailed financial overview.

We have now completed our seventh consecutive quarter of generating positive cash flow and we continue to be focused on accelerating top and bottom-line growth. During the quarter we signed Net Bank, Pitney Bowes, Tiscali and many other clients of all sizes.

During the quarter, we made significant progress from the standpoints of both organic growth and strategic product development. We continue to have a healthy mix of 60% incremental revenue growth from existing customers and the remaining 40% from new customers. Existing customers continue to expand beyond pilot programs in the past we would typically focus in on single divisional deployments within large corporate clients, however, this is evolved into a process where we now review a customer's entire on-line communications strategy. For example, HP is using LivePerson Sales Edition to proactively engage likely buyers visiting the HP website.

Sales Edition is a probable product for any company selling or generating sales leads on the web and our customers are seeing consistent, measurable ROIs. These measurable ROIs are are driving customers like Hp to expand into multi-division. After starting with the single division of HP in May, we are now in three divisions.

Our Service Edition in Pro products, which are customer service oriented, both continue to grow steadily at approximately 8% sequentially. This provides a strong base as we introduce new features and products to the service side of the business.

Strategically, we continue our path to becoming a communications service provider in all three channels of chat, e-mail and eventually voice. Our focus first and foremost is on strengthening our leadership position in real-time chat as it is the fastest growing segment in call center technology today.

We are, however, in the midst of rolling out an integrating an e-mail product, which is part of our LivePerson Sales Edition Platinum product. This product will make us one of the few providers with an integrated on-line communications platform delivered on an ASP basis. We expect to see initial sales of this product in the first quarter of 2004. The real tests of this product will be in competing with companies that already have a stronghold in this market. If we can show an ability to unseat these players in key accounts, then we will have a solid platform upon which we can build the third channel of communication, which is voice. Our voice presents a large and potentially lucrative opportunity for us over the long term, look for the remainder of 2003, and most of 2004 to be focused on chat and e-mail.

Our business model is playing well in the current business environment for the following reasons: First, many companies want software delivered as a service. They have eliminated internal resources and do not want to deploy and maintain complex enterprise software. Companies like HP, Microsoft, AT&T and others want the convenience of rapid deployment. This means implementation within just a few weeks rather than the several months typically acquired with enterprise software companies.

Second, many companies prefer to pay for software on a monthly basis rather than the tens or hundreds of thousands of dollars up front. The monthly fee structure also has tremendous benefit for LivePerson. It enables us to have a recurring predictable revenue stream without the end of the quarter rush to close contracts typically experienced by enterprise software companies.

Finally, the call center is changing. Where once it was 100% voice, today is becoming a blend of chat, e-mail, and voice. This shift to on-line communications being as important as voice places LivePerson at the center of being a major provider of communication services to this market.

To summarize our accomplishments during the quarter, we achieved the following: We had our seventh consecutive quarter of generating positive cash flow, we increased our sales by 11% over the second-quarter sequentially. We increased our cash in the bank by nearly 10% to $9.6 million. And we delivered LivePerson Platinum Edition of fully integrated chat, e-mail, and self-service communication platform. We expect top and bottom-line growth to continue into Q4 and are excited about the strategic opportunities that await us.

Now I'd like to turn the call over to Tim to review the financial results and outlook in more detail, Tim?

Thanks, Rob. We continue to make progress on key performance metrics. We again exceeded our expectations for the quarter as revenue grew 11% versus the prior quarter, increased 45% from the same quarter in the prior year. Our business with key existing customers grew during the quarter, including with Forex, eBay and HP, among others. New business from clients, like Pitney Bowes and others, is also driving the majority of our growth.

Growth from new customers continues to be balanced by strong growth from existing customers as well as growth across all product lines. In our corporate business, 60% of sales growth in the quarter came from new customers while 40% came from continued growth of existing clients. We also had growth in all product lines, including Sales Edition, Service Edition, and LivePerson Pro for small businesses. Our small business group performed well, contributing 25% of the growth in the quarter. The balance came from our direct sales group selling to larger corporate clients.

On the corporate side of the business, 65% of the growth is now coming from our newer Sales Edition product, our proactive sales support tool, up from the previous quarter. And the remaining 35% is coming from our flagship Click-to-Chat Service Edition product.

In terms of sequential growth, both the Service Edition and the small business product lines are growing consistently at about 8% quarter-over-quarter, while the Sales Edition product is growing at better than 20% off of a smaller revenue base.

