LivePerson Inc (LPSN) 2016 Q3 法說會逐字稿

Good afternoon. My name is Sara and I will be your conference operator today. At this time, i would like to welcome everyone to the LivePerson third quarter 2016 earnings conference call. (Operator instructions). On the call today are LivePerson's founder and CEO Robert LoCascio and CFO Dan Murphy. You may begin.

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 the conference call and in the 10-K and 10-Q 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 over the call to Robert LoCascio.

Thanks, Thank you for joining LivePerson's third-quarter 2016 conference call. This is an exciting call for us today as we have much to share regarding our 2016 priorities of completing the migration of LiveEngage, planting the flag in messaging and capturing operating efficiencies. Our vision is to reinvent customer care through messaging bringing massive cost savings and efficiencies to contact centers across the globe and game changing shift in how customers -- consumers connect with their favorite brands. The opportunity is also game changing for LivePerson as we believe that transferring even a fraction of existing contact center call volumes onto our messaging platform will fuel substantial long-term growth. A shift in consumer behavior to mobile is ushering this change and we've been talking for some time about a work to ready LiveEngage for the messaging error. We designed the platform to handle the scalability, security and stability requirements of the largest global enterprises. Our ability to execute on our messaging strategy is really beginning to hit its stride.

Just two weeks ago, we led a summit on business messaging hosted on site by T-mobile, our first flagship messaging customer. Boasting 69 million consumers, t-mobile is the third largest and the fastest-growing mobile communications company in the United States. They're breaking the mold on how to build a powerful brand and a valuable customer experience and are truly aligned to the vision enabling consumers to connect with the brand on their own terms at anytime on any device. The Summit was groundbreaking. Together t-mobile and LivePerson showcased how brands can leverage the LiveEngage platform to reinvent customer care. We validated that messaging reduces costs by deflecting expensive 800 calls and increasing agent efficiency.

We also demonstrated how brands can transform contact centers into connection centers by enabling consumers to engage with brands on their own terms. This exclusive content was delivered to an invitation-only audience and approximately eighty senior leaders from more than forty of the world's consumer facing brands, the majority of which are already LivePerson customers spanning the telco, financial services retail travel and hospitality and technology industries. The brands collectively reach about three billion consumers. There's no better validation that we are positioned with the right vision and the right platform at the right time than what we did at that event.

Also we showcased the new capability support messaging conversations that originate with mobile search. With LiveEngage large enterprise can intelligently manage, analyze and import on the messages of that scale. LivePerson is supporting half a dozen customers with the capability including Kia Motors and also T-mobile. This release underscores the (inaudible) dramatic shift toward mobile messaging as a preferred way to communicate and connect with brands. And the same way that they use messaging to talk to each other through facebook or what' sup. Our messaging summit would not have been possible without the support of an industry leader and partner and customer like t-mobile. The company is not just talking about delivering its superior customer service but executing on it.

T-mobile is now using LiveEngage to message with its own branded app, search, facebook messenger sms and now on the web. This is the power of LiveEngage to enable leading brands to manage all of the digital connections with the consumer regardless of the channel or device in which they originate. This win is illustrating the paradigm shift we are pursuing. Our platform (inaudible) better experience and build stronger relationships to all of our consumers, not just those on the web. T-mobile understood the value of this proposition and chose to employ LiveEngage across millions of devices. We are building on our success of T-mobile North America by launching messaging with other major brands in additional geographies. In the third quarter, we brought messaging to the leading telco in the Asia Pacific region

Fourth quarter we plan to launch a major brand in EMEA. By year end, we expect to have large-scale referenced messaging customers in each key region of the globe. Although revenue contributions from our success will accumulate over time through usage, the momentum is building, we are confident we're on the right path. The power of our unique assets are employees, our global customer base and our platform positioned LivePerson to emerge as the leader in brand to consumer messaging. The LiveEngage platform underpins not only decision for mobile messaging but also our strategy for increased usage and operating scalability. Completing the migration of our customers on the platform will support our long-term growth and profitability and we're pleased to report another strong quarter of progress. We ended the third quarter with nearly 80% of our customers on LiveEngage up from 70% in the last quarter and 45% as we entered 2016. Revenue on LiveEngage is climbing rapidly as our largest customers migrate. 37% of recurring software revenue now on the platform we have a line of sight into a total of 73% of revenue and including customers started moving businesses -- business lines over today.

