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Liveperson Inc (NASDAQ:LPSN)
Q4 2020 Earnings Call
Feb 25, 2021, 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 Fourth Quarter 2020 Earnings Conference Call. My name is Matt, and I will be your conference operator today. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Ms. Idalia Rodriguez. Please go ahead.

Idalia Rodriguez -- Investor Relations

Thank you, Matt. Joining me on the call today is Robert LoCascio, LivePerson's Founder and CEO; and John Collins, 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 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 you, 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 for the quarter, are available in the Relations section of LivePerson's website.

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

Robert P. LoCascio -- Founder and Chief Executive Officer

Thanks, Idalia. Thank you for joining LivePerson's Fourth Quarter 2020 Earnings Call. We had an awesome quarter with records across revenue, profitability and customer wins. LivePerson delivered one of the strongest quarters in our history. Revenue for the quarter was $102.1 million, making Q4 our first $100 million quarter. Year-over-year growth for the quarter was 29%, which exceeded the high end of our guidance range and marked our third consecutive quarter of 25% plus revenue growth. For the full year, we grew revenues 26% year-over-year, exceeding our long-term growth of 25%, one year ahead of plan.

A continued focus on internal automation and enhanced financial discipline also increased our operating leverage. Q4 adjusted EBITDA of $18.2 million or 18% margin exceeded the high end of our guidance range and translated to a second consecutive quarter of hitting the rule of 40. We ended Q4 with ten seven-figure deals, a new record, four of which were new logo wins. We have seen the return of momentum in new logo acquisitions with new logo annual contract value doubling year-over-year, which is complementing our strong growth within our existing customer base. Before going deeper into the key wins of the quarter, I'd like to take a step back and share a few thoughts on what is driving our success. four years ago, we shifted our strategy to focus on conversational AI and automation.

The rise of AI represents one of the greatest leaps forward in technology across all industries. Because of its contribution to our success and its central role in the strategies we're executing against, I'd like to unpack what AI really means to us. When we speak about AI, there are several dominant categories. There's robotics from companies like Boston Dynastic, GPU makers like NVIDIA, and software companies like Google, Microsoft and Amazon that make AI technology in general purpose tool sets that can be applied to things like image processing to autonomous vehicles. In simple terms, AI enables the processing of outcomes and goals at scale beyond what a single or multitude of human brains can do at any normal capacity. AI starts with having a very large set of unique data.

Our data set is unequivocally one of the largest consumer engagement interactions in the world. Analyzing that data set, which in itself, we have developed a set of powerful tools allowed us to think exponentially about what big processes and challenges can we solve that exists between a brand and its consumers. For example, on average 30% of conversations that happen with a telco or credit card issuer around bill pay. Therefore, we created an AI to Automate bill pay, which can deliver tens of millions of dollars in savings for a company. And in order to deliver scaled automation like the bill pay example across tens of millions of transactions a month that ride on our platform, we had to do things like build our own NLU, which is a process that interprets human language in a unique setting like customer care.

Then we had to build the tools to extract, analyze and annotate the data to make the data rich. And as we just announced yesterday, we launched AI annotator, which takes normal contact center agents and puts them in the middle of AI automation by enabling them to enhance and tag conversational data sets. Let me take all that data, that rich data. We have the tools to create them, what we call consumer experiences or what's known as chat box. And finally, we created a world-class business messaging platform to deliver those automations to numerous endpoints. Overall, nearly 70% of our messaging conversations rely on this AI technology stack. Over the past four years, we have built a lot of intellectual capital and have filed nearly 100 patents from a team that includes some of the best data science and engineering talent in the world. Our 4-year lead unique data set, talent, intellectual property and vision make us definitely unmatched against any competitors in the contact center space.

And also against the likes of Google, Amazon and Microsoft when it comes to conversational AI. Volume on the conversational cloud skyrocketed during Black Friday and Cyber Monday with peak conversation volume growing 200% year-over-year. Our latest global survey in September of 2020 reveal that 85% of consumers worldwide want the ability to message with brands up from 65% the previous year. And 75% say they are more likely to make purchases if they can browse and get answers over messaging. The shift in consumer behavior is a tailwind that we expect will only intensify over the next few years, driving a shift in traditional retail shopping, web and in-app-based e-commerce to conversational commerce. In fact, we're seeing a massive opportunity ahead with retail brands that want to use the conversational cloud to drive incremental sales and revenue.

I'll illustrate with a few examples of our big wins in the quarter. One of our notable new logo wins is a multiyear deal with one of the world's largest crypto currency exchanges, marking a strong entrance into this rapidly growing segment. Their platform hosts millions of users with billions of trades globally as they ramp their business to the use of human agents to answer questions that become untenable. Previously, customers were using a system from one of the leading CRM providers with a focus on using email and online ticketing as a primary communications channel. The inefficiency of such a system created a ton of operational issues that created tremendous customer frustration. They became a customer because they are aligned with our vision of AI and are able to see how they can quickly ramp up automation using our tool sets like content manager and conversation builder.

Another notable win during the past quarter is strategic multiyear, multimillion-dollar agreement with Williamsville Group, a global top five gaming company with millions of consumer interactions per year. LivePerson in William Hill will implement and expand the conversational cloud platform across the company's key brands, including William Hill and Mr. Green. The deal was closed within three months. The goal of LivePerson replacing the legacy chat platform and quickly re envisioning the consumer experience. They will take advantage of LivePerson's customer service, sales and marketing solutions, including our highly differentiated 2-way product and messaging capabilities. With William Hill on board, three of the top global sports, booking and gaming companies are now LivePerson customers. Another exciting win in Q4 is with one of the world's top COVID rapid antigen in home testing companies.

We were introduced to this opportunity through one of our existing banking customers who is seeking a scalable testing solution to safely bring back its employees, its branch employees and trading for employees back to work. We developed an AI-powered conversational experience that guides an employee to take the test, that analyze their results and then generate a health pass, so the employee can go back to work with a high level of efficacy. This was a 7-figure deal secured within a record 11-day sales cycle as part of a number of offerings we have created for COVID-19, including ones around vaccinations, which we are deploying with state governments. In addition to the robust momentum in new logos, we also signed multiple expansion deals with existing customers in the last quarter. The top five U.S. airlines signed an upsell in an effort to consolidate their tech stack and add our social media capabilities to their messaging agent repertoire.

