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Liveperson Inc (NASDAQ:LPSN)
Q1 2021 Earnings Call
May 4, 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 First Quarter 2021 Earnings Conference Call. My name is Matt, and I will be your conference operator today. At this time, all participants are in a listen-only mode. After the prepared remarks, the management from LivePerson will conduct a question-and-answer session. [Operator Instructions]

I would now like to turn the conference call over to Ms. Idalia Rodriguez. Please go ahead.

Idalia Rodriguez -- Investor Relations

Thank you, Matt, and good afternoon everyone. Joining me on the call today is Rob 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 on our 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 and the comments made during this conference call and in 10-Ks, 10-Qs and other reports we filed 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 like to turn the call over to Rob. Rob?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Thanks, Idalia. Thank you all for joining LivePerson's first quarter 2021 earnings call. Over the past years we've demonstrated LivePerson's clear leadership in Conversational Commerce. This quarter validates another data point showcasing the massive potential of Conversational Commerce and strength of our strategy and execution. Revenue increased 38% year-over-year to $107.9 million in the first quarter and grew approximately 6% quarter-over-quarter exceeding the high end of our guidance. This acceleration of growth was fueled by a combination of growing wider and deeper with existing customers, as well as adding new large brands. In Q1 2021, we signed eight deals, a seven figure annual contract value, four which were new logos. We also expanded into target verticals such as healthcare and government. Total annual contract values signed in the quarter hit a record high increasing more than 120% year-over-year. And the fact that this grew significantly faster than overall revenue is a great leading indicator for future acceleration. Volume on our Conversational Cloud in the first quarter reached an all-time high even exceeding Q4 2020 peak volume during the holiday season. Overall platform volume at the end of March increased nearly 40% year-over-year while automation volume accelerated by almost 50% year-over-year. Messaging volume that was partially or fully automated increased quarter-over-quarter and reaching more than 70% of the total messaging volume. A key highlight I'd like to share about Q1 was our focus on capturing massive opportunities, helping brands, create conversational sales and marketing journeys for their customers. You may remember that we prioritize these revenue generating use cases to own the entire customer lifecycle from marketing to sales to customer care.

And Q1 showed strong execution around the strategy. Our gain share business driven largely by e-commerce experienced a solid top line and robust pipeline for upcoming quarters across North America and EMEA. LivePerson's innovative marketing programs also contributed to this momentum as we continue to adapt to the virtual selling environment we've developed a new breed of top notch remote marketing events. During the quarter, we added a large online event with expert-led educational masterclasses, community building activities and peer-to-peer connection. In total 119 executives across 79 leading brands joined the multi-day retreat. We plan to hold these events every quarter and anticipate they will continue to possibly impact contract signings and pipeline. Now I'd like to highlight a few stories of our plans leveraging LivePerson's expertise and technology to drive digital transformation across care, commerce and additional innovative use cases. The first is our win of a multi-year seven figure contract with huge potential for expansion with one of the top three healthcare companies in the world. This company generates hundreds of millions of calls across their key lines of business at the cost of billions of dollars each year. In the immediate future, we will assist the brand in reducing operating expenses and raising member satisfaction by shifting calls to messaging and introducing automation at scale. Over the long-term our product and messaging and social messaging capabilities will help the brand build the strong connection to its end customers by giving them the ability to more proactively self-manage their own health. Together we unify the consumer experience across channels to develop a more intimate and long-term connection between the brand and its members.