We are continuing to see success in our Sales Edition pilot programs, all of which are paid pilots. One implementation, with Pitney Bowes has shown tremendous measurable results and we are optimistic about our long-term potential with that company, as well as others currently on similar pilot programs.

Based on our results for the quarter and our visibility into the recurring revenue stream for Q4 we are again increasing our 2003 financial guidance to 45% annual revenue growth, which would take us to $11.9 million in revenue for the year. I will give more detail on our expectations for Q4 in the full year later in the call.

I'd now like to do a quick review of the financial results for the quarter ended September 30. In the quarter, LivePerson reported record revenue of $3.1 million and 11% increase versus $2.8 million in the prior quarter, and a 45% increase versus $2.2 million in the comparable period of 2002. Cost of revenue in the third quarter was flat versus the prior quarter, at $.5 million resulting in a gross profit of $2.6 million and a gross margin of 84%, a slight improvement versus a gross margin in the prior quarter of 83%. Gross margin in the prior year quarter as a reference point was 78%.

Product development expense for the quarter was flat, at point $.4 million versus the prior quarter and up slightly from point $.3 million in the prior year. Sales and marketing expense was flat at $ .9 million versus the prior quarter and up from $.6 million the prior year. This increase versus the prior-year period reflects greater personnel costs related to growing our direct sales force, increased sales commissions in line with revenue growth, as well as higher direct marketing expense.

General and administrative expense for the quarter, excluding amortization of intangible assets, was $.9 million, up from $.7 million in the prior quarter and versus $.6 million in the prior year. This increase was driven primarily by a severance payment in the quarter as well as somewhat increased professional fees.

We recognized net non-cash amortization expense of $.4 million in the quarter, we will continue to have amortization expense related to intangible assets at these levels for the remainder of 2003. In intangible assets related to the 2002 new channel transaction will be fully amortized by December 31 of this year, and has been and will continue to be amortized at $250,000 per quarter.

EBITDA or earnings before interest, taxes and depreciation and amortization was $.5 million , up from $.4 million in the prior quarter and versus $.2 million in the prior year. EBITDA per share was a penny, also flat versus the prior year. The reconciliation between EBITDA and GAAP net income or loss is provided in the financial statements accompanying our earnings release.

Net income per share in the quarter was 0 cents compared to a net loss per share of 3 cents for the prior quarter and break even or 0 cents for the third quarter last year. The prior quarter, included a $1 million restructuring charge related to a legal settlement associated with our 2001 restructuring.

Turning now to the balance sheet, our cash balance at year-end was $9.6 million, up from $8.8 million at the end of the second quarter. Accounts receivable, decreased slightly to $.5 million, due primarily to the timing of cash collections. Deferred revenue was down to $1.0 million versus $1.3 million in the prior quarter, while DSOs have been consistent with prior periods at very low levels due to excellent collection history, they're running at less than 30 days. Depreciation in the quarter was $.1 million dollars and will continue at approximately that quarterly rate in the fourth quarter.

We would now like to outline our expectations for near-term financial performance. We are confident in the size and predictability of our sales pipeline and have seen good results to date in the fourth quarter. As a result, we are increasing our full-year revenue expectations to 45% annual growth to $11.9 million , and EBITDA per share of 5 cents. For the fourth quarter of 2003, we expect sequential revenue growth of at least 8%, and revenue of $3.4 million, and EBITDA per share of 2 cents.

We have a strong pipeline for the fourth and first quarters, and we anticipate sharing financial expectations for 2004 in early December, once the heaviest Q 4 selling activity is nearly complete. That covers the financial review.

We would also like to let all of our listeners know that LivePerson will be participating in the annual AEA Classic. AEA Technology Conference in San Diego next week on November 4th and 5th.

And at this point we would be happy to take your questions. I'd like to request that the conference call operator rejoin the call and give instructions for Q & A.

At this time if you would like to register to ask a question, please press the star and one on your touch tone telephone. To withdraw the question, please just press the pound key, once again if you would like to register to ask a question, please press the star and one on your touch tone telephone at this time.

We're going to take our first question from the site of Michael Rossler of CJS Securities. Please go ahead, sir, your mic's open.

Good afternoon. Rob, could you talk a little bit about the contribution from the salespeople you recently hired, did they have any impact on sales this last quarter or is this something we have yet to build into the numbers?

They have pretty much a limited impact, they are probably traveling at about 15 to 20% of what they should be doing on a quota level. So we're still generating a fair amount of our revenue off of the original three salespeople starting in the beginning of the year. They're starting to ramp nicely though, so we should see more contribution coming in from them, you know, Q 4 into next year.

