LivePerson - Earnings Call - Q3 2016

Transcript

Speaker 0

Good afternoon. My name is Sarah, and I'll be your conference operator today. At this time, I would like to welcome everyone to the LivePerson's Third Quarter twenty sixteen Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

You. On the call today are LivePerson's Founder and CEO, Rob LoCascio and CFO, Dan Murphy. You may begin.

Speaker 1

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, in the 10 Ks and 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'll turn over the call to Robert LoCascio. Thanks, Dan, and thanks for joining us LivePerson's third quarter twenty sixteen 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 efficiency to contact centers across the globe and a 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. The 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 era. 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 seminal industry summit on business messaging that was hosted on-site by T Mobile, our first flagship messaging customer. Boasting 69,000,000 consumers, T Mobile is the third largest and the fastest growing mobile communications company in The United States. They are breaking the mold on how to build a powerful brand and a valued customer experience, and they're truly aligned to the vision of enabling consumers to connect with the brand on their own terms at any time on any device. 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 80 senior leaders from more than 40 of the world's largest consumer facing brands, majority of which are already live person customers, spanning the telco, financial services, retail, travel and hospitality and technology industries. The brands collectively reach about 3,000,000,000 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 capabilities to support messaging conversations that originate from mobile search. With LiveEngage, large enterprise can intelligently manage, analyze port on these messages at scale. LivePerson is supporting approximately zero five dozen customers with the capability, including Kia Motors and also T Mobile. This release underscores to accelerate the dramatic consumer shift towards mobile messaging as a preferred way to communicate and connect with brands in the same way that they use messaging to talk to each other through like Facebook or WhatsApp. Our messaging summit would not have been possible at the support of an industry thought leader and partner and customer with T Mobile.

The company is not just talking about delivering superior customer service but actually executing on it. T Mobile is now using LiveEngage to message with consumers through its own branded app, search, Facebook Messenger, SMS and now on the web. This is the power of to enable leading brands to manage all their digital connections with the consumer regardless of the channel or device in which they originate. This win is truly illustrating the paradigm shift we are pursuing. Our platform enables brands to provide a better experience and to build stronger relationships with all of their consumers, not just those on the web.

T Mobile understood the value of this proposition and chose to deploy LiveEngage across millions of devices. We are building on our success at T Mobile North Market by launching messaging with other major brands in additional geographies. In 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 referenceable messaging customers in each key region of the globe.

Although revenue contributions from our success in the messaging will accumulate over time through usage, the momentum we're building leaves us confident that we're on the right path. The power of our unique assets, our employees, our global customer base and our enterprise class messaging platform position LivePerson to emerge as a leader and brand to consumer messaging. The LiveEngage platform underpins not only the decision for mobile messaging but also our strategy for increased usage and operating scalability. Completing the migration of all 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 2015.

Revenue on LiveEngage is also climbing rapidly as our largest customers migrate. 37% of recurring software revenue is now on the platform, and we have line of sight into a total of 73% of revenue and including customers who already started moving businesses or business lines over today. This is up sharply from the second quarter, and we reported 24% of recurring revenue on LiveEngage and line of sight of 60%. While still small, our data sets are growing more meaningful with each branded 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, we continue to see a greater than 100% dollar renewal rate for the LiveEngage customers.

These results are directly tied to value and experience that LiveEngage provides, which fuels broader platform adoption, especially around mobile. Same customer usage is exceeding 10% year over year growth. Mobile jumps through approximately 25% of total interactions from less than 10% on legacy. Greater than 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 are focused on completing the migration in the 2017.

We anticipate ending 2016 with approximately 50% of recurring software revenue in LiveEngage and now 30% of revenue in our funnel. In fact, we 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, and visibility is crystallizing for the final 20% of revenue. Not every brand will come along for the journey, but we expect the majority to embrace the future customer care on LiveEngage. These brands will be aligned with our vision and positioned to grow at a healthy clip once the migrations are complete.

Furthermore, 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 LivePerson realizing its vision. And today, we have everything in our hands to transform an industry that has long overdue for change.

We have a powerful enterprise class platform that scales mobile intelligently and securely established relationship with hundreds of the world's leading global enterprises offering combined reach into billions of consumers first fully 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 an 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 brand to consumer messaging and knows how to deploy and support the large enterprise. Our goal will be a complete migration in the 2017, getting more brands up on our strategy and move forward to reshape the future of customer care for our company. What I want to underscore is that we have all the pieces in place. The messaging revolution and customer care is now underway. We are leading in this market, which we believe will have a tremendous potential.