This airline represents the first flagship brand to leverage our new platform social messaging capabilities to communicate with consumers across platforms like Twitter, Facebook and Instagram. Partners continue to be a key part of our go-to-market strategy, especially around new logos in 2021. the highlight of our partnership expansion in Q4 was with IBM Global Business services. LivePerson and IBM will work together to market and deliver an AI-based solution to clients across industries, strengthening our go-to-market reach In fact, three of our key 2020 were facilitated by this partner. Infosys joined LivePerson last quarter in the first of its kind 360-degree channel partnership. We are seeing great progress. And during the quarter, we developed a strong pipeline for the conversation cloud with an Infosys's client base. We're working closely with key vertical groups within Infosys, including consumer retail and logistics, financial services and the TMT group.

Looking ahead to 2021, we'll be extending our focus to go after retail and commerce opportunities, and we'll continue to build out a number of key areas of our platform, including payments, social media, product and messaging and ad-based consumer intelligence and targeting capabilities. We see the potential for sales and marketing use cases to more than double as brands look to enhance traditional advertising and shopping experiences. Our latest estimate suggests the conversation with cloud is already supporting approximately $5 billion in annual transactional value, and we're just getting started. And finally, given the success of gain share in our partner network and the renewed momentum in new logo acquisitions, we're making strategic investments to continue accelerating growth from these go-to-market channel.

And with that, I'll turn the call over to John to provide an operational update and more color on our guidance. John?

John Deneen Collins -- Chief Financial Officer

Thank you, Rob. We closed 2020 with exceptional business and financial performance, surpassing previous records across several key metrics in the fourth quarter, including revenue, profit, the quantity of 7-figure deals, average revenue per customer, and billable platform usage. We exceeded the high end of our guidance range for the top and bottom line, once again, demonstrating our ability to enhance operating leverage while aggressively growing the business. Overall, these results reinforce our position as a clear market leader for conversational AI and demonstrate the ease with which our platform can be adapted to meet accelerating demand across a broad spectrum of use cases, industries and geographies.

Building on the latter point, the world has been undergoing a steady digital transformation for decades but the pace of that transformation, as we've all observed, accelerated significantly in 2020, including usage in the conversational cloud, the agility of our platform and developer tools customers to expand from saving costs and enhancing customer service experiences to generating new revenue streams from conversational commerce. In total, as Rob mentioned, we estimate that the gross value of commerce on our platform has increased from several hundred million to approximately $5 billion in 2020. With long-term provision taking shape and significant forward momentum, I'm excited to expand on our 2020 results and plans for the year ahead. Before shifting to the fourth quarter numbers, I think it would be helpful to put our 2020 results into perspective.

On the fourth quarter call one year ago, we issued guidance of 21% for full year 2020 revenue growth and reaffirmed our long-term plans to reach 25% in 2021. With that context top of mind on exceptional execution by teams across the company drove the 2020 full year revenue to $367 million or 26% year-over-year. Surpassing even our long-term growth expectations one year in advance. As I alluded to a moment ago, customer expansions into conversational commerce drove the bulk of that upside. In the fourth quarter, total revenue grew 29% year-over-year to $102 million, exceeding our previously issued guidance of $98 million to $100 million or 24% to 25% year-over-year. As Rob mentioned, the fourth quarter marked our third consecutive quarter of revenue growth at 25% plus and our first quarter to exceed $100 million.

Unpacking the upside there, continued momentum in new logo demand, leverage from our partner network, gain share and over performance by our consumer segment all contributed materially to those results. In terms of new logos, annual contract value is approximately doubled across the board on a year-over-year basis. Driven by a corresponding doubling in enterprise new logo counts. The successful side with new logos in the third and fourth quarter is strong evidence that we're seeing a resumption of normal new logo pipeline growth. The continued success of our partner strategy also merits highlighting. Partners have materially enhanced our opportunity in levered by multiplying our feet on the Street and establishing a robust ecosystem of systems integrators. In the fourth quarter, this strategy contributed two 7-figure deals, bringing the total to 10 and breaking our previous record for 7-figure deals in a single quarter.

Within total revenue, B2B, hosted software and consumer segment all grew 29% year-over-year. Game share performed in line with expectations at 15% of revenue, from a geographic perspective, U.S. revenue grew 37% year-over-year and represented 63% of total revenue. International grew 18% year-over-year and represented 37% of revenue. Significantly, we continue to build momentum in EMEA, with contract signings growing over 50% year-over-year in the fourth quarter. Average revenue per customer grew 35% year-over-year, reaching a new record of $465,000. Revenue retention continued to surpass the high end of our target range of 105% to 115%. In terms of industry trends, year-over-year growth was led by retail and consumer, followed closely by financial services and technology. Retail and e-commerce, a industry within retail and consumer was also the fastest-growing in terms of buildable platform usage driven by demand for conversational commerce and the incremental revenue we generate for our customers.

Overall, billable platform usage continues to accelerate in 2021, nearing the high-water mark set during the fourth quarter seasonal peak when volumes were up 200% year-over-year. Turning to the bottom line. Fourth quarter adjusted EBITDA was $18 million or 18% margin and exceeded the midpoint of our previously issued guidance by $8 million and marked the third consecutive quarter of double-digit margin. We also operated the rule of 40 for a second consecutive quarter. Overall, margin expansion was driven by top line performance, increased budgetary discipline. And internal automation, which reduced hiring requirements throughout internal operations. Approximately half of the upside above our previous guidance was a function of delayed investments in R&D and go-to-market capacity that we are accelerating in early 2021.

