LivePerson Inc (LPSN) 2017 Q3 法說會逐字稿

Good day

-- 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.

I will now turn the meeting over to Robert LoCascio, CEO and Founder of LivePerson.

Thanks, Dan, and thank you for joining LivePerson's third quarter conference call. We're excited to announce the LivePerson return to year-over-year revenue growth in the third quarter, which is two quarters ahead of schedule. This is a significant milestone for LivePerson and coincides with the completion of our transition to the LiveEngage platform. We are also once again raising revenue guidance for 2017.

For the past year, we've been highlighting the leading indicators of our return to growth. These are the enterprise wins on messaging that denote our steady transformation of the customer care industry, and the compelling metrics for LiveEngage around platform adoption, same customer usage, and dollar retention. With a vast majority of our revenue on LiveEngage in the third quarter, these leading indicators of LivePerson momentum were clearly reflected in our reported financial results. Furthermore, we demonstrated continued traction with additional market penetration and strong platform metrics.

Several key customer wins in the third quarter characterized the momentum we are seeing. We signed a 7-figure, 3-year deal with one of the top 3 diversified insurance trends in the US. This leading brand is deploying LiveEngage enterprise-wide, replacing a competitive solution from a large ERP vendor. The company chose LiveEngage to deliver a best-in-class digital customer experience that better competes with the new generation of online insurance providers.

We also won our first two lines of business at a Fortune 500 financial services institution that ranks as one of the top investment banks in the world. After only a four-month sale cycle, we closed a 6-figure, 2-year deal. The rapid selection process is a testament to our position as an industry leader, as we clearly demonstrated our unique expertise and superior capabilities of the LiveEngage platform. In addition, LivePerson signed expansions with two of the top three banks in Australia, and brought the first bank in the region live on in-app messaging.

Of course, our key wins extend beyond financial services and also include a multinational telecommunications company, one of the world's leading fashion brands, with approximately 500 locations, one of the premier music subscription services, and a global luxury jewelry brand. For example, in August, one of APAC's leading online travel sites went live with a messaging, both in-app and through-Facebook messenger. The company, which had previously been on LivePerson with chat, has now expanded into service as well as messaging, driving a greater than 50% lift in usage.

The power of LiveEngage continues to be reflected not only in new customer wins, but also in the key growth metrics we are seeing across the customer base. Mobile is growing rapidly, accounting for 40% of our interactions in the third quarter. This is up from 25% just a year ago, and less than 10% before LiveEngage. Approximately one-third of our customers are using more than one interaction type on the platform.

Same customer interactions continue to grow at greater than 10% year-over-year, and the dollar retention rate for enterprise and mid-market customers continues to be at 100%-plus.

As we all know from our daily behavior, communication preferences have shifted over the last several years, from talking on a mobile device to messaging, be it through SMS, Messenger, or any of the social messaging tools. We recognized the shift years ago, and that is why LivePerson built LiveEngage, to seamlessly integrating messaging, AI, automated bots, and human agents on a single platform. LiveEngage aligns businesses to consumers' behavior, replacing antiquated voice with a superior messaging solution that can drive higher customer satisfaction and more than two times the productivity of voice. This is an extraordinary win for a large enterprise, offering the potential of tens if not hundreds of millions of dollars in savings.

We went live with our first enterprise customer for messaging last June, and now have numerous large enterprise scaled on messaging and AI across multiple industries around the globe. Each win is a direct attack on the legacy voice and IVR infrastructure that is in place for decades. These competitors have relied on this old infrastructure as a cash cow, and I expect them to respond like they did with chat in the past by making messaging a feature versus a transformational platform. But as yet, we haven't seen any of these legacy IVR companies or contact center vendors do anything meaningful.

This is why the leading brands make the leap to messaging and bots and AI. They're using LivePerson and our technology and our expertise around how to scale customer service, sales deployments, and even now, retail. We have started to enter the retail world in doing messaging out of retail locations.

We've showcased our industry leadership over the past year by holding several groundbreaking customer summits, built around large enterprises that successfully deployed messaging and AI scale. LivePerson held two of these invitation-only elite customer events in October, the first in Edinburgh, Scotland, centered on the amazing outcomes that a leading European telco realized by introducing messaging as a tool for deflecting calls out of the IVR.