With that, I will turn the call over to Dan, who will discuss our third quarter results and outlook in more detail. Dan? Thanks, Rob. As you heard in 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 Bayer reiterated.

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 also rapidly reducing the exposure to customers not yet on the platform. 37% of recurring software revenue is now in 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 are successfully executing our mobile messaging strategy. We are adding new customers and solutions, and we held a seminal event that validated the efficacy of 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 were on target to hold second half twenty sixteen 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 $14,000,000 in 2016 as compared to 2015, and total EBITDA is projected to increase in the 2016 as compared to the first half. Recall that we are achieving these savings even while investing approximately $5,000,000 in onetime costs to ensure a positive upgrade experience as our brands move to LiveEngage. With that, I will turn your attention to details in the 2016 operating results. Total revenue of $54,500,000 met the midpoint of our guidance range. LivePerson generated third quarter B2B revenue of $50,500,000 and consumer revenue of 4,000,000 Trailing twelve month average revenue per enterprise and mid market customer held steady above $200,000 for the third consecutive quarter.

We signed 83 deals in the 2016 as compared to 126 in the 2015. As we had guided, our focus on migration is temporarily limiting our effort to drive upsells from existing customers. The trailing twelve month customer renewal rate held at 83% for the third consecutive quarter, Although we expect the renewal rate to remain near this level until the migration is completed, data online engaged customers suggest that they will rebound to our target of 90 plus percent 90 plus once all 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 two eighty 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 loss per share of $0.10 and adjusted net loss per share of $05 were higher than previously issued guidance. Both GAAP net loss and adjusted net loss were impacted by reporting taxes that were approximately $04 per share or $2,200,000 higher than we had anticipated due to a larger increase in taxable income in forest jurisdictions and the implementation of a valuation allowance for one of our foreign subsidiaries. This change has no effect on cash taxes paid.

Excluding the $04 impact from the noncash 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 $08 was within our guidance range. The company held $55,400,000 of cash, including restricted cash, at the end of the third quarter as compared to $56,300,000 in June. LivePerson generated year to date cash from operations of 16,600,000 a 52% increase as compared to the $10,900,000 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 $26,500,000 in the third quarter from $10,300,000 a year ago. The company repurchased approximately 190,000 shares of stock for $1,200,000 in the third quarter. An additional $14,300,000 remained available under the share repurchase authorization. Capital expenditures totaled $2,600,000 in the third quarter. I will now review our updated guidance.

Despite an estimated incremental foreign exchange headwind of approximately $600,000 in the 2016, We are maintaining the midpoint of our previously issued 2016 guidance range. Our detailed financial expectations are as follows: For the 2016, we expect revenue of $55,800,000 to 56,800,000.0 a GAAP net loss per share of zero five dollars to $03 adjusted net profit per share of $01 to $02 and adjusted EBITDA of $5,200,000 to $5,600,000 or $09 to $0.10 per share. For the full year of 2016, our expectations are as follows: revenue of $222,500,000 to 223,500,000.0 Revenue guidance includes a negative foreign currency impact of $3,600,000 GAAP net loss per share of $0.34 to $0.32 adjusted net loss per share of $09 to $07 and adjusted EBITDA of $19,100,000 to $19,600,000 or $0.34 to $0.35 per share. We expect to pay cash taxes between $1,000,000 and $3,000,000 in 2016. Furthermore, as a percentage of revenue for the year, we anticipate gross profit to be approximately 71%, sales and marketing of 40%, G and A of 17% and R and D would be 18%.

Please refer to LivePerson's earnings release issued earlier today for details on our full year 2016 assumptions. We also have published a supplemental presentation on the Investor Relations page of our website that reviews key points from the earnings call. The financial results we are 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, mainly fewer upsells and lower customer renewal rates. These temporary impacts, however, should not overshadow the momentum we are building around LiveEngage, messaging and our efforts to transform the customer care industry.

In our view, the revenue growth that we are 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 migrations in site and solid traction in messaging underway, we will focus on improving profit margins in 2017 and subsequent years. With that, I will open the call to questions. Operator?

Speaker 0

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

Speaker 2

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

Speaker 1

So Kyle, this is the second quarter in a row. And again, it's off a small sample set, but this is the second quarter in a row where we're seeing greater than 90% customer renewal rates and greater than 100% dollar renewal rates. Right now, I'm comfortable just leaving it at greater than 100%, again, because it's a small sample size. But as we get customers more customers on the line and as we get a couple more quarters under our belt, we'll be more accurate with that information or more targeted information.

Speaker 2

Okay. That's fine. And Rob, this quarter, you announced a new go to market partnership with GoDaddy. I guess I understand it's early, but have you seen any benefits from that relationship? And has it helped your customer acquisition and lead generation prospects?