For the full year, adjusted EBITDA in 2020 was $38 million, translating to a 10% margin. In terms of free cash flow, we improved cash burn by $98 million year-over-year, earning only $8 million for the full year. Compare that to our original plan to cut cash burn by $50 million in 2020. We also materially strengthened our balance sheet by raising $518 million in 0 interest convertible notes maturing in 2026. Turning to the full year guidance. We closed 2020 with exciting forward momentum, giving us confidence that we'll continue to accelerate growth. As a result, our guidance range for 2021 revenue is $458 million to $466 million or 25% to 27% year-over-year.

Our guidance range for adjusted EBITDA is $33.5 to $41.5 million or 7% to 9% margin. Note that as we guided during the third quarter call, we expected full year margin in 2020 to be approximately 8% due to planned investments in go-to-market capacity and product development. Those are key growth drivers. And as such, we are accelerating those investments in the first quarter, and this is the key reason we expect similar margin for the full year 2021. In terms of go-to-market capacity, we are presently working to increase quota carriers from approximately 80 to 110. As for the first quarter of 2021, our guidance range for revenue is $103 million to $104 million or 32% to 33% year-over-year. Finally, our guidance range for first quarter adjusted EBITDA was $5 million to $7 million, or 5% to 7% margin. Before taking questions, I'll briefly reiterate several key factors underpinning our success in 2020 and expectations for the year ahead. Platform usage continues to accelerate with the 2021 levels already approaching the fourth quarter seasonal peak.

We broke our previous record for seven-figure contract signings in this single quarter. New logo contract value has doubled year-over-year and are, once again, materially contributing to our growth. Our strategy is to enhance operating leverage on the expense side through internal automation and on the go-to-market side through our partner network are both exceeding expectations. And perhaps most importantly, our vision for conversational commerce has taken root across the market, and we expect our platform of sales and marketing capabilities to continue driving upside in 2021.

Operator, we're now ready to proceed with questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] Our first question will come from Richard Baldry with ROTH Capital.

Richard Baldry -- ROTH Capital -- Analyst

Given your growth has accelerated beyond and faster than you had expected, can you talk a bit about status of your organic growth engines. And I heard the 80 gross to 110 figure for headcount. But how do you feel about how mature the group you've got in? Do you feel like there's some catch-up to do because it sort of outperformed you faster than you thought? Is there something that would sort of gate early year growth, given the performance you had sort of in the second half of 2020?

Robert P. LoCascio -- Founder and Chief Executive Officer

Thanks, Richard. Yes. I mean, we feel good about the current team. Obviously, they performed very well last year. If you remember, we -- the year before, we did a lot of hiring of that team and then it takes six months or so to get them a little bit longer to get them up to the capacity. So the team we have is, I feel very strong in season and now we're ready to add another group to expand because of the demand in the market. As you know, also, we have partners. So we got very focused on partners last year, and that's also showing good results, especially on the new logo side. So I think we feel good about the current team, the leadership is doing a great job. And we just see this demand out there right now that we want to be able to go out and land and sell.

John Deneen Collins -- Chief Financial Officer

And just, Richard, I would add that from a productivity perspective, measured in terms of quoted payment per rep, we've seen that increase every quarter in 2020. And that's driven by automations that allow reps to focus more on selling and less on data entry and pipeline analysis. And in addition, we have fully automated and accurate sort of bookings prediction model that allows management to course correct early in the new quarter and optimize the playbook with machine prescribed actions that increase our win probabilities. So with that machine starting to take shape, we have confidence to continue increasing in our go-to-market capacity.

Richard Baldry -- ROTH Capital -- Analyst

Okay. And can you maybe look at the partnership side a little deeper about how that works in terms of economics, maybe? And how far the partners can take you through a sales cycle and/or even into an implementation deployment cycle, sort of how much burden is on you guys versus them? And what's the rewards to kind of keep them motivated?

John Deneen Collins -- Chief Financial Officer

Yes. So in terms of the economics, we typically will have a presale of credits to the partner that the partner receives a discount. They then sell those to their installed base. In terms of the latter question on -- who does most of the work upfront, right now, we're putting most of our PS work through these partners. And our goal is to put all of our PS work especially for those industries which we have a well-established playbook into the hands of our partners. So right now, there's a healthy balance of LivePerson helping with implementation and the partners running with that themselves. Our goal is for the partners to be fully self-service on our platform in order to serve those end customers.

Operator

Our next question will come from Zack Cummins with B. Riley.

Danny -- B. Riley -- Analyst

I was wondering -- this is Danny on for Zach. I was wondering if you guys could comment on any changes you've seen in the messaging landscape. Especially as peers like Zendesk are investing into China or you guys mentioned that you guys started investing pretty early on. But I was wondering if you could comment on the competitive environment.

Robert P. LoCascio -- Founder and Chief Executive Officer

Yes. I mean, we pioneered the business messaging offers four years ago, we released it. And so the pure messaging platform is the best in the world, the AI capabilities, as I explained, because as you scale conversations, what the customers want is automation, and so a lot of them are treating messaging as a channel, and yet the majority of the interactions they have, for instance, on this crypto currency exchange, one of the largest in the world. They use -- they actually use that one. And we're replacing it because they're predominantly strong with ticketing and the email. And then they've added messaging capabilities. But if you look at a customer like that, that wants to -- has millions and millions of conversations, they need to power. They can't power them with humans doing messaging as a base level automation.

They want to create an asynchronous communication strategy with messaging, but they want all the power to automate those conversations at scale, and that's really where we're winning the business, and that's where we continue to be, as I said in the opening remarks, sort of unmatched because of our data sets and then all the IP now we have on that side, we continue to invest tens of millions of dollars into it every year. So we've got a strong leadership position right now there. But I expect a lot more to come in. I mean messaging is hot. We knew that years ago when we went into the business, and we made a big bet, but now it's like it's hot, and there's a lot of people entering, but it's mostly -- I see small business mid-market stuff. SMS but doing the real scale automation, where the real money is, that we are owning in that area right now.

Danny -- B. Riley -- Analyst

Got it. And I was wondering if you could speak about some of the opportunities that you're seeing outside your core verticals.