Over the course of a few months, this enterprise shifted millions of calls, approximately 30% of their call volume, from voice to messaging. This is actually a really big, I think, hallmark in the industry. There was never really an alternative to voice, and we're showing that we can deflect a very large percentage of volume from calls and straight out of the IVR. And not only do consumers take up with messaging quickly, but this telco, they basically cut their cost in half over what they would do with voice.

At the same conference, we demystified bots and AI. We have proven firsthand how AI-powered messaging can deliver transformative results in care, sales, and marketing, and this has become a must-have component of our enterprise wins. The key to success is through optimizing and doing integration at enterprise-grade levels using our conversational interface, and that's how LiveEngage was built. We deliver on the platform tools to do optimization, scale, bot readiness, to working workflows analytics, KPIs, sentiment measurement with our MCS tool, and even reporting, obviously, and we do with our [PS] training resources with the bots.

Edinburgh was an amazing event that included participation from AI and bot leaders such as IBM Watson, who we partnered with to launch LiveEngage with Watson, the first global enterprise scale out-of-the-box integration with Watson's bots and human agents, and other industry thought leaders, including Microsoft. More than 100 executives walked away from the summit with a blueprint on how they could go back to their organizations and deliver powerful results by deploying automated and human assistance at scale via messaging.

Our second event included exclusive lists of senior executives from several of the world's largest banks, telcos, and retailers. This event focused on how these industry leaders can leverage the upcoming launch of a new messaging channel that will radically improve how they connect with their consumers.

We are excited by the rapid progress we have made so far in 2017, as we have focused on selling and improving the productivity (inaudible) organization. The majority of our wins in 2017 were tied to customers who attended one or more of our summits over the past year, and we'll continue to invest in these events as they are becoming a great tool for building our sales pipeline. And with the coming quarters, we will also put additional resources towards developing the LiveEngage ecosystem, working with AI and bot technology partners as well as other messaging thought leaders.

Similarly, we are increasing (inaudible) spend to deliver on a robust messaging and AI roadmap that has been informed by all the learnings that we have come from managing scale enterprise deployments for the past year. These investments will spur even more differentiation and customer benefit in the years to come. With each new customer that ramps up on messaging, we are proving to the world that there is finally a true alternative to voice, one that delivers a superior customer experience and measurable increases in productivity. This is an exciting time to be at LivePerson. I'm extremely proud of the transformation we are driving.

Finally, I want to comment on the announced change in leadership of our CFO, Dan Murphy. As stated in our earnings release, Dan will be leaving LivePerson early next year, and after more than 6.5 years of service. Dan has played a instrumental role in getting the company to its new chapter of its growth story. He has developed a globally scalable infrastructure, top notch financial organization, he is leaving us in a solid capital position on which to build our future.

Dan will be working with me and the board to effect an orderly transition and assist in identifying a successor. I want to thank Dan for all of the contributions to LivePerson and wish him all the best on the next journey.

Before I turn the call over to Dan, I just wanted to also make our annual announcement of our FeedingNYC program, where November 21, here in New York, we'll be feeding over 4,000 families who live in shelters in the Metro New York area. If you'd like to participate or make a donation, please go to feedingnyc.org's website.

I'll now turn the call over to Dan, who will discuss our third quarter results and outlook in more detail. Dan?

Thanks, Rob. I want to share my appreciation for the amazing opportunities that LivePerson has presented these past 6 years. As I look forward to new challenges, I am confident that I am leaving LivePerson with a solid foundation for continued success. LivePerson's transition to LiveEngage is complete. We are growing again and we've established a leading position in a greenfield market with enormous potential.

This is the perfect time to pass the baton to someone who will see the company through the next chapter. I'll be working alongside Rob, the board, and our finance team to effect an orderly transition. I want to thank Rob, all our employees, our customers, our investors, and our analysts. This has been tremendously rewarding experience.

Taking a look at the third quarter, we once again demonstrated solid execution. Our renewed focus on selling, along with solid adoption trends for LiveEngage, helped us return to year-over-year growth earlier than we had previously anticipated, LivePerson revenue exceeded our guidance for the third quarter, and we are once again raising our 2017 outlook. We continued to gain market share in messaging and AI, with key wins across our target list of customers and prospects.

