Liveperson Inc (LPSN) Q2 2019 Earnings Call Transcript

LPSN earnings call for the period ending June 30, 2019.

Motley Fool Transcribers
Motley Fool Transcribers
Aug 1, 2019 at 1:23PM
Other
Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Liveperson Inc (NASDAQ:LPSN)
Q2 2019 Earnings Call
Jul 31, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to LivePerson's Second Quarter 2019 Results Conference Call. My name is Ian and I will be your conference operator today. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the 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, Ian. 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, and 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 annual 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 for 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 Q2 2019 earnings call. For the last year, we've been demonstrating LivePerson's leadership in conversational commerce. We see conversational commerce as a means for brands to build a direct lasting relationship with consumers where people connect by natural language using text messaging or voice commands. It replaces the disconnected experiences of waiting on hold for a transactional call with a phone agent or browsing in search, and then clicking on an ad and being redirected to a landing page which lacks personalization. We expect conversational commerce to profoundly change how leading brands deliver care, sales, and marketing experiences to consumers. That is why the largest technology companies in the world are also participating in this shift. We are not looking to just participate in this market. We're aiming to win it.

And from our recent results, we believe we're doing just that. We're moving fast and staying focused in order to close the gap from where we are today to reaching our mission. During this quarter, we definitely achieved a new inflection point. Here are a few highlights that showcase what underpins that positive inflection point. Total revenue of $71 million in the second quarter exceeded our guidance range and accelerated the 15% year-over-year growth. Total contract signings in the first half of 2019 were at an all-time-high, increasing approximately 75% over the first half of 2018. The impressive growth was fueled by our enterprise sales team, which closed a record 9 seven-figure contracts. This is three times more than previous periods. And our mid-market team also set a record closing 10 six-figure contracts in the quarter.

Similar to previous periods, the majority of the top 10 deals signed in Q2 were multi-year contracts. This is key to providing high visibility into future recurring revenue. Nearly 50% of the enterprise customers on messaging and approximately 50% on messaging conversations include automation. Virtually all new deals are following with a blend of human and our Maven-powered AI automation services. We have always had a vision for how the conversational commerce market would unfold. And based on the activity in front of us, we are now seeing an opportunity to drive even faster adoption and more rapidly monetize new platform capabilities. With this momentum in mind, we are raising our revenue guidance in 2009 -- 2019 and increasing investments to keep up with the demand.

I'll walk through the key points that support how we arrived at this conclusion and Chris will provide more details on our guidance shortly. In 2019, we front-loaded our expenses in both field and product with the anticipation that we would have a good measure of their potential impact by mid-year. We're seeing a faster than anticipated ramp and a strong ROI from those investments. We are now going to pull forward another set of investments in order to add more quota carrying reps, marketing events, and product teams to meet this increased market demand. We are starting to deliver on the next set of major platform capabilities that will fill in the white space of conversational commerce. In Q3 and Q4, we have four to five major platform capabilities coming out around marketing, in-store retail, social, and new agent console in AI analytics. We feel that the most efficient use of our capital right now is in building product versus acquiring it. And Alex and team are doing a great job in increasing the momentum of our overall platform capabilities.

Another momentum driver is coming from the established consumer messaging players who are delivering the front-end consumer demand for conversational commerce even faster and to our benefit. For example, Apple previewed a new feature called Chat Suggest, which would give the consumer a choice when they dial any phone number to instead of--to message--to instead of calling the brand, to message them directly. This would basically deflect calls even before they get to the brand's IVR. We expect Chat Suggest to help millions of consumers discover messaging as a communication option, which in turn will derive higher platform utilization, and ultimately revenue for LivePerson.

Subsequently, Google and many global telcos are now aggressively rolling out their RCS services, a next generation messaging standard that offers a native android experience comparable to Apple Business Chat. With android accounting for approximately 3.2 billion of the estimated 5 billion handsets in the world, RCS will be a material conversational endpoint. We have built RCS connectors into LiveEngage and are working alongside Google and individual telcos to drive adoption of RCS. Our sales teams are capitalizing on the drivers I just outlined as we further tap into the $60 billion total addressable market opportunity. The sales pipeline is up nearly 120% versus a year ago and up approximately 75% since the start of the year. I want to now outline some notable customer wins in the quarter.

In a groundbreaking win, we will be powering one of the first at-scale conversational food ordering systems for one of the largest quick casual restaurants in the United States. They selected LiveEngage to power automated food ordering through messaging using our Maven AI engine and conversational builder platform. The thesis is that we can reduce the ordering that happens in third-party food apps and instead create a direct messaging relationship with a brand that generates more loyalty and greater margins for the restaurant. The next example is from another win-back of a former chat customer who left us during the migration. And this time it's one of the largest telcos in the U.S. The telco signed a three-year, multi-million dollar agreement to digitally transform their customer communication across care, sales, and marketing. We'll replace their incumbent chat and social offerings with messaging and automation across numerous conversational endpoints. And we won the contract because of our unique ability to provide a holistic transformation that delivers best in class outcome across human agents and AI for inbound and outbound conversations.

The final example highlights the growth opportunity we see with existing customers as they progress along the transformation journey into new messaging endpoints in these cases. Starting with a six-figure chat contract four years ago, this financial services customer steadily expanded, first deploying in app messaging and then web messaging. Most recently, they began testing Conversation Builder. In a relatively short amount of time, they created automations that contained approximately 20% of all inbound messages while closing conversation three times faster than their human agents. Following on the heels of this success, in the second quarter the Company signed a multi-million dollar, multi-year commitment to drive even more automation and to add IVR to messaging deflection. This is a really exciting time to be at LivePerson as we are in a very unique position, leading this emerging market with a clear vision of what we must do to create, execute, and win the conversational commerce space. Our strategy has worked well so far, and because of that we are now seeing an opportunity to accelerate the time between where we are today and our long term vision.