And I guess just 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?

Speaker 1

Yes. I think, honestly, as we focus on the enterprise for, LiveEngage, we're looking at more and more partners to service down in the, small business and mid market segments. So GoDaddy being one of those. Obviously, we've got integrations on the messaging side with, like, 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 very targeted selling there, but it's it's kinda it'll become more key to our strategy where we will focus much more on the enterprise size customers for the big implementations in the customer care organization and use the channel partners. Yeah.

Speaker 2

Okay. I appreciate it. Thanks.

Speaker 0

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

Speaker 3

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'd like the business to be at ending the quarter? And 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? And that's it for me. Yes.

Speaker 1

We haven't changed the rep count. It's been pretty steady for this year, but the focus, as we as we know, is is on the migration. So majority of what they're doing is working on getting their large enterprise customers and working with support teams on making sure the migrations go well and supporting them. So that's that's really what the productivity is about. We even have comp tied to the migrations because we wanna finish them up, and we're 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.

Speaker 4

Great. Thanks.

Speaker 0

And your next question comes from the line of Mark Chappell. Your line is open.

Speaker 5

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.

And that's typically not what sales reps like least like What are some of the things you're doing just to keep the sales force on board and engaged during this transition here?

Speaker 1

Well, I mean, we're kind of missing the point a little bit, which is and I talked about it, that we launched one of the first enterprise scale messaging customers in the world. We had a very big event with T Mobile out of their, outside their corporate headquarters and brought in 40 very large brands to talk about that. And so that's our strategy. And so it's not about I think comp's a pretty tactical thing to talk about today, where I think it's about we're converting customers onto the platform. The platform has messaging on it, and and we've got the first referenceable customers for it, and there's some more beyond T Mobile.

So, that's what's really driving the enthusiasm because I really see the potential as our largest customer today, which is, you know, eleven, twelve million, that there's 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. And I think we can trans transfer a large majority, not a majority, but, like, could be 40% of a a contact center's calls onto 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 out of the call center and contact center industry who have some good perspective on how the whole ecosystem works because we're getting more focused on competing with the Genesis and the Advias and the Ciscos. And so that's that's really what's exciting is the potential.

And they've got a shiny new platform to sell. So it's not like we're working off some old technology. They're working with the latest and greatest of technology, which now we have some great referenceable customers there for the enterprise. So if you're a sales rep, you kind of got a new platform, you got a referenceable customer, you got the future of a contact center and how the industry is going to play out, and you got resources behind it. So that's what they're excited about.

Speaker 5

And

Speaker 0

your next question comes from the line of Glenn Mattson. All

Speaker 1

right. Rob, so I'll bite a little bit.

Speaker 6

You just threw a number of 40% of a call center. What are you seeing? What makes you say that type of figure? And maybe it's been early for T Mobile, but what kind of early uptake have you seen?

Speaker 1

We can see that if we look at consumer behavior and demand for messaging and and what we could do as we're fully scaled, we can see that, you know, the consumers, their behavior, they've moved. Like, 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 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's a a pretty high probability that we're gonna be messaging with every brand.

You know, we're gonna be instead of picking up the phone and calling, we're gonna message like we do our friends and family. So that behavior has changed, and we're seeing it with not only T Mobile, but other customers we have live with, on messaging. So we're in a good place with that. So that's what we see. Second

Speaker 6

question. There's lot of moving parts, I guess this is kind of a new goalpost with the new kind of line out there for conversion by the 2017 sorry, 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 these moving parts?

Speaker 1

So Glenn, you're right. We're not giving guidance for 2017, but 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 migrations, which has had an impact on upsells to existing customers. So from our perspective, we're looking to our vision of where we want to be our customers are going, where we want to be with our customers around messaging.

And so that's the goal. And we can't the goal is to get all our customers on the LiveEngage as quickly as possible and then take advantage of that messaging opportunity. And the event that we had with T Mobile was very exciting to our 40 of our top customers, 80 executives that were there. And that's the goal and the focus that we have right now.

Speaker 6

And you mentioned that twice now that not everyone's going to come over, but has there been have you gotten further along the path on the conversations? And do you have a clear insight now as to just what the maximum conversion rate is going to wind up looking like?

Speaker 1

Again, we have estimates that we have internally that we use, nothing that I'm comfortable sharing externally. But we have 30 plus seven percent of our RMR over onto the LiveEngage platform. That's a good data point. Another data point is we moved our largest customer onto the LiveEngage platform. So that shows you that our largest customer moved both, and it is enterprise scale.