Trailing 12-month average revenue per enterprise and mid-market customer set, a new record of greater than $215,000, up from approximately $205,000 reported in the second quarter. We successfully completed our transition to LiveEngage, as we guided at the start of 2017.

I'll now review our third quarter operating results. Total revenue of $56.5 million was above our guidance range and consisted of B2B revenue of $52.1 million and consumer revenue of $4.4 million. In the quarter, we delivered $1.5 million of revenue upside versus our issued guidance range of $54 million to $55 million. Similar to the second quarter, approximately $1 million of the upside stems from better-than-forecasted non-recurring revenue. We typically see a lift in pay-for-performance revenue during the fourth quarter, holiday season, and this year there was some [pull-for] to that spend into the third quarter. The other half a million of upside versus guidance was tied to improve the current revenue, primarily from lower-than-expected attrition as we ended our transition to LiveEngage

We signed 76 deals in the third quarter of 2017 as compared to 83 in the third quarter of 2016. New customer-signed deals increased from 30, to 30 from 28. The overall low deal count reflects our LiveEngage growth strategy, which is to focus on a targeted list of large global enterprises where we have the opportunity to drive transformation. Our strategy is working, as reflected in the rising ARPU and average selling price for new contracts.

For the trailing 12 months ended September 30, 2017, the dollar retention rate for customers on LiveEngage exceeded 100%. This measure takes into account the full impact of upsells, down-sells, renewals and cancellations from our existing customer base on LiveEngage. The B2B revenue breakdown by vertical was consumer retail at 26%; financial services at 18%; telecommunications at 18%; auto at 12%; technology at 8%; and other at 18%.

International operations accounted for approximately 37% of total revenue in the third quarter of this year, in line with the third quarter of 2016.

Third quarter GAAP net loss per share of $0.02, adjusted net income per share of $0.05, and adjusted EBITDA per share of $0.13, were all within our previously issued guidance ranges. The GAAP net loss does include $1.6 million of non-recurring litigation costs.

Gross margin increased 150 basis points to 74.3% in the third quarter, from 72.8% a year ago. This improvement primarily reflects the reduction in costs for our legacy operations now that we have transitioned to LiveEngage.

Excluding non-recurring and restructuring charges, total LivePerson third quarter operating expenses decreased $1.5 million year-over-year.

At the end of the third quarter, cash on hand, including restricted cash, was $55.8 million or $1.00 per share. Deferred revenue increased 35% in the third quarter to $35.7 million from $26.5 million a year ago.

LivePerson used cash from operations of $1.8 million in the third quarter, and spent $5.2 million on capital expenditures.

Turning your attention to our outlook, we are raising revenue guidance for 2017 to a range of $217.5 million to $218.5 million from previously issued guidance of $213 million to $216 million, and initial 2017 guidance of $201 million to $209 million. The combination of healthy platform growth metrics and solid execution as we renewed our focus on selling has contributed to faster-than-expected revenue growth. With strong proof points that LiveEngage is fulfilling our vision, we are taking a step to extend our market lead and propel LivePerson on a path toward returning to historical growth rates.

These steps include continuing to invest in our highly successful customer summits and adding resources to long-term growth drivers such as channel partnerships and continued enhancement of our AI and bots on LiveEngage. Even as we increased these investments in 2017, we are on target to meet our goal and holding margins flat with 2016.

With the transition of LiveEngage complete, we anticipate a final restructuring charge of approximately 600,000 in the fourth quarter. Our full-year 2017 view for total restructuring and severance charges of $2.8 million to $3 million is unchanged. We also expect non-recurring legal expenses tied to IP litigation of $1.5 million in the fourth quarter, which is in line with previous quarters in 2017.

I will now review our detailed financial expectations. For the fourth quarter of 2017, we expect revenue of $56 million to $57 million; GAAP net loss per share of $0.10 to $0.09; adjusted net income per share of zero to $0.01; and adjusted EBITDA of $3.5 million to $3.9 million or $0.06 to $0.07 per share.