And any people been added.

There's been one other person added in the quarter, so we're currently at six, and our vice president.

Okay. One of your competitors, particularly has an e-mail mentioned they're going to stick with this integration strategy, could you talk about what your strategy is with the new e-mail product in relation to that.

Yeah. I mean, when we look out into the market today there's really been no provider of e-mail on both an ASP hosted basis and also as an integrated basis. So what happened a couple quarters ago is our customers came to us and said, look, you're providing a great service on the chat side, and we also, and that same decision maker matches e-mail and we would like you to have an integrated solution because we really want to get a more integrated view of our customer. They drop off an e-mail and two minutes later they take a chat, we want to know that and we don't want the e-mail answered and we want to see the data on that customer. So that's really why we've built that system and we're deploying it right now as we speak.

I guess a slightly different question. I'm just thinking about a competitor who's using integrators to go at part of a CRM solution. And just wondering how you guys are trying to address that market in perhaps the same way or differentiate it.

We don't as much work with integrators and it's really the nature of our model where the enterprise software guys really rely on integrators because it's usually a four, five, six-month process to get up and running. Because we're in ASAP there's no technology for our customers to integrate or to install.

So we really focus on more of how do you do customer support on a high level, how do you do chats on line so you can sell, and that's why it allows us to really deploy quicker and ramp customers quicker.

Okay. That's all for now, thanks.

Thanks a lot.

All right. We'll move on and take the following question from the site of Brad Mook of Emerging Growth Equities. Please go ahead, your mic is open.

Thank you. On the gross margin line you guys are running ahead of expectations, in fact your own stated expectations, where do you see that playing out over the next year or two. Does your theoretical threshold lift by this or are you just going to top out sooner.

I would anticipate we would top out sooner, so the, you know, the slope of the curve may be a little more, a little steeper up front but long term, you know, I think the same potential, the potential is not changed long term.

So 90% target is reasonable.

Yeah.

Okay. You had talked about a user group or a seminar that you had had in New York that was particularly successful with customers like HP and Microsoft, you had said you intended to start rolling that out regionally, is that still the plan and have you made any plans.

Yeah, actually, we did conduct a customer summit in June of this year, it was a great success and as you mentioned we had a bunch of our largest customers there, 15 of our large corporate users, both Service Edition and Sales Edition users, the interchange was very lively and effective, we think it's really helping us generate follow-on sales business, follow-on leads from that kind of event.

So the kickoff for the sort of number-two event there will be on the West Coast during November, where we'll focus again on similar topics, but a little more emphasis on potential customers as opposed to existing customers and really get the word out to folks who are either evaluating LivePerson specifically or evaluating entering into the chat technology space or the e-mail technology space for the first time.

Great. Will you announce that to the summit publicly ahead of time.

Yes.

All right. Now, you talked about some of your larger users increasing your penetration there and getting more usage out of them. Have you seen any fall-off from any of your major customers that have scaled back because it's not as effective as they hoped.

We see the metrics we look at there are, number one, the Sale Edition conversion from pilot programs to long-term contracts, and those success rates are consistent to very high, nearly 100% conversion rate. And then we also look at our attrition rates which, again, have been relatively, have been very low and consistent. So on the corporate side, our attrition rate's less than 1% per month and the small business side, about 4%, 3 to 4% and those have been consistent.

Okay. And how many customers have gone off of pilot on Sales Edition onto long term.

We don't disclose that number customer by customer. But numbers we have shared in the past, we have had, roughly, more than 20 deployments go through either the initial process or the pilot process and move into long-term deals.

Okay. And then just one thing. You mentioned the e-mail product , the Platinum product coming out. Did you say it was Q 104 that we should expect it.

The product's out right now and so revenue being generated from it is a Q 1 target for us.

Okay.

So it's out with handful of customers right now being, it's beyond tested but they started giving us the next level of features that they want and then we roll out to general population in the Q 1.

Sounds good. Thank you.

Thanks a lot.

All right. We'll move on and take the following question from the site of Mike Sunstrum of Sunstrum and Associates. Please go ahead sir, your mic's open.

Good afternoon.

Hello.

How are you doing?

Good, thanks.

The question I had was on the number of participating or, rather, the number of seats per participating customer. What is the trend for that? Are you seeing that go up dramatically or moderately? And do you have a metric for that.