This is up sharply from the second quarter when we reported 24% of recurring revenue on LiveEngage and line of sight of 60%. While still small, data sets are growing more meaningful with each brand added to the LiveEngage platform lending further validation to our assumptions that overall customer renewal rates of LiveEngage comfortably met our target of greater than 90%. Moreover, continue to see a greater than 100% renewal rate for the LiveEngage customers. These results directly tie to value and experience that LiveEngage provides with fuels broader platform adoptions especially around mobile. Same customer usage is exceeding 10% year-over-year growth. Mobile jumps to approximately 25% of total interactions from less than 10% on legacy. Created in 25% of our full-service customers on LiveEngage are using more than just traditional chat versus approximately 10% historically on legacy. With each indicator suggesting a healthy outlook for LiveEngage customers, we're focused on completing the migration the first half of 2017. We anticipate ending 2016 with approximately 50% of recurring software revenue in LiveEngage and another 30% revenue in our funnel.

In fact, we see recently upgraded our largest customer by revenue and achievement that underscores the enterprise scalability of the platform. We have dates in hand for most remaining legacy customers. Visibility for the final 20% of revenue. Not every brand will come along for the journey. We expect the majority to embrace the future, customer care on LiveEngage. The expands will be aligned with our vision and position to grow at a healthy clip once the migrations are complete. Moving past the migrations, will enable our sales teams to reprioritize on expanding with existing customers. Renewal rates should also improve at that point. Once migrations are behind us our plan will be to align our resources and our operating model around our strategic opportunity. This focus will also be critical to realizing its vision and we have everything in our hands to transform an industry that's long overdue for change.

We have a powerful enterprise class platform that scales mobile intelligently and securely, establish relation with hundreds of the world's global enterprises offering combined reach into billions of consumers. (Inaudible) scaled large enterprise that deployed messaging on millions of devices and is working as a partner. A seminal industry event that exceeded our planned capacity attracting senior leaders from more than 40 of the world's leading brands and open platform and architecture that positions LivePerson as the hub for all branded and third party messages from in app to sms and facebook messenger. A global organization that possesses the leading domain expertise on brands to consumer messaging and knows how to deploy and support the large enterprise.

Our goal will be to complete migration the first half of 2017 getting more brands up on our strategy and moving forward to reshape the future of customer care for our company. What I want to underscore is we have all of the pieces in place. The messaging revolution and customer care is now underway. We're leading in this market. Which we believe will have a tremendous potential. With that, I'll turn the call over to Dan who will discuss our third quarter results and outlook in more detail. Dan?

Thanks, Robert. As you heard Rob' s comments, the third quarter was marked by solid execution and strong progress laying the foundation to win in messaging. There are a few key takeaways that bare reiterating. The migration to LiveEngage is advancing into the later stages. Nearly 80% of our customers are now on the platform exceeding our initial 2016 target of 75%. We are also rapidly reducing the exposure to customers not yet on the platform. 37% of occurring software revenue is now on the platform and we have line of sight into a total of 73% of revenue including customers who have already started moving business over to LiveEngage. LiveEngage customer metrics from usage, to mobile adoption and dollar retention rates suggest the potential for our brands to grow at a healthy clip post-migration. We're successfully executing our mobile messaging strategy.

We're adding new customers and solutions and we held a seminal event that validated the efficacy on messaging in the contact center and its ability to transform customer care. Financially, we also executed on our priorities. Third quarter revenue was within our guidance range and we're on target to hold second half 2016 revenue in line with the first half. The company also continues to capture operating efficiencies as we shift to LiveEngage and continually work to improve our operating model. In fact, total operating expenses are tracking to decrease by $14 million in 2016 as compared to 2015.

And total EBITDA is projected to increase in the second half of 2016 as compared to the first half. Recall that we were choosing (inaudible) even while investing approximately $5 million a month on costs to ensure a positive upgrade experience as our brands move to LiveEngage. With that ,I will turn your attention to details in the third quarter of 2016 operating results. Total revenue at $54.5 million met the midpoint of our guidance range. LivePerson generated third quarter B2B revenue of $50.5 million and consumer revenue of $4 million.