For the full year 2017, our expectations are as follows: revenue of $217.5 million to $218.5 million; GAAP net loss per share of $0.36 to $0.35 -- this includes $0.21 per share for non-recurring and restructuring charges; adjusted net income per share of $0.07 to $0.08; and adjusted EBITDA of $18 million to $18.4 million or $0.31 to $0.32 per share.

Furthermore, as a percent of revenue for the year, excluding non-recurring restructuring and litigation charges, we anticipate gross profit to be approximately 73.5%; sales and marketing, 41.5%; G&A, 16%; and R&D to be 18.5%.

Please refer to LivePerson's earning release issued earlier today for additional details on our full-year 2017 assumptions.

We have also published a supplemental presentation that reviews key points from the earnings call on the Investor Relations section of the company's website.

We entered 2017 with four priorities: return to our focus on selling, build on our lead in customer care and mobile messaging, complete the transition to LiveEngage, and maintain our profit margins. Year to date, LivePerson has executed on plan or better than plan on each of these objectives. These achievements, paired with normalizing attrition, a consistent 100%-plus LiveEngage dollar retention rate, and improved revenue predictability provide a strong foundation for our next chapter of growth.

Growth will be fueled by adoption of messaging and AI in existing customers, expanding our new customer pipeline through our customer events and partnerships, and extending our product lead through innovation. Across LivePerson, our teams are aligned to these levers, and we look forward to reporting on our progress in future quarters.

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

(Operator Instructions) First question comes from the line of Richard Baldry of Roth Capital.

Could you talk about any vertical market particular strengths you're seeing for LiveEngage, maybe on the messaging side? It seemed like as a percent of their contribution, that the tech at 8% is below what I would have thought. I would have thought they'd been earlier adopters, so maybe if you can go over that. And then also, what you think the usage impact in fourth quarter. I know historically, on the prior platform, the usage really drove in incremental revenues in the fourth quarter due to holiday seasonality. Is that similar under the newer model and how should we think about that?

So on vertical side, the big verticals that we're going after is telco banking and broadband providers, and some travel. So in telco, we've got basically the leading telcos in each of the areas or countries around the world. They were the first to go live because they can see the messaging and how it's being used on device with their consumers, and now banking has followed and then we've got broadband providers in each area.

So it's following along what we previously did, and there's some retail also now that's coming, but those are the biggest areas that we have in messaging today because strategically, they've got the largest contact centers, they have the biggest expense when it comes to managing voice calls. An average telco could spend over a billion dollars a year on phone calls, so that's where the real pain point is and that's where we're focused on attacking.

So, and Rich, on the second part of your question, just around the usage portion, we had the benefit of PFP being pulled forward into Q3, and what we've historically seen in previous years on the legacy platform is that usage would increase in the fourth quarter, and specifically around PFP, and drive some additional revenue. The fact that we were able to pull some forward is a positive step in the right direction.

And the second piece, with our business model that you're seeing these days, that increase in usage does come through the P&L and you see it in our bookings number and driving and continuing to drive our increase in recurring revenue. So those are the two components that we expect when we gave the guidance for Q4.

And last thing would be, you have pulled your costs down year-over-year, has kind of sunsetted the legacy platform. Should we look at Q3 as really setting a floor now, from here forward, to support your growth in LiveEngage, that the expenses will grow sort of with the top line, or, given there is a stub restructuring cost in the fourth quarter, is there really one more level down as we exit the year and then sort of see our way higher again in 2018?

Yeah, so good question. From our perspective, we have taken some of the upside in revenue so far this year and invested it back in the business, specifically in partnerships and around AI and bots and adding more development resources to fill out the product roadmap. So as we move forward -- and customer events, sorry. And investing in customer events. So as we move forward into 2018, our goal is to continue to drive top-line growth, and so we'll continue to invest in the business in those strategic areas that'll help us drive

that top-line growth.

Thanks, and good luck, Dan.

Next question comes from the line of Koji Ikeda.