And we have line of sight into an additional 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 on the results in the fourth quarter. We've got a lot of activity happening in this fourth quarter and even into early January. And as Rob talked about in the script, we put a line in place that our goal is to be complete with these migrations by the end of the 2017.

So I think we're being transparent in trying to get to that endgame of getting customers on the LiveEngage platform as quickly as we possibly can.

Speaker 6

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

Speaker 1

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

Speaker 6

Well, I forget. Have you

Speaker 1

said what it would

Speaker 6

be once everyone's converted? What do

Speaker 5

you think roughly gross margins would be?

Speaker 1

We've talked to getting back to historical averages, which is in the next 75 to 76% range.

Speaker 0

Your next question comes from the line of Mike Laidmore.

Speaker 3

Yes. Hi. Thanks. On on the T Mobile customer, I guess you have 65,000,000 subscribers. Is there a a a of those that are using your service today?

And if so, like, what percent of those total subs might be able to access it at some point?

Speaker 1

Yeah. We're on a few million devices right now. Can't give you the spare numbers, and we're scaling that. So we're in a a pretty large selection. We're on all the iPhones today and some of the Androids, and we're moving from there.

So that's, that's where we are at it. So we have a lot of interactions happening. And demand just quite amazing. They basically launched it. If you're a T Mobile customer, you can see it off their app.

There's a little icon on the front. And boom. There's not even 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 the app stores around it.

And so we've been running since June 1 is when we went live. So we wanna wait and get a lot of, you know, data under our our belt and and how it's performing. And once again, they were nice enough to have a 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 yes, we're at a point where we have a lot of scale.

Speaker 3

Great. Then you talked about this roughly 10%, 11% growth in LiveEngage used year over year. I guess is that kind of also a good ballpark to think about once a customer has migrated over, we see that kind of use? And is that use largely tied to just e commerce growth? Or how do you and what do you think that up to?

Speaker 1

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 the platform is built for mobile.

So all of that drives more interactions because you're getting more, you know, more interactions with the base. Obviously, sometimes some of their traffic is growing. It's not as much as it used to be in the past. Traffic is fairly stable on most websites and maybe a little bit of growth. But it's mostly about going after a larger group of consumers and then focused on mobile.

It's about 60% of usually visitors to a website of mobile. And so we're focused on getting those consumers onto LiveEngage.

Speaker 4

Got it. And then

Speaker 3

with regard to the migrations, when a customer migrates, is the 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? If they you know, maybe they migrate a portion of their traffic over and and kind of leave the rest on something else.

Speaker 1

No. We we haven't seen that. It's it's pretty hard to split the traffic when we're dealing with because you you need to tag the whole site, and we gotta look at the whole site. So we've had nobody who's split the you know, between one platform or another. So that's that's not the way.

Once they go live on one business unit, then they just we go live over time. Sometimes they start with a smaller business unit, and then they'll migrate it, but we go pretty quickly on that.

Speaker 3

And in fact, you said you expect 50% of revenue to be migrated over by year end. What's the profile like of the other 50% the remaining 50%? Do you feel like the churn risk there is higher or lower versus the first 50%?

Speaker 1

Well, I think we have 73% of revenue right now that's line of sight as in it's migrating or 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 frames in the first half of the year. And so but we feel pretty good about where we are with the migrations as an organization.

So it's it's for us, in many ways, it's not behind us, but we sort of booked back of it in many ways. It's because we've migrated our largest, most difficult customers in many cases. The most complicated implementations from the past were migrated, and we're seeing good results once we get on the platform. So we feel really good about, I think, the migration for us is it's getting into the rearview mirror. It's not there, obviously, but it's to enter our rearview mirror.

And at the same time, you know, I think it's important to note that we launched the the strategy. So although it's not like we migrated to chat, although we did, we also migrated and then we're 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 and execute on them quite well. So, which I think is important to set us up for 2017, 2018, twenty nineteen, twenty. Fair enough.

Thanks. Thanks.

Speaker 0

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

Speaker 7

Great. Thanks. Most of what I need has already been answered. Just two remaining. Dan, you had talked about the $5,000,000 in expenses that you had in this current year to accelerate the migration time line.

Just refresh me. What was that? What was in there? What were those? Just a little more color on those expenses.

Speaker 1

Yep. So there was three main components. The first was just outsourcing. So we used some outsourced resources to help us set up the accounts in the background to support our professional service and salespeople. The second biggest piece was associated sorry, said three, but there's two.

The second biggest piece was associated with compensation aligned to certain groups of people to to get migrations accelerated and done as quickly as possible.