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

Chris Greiner -- Chief Financial Officer

Thanks, Rob. After a strong start to the year, our execution accelerated in the second quarter, pacing us ahead of our initial 2019 plan as it relates to contract signings, sales productivity ramping, and pipeline creation. Before we get into each of those areas, I'll quickly run down the number of big picture highlights. First, on a total revenue basis, growth accelerated to 15% year-to-year and 7% quarter-to-quarter, exceeding the high end of our guidance range. We saw very strong renewals and upsells in the period, once again driving revenue retention well inside our target range of 105% to 115%.

For the fifth straight quarter, our trailing 12-month ARPU growth increased by at least 20% to a record 310,000, continuing to demonstrate the increasing size of new wins and cross-selling activity. From a revenue perspective, the telecommunications and financial services verticals once again continued to lead overall growth, climbing faster than 20% year-over-year. In terms of our geographic revenue, the U.S. accounted for 58% of sales and accelerated year-over-year for the third consecutive quarter to 16% growth. Our overall international growth also came in at double-digits growing 14%.

The U.S. enterprise team led growth, increasing 30% year-over-year on the heels of seed investments we made last year, which are now approaching full productivity. In 2019, we're expanding these investments in the U.S. and bringing the same blueprint to our other regions. Consumer segment execution was very strong, growing at a record 24% year-over-year. With sales and marketing productivity metrics exceeding our expectations, we took advantage of a strong sales candidate funnel and hired above our 2Q plan. This impacted profit in the period with GAAP net loss per share of $0.38, and adjusted EBITDA -- and adjusted operating losses of $9.1 million below our guidance. An adjusted EBITDA loss of $5.3 million was within our issued guidance range.

Finally, from a balance sheet perspective, we remain very well capitalized with total cash and equivalents on hand of $225 million. Deferred revenue reached a record $70.1 million, and on a trailing 12-month basis increased 42% year-over-year. On the back of this increasing momentum and ramping sales productivity, we're seeing multiple opportunities to drive even faster platform adoption, along with new ways to monetize LiveEngage, the combination of which is translating into increased revenue guidance in the second half and opportunities to pull ahead investment aimed at capturing surging pipeline demand.

Toward that end, I want to discuss three areas in greater detail. First, the powerful ROI and sales productivity attributes propelling our strong execution; second, the criteria we're using to step up product and go to market investment; and third, how each of these tailwinds are reflected in our updated guidance. First, we built our 2019 plan anticipating a market inflection based upon what we were seeing in our opportunity pipeline in late 2018. To capture it, we front-end-loaded investments, calling for very aggressive first half hiring pipeline--for pipeline generators, quota carriers, along with a packed global marketing event schedule. In each of these areas our execution was flawless. In the first half of 2019, we increased quota carriers by nearly 80%, from 50 to 89 versus our target of 75.

Total sales capacity, including sales development reps and partner managers, increased over 100%, as compared to our target of 90%. And our marketing events connected over 510 executives to LivePerson in cities such as Manhattan, Milan, Tokyo, Sydney, London, Chicago, Madrid, even Shanghai and Moscow. If our packed events are any indication of the future, we can continue to--we can expect to convert approximately 40% of all opportunities coming out of these events. In order to quickly ramp and scale the new salesforce, we created a rigorous onboarding and training program.

We also armed our sales teams with productivity analytics, providing real time insights into best practices for progressing opportunities quickly through the pipeline. The early impact has been material and climbing. In fact, in just their first several months onboard, these newly hired sales reps have already created 70 million of qualified pipeline opportunities. In total, the opportunities created by our pipeline generation teams, which include sales development reps and channel partner managers, now account for half of the aggregate pipeline. Since January, nearly 100 new starters in our field organization have enrolled in training and are in the process of completing their multiple certifications.

And our training programs are contributing to bending the curve on sales cycles with the average number of days for closed won opportunities improving by three weeks, as compared to a year ago. The culmination of investments in marketing, sales resources, and training, have in part translated into the record results we saw in the second quarter. To put things in further perspective, the 9 7-figure deals we signed in the second quarter is equivalent to the total of all 7-figure deals signed throughout the entirety of 2018. Even more encouraging to us, the sales activity was widespread across our Hunter and client partner teams. Total deals signed in the quarter increased 50% year-over-year, with 72% growth from new customers and 33% growth from existing customers.

And over the same period, our 2Q sales pipeline has increased 120%, well ahead of our growth in quota carrier capacity. This strong demand means that even with the nearly 40 quota carrier hires this year, we still have insufficient capacity to address the opportunities in our pipeline. In fact, the average number of deals per enterprise quota carrier remains unchanged from six months ago at 15.

Finally, we remain an entrepreneurial product-led company, choosing to leverage our balance sheet to extend LiveEngage's technical leadership position organically over the near term. As evidence of this, we successfully built out one of the industry's most advanced AI development teams, recruiting more than 100 machine learning, state of science, and automation engineers over the past 12 months. This team launched LivePerson's groundbreaking conversation bot builder in the first quarter and demand has been impressive.

Nearly 20 enterprise customers and an additional 40 mid-market SMB customers have already deployed the platform and are building AI automations as we speak. In the second quarter, they launched our Maven Assist solution with a leading airline and large cable company. Maven Assist features next best action, automations, and content to human agents. Our product development machine is running at an entirely new level of productivity. And as Rob detailed, there's a robust pipeline of new products coming in the next few quarters. When you combine record contract signings, ramping sales productivity, surging pipeline demand, and leading product capabilities, it's a recipe for strength.