Trailing 12-month average revenue for enterprise and mid market customer held steady above $200,000 for the third consecutive quarter. We signed 83 deals in the third quarter of 2016 as compared to 126 in the third quarter of 2015. As we had guided, our focus on migration is temporarily limiting our effort to drive up sales from existing customers. The trailing 12-month customer renewal rate held at 83% for the third consecutive quarter although we expect a renewal rate to remain near this level until the migration is completed. Data on LiveEngage customers suggest the rate will rebound to our target of 90% plus once all of our customers are on the platform.

The B2B revenue breakdown by industry was retail at 25%. Financial services at 22%, telco at 16%, technology at 9% and other at 28%. Revenue from our international operations accounted for approximately 36% of total revenue. Gross margin in the third quarter increased 280 basis points year-over-year to 72.8%. The company is beginning to realize some benefit as LiveEngage matures at the enterprise level and fewer resources are needed in production. Third quarter GAAP net lose per share of $0.0410 cents and adjusted net loss share of $0.05 were higher than previously issued guidance. Both GAAP net loss and adjusted net loss were impacted by reporting taxes that were approximately $0.04 per share or $2.2 million higher than we had anticipated due to a larger increase in taxable income in foreign jurisdictions and implementation of evaluation allowance for one of our foreign subsidiaries.

This change has no effect on cash taxes paid. Excluding the $0. 04 cent impact from the non cash taxes, our reported GAAP net loss and adjusted net loss per share would have been in line or better than our guidance. Diluted adjusted EBITDA per share of $0.08 was within our guidance range. The Company held $55.4 million of cash including restricted cash at the end of the third quarter as compared to $56.3 million in June. LivePerson generated year-to-date cash from operations of $16.6 million a 52% as compared to the $10.9 million in the same period last year. Cash flow continues to benefit from our ability to move customers to cash payments in advance on annual billings. The shift is reflected in deferred revenue more than doubling to $26.5 million in the third quarter from $10.3 million a year ago.

The company repurchased approximately 190,000 shares of stock for $1.2 million in the third quarter, an additional $14.3 million remained available under the share repurchase authorization. Capital expenditures totaled $2.6 million in the third quarter. I will now review our updated guidance. Despite an estimated incremental foreign exchange headwind of approximately $600,000 in the second half of 2016, we are maintaining the midpoint of our previously issued 2016 guidance range. Our detail financial expectations are as follows. For the fourth quarter of 2016, we expect revenue of $55.8 million to $56.8 million, a GAAP net loss per share of $0.05 cents to $0.03 cents. Adjusted net profit per share of $0.01 to $0.02 Adjusted EBITDA at $5.2 million to $5.6 million or $0.09 cents to $0.10 cents per share.

For the full year of 2016, our expectations are as follows. Revenue of $222.5 million to $223.5 million. Revenue guidance includes a negative foreign currency impact of $3.6 million. GAAP net loss per share of $0.34 to $0.32. Adjusted net loss per share of $0.09 to $0.07 and adjusted EBITDA of $19.1 million to $19.6 million or $0.34 to $0.35 per share. We expect to pay cash taxes between $1 million and $3 million in 2016.

Furthermore, as a percentage revenue for the year, we anticipate gross profit to be approximately 71%. Sales and marketing at 40%. G&A at 17%, and R&D will be 18%. Please refer to LivePerson's earnings release issued earlier today for details on our full-year 2016 assumptions. We also have published supplemental presentation on the Investor Relations page of our website that reviews key points from the earnings call. Our financial results we're reporting today and for the next several quarters are directly linked to our near-term focus on migration.

We have been transparent about the expected short term impact of this effort namely fewer upsells and lower customer renewal rates. These temporary impacts should not overshadow the momentum we are building around LiveEngage, messaging and our effort to transform the customer care industry. In our view, the revenue growth we're sacrificing near-term is worth a substantially greater opportunity that will be afforded long term by executing on our vision. We believe that when we complete the shift to LiveEngage, the impacts from our focus on migration will diminish while the growth potential for messaging adoption will become increasingly apparent. Simultaneously, with the completion of migration in sight and solid traction in messaging underway, we'll focus in on improving profit margins in 2017 and subsequent years. With that, I will open the call to questions. Operator?