Robert P. LoCascio -- Founder and Chief Executive Officer

Yes. I mean, it's really interesting. The focus -- so this year, just -- I mentioned in the remarks that retail, sales and marketing is where we're going this year. We definitely have laid a lot of ground in the care operations. And we will continue doing that. But we are seeing a lot of opportunity in the retail area. And retail is definitely transformed because of the changes in obviously, stores and stuff like that. But there's just a real focus on digital and where we have one of the biggest jewelry companies in the world, and they're doing amazing things. I saw their CEO on Kramer last quarter and talk about how their whole online business is booming, and we're powering that. So we see a lot of opportunity on the retail side. I talked about like we have the gaming side, even the crypto currency exchange, one of the largest COVID testing in home.

One of our customers and one of the largest banks came to us and said, we want to get our branch, employees back to work. They were doing PCR tests, which are slow, take three days to get, they want it in home antigen tests, but they needed an AI that the employee could be in their home, open up the mobile device, being instructed how to take the test with high efficacy, get a result, report that result and then get a health pass. And we built all the connective tissue for that, and that launched last week. And so we're seeing -- we're bringing branch employees back to work. So there's all these cool things going on right now that we can power because of the -- it's really AI and automation. Some of it is messaging, but it's really around all these different things. So it's interesting. This year is going to be interesting, especially on the retail side.

Operator

Our next question will come from Rajim Bhatia with William Blair.

Chris -- William Blair -- Analyst

This is Chris on for Rajim. Congrats on the quarter. I was wondering if you could a little bit about some of the early success you may have seen with rolling out the payments offering. And then if you can give any color on when we might expect to see that layering into revenue?

Robert P. LoCascio -- Founder and Chief Executive Officer

Yes. I mean, we're seeing some good usage of the platform right now. We have not given any thinking of how that's impacting the revenues this year. There will be some of that. I think next quarter, we'll talk a little bit more about it and give some examples because we're seeing some good usage of the platform. But yes, I mean, our whole strategy around commerce starts with payments and the ability to take payments. And that's why going after these retail opportunities, and the conversational commerce opportunities this year is predicated on that platform. So as we, once again, sign more and more of those types of customers. We'll talk about how the payment platform is driving that, but we feel really good about it.

Chris -- William Blair -- Analyst

Awesome. And then I just wanted to check-in, see if you could offer some color on where you stand on migrating customers to CPI contracts? And if you've experienced any pushback on that so far?

John Deneen Collins -- Chief Financial Officer

Rajim or Chris, no pushback in that front. We migrated about 15% and of the base in 2020, which was ahead of what we expected. And we have about 2/3 up for renewal in that respect in 2021.

Operator

Our next question will come from Mohit Gogia with Barclays.

Mohit Gogia -- Barclays -- Analyst

I offer my congrats on a really strong entry year here. So my question is on the land and expand motion. I mean it's great to see that the new logo ads are sort of like I think you as mentioned that it's impact to prepayment pandemic levels. And obviously, the new logo ACV Dublin again is quite a good parameter. My question was on the expansion rate side. I think you have been coming ahead of a target range share for the last few quarters, right? And if we look into 2021 and beyond, I was wondering if you can talk about the sustainability here, right? I mean, obviously, we know that COVID accelerated the secular adoption, but it just woke customers up to the reality here, right? So if you can speak to the sustainability of growing that usage, growing in that expansions and retentions among the customers in '21 and beyond? It will be very helpful. And then I have a follow-up question.

Robert P. LoCascio -- Founder and Chief Executive Officer

Sure. The way we see it is that the pandemic was kind of a forcing function for adopting digital solutions. And because, as we discussed, automation is so key to powering those digital solutions at scale, it really is very sticky. So in a post pandemic world or years from now, when you built the machine to solve a problem for a customer or a brand and it does so effectively at a high level of customer satisfaction, you're not going to revert and put that problem back into the hands of human labor, which is more expensive and less efficient for that problem that you've solved.

So from that standpoint, our automation, our increased usage is highly sticky. And on top of that, I would say that from an expansion perspective, we're only penetrated today. Lastly, at the beginning of last year, we were penetrated into our base in terms of the fraction of total conversations across voice messaging, chat we service on the platform, approximately 10%. And our latest estimates have that number more in the range of 15% to 20%, again, on average, across our entire base. So that leaves a lot of room for further expansion.

Mohit Gogia -- Barclays -- Analyst

That's very helpful color. And the second question I had was just a follow-up with the CPI question asked earlier. Can you give us an idea when you migrate these customers over to the CPI contract? what's the change you see in terms of the customer spend? And that's it from my side.

John Deneen Collins -- Chief Financial Officer

It varies, of course. But typically, we see up-sell. There are some where there's an initial period of lighter revenue coming off ELA. And then as they ramp into the high end of the usage that we've contracted with them, we see better results in the form of upsell and overages. But in general, these are upsells that take place. And to cite an example from last year, very rapidly, we converted a top bank from an ELA to CPI contract and within just a couple of months. We had a seven-figure upsell because of how much volume they routing to our platform. And of course, because of the CPI structure. So in general, it's a very good tool for upsells.

Operator

Our next question will come from Siti Panigrahi with Mizuho.

Siti Panigrahi -- Mizuho. -- Analyst

Congratulations, that's a great quarter, but also I just want to dig into the guidance, very impressive guidance for 2021. So you talked about ELAs converting to CPI contract, but what are your other assumptions in terms of that -- when you guided 25% to 27%, mainly gains, do you expect that to be at this 15% level? And then what sort of trends are you seeing on those CPI contracts that coming up for renewal in terms of growth coming from there?

Robert P. LoCascio -- Founder and Chief Executive Officer

Sure. So as you pointed out, gain share is certainly part of the equation, has a variable source of revenue. We don't have as much visibility into it as we do with recurring revenue. But nonetheless, we have a large pipeline that we're chasing right now. Another core factor here are all the new use cases that have been driving revenue for us. In 2020. We're expanding on those use cases in almost every industry, which, again, is a major factor. And then overlaying that is commerce, conversational commerce. And our vision for that, as I said, is truly taking root in the market.