LivePerson's expertise in asynchronous messaging are robust suite of conversational AI capabilities and the fact that our platform is turnkey ready for transforming large enterprises were the key factors in winning this new logo. Another new logo win of the quarter was a seven-figure deal with one of the largest automotive and manufacturers in the U.K. Like many other companies the brand was challenged due to head count churn as its contact center and shutdown and customer satisfaction ratings were hurt as well as revenue. LivePerson's Conversational Cloud will operate at the brand's central hub for messaging, creating a holistic experience for every stakeholder including OEMs over 3,000 global retail dealers and the brands employees and customers across the channels. First, we'll transform the global contact centers to help them with customer care retention, expand into commerce use cases with our highly differentiated two-way product to messaging which will generate a customer response rate as high as 35% for several brands already using it. For example whenever a vehicle recognizes that brakes need to be fixed proactive outbound message will be sent straight to its owner enabling to self-service and book service from anywhere with the dealership. This kind of use case truly represents a large revenue generating opportunity for the brand especially when they had millions of connected vehicles globally. Key drivers of this will include LivePerson's easy to navigate user interface, outstanding AI capabilities and the ability to take payments and scale with automation across all channels. I'd like to share an example of an existing client a global multi-billion dollar jewelry retailer that is taking full advantage of AI powered messaging potential drive to sales.

We signed our first deal with the customer in Q3, 2020 expanded it this quarter. We started by launching both web messaging and a QR code experience that lets customers message with their dually consultants from any device that basic start achieves 70 million messaging driven sales-in just $70 million in sales in just a few months. To-date over 900,000 messages conversations have taken place with daily average sales conversion rate of 15%. With our new deal expanding into new end points, proactive messaging and conversational ads, this expansion will also meet the retailer's demand for full NLU capabilities, payment within messaging and direct IVR deflection. Incredible results the brand has achieved prove AI powered messaging is not just about customer care, but also marketing and sales journeys that give customers the power to purchase when they want. Speaking of expansion in Q1, 2001 we signed one of the large expansion deals in our history with the multi-billion dollar North American satellite radio company. They started their journey with LivePerson in late 2019 with IVR deflection for their customer care operation. Over the year they massively expanded with their service with us multiple times through our gain share model, not only in customer care, but also by moving into commerce through in app and product and messaging. With this latest expansion we will fully migrate their current technology onto LivePerson's platform. We envision the consumer experience with AI powered messaging replacing costly voice calls. LivePerson exciting product roadmap combined with our AI expertise and scalability are key factors for us to expand the deal within a matter of weeks. One of my favorite product launches of the quarter is a loyalty program for Dunkin, one of the biggest fast food chains in the U.S. The brand was looking for new ways and new channels to build continuous connections with customers.

They're adding QR codes on food packaging, giving customers the ability to easily scan the code, download the app and sign up for the loyalty program via an automated SMS message sent from the bar and if we done it-this program and packaging is starting to rollout in over 9,000 Dunkin stores in the United States. We continue to innovate not only in the AI sphere, but also in extending our platform to new channels including social. We believe that social messaging will keep-help meet the strong demand from our customer care for a fully integrated messaging experience. Brands can now message social conversations including public and private messages at scale increasing the surface area of automation touch points and the other capabilities when in the Conversational Cloud currently enabling brands to match customer care and social within our platform and our long-term vision to find an engine and social solution for care and marketing powered by AI and automation. Several of the world's largest brands have signed on to use our social capabilities or plan to use as part of joint roadmaps. Our partner ecosystem also continues to expand both in terms of go-to-market and introducing new joint solutions with industry leaders. We recently announced that Tech Mahindra has joined other LivePerson partners including T Tech Infosys and IBM Global Business Solutions and strengthening our go-to-market region sales distribution. In fact one of the seven-figure deals in our targeted government vertical was driven by a partner. Simultaneously after a quarter of ramping and developing the pipeline we close important-we closed important new logo deals with Infosys in Q1.

We also announced a partnership with Medallia offering brands the ability to seamlessly integrate conversations and customer engagement analytics to help them measure and respond to customer employee signals in the real-time. We consider these collaborative partnerships with sort of a significant indicators our leadership position in Conversational AI. Finally in Q1 we were approached by Citi one of our long-standing Conversational Cloud banking customers to help bring in-and to help bring an at home rapid testing option for COVID to its employees. They asked us to build an app we called Bella that would take the power of our Conversational AI that they use in their contact centers and see if we can apply it to at home rapid testing. The goal was to have an AI solution that would take the employee through a conversationally AI guided experience every day. That could boost home testing confidence, create positive user experience and provide the digital enablement that can obviously create an additional level of mitigation in their offices and returning their employees back to office. Working closely with the Siri team in the matter of weeks we launched the Bella app on the Conversational Cloud.

