LivePerson Inc (LPSN) 2016 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. My name is Sally, and I will be your conference operator today. At this time, I would like to welcome everyone to the LivePerson second quarter 2016 earnings conference call. (Operator Instructions.)

On the call today we have Dan Murphy, CFO, and Chief Executive Officer, Robert LoCascio. I will now turn the conference over to Mr. Murphy. Please go ahead.

Thanks very much. Before we begin, please note that we will make forward-looking statements during today's call which are predictions, projections, or other statements about future results. These statements are based on our current expectations and assumptions as of today and are subject to risks and uncertainties. Actual results may differ materially due to various factors, including those described in today's earnings press release, in the comments made during this conference call, and in 10-Ks, 10-Qs, and other reports we file from time to time with the SEC. We assume no obligation to update any forward-looking statements.

Also during this call, we will discuss certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release, which is available in the Investor Relations section of our website.

With that, I will turn the call over to Robert LoCascio.

Thank you for joining LivePerson's second-quarter 2016 conference call. The second quarter in many respects marked a watershed moment for LivePerson. We accomplished something no other company has done. We brought the first enterprise live on mobile messaging at scale, and it was delivered on the LiveEngage platform. This achievement, coupled with now over 70% of our customers migrated to LiveEngage, sets us up for a really tremendous future.

We did sacrifice some short-term revenue for the year, as our focus on accelerating migrations had a further impact over upsells to the existing customer base. The impact was about 3% of revenues, or additional $7 million from those delayed upsells for the year. Approximately 25% of revenues are already on LiveEngage. A total of 60% of revenues are currently in the migration queue, and the remaining 40% are in process.

The trailing-twelve-month customer renewal rate is steady at 83% in the second quarter, which is in line with our forecast, and we continue to target returning to 90%-plus once the migration is complete. In fact, a small initial sample set of full-service customers generate on average a greater than 100% dollar retention rate within the first year of upgrading to LiveEngage.

The really interesting thing is what happens when customers are on LiveEngage. First, they instantly get a aligned to our mobile-first strategy. Mobile accounts for nearly 25% of all interactions on LiveEngage versus less than 10% on legacy. And same-customer mobile interactions on LiveEngage increased by 19% in the second quarter over the first.

Secondly, they use more functionality. Greater than 20% of our full-service customers on LiveEngage are using more than just traditional chat. Superior mobile, easier campaign building and testing capabilities, a more efficient agent workspace, and our embedded window design are just some of the reasons LiveEngage is fueling healthy adoption.

Finally, overall usage is up, as same-customer interactions on LiveEngage increased by 11% year over year in the second quarter. Interactions grew even faster for the enterprise and mid-market segments.

During the quarter, we moved enterprise customers across every vertical, including a leading financial services company that manages more than 100,000 chats a month, a national retailer who has more than 1,000 stores, a global developer of financial software with a 10-year history on our legacy platform and multiple lines of business and several hundred agents.

Besides driving usage, LiveEngage is built to give us more scale and operating leverage, as we automated many of the processes that today are done by our professional services organization, like reporting and data analytics. We're seeing just some of these cost savings today. Based on our current forecast, total expenses in 2016 will be approximately $12 million better than in 2015. There's also an additional $5 million in one-time migration costs in 2016 that we will be able to recoup once we complete the migration.

We made a few key assumptions around usage, scalability, and mobile when developing LiveEngage three years ago, and we're now seeing those assumptions come true. This lays the product and technology foundation for us to continue our leadership and accelerate our execution around what I consider to be one of the most important disruptions in digital, which is the shift from traditional analog voice to mobile interactions.

The stage has been set for us to lead this disruption, as we went live with the first enterprise deployment of mobile messaging at scale in the quarter. When I mean scale, we are already on a few million devices. I believe this is the first enterprise at scale in the world to go live, and I've never been more excited in the past 21 years of leading LivePerson. In some ways, it's even more exciting than when we launched chat for the first time in 1997 because of the scale of the impact that we can have on digital commerce and care.

Being the first does not guarantee success alone, but being first, coupled with delivering on our brand-new platform, having substantial resources, and our install base of great customers puts us in the pole position right now.

If you remember on our last call, this customer is a new customer that started as a mid-seven-figure deal. We already added another small seven-figure deal during the quarter, an additional revenue opportunity.