Your first question comes from the line of Kyle Chen. Your line is open.

Thanks for taking the question. Really good to see that the migrations are moving along. Dan, quickly-- in terms of the LiveEngage dollar renewal rate of greater than 100%, understanding it is still a relatively small sample size of customers that have come up for renewals since the initial migrations, can you be a little bit more specific about the magnitude of growth beyond--greater than 100% you're seeing from customers who are renewed?

This is the second quarter in a row. It is a small sample set. This is the second quarter in a row where we've seen greater than 90% customer renewal rates and greater than 100% dollar renewal rates. Right now, I am comfortable just leaving it at greater than 100% again because it is a small sample size but as we get customers, more customers on to LiveEngage, get a couple more quarters under our belt, we'll be more accurate with that information or --more targeted information.

Okay. That's fine. And Rob, this quarter you announced a new inaudible) market partnership with go daddy. I understand that it is early but have you have seen any benefits from that relationship? Has it helped your customer acquisition--and lead generation prospects? I guess more broadly speaking, how should we think about your use of channel partners to broaden the reach of LiveEngage and perhaps take some of the burden off your sales reps?

Yeah, I think -- honestly as we focus the enterprise for LiveEngage, we're looking at more and more partners to serve us down in the small business--midmarket range. So go daddy being one of those, obviously we have integrations on the messaging side like with a facebook and we're doing stuff in search. So we're sort of looking at that, the best way to service that market. We obviously have some direct sales that are doing targeted selling there. It will become more key to our strategy where we will focus much more on the enterprise size customers for the big implementations and the customer care organizations and use the channel partners.

Okay. I appreciate it. Thanks.

Your next question comes from the line of Brian Schwartz. Your line is open.

Hey, Rob and Dan, this is Daniel Greenfield sitting in for Brian Schwartz. Thanks for taking my question. Rob, could you talk about how sales hiring and sales productivity is trending this year on the hiring front, are you on track with the plan year-to-date? And is the sales rep capacity where you would like the business to be at ending the quarter? Can you also talk about sales productivity trends in general if you're seeing productivity gains with the sales force, maybe across business segments or geographies. That's it for me. Thanks.

Yeah. We haven't changed the rep count. It has been pretty steady for this year. The focus as we know is on the migration. The majority of what they're doing is working on getting the large enterprise customers and working with support teams on making sure the migrations go well and supporting them. So that's really what the productivity is about. We even have comp tied to the migrations because we want to finish them up. And we're doing very well with them right now. So I think overall productivity as we get into next year, we'll start seeing a different level of productivity because they'll be out signing upsells and cross sells and more greenfields versus focusing on the base and getting them converted.

Great. Thanks.

Your next question comes from the line of Mark Schappel. Your line is open.

Hi, good evening. Nice job on the accelerated LiveEngage migrations. Robert, question for you. With respect to the sales force, sales comp plans were adjusted a quarter or so back to favor LiveEngage migrations at the expense of upsells. That's typically not what sales reps like to hear. What are some of the things you're doing to keep the sales force on board and engaged during this transition here?

Kind of -- missing the point a little bit which is I talked about is that we launched one of the first enterprise scale messaging customers in the world. We had a very big event with T-mobile out at their -- outside their corporate headquarters and brought in 40 very large brands to talk about that. So that's our strategy. So it is not about -- i think comp is a pretty tactical think to talk about today where I think it's about -- we're converting customers on to the platform. The platform has messaging on it. We've got the first referencable customers for it. There's some more beyond T-mobile. That's what's really driving the enthusiasm because I really see the potential as our largest customer today which is 11 million, 12 million, the customers that are much larger than that when we get into messaging. The size of the opportunity because we're talking about transferring voice calls. I think we can transfer a large majority -- not a majority but could be 40% of a contact center's calls on to the LiveEngage platform which we've never been able to do before with just chat.