We really try and focus people on the sequential revenue growth as the best metric for future performance and that's really because of the ASP model and the recurring aspect is you get a good picture of the coming quarter from the previous quarter, which is just the nature of how the model works.

In terms of a more specific metric, seats, for example, we've chosen specifically not to disclose that number because it does not, because of the broad range of our products, does not really indicate the direction of the company. For example, our Sales Edition product typically has a very high price point and a relatively low number of seats, is right now showing the highest sequential growth pattern. And so, you know, disclosing a specific seat number there, I think, actually detracts from the ability to measure where we're going with that product. So while we do share sort of what a typical deployment or a large deployment might look like, quarter by-quarter month-by-month sheet metric we will not disclose.

What we are seeing growth within,if I take HP, like I mentioned in my, what I was talking about before, is they started in May on a single division and currently they're over at, we're in three divisions right now. So our sales in the way we approach sales is a little different than we did in the past, which is we really look globally at a large customer and say what are your communication needs? How are you going to communicate with your customers on your website and they usually bring in multi-divisional and then we'll start with one as a pilot and then sort of roll it out from there and that's been consistent on the Sales Edition product.

What is your, as you move up the food chain to the Sales Edition and as you go after larger and larger customers, what is happening to your sales lead time, your time to close your...

I think it's still in the six-month range when we're looking at your average sales cycle on that product and once again, it really has to do with where they are, where the customer is in their buying cycle. If they're ready to buy chat and they come to us, they can be up and running in two months or a month. And if we are more or less cold calling them stimulating it through a marketing program, then you're looking, you know, more back into the six-month program.

And now that you have the additional salesmen sort of moving into a more productive mode, do you expect this to have some drive on influctuating the sales growth momentum upwards.

Yeah. I mean if we're looking at, I mean, growing 11% sequentially every quarter, that's a bigger number. So, when we look at the contribution from each of these sales guides, we're looking at them to continue on that path and, yeah, we're expecting them to add to that and get the quota. Like I said, the new guys are about 15 to 20% quota and they're starting to ramp considerably. And a lot of it has to do with our marketing that we're starting to implement in the last quarter.

And one final quick question has to do with your, to IP telephony product, where do you stand on that and how does that look as far as the launch time.

Yeah, we haven't given anything out, I think the focus of our company is still going to be, there's a lot of momentum in real-time chat space because it's the newest technology, and e-mail is, we think, there's a big opportunity there because we think the incumbrance in that market are pretty weak right now and that will give us a lot of momentum. So for us voice is a little bit, that's a late 2004 type of a project for us. Right now we're really investigating it, putting our strategy together for it so we can, if we start some development we can get a 12-month time frame, it might take about 12 month to get that ramped.

Right. You just, I think you had mentioned the fact that some people were pushing you towards that direction and I was just ...

Yeah. The call centers are really changing. I mean, what's really happened is if you go back 10 years ago our call center was a phone center because there was no on-line activity and today if you look at a company like HP their website provides a lot of revenue for their company, and now they really need a way to communicate on-line and that's where e-mail came in four or five years ago and now chat is starting to really come into favor. So that's why we know eventually voice is some place that we want to go on voice over IP. It's there, it already exists in the call center, it's their largest seats, you know, but we want to follow behind our strengths which is really let's own chat, let's own e-mail and then let's go ahead and go after that market of voice.

Great. Thank you.

Thanks a lot, Mike.

All right. We'll move on and take the following question from the site of John Higman of Halpern Capital. Please go ahead your mic's on.

Hi, Robert. How about talking or giving color on the channel partners, any news there.

Yep. So we have on the second quarter announced our partnership with Digital Insight and that started back in Q2, at the end of Q 2. They are reselling our product as an integrated bundle with their on-line banking. They're also ASP so our models fit nicely. We're up to about 19 or 20 customers co-sold between the two companies so we feel very good about it right now. These are new customers, these are not existing LivePerson customers, so there's an integrated platform and then they've got their salespeople out selling our product so right now it looks pretty good.

And you're still trying to add more channel partners.

Yeah. We had a focus in the financial arena and we'll sort of focus in, continue to focus there and pick up maybe one or two more partners in that area and then sort of move it out from there.

And one last question. You know, you mentioned the financial sector, are you seeing any different growth rates out of any of the sectors, anything different that's changed over the summer.

No. I mean, we're still heavily skewed in financial services, hardware, software companies, you know, our biggest opportunities obviously company's doing on-line commerce, so that's where our focus is. A lot of our marketing campaigns are around that and, you know, when you have Microsoft as a customer, it's easy to leverage it and pick up other companies like a Microsoft.