In this case, it's translating to an accelerated view of revenue in the second half, even greater confidence in the timing and achievement of mid and longer term growth models, and conviction to step up investments in proven areas of return. In that setting, we're raising 2019 revenue guidance from $288.5 million to $292 million, with the midpoint of guidance implying a second half growth rate of 17.5% and high teens to 21% growth in the fourth quarter. As mentioned, because the number of pipeline opportunities has once again exceeded our sales capacity models, we're pulling forward planned 2020 spending into 2019. In all, we're targeting approximately $10 million of incremental investments, revising our adjusted EBITDA guidance to a range of zero to $5 million. The spend is allocated across the following categories.

Approximately one-half of the spend is tied to higher quota carrier and marketing capacity to meet the increased demand. We ended Q2 with 89 quota carriers, above our target of 75, and plan to end 2019 with well over 100. Approximately one quarter of the spend is tied to engineering investments to support emerging product opportunities, such as social, payments, and proactive sales. And approximately one quarter is tied to higher consumer segment marketing spend, given the positive year-to-date returns. You can refer to our earnings release for additional details on our third quarter and full year 2019 assumptions. Now let me bring all of this back to discuss how the positive forces unfolding today relate to our broader aspirations.

At our Investor Day in May, we outlined our strategic vision and how we plan to execute on it. By every growth measure we're running ahead of plan. Our execution is underpinned by a companywide commitment to drive the achievement of key metrics with the same rigor everyday as we would for the quarter or year. And you're seeing that play out in our results. And finally, every dollar of invested capital undergoes an arduous ROI vetting and competes for future funding based upon payback models and proven outcomes. Our decision to pull ahead investment from 2020 into the remainder of this year stems from data that demonstrates that we could ramp those investments effectively, and a belief that the pipeline opportunities in front of us are ripe for the taking now.

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

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Samad Samana with Jefferies. Samad?

Samad Samana -- Jefferies LLC -- Analyst

Hi. Good afternoon. Thanks for taking my questions and congrats on a nice quarter. So one for you, Chris, and then maybe a follow-up for Robert. But just as I think about the pull forward of the $10 million of spend, how should we think about that driving either incremental leverage or the impact to 2020 guidance that you gave at the Analyst Day? I believe you guided for 7% to 10% EBITDA margin for 2020. And should we also think about that 20% growth for next year having kind of an additional tailwind, given those investments are being pulled forward and you'll start to monetize those? How should we think about the 2020 guidance?

Chris Greiner -- Chief Financial Officer

Yes. I think we want to be careful not to give 2020 guidance or updated long term model guidance every 90 days, but I appreciate the point. Let me spend the time on the answer talking about the areas that we're investing in and the ROI characteristics that they have. So first, the inflection that we're seeing, right, the first half contract signings, over 75% growth, the growth in our pipeline, they're compelling us to add capacity. Right? We talked about the enterprise yield per rep right now back to where it was six months ago. That was something we were trying to alleviate and get down into the nine--eight to nine area. We're investing in three areas, right, in the go to market side. First, on marketing and the events, let's taking one just from our Investor Day where we held one in Manhattan on May 8th.

When you look at the Manhattan event, we had 85 attendees, 51 distinct customers, $15 million in new pipeline created from there, and already six deals closed. So it's already generated over a 2x return on the investment for us. From a sales development rep perspective, the other area that we're looking to invest and have invested, we're actually finding that those sales development reps are able to ramp up much quicker than we had modeled, in fact, closer to three months than the six months that we were anticipating. When you look at North America as an example where we seeded those investments first, I talked about the North American enterprise growth rate being over 30%. We have SDRs that have created more than a third of their pipeline right now and contributing to over 13% of their closed deals.

And then, finally from a quota carrying rep perspective, our data is showing us that it takes about 12 months to ramp, which is about what we thought and what we expected. But we're bending the curve on the sales cycle, the training that we're giving them. We've been able to cut three weeks out of the sales cycle in a year, which we think is pretty impressive. So we think the combination of all of those areas of investment, the higher demand that we have, the inflection in the market that we're seeing, now is the time to be investing. And as I mentioned in the prepared remarks, we have a high degree of confidence that we're running ahead of the longer term plan.

Samad Samana -- Jefferies LLC -- Analyst

Great. That's helpful. And then, maybe, Rob. As I think about the large deal activity in particular, it was very healthy in the quarter. I'm curious, are you starting to see kind of an inflection in what I would describe as lookalike deals as well, where when you sign somebody like a Delta or a T-Mobile, logos you've called out before, are you starting to see companies that are their peers in their respective industries look at them moving to LivePerson and that bringing new customers to the table as they see potential competitors? And then, how do you think about that impacting kind of just inflection in the very large deal activity that we're seeing?

Robert LoCascio -- Founder and Chief Executive Officer

Yes. I mean, if you look at the first customer to go live was T-Mobile. And if you look at we just signed one of the--there are four major telcos going to three now with T-Mobile combining with Sprint. But obviously, they took down another one. There--we have a lot of activity in that space. We're seeing a lot in the airlines space with--obviously with Delta and we have some others in the pipeline. We're just at the beginning. Globally, when you think about telcos, airlines, banks, we still have a lot of runway.

And so, yes, it definitely influences it once they go Live and the competitor sees the opportunity that now--like with Delta. I don't know if you've used it, but you can literally message through Apple Business Chat and you don't have to call and be put on hold. If you're an airline and you see that, you want that. And you're going to need to do that and we have the best platform for it. So it definitely is driving those use cases and references. And if you've been to our events, those companies end up speaking at our events as references in front of their peers also.

Operator

And our next question is from the line of Steven Enders with KeyBanc. Steve?

Steve Enders -- KeyBanc -- Analyst

Thanks for taking my question. Just wondering what you're seeing on the consumer side that's leading to the pickup of investments there, and what's really driving the strength there?

