LivePerson Inc (LPSN) 2013 Q1 法說會逐字稿

Good afternoon and welcome to the LivePerson first-quarter 2013 earnings call. My name is Amber and I will be facilitating the audio portion of today's interactive broadcast. All lines have been placed on mute to prevent any background noise. For those of you on the stream please take a note of the options available in our event console.

At this time I would like to turn the call over to Mr. Dan Murphy, CFO of LivePerson and Chairman and CEO, Robert LoCascio.

Thank you. Before we begin, I'd like to remind listeners that during this conference call comments that we make regarding LivePerson and are not historical facts, are forward-looking statements and are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The internal projections and beliefs upon which we based our expectations today, may change over time and we undertake no obligation to inform you if they do. Results that we report today should not be considered as an indication of future performance.

Changes in economic, business, competitive, technological, regulatory and other factors could cause LivePerson's actual results to differ materially from those expressed or implied by the projections or forward-looking statements made today. For more detailed information about these factors and other risks that may impact our business, please review the reports and documents filed from time to time by LivePerson with the Securities and Exchange Commission. Also please note that on the call today the non-GAAP financial measures in talking about the Company's financial performance. We report our GAAP results as well as provide a reconciliation of these non-GAAP measures to GAAP financial measures in our earnings release. You can obtain a copy of the earnings release by visiting the investor relations section of our website.

Now I'd like to turn the call over to Live Person's Chief Executive Officer, Robert LoCascio.

Thanks, Dan, and thanks, everyone, for joining us today. During the first quarter we continued to advance our platform strategy with a roll out of LiveEngage to a great number of customers. We also saw continued traction in key business indicators such as bookings growth, numbers of deals signed, and new customer additions. During the quarter, our B2B revenues were $38.9 million, 18% higher than last year's $32.9 million. Bookings came in at $7.5 million, a 22% increase over last year's first quarter. We signed more than 50% new logos during the quarter when compared to last year and between new and existing customers signed 26% more deals overall.

We also continue to see solid uptick's surrounding new product adoption. Although we had an unusual spike in attrition from a few enterprise customers in the first quarter, overall growth rate for Q1 and B2B, excluding S&B was 23% year-over-year. Two years ago we laid out a strategy to set LivePerson on the path to become the leader in realtime customer engagement, and today I remain confident in that strategy, and in how the platform is being developed and deployed. However, right now the single most important thing we can do is to make the necessary investments to accelerate the roll-out and adoption of LiveEngage. In making the additional investments this year, our goal is to build a more scalable Company and platform, that can ultimately get us to the $500 million plus revenue level, and deliver even stronger margins and growth rates in the future. Today we are focused on making the necessary changes to allow us to grow beyond what we have seen in the past, and to achieve what we believe the business is possible of doing in the future.

Dan will do a deeper dive regarding the drivers for an impact of these investments for the year. During the first quarter we made solid progress against our strategy, rolling out the platform to more than 4,000 small business customers. With LiveEngage it's no longer going to be about the individual engagement channels, but how to create cohesive strategy using the best combination of tools to drive the most value for our customers. LiveEngage leverages the strength of our core intelligent capabilities providing functionality such as seamless campaign creation, and realtime segmentation capabilities. We are also making our support of the platform more frictionless and proactive by using our own communication framework of chat, video, voice and content. The beauty of our core product line is that we have already seen some of the largest -- we have some of the largest companies in the world, and the enterprise customer is becoming a different type of customer for us going forward. They are expecting us more than ever to deliver an engagement platform than just a single channel of chat.

So we are creating use cases so they can drive more value from the platform where the goal is called deflection, new customer acquisition or increasing online sales. The conversation with our customers is around how we are going to help and create a strategic road map, and build a more complete customer engagement strategy. During the first quarter, we more than doubled the number of customers that are going live with mobile chat, when compared to the fourth quarter. We now have more than 200 customers using our mobile solutions spanning across the customer base, and various sectors. Social mobile has made the internet more personal, and now more than ever customers are expecting a more humanized experience on mobile. Today's technology is allowing companies to do just that, make it personal.