Other brands are already following the example of this flagship customer. We now have agreements to deploy our mobile offering in the coming months with some of the largest telcos and financial services companies, and additional verticals will follow.

The second quarter will go down as a very important quarter for LivePerson. We had a landmark event, bringing live the first enterprise at scale on messaging customer, and we executed our plan in almost every aspect of our business. Our mission for the remainder of 2016 is unchanged. We will focus on upgrading customers to LiveEngage and deploying other leading brands on the industry's first fully scalable mobile platform.

As I look past the migration, I see LiveEngage cementing our leadership in the traditional online engagement market, which will provide a solid foundation for growth and profitability. Then on top of that strong foundation, we will have this tremendous new opportunity -- that is, brand-to-consumer messaging. Messaging will reshape customer care and meaningfully expand our addressable market. It offers the potential to increase the number of interactions on our platform many times over.

We are excited about the future and its potential to be quite transformative for consumers, brands, and for LivePerson.

And with that, I will turn the call over to Dan Murphy, who will discuss our second-quarter results and outlook in more detail. Dan?

Thanks, Rob. Reiterating Rob's comments, our underlying fundamentals point to solid execution on most of our 2016 objectives. As of the end of the second quarter, we have migrated more than 70% of our customers to LiveEngage, and we're very confident in meeting our goal of upgrading 75% of our customers by year end. We are rapidly moving readily onto the platform as we upgrade our largest brands, and we are seeing positive results in LiveEngage customers, including strong mobile adoption and double-digit year-over-year usage increases. These are great indicators of customer satisfaction and future revenue growth potential.

We stabilized our customer renewal rate in the second quarter and generated solid traction in the consumer and automotive verticals. We are also keenly focused on driving efficiencies throughout our business, and we are on track to reduce expenses year over year by approximately 5%, or $12 million in 2016. 2016 expenses include an investment of approximately $5 million in one-time costs to ensure a positive upgrade experience as our brands move to LiveEngage.

As we entered 2016, we knew there would be three key levers associated with pushing the upgrade to LiveEngage -- customer renewal assumption, the timing of migrations, and the timing of upsells from existing customers migrating to the new platform. We built our forecast to account for these levers based on detailed account plans for each brand and in-depth customer-level conversations.

Midway through the year, we are right on target with our renewal rate assumption. We're also tracking extremely well against our migration forecast, with more than 70% of our customers now on LiveEngage. We have approximately 25% of our revenue migrated as of the end of the second quarter.

As well, our success out in key mid-market and enterprise reference customers onto LiveEngage has helped accelerate migrations, either in the form of customers upgrading pieces of their business onto the platform more quickly, or having discussions about moving more quickly than we had anticipated. This is a positive development which should contribute to fewer remaining legacy dollars needing to be migrated onto LiveEngage in 2017 than we had originally forecast.

The offset is that customers typically prefer to complete migrations before expanding the scope of their contracts. As such, we are experiencing modestly higher-than-anticipated delays in upsells from existing customers. As we continue to move larger customers over to the platform, I would expect the percentage of customers migrated to slow down, but the percentage of revenue migrated to increase.

Taking this trend into account, a refresh of our assumptions around upsell suggests our forecast should be reduced by $7 million, or 3%. Combined with an incremental $2 million foreign exchange headwind following the Brexit vote, we see a roughly $9 million impact to our full-year 2016 revenue guidance at the midpoint of the updated and previous ranges.

Our goal for 2016 is to provide stable revenue and healthy cash flow generation as we focus on completing the migration. We expect second-half 2016 revenue to be in line with the first half, while profitability strengthens, half over half.

With that, I will turn your attention to the second quarter 2016 operating results. Revenue at $56.7 million was in the upper half of our guidance range. Trailing 12-month average revenue per enterprise & mid-market customer held steady, above $200,000 in the second quarter of 2016 and in line with the record result reported in the first quarter of 2016. We signed 117 deals in the second quarter, and 36 of those were of new enterprise or mid-market brands.

B2B revenue declined 5% to $52.4 million, and consumer revenue increased 10% to $4.2 million. The B2B revenue breakdown by industry was retail, 27%; financial services, 22%; telecommunications, 17%; technology, 10%; and other at 24%. Revenue from international operations accounted for approximately 32% of total revenue.