Robert LoCascio -- Founder and Chief Executive Officer

So the consumer side, as you can see, is doing very well. Like--small--the small business people want to message with these experts. We found this--there's a millennial population that wants to message and get expert advice, whether it's healthcare advice, legal advice, and spirituality, whatever it is, we're finding really good demand there. And so, we've funded more activity into that operation over the last couple months and they're doing great. I mean, they have a lot of runway also in their business. But we did add some funding into them in the last couple months to grow that business.

Steve Enders -- KeyBanc -- Analyst

Okay. And I just want to touch on kind of what you're seeing in other messaging channels. We hear a lot of talk about Apple and android ramping. Just kind of wondering what you're seeing from customer adoption of Facebook Messenger and WhatsApp and kind of those other channels out there.

Robert LoCascio -- Founder and Chief Executive Officer

Yes. So I mean, in Europe we're seeing tremendous activity with WhatsApp. I'd say they're really getting a lot of momentum in that region. South America, also. The U.S. we see still a lot of activity in the--in what Apple's doing now. As I mentioned, Apple is about to launch shortly in the new iOS release Chat Suggest. So basically what it is, if you know when you click on a phone number off of a website or--and you get that little window pops up that says cancel or call, it's now going to say cancel, call, or message. So think of that. Every phone number that's clicked on can become now text-enabled and then that will send you right to Apple Business Chat. I think it's going to have a huge impact on the industry and what we're doing.

And also, it cuts off calls before they even hit the IVR, which is a--which will be a major change in the contact center world. And then, the last part, obviously we've got Facebook and Facebook Messenger in the U.S. is doing OK. We see more on WhatsApp because of the security elements. It's encrypted and all that. But we're doing pretty good with Facebook here. And then, you've got all the RCS implementations globally that are rolling out with telcos. That is--SMS is now going to become a rich communication service. And there is brand--ability for brands to connect into that. And we are in the middle of wiring into the telcos directly. And then, Google also has their platform and we have a very tight partnership with Google. So we're doing that. We've got WeChat. We've got a couple of customers who want WeChat. We've got Line in Japan we've launched. So basically, all the messaging front-ends globally are now available. And once again, I think they're at the beginning. There's--there aren't like thousands and thousands of brands on these platforms yet. And there'll be millions of brands one day, and that's why we're pretty excited about what we're seeing there. But they are driving volume for us and adoption for us.

Operator

And our next question is from the line of Brett Knoblauch with Berenberg Capital Markets. Brett?

Brett Knoblauch -- Berenberg Capital Markets -- Analyst

Thanks for taking my question. Just one on the new futures that you guys are investing in on the R&D side, specifically with the outbound marketing and the in-store features. Can you just expand on that a little bit, and how you really expect that to drive maybe new deals or bring more customers to the table maybe at the end of this year or 2020, however that rolls out?

Robert LoCascio -- Founder and Chief Executive Officer

Yes. So it--our strategy has been--up to now is to really beachhead in on care, and then fan out from care. But when you start fanning out from care in sales and marketing and retail, you've got to have a certain amount of features. So if we put the sales and marketing--let's put them in the bucket today, that's really about outbound. How can we create campaigns that we can send outbound with intelligence? So it's really two parts. One is gathering conversational intelligence that we can say, here's a consumer who may want something later on. So maybe they inbounded originally with care--asked a care question, and four or five weeks later you outbound to them with some sort of marketing or sales message.

So we need the capabilities to have a sophistication to group consumers, send something to them based on data. It could be system data. We know--we've been testing some stuff with like one of our cable companies in Europe that when there's outages happening in an area they can outbound based on system data to consumers to tell them we know there's an outage. We're on it. You don't have to call us or even message us. So capabilities like that. So that's the outbound. The second part is retail. We are in the middle of rolling a couple thousand stores here in the U.S. with one of our customers in which when a consumer inbound--it could be sales or even care, that could be redirected to a store.

And then, there's a store rep who has--we've built now an agent--call it an agent console that's on an iPhone or an iPad. And then, they can message right from their own devices in the store. So you can imagine we really want to tie that store experience that you messaged in, or even if there's an outbound marketing campaign that then says come into the store to do something. And so we're sort of tying the retail marketing and out-care operations altogether. We're also -- there'll be an addition of social because we've heard a lot of our customers don't want to keep the social monitoring and messaging on a separate group. They want to bring it into our platform. So we have a part of the platform -- come September, we'll be delivering the ability to bring all the social interactions from Facebook and Twitter into the platform also, outside of Messenger that is, straight out from the social feeds.

Steve Enders -- KeyBanc -- Analyst

Okay, now that helps. And then just one more for me on just the 9 $1 million-plus deals that you guys signed in the quarter and 12 for the first half of 2019. Is this ahead of what you previously expected when you first gave 2019 guidance, or how are you performing on the large deal front compared to what you initially expected going into 2019?

Chris Greiner -- Chief Financial Officer

There definitely had if you look at just the sheer volume of deals, not just the aggregate value of them, but it was the highest on my sheet here, the highest I can go back to when you look at the total number of deals signed. But it was really nicely mixed between our farmer teams, so those sales leaders that are going out and hunting for new logos it was up over 70% and then up over 30% on the existing side. So it was a nice mix of small and large deals. I think, as Rob mentioned, importantly, the deal durations are getting longer and longer. These are now multi-year deals on average that are happening versus 12-18 months ago they would've been 12 months in duration. So we're definitely ahead.

Steve Enders -- KeyBanc -- Analyst

Alright. Thanks for taking the question. I really appreciate it.

Operator

And our next question comes from the line of Raimo Lenschow with Barclays. Raimo?

Raimo Lenschow -- Barclays -- Analyst

Hi. Thanks for taking my question. Look, I get the investments and it makes total sense given the momentum that's in the market, but Chris can you talk a little bit about the -- so we're saying we took 10 million out, why not take out more or like what are the chances in Q3 you come back and just say well, actually, it's 15 rather than 10? Just talk me through your thinking process there. Thank you.