The ROI on a good mobile experience is very high, and many companies are not doing a great job with mobile just yet, so when a customer has a great experience they share it, especially in the social space. With shorter chat times and equal to higher customer satisfaction ratings, mobile has become a strategic requirement for more companies, and they are using and driving and adopting our mobile applications. About a month ago we launched predictive targeting 2.0 with several beta customers, with the addition of Amadesa technology that we acquired last year. And what we have got is a machine learning capability, that will cut down implementation time, and allow us to deploy at a faster rate. An early success story comes from an enterprise customer previously using our old predictive technology that we built, and after they deployed predictive technology 2.0 for Amadesa they realized a 25% incremental chat conversion, with 30% incremental revenue lift.

They previously had with 1.0 the way they were scoring and engaging their customers was by building manual rules, and with PT2.0 they are able to do this automatically because the engine has its own machine learning technology. So it's allowing us once again to get to the place where we want to around implementation times and that's going very well as we deploy it out to about 15 customers now. Global expansion is also becoming a larger part of our focus, and a few weeks ago we made our first serious move into Japan, announcing a partnership with Vixia. Vixia is the leading interactive digital marketing company in Tokyo, and a subsidiary of one of Japan's largest contact centers. We are looking forward to delivering our intelligent digital engagement solutions more broadly across the Japanese market now. As you know, we completed the acquisition of Australian reseller partner Engage, which gives us a greater exposure to the fast growing APAC market, and we are going to strengthen our foothold in that over this year and next.

In EMEA, despite tough economic times, we recently went live in the Netherlands with one of the worlds largest mobile communications companies. They are using our mobile chat solutions in three languages, Dutch, French and English, and using it on Italian mobile website as well. We are also getting ready to kick off the first of our three Aspire customer summits this year, Aspire is where leading brands share best practices and success stories around how they are pushing the boundaries of digital, creating innovative and unique (inbound) customer during utilizing LivePerson's intelligent engagement solutions. And the first of these events will be held in Australia at the end of this month. Last year we had several of the largest companies in the regions in attendance, and with the expanded base of customers, gained from the Engage acquisition, we are hoping to increase attendance by about 50%.

During the first week of June we will be hosting our London Aspire event and our largest event will be held in New York in October. We have been busy transforming the business into a true multi-channel engagement platform and 2013 is an important year for us as we prepare to deliver on the next big piece of the strategy. And that's the roll-out of the platform. We've made great progress in a short period of time, preparing the business for scale by building out our infrastructure, putting the right team in place, and delivering four new products which are now merging into a single cohesive platform. Now we are focused on accelerating the strategic plan by making further investments in our global infrastructure, R&D, product groups and stepping up our marketing initiatives so we can continue to build momentum behind the roll-out of the LiveEngage platform.

So with that I'd like to now turn the call over to Dan who will review the numbers in greater detail. Dan?

Thanks Rob. Our focus during the first quarter was similar to that of the fourth quarter. Delivering our LiveEngage platform, and rolling them out to a greater number of customers, while continuing to make investments in infrastructure, people and processes. Last year we added headcount, made several technology acquisitions, and completed the Engage acquisition in Australia. This year we will continue to invest in the business to support our long term growth initiatives. While it would take some time to fully realize the benefit of all the investments, we remain confident in our overall strategy, and have made some good progress so far. And we'll continue to make progress throughout the year. During the first quarter, B2B revenue was $38.9 million, an 18% increase compared to the prior year quarter. Overall growth rate for Q1 in B2B excluding small business was 23% year-over-year. Total revenue came in at the midpoint of our guidance range, increasing 16% as compared to the prior year to $42.5 million.

Revenue from the consumer operations for the first quarter of 2013 was $3.6 million, which is down 3% from $3.8 million in Q1 of 2012. During the quarter we had approximately $900,000 of foreign currency loss, that impacted our financial metrics, while our results are often slightly impacted by foreign currency fluctuation, the impact this quarter was unusually high as compared to past periods. The loss was primarily generated through the exchange rate between the US dollar and the UK pound. All metrics that I talk -- that I discuss in this call including adjusted EBITDA, reflect the impact of the foreign currency fluctuation. First quarter adjusted net income per share came in at $0.06 as compared to $0.09 in 2012. GAAP EPS came in at zero for the first quarter of 2013, as compared to $0.06 in 2012, and adjusted EBITDA per share was $0.09 as compared to $0.16 per share in the first quarter of 2012. All three measures were impacted by the negative foreign currency fluctuation primary from the UK pound.

