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Liveperson Inc  (NASDAQ:LPSN)
Q1 2019 Earnings Call
May. 02, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to LivePerson's First Quarter 2019 Results Conference Call. My name is Deidre and I will be your conference call operator today. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Matthew Kempler, the Company's Vice President of Investor Relations. Please go ahead, sir.

Matthew Kempler -- Vice President of Investor Relations

Thanks very much, Deirdre. Joining me on the call today is Robert LoCascio, LivePerson's Founder and CEO; and Chris Greiner, our Chief Financial Officer.

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

Also during this call, we will discuss certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release. Both this press release and supplemental slides, which include highlights of the quarter, are available in the Investor Relations section of LivePerson's website.

With that, I will turn the call over to Rob.

Robert LoCascio -- Founder and Chief Executive Officer

Thanks, Matt. Thank you for joining LivePerson's Q1 2019 earnings call. In the first quarter, LivePerson once again executed on strategy, meeting guidance for revenue and profit measures and generated 14% year-over-year growth. This growth is being fueled by a combination of going wider and deeper with existing customers and adding large new brands. The trend is most evident in our ARPU and retention metrics. Trailing 12-month average revenue per enterprise and mid-market customers set a record in the first quarter, increasing 24% year-over-year to $300,000. This marks the fourth consecutive quarter of greater than 20% growth. We raised our target range for enterprise and mid-market revenue retention to 105% to 150% (ph) in 2019. From the greater than 100% in 2018, we met with the higher target in the first quarter.

Next Wednesday LivePerson's will host an Investor Day in New York City, where we will discuss our vision for conversational commerce, our technology, competitive differentiation and long-term financial model. As a result, I'll keep today's comments focused specifically on how we are progressing on our plan to accelerate revenue growth into the high teens to 20% by the fourth quarter, and at least 20% into 2020.

We spent a good portion of Q1 focused on increasing the overall capacity of the Company, with the major portion hiring both engineering and go-to-market resources. This is a major change in our business as we align with the increased demand in our overall pipelines. After two years on leading the development of this new industry called conversational commerce, we can now see that it has become a standard part of how enterprises think about the future of their digital businesses. Strong contract signings in the first quarter, particularly with new logos is a clear indicator of this shift.

Some of our first quarter wins and up-sells include a top five airline in the U.S., a top five telco in Canada, a top five cable company in the U.S., a top three telco in Japan, a top three manufacturer of computer storage technology, a top three accounting and tax software provider and a top three telco in Australia. Working with some of the largest companies of the world is one of the reasons why we believe LivePerson is in the pole position to power conversational commerce and capture a large share of this market.

Let me now highlight a few incredible opportunities with these customers. In the travel vertical, we signed another top five U.S. airline just months after signing Delta. This new customer committed to a three-year seven figure annual contract, motivated by the need to reduce call center costs while improving customer satisfaction. They will launch with our voice to messaging deflection solution, giving consumers the ability to start a messaging conversation instantly from a 800 phone call rather than waiting on hold. This is one of the fastest closing enterprise wins in our history, from proposal to signing in less than 90 days. And it was powered by the airline attending our January Customer Summit in Dallas. Clearly, we continue to see a powerful payback on these one of a kind, marketing programs.

Another key win in the quarter was a seven-figure three-year contract with one of the leading telcos in Australia. There's nothing more gratifying than a deal like this one, because they were once a chat customer who left us during our strategic pivot to messaging a few years back, and now returned to go after the vision of conversational commerce. This marks our fourth enterprise customer's comeback, and similar to the other win-backs, the ARPU on this new customer was more than double that of when they were a matured chat customer with us. Kudos to the team in Australia for this win.

I'll also highlight a win with one of the top five cable companies in the U.S. that is launching a new wireless business. This win is significant, not just for the future revenue potential, but because it represents a major shift in how the enterprise is thinking about the impact of conversational commerce. They are launching with messaging as the sole means in which a consumer can communicate with them as there will be no 1800 numbers present. Having businesses launch with our technology as a core part of this strategy is yet another validation point for how our conversational commerce is moving into the mainstream. One of the strengths of LiveEngage and our Maven AI engine is that we can support a myriad of use cases for businesses. And this is just one of the many brands that are beginning to expand beyond care into new areas like sales and marketing.

With these wins, and many others, the percentage of enterprise customers on message increased to 45% in the first quarter, up from 25% a year ago. With demand rising, we enter 2019 with a plan to accelerate our go-to market velocity by increasing sales capacity and expanding the breadth of our marketing programs. We've been hiring at a record pace so far in 2019. We are on track to meet our target of adding more than 60 quota carrier reps -- sales development reps and channel partners by the end of June. This represents an approximate 90% increase in our total sales capacity. As previously guided, we expect to see a modest revenue contribution from new hires in the third quarter of 2019, and a more meaningful contribution by the fourth quarter and full productivity of 2020 as they start to scale.

LivePerson's marketing programs have also proven to be an accelerant of growth for the enterprise, as illustrated with the airline win mentioned earlier. We are powering these events at a record pace in 2019. First quarter, we hosted alone two large summits, one in Dallas and one in Berlin, participating key industry events, such as the National Retail Federation Contact Center Week, Mobile World Congress and South by Southwest. In total, we met with approximately 400 leading brands at these conferences, which had significant impact on our overall pipeline, and our ability to influence trajectory and scope of opportunity. In fact, 7 of the top 10 deals we signed in the first quarter were with brands that attended our customer summit in the prior six months.

We are complementing our investments in marketing programs and sales capacity by further increasing our engineering capacity. In the first quarter, we added a number of key machine learning, data science and automation engineers at our Seattle Advanced Technology Center, bringing the size of this team to over 100. These are the people delivering on our AI and conversational commerce product road map, which will fuel high returns for our customers, serve as a catalyst for our platform adoption, extend our competitive lead.