Speaker 7

Mhmm. So as you go into 17 and and, obviously, now with T Mobile and some of the I think you said you're your largest migrated and a few others that are obviously large. As you get into higher frequency of the very large customers, What is it about 2017 that doesn't require the outsourcing, particularly in thinking about tagging pages and and kind of some of the challenges of a migration? Just help me. You did it this year and and not in 2017.

Speaker 1

So we'll have some of those costs that do spill into 2017 as we complete the migration, but it won't be as much. That's kind of the first statement. The second statement is we're heavy into it right now, moving our large customers. And again, it's not just about tagging pages, it's also getting them set up as an instance, so they can actually see and and feel and touch their data while they're going through the migration. So, you know, the 5,000,000 is happening in '16, some of those expenses, not all of those going to '7.

But we're moving pretty fast from our perspective on the migrations, getting those large customers over onto the LiveEngage platform.

Speaker 7

Okay. Congrats on T Mobile. Thanks for taking my questions.

Speaker 1

Thanks, Patrick. I appreciate it.

Speaker 0

And your next question comes from the line of Craig McEvice. Your line is open.

Speaker 4

Thanks. Good afternoon. Just

Speaker 1

a

Speaker 4

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?

Speaker 3

No. I mean, they're going

Speaker 1

to be similar to the very complex ones we've done. There's some others that are complex, but we've done the most complex, the largest, the one with the most business units. We kind of done, you know, pretty much all the the ones with the highest volume, highest volume in mobile, web. I mean, so we we kind of cut across a lot of them right now. So we feel very good about, migrating, the rest of them over, and, and that's what we're focused on.

I I believe there'll be some that don't move for certain reasons. You know, and and so we'll have to see where that plays out. We're kind of we're we're very focused. But as I said a couple of minutes ago, we've got this great platform, but the future of that platform is focused on creating more opportunities like T Mobile. And we're doing that.

And if you look at just at the industry as a whole, there's a lot of movement in our space right now around messaging. And no one has gotten an enterprise customer live with millions of consumers. It's all about small stuff. Even the Facebook stuff they're working on, it's fairly they're mid market small business for today. Even when the enterprise uses it, it's not scaled operations.

It's small use cases. So we're we're in a very big hunt to win at this, and and we've got the first out, and we've got our platform that supports it. So the the migrations, we're probably one step ahead of you guys a little bit in that we because we migrated all these complex customers and the biggest ones, and we feel very good about just getting everyone or everyone who needs to convert across the line. And then but we're also focused on, obviously, getting them up on messaging. The ones that came to the the the T Mobile Summit, they're they're very interested in messaging, and these are very large brands, the largest banks and telcos.

And so we're very focused on getting them. That's what's gonna win the day here in the end. Yep. So so the migrations is one thing, but it's really about also once we migrate and we get them onto the the messaging framework. And we intend 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.

And I think we've got a good head start, but it's gonna heat up pretty quick.

Speaker 4

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

Speaker 1

Yes. I mean, they I can't talk about what they're going to do because that's it's their business and stuff. But we once again, the demand was really significant without much promotion because of the demand in consumers not to call and to do what they're normally doing. So that demand continues to go as we get on more devices and we're accessing more consumers. So that's just the demand in itself is far greater than we ever expected, to be honest.

When we launched an hour later, we were flooded with messages. And so there's significant demand in the market, and that's driving what we're doing. There's a lot of plans, but I can't speak to what they want to do. Do you think

Speaker 4

that the initial demand even surprised T Mobile?

Speaker 1

When you're the first to do something for both of us, I think we just you don't know. And I think it's a pretty proud day. I've always felt that our our company is always about we invented Chad in '97, built a company on it, and we planted the next flag in an industry that's trying to a lot of talk. And and I haven't seen a lot of action except for what we're doing. Everyone's talking about messaging, whether you're Facebook, whatever, but we saw it.

And it was it was an exciting day even for me to see, like, you built this thing that it's part of the vision from three years ago off of a platform that's being rolled out, and you see it working. Like, it's up to if the consumers love it, it goes. If they don't love it, you're done. Like, they adopted chat on a certain level. And so we've just seen some great adoption.

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're going to get more brands and the enterprise is where I think the win is because they have these large contact centers and we're going after that heart. And it's good to have a customer and we have more than T Mobile app that's with us.

Speaker 4

Thanks for the color.

Speaker 1

Thank you.

Speaker 0

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

Speaker 1

Thank you for Q3 twenty sixteen call. And on election night, I guess, get out the vote. So have a good night, guys. Thanks, everyone. Thank you very much.

Okay. Bye.

Speaker 0

This concludes today's conference call. You may now disconnect.