Bookings were $7.5 million in the first quarter, which is 22% higher than the first quarter. We had a couple of large deals that we expected to close in the quarter that pushed -- were pushed out, and we experienced some weakness in the European market. As a reminder, LivePerson defines bookings as a new contractual commitment from new or existing mid-market or enterprise customers that excludes nonrecurring revenue. This metric generally represents contracts with committed recurrent subscription fees and does not capture usage or performance based contracts. In Q1, 2013 we signed 149 total deals in the quarter, compared to 117 deals in the first quarter of 2012. During the quarter we added 43 new enterprise and mid-market customers, versus 28 in the first quarter of 2012. Our small business group's revenue grew by 3% in the first quarter when compared to the first quarter of 2012. Average deal size for all deals was $51,000, the average deal size for new customers was $51,000, the average for existing customers signing up for an upsell or expanded business was $50,000.

Similar to our booking metric, this metric generally represents contracts with committed recurrent subscription fees and does not capture usage or performance based contracts. The breakdown of enterprise and mid-market bookings in revenue terms was approximately 70% existing customers, existing customer expansions, and approximately 30% to brand new customers. As Rob mentioned earlier, we had an unexpected increase in attrition in the quarter. Customer attrition for enterprise and mid-market accounts averaged 2.9% during the first quarter, which compares to 0.9% in the fourth quarter. Q1 is typically a higher attrition quarter as customers are resetting their budgets for the year. In addition, the increase in attrition was predominantly driven by one large customer cancellation, and some softening in the European market.

While the attrition had minimal impact on Q1, it will have an impact in Q2 through Q4, we do not currently anticipate that the higher than expected attrition in Q1 is a trend, but we are monitoring closely. Small business attrition rates averaged 2.6%, which is consistent with prior quarters. Pay for performance generated approximately 16% of total enterprise revenue, and 9% of total revenue, consistent with fourth quarter and prior year first quarter. Revenue coming from outside the US was approximately 29% of total revenue, with the UK representing our largest concentration outside of the US. The increase in international revenue is primarily driven by our presence in Asia-Pacific through the recent Engage acquisition.

The revenue breakdown by industry verticals was consistent with prior quarters. Telecommunications made up 32%, financial services 25%, retail approximately 13%, technology 13% and other at 17% for the quarter. In terms of the scope of our customers, at the end of the first quarter 2013 we had 36 customers above $500,000 in annualized spend, and we had 13 customers spending more than $2 million in annualized spend. We believe there's continuing opportunity for our larger accounts to grow organically and build more strategic relationships, especially as we roll out the LiveEngage platform.

First-quarter gross margins came in as anticipated at 76%, which compares to 78% in the first quarter of 2012, and 76% the fourth quarter of 2012. In Q1 we had a full quarter of amortization for both work IO accusation, and days acquisitions, and in Q2 we expect the beginning amortization of the Amadesa acquisition as we continue to roll out PT2.0 technology to select customers. We ended the quarter with cash balance of approximately $95 million, which compares to $103 million at the end of 2012. We had $1.7 million in capital expenditure for the quarter related to servers, computers and the build-out of office space. In addition, we purchased approximately $7.4 million of common stock in our corporate buyback program. First-quarter accounts receivable were $24.6 million, our DSO metric for the first quarter of 2013 was 50 days, which is in line with the fourth quarter. As discussed in prior calls, we are comfortable with the DSO in the range of 50 to 55 days. Our tax rate during the first quarter was 59%, the increase in the effective tax rate is primarily attributable to an increase in nondeductible expenses related to incentive stock options as a proportion of taxable income.

Now I would like to discuss the financial expectations for the second quarter of 2013 and the full-year taking into account some of the factors we discussed on this call. As Rob mentioned, during the second quarter we will be hosting two of our three (inaudible) customer summits. So we expect to see an increase in expenses as we ramp up marketing efforts surrounding those events, and also as we fast track some of our productive initiatives to support the platform roll-out and we will have a full quarter impact from Q1 attrition. With that, our current expectations for Q2, 2013 are as follows -- revenue of $42.5 million to $43.5 million, adjusted EBITDA of $0.05 to $0.07 per share, adjusted net income of $0.03 to $0.05 per share, and GAAP EPS loss of $0.02 to $0.04. Fully diluted share count of approximately 58 million.