So that's really the opportunity that's making them excited. We are hiring people who are coming out of the call center and contact center industry, some good perspective on how the whole ecosystem works. We're getting more focused on competing with the genesis and the avayas and the ciscos. So that's really what's exciting is the potential. And they have a shiny new platform to sell. It is not like we're working off old technology. They're working with the latest and greatest of technology. Now we have great referencable customers there for the enterprise. So if you're a sales rep, you've got a new platform, a referencable customer, you've got the future of a contact center and how the industry's going to play out and you've got resources behind you. So that's what they're excited about.

Okay, great. Thank you.

Your next question comes from the line of Glenn Mattson. Your line is open.

All right. Rob, you just threw a number out. 40% of a call center. What are you seeing, what make you say that type of figure? It has been early for T-mobile but what kind of early uptick do you see?

We can see that if we look at consumer behavior and demand for messaging and what we could do if we're fully scaled, we can see that the consumers, the behavior, they've moved. All of us are messaging our friends and family. When we launched with T-mobile, it was like boom, instantly we can see the demand for messaging and how it can impact voice over the long-term. So if I look five years out and that's what this is all about is there is a pretty high probability that we're going to be messaging with every brand. We're going to be instead picking up the phone and calling, we're going to message like we do our friends and family. That behavior is changing. We're seeing it not only with T-mobile but other customers we have live on messaging. We're in a good place with that. That's what we see.

Second question, there's a lot of moving parts. I guess this is a new goal post -- new kind of line out there-- for conversion and by the second half of 2017-- first half of 2017. Can you guys say -- I'm guessing you probably don't want to talk to guidance in 2017 but can you give any indication as far as directionally. Would you expect to see revenue growth in 2017 even given all of these moving parts?

Glenn, you're right. We're not giving guidance for 2017. What's important to us is getting as many customers on the LiveEngage platform as possible. We do know that not all customers are going to make the journey. We also know that in the back half of 2017, we've incentivized our sales guys to focus on migration which has an impact on upsells to existing customers. So from our perspective, we're looking to our vision of where we want our customers to go and where we want to be with our customers around messaging. So that's the goal. The goal is to get all of our customers on the LiveEngage as quickly as possible and then take advantage of the messaging opportunity. In the event we had with T-mobile is very exciting to -- 40 of our top customers, 80 executives that were there. That's the goal and focus that we have right now.

You mention that twice now that not everyone's going to come over. Have you gotten further along the path on the conversations? do you have a clear insight now as to just what the maximum conversion rate is going to wind up looking like?

Again, we have estimates that we have internally that we use. Nothing I'm comfortable sharing externally but we have -- over on the LiveEngage platform that is a good data point. Another data point is we've moved our largest customer on to the LiveEngage platform. That shows you that our largest customer moved over on the enterprise scale. We have line of sight into a total of 73% of customers that are in the process of moving or have moved. So we're getting pretty far along the map. What we want to do is get another quarter under our belt in the fourth quarter. We have a lot of activity happening into this fourth quarter and even into early January. As Rob talked about in the script, we put a line in place that our goal is to be complete with the migration by the end of the first half of 2017. I think we're being transparent and trying to get to that end game of getting customers on the LIveEngage platform as quickly as we possibly can.

Okay. I guess last question, can you talk -- gross margin was better than expected this quarter. Anything there to read into that?

Yeah. What we talked about in the past is that we want to improve our margins and this is the first step in that direction. It is not all directly correlated to the moving customers over to LiveEngage. As we get customers on to LiveEngage, we know it is a more efficient platform. It doesn't cost us as much to support. We know we don't get all of the savings into our gross margin until we shut down the legacy platform but we've been able to make some strides in moving the gross margin. We talked about those margins. We're starting to deliver that in the gross margin perspective.

I forget. If you said what it would be once everyone is converted, what roughly gross margins could be?

Back to historical averages which is in the 75% to 76% range.

Okay, thanks.

Your next question comes from the line of Mike Latimore. Your line is open.

Yes, hi, thanks. On the T-mobile customer, 65 million subscribers. Is there a sub set of those that are using your service today and if so, what percent of those total subs might be able to access it at some point?