Just want to say congrats on the retirement news, Dan, and wish you well on your next adventure, and thank you for taking my questions. I've just got a big-picture question for Rob or Dan. Do you think that enterprises out there have a full grasp on really how to engage millennials? And now it's just really a question of technology execution. And do you think -- there is such a big focus on millennials right now, but to really think about it, Generation Z is coming up pretty quickly right behind them. I mean, does this generation, in your experience, have a different set of demands, even from the millennials, that enterprises are going to have to think about?

Yeah, so the millennial population, which is now the largest segment in the US -- I think it's 75 million or 78 million people -- the Baby Boomers now, as of last year, are reducing in size. And basically, the influence of this group, because they also have buying power, is significant. So when we look at how they're communicating with each other, even beyond (inaudible), but they are engaging in messaging, they're engaging in content in a different way. They obviously engage in retail in a different way, and we see that with how -- the impact on the retail world we live in. They're not going to big-box retailers.

So that's been influencing us for a while. Now what's happening is that they have buying power, and significant buying power, and that's making the brands just face off to them in a different way, and that's why our platform is sort of instrumental in a digital transformation. So we're not selling a channel of communication, we're selling a way to connect with consumers in a certain way that they're doing in their normal lives. So I think they have such a tremendous influence today, and we see it when we're with our businesses, our customers, they're definitely obviously been influencing them for many years and there's change that's got to happen in order to service that group of consumers.

Got it, and maybe a question for Dan. Looking at your trailing 12-month ARPU here, looks like it came in about $215,000 in the quarter. It's been picking up here for the past, it looks like 6, 7 quarters, and I guess this is one of the biggest jumps that we've seen in a while. What are some of the levers that are playing into that growth? Is it more from bigger customers signing onto the platform, or are you really seeing a better monetization of the install base? Or is it really just a healthy mix of both?

I think it's a healthy mix of both. I mean, as we've talked about, our strategy is to go after the large enterprise customers, and really, they've got access to a lot of consumers and they've got access to big care centers, and they've got to improve their CSAT scores and consumer satisfaction. So I think it's a combination of the two, and we're happy that the trailing 12-month metric is going in the right direction, and it's exciting to see.

Congrats again on the news, Dan, and thanks for taking my question.

Next question comes from the line of Jeff Van Rhee.

Congrats, guys. Numbers look really good. Great growth there. I guess just several questions. First, with respect to bookings, I know you don't provide a number, but can you characterize bookings this quarter maybe versus last quarter or last few quarters? What stands out? Did you see notable acceleration in the bookings? We can see a little bit on the ARPU side, but any color on bookings?

Yeah, I mean, from our perspective, Jeff, they've been where we expected them to be if not slightly higher, as you can see in the current run rate. Some of that was from -- in the second quarter from better-than-expected bookings, and then the third quarter, from a recurring run rate perspective, less-than-expected attrition related to migrating customers over.

But our goal is still the same. As we stated before, we're going after the large enterprise customers and we think there's a big opportunity there, and you can see that in our ARPU starting to pick up in the right direction.

And as you think about 2018, should we assume that all revenue upside goes back into the business, so, namely, don't count on leverage but also don't assume or see scenarios where maybe the margin comes down? Just a little more color on margins, if you would.

So, good question. We're not giving the bill of directions for 2018, but I think in 2017 we've taken our dollars and put them back into the customer events. And as Rob stated in his prepared remarks, those customer events have been strong from a pipeline perspective as well as helping up with bookings. And many of our deals that are closed have been related to those customer events, and they are high-end events focused on senior-level executives at these large enterprises. So we'll continue to invest in those, and as I stated in my prepared remarks, we've got a very strong product roadmap and we'll continue to invest in the products as we continue to lead the market with LiveEngage and messaging and AI and bots.

Yeah, and on the product side, Jeff, when we go live with a customer, we see very quickly anywhere from 20 to 40 product requests. So the product, there's so much more to do with it even though there's a lot in it -- it took a couple years to build it -- but we're learning so much, and so we still need to build a tremendous amount on the platform to allow us to scale.

And we talked about this telco that held the event in Edinburgh. They're a recent customer, and we were able to get 30% out of their IVR, a lot of that's because there's a year's worth of product roadmap that came from finding our -- going live a year ago with our first customer. So we'll continue to invest in that as we accelerate growth and get more customers and satisfy their needs.