Second-quarter GAAP net loss per share of $0.14 and adjusted net loss per share of $0.04 were higher than previously issued guidance. Diluted adjusted EBITDA per share of $0.08 was within our guidance range. Included in the second-quarter GAAP net loss was $3.1 million of non-recurring costs primarily associated with IP litigation and cost rationalization efforts.

The second-quarter gross margin was 69.1%, in line with our expectations. The Company's cash balance, including restricted cash, increased to $56.3 million at the end of the second quarter from $48.5 million in March. LivePerson generated cash from operations of $12.6 million in the second quarter of 2016 compared to $7.9 million in the year-ago period. Cash flows continued to benefit from our ability to move customers to cash payments in advance on annual billings. This shift is reflected in deferred revenue more than doubling to $29.4 million in the second quarter from $12.3 million a year ago.

The Company repurchased approximately 185,000 shares of stock for $1.4 million in the second quarter. An additional $15.5 million remained available under the share repurchase authorization. Capital expenditures totaled $2.1 million in the second quarter.

I will now review our updated guidance, and our detailed expectations are as follows. For the third quarter of 2016, we expect revenue of $54 million to $55 million; GAAP net loss per share of $0.09 to $0.07; adjusted net loss per share of $0.03 to $0.01; and adjusted EBITDA of $3.8 million to $4.7 million, or $0.07 to $0.09 per share.

For the full year 2016, our expectations are as follows -- revenue of $221 million to $225 million. That revenue guidance includes a negative foreign currency impact of more than $3 million from approximately $1.5 million previously guided. GAAP net loss per share of $0.34 to $0.28; adjusted net loss per share of $0.08 to $0.03; and adjusted EBITDA of $18.2 million to $20.5 million, or $0.32 to $0.37 per share. In addition, we expect to pay cash taxes between $1 million and $3 million in 2016.

Furthermore, as a percent of revenue for the year, we anticipate gross profit to be approximately 70%; sales and marketing of 40%; G&A of 16%; and R&D at 18%. Please refer to LivePerson's earnings release issued earlier today for details on our full-year 2016 assumptions. We have also published a supplement presentation on the Investor Relations page of our website that reviews key points from the earnings call.

With strong mobile momentum, favorable LiveEngage usage trends, upgrades moving into the final stages, and retention stabilizing, we are progressing solidly through our business transition. The completion of the upgrade to LiveEngage will not only position us to expand our lead on the Web and target a larger addressable market, but it will also enable LivePerson to fuel greater profitability. As such, we remain confident about our prospects for returning to growth and reattaining our historic margins as we move past the migration.

With that, I will open the call to questions. Operator?

(Operator Instructions.) Richard Baldry, ROTH Capital.

As we try to back out the one-time expenses, could you walk through which lines those would be in so we can see more of a run rate operating expense level? And then where are the continuing cost cuts maybe focused to build the models? And then over on the operational side, could you talk maybe on the messenger, a little about how you're seeing or finding your initial large-tail customers? Is it vertical or added? Who you compete with on those deals may be different than who we've seen you compete with in the past. Thanks.

So, Rich, on the one-time costs, you're referring to the $5 million that we're talking about?

Right, and during the quarter itself, it looked like there was something around $3 million in nonrecurring expenses.

Yes, so we have about $3 million and it's bucketed in a few buckets. One is around litigation and the second is around what we call cost optimization opportunities. Some of it's severance; some of it's the closing of offices that we used to have in places that we don't need anymore. But as far as the $5 million, that's predominantly in the sales and marketing line item related to the migration, and there's a little bit in cost of goods sold as well.

And then on the messenger side, today there are a small amount of startups that are out there, but we are the first out on scale. So when we're working with this large enterprise, we're dealing with thousands and thousands of potential agents and tens of millions of consumers and millions of devices. So -- and our platform can handle that scale. So right now, we're in a strong position in executing on delivering it.

Thanks.

Kyle Chen, Credit Suisse.

I guess, Dan, just on the $7 million reduction in the outlook, can we drill into that a little bit? So it looks like there's delayed upsells related to existing customer migrations. What were you anticipating, going into the year in terms of upsell activity? I was under the impression that the focus was largely on migrations, not so much in terms of new bookings. But maybe a couple of words there and a little clarity.