As Rob and I both mentioned, during 2013 we are moving ahead with the launch of our LiveEngage platform, which has been rolled out to approximately 4,000 customers and we remain confident in the strategy and the potential of the new platform. 2013 continues to be an important year from an execution perspective for LivePerson, as we are seeing an inflection point in the business model. We spent the past two years transitioning the Company from a single product to a multi-product Company and now to a platform. And we plan to make further investments in 2013 we believe are needed to accelerate through this transition, and execute on the next big piece of the strategy.

The adjusted full-year guidance based on the full-year impact of Q1 attrition and the softening European market, and increasing investment necessary to put additional resources behind sales, marketing and R&D to support the roll-out of the LiveEngage platform. In addition, we do not expect to recoup the foreign currency loss previously mentioned. With that, our current expectations for the full-year 2013 are revenue of $174 million to $179 million, adjusted EBITDA of $0.32 to $0.35 per share, adjusted net income of $0.18 to $0.21 per share, and a GAAP EPS loss of $0.02 to $0.05 a share. Fully diluted share count of approximately 60 million.

Other full-year 2013 assumptions include amortization of intangibles of approximately $4 million, stock compensation expense of approximately $13 million, depreciation of approximately $10 million and effective tax rate of approximately 40%, a cash tax rate of approximately 40% and capital expenditures of approximately $12 million. We expect gross margin on a GAAP basis to be approximately 75% due to the amortization of the IO Amadesa and Engage acquisitions running through the cost of goods sold. And as a reminder our cost of goods sold continues to be sensitive to foreign currency fluctuation. Furthermore, as a percent of revenue for the year we continue to anticipate sales and marketing to be approximately 35% of G&A, G&A approximately 18% and R&D to be approximately 19%.

That covers all the operational and revenue highlights, and now if the operator could rejoin the call we'd be happy to take questions from folks participating on the call. Operator?

(Operator Instructions)

Michael Nemeroff.

Just wanted to dig in a little bit on the customer attrition, the big customer that you lost, just how much in annual revenue did that customer contribute? And then also, Dan, I don't think I heard any of the products stats or how many new products -- how many different deals on the new products and we will start from there?

Okay. So from the customer perspective there's a large customer, we don't normally talk about specific customers and their spend, but it was a large customer had an impact on our attrition rate and so if they cancel in the first quarter, we had a minimal impact on the first quarter, but that customer won't be there in Q2, Q3 and Q4 hence the adjustment of the guidance. As far as the product metrics, as far as new product metrics are concerned, as we roll out the platform, our customers will have access to all of our offerings and all of our products and as we -- as we move through 2013 that's a metric that doesn't have as much of an impact on the business as it previously had.

Okay. And was this a competitive loss? Did this customer go to some kind of a competitive solution? And then also, when you talked about the reduction in guidance for the year, you mentioned the macroeconomic environment in Europe. Is this part -- is that customer a part of the macroeconomic or is it a competitive loss? I guess is the question.

No. It was more of -- it was a PFP customer so the total attrition is a little over $5 million the impact through the year between this one customer and a couple of small ones. So, it's not a trend but we got caught a little off guard on a PFP. It's not our largest PFP, it's a bigger size one and so that has the impact which we can't get back. And it wasn't a competitive loss, just they want to do it themselves and so that changes how we are going to work with that customer and a couple other ones.

When it comes to now talking about our bookings number and a percentage of new products, because everything is going onto the platform, what we want to do now is start focusing on how many customers we have on the platform. Because now everyone is getting all the products, they get access to all the products so we are not selling individual products like LP Marketer, Insights and all those. Where just now everything is on the platform and then we are billing out on the platform. That's the change this year.

We have 4,000 customers now that are rolled out on the platform. We had 1,000 last quarter, so we are making good progress and now our focus is getting them to use more than one piece of the product. Right now they are all using Chat on the platform, but now we are focused on getting them to use more than one product.

That's very helpful. And if I could just ask one last one. You had mentioned a couple of slip deals in the quarter from last quarter. I was just wondering the progress and have you signed all of those, have they gone away? Then also if you could just comment on the implementation issues, the lengthening -- that's also been an issue too?

So we are still in pursuit of those deals. We are still actively going after them, and we are still in active discussions. As far as the implementation cycles, everything from an implementation perspective as we are rolling out LiveEngage, the goal has been to make it less frictionless -- or more frictionless, sorry, in rolling out the products. But some of the larger customers aren't on the LiveEngage platform yet, and we are still in that three to four month time frame.