Got it. And Dan, you referenced one-time revenue this quarter and last quarter. Just a quick recap of what that was?

Yeah, so the increase from revenue this quarter was approximately $1 million of what we'll call non-recurring. We had a PFP customer that fast-forwarded some of their spend into Q3, so we did receive the benefit of some of that spend in Q3.

And last quarter, the pull-forward was?

Last quarter, so we had a portion related to professional services, and then we had some related to customers that went into overage on their billing contracts.

Okay, great. And one last one, just on sales. Thoughts at this point are along two lines. One, any preliminary thoughts around sales hiring for 2018? And second, you've been in outbound sales mode now for enough time to have some semblance of productivity and ramp, if you could give some color there?

Yeah, right now we have a sales team that's pretty focused on a very finite group of customers, so we'll probably add, obviously, more people, because there'll be more demand. But we have the group we need size-wise to go after this group of enterprises that can just change the game. And as I think I said before, I believe our customers could be 10 million, 15 million, 20 million, they could be 40 million at scale a year if we're doing the work we're doing today. And so, we're keeping at a very finite group. Our top sales guys are making over a million dollars a year. And so, we want to keep this very, very expert-based, high-end sales group that's going out and doing these big deals and they're very strategic. So that's kind of where we are.

And the second question?

Outbound sales mode. From an outbound perspective, Jeff, you're right. We've been going through this year and we refocused our sales guys on selling again. In 2016, just to refresh everybody's memory, we focused them and their compensation on migration. In 2017, we focused them back on selling to new customers.

That being said, we still have some customers that had to go through the migration. So as we end 2018, and as Rob talked about, we've got a high-end sales group focused on enterprise customers, and there is some capacity in that group. And we'll continue to leverage that capacity as we move into 2018 and add heads that are necessary that have the right skillset to sell to those enterprise-level customers.

Great, okay. Thanks so much. Best of luck, Dan.

Next question comes from the line of Mark Schappel.

Congrats on the quarter, and Dan, congratulations on your retirement. Rob, just starting with you and your customer summits, they appear to be very successful. What can we expect with respect to future events in the next, say, six months or so?

We're doing about one a quarter of the big one, and then we've got some small ones in between. So we're going to continue on that path. There may be some more next year. I mean, we're working through a plan as we speak. But these events usually have about 100, 120 people, about 70 brands show up. We actually do it, we host them at a customer site or next to a customer site, so the customer can show off what they've been doing. But they're very high-end, and they're very focused on I think taking a very C-level group of people through an experience so they can understand how they can be transformation. But we'll probably accelerate the marketing from where we are because we're getting great results from it.

Great, thank you. And then on a vertical, if I recall correctly, it was down about 12% this quarter, and that kind of brings up contact at once. I was wondering, with respect to that business and product, where does that fit or not fit within the broader LiveEngage migration?

I mean, they do messaging, and there is some exciting stuff happening there. We just launched a direct-from-manufacturer to consumer messaging to sell cars, and this took place about four weeks ago. Normally when you buy a car, you're connecting with a dealer, but we've launched for the first time direct manufacturer to consumer messaging, and we've started to sell.

So I think there's a lot of stuff there. We are going to bring the businesses together now, so the (inaudible) have a lot of small business and mid-markets and then it's got the large manufacturers, we're going to put that together closer with our current SMB business, because there's a lot of overlap, and put a single leader on that group. So we are going to take sort of advantage of what we see as two pieces that could come together today.

But I expect a lot of good stuff from them in the upcoming months. Once again, they kind of shifted a little bit into seeing if they could go after these very large deals with the manufacturers. And we just went live, we got preliminary results that look pretty good. Nothing to really talk about in detail. But we should see more enterprise-type deals coming out of them and then we'll supplement that with a small business in the dealership segment.

The next question comes from the line of Mike Latimore.

You mentioned pay-for-performance. What percent of revenue is that now?

Yeah, it's in the high single digits, so in that 8% to 9% range.

And then the revenue retention continues to be very strong. To what percent of total revenue would that apply, let's say?

And you're talking about the metric on LiveEngage, the 100% greater than -- 100% on customers on LiveEngage?

Yep.