Now this leads me to our Maven AI engine and Conversational Builder. We knew when we introduced these groundbreaking technologies in the fourth quarter that we are providing a solution the industry have long awaited. We solve for the flaws of legacy bought products by building a platform specifically designed for conversational commerce, one that combines both humans and AI and leverages our data moat of hundreds and millions of conversation to create superior machine learning algorithms and powerful dialog flows.

We also broke the mold for bot design by empowering not only developers, but every day contact center agents to build, train, deploy and manage bots. Maven and Conversation Builder went into general availability in the first quarter and we are already seeing an incredible impact in the marketplace. Leading enterprise customers, including one of the largest banks in the world, a major European telco, a Fortune 500 software company and a global hospitality company have already replaced their existing AI solutions with Conversational Builder. The large cable company, win I spoke to you early, had approached us a couple of years back regarding an automation strategy, but they put it on hold, because they didn't see that the industry was mature enough. When they saw what we built with Maven, they're eager to move forward. In a matter of weeks, we have added millions of dollars of pipeline, and more than a dozen new opportunities tied to these new AI-based solutions.

The data points and metrics we saw in the first quarter reinforce the trend we are seeing a growing market demand and the development of a substantial TAM. As we discussed on our last earnings call, we are accelerating our pace of investment in order to capitalize on our leading position and capture a large share of this dynamic market.

In the first quarter, we started executing on that plan, hiring sales, product development capacity at a record pace, holding a record number of marketing events, which generate pipeline and sales conversions and introducing groundbreaking new products. In turn we have laid the groundwork for revenue to accelerate toward 20% by the fourth quarter of 2019 and meet or exceed 20% in 2020. Our hope is to be one of the largest technology companies in this new conversational economy and we continue to build the foundation that will position us to seize this incredible opportunity.

I will now hand the call over to Chris, who will do a deeper dive on our overall financial outlook. Chris?

Christopher Greiner -- Chief Financial Officer

Thanks, Rob. We entered 2019 with a number of tailwinds and a clear plan to capture a growing share of a multi-billion dollar total addressable market. Several key first quarter building blocks of that plan included gaining traction in new product launches, launching a robust set of marketing activities and ramping up sales and technical capacity. In each of these investment areas, we executed very well. In product, we brought multiple customers live on Maven and Conversational Builder and generated millions of dollars of pipeline opportunities tied to these new solutions. On the marketing front, we hosted a record number of events in the first quarter, meeting with more than 400 customers and prospects. This is up nearly 50% from the same period last year. And remember, our customer summits, which convert opportunities to wins that greater than a 40% rate are the fuel for pipeline growth and progression.

And from a recruiting perspective, as you heard from Rob, during the quarter we did an outstanding job of laying the groundwork to scale our hiring and onboarding processes. You can best view this through the lens of our candidate funnel that the entire Company processed in the first 90 days of the year. We experienced impressive demand for career opportunities in our Company, resulting in the screening of over 8,200 applicants in the quarter. As a result, hiring managers conducted over 3,200 interviews and onboarded well over 100 employees. All told, we added more sales, marketing and product development capacity in the first quarter than we did in all of 2018. The majority of which were quota carriers, pipeline generators and AI engineers. To support this influx of talent, we automated our internal processes, allowing us to now onboard new employees two times faster than we could just one quarter ago and we're already seeing indications that investments in these areas are extending our leading market position and accelerating sales velocity.

I'll elaborate. You'll recall in the second half of 2018, we began testing a more scalable and efficient method to create and qualify early sales -- feed sales leads by establishing a sales development representative or SDR function for the North American enterprise market. Their impact has been measurable. First, these resources were heavy contributors to our sales pipeline, increasing by more than 30% quarter-over-quarter, which is a continuation of the trend we saw throughout the second half of 2018, and now those SDR deals are converting.

In fact, during the first quarter, nearly 20% of enterprise signings, including two of our largest wins, resulted from leads initiated and qualified by the North American SDR team. This team is also leveraging LivePerson's increasing brand recognition as a leader in conversational commerce to target new customers. This is helping to propel new customer signings, which grew by nearly 90% year-over-year in terms of deal count and by over 150% in annual contract value during the first quarter. And as planned, we are now extending our investment in SDRs to cover EMEA, and APAC for enterprise and adding dedicated teams to cover our mid-market customer base as well. We also continue to ramp up our partner channel, which influenced approximately 25% of contract signings in the first quarter, across enterprise, mid-market, in SMB. We are now strengthening these relationships by enrolling partners and conversational commerce programs at our recently formed LivePerson Institute. And most exciting, our indication is we're starting to reduce the enterprise sales cycle. Two of our enterprise deals in the first quarter took less than 90 days from proposal to signing. We attribute this to our investment in new sales training program, and the effectiveness of our transformation model brought to light at our customer summits and client workshops.

Looking at the broader breakdown of the first quarter financial results. Both our B2B and consumer segments grew at mid-teens pace, right in line with our expectations. From a geographic perspective, the U.S. accounted for 58% of revenue in the first quarter, and generated 13% year-over-year growth, marking a continued acceleration from the fourth quarter growth of 11%. And as expected, our international revenue accounted for 42% of sales and delivered 15% growth against the steep prior year comparison.

Our industry growth was as follows. Telco and financial services industries continued to lead growth in the first quarter, increasing at a faster than 20% pace. The largest vertical in the quarter was consumer retail at 23% of revenue, followed by telcos at 22%, financial services at 22%, auto at 11%, hi-tech at 6%, and other at 16% of revenue.

Finally, in terms of profit in the first quarter, GAAP net loss per share of $0.31, adjusted operating loss of $7.1 million, and adjusted EBITDA loss of $3.2 million, were all within our issued guidance ranges, influenced by our previously communicated plan for first half investments.