Yes, so, hey, Kyle, as you're familiar with the business, roughly 70% in the past of our bookings have been from existing customers. And we did expect to take a little bit of a haircut on that, or a decent-sized haircut on the upsells to existing customers.

But what actually ended up happening -- the good news is we have this in our control, and it's up to us -- but the migration of customers, and we're actually having the ability to start moving customers over a little bit faster than we expected, and we're able to move over portions of the business or a line of business. And what we're seeing, early indications, or indications in Q2, when we're moving those customers over, they're holding off on a buying decision. And it's better for LP and better for our customers to move these migrations in bite-sized chunks as opposed to trying to do a whole line of business that's relatively complex all at once.

So from our perspective, it is having an impact on the upsells, and we are having our AMs, account managers, really focus on driving the migrations over to the LiveEngage platform.

Okay, that's helpful. And I guess conceptually, if we were to fast-forward 12 months and assume that you migrated all the customers that you intend to migrate over to the new platform and you make your way through all the contract renewals, I guess this quarter looks like 11% from an interaction perspective, growth perspective. Is this the bare minimal level of rev growth that we can expect to see if usage trends remain just -- is it improper to correlate the usage trends with the minimum revenue growth going forward?

I'm not giving specific guidance around what's going to happen on LiveEngage, but we're actually pretty happy about the usage trends as far as the number of interactions, what's happening with mobile. There is a correlation that we're seeing. As Rob talked a little bit about in his script, although it's a small sample size, we are seeing a small sample size of LiveEngage customers that actually come up for renewal. We're at a dollar renewal rate of greater than 100%. Again, small sample size, but that's going in the right direction. And what we're seeing is those early indications.

So following on the other answer, our goal is to get these migrations done as quickly as possible. And one of the assumptions that we have goes around 75% of our customers being migrated onto LiveEngage platform by year end. And with us being above 70%, that target's in reach.

In addition, what we're seeing, or what we're expecting, is less revenue will have to be migrating in 2017 than we originally anticipated. So a couple of positive trends there around LiveEngage and the migration to LiveEngage.

Okay, thanks very much. Best of luck, guys.

Brian Schwartz, Oppenheimer.

This is Koji Ikeda for Brian Schwartz. Just a quick question on the remaining conversions that you have for LiveEngage. I believe you're saving the largest enterprises to convert to LiveEngage last. Maybe, if you could, talk a little bit about what percentage of the remaining -- it looks like 30% -- of those customers are the large enterprises that you have. And maybe, could you give us an idea of how long it takes to fully convert these customers over to LiveEngage?

So we're already converting the large ones, so that's the thing that started. So as large as they can get, they're getting converted right now. We have about 60% already in the LiveEngage queue to go of the total revenue base. That's the total revenue, 70% of the total customer base. So we're moving that quite quickly, and that's our focus right now. So we have line of sight, a lot of control over the movement. Everyone's got dates. So we feel good about where we are with that.

And we're seeing, more importantly is when we move them, they have really good results. So there's a confidence in the organization as they see more and more of these large enterprises go live, there's a confidence that builds with all the account managers and the sales team, and they just want to go. Because once they go, that gives them an opportunity, obviously, to upsell, cross-sell, and do those things. So that's where we are right now -- 25% of revenue, 70% of the customer base, about 60% line of sight that are in queue to go. And the large enterprise is already being moved, the largest of the large.

Okay, great. Thanks for that. And a question for Dan, I think. Could you talk maybe a little bit about if there was a FX impact to international revenue in the second quarter?

There was an impact in the second quarter. It was minimal. The pound actually held pretty steady. And as you know, we have pretty good exposure, a decent-sized exposure, to the Great British pound. So there's about a $400,000 impact, approximately a $400,000 impact in the second quarter.

Great, thank you. Thank you for taking my questions.

Glenn Mattson, Ladenburg Thalmann.

On the mobile platform, the customer that you converted at scale, can you say -- and then the second customer you added -- can you say what industry that was in and any other details? I know it's early about just the initial uptake and anything like that.

No, I'd rather not say what industry they're in. We'll do some press and stuff shortly. But they're in one of our top verticals of banking, telco, cable, or travel. So yes, they're one of the leaders in one of those four verticals.

And is it a global deployment or in any region of the world?