Chris Greiner -- Chief Financial Officer

Sure. Hey good to talk to you again. Everything that we've done now for the pulling ahead of 2020 into 2019 was based upon all of the models that we've put in place for the first half of the year. And we look at various different metrics. We look at what is the ratio of sales development reps to quota carriers, and we have a ratio in mind that we want to hold to. We look at the number of deals in our pipeline per rep and we have ratios that we aspire to get to. Because their opportunity pipelines move so fast and faster than we're able to hire, even though we did a great job on the hiring front, we're back to where we were six months ago. We'll look at the payback both on a pipeline created basis, how many of the deals are being created, how many of them are making in the late stage, how many are getting closed.

We look at them on an individual per rep basis. And we're getting an idea for how quickly reps can scale. Interestingly, we've employed a new analytical capability that has accelerated our understanding of how long it takes a rep to scale. So we were waiting six to nine months before to see that first deal close. We now have the ability to detect in weeks based on the pattern of activities. So we feel like we could be much more fluid and much more dynamic. It's a rapidly moving market right now. If you would've asked us three months ago if we saw the pipeline growing as much as it did just in the last quarter, I don't think we would've guessed it would've grown 120% year over year. It's based upon data. It's based upon our experience in the first six months, and we're fortunate enough to be able to look back at North America and see what full productivity looks like.

That was the area that we first seeded investment, as you recall. We put SDRs in. We put quota carriers in, new client partners in, and that region of the world for enterprise just posted a 30% growth rate. We feel like in total we've got the formula figured out. And in terms of what it means for the rest of the year, it's largely going to be dictated on the demand environment and if that continues to grow as it is.

Raimo Lenschow -- Barclays -- Analyst

Perfect. Okay, thank you. And a follow-up question for Robert, then. On the AI side, so I'm one of those Delta Messaging customers, where are we in terms of AI understanding and giving us the right answer from what you see from your clients in terms -- and maybe let's try -- where are we on that journey?

Robert LoCascio -- Founder and Chief Executive Officer

We designed conversational builder so that a normal contact center agent who has conversations can create the automation, deploy it, and manage it. So, as I've said in previous calls, since we launched it in the beginning of the year, is when we launch an automation it's about a 70% completion rate and over about a forward period of time with the agent behind it we get into the 90s. So, basically, there still needs to be human hands to get it forward. We are releasing vertical templates for basically intents to goal. So we've taken our data set and looked at verticals in financial services, telco, and retail.

And we're releasing into the platform that there's like preset intents and then the best conversations to get that intent's goal. You can still modify it, but at least we'll get started on something that we know is based on the data that we have. I don't think we're any place close where things just run on their own and there's just like this magic machine that just figures out intents and then processes them, but we have the mechanism to scale very quickly. And that's why half of our interactions already are automated in a very short period of time. So we have definitely the way to do it. Perfect. Thank you.

Operator

And our next question is from the line of Richard Baldry with Roth Capital. Richard?

Richard Baldry -- Roth Capital -- Analyst

Thanks. Without getting into guidance for 2020, I'm sort of curious if you can think about seasonality now because you typically haven't seen sort of the second half hiring acceleration like you're going to see this year, some of the spending coming in in the second half at higher levels. So do you think it materially changes your thoughts on how the patterning on either revenue or expenses comes in 2020, particularly maybe on the revenue side given the faster closings? And then maybe as a follow-up, can you talk about these large numbers of new seven-figure deals, how you're sort of seeing the patterning in deployments of those? It's much more of them coming sort of sooner, quicker together. Do you have the resources to kind of support that? Is there any change to the durations of deployments, etc. Thanks.

Chris Greiner -- Chief Financial Officer

Rich, I'll take the first and Rob can take the second. We're not seeing anything in terms of timing or seasonality change in the business. If you look back at the pipeline, right, and the close date to the pipeline, there's nothing that would indicate it's heavy backend loaded or front-of-the-year loaded. So we're not seeing anything there that's changed over what we've observed over the last several years.

Robert LoCascio -- Founder and Chief Executive Officer

And on the deployment side, we are -- part of our hires is deployment. We need more deployment people, conversational designers. So we are hiring more people in the deployment area. So we do have, obviously, methods and frameworks to deliver based on what we've done over the last two years or so, but we definitely need more people here to help as we ramp customers. And I think more importantly is on the hiring side we have the client partners, the CPs, that work with our existing customers and that currently at a ratio of, I think, 1-to-8. But if you take like a Delta Airlines, can a rep really help more than 1 Delta or 2 Deltas, let's just say 2 airlines.

We're seeing as that we're going very deep with these customers and it's just not care, it's conversationalizing and automating the business. We're trying to bring down the ratios so the CPs can be more focused on more of a 1-to-4, 1-to-5 ratio, even lower when you see we go deep into the big, big enterprises, maybe just by work one account for the next three or four years because they have so much upside. So that's part of that team that's doing the implementations and we're landing and expanding in those very, very large enterprises.

Richard Baldry -- Roth Capital -- Analyst

All right. Congrats

Operator

Our next question comes from the line of Ryan MacDonald with Needham. Ryan?

Ryan McDonald -- Needham -- Analyst

Hi Chris congrats on a good quarter. I guess it's a two-part question, here. I guess first, on the additional incremental marketing, and that's for Chris. Previously, a lot of the customer assortments, which you've obviously had some nice conversions out of, it seemed like the purpose for that was really to help educate the marketplace. Now that you're seeing increased demand and sort of an increased velocity there, is the goal to lessen those numbers of events or lessen the investment in those events as well as you sort of increase quota-bearing sales there? And for Rob, from a technology perspective, with this Apple Chat Suggest and IVR Deflection has been a very popular seller, I believe, for LivePerson; just wondering what potential impact that has on sort of adoption for that moving forward? Thanks.