Yeah, we're on a few million devices right now. I can't give you -- it is their numbers. We're scaling that. So we're in a pretty large selection. We're on all of the iphones today and some of the androids. We're moving from there. So that's where we are with it. We have a lot of interactions happening. And demand -- they basically launched it. If you're a T-mobile customer, you can see it off their app. There is a little icon on the front. And boom, there's not even a promotion behind it. It just went out. And then we have a tremendous amount of demand for it. A lot of great reviews in all of the app stores around it. And so we've been running since June 1st is when we went live. So we want to wait and get a lot of data under our belt and how it is performing and once again, they were nice enough to have an industry event there with us. Our industry event. Because they wanted to show what they were doing and how impressive the results are. So yeah, we're at a point where we have a lot of scale.

Great. And then you talk about the roughly 10%, 11% growth in LiveEngage use year-over-year. Is that kind of also a good ballpark to think about once a customer's migrated over, we see that kind of use. Is that use largely tied to e-commerce growth? what do you think?

No. The usage is the ability to use content so greater than 25% are using more than just chat. So they're using content targeting, mobile interactions goes up considerably because of a platform built from mobile. All of that drives more interactions because you're getting more -- more interactions with the base obviously. Sometimes some of their traffic is growing. It is not as much as used to be in the past. Traffic is very stable on most websites. There may be a little bit of growth but it is mostly about going after a larger group of consumers then focused on mobile. 60% of visitors to a website are mobile. So we're focused on getting those consumers on to LiveEngage.

With the migrations, when a customer migrates, do they typically kind of -- once they've started they clearly end up migrating everything to you guys? Or are you assuming that some customers don't migrate? maybe they migrate a portion of their traffic over and kind of leave the rest on something else.

No. We haven't seen that. It is pretty hard to split the traffic when you're dealing with -- because you need to tag the whole site. We've got to look at the whole site. We've had nobody who split between one platform or another. So that's not the way -- once they go live on one business unit, we go live. Sometimes they start with a smaller business unit and then they'll migrate it. We go pretty quickly on that.

You said you expect 50% of revenue to be migrated over by year end. What's the profile like of the remaining 50%, do you feel like the turn risk there is higher or lower versus the first 50%?

I think we have 73% of the revenue right now that's line of sight as in it's migrating. Some of it went in October, it didn't go in last quarter. Some of the line of businesses that went so there's a little bit more than 20% that we are just finalizing dates and time frame in the first half of the year and so but we feel pretty good about where we are at the migrations as an organization. So for in many ways it's not behind us but we sort of booked back of it in many ways because we've migrated our largest most difficult customers in many cases the most complicated implementations in the past were migrated and we're seeing good results once again in the platform.

So we feel really good about - I think the migrations for us is it's getting into the rear view mirror. It's not there obviously but it's starting to enter our rear view mirror and at the same time I think it's important to note that we launched the strategy. So although it's not like we migrated to chat although we did we also migrated and then getting them live on mobile and mobile messaging. And so we're able to do sort of these two big things at one time and execute on them quite well which I think is important to set us up for 2017, 2018, 2019,2020.

Thanks.

Your next question comes from the line of Jeff Van Rhee. Your line is open.

Great. Thanks. Most of what I need has already been answered. Just two remaining. Dan, you had talked about the $5 million in expenses that you had in this current year to accelerate the migration timeline. Just refresh me what was that -- what was in there? Just a little more color on those expenses.

Yep. So there was three main components. First was outsourcing. We used some outsourced resources to help us set up the accounts in the background to support our professional service and salespeople. Second biggest piece was associated with -- just two. The second was associated with compensation aligned to certain groups of people to get migrations accelerated and done as quickly as possible.

So as you go into 2017 and obviously now with T-mobile and some of the -- I think you said your largest migrated and a few others that are large. As you get into higher frequency of the very large customers, what is it about 2017 that doesn't require the outsourcing, particularly I'm thinking about tagging pages and some of the challenges of a migration. Just help me -- you did it this year and not in 2017.