Yes, it's a US entity. They're a US company, only in the US. I said they have over 50 million consumers in their base of customers, and millions of devices of their app out in the market today. So we are installed in that app. Like I said, it's the first one that I believe in the world has gone live at scale. So there's thousands and thousands of consumers -- tens of thousands, actually. It's quite large. Hundreds of thousands, actually.

Great. And just on the conversion real quick to make sure I have -- you said 25% converted, 60% in the queue, and 40 -- you give another number -- 40%, what was that? In process? Is that -- ?

Are in process right now, yes, so 40% are in process. And so we're locking down the final dates and going through the final planning. We have target dates with them, but they're the last -- the 60%, they've been migrating, lines of business went live. So those are where we put code on pages and things are moving. So that's that 60%.

Okay, great. Thanks. Best of luck.

Jeff Van Rhee, Craig-Hallum.

So on the sales side, obviously, your message, you're going to really have guys focused on migrating at the expense of trying to drive new business. Obviously, one of the challenges there is salespeople like that big incentive comp for new business. In terms of retention, what have you done and how have you done in terms of holding your people in their seats while they're really doing more customer migration than what I would call more of their typical selling roles?

Yes, Jeff, that's actually a great question and something that we gave a lot of thought to. And as we started to move towards the migrations in 2016, we actually adjusted the comp plan for a good portion of the sales organization to get them to focus on the migration. There's a portion of their compensation tied to that migration. So we made that change, and from our perspective, it was in our control to be able to take advantage of upgrading and migrating those customers onto the LiveEngage platform. And as you guys know, if this goes out for an extended period of time, that's not good for our customers; it's not good for LivePerson. So we're getting much more aggressive in bringing these customers across the finish line.

And we added the resource for them, some outsourced resources, which was approximately this $5 million one-time. We did a larger investment in some outsourced resources to do the migrations. So where we've got that very standardized work for tagging and setting up accounts, we'll set up a full account before they even go live. So it's got all the data and everything ready to go, and they just have to switch it on. So we actually increased the expense there, which is part of that bucket of one-time fees. Because once again, we see the way to go, the demands there, and we just want to get the majority of it done, obviously, this year. And we're on track to do that.

That's great. And in terms of the -- you counted on the deferred revenue and the improved cash flow -- as you look at this migration into LiveEngage, now that you're getting a little better sample size, how do you think about the percent that will likely be, going forward, coming with upfront payments versus not?

It's a focus, again, of when they come up for renewal, there's an incentive for the team to move them to annual payments, and I think we've actually done a pretty good job. And I know a lot of the AMs are probably listening on this call, and I think they're doing a great job with the migrations, and they're doing a great job with our customers in navigating through this process. But there's an incentive in there and it's definitely one of our corporate goals for annual upfront payments from our customers in order to drive cash flow and help with the business.

Okay. And then just a couple quick ones here, then. The CapEx guide for the year -- I'm not sure if I missed it. And then consumer, a bit of an uptick there. Just very briefly, what's going on there?

On the consumer side, we launched a mobile app for the experts, and it's doing quite well. So we also have been very mobile-focused over there, and we're just seeing a great uptick in overall usage across that division of our Company.

Do you think of that growth rate as sustainable? Is that how we should think about that piece from here on out?

Yes, we've been pretty -- it's pretty amazing what's happened on the demand side, just by delivering it through an app. We feel good about this year, and so we feel good about where the growth rates are, and I think they could be sustainable going into next year.

And Jeff, just on the CapEx, it's in the press release, but it's about $12 million to $13 million for CapEx for the year. It's a little bit higher than we originally guided, but we decided to put more money into A-Pac as customers start to gear up and use more. What we're seeing is having the data center in country is getting some of our financial service and telco companies more comfortable having the data within their borders, and we're seeing an opportunity for increased usage there.

Got it. Great. Thanks, appreciate it.

Mike Latimore, Northland Capital.

On the 60% number in the migration front, what kind of timeline do you have attached to that? Is that by year end, or how long is that? What's the timeline on that funnel, let's say?

Yes, Mike, so let's break this down a little bit. So as of the end of the second quarter, we've got about 25% of the revenue over. And as I talked a little bit about earlier, we're moving that in some bite-sized chunks. So included in that 25% might be a line of business of a customer that has five or six lines of business. And so we might have moved two lines of business, maybe three lines of business over, and so what we do have line of sight as we're moving those lines of business over is there's additional lines of business with more revenue that we can move over. So they've already migrated a portion of the business, and there's more to come. And that's how we're getting to that 60%. So 25% is done already and there's another, give or take 35%, that we expect to get us to 60%. And then on top of that, we have line of sight to the other 40% of the revenue through account planning, conversations with customers, migration dates, timing, et cetera.