Yeah, we don't actually break out the revenue that's specifically on LiveEngage. We just talk about 95% of our revenue being on the LiveEngage platform as of the end of migration. So from our perspective, Q3 of last year when we're comparing that retention rate, we had a good number of customers on the LiveEngage platform, so where we were comparing it in Q2 where maybe there was less customers, in Q3 there's significantly more customers, especially enterprise and mid-market customers, so we've got a good vine of customers that we can make that comparison to.

And then on the 7-figure deal, did you say that was replacing an ERP system?

Yeah, one of the big, you know, like oracles of the world that -- we kind of put it under that category. And so we replaced one of their implementations with messaging. They have chat, legacy chat, from RightNow Technologies, and they're replacing legacy chat systems with messaging.

And then was that 7-figure per year or more just over 3 years or whatever you said?

Over 3 years.

Next question comes from the line of Peter Levine.

Just (inaudible) on the sales. With this new strategy, can you maybe quantify changes to the pipeline's sales cycles, if you're willing to maybe break out the bookings, percentage of those bookings now as enterprise, if you're willing to give that.

Yeah, so we don't break out the bookings between enterprise and mid-market, but historically our bookings have been 75% to existing customers and 25% to 30% to new customers, and we can tell you that that's been pretty consistent from quarter to quarter.

As far as pipeline is concerned, one of the goals of our investments in these customer events and customer summits is around growing that pipeline. So these aren't meetings or events, customer summits, just for existing customers. They're also for prospects, and it's very valuable for those prospects to have the opportunity to talk to existing customers about how they think about the world, some of the hurdles that they had to go through in their own business to go live on messaging or AI or bots. But it's been helpful in building the pipeline and it's definitely been helpful in closing customer contracts.

Then with -- I know the migration came to an end, so can you talk about any new product areas that you're focused on, maybe with the product roadmap or your M&A appetite entering 2018?

On the cognitive side of what we call bots -- the reality is it's automation -- is where we have a lot of focus. There's two types of agents, there's an automated agent and a live agent. And so, we have a lot of focus on building those things. So there are pieces of technology we've built, like a greeter bot, concierge bots, agent assist bots, then we're using things like Watson and other bot makers for some basic NLU/NLP processing. I think we're inquisitive in those areas, because I think it's part of our core strategy is to provide an agent, so we manage agents' lives, we don't supply the live agents. That's our customers who really manage them, but the bot is something we can actually manage and own on our platform.

And every implementation on messaging now is going out with automation in it, so that's an important key aspect. And after a year of doing this, we've kind of demystified what AI is in our world, in the care world, and how it works and how you implement it and how you get, like we have customers that have 60% containment of questions, of intents, get it contained in messaging and never go out to a voice call. So we've kind of figured it out for our world and demystified it, and we know what we need so we're spending a fair amount of time there.

We're also spending a fair amount of time on things around operations and scale, because we're talking about thousands of agents and bots that run on our platform. And the third big part is we built an ecosystem where other technology providers can get into our platform and implement their technologies in there around bots AI, it could be other types of messaging units like video, voice. And so, we need to build out a better way to service those smaller startups and put them in our secure environment so they can scale with our customers.

One of the things we're seeing is that I think our customers, they want to write one check to one company to get their bots and their live agents, and I think that's an opportunity. They've been approached by many companies around, all these different bots and AI technologies. They've been playing with a lot of it, a lot of it with a lack of success. But I believe that there's an opportunity just to get one single check written that we have a platform that rides all that and will bring that technology to the game, and that's a big opportunity going into 2018.

And probably one for Dan. I'm not sure how far along you are in your assessment of implementing ASC 606 for next year, but maybe you can give us some highlights of what you think the impact of the model will look like.

First of all, thanks for joining the call, and appreciate it. I know this is your first call. So on 606, so we've been going through the process of looking at 606, and from a revenue recognition standpoint we're still going through with our auditors. I don't think it'll have an impact, or a minimal impact if any, but we're still going through that assessment and have done so with our audit committee and our auditors, but I don't expect any major impact.

There are no audio questions at this time.

Okay, thank you for joining us on the Q3 2017 call, and we will see you next quarter.

Thanks, everybody.