With respect to the balance sheet, deferred revenue increased 20% quarter-over-quarter and 20% year-over-year, to a record $66.4 million. We also materially strengthened our financial flexibility in the first quarter, and increased cash on hand by $171 million, following the successful private placement of $230 million of 0.75% convertible senior notes due in 2024. The effective conversion price on the notes, including separately negotiated capped call transactions is $57.16, or a 100% premium to the closing price of LivePerson shares on the issue date. Cash net of convertible debt, increased $9 million year-over-year.

Transitioning to the full year outlook, we are reaffirming our guidance for 2019, with revenue of $284.5 million to $291.5 million, and adjusted EBITDA $10 million to $15 million. Our outlook reflects our strong first quarter execution to plan, and confidence in the underlying metrics that support the ramping of our investments. As a reminder, our revenue guidance calls for mid-teens growth in the first half of 2019 and then a ramp toward 20% growth by the fourth quarter of 2019, as marketing programs, new products and added sales capacity begin to scale. Our 2019 investments are front-end loaded and designed to maximize in-year productivity. Because of this, we continue to anticipate losses in the first half of 2019 with the opportunity for renewed leverage and a double-digit adjusted EBITDA margin in the second half of the year. You can refer to our release and additional details on our 2Q and full year guidance assumptions.

As we wrap up to take your questions, I want to close with a few overarching points that emphasize and summarize our call. First, we're executing well on our plans. Alignment across the Company is extremely strong and we're leveraging robust data-driven management systems to drive daily, weekly, monthly and quarterly performance.

Second, our position as a market leader in conversational commerce is growing. Our platforms differentiation is allowing us to rapidly win new customers and also unlocking new industry verticals. And third, our momentum continues to position us well to deliver high teens to 20% growth by the fourth quarter of 2019 and at least 20% growth for the full year of 2020 with renewed operating leverage. To that end, looking forward to our Investor Day in York City on May 8 to bring additional visibility into our vision, platform, customer experiences and long-range financial model. We hope you can join us next week.

With that, I'll hand the call back to the operator to take your questions. Deudre?

Questions and Answers:

Operator

(Operator Instruction) And your first question comes from Koji Ikeda with Oppenheimer.

Koji Ikeda -- Oppenheimer -- Analyst

Hi, thanks for taking my questions and nice quarter there guys. A question for Rob or Chris. In the commentary, Chris you said, hey, double-digit EBITDA margin target here in the second half. We really like that as the target. I mean how do we think about the linearity of achieving that margin target there? And I know you're not guiding to 2020 yet. But how do we think, maybe from a high level, about the sustainability about that margin profile? Maybe any sort of seasonal spending patterns we should expect next year in terms of infrastructure spend or headcount or marketing events. Thanks.

Christopher Greiner -- Chief Financial Officer

Yeah. Hey, Koji. I'll save the signaling for what 2020 and beyond is for May 8. There will be more time dedicated to it. But I think to your question, let me walk through the linearity or the cadence of the rest of '19 and maybe some -- I think some bread crumbs to where we see it could go. First, a lot of what you saw in the first quarter, our successful hiring and our marketing summits, those will continue in the second half. Our hiring during the first quarter really starting to scale in numbers in March. So you're seeing that the full flow-through effect of those hires that were done in March, will then flow into the second quarter, for a full quarterly impact and then we'll hold the same, if not a bit more marketing summits in the second quarter than we did in the first. From there, we'll see a step-down, we'll see a step-down in spending from the first half to the second half. That's really driven by a combination of the front-end loading of our marketing programs by design, as well as the benefits and payroll that will fall off in the second half of the year -- payroll taxes.

Koji Ikeda -- Oppenheimer -- Analyst

Got it. Thanks for that. And just one point of clarification here, the revenue -- net revenue retention rate. I know you guys gave that range of 105% to 115%. I just wanted to be clear here on where that fell in the first quarter, did I hear it right was that in the higher end of that range or was it right at the middle or was it near at the bottom? Thank you for taking my questions.

Christopher Greiner -- Chief Financial Officer

Right in the range. Solidly in the range.

Operator

And your next question comes from Raimo Lenschow with Barclays.

Unidentified Participant -- -- Analyst

Hi, it's (inaudible) on for Raimo. Thanks for taking my question guys. A nice start to the year. My first question is for Rob. Again, I guess Chris can chime in as well. So I was -- so great performance in terms of both landing key marquee customers and also sounds like the sales cycles are shortening, which is a trend we'll like to see, I guess, as you move toward accelerating growth prospects. Just wondering if you can discuss as to what were some of the things that really worked well in terms of shortening the sales cycles, and how do you expect that will trend for the rest of the year. Then I have a follow-up question for Chris. Thank you.

Robert LoCascio -- Founder and Chief Executive Officer

Yes. So, yes, we had a lot of -- you remember about two quarters ago, we added Hunter Group in, so new logo group into the Company and we're now adding large new logos, as I mentioned on that list. I think there's two things that are driving it. One is there is a certain maturity now where we have over 200 enterprises that are live. And so when we do our events, usually in almost every one of the main verticals, there's one or two of those customers that are having successes, then showing those successes to potential customer, and that kind of accelerates that. You're not going to be the first to do something and take that risk. You're going to be more in the -- we can get this implemented in scale. The other thing is that we are starting to reinvest in -- in what we call gain share where we take the total program. So we take the agents and we work with partners. Obviously, we don't -- they're not on our payroll, we work with those partners. But we'll take the agent labor and we'll take the transformation and that seems to be moving things also, because we're going to own the whole contact center, let's call it, solution, including the agents and we're able to scale those versus working within the customers back office and some of the operational challenges they may have with their own agents. So these are some things that drove shorter sales cycles. The one with the telco, especially, excuse me, what an airline was related to this new biz model that we have now, the gain share model.