Chris Greiner -- Chief Financial Officer

Hey Ryan. Good to talk again. On the marketing front side, our team has done an extensive ROI analysis, not just on the heads but on the marketing events themselves. Interestingly, what we're finding is there certainly is a correlation with how closely together they're held, or in some cases how much distance you give between them to create and then close. You're right that in the beginning those events were about creating and building brand awareness and educating the market on the category.

I would say now they've evolved to where they're progression and they're closing events. They're not just all large scale anymore. Right? We're increasingly starting to take them directly to customers, giving them their own custom events. So do I see us decreasing the number of events? No. I think right now we're starting to figure out a formula for what our pipeline looks like, how many attendees we can get there and at what stage in the pipe they're in, and using them as closing and progression events. And then Rob.

Robert LoCascio -- Founder and Chief Executive Officer

So when it comes to the Chat Suggest, it's awesome. I mean we do have a lot of Deflect. When a call comes in, we then offer up "press 1" instead of taking a phone call, proceed in phone call, get messaged. But, if we can just take it right at when somebody dials and bring it right into Apple Business Chat and then right on our platform, we don't even have to have that step of "press 1." It's kind of like it's there. It's built into the operating system, into IOS. It's just -- I keep thinking what brand in the world is not going to be there. You're going to start seeing every brand you're going to call -- or a lot of brands you call, you're going to see, OK, they're letting me do something else. CEOs are going to see that, heads of marketing are going to see that, heads of cares are going to see that and going like "why don't we do that?" Just from that standpoint that you think about the billions of people, the hundreds of millions that have IOS devices, they're all going to have access to this. I think it'll just drive a greater adoption in the market. And once again we're wired in, obviously, to Apple Business Chat to handle those types of ramps and flows.

Ryan McDonald -- Needham -- Analyst

Got it. Thank you very much.

Operator

And our next question comes from Mark Schappel from Benchmark.

Mark Schappel -- Benchmark -- Analyst

Thank you for taking my question Rob, question for you. In your prepared remarks, you noted that you're seeing more opportunities to build new products and capabilities rather than going out and buying them. And I was wondering if you could just give some additional color of what you see out there that's driving that decision.

Robert LoCascio -- Founder and Chief Executive Officer

Well, I think there's two parts to it. One is I think we've taken a leadership position. Not that "I think" -- we've taken a leader position on building LiveEngage early and we've got great talent here that continues to add features to that. And I just think that talent is some of the best in the industry for what we want to do in conversational commerce. So as we've looked out into the market for other features, or whether we're doing an outbound feature, we just don't see anything that's compelling to buy based on even valuations that are out there. There's also the valuations of private companies are fairly high right now and it doesn't make sense to us. I'd rather put the money into our people. It's less risk. It's going to have a higher return. It's fully integrated into our platform.

And so right now we decided even though obviously we've raised over $200 million a couple -- in February and we're like, we should use this capital. Not all of it, obviously, we don't need to, but we should use it to deploy and build the things we know we need to finish to get conversational commerce where it should be. And even the commerce angle of payments, we're starting to look at the payment side of the platform and all the ability to do payments and messaging which doesn't exist today. We are really focused on how do we bring payments on to our platform because of hundreds of millions of dollars is transacted our platform every year and we're not capturing those on the platform. They sort of go off platform. So there are some big things we're working on with Alex leading that team. And many of you met him, and his group of people are doing a great job globally on the platform.

Mark Schappel -- Benchmark -- Analyst

Thank you. That's helpful.

Operator

And our next question is from the line of Zach Cummins from FBR. Zach?

Zach Cummins -- B Riley FBR -- Analyst

Hi. Good afternoon and thanks for taking my questions and congrats on a strong quarter. I was interested in hearing more about the automated food ordering system that you did for a large QSR customer. Can you provide a little more color around that solution and maybe the potential interest that you would have from other customers within that market?

Chris Greiner -- Chief Financial Officer

This is what's, I think, pretty cool about what we're doing, is that we didn't envision food ordering. We envisioned customer care at the beginning, if I go winding back to five years ago when we started thinking up this concept of this platform. So we approached one of the quick casual restaurants. Actually, it came through an acquisition we did with Conversable. They had quick casual. We had Friday's on that platform doing Alexa stuff with TGI Fridays and things. So through that acquisition we found a customer that was thinking a little differently, which they're kind of looking at most people are just walking in the door and buying. There are usually lines. They don't have an app or the app they have is limited use.

And obviously a lot through the third-party aggregate seamless and stuff like this. We just kind of came up with a joint strategy with them that we could do food ordering with automation. The menu comes up. Basically, you can automate it and you can have it delivered or you walk in, and you get it. And it's just going to create a more direct relationship. Once we get people food ordering through that, then we can proactively go back to them. We've got something new. How about something special for you? How about a reorder? We find -- we found with the TGI Fridays and Alexa, a lot of reorders, like a huge amount of reorders. High return on investment with those.

So there's so much more we can do once we're in the pocket of the consumer, and there's nothing in-between them and the consumer. They're not having somebody take them to a third-party app. So that's really where we started. And these guys are in the top 30. They're very large of big brand. We would all know them, but they're like in the top 30 of quick casual in the United States even though they're really well known. And I just think of one through 29. We can go one through 29, like you walk into a MacDonald's and you have those kiosks and stuff, and you're waiting on line and you have to go the kiosk. The whole thing doesn't make sense. You should be messaging in. You walked in. Your foods there. It's kind of like the food-to-you model in the stadiums that we do. You order; your stuff comes to you. So that's the type of thing that we're doing. So we'll see how it goes. They're very excited; we're very excited. I think it'll launch in about a month or so, but we'll see how it goes.

Zach Cummins -- B Riley FBR -- Analyst

Great, thanks for that and best of luck in the second half of the year.