And the demand for our solutions, the demand that consumers have to simply have a conversation with brands before they purchase a product is driving adoption of the platform. And in part, it's driven by the consumer. And in part, it's driven by the revenue, the incremental revenue that we're generating for our customers. So because of those trends, we have confidence that we'll continue to accelerate from where we were.

Siti Panigrahi -- Mizuho. -- Analyst

Okay. And then on the investment side, you talked about that go-to-market investment. So are you planning to add more headcount, quota getting cell type? Or is there any other areas you're investing?

John Deneen Collins -- Chief Financial Officer

I mean, we are -- oh, go ahead, Rob.

Robert P. LoCascio -- Founder and Chief Executive Officer

So yes, we -- obviously, we've got partners. We have our direct sales quota accounting reps, we have a part of our business call which start call marketplaces where we are working with partners that already have a bunch of mergers and a bunch of small businesses, and we put an overlay on top of that, and we can fire up thousands of these small businesses on to our platform. So there's some -- there's areas that we're investing in those key areas today, but it's -- those are kind of the three areas that we're looking at. John, if you want to expand on that form. So there's some -- there's areas that we're investing in those key areas today, but it's -- those are kind of the three areas that we're looking at. John, if you want to expand on that?

John Deneen Collins -- Chief Financial Officer

Investments there, not to get too technical, but probabilistic dialog management is an area of focus for us as is natural language generation, which we think collectively will dramatically enhance the consumer experience and our overall automation capabilities. We're also focused on making implementation faster and easier, both for us and for our partner network. And that includes or necessitates the addition of many more out of the box integrations for the enterprise.

Siti Panigrahi -- Mizuho. -- Analyst

That's great. Just want to clarify also that what sort of efficiency you're seeing in terms of your initiate of on leveraging data and mainly on the back office side? And also, any kind of benefit from now that you're working from -- remote working permanently?

Robert P. LoCascio -- Founder and Chief Executive Officer

Yes. So us being efficient, I mean as from working from home, I mean, we're obviously not traveling and obviously, that was a strategy around sales, but things have changed. So you see some sales cycles have come down because you don't need to see somebody face-to-face and all that. I mean -- so I think we're obviously seeing a lot of efficiencies on marketing and travel and all of that. And we're also just rethinking how we're selling and there's some things we're doing with video, like all of our reps are using video, and there's a lot of stuff that we're rethinking because we've got to continue having a certain level of engagement with prospects and customers.

But obviously, we -- the old model one -- of the big conferences and direct sales folks flying on planes. And obviously, I think this year, it's going to be like that. And it just may be the way it is for the future. And obviously, we're doing more on our platform to make it self-serviceable that our customers can use the platform, but they don't need people go in and sell them -- and we can do everything remote as we've shown and scale the business quite nicely. So right now, we're in a good place with -- and we're going to stay like this, where we're not going to go back to offices. We've given up our offices. We're in the middle of it. So we're building a new way to work, but it's definitely not back in offices.

Operator

Our next question will come from Sterling Auty with JPMorgan.

Drew -- JPMorgan -- Analyst

This is Drew on for Sterling. I was wondering if you could clarify the commentary around the $5 billion of annual transactional value. Is that the GMV equivalent moving across the platform? Or what is that exactly?

Robert P. LoCascio -- Founder and Chief Executive Officer

That's correct.

John Deneen Collins -- Chief Financial Officer

That's correct, GMV, yes. Yes, that's the GMV.

Operator

Our next question will come from Ryan MacDonald with Needham & Company.

Ryan MacDonald -- Needham & Company -- Analyst

Rob, I'd be curious, you mentioned how sales cycles have continued to come down. I'd love to know, I think that's driven more by sort of increased demand in the end market or improved sales productivity, I guess, as you're looking between the mix? And I noticed the success that you're seeming to have more outside of the core customer service use case. Do you feel like we're hitting an inflection point in terms of -- sort of knowledge and understanding in the end market of different applications for conversational AI?

Robert P. LoCascio -- Founder and Chief Executive Officer

Yes. So on a sales cycle, one, we had some very short sales cycles. There's -- it's really companies that want to do very scaled automations and I mentioned a couple of them, but that's where they just scaled automations. And I mentioned a couple of them, but that's where they just -- they come in and they're like, I got to go. It's one of the biggest ones. And they're scaling massively right now and they're suffering. And so they just got to go. They got to get automation quickly. So the messaging parts are very important as a delivery mechanism.

And there's definitely a maturity in thinking I can say that, like, remember, we launched four years ago and like T-Mobile is the only customer in the world when we launched that actually did business messaging. And now that's radically changed. So it's definitely in people's minds that this should be the way that a brand can communicate with their consumers. So that kind of checks that box. And the next level is how are you going to do that at scale and what tools are you going to use in automations. And we've gotten much better at the set of tools we have are really rich around how we can even bring -- we just announced we can -- this whole agent annotator that if you have agents instead of them taking messages, they now take data.

So they're like data annotators, and they can make that data and prepare it to be in a place to be annotated. So I think as our tool set has gotten richer and it's easier and is more with it. It's opened up more use cases, like the antigen in-home test. I mean, we brought that to market pretty quickly in a matter of weeks. Because we have these really robust tool sets that we put together and then we can give a solution. So that's really what's happening in the market. And I think this year, there's going to be a lot of other interesting use cases as automation and AI take hold in many different industries.

Ryan MacDonald -- Needham & Company -- Analyst

Excellent. And as a follow-up, more general housekeeping. I think historically, as we've looked over the past few quarters, you've talked about total deal counts and mix between new versus existing. Obviously, you saw some very strong metrics on the 7-figure deals, but could you provide the total deal counts and the mix between you and system?