And anything you can comment on as far as combining your service with the search guys.

Yeah. I mean, we just, we haven't really announced anything so it's still, we're testing through some pilots on that and, you know, when we actually see some real results, then we'll put some numbers out. We're pretty conservative on announcing stuff until it goes beyond something that's generating revenue. Hello?

Mr. Higman just dropped off the line. We'll go ahead and take the following question from the site of Brian McCuen of Ascending Investment Partners. Please go ahead, sir, your mic's open.

Yes, thank you. I would like to know where and how the penetration into the financial sector is going to grow for LivePerson as a commerce tool and the number of customers that the financial institution service in the country.

I mean for us it's a tremendous opportunity when you look at financial institutions let's take, you know, we have Ameritrade and Net Bank and we have a bunch of customers in that area. These are very complex transactions. If you're doing a mortgage on line or filling out a, setting up a checking account, they're extremely complex transactions so they need some sort of live interaction.

What's interesting is we added to or product in the new Platinum Edition is the ability for literally a customer-support rep to help fill out an application on line, so literally they can see you filling out a mortgage application and then help you fill it out simultaneously. So it's pretty powerful. So we consider it a very large vertical for us. When you look at customer size, I mean it's, I don't really have a target number to give you right now, um, but it's definitely a focus of our company.

Do you have any further questions, Mr. McCuen?

No, thank you very much.

Thank you.

We'll move on and take the final question from the site of Kevin Foley of Constitution Research and Management. Please go ahead, your mic's open.

Hey, guys, how are you.

Good, thanks.

Just, can you comment a little more on the sales environment? Are you continuing to see purse strings kind of loosen a bit, is there sequential improvement here as we get deeper into the quarters or into this recovery, or so-called recovery.

Yeah. I think what we're seeing -- there's a couple things. One is the selling cycle for our process -- for our product is sell dom been about price. It's much more about the ROI and the features that we deliver and then also freeing up the resources at a given company to sort of provide the bodies to implement the solutions, so it's very much a service implementation focused sale and price is really secondary. So to that extent, you know, once people started getting back in a buying mode, I would say six quarters ago is when we saw things start to really bubble up and start to increase for us, is when we beefed up the sales force to match it. That's when things really started to change. Over the past two to three quarters for us I don't think that has changed dramatically.

What really has changed, I think, is the understanding of our target clients that they have to find new and more creative and more efficient ways to acquire new customers. And so you see things like the do not call list, and other ways that companies are being forced out of traditional channels and forced to look at new channels, they invariably sooner or later end up looking at their website traffic and how they can best monetize that and that's where I think we're seeing the most, the biggest change in terms of people understanding that this is a very valuable resource they have and we can help them tap into that.

How about on a retail side as we're heading into the holiday season with internet sales on line growing for the consumer, have you seen any ramp from that.

We don't see in our financial results a significant either spike in the fourth quarter or significant downturn in the first quarter, just because any change really gets slowly added in over each month as we recognize the revenue.

However, we do see a little bit more interest from folks who are really gearing up for the holiday season and maybe closing deals a little bit faster among retailers who maybe would have ended up in the first quarter but getting pushed into a little bit more likely of closing a deal in October, November, but from a financial perspective, it's fairly smooth.

Okay. And final question is you mentioned you were at six salespeople, any idea where you kind of think you end the year in the number of salespeople you plan to add during the quarter.

Yeah. We're actively interviewing as we speak and have been, you know, it's essentially November here now, there's only a couple months left in the year. So we don't have a set target amount, but, you know, we would bring in two to three more as soon as we find people that we think are excellent.

Okay. Thank you.

Once again if you would like to register to ask a question, please press the star and one on your touch tone telephone at this time. We're going to take the following question from the site of Jason Crawshaw of Brait Specialized Funds. Please go ahead, sir, your mic's open.

Good evening, guys, just a cup of quick questions here. The first would be, can you quantify the revenue contribution from the new channel asset acquisition on a year on year basis would be the first question, give us a sense of how that's going.

The new channel transaction by just about, just about any measure was, you know, very successful, we converted almost 100% of those clients onto our platform, generating revenue from all of them. We've grown several of those, probably 50% of them have grown since the acquisition.

In terms of the overall, you know, run rate, I would say roughly 50% of our current Sales Edition business comes from customers that came to us through that acquisition, and the other 50% comes from new clients who we sold Sales Edition to.

Okay. And that deal, when did it close, what, July last year, beginning of July, end of July.