So as far as the timing to get to that 60%, our expectation was out -- we expect to get a majority of that revenue over by year end. And so we're confident in the process that we've got in place. We're confident in the people that we have in place. And it's further emphasized by the money that we're putting behind the migrations for outsourced resources to drive that migration. So --

But the majority of revenue will be over, will be done. We'll have this behind us. So we'll have a small portion going into next year.

Got it. And then just the pricing model for LiveEngage -- has that changed much since the start of the year, or is it still the pricing model year as laid out earlier this year?

No, the pricing model was primarily the same. Obviously, we're always looking at it, but it's still the same. And as we've talked about on previous calls, if a customer is on legacy and they're paying for seats, we're not looking to have a commercial discussion; we're looking to get them onto the LiveEngage platform as quickly as possible.

Right. And then I was just -- outside of the upsells to current customer dynamic, how are the new logos, the new bookings related to new logo sales in the quarter?

Yes, we're excited. The guys are out there. They're all LiveEngage sales, of course. We had about 36 deals. And as Rob talked a little bit about, the large messaging dealer we have, we actually had a decent-sized, seven-figure deal selling the rest of the platform beyond messaging to this customer. So we're happy with the trajectory and the direction, and Dustin and the team are focused on getting those new customers across the finish line. As further with our ARPU around a few hundred thousand dollars, which is consistent with Q1. So $200,000 in Q1, $200,000 in Q2, so all going in the right direction.

Great, thanks.

Craig Nankervis, First Analysis.

Can you review why the migration was faster than expected? I'm not sure it's entirely clear to me.

So from a migration perspective, Craig, we talked about getting 75% of our customers by the end of the year on the LiveEngage platform. And right now, we're at roughly 70%. So from a customer perspective, we hastened and pushed through from a migration perspective more customers. In addition, I think one of the questions a little bit earlier was around the timing of mid-market and enterprise, and we've actually started to move a good number of mid-market and enterprise customers over. It's not always as easy as just a lift-and-shift, and as I talked about, there are lines of business that already have the capability to move over. And a customer that might have five or six lines of business (inaudible). So that's what's happening in terms of a migration perspective. And that's one of the reasons we're fast-forwarding.

And there's an important statement that I made that I just want to reiterate. Although that was greater than 70% of our customers migrated as of the end of the second quarter and 25% of revenue, I do expect the customer percentage to slow down as we move some of those larger customers over. But I also expect the percentage of revenue to increase as we move some of those larger customers over.

So that's the path that we're going down. And the last piece of that puzzle is we had an expectation of revenue spilling into 2017. We still have that expectation, but just not as much. Actually -- migration, sorry. Sorry, migration. So that's the hastening or the speeding up or the fast-forwarding, if you will, of migrations.

You made -- in the quarter some time, you made some sort of conscious decision to accelerate migrations, and you chose to do that -- I'm not exactly sure why you chose. But it sounds like you made a conscious decision to accelerate them, for whatever reason.

Yes, the biggest drivers for the acceleration is features. It's delivering the platform with the set of features that can drive that. And then the readiness of the customer, that they've got their resources aligned to us, and we pushed very hard to get those resources aligned in many different ways. And obviously, incentivizing the account managers. We added more resources on our side that are part of these one-time costs. And then being able to move that customer very quickly against their resources, we wanted to accelerate. Obviously, we know once we give everyone LiveEngage, we have a whole new business, and we're off to the races. So we wanted to just move it, and we did.

Like I said, it was a little bit in sacrifice of you can't upsell someone when you're in the middle of it. So we're going to take a little bit of an impact. But when the customers get on the platform, they're steady, and that's the most important thing, and they grow, and they're using more things, and they're mobile-enabled, and they're ready for the vision. And then that vision, now, we also have intact with an enterprise customer who's live and having success. So we've got a referenceable customer in our vision. So we've got to go.