Operator

And our next question is from the line of Jeff Van Rhee with Craig-Hallum.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Thank you. A couple for me, Rob. So on the -- I guess at a high level. You get a lot of questions about differentiation from peers. It's a very, very noisy landscape and everybody's jumping on messaging. Certainly, you were there early. It is tons of noise about bots and automation. A lot of it coming from very big brands with deep pockets. You talked about a lot of the features, but maybe just give us the quick pitch on what are the defendable barriers to entry. Where are your biggest advantages when you sit down to pitch a deal? What are the core -- the fundamental differentiators where people just nod and say, "got it, we're buying from you"?

Robert LoCascio -- Founder and Chief Executive Officer

If I look at the platform first where we are integrated into every endpoint out there on the third-party endpoints, like Apple and Facebook and all that, we have, I think, very special relationships with all those frontends and we're co-developing with them and doing a lot of things, I think, strategically versus other smaller players. Or even some big players you'll find, like in Apple's case, they've been removed now from the program because they were not bringing customers to the table like we have. So I think that's a big part, is having that strategic relationship with them. The next thing is that we know how to take a live conversation and automated conversation and make it happen at the scale.

And if you look at our automation capabilities, there were all these start-up bot providers. You're right; it was so noisy for about the last year or so. And it's really died down because a lot of brands just like pick stuff up and start playing with it, and they couldn't deliver on any real scale with it. We saw a lot of bad bots in the world. We've all seen them. We've played with them. With our technology, it's really about we have a great way to design, deliver, deploy, and manage the bots at scale. And we're able to do it with the agents who normally have these conversations. We have a lot of integrations with that technology.

And so we're able to use AI and bot, I think, in a different way that allows us to automate now 30 million conversations a month. And then on top of that we have this data set. So having this data set of hundreds of millions of messaging and chat conversations gives us in our data science groups a way for us to create more and more value out of that. As I was saying, we've got these prebuilt intents that we're delivering shortly. We have an analytics now, part of our platform that's all intent based, so people can build an intent-based business. All that data and managing it and making value out of it is something it I think is very unique to us and creates a strong ROI for using our platform over someone else's. And that's why we're, I think, scaling the way we're scaling today.

Jeff Van Rhee

I appreciate that. Okay, then just one other sort of area I want to dive a little deeper on, the 9 7-figure deals in the quarter. From a number of angles, how many of those were new versus existing customers and what was kind of the distribution of these cases?

Chris Greiner -- Chief Financial Officer

Looking at -- we'll have to do the math on the new versus existing, but just kind of going off the top of my head, pretty evenly split, I'd say. But the use cases ran the spectrum of care and sales and marketing. Also --

Jeff Van Rhee -- Craig-Hallum -- Analyst

Is there --

Chris Greiner -- Chief Financial Officer

Pretty evenly --

Jeff Van Rhee -- Craig-Hallum -- Analyst

Sorry, go ahead Chris.

Chris Greiner -- Chief Financial Officer

I was just going to say also pretty evenly split.

Jeff Van Rhee -- Craig-Hallum -- Analyst

And were there -- in the ultimate use cases in the service side, I mean were these -- what were the primary paying points? Were the bulk of these coming in on IVR Deflect, were in the InApp? Was it driven by some inbound messaging, WhatsApp, Facebook? And kind of a little more on the core drivers?

Chris Greiner -- Chief Financial Officer

It depends on which market we're in, but IVR Deflect is still a big point because people are calling and now they have a way to get out. We can move pretty much 30% of call volume will move immediately when we implement on the IVR Deflect. That's just people and 30% of the population saying like I'd rather take a message than a phone call. Then, behind that InApp is also pretty big -- a lot of the telco brands here we see a lot of volumes. Over in Europe, though, WhatsApp is huge. We're seeing WhatsApp actually soaking up InApp and also against other third-party messaging platforms. So WhatsApp in certain countries has 90% penetration, 80% penetration. And so the consumers prefer that and they're using that instead.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Got it. So, and then if I could, also on those deals, sort of a typical -- assuming that they are, Rob, but I want to just clarify that seven-figure ARR, 9 7-figure ARR deals. And in terms of the composition of a deal in, say, Year One, how much of that is -- I mean you've got a heavy recurring revenue model. How is that different in Year One? How much of it is PS versus recurring subscription revenue?

Robert LoCascio -- Founder and Chief Executive Officer

Most of it is subscription. It's a small portion, 15% or so over the lifetime of the -- every year would be PS. We kind of evenly split the PS hours across the year, but it's predominately all recurring revenue, or mostly recurring revenue. I don't Matt if you anything to add.

Matthew Kempler -- Vice President of Investor Relations.

Even our professional services component has a high subscription piece to it because customers are signing up for our teams that are going to help them optimize and move them along the transformation journey.

Operator

And our next question is from Koji Ikeda with Oppenheimer. Koji?

Koji Ikeda -- Oppenheimer -- Analyst

Thanks for taking my question guys and congrats on the quarter. Just a question here on the hiring plans and timing. Hiring for quota-bearing sales reps went really well in the first half and in fact you went beyond the goal, which I think is a good sign for pipeline trends in the future. And in fact you're upping the goal for the year-end, I think, by to around 100-plus and that's a big target. And we hear from a lot of software businesses out there that hiring is really tough out there, especially with enterprise reps. So my question is why has LivePerson been so successful bringing on new sales capacity and how should we be thinking about the hiring, the timing of hiring from here on out for the rest of the year and into next year too. Thanks for taking my question.