I'm really proud of what the team delivered and in privacy our platform has been instrumental in providing additional measures to create a safe working environment for thousands of employees who would feel more comfortable getting back to physical workplace. We're looking at other opportunities within our corporate customers and we'll keep you updated on our progress with this COVID-19 testing program. Given all of the momentum and an opportunity we continue to experience, we entered Q2 laser focused on retail, e-commerce in sales and marketing use cases, while continue to innovate in customer care. We're committed to bringing our complete vision use cases, while continue to innovating customer care. We are committed to bringing our complete vision for Conversational Commerce to live for our customers through our industry leading AI and messaging and game share offerings and capacity entrusted Conversational AI remains key pillars for our strategy as we lead Conversational Commerce in Q2 and beyond.

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

John Collins -- Chief Financial Officer

Thank you, Rob. In the first quarter we continued to build on the momentum we generated throughout 2020. We signed eight, seven-figure deals, four of which were for new logos. Overall seven-figure deal counts increased 400% year-over-year and annual contract values across all market segments increased 120% year-over-year. We materially expanded our reach into large target verticals including healthcare and government where we're setting our foundation for future growth. Our international business continued to grow at an accelerating pace and is now on track to match U.S. growth on a year-over-year basis in the second quarter. As for our strategic partners we signed deals with Medallia and Tech Mahindra and we've only just begun closing opportunities within Infosys' growing pipelines. In terms of operating metrics, we once again exceeded the high-end of our guidance range for both the top line and bottom line continuing to enhance operating leverage while delivering the highest quarter growth in our history. We operate at the Rule of 40 for our third consecutive quarter and improved on a wide range of key metrics which I'll discuss shortly. Significantly, billable platform volume also continued to accelerate reaching a new high in March, all considered the data clearly signals the recapitalizing on a robust and rapidly growing market for Conversational AI. In the first quarter, total revenue grew 38% year-over-year to $107.9 million, which exceeded the midpoint of our previously issued guidance by $4.4 million and marked our fourth consecutive quarter of revenue growth at 25% plus. The material sequential increase in revenue in the first quarter of 2021 underscores accelerating demand for Conversational AI generally and expanding applications for Conversational Commerce in particular.

The primary contributors to upstart in the first quarter were overage our demand-based revenue for CPI contracts over performance by our consumer segment and the at-home COVID-19 testing solution that Rob described. Gain share also performed above our internal plan. Note that the magnitude of year-over-year growth in the first quarter was heavily influenced by last year's relatively soft pre-pandemic comparable period. This dynamic also accounts for expected growth changes in the first quarter to the second which I'll discuss with guidance. Further unpacking the first quarter results and beginning with new logos annual contract values increased more than a 100% year-over-year and four new logos were seven-figure deals. While the new logo growth was led by enterprise, annual contract values were also up significantly year-over-year for new logos across mid-market and small businesses. As for the gain share business we signed a seven figure expansion and a record number of new logos because we've optimized and proven playbook for winning agent labor, deploying automation services and guaranteeing financial results each new logo win sets up a multi-million dollar expansion opportunity. In the first quarter, gain share was 13% of revenue. Our partner network contributed several new logos as well including a seven figure government win, which adds to our momentum in this large target vertical. The deal will help build the relationships and technology infrastructure that we expect to service the foundation for many other government related applications and conversational AI. And as mentioned Infosys also begin closing deals in the first quarter and continues to build a significant pipeline. In terms of our reporting segments within total revenue B2B grew 38% year-over-year and hosted software grew 37% year-over-year.