Unidentified Participant -- -- Analyst

Understood. A follow-up for Chris. Just in terms of deferred revenue growth. So, you mentioned 20% growth, somewhat tough comps from last year, I acknowledge that, but wondering as you look toward sort of like accelerating growth in the back half of the year, what trend or linearity should we expect in that deferred revenue growth going forward? That's all from me guys. Thank you.

Christopher Greiner -- Chief Financial Officer

Yeah, I'm glad you recognized the comp. We had a -- just some really exciting wins in the fourth quarter of 2017. And on top of that, we had a very large company that paid a three-year multi-year deal in advance; that certainly drives the comps. In terms of how you should think about deferred revenue growth, It should keep up, if not outpace the full Company's growth rate, especially as we ramp. There are some around the margin, issues around when customers choose to pay. But in general, it should grow faster than the overall Company.

Operator

Your next question comes from Peter Levine with Evercore ISI.

Peter Levine -- Evercore ISI -- Analyst

Thank you, Rob and Chris for taking my questions and congrats on a good start of the year. So first question is, you guys talked about sales productivity looking good in terms of the newer reps coming on board. And obviously, I think you mentioned that bookings for this quarter, which is great. So can you kind of just remind us how you sort of think about sales productivity or how you track these newer folks coming on and then maybe talk about how you're allocating or dividing up territories with these newer reps and if you made any changes to the comp plan?

Robert LoCascio -- Founder and Chief Executive Officer

On the territory side, there's some territory -- obviously they're all geographical base, so we have three main business lines, which is North America, EMEA, and APAC. South America, we serve for them -- primarily today with partners, but we will look at some direct in the future. When we look at their productivity, it's about still six months to get them at full productivity. That's why we wanted to do a lot of hiring now, get everyone on board, train them and get them going, so that we have the impact of their productivity hitting in the Q4 numbers. There is the demand in the pipeline. So the reason we're making these investments is because the SDR group, which has been up for about a quarter or so is doing quite well and that pipeline is growing. We just need more capacity to close those -- work those deals to close them, but it's about a six-month ramp to get someone at full capacity as a rep.

Peter Levine -- Evercore ISI -- Analyst

Thanks. I guess my last question here is, if you think about the traditional contact center, right, where you sold directly into customer service, support organizations, where we are today, where now you're seeing sales and marketing departments kind of deploying these technologies. So, curious to see like has the sales motion changed over the past 12 months? I mean, I assume now you have a broader audience within an organization. Right? So I guess you have more of a budget to go after. So if you go into an organization, are you selling directly to a department or are you seeing it more turn into a larger transformational sale within the organization, meaning it comes down from the CEO, CFO level?

Robert LoCascio -- Founder and Chief Executive Officer

Yeah, I mean, we always -- on the large enterprise, I would say, it's always aligned to a conversational business transformation. So, we'll walk into an airline deal, like you've got to be a conversational airline. And then we work through, how do you automate conversations and then have live agents as part of that. So I think the very large enterprises we will -- if you see, a reason we're beachheading in, it could be a sales reason, a marketing reason, most likely it's care. But then we only bring to the table internal groups to align to a greater vision. And so when we go to sign a deal we have sort of a North Star of how do the transformation with that overall organization, and that's why we we're landing these big deals. We still beachhead into care. In many cases because care is still full of live agents doing voice calls. And that's the place that we can really show great productivity and great consumer experiences beyond the old 800 number. So I think that's still the major focus of the business. I think what's really cool, though, is that like working our quick casual deals, where quick casual restaurants, you can order through messaging and then go and pick up your order at the restaurant. Like, we didn't really craft that to start. We've got the rollout now happening with Aramark on all these stadiums in the U.S. to deal ordering of food and beverage at (inaudible). So there's a lot of these cold used cases that are coming up now as bots and conversational commerce sort of becomes in everyone's mind. So I think there is -- first with these large deals doing the transformation and now there's all these interesting other verticals that we weren't as focused on two years ago when we started the launch of LiveEngage.

Peter Levine -- Evercore ISI -- Analyst

Great. Thank you for taking my questions.

Operator

Your next question comes from Samad Samana with Jefferies.

Samad Samana -- Jefferies -- Analyst

Hi, good afternoon. Thanks for taking my questions. A couple. First, Rob, on the enterprise ARPU growth, impressive trend there. I'm curious how much of it you would attribute to larger customers and signing larger customers versus customers using more channels. So maybe like a same-store sales growth number. And then just one follow-up question.

Christopher Greiner -- Chief Financial Officer

Hey, it's Chris. It's not -- I'll go ahead and take that one. It's really both and we'll kind of peel back the onion on this I think in a really neat way at our Investor Day on May 8. But the new deals -- the new logos are getting bigger. As I mentioned in my prepared remarks, not only was the new customer deal count up a lot, greater than 90%, but the annual contract value of those new customers was up 150% and greater. So new customers are getting bigger and then at the same time, we're continuing to hone our ability to go wider and deeper with our existing customers by extending endpoints and then, opening up the spigot, if you will, for the existing endpoints that we already have.

Samad Samana -- Jefferies -- Analyst

That's helpful. And then maybe as we think about the customers that you called out, a handful of big customers that have come back that left during the transition, and I'm curious as you think about those customers coming back, what may be -- what they are replacing, and not just in ARPU terms, but as you think about what their -- what the opportunity with them is. I guess, is that a big group of people that you can bring back generally, we're just curious?