Thank you very much for taking my questions.

Nathan Schneiderman.

Just to clarify on this large customer attrition, it was in the P-for-P phase and would you have needed to take the revenue guidance down had this customer not churned off that solution?

So in the PFP it's a fixed portion of PFP, so that's to answer that part of the question, and no we would not have expected to take the guidance down.

And then when you look at -- when you look at the balance of your customer base, what kind of customer concentration do you feel you have remaining in the P-for-P segment if you had the loss of let's say your next biggest customer, would that be an impact you could absorb or not? And maybe if you could answer that same question on the base business as well?

Yes, we have not seen anything with other customers. We have customers, we give the concentration $2 million buckets, $5 million and a couple, one or two above $10 million, but we don't see anything right now. Was an unusual case, usually we get some notice, it was part of a negotiation and then they are just -- we can't get them there where we need to go.

So it is what it is. But it wasn't planned and we are keeping a focus on all the other Enterprise customers and we have very low attrition rate over the last, five years -- so things haven't changed. But we got hit with this one surprise and we got to suck it up and it's going to impact the year but it's not like a trend -- like we have a bunch of customers leaving. It was a one specific case and a couple of small things.

Okay. And can you comment about the -- maybe I heard different numbers online versus the press release but from the press release, it sounded like you had 80 existing customer deals versus 89 in the year-ago period, but I may have heard a different number on the live call? So how many existing customer deals did you have and did you comp negative there? And if so, why, why do you think?

So, no, yes, we have to make an adjustment on the press release. The press release, we found 149 total deals in the quarter for Q1, 2013 compared to 117 deals in the first quarter of 2012. And during the quarter we added 43 new Enterprise and mid-market customers versus 28 in the first quarter.

Oh, okay. So you were actually -- you were actually -- you actually comped positive on that stat. Okay. Great. Final question for you, just on this softening environment that you saw in Europe, I was hoping you could describe what you actually saw in a little more detail and how did -- how did it manifest itself? And then thus far in Q2 have you noticed any change there or are your conditions seeming to continue that pattern? Thanks very much.

So, as far as how it manifested itself, we had some deals that, we felt we had an opportunity on and some of those deals slipped through and customers are pulling back, just from a financial perspective, on some of the deals that we were pursuing. So, as far as Q2 was concerned, we are obviously still focused on closing deals in Europe and we expect the softness to continue for a period of time but we are still actively pursuing deals and signing deals and moving into other territories.

Richard Fetyko.

Yes, guys, thanks. Curious on the LiveEngage roll-out what's the timing this year? Obviously you've been in the market with the SMB or small businesses but the Enterprise and mid-market, when do you expect that to begin and finish? Should we expect any hiccups with the larger customers that perhaps you built into your guidance as well?

We are really focused right now on just small business area and we are not -- we are touching selectively some mid-market and low Enterprise right now. So the focus is really on the small business. We don't want to disrupt anything that's happening in the Enterprise side when it comes to selling and the deals that we have. So that's really towards the latter end of the year, early next year and right now we are focused on small business. And then they are testing different ways to move customers into using more of the products, so far they are excited.

It's making them more competitive, we are changing the market on how SMBs are buying from us because they would come to us from chat. Look would look at other chat competitors and now they have a broader offering. So the SMB team feels strong about what we are giving them. And we want them to work it out because it's a small enough business where they can work out the kinks, work on maybe implementation but so far we like what we are seeing. And we want to accelerate that and keep investing in the business and not pull back.

Obviously the thing with attrition is we looked at it and said okay should we pull back on the expenses to equal out on the bottom line because we want to make our number, because we feel like we have this opportunity and we need to get the platform out and keep rolling so up to 4,000 customers now and we are making good progress.

With respect to the method that you're making into the product and to accelerate some of these things, I mean, there are others in this and what form? More developers, more sales force individuals, more people in the services group -- professional services group? Could you give us a little more color where those investments are being made?

We are starting on the marketing side like the -- we are going -- we are building up on the [lead flow] right now. We just launched a whole, few weeks ago, a whole new lead flow campaign, they're ready to move it up, and increase the lead flow even beyond the Chat leads we get. The marketing is a getting a big portion of the spend. There is more sales activity there, and there is some more development activity that we want to put around there, but it kind of starts with marketing and nearly three weeks ago we launched new micro sites, we start buying new key words and we want to keep going with that because we are seeing some good progress with that team.