John Deneen Collins -- Chief Financial Officer

Yes. I'll provide maybe some high-level color in that regard. So I think, one, while deal counts overall were down, I think it's important to take a step back and consider our broader results, right? The significant beat that we had on the top 10 bottom line, because of the deals that we did close. And while smaller in number, those deals were far greater in value. So for example, as I think we've mentioned already, we put 17 figure deals in the fourth quarter, and four of those were new logos.

Overall, average new logo contract values double on a year-over-year basis. And I think that's exactly the kind of trend we want to see in our new logo business and business in general. And within enterprise, however, new logo counts also doubled on a year-over-year basis. So we're seeing a lot of positive indicators of demand from that perspective as well as, of course, the top line metrics that we've reported.

Operator

Our next question will come from Jeff Van Rhee with Craig-Hallum.

Jeff Van Rhee -- Craig-Hallum -- Analyst

So a couple for me. Maybe, Rob, just to start with you. I'm curious the sort of the higher level competitive landscape issue. You moved down market due to smaller enterprises. At what point is a messaging capability from somebody like a Zendesk enough? Or you see some of the CCaaS guys bringing to varying degrees messaging. And I guess the question is, what point is the customers just say, this is a platform.

We've got to do super innovative things here, and this has got to be very robust, and we got to go for best-in-breed versus it's good Enough if it's part of a suite. So embedded in there, obviously, is, are you -- because your deal size is rising, do you find yourself just seeing bigger and better win rates at the high end and these very complex deals and the further down market you get when rates go down or customer interest goes down?

Robert P. LoCascio -- Founder and Chief Executive Officer

No, I don't think so. It's -- as a matter of fact, we've introduced this marketplace platform that allows us to go after firing up thousands of company certain, we have -- there's a company in the U.K. They're the yellow pages of the U.K., the largest, but they have all the -- have a digital property where there's tens of thousands of small businesses on there. And because they transformed the digital over the years. And we built this platform to enable all those businesses to create conversational experiences with automation. So this isn't a plumber taking a message. This is I can message into that plumber, and it gives me like what are they open, it gives us like basic information, and it's worked quite well. Then it goes to a live person from there.

So I don't see it as any different. Obviously, it's the automation capabilities, even in the smaller businesses, they want to automate, and that's where these companies kind of fall down. But their messaging platforms, they're not that good. They're not asynchronous. They don't scale very well. And it took a long time. We've been on this for a while. It took a long time to build that. So we feel like we still get a world-class messaging platform, and then we've got these really powerful tools on top of it. So we're going after that space. And we're going to expand different product features. And we went after social. Some of the social guys are starting the like want to get into messaging.

So we added the social capabilities, and we're going to continue. We have a full group on it.

And there -- we're taking social platform business away from those guys to get it into a single platform. All I have to do is a voice, but that's the last horizon. And that's -- it's basically -- we've got all everything else covered, except, I mean, the voice platform. And so we just may head in that direction and create more of an Alexa style voice just to bring that onto our platform, and that's something I wouldn't be surprised if you saw something like that from us because I'm just kind of would like to take that volume and automate it. I really want to automate that stuff. So that's kind of where we're at. So that would kind of finish off the care. And then we get all the sales and marketing components and all that stuff.

Jeff Van Rhee -- Craig-Hallum -- Analyst

And would that be with respect to that, the voice capability, something you're in process on developing? Is that a build by, I guess, is the question?

Robert P. LoCascio -- Founder and Chief Executive Officer

No. I think we'll talk more about. I didn't put it in the prepared remarks, but we're looking at dealers. We already obviously connect to the voice platforms that are out there. So even Amazon Connect and all that, we have integrations. But I think there's more we want to do that. Obviously, our engineering team, and Alex, our CTO, was -- these are the core engineering team from Alexa. So we -- when I brought Alex on three years ago, the concept was, one day we're going to power like these types of things. And we're -- I think we're at a place where we want to start looking at it. And as we get more, I'll talk more about it in the future.

Jeff Van Rhee -- Craig-Hallum -- Analyst

That's fair. If I could just -- I want to sneak quick in the deal counts than, Rob, in that context, obviously, great quarter, great guide. So no shut over any of that, but the deal counts being down. How would you think they behave in '21? Should we start to see growth in both expansions as well as new logos, total deal counts starting to pick up? How do you think about that?

Robert P. LoCascio -- Founder and Chief Executive Officer

Yes. I mean, we got very focused on the enterprise, as you know, and I expect them deal counts to go up. But we don't really focus on it, put say, we focus on our -- our overall revenue and our mix and if I take the marketplace concept, that counted as one customer, but actually, there's 10,000 businesses that are now powered on our platform, but we count that as one. So we -- so I don't -- the way we look at the business is we look at it from what's the bookings and the revenue impact of that. And then we look at an overall mix. Obviously, we are still skewed toward high end mid-market and enterprise. That's our sweet spot. It's because that's where the volume is. But I think these marketplace concepts will really fire up. It'd be interesting if we turn to reporting on the individuals, business that are part of those marketplaces like Yell or will do something else. So we'll see. But I feel good about where the revenue mix.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Okay. And last, I guess, just can you put a little finer point on the bookings? I mean, RPOs are somewhat helpful, deferred not so much. I mean, nothing really tells a holistic talked about new contract value up two times and deal cuts up, but it's not a holistic bookings number. Can you tell us something more about the total value of bookings in the quarter? Are they give us a percentage year-over-year or maybe a little more qualitative.

John Deneen Collins -- Chief Financial Officer

I'll take that. So one, I would say, you're right, right. Like deferred is not an optimal proxy here for bookings or demand generally because of variance and contract structures and timing of invoicing and the like. We had a lot of -- we had several, I should say, large deals in the fourth quarter, for which we didn't receive cash advance, right? So that means there's a direct impact to deferred. RPO, I think, is a better metric, and we did increase 21% sequentially from that perspective. But even that, Jeff, doesn't include the benefit of gain chip because of that source of revenue. So when you think about it from that perspective, we have really strong indicators for the demand that we're generating and the momentum we're entering the year with.

Operator

Our next question will come from Brett Knoblauch with Berenberg Capital Markets.