Robert LoCascio -- Founder and Chief Executive Officer

Yes, I mean if you (inaudible) but when we went through the transition, we lost some enterprise, some telcos and banks and things like that. It's awesome when we get them back, and like I said, we've got four very large ones. There is also a handful of smaller ones, but this is a big win. They left us for a chat -- pure chat provider. As we were going through the transition, we stopped developing on our chat products, we bet all in on the LiveEngage platform. So our platform people caught up. But it's really (inaudible) we go back to them and we basically are replacing what I said two years ago, I don't think chat should be around. I think it's synchronous. There's a new way to do things, obviously, aligned to consumer behavior with messaging and we are proving it. So they are like -- they're buying into -- nothing (ph) to cancel with us, and whatever that leaves as a taste in your mouth, on us, It's the same people coming back and saying, actually this is pretty cool. This will transform our business. So I just think it's a great marker for how we view the business of voice and chat and how they're sort of a past technology and that conversational commerce and messaging will enable these businesses to do some great transformation in the future.

Samad Samana -- Jefferies -- Analyst

Great, thanks. That's really helpful. And look forward to seeing you next week.

Robert LoCascio -- Founder and Chief Executive Officer

Yeah, see you next week.

Operator

Your next question comes from Ryan MacDonald with Needham.

Ryan McDonald -- Needham -- Analyst

Good afternoon, Rob and Chris. I guess, starting out, it seems like you've had some nice initial traction for Maven AI and Conversational Builder, now that it's generally available. Can you just talk about a bit, one, track toward your expectations. And then, two, as you're looking at the road map toward this reacceleration toward 20%, what role can the Maven AI and Conversational Builder solutions have in that and what impact does that have on ARPU growth?

Robert LoCascio -- Founder and Chief Executive Officer

So there is a slide I usually show when I'm presenting, which -- it looks at our total volume of our messaging volume today and close to half of it -- about (ph) 47% or 48% today is automated. So in many cases that automation would come with some other technology provider. So I think that -- when you look at that large amount, obviously, it's got to be strategic to us. We always looked at it as a potential threat, which is -- some of this automation is front of us and we're just getting the live agents, we could lose that volume. But we waited, we just sort of like looked at what would work and didn't work. We saw some of the big technologies out there and partners who work with the good, bad and ugly of them, and then we went ahead and focused and built the Conversational Builder and Maven as the AI in there. So I think it's very, very important. Ultimately, I believe 80% of conversations will get automated and 20% will stabilize. So this will just drive the size of the deals. Every deal, I can tell you that we're in, there is a conversation about automation. It always -- it's our product, what you guys do, how can you help us automate. Obviously, the enterprises want automation from a cost saving perspective, but also can create a good consumer strength. The most important part about Conversational Builder, the one I think makes it unique is that we really power up the contact center agents to build the conversations and work with the technologists, but they build, deploy, manage, and this allows for scale that they can have thousands of agents working on AI and deploying these bots. The Maven is very -- but Maven is very interesting too, because Maven sits within the LiveEngage platform now and it is -- as an agent is creating a conversation, Maven actually guides and gives them hints. And so that's an intent, you should use a -- that's a product catalog, wants to use this API, that's a product catalog, and it really helps the agents to be more efficient with live -- chat with live messages and also with building and crafting and deploying the AI -- the bots.

Ryan McDonald -- Needham -- Analyst

Got it. And I guess sort of a quick follow-up. It sounds like that you're continuing to see strong results out of the summits that you're hosting in terms of both conversion rates and shortening sales cycles. Can you talk about sort of, as you're converting these customers and shortening sales cycles, what the mix is, generally or qualitatively, between accelerator packs and sort of full scale implementations? Thanks.

Christopher Greiner -- Chief Financial Officer

You know, it's interesting. A year ago, we basically had just kind of launched the accelerator pack and our intent and our thesis was that it would, A, accelerate the sales cycle, and B, it would allow us to more quickly open doors that otherwise would have taken us longer to do. It's interesting as you test and learn on it and you see the volumes come through. What we're finding is that it does have some benefit, although not as material as we thought on accelerating deals, but it's arguably had a more positive impact than we expected on opening up doors. Many of the deals we closed this quarter actually began the sales cycle as an accelerator pack. But then as conversational commerce really over the last year has become more mature and mainstream, we're finding that customers are willing to make longer-term commitments. And while the accelerator opened the door for the SDR to create the opportunity when our sales teams came in, when our solution architects came in and showed them the power and scale, they very quickly became bigger and longer-term deals.

Ryan McDonald -- Needham -- Analyst

Great, thank you very much.

Robert LoCascio -- Founder and Chief Executive Officer

Thank you.

Operator

Your next question comes from Aleksandr Zukin with Piper Jaffray.

Aleksandr Zukin -- Piper Jaffray -- Analyst

Hey guys, thanks for taking my question. Rob, maybe just the first one, I think last quarter you called out the successes by the different messaging channels and providers. I was curious if there was any one or two channels or providers that really stood out in terms of either bringing customers to you or driving strategic interactions, and I've got a quick follow-up for Chris.

Robert LoCascio -- Founder and Chief Executive Officer

Yes, so what's up right now is driving a lot of volume, mostly outside the U.S. And so, the reason is, if you look at like Germany, it's -- 93% of people have WhatsApp on their device. And so we have a German telco that went live and we moved a tremendous amount of volume out of there, out of the IVR to WhatsApp. And we originally have them on Apple Business Chat and they start on SMS, then they went Apple Business Chat, then they went WhatsApp. WhatsApp has dominated over the other channels. So that's going quite well. Apple Business Chat is going quite well here. And then Facebook is behind that, because it's not encrypted. So it's hard for the large enterprises to be on that platform without data encryption. So that's kind of how it's playing out. We've got also line integration, and we just finished WeChat. And so we'll be taking our first -- I think we already took one live, but within the last couple of weeks we just finished WeChat. So we're starting to take some enterprises over in Asia live on WeChat with LiveEngage.