Could you give us an update on the sales force expansion (technical difficulty).

Sorry, Richard, can you ask the question again. It's tough to hear you.

Sorry. The sales force expansion how many people do you have in your sales force now?

We ended the quarter at 48 people, 48 account execs.

Thank you.

Mark Schappel.

One of -- Dan if you could just address the R&D spend, it was down sequentially and caught me by surprise. I would have thought that would have been up actually, given the product investment that you're going through right now?

So there's a slight down tick sequentially. We had some costs in Q4 that were outsourced costs that happened in Q4 that didn't occur in Q1. But that investment will start to pick back up in Q2.

Okay. Great and with respect to the Engage acquisition a few months back, what was that contribution in the quarter?

We didn't disclose the financials specifically around Engage, but we are happy with the direction that it's going and it is giving us -- as Rob talked about, a broader footprint in Asia Pacific, and helped us with the Vixia deal as well. So we are excited about the acquisition and it's going in the right direction for us.

Finally Robert wondering if you could address or give us an update on the Apple roll-out. Don't think we heard anything about that in the prepared remarks.

We are sort of steady state there right now so no change right now.

Thank you.

Brian Schwartz.

Rob, was wondering if you could comment on the sales productivity trends, kind of what you're seeing and what your expectations are for potential gains ahead?

So the mid-market right now is our strongest group. They are actually sort of beating the internal expectations we have of them. The small business group because they are really focused on the roll-out of LiveEngage, a sort of steady state. We haven't seen tremendous growth because they are focused on moving the platform out.

I think Enterprise, there's a lot of opportunity there and this is where we are continuing to make changes, we are focusing on marketing messages, but they are just -- they are getting started. They are talking about the platform. They are talking about the multi-products so that what we are trying to do now is take some of our large Enterprise customers and actually really accelerate what we do with them beyond what we are doing on just Chat. And that's kind of the exciting opportunity. But we are not there yet and we are still going through a learning process with that group.

The group that's also interesting is in direct channels, that group was our plan and we have never really had a challenge group. We fired it up mid-last year, there's like five or six people in that group today. The leader came with our head of sales from Oracle and he's doing a good job in opening up channels with obviously call center partners. Also digital agencies, so now we are expanding into the digital agency area. We've got a project we are doing right now with one of the large digital agencies with one of our customers and using the LPMarketer product with key words.

So there's some good action happening in there. So, you know, mid-market, great, channels really good. Small business rolling out of LiveEngage and [Chat] and Enterprise is still going through a retooling of, how are we really going to expand our strategic accounts and grow them on a different level. But they have good growth rates, obviously the core is doing strong, outside the attrition. So we had 23% growth year-over-year on that one, so.

Great thanks for that color. And Dan just wanted to make clear on the guidance change I think you did answer it before -- I'm sorry the message got chopped up. But it looks like from the revenue the midpoint of the guidance is down about $7 million. I think you said $5 million-plus was related to churn and attrition, looks like you had almost $1 million that hit you just on currency here. So looks like, I still maybe have about $1 million delta. Is that reflecting softer activity in Europe, or is it more just a range and that's how we should think about it?

It reflects some of the softness in Europe, and it's a range so I think you have the components right that you went through.

Great. And then just last question for you guys, didn't have a chance to see the proxy but saw that you guys had filed that here recently. Can you maybe just refresh us for this year in terms of what are the key compensation performance metrics for you guys, whether it's bookings growth, revenue growth or EBITDA, what are the compensation focuses for the plan this year? Thanks.

So obviously bookings revenue, LiveEngage roll-out, global expansion so when you look at our -- and EBITDA, obviously, is with EBITDA but we fund the bonus pool off of the EBITDA number. So, that's how we basically get our bonuses today. So those are the drivers of the business. And for our bonus plans.

Great thanks for taking my questions today.

Jon Hickman.

You say you have 4,000 customers on the LiveEngage platform now. Can you give me what you expect as you go forward? Is that going to go to 6,000 or -- I'm -- isn't your total count around 8,000?