Christopher E. Greiner

Again, we have had -- I remember sitting with Rob and some of my colleagues and putting our hiring plan in front of them, and it was daunting. It was daunting on January when we said we were going to do a full year hiring in six months, and we outpaced it in May. And that was because we had a great funnel of candidates. Interestingly, I was just in the talking to my head of HR a few hours ago, and she let me know that on a year-over-year basis we're actually down a million dollars in agency spend. So I think we built out an internal recruiting engine that's been able to largely bring on these candidates. You're right, we set a goal at the beginning the year of 75. We hit 89 and we see ourselves going in excess of 100. Interestingly, if you look at North America and all the hiring that we've done in North America, we've only had one regrettable attrition. So not only are we being successful in hiring, but we're keeping them. And I think that's a reflection of the onboarding process that we're following, the training that we're giving them, and the continued development opportunities throughout their first three, six, nine months in the Company and making sure that they're successful and getting paid.

Robert LoCascio -- Founder and Chief Executive Officer

But it's like if we get down to its commissions. Like these guys, these people, can make a ton of money. Our top reps are making seven figures and they've got a whole -- I've said this before, there's a $50 million deal out there. There's a $100 million deal out there one day. So you have reps who are trying to look at the world like that and that's hard to find in software. And then you're in a dynamic market where you've got coal. You've got customers saying, OK, my competitor went live, why am I not on that? It just creates good opportunities. Sales people want to go where they can make money and ramp and scale themselves and their commissions, and this is a good place for that right now.

Chris Greiner -- Chief Financial Officer

Not to simplify a salesperson.

Operator

And our next question is one of Peter Levine from Evercore. Peter?

Peter Levine -- Evercore -- Analyst

Thanks for taking my question. Just to piggyback off of the prior question. So on the enterprise side it seems like a pretty attractive proposition for partners to want to work close with you all. As fee deals get larger, more transformative, it would seem like you have some currency with implementations, deployments, that are kind of starting to build up. Talk about your conversations that you're having or how are you accelerating those conversations today with the SIs, if not already having them.

Robert LoCascio -- Founder and Chief Executive Officer

We have a good many of the big ones already are partners of ours and we're joint selling. They're doing some implementation for us. We do have -- we'd like to get more pushed out. If we can move more of the implementation and transformation out to partners, it's our goal. So I think we're doing an OK job to be honest. I think we are very focused, obviously, on perfecting things and getting things right for us, and then taking that knowledge and getting it out to partners. And we have, I think, a long way to go to get them to scale with us, but that's the opportunity right now, is we haven't even really turned on the partnering. I'm talking about on the enterprise side. In the mid-market, they've got tons of partners and they're doing really well, especially internationally, but in the enterprise side they're doing good but there's a ton more to do with them.

Chris Greiner -- Chief Financial Officer

I think that's well said. There's a lot of opportunity there still.

Robert LoCascio -- Founder and Chief Executive Officer

Yes.

Peter Levine -- Evercore -- Analyst

Just a final question here. Obviously, APAC expansion is a focus of yours, but we've heard from a number of software companies this quarter that they've witnessed a slowdown in Asia-Pac. Well, not so much a slowdown but just elongated sales-like goals, and obviously a mix between executions and macro issues. But obviously you went live with WeChat and that's huge in Asia, but more of a sounding check just to see how that region is performing versus your expectations. Thanks.

Robert LoCascio -- Founder and Chief Executive Officer

We feel good about APAC right now. Our international operations are doing well. We have a new leader over in Japan who took over the reins a couple months ago and has done a really great job. We have just closed a ton of really quality brands; retail, banks, telcos. So we're seeing some good stuff. We're actually going to make further investments with, what Chris was talking about, the 10 million. We are going to put more money into that region and specifically into Japan right now and the other areas. We have Singapore now, we have a person in. So we're only at the beginning of all of this. So we're not feeling anything right now in markets. It's just our ability to focus, fund, and execute. That's our risk. It's not like macro. We have to focus, fund, and execute on everything we do. So each market is an opportunity for us to grow and that's what we're doing with it.

Operator

And we have reached the end of our call today. I will now turn the call over to Rob LoCascio for closing remarks.

Robert LoCascio -- Founder and Chief Executive Officer

Thank you, operator. So just to end with a few key points. We are seeing unprecedented demand and activity in the conversational commerce space, and this is obviously translating to record contract signings and surging sales pipelines. The industry, and our business, is definitely at an inflection point and we're being presented with an opportunity to compress the timeframes of how quickly we can deliver on our vision and transform the brand to consumer communication and relationship. I'm really confident that our investments and the increased investments -- and we don't take it lightly making these investments, but that we need to make them, that they're going to things that are knowns. These are things that our salespeople, product, and things that we know our customers want from us.

And finally, as I was saying before, we have five airlines globally and three in the U.S. I think of it as hundreds that are going to need, just in that vertical, conversational commerce enablement. And this goes for every industry globally. And this is why we have such a tremendous opportunity ahead of us and we're working now to just accelerate the overall momentum of the business and just capture the market as quick as we can. Aligning with our shareholders and obviously all us even in this room are shareholders -- I think all of us want to get every customer on our platform. We want every airline. We want every bank. We want every telco. We want every retailer. And that's what we're after right now and we can see we can do this. We just need to focus, fund, and execute.

So with that, thank you and we'll see you on the next quarter.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Matthew Kempler -- Vice President of Investor Relations.

Robert LoCascio -- Founder and Chief Executive Officer

Chris Greiner -- Chief Financial Officer

Samad Samana -- Jefferies LLC -- Analyst

Steve Enders -- KeyBanc -- Analyst

Brett Knoblauch -- Berenberg Capital Markets -- Analyst

Raimo Lenschow -- Barclays -- Analyst

Richard Baldry -- Roth Capital -- Analyst

Ryan McDonald -- Needham -- Analyst

Mark Schappel -- Benchmark -- Analyst

Zach Cummins -- B Riley FBR -- Analyst

Jeff Van Rhee -- Craig-Hallum -- Analyst

Koji Ikeda -- Oppenheimer -- Analyst

Peter Levine -- Evercore -- Analyst

More LPSN analysis

All earnings call transcripts

AlphaStreet Logo