Aleksandr Zukin -- Piper Jaffray -- Analyst

Perfect. Chris, just maybe stepping back for a second, it sounds like bookings were really strong. It sounds like the pipelines are really doing -- they are accelerating 30% growth on top of pipeline growth of 25% last quarter. But when I look at it, was there anything that constrained the performance, either in the quarter from outperforming your guidance or anything that constrained you from raising the guidance for the full year? Just given some of the positive trends that you've discussed on the call, is there anything that we should keep in -- take into account from a retention rate perspective, or just a customer transition or a timing perspective? Anything there would be helpful -- or FX.

Christopher Greiner -- Chief Financial Officer

Yeah, no. I mean this was a quarter, if you kind of sat in my seat throughout the quarter, was a quarter that went really according to plan and we had very good visibility entering the year of what our first and second quarters would look like. And now that we're starting to see the underlying metrics that support what would be necessary for the ramp, we maintain that level of confidence. I would tell you, if there was anything that we expected it, but it impressed us with the level of time commitment that it took was when you're hiring at the volume we're hiring for and the fact that you can't just hire any Joe, or Susan off the street in Seattle for an engineering job and AI, and you also want to be equally scrupulous with who you're hiring from a sales role, multiply that times 8,000 plus applicants and then over 3,000 interviews that we were conducting as a team, and all of that goes into -- once you made the decision, onboarding them and training them. That's a legitimate consumer of time and that was -- that was part of all 1,200 employees that we had during the first quarter live, quite literally. So that impressed us, it was a time consumer, but it was built into our assumptions for the year, and it's very necessary for us to have laid that groundwork, to have begun building those muscles of onboarding.

Second quarter is going to be a heavy training quarter. We rolled out a new sales training program, the team has done a phenomenal job, creating a curriculum around conversational commerce, incorporating it into our Live Person Institute and it stood up, we're holding them every two weeks. I present at them, Bob presents at them, we have experts from all over the Company who spend time with our newest hires, from our engineers to our sales reps, to even some folks on the G&A side of the house. We want everybody to be well specced up on AI and well specced up on what differentiates us in the market. So I wouldn't say there's anything -- all of our metrics that we talked about were right in line with what we expected.

Aleksandr Zukin -- Piper Jaffray -- Analyst

Perfect. And then just maybe just a quick follow-up. From a seasonality perspective, can you remind us of some of the drivers, both for the revenue acceleration that give you that visibility in the back half of the year, as well as the gross margin improvement that you've guided for in the second half of the year?

Christopher Greiner -- Chief Financial Officer

Sure. So let me start with the gross margin. So the gross margin, the reason why you're seeing 72%, in that range for the first quarter and again expecting 72% in the second quarter is, on the cost of revenue, we're investing in technical resources. So those delivery resources that are charged was making sure that once you onboard the brands that we are, how do you make that experience near instant and great. So surrounding our customers, not just with increasingly more industry skills, but the technical skills that's an investment that will begin to scale as the revenue scales in the second half of the year. So that's what will drive the lift in the second half of the year of gross margins, and what we said the full year would be in that 74% range.

In terms of -- there is no real seasonality to our revenue, it really is driven by the bookings momentum that we're building, that we'll continue to build with the productivity of our sales reps. Yeah, I mean there is something on net, there's some gain share seasonality that comes with the consumer seasonality you'd expect in the markets in fourth quarter, but that's not -- I wouldn't say that's material.

Aleksandr Zukin -- Piper Jaffray -- Analyst

Perfect, thank you guys.

Christopher Greiner -- Chief Financial Officer

Thanks, Al.

Operator

Your next question comes from Jeff Van Rhee with Craig-Hallum.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Great, thanks for taking my questions guys. A couple from me. With respect to the-- I know the sales capacity had overwhelmed and deal counts per rep, it sort of maxed out, obviously driving that, and the returns you're seeing driving this big wave of investment. I want to take that to the sort of the next step. After folks have signed, can you talk about the timing from when they sign to go live on an apples to apples deal, kind of how that's trended in the last several quarters and your level of satisfaction with that timeline?

Robert LoCascio -- Founder and Chief Executive Officer

Jeff, just to be clear, you're asking on the customers' time to ramp -- the employee --

Jeff Van Rhee -- Craig-Hallum -- Analyst

On the customer -- no, on the customer's time so sign. So they sign, how long from there until they get live? I'm just trying to get a sense of how that's trending, because I know sales get overwhelmed, is essentially the underlying concern is implementation able to keep up with the time lines expected by the customers, and how has that changed?

Robert LoCascio -- Founder and Chief Executive Officer

Yeah, it's about eight weeks. I am talking about the large, large enterprises, obviously commercial can go quicker. But if I think about sign to kickoff meetings to -- you've got about an eight-week pretty much go live, I'll put it in that area today.

Jeff Van Rhee -- Craig-Hallum -- Analyst

And that's been steady?

Robert LoCascio -- Founder and Chief Executive Officer

Yeah, it's been pretty steady. It's mostly driven by their internal resources. We may be integrating into an app. It's easier now, because we got these front end like Apple Business Chat and stuff, it's much easier. The training of the reps, the building of the AI, the implementation of the AI, it's got still all those pieces to it.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Yeah. On the B2B side, I know you've commented in recent quarters about the SMB side of that, and that the product for a lot of reasons is now appropriate and that you were going to focus more there and you've expected to see acceleration there. Can you just give us an update on that?

Robert LoCascio -- Founder and Chief Executive Officer

Yes, so there the -- definitely the product is getting in line. It's not too, I would say, exactly 100% where we want to be. We have a lot of focus on it or that group does. They're doing very, very well, like excitingly well. So we don't give a lot of color on it. But they're doing quite well, and their bookings is doing really, really well and we've added a lot of capacity in there, because there's just a tremendous amount of mid-market, small businesses that want to go live and get on these messaging platforms. So they're doing really well. It's a turnaround, we didn't invest in it for many years, because we were focused on the enterprise. And about a year ago, we started with a new leader on it and he has taken that group and accelerated it to a place where it can be impactful throughout the year. They could start to be really impactful to the growth.