July 1st of 2002.

All right. Great. Okay. The next question would be, I guess you price, per seat, is that correct.

I'm sorry.

As far as the pricing, is it per seat.

Yeah. We have three products, the pricing for those is $99 per month per seat.

Yeah.

Service Edition is $500 per month per seat.

Yeah.

And Sales Edition is typically sold in a block of seats basis, a minimum of five seats for $12,500 per month for that block of five.

Okay. All right. And if you look at the pricing per seat, maybe historically and then going forward, I mean has that been a stable metric, has it been improving, decreasing, how sort of clarify or discuss pricing.

Historically we've had good success with increasing pricing over time.

Yeah.

So, just a couple metrics, the pro product has increased 50% over two and a half years.

Uh-huh.

So it was initially 50 bucks, is now $99. The Service Edition, similar increase was, you know, two and a half years ago was $250 a seat. We moved it to $350, and then a year ago moved it to $500 list price.

Uh-huh.

And then Sales Edition is a much newer product, only around for a little more than a year. We bumped that up, our base rate, has increased about 25% in a year.

So these are pretty good numbers. I don't think, taking a conservative view, I would not project, you know, doubling of prices over time, but I think it's a good metric, a good indicator because we're seeing in a lot of other markets a significant amount of downward pressure on pricing. I think that's a good, sort of bodes well for us over the next several quarters.

Last question would be, you know, given so the success, you know, the year-to-date and alike and, you know, where the balance sheet is right now, I mean, would you guys consider at some point in accessing the capital markets to just bring more cash on the balance sheet maybe for an acquisition or times change maybe the environment changes just to give you a bit more heft on the balance sheet, is it something you would consider.

Well, that's something we have historically always considered, sort of evaluate the strength of the balance sheet in different ways and different areas where we might adjust it or shore it up. There are, you know, because of our cash flow situation, we are able to put away a good amount of cash this quarter, we're up near $10 million, we're throwing off, you know, 500,000 plus per quarter. We're pretty comfortable with the cash needs of the business and how much we're generating each quarter.

That being said, we're going to be smart about what the balance sheet looks like and look at opportunities as they come. We're always, you know, historically going forward, been evaluating potential transactions and that might make sense to do it in conjunction with that. But right now we're comfortable with the strength of the balance sheet.

Thanks guys.

We'll take the following question, a follow-up from Brad Mook of Emerging Growth Equities. Please go ahead, your mic's open.

Thank you. In terms of customer concentration, you put up $3.1 million in revenues in the quarter. I think you gave a figure last quarter as to the contribution for the quarter from your largest customer, can you do that again, give us a sense as to how much of that 3.1 was derived from a customer or two.

In terms of specific customers, that's unchanged. Our largest customer is less than 5% of sales. So, there's really been no change from the last quarter on that.

Okay. All right.

In terms of the breakdown of the net growth, which I also think is also an interesting metric, about a quarter of the net growth comes from our Pro product which is all small businesses, and then 75% or the remaining 75% comes from large corporate clients, about half, about two thirds of that from the Sales edition product and about a third of that from the Service Edition product.

Right. Okay. And then any update on the courier situation, the timing of that.

No. The status is essentially unchanged. We're fully reserved on the balance sheet, but we feel that we've not yet exhausted, you know, reasonable things with a reasonable likelihood of some benefit to us. We are balancing, obviously, the timing of winding that up versus any cash benefit, so it may wind up this year but it more than likely would move into the early part of next year in terms of the cash payment.

Okay. Fair enough. Look forward to seeing you at AEA.

Thanks.

And we have another follow-up from the site of Mike Sunstrum of Sunstrum and Associates.

Thanks. Just wanted to revisited the numbers you gave out the last conference call with regard to the impact on Sales Edition to the number of visits and how many visits turned into, you know, conversations and eventually you gave some percentages. Do you recall those and what were they.

Yeah. I think we were talking about conversion rates. We were giving anecdotal evidence or data about what kind of conversion rates people experience with Sales Edition.

Right.

And those are really more sort of a range of success rates that people see and it's typically 20% conversion rates or better, once someone is proactively engaged in QA Sales Edition chat conversation. And then we compare that to our typically on-line website conversion rates of anywhere from 1 to 3 or 4%, depending on the type of product and transaction people are conducting.

That's it. Thank you.

Okay. At this time we have no further questions. So I'll go ahead and turn the call back over to management for any further comments.

Thank you for the quarter and we'll see you out at AEA and have a good day.