So we'll have some of those costs go we go into 2017 as we complete the migration but it won't be as much. That's the first statement. The second statement is we're heavy into it right now moving our large customers. And again, it is not just about tagging pages. It is also about getting them set up as an instant so they can actually see and feel and touch their data while they're going through the migration. So the $5 million is happening in 2016. Some of the expenses, not all, will go into 2017 . We're moving pretty fast from our perspective on the migrations, getting those large customers over on to the LiveEngage platform.

Okay. Congrats on T-mobile. Thanks for taking my questions.

Your next question comes from the line of Craig Nankervis Your line is open.

Thanks. Good afternoon. Just a question on the complexion of those migrations yet to come, the remaining 20% or so. Is that complexion much different than what's already happened in the past few quarters? is there any way you can talk about the flavor of that?

No. They're going to be similar. The very complex ones we've done. There are some others that are complex. We've done the most complex. The largest. The one with the most business units. We've kind of done pretty much all of the ones with the highest volume, high volume in mobile. So we've cut across a lot of them right now. We feel very good about migrating the rest of them over and that's what we're focused on. I believe there will be some that don't move for certain reasons. So we'll have to see where that plays out. We're very focused. As I said, a couple of minutes ago, we've got this great platform but the future of our platform is focused on creating more opportunities like T-mobile. And we're doing that. And if you look at just the industry as a whole, there's a lot of movement in our space right now around messaging.

No one has gotten an enterprise customer live with millions of consumers. It is all about small stuff, even the facebook stuff they're working on-- there mid market small business for today. Even when the enterprise use it, it is not scaled operation. It is small use cases. So we're in a very big hunt to win at this. And we've got the first out. We've got a platform that supports it. The migrations -- we're probably one step ahead of you guys a little bit, because we migrated all of the complex customers, the biggest ones. We feel very good about just getting everyone -- everyone who needs to convert across the line but we're also focused on obviously getting them up on messaging. The ones that came through the T-mobile summit there, they're very interested in messaging. These are very large brands, the largest banks and telcos. We're very focused on getting them. That's what's going to win the day here in the end. The migrations are one thing. It is about once we migrate them, we get them on to the messaging framework. Our goal is to be that central place for an enterprise to plug in and do messaging on their own apps, through search, through facebook and any other place that will happen. I think we've got a good head start but it's going to heat up pretty quick.

Thanks for that color. The T-mobile situation -- you mention -- I think you mentioned there's no promotion. That the capability essentially just appeared and that is driving the uptake. Do you know -- is there a plan for T-mobile to be more -- I don't know -- to be more noisy about it? do they plan to promote this in a particular way as a strategy for that? how does -- can you share anything about how T-mobile expects to expand the user base for this?

Yeah. I can't talk about what they're going to do because it is their -- once again, the demand was really significant without much promotion because the demand in consumers, not to call and do what they're normally doing. That demand continues to go. As we get on more devices and we're accessing more consumers. So the demand in itself is far greater than we ever expected. When we launched an hour later, we were flooded with messages. So there's a significant demand in the market and that's driving what we're doing. There's a lot of plans. I can't speak to what they want to do.

Do you think that the initial demand even surprised T-mobile?

Ya know, when you're the first to do something for both of us, I think we just -- you don't know.

Right.

When you're the first to do something for both of us, I think we just - you don't know and I think it is a pretty proud day. I've always felt that our company is - we invented chat in 1997 and built the company on it and we planted the next flag in an industry that trying-- lot of talk --and I haven't seen a lot of action, except for what we're doing. Everyone is talking about messaging with your facebook whatever but we saw. It was exciting day even for me to see like you built this thing but it's part of the vision from three years off of a platform that's been rolled out. And you see it working like - if the consumers love it, it goes, if they don't love it, you're done, like the adopted chat on a certain level. And so we've just seen some great adoption, and I know for us as a company, we're just pretty excited to be in the middle of it and to be leading it. And now we are going to get more brands and the enterprise is where I think the win is because there will be large contact centers. And we're going after that hard and good to have a customer and we have more than T-Mobile with us.

Thanks for the color.

Thank you.

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

Thank you for Q3 2016 call. And on election night, get out to vote. Have a good night, guys. Thank you very much.

Thank you everyone.

Operator this concludes today's conference call. You may now disconnect.