Brett Knoblauch -- Berenberg Capital Markets -- Analyst

Maybe just one for Rob. As you look out maybe three, four years, do you envision, I guess, by first being more of a conversational AI as a service provider, where you have whole businesses being built on top of your AI. And I think what you're doing in the fintech space is a great example with body bank. But do you think that is going to be a meaningful driver or development over the next three to five years? I guess, how should we think about that?

Robert P. LoCascio -- Founder and Chief Executive Officer

Yes. I mean I would like to see one day, and this is more five years we plan pretty long term. But I'd like to put something one day in people's homes that are as AI that people can trust and they can get things processed intense in their life and obviously talk to it like an Alexa, but something that they actually trust and is carrying. And you mentioned like we're powering Bella, which is a bank. And we built that platform, we built that off of our platform to show how you can build this sort of compassionate loving and trustful AI, and we manifested it into a bank, which also, by the way, has payments in so if you look at bellaloves.me shareholder, you can see how we built this business.

It's doing quite interesting things. We're learning a lot. But yes, I see these markets, healthcare, banking, insurance as big market spaces for us to build a business on top of. And then ultimately, we have this general purpose AI that you can really get your most important intense fulfilled. I want to buy a car to, I need to check my health to, I want to get a loan for -- by a house. And the interesting thing is because we have this data, we have this extraordinary data set, which it's just hard to quantify the shareholders that is so powerful because we understand how humans, how people ask for questions, how they ask to get a loan. And that's so -- and we got millions of those things, so around that one use case. So that's where I want to go with the company.

And I think ultimately, I've said this for conversational commerce will have a brand and Amazon's got Alexa and you got Facebook with their messaging platforms. You got a Siri, you got Google Home, but ultimately, why can't we take a shot at it? And we have this data set. And so we're taking our time, and we built things step by step. But we have a big vision, and we raised a ton of capital. I mean, we raised $500 million because we know this is a multibillion-dollar opportunity. We didn't raise that type of capital because we think, oh, this is small, and we were going to just sign one enterprise deal at a time. Although that's important, we see something broader and bigger.

And as the years go on, I believe you'll start to see the fruits of that, of all these investments. But we're excited. And we're definitely a leader. We put a lot of time and energy into this over the last four years, but are definitely leading in this area. And we can compete with the biggies. We're hiring against Google and Facebook. Sometimes they hire against us. But we're actually able to hire talent at that level because we have a great business model, and we can get the best in the world. And that's what makes a great company. So I'm excited. After being here 25 years, I feel like we're just getting started.

Brett Knoblauch -- Berenberg Capital Markets -- Analyst

Also I'm excited. And maybe just one question for John. When you look at your, I guess, your 2019 Investor Day, you guys said 2018 revenues, about 60-some percent of it was coming from large enterprise. Could you maybe provide an update on that? I guess, how should we think of the mix now, given you guys have tended to gravitate toward the higher end of the spectrum?

John Deneen Collins -- Chief Financial Officer

Brett, we're a little above that figure now, but it's not it's maybe 10 points above that figure, 5% to 10%. So we're still predominantly enterprise, but it's not overwhelming. We have a large base in the small business segment, which is -- still remains about 15% of revenue in the mid-market, which is another 15% or so. So we're approaching about 70% for enterprise.

Operator

Our next question will come from Peter Levine with Evercore.

Peter Levine -- Evercore -- Analyst

Peter, your line might be muted. So that. Great. Maybe just one for me. Are you guys going after new buyers within an organization? Meaning, as you think about the use cases with messaging across the company, you would think it opens up for wallets are for you guys to go after. So just curious to know how much of the enterprise deals that you won in Q4 and then throughout calendar '20 was kind of department-driven versus a big mandate from the C-suite. I'm curious to know how that mix shift has trended the past 12 months?

Robert P. LoCascio -- Founder and Chief Executive Officer

Yes. I mean we -- I guess there's been some shifts -- it was originally care a couple of years ago, and we were focused in those areas. We definitely have seen a shift to IT because we have this AI tool set, and they want to use the tool set to look at data, to build automation, to deploy the automations so that's the IT buyer developers sitting on our platform, using that tool set. We're seeing a lot of activity there. And now in the CMO areas and the marketing and digital areas, we're seeing more and more opportunity in that area. And then this year, we had a lot on just the digital heads who are running the websites and running sales.

So it's definitely been a mix. We're definitely putting a massive focus this year. Our plan is to get very heavy in the sales, retail marketing use cases. And so there's going to be a big push for us on the product side there. But IT has become definitely a major player in our purchases because of the nature of the -- it's a technology platform that they can use to do a lot around AI and automation.

Operator

Our next question will come from Steve Enders with KeyBanc Capital Markets.

Steve Enders -- KeyBanc Capital Markets. -- Analyst

I just wanted to check-in. I know you gave a little preview a few questions ago, but how you're thinking about the cash that you raised and potentially uses of that going forward?

Robert P. LoCascio -- Founder and Chief Executive Officer

Well, we -- the interesting thing is, obviously, we're an acquisitive. We're looking out in the world and especially on the AI science side, is there some technologies we would want to buy and get talent. So that's definitely an area for us to look at. We basically -- the voice stuff is kind of interesting. There's some interesting, like I said, more of the Alexa style voice. And obviously, you can bleed that over in the contact center. The interesting thing about voice is not to get too deep, but we already have an aging console. It does everything that you would need as an agent, and we can put in another channel but then run it with all of our AI capabilities.

So that's what makes voice kind of an interesting thing. So there's potentially some opportunities there. And then organically, there's just a lot to do. Like we're a very innovative company. We have a lot of things we want to build. We keep it within reason, obviously, but there's just a lot organically that we can do. There's markets we want to open. There's more technology we want to build. So I think that's -- we haven't quite dialed in 100% on what we'll do with the cash, but it's in those buckets is kind of where we're looking at.

Steve Enders -- KeyBanc Capital Markets. -- Analyst

Okay. Great. Very helpful. And then just on the -- you called out a social media win in the quarter. Just kind of wondering what was the differentiator of the LivePerson platform there that went against an incumbent in social?