Because I've said this before. I think we've got a 24-month to 36-month play with this company, and the industry we're in, which is having to take large enterprises and get them live on mobile messaging and change the dynamic of how they're connecting with their consumers, this is a quick play. There's many people looking at the space. There's a lot of talk about this space. And we're the first to be up in the space. So we've got to get migrations way behind us quickly and move to our vision and scale the company to the next level.

Okay. Hey, thanks for taking me through that. And then, but you would caution me -- either Rob or Dan -- you would caution us to think that you could have, I don't know, 80% to 85% of customers -- if you're ahead of things now in terms of the customer migrations, could you be a pretty high number, theoretically -- not like you're guiding to it or anything, but just theoretically, as you --

On a public call, theoretical is kind of hard, but we can do it.

Well, I mean, is it conceivable -- let's use that word. Is it conceivable you could be, I don't know, 80s, in the 80s in terms of your percent of customers migrated by the end of the year?

I think you can look at where we are now and just make -- well, however you want to look at it -- but we gave 75%. That's our target. I want to stay on that. Obviously, we're putting a lot of focus on this, so it's just stay with what we've got, and then if we beat it, great.

Okay. That's all I have. Thank you.

Mark Schappel, Benchmark.

Most of my questions have been answered. Just one question for you, Dan. Regarding the customer renewal rate, when do you think we'll start seeing that start to tick higher here?

So we're on target with our internal assumptions that we made around customer renewal rate. One of the stats, again, that Rob gave was just around renewal rates. Although it's just a small sample, we are seeing customer renewal rates and dollar renewal rates higher than what's on legacy right now.

And Mark, the risk that we've identified in the beginning of this process and one of the levers is as you're going through an upgrade process, there's a risk of attrition. As you're going to a customer and talking to a customer and getting them to move to the LiveEngage platform, some aren't actually going to pick their head up and take a look around. Whether it's the right thing or wrong thing to do, they obviously think it's the wrong thing to do, but we do know customers go through that process. So that's, again, another reason we're seeing strong, encouraging early signs on the LiveEngage platform -- stronger renewal rates, stronger mobile, and then setting our customers up to get them to start to adopt messaging as we've just launched this large premier customer.

Thank you.

Kyle Chen, Credit Suisse.

Hey, Dan, just a quick follow-up. You talked about Brexit in the form of FX impact on the outlook, but just wondering what you're seeing from a demand perspective and what you're hearing from customers, given your material exposure to Europe and that region. And I guess, to what extent have you properly handicapped that in the revised outlook? Thanks.

Kyle, thanks for your great question. And Rob spends a lot of time in Europe, and I was in Europe at the end of the quarter as well. We did go around talking to a lot of customers. We don't think it has an impact on the decision-making; at least we haven't seen it have an impact on the decision-making process yet. But we think we've built it in from our guidance. But I think there's still a lot more uncertainty that Europe has to go through, especially around supporting the currency and other things that they're doing. So right now, still moving forward. We haven't seen any slowdown in decision-making yet.

Okay, that's great to hear. Thanks.

Glenn Mattson, Ladenburg Thalmann.

Also a follow-up related to the retention. Are you seeing any increased aggressive pricing or aggressive marketing efforts by competitors on people you haven't converted yet? And I guess related to that, have you ever seen, just as we're trying to get confidence around the projected conversion dates or anything, have you ever had any customers who had conversion dates who then dropped out of the program?

Just on my last one, Glenn, what do you mean "dropped out"? Meaning?

I mean they had a conversion date, they told you, "We want to get up and live by September of 2016," but then all of a sudden they got plucked away by a competitor.

Can't talk about anything being plucked away by a competitor. We are constantly monitoring our customers, and there are competitors. Listen, they know that we're going through this transition, and they know that we're upgrading our customers to a significantly better platform than they have. And some are out there taking advantage of it and trying their best to take advantage of it. And again, that's why, from a customer renewal rate, we made certain assumptions, and that's one of the levers that we talked about. There's always an opportunity for a customer to pick up their head when they're going through a migration. And it's another reason that we're trying to do this as quickly as we possibly can, to not leave ourselves exposed.

Okay, thanks.

There are no further questions at this time. I will turn the call back over to the presenters.

Thank you for joining our Q2 2016 call, and we'll see you on the next call. Thank you.

Thank you.

Thank you, ladies and gentlemen, for your time and participation. This concludes today's conference call. You may now disconnect.