Christopher Greiner -- Chief Financial Officer

Yeah, Jeff, we are confident that this mid-market, small business will grow in 2019.

Robert LoCascio -- Founder and Chief Executive Officer

Yeah, it's going to grow.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Yeah. Got it. And then, last quarter you commented -- a little more detail on the POC accelerator packs. I think you had mentioned the ramp of 25, 65, 100 deals. I guess, any update there? If you're willing to give a specific number great, trajectory stayed on track. Just -- is that ramp still on that trajectory?

Robert LoCascio -- Founder and Chief Executive Officer

Yeah. The trajectory that you're speaking of Jeff, that was the number of pipeline opportunities that were coded as an accelerator. And when they're coded as an accelerator, two triggers of that in our internal systems. One, the size of the deal. So call it 150K to 350K in size and then the duration of the deal. So three to nine months. What we are finding though, and this is a question I responded to earlier, interestingly that those -- they're staying in the pipeline loaded at a lower value, but during the sales process now there more prone to go up in size and convert to what a traditional deal would look like. We just -- we've not found them to cut sales cycles in half. There are other tactics that we're using that we're finding are shortening sales cycles, but the accelerator isn't one of them. But it is continuing to be very impactful in the opening of doors with very large enterprises that either left us or this is a new concept to -- that we're able to go in with a compelling price point. But now once we're demoing and we are sizing ROIs, there is a willingness to go bigger.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Okay. And last from me, then on the pipe, if you could just circle back to pipeline, the mix of deals in there, specifically viewed from use cases. And so, are you seeing sort of meaningful increases in the IVR call deflection versus in-app versus other channels? So just talk to kind of the channels and the use cases and what's changing.

Robert LoCascio -- Founder and Chief Executive Officer

Yes, so the -- still the number one driver is IVR to messaging. That's -- it's our live deflect part of the platform and we'll deflect that to any channel now. So we can get a phone number and then we can deflect that the WhatsApp, Facebook, SMS. So that's still the biggest driver. The care use cases are still where we'll be chatting in, because it's still the problem of all those calls and that strategically is still our focus. Although, once again, we align through the marketing and sales folks, and then as I mentioned before, there's always interesting verticals that are coming up, like quick casual dining and stuff that we didn't really focus on, but they're coming in. They are kind of interesting -- very interesting deals. So -- but the number one driver is still voice to messaging, is getting rid of those voice calls.

Jeff Van Rhee -- Craig-Hallum -- Analyst

If I could sneak one last quick one in there. You said Maven displaced in a couple, two or three deals, I think you mentioned, existing AI. It's interesting to hear displacement of AI solutions this early. What did you displace?

Robert LoCascio -- Founder and Chief Executive Officer

You mean the actual vendors I won't -- they are partners of ours too.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Okay, leave it there. That's fine.

Robert LoCascio -- Founder and Chief Executive Officer

So I'll leave it there. But I think the interesting thing was, I'm thinking of one particular -- these -- what's happening is, what we saw is, usually there is a technology group that -- or a digital group that implements the AI, so they are using these technology solutions, because no one else can. And they are very hard to use. They sometimes are a set of APIs and you as an engineer, you put the APIs together and you make a bot. And what happens, they deploy them and now let's say we've had now two years of bots being deployed, they'll be deployed in front of a live agent and then they wreak havoc, because they are not -- they are failing a lot and then they get routed onto a live agent. We -- a lot of times, the way they are routed is not done appropriately. What I found as a number one problem is that they're not improving them quick enough, because they don't have the resources. So these valuable engineering resources are working on 10 projects. So they'll come back to it a month from then and the agents kind of suffer and the contact center suffers. So the idea we'd move that aside, and then the agents and the contact center now has full control over the end-to-end experience, allows them to move very quickly. And we can get to a confidence rate in the high 90s of completion of a bot. We will start in the 70s, but we get into the high '90s very quickly within like four weeks using the agents. You won't get that with technical folks who are not focused on improving it. So that's the winning -- that's what's doing the winning solution right now.

Christopher Greiner -- Chief Financial Officer

Jeff, just those wins, there were four enterprise grade wins that we displaced and it was in industries ranging from banking to telco to software to hospitality.

Robert LoCascio -- Founder and Chief Executive Officer

Yes. And we will still implement the other technologies, as people want them and we'll support them, because we are an open platform. But we want to do the best consumer experience we can.

Christopher Greiner -- Chief Financial Officer

Thanks, Jeff.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Thank you.

Operator

Your next question comes from Zach Cummings with B. Riley.

Zach Cummings -- B. Riley. -- Analyst

Hi, good afternoon, thanks for taking my questions. So saw that you were ramping up hiring within your Seattle technology center. Can you give us any insight into, is there going to be additional hiring here in the coming couple of quarters, and then any insight into your long-term technology road map after you've rolled out these new AI platforms? Thanks.

Robert LoCascio -- Founder and Chief Executive Officer

Yeah, so we -- our CTO, Alex Spinelli who came from Amazon, he was running Alexa, he brought in a lot of people from that company and then other people in the Seattle region. We do have -- now, he also globalized operations, which was really a focus of ours. So originally we only had really operations in Israel, but today we've got Seattle, Atlanta, now into Israel, Mannheim, Germany and New York City and in Austin, Texas. So he quickly globalized operations and analysis is driven all that. So we'll continue to hire in all those areas. That group, specifically in Seattle has like our Head of Data Science and Data Science Group. So they are very focused on that area. So that's where we have like 100 people in the machine learning data science area out of a couple hundred total engineers.