Professional services revenue grew 41% year-over-year and along with that momentum in the B2B, our consumer segment posted record growth of 44% year-over-year. From a geographic perspective, U.S. revenue grew by 42% year-over-year and represented 64% of total revenue. International growth accelerated from 18% year-over-year in the fourth quarter to 32% year-over-year in the first. Driven by growth in both EMEA and APAC and total international revenue represented 36% of revenue. Average revenue per customer grew approximately 34% year-over-year reaching a new record of $490,000. The strong relationships we forged over the years helped drive both expansion and revenue retention, which once again significantly exceeded the high end of our target range of a 105% to 115%.In terms of industry trends, year-over-year growth for retail and e-commerce was more than double the growth rate of our next fastest growing industry financial services driven by a compelling return on investment for Conversational Commerce applications. Billable platform usage continues to accelerate in 2021 and increasing 40% year-over-year and surpassing the high watermark set offset during the fourth quarter's seasonal peak. In terms of the bottom line, first quarter adjusted EBITDA of $13.3 million or 12.4% margin exceeded the midpoint of our previously issued guidance by $7.3 million. These results marked our fourth consecutive quarter of double-digit margin and our third consecutive quarter of operations at the Rule of 40. More than half the upside was driven by over performance on the top line and the remainder was due to the pace at which we made investments. We continue to add go-to-market capacity to our partner network and total quota carriers increased slightly relative to last quarter and we continue to focus on increasing the numbers. As per cash, we generated $14.6 million in free cash flow in the first quarter driven primarily by higher than expected adjusted EBITDA.

We closed the quarter with $668 million of cash on the balance sheet, an increase of $14 million from the end of 2020. We've continued to strengthen our business we are raising guidance for 2021 revenue from our previous range of $458 million to $466 million to a new range of $460 million to $468 million or a 25.5% to 27.5% growth year-over-year. The guidance range for 2021 adjusted EBITDA remains $33.5 million to $41.5 million or 7.3% to 8.9% margin. As per the second quarter of 2021, our guidance range for revenue is a $112 million to $114 million or 22% to 24% year-over-year. And the range for adjusted EBITDA is $5.2 million to $7.2 million or 4.5% to 6.5% margin. Knows that the guidance for the second quarter is a function of lapping the pandemic induced acceleration in our business that commence one year ago and continuing to invest in a range of growth drivers including go-to-market capacity. And on that note, I want to underscore the implications of our full-year guidance that we expect to accelerate growth on top of such a transformative period last year to the strong testament to the staying power of our platform. Conversational AI is solving fundamental business problems that have a clear and recurring return on investment for our customers in terms of both cost savings and increasingly incremental revenue. Now before taking questions, I want to touch on several key themes that were key to our success in the first quarter and that we expect to continue throughout 2021. The depth and breadth of our conversational cloud and the ease with which developers can adapt the platforms, products and services to new use cases have enabled us to rapidly diversify and grow revenue streams. Conversational Commerce, AI assisted telehealth, innovations in customer care like social media management are all growing sources of revenue that reinforce our leadership position in the market for conversational AI.

In addition, we've optimized our gain share offering and go-to-market motion, narrowing in on a repeatable model that resonates with brands and that we execute with machine like precision. International revenue growth continues to accelerate and is on track to match U.S. growth within a quarter. Our expanding partner network helped extend our reach into new verticals and continues to build integrations with our platform. Annual contract values for new logos in all market segments from small business to enterprise grew more than a 100% year-over-year. Considering all of those exciting trends coupled with billable platform usage continuing to accelerate beyond the fourth quarter seasonal peak it's clear that we're at the center of a rapidly growing market for conversational AI which is beginning to look a lot like our long-term vision.

And with that operator, we're now ready to proceed with questions. Thank you.

Questions and Answers:

John Collins -- Chief Financial Officer

[Operator Instructions] Our first question will come from Siti Panigrahi with Mizuho. Please go ahead.