Yes. So the goal is to get all 8,500 customers up and running on LiveEngage. So the goal now is to have by Q2, 4,000 and so we are, obviously moving in that direction. We will continue to keep moving as we roll-out the product. We will also have a new version coming out of the product in Q3, Q4. So that 2.0 version is also I think will have a tremendous amount of capabilities in it to start moving the larger small business and then mid-markets and then ultimately the Enterprise customers up. We are also building in all the predictive technologies -- the PT technologies are being built into the platform, so that's all being wired in as we speak because that will help us with the implementation.

So the goal, the goal ultimately here is what I've been looking at and if you look at our Company, as SaaS companies have been growing. Whether you look at any of us in the category, you see sometimes margin compression and sales cycles go out and the products becomes very complex. And we have taken the time I think to not head in that direction, and the platform will get us to a place where we can scale. And, that's where we want to go with the business so we are making good traction on focusing on the platform and then that's where we are today.

So can -- do you have a number of how many of your small business customers are using more than just one product on the platform?

Yes. There's about 800 or so that are using more than one portion, they are using the content portion, or one of the other areas, video, voice, mobile, so far, so good. We got them on and wired them up and what's interesting is the use cases. Coming up with a set of use cases and the small business keeps finding new use cases.

I was talk to one of the small business guys and one of our customers who uses e-mail to do outbound e-mail around trade show promotion, we got them then now to use the content capabilities to promote trade shows when somebody comes to the website, so it's a much more effective way. So we are starting to build the case studies and use cases for our customers.

So it's an exciting time and last year it was all about do these products work, do people want them and now it's all about how do we scale and get these in the hands of our entire customer base plus the future customers, so.

So just one more question there. So once you're on the platform, if you want to add a module or a capability, you just -- I mean, you can just turn it on and then you start billing that person for that extra --?

No. Actually we are not doing it that way. Everyone gets all access to all products, and we are charging them as they use the products, so we are not limiting them by feature and functionality. One of the things I think we talked about last year was nickel and dimming your customers on each little feature and functionality in API. It's not a good way to ramp a business.

So we said here's the platform, here's the base fee, use it and as you use it, you're paying us and that's what we have been testing in the market. And that's what we have been seeing so it's a much more -- it will be one product set for all customers, it's one way to pay for all customers, and it will allow us to have a lot more freedom on driving adoption, and ramp the overall business. That's what we are looking to do. So as I said, we want to move above the 20% growth rates and, that's what we do consistently in the B2B space. We really want to drive it to another way and that's what we are doing with the platform. So, far 4,000 customers we are hitting our goals there.

Okay. Thank you.

Mike Latimore.

The guidance implies some positive seasonality in the third and fourth quarter, I believe. I guess can you talk a little bit about that pattern occurring at the same time that you're starting to move some of the larger companies onto LiveEngage? Do you think that seasonal pattern plays out as you go through that transition?

Yes, I think it relates to what Rob talked a little bit about earlier on the sales force productivity. We are doing well in mid-market, we have made the investment in channels. So the expectation is as we move towards the back half of the year there is the seasonality upside that we normally have. We have the impact of attrition but we have to sell more and do more in the back half of the year, which we're focused on and that's how we are looking at the guidance.

In terms of just the mid-market and Enterprise category there, I mean, what's -- what percent of those customers let's say would be reasonable to have on a LiveEngage by year-end?

A small percentage of those customers. Depending on when we get the next version out, we will see what the adoption -- we are just being careful there. The first part is small business, get small business successful, work through pricing, work through how we are up-selling, getting more usage and so far that's what we are working on, and we are getting the learnings. Once we get that, we can accelerate the adoption in the other areas, but we just want to focus on that area.

And we've got some cool technology we even build into the platform, we have built our own connection framework and when monitoring the use of our product and we literally have a success manager who can proactively engage a customer as they are using LiveEngage. It says look it looks like you're only using Chat, why don't you try content and then we have a way to even walk them through a set up instantly.

So, we are using our own technology embedded in our product to drive adoption and our whole customer support team is supporting that. So even the way we are aligned internally is all again adoption of the platform. But we want to go through the learnings and we are doing it, and we are doing it as quick as we can so.

Is the fact that the second quarter attrition would kind of normalize again back to what we have seen in other second quarters?

The question is that attrition would normalize in Q2, Q3 and Q4.

All right. Thank you.

There are no other questions at this time.

Thank you for being on the call and we will see you next quarter.

Thanks, everybody.

This does conclude today's conference call. You may now disconnect.