Christopher Greiner -- Chief Financial Officer

And we've got -- Zach, it's Chris. We've got more hiring still to go in the second quarter, but we'll be materially done by June.

Zach Cummings -- B. Riley. -- Analyst

Understood. That's helpful. And then final question from me, with all the additional cash on the balance sheet now, are you more open to considering M&A, whether it be more of a tuck-in technology acquisition or something more substantial in scale?

Robert LoCascio -- Founder and Chief Executive Officer

Yeah, I mean, this is a huge opportunity. We raised the capital, because we thought it's going to be a very big opportunity. There will be things that come up in the future, we don't have anything imminent right now. But we are looking out there and saying what can help us accelerate to our vision and strategy. So we did put it on the balance sheet, because we felt like there's probably opportunity out there in the future.

Zach Cummings -- B. Riley. -- Analyst

Understood. Well, thanks for taking my questions and look forward to seeing everyone next week.

Robert LoCascio -- Founder and Chief Executive Officer

Thanks Zach. Thanks a lot.

Operator

Your next question comes from Mark Schappel with Benchmark.

Mark Schappel -- Benchmark -- Analyst

Hi, good evening. Nice job on the quarter, coming to say that. And one question. Most of my questions have been answered, but I do have one question. And Chris just building on a prior question here with respect to the sales force and your sales force growing so rapidly. I was wondering if you could just go into a little bit of detail about what the Company is doing to organizationally manage that growth.

Christopher Greiner -- Chief Financial Officer

So we -- yeah, thanks for the compliment. We've been gearing up for this. So the investment plan that we put in place and the strategizing around it dates back to June of last year with our management team and with our Board. So from even the mundane of making sure that we've got office space, which by the way is a piece of our CapEx investments that we've been making, as you'll see in our books to the onboarding process and building out an internal recruiting capability. An interesting fact, from fourth quarter to first quarter, we reduced our need for agencies by more than 50%. So -- and there is obviously many benefits to that other than cost. You build -- recruiting agency. There's many benefits to that, but we have done a great deal with the Company to align around a set of -- not just near-term priorities, but long-term priorities of the Company. All those priorities for every employee in the Company are aligned to different initiatives, down to the engineer, to the attorney, to the sales rep. So this combination of making sure that they have the infrastructure around them to be successful and that they know exactly where they fit in and what they have to contribute, is all part of our on-boarding process. And as I mentioned, we've been able to cut that time in half. And now what we're focused on is, how do you get them as productive as possible. And that speaks to the training programs that we're putting in place across the Company.

Mark Schappel -- Benchmark -- Analyst

Great, thank you. That's helpful.

Operator

And your last question -- and your last question comes from Mike Latimore with Northland.

Vijay Devar -- Northland -- Analyst

Yeah, hi. This is Vijay Devar for Mike Latimore. I think most of my questions have been answered. I have one question on your win rates, could you comment on your win rates? You've seen a pretty good wins, some large wins, but whom do you generally encounter in terms of any deals and how has been your win rates trending? Is it really trending positive or any comments over there should be helpful?

Christopher Greiner -- Chief Financial Officer

Yeah, we had a really nice win rate in the fourth quarter and that persisted in the first. So on a percentage win rate basis, what was the high watermark persisted, so that was good. In terms of the competition, it really continues to be mixed across the Company, proactively going in with prospects, these are leads created by our SDR teams that I mentioned. They do not have open sales cycles, we're creating an event, we're creating a need, all the way to displacing the voice vendors. So nothing material has changed on the competitive front.

Vijay Devar -- Northland -- Analyst

Yeah. Thank you.

Christopher Greiner -- Chief Financial Officer

Thank you.

Operator

I will now turn the call over to Mr. Rob LoCascio for closing remarks.

Robert LoCascio -- Founder and Chief Executive Officer

Thank you, operator. So I'll end the call by emphasizing a few key points. One is, we entered 2019 with a plan to capitalize on conversational commerce industry and we shifted into the mainstream to accelerate our growth to at least 20% by 2020, by investing in go-to market velocity and new products. And we're executing on that plan. Our product initiatives around AI and bots substanding (ph) our competitive moat, positioning LivePerson to take an even greater share of this emerging multi-billion dollar market opportunity.

And so those things together, adding resources and technology, (inaudible) of a technology company, the go to market and our product lines, I think we're doing a really good job and focused investments in those areas. So next week, if you like to -- obviously we're holding our first Investor Day in many years on May 8 in New York City and you'll have an opportunity to meet with the leadership team face to face and one on one and you'll see presentations, we'll do product presentations and we have some -- I think five customers are coming to present, also some of the successes that they've had. So if you're interested in signing up and coming, and you haven't done it yet, you can reach out to Matt Kempler and --- Kempler at LivePerson to keep it within brand. You can text him at 917-250-2537, just don't call him at 8 o'clock at night, his wife will get pissed off with me.

So with that I appreciate all your support and we'll continue to execute and see you guys next week. Thank you.

Christopher Greiner -- Chief Financial Officer

Thank you.

Operator

This does conclude today's conference call. Thank you for your participation, you may now disconnect.

Duration: 61 minutes

Call participants:

Matthew Kempler -- Vice President of Investor Relations

Robert LoCascio -- Founder and Chief Executive Officer

Christopher Greiner -- Chief Financial Officer

Koji Ikeda -- Oppenheimer -- Analyst

Unidentified Participant -- -- Analyst

Peter Levine -- Evercore ISI -- Analyst

Samad Samana -- Jefferies -- Analyst

Ryan McDonald -- Needham -- Analyst

Aleksandr Zukin -- Piper Jaffray -- Analyst

Jeff Van Rhee -- Craig-Hallum -- Analyst

Zach Cummings -- B. Riley. -- Analyst

Mark Schappel -- Benchmark -- Analyst

Vijay Devar -- Northland -- Analyst

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