Robert P. LoCascio -- Founder and Chief Executive Officer

The big thing is that we have a lot more -- we would have a lot more volume than the social media player would have in the customer. And with that, they want to integrate and they want to move all of that volume into a single consumer agent experience. So they have a set of agents out that may be on these social platforms, and they got a set of agents usually where we're like 10 times the amount of agents on ours. And they're like, can you bring that can you bring that over? And that's what we did. So we got to speak airline. There's another -- a big music company, one of the digital music platform, streaming platform. So we're moving pretty hard into that area. And I think there's just a lot of low-hanging fruit there because a lot of those guys they got acquired by private equity and there wasn't a lot of innovation, and they don't have a lot of volume. So we think there's an opportunity. We put real focus and product on it, and we have a team focused on it. So we expect to pick them up more and more of that as we go forward.

Operator

Our next question will come from Ryan Koontz with Rosenblatt Securities.

Ryan Koontz -- Rosenblatt Securities -- Analyst

Great. Could you update us on your public cloud migration thoughts fair with kind of sales surging? Is that a lower priority for you? And how should we think about the impact of that on gross margins kind of over the medium term?

Robert P. LoCascio -- Founder and Chief Executive Officer

Ryan, it is definitely not a lower priority. We're full steam ahead there. And in fact, some of the investment that we're managing early in '21 is related to that migration on the infrastructure side. In terms of margin, we'll have some hit to margin in the early to medium-term as a result of managing two stacks. But in, I would say once we finished the migration, the end of '21 going into '22, we should start to see some expansion in that respect.

Operator

Our next question will come from Jonathan Kees with Summit Insights Group.

Jonathan Kees -- Summit Insights Group -- Analyst

Great. I just have to make some quick Rob, you talked about at the beginning where AI means to like person and I heard what you said. I guess you guys made a couple of impressive executive hires in Q4, including one from Amazon, he has operations and AI background. According news reports, you canceled some of the AI projects that you guys are working on for some time. I guess, how does -- what you said during your prepared remarks, was tweaked from before he came in and also the stuff that he canceled, was it material in terms of the projects, the AI projects?

Robert P. LoCascio -- Founder and Chief Executive Officer

I have no clue what you're talking about. I'm not to be confrontational. I know you're talking about Andrew Hammel who came in who was running a lot of AI, but I have actually -- it's just so interesting. I mean, I don't know. He actually increased -- he actually came aboard because we're expanding all we're doing. He was Alex's boss over at Amazon. But I have no idea of what you're talking about.

Jonathan Kees -- Summit Insights Group -- Analyst

Okay. I can send you the news article that I read, I think it was from Fortune. I don't think it's fake news or anything I think.

Robert P. LoCascio -- Founder and Chief Executive Officer

I would -- I mean, obviously, we're investing so heavy in all of that, there's nothing. So it's just kind of odd. So I feel like -- you can send it to me, I'll take a look, but there's nothing in the press nor I said or that's just the weirdest thing I've ever heard because of all the investment we're doing. So for what it's worth...

Jonathan Kees -- Summit Insights Group -- Analyst

I think one of the things that was mentioned in the article was not so much decrease in investment, but just making sure it's following the ethical aspect of AI, making sure it's relying heavily on the privacy, focusing more on the natural language, which you guys talked about during your prepared remarks because there is that bias and there's been companies out there that have said, we're not going to do AI in this aspect because of of the inherent problems with AI, with like bias or privacy and that kind of stuff.

Robert P. LoCascio -- Founder and Chief Executive Officer

We started -- we started an organization called Equal AI, which is maybe what you're talking about. So we funded it, I think, over 2.5, two years ago, and Marion Vogel, who worked under Obama in the justice department is the head of that, and we're really proud of that. So yes, that's something we actually start a whole organization around it, and it's a great Board of Directors now that's now part of that. But we've always prescribed to that. Obviously, Andrew also prescribes to it. But yes, that's pretty much what maybe that's about that. I didn't get the connection between that and discontinuing projects, but -- not sure, yes so...

Operator

We have reached the end of the call today. I would like to turn the call over to Rob LoCascio for closing remarks.

Robert P. LoCascio -- Founder and Chief Executive Officer

Yes. So obviously, the rapid changes in everything that's happened globally has really accelerated our work on the conversational cloud. And obviously, we had an amazing 2020, and I want to thank everyone in the company who just really delivered against a tough year in the middle of COVID, rapid changes, the amount of volume that hit our platform and keeping our platform scaling delivering all the results and all of the implementations. It just was awesome.

So I'm really proud of what everyone's done. 2021, I think, is going to be a really great year for us. Just not only the continued momentum. But the vision we had four years ago, it was actually seven years ago when we delivered the platform four years ago. We're kind of waiting for when is this thing going to really, really take off. And we can see going to 2021, the demand will continue. But the connection to our vision and how we see AI in the world and how that can drive real change in businesses is happening. So I'm looking forward to this year and everything we're doing, and we'll catch you on the next call. Thank you.

Operator

[Operator Closing Remarks].

Duration: 74 minutes

Call participants:

Idalia Rodriguez -- Investor Relations

Robert P. LoCascio -- Founder and Chief Executive Officer

John Deneen Collins -- Chief Financial Officer

Richard Baldry -- ROTH Capital -- Analyst

Danny -- B. Riley -- Analyst

Chris -- William Blair -- Analyst

Mohit Gogia -- Barclays -- Analyst

Siti Panigrahi -- Mizuho. -- Analyst

Drew -- JPMorgan -- Analyst

Ryan MacDonald -- Needham & Company -- Analyst

Jeff Van Rhee -- Craig-Hallum -- Analyst

Brett Knoblauch -- Berenberg Capital Markets -- Analyst

Peter Levine -- Evercore -- Analyst

Steve Enders -- KeyBanc Capital Markets. -- Analyst

Ryan Koontz -- Rosenblatt Securities -- Analyst

Jonathan Kees -- Summit Insights Group -- Analyst

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