Michael Berg -- Citi -- Analyst

Hi, this is Michael Berg on for Citi. Congrats on a fantastic quarter. So you mentioned the gain share program is going strong. On a similar note how can we think about the conversion trend from ELAs to CPI contracts and what's the percentage uplift you're seeing there?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

So I'll take that. At the end of the fourth quarter, we converted about 15% of total ELAs to CPI structures. And at the end of the first quarter we grew that fraction to about 40%. So by the end of 2021, we're expecting approximately 70% to be converted to CPI structures.

Michael Berg -- Citi -- Analyst

Great, OK. And then in terms of I think you mentioned one-in the customer examples that payments was involved in the messaging platform. Is that your payment solution that's built into the messaging or how can we think about the progress of your payment solution though you mentioned last year?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Yes that's hard, there was-two-part, two examples I had of the pansies. So that's our system in there right now that's taking the payments on the platform.

Operator

Our next question will come from Sterling Auty with JPMorgan. Please go ahead. Hi, this is Maya [Phonetic] on for Sterling. Could you just give us a sense of renewal rates in the quarter and how about the run rate change for this renewal?

John Collins -- Chief Financial Officer

Yes, renewal rates in the quarter are on par with kind of seasonal expectation for renewals. As you may recall the fourth quarter is typically where we see the most renewals occurring, but in the first quarter we're on par with what it looked like in similar period last year.

Maya -- JPMorgan -- Analyst

Okay great, thank you.

Operator

Our next question will come from Drew Foster with Citigroup. Please go ahead.

Drew Foster -- Citigroup -- Analyst

Hey guys nice quarter. Thanks for taking the questions. John can you unpack the assumptions you're making around the full year guidance set up. You had close to $5 million revenue upside in Q1 and you raised the full year by less than that? So it didn't appear like any of that flow through paused that either business was pulled forward or there were other things giving you caution around the back half of the year. Can you just help us parse through some of the puts and takes there?

John Collins -- Chief Financial Officer

Yes I would say we're obviously above the top end of our guidance by about $4 million. We are executing on the core strategy that we set forth last quarter and we think it's still early in the year naturally, but we are seeing the results that we expected from that execution. We also had some upside in the quarter driven by the AI assisted telehealth experience that we launched with Citi. And some of that might have been pulled forward into the first quarter. But altogether the actual results, the continuing trends in the second quarter, the core business all suggest and support a guidance increase and we think the amount that we've put out is the right balance.

Drew Foster -- Citigroup -- Analyst

Okay thanks. And then you mentioned social media management capabilities for one of your key customers. Could you just unpack specifically what you're doing for them. It sounds like a non-traditional sort of LivePerson use case. I'm curious to get your thoughts on how you view that as a more repeatable use case that you could replicate within your install base and potentially open up new opportunities for you?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Yes, our customers want us to take all the different communication channels onto our platform and social is usually they have, it's a handful agents to a couple hundred and so, they wanted to bring those agents and all the capabilities of our platform to automate against all the social media both direct messaging and then the public the stuff that happens in the feeds. And so, we've been building product for a little bit in there on our platform. And we've got a good set of features we're going to continue to bring. You know it's an opportunity with some very large brands signed up to move their social media current implementations onto our platform. And then the next step is looking at voice-you know digitization of voice and that's kind of like-the last channel shall we say that we're bringing in to digitize all those communication channels so that's where we are with it.

Operator

Our next question will come from Arjun Bhatia with William Blair. Please go ahead.

Chris -- William Blair -- Analyst

Hi yes, this is Chris [Phonetic] on for Arjun so congrats on the quarter. I have a quick question about ARPU growth and solid growth in the quarter, so is this dynamic in part driven by some of the contract migration activity that you saw, is that mostly volume driven or you know where some of the kind of factors that play there?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Yes, the changing contract structures and expansions are clearly part of the growth in ARPU. I would also say that the intentional strategy we have to move up market in mid-market is another factor. So we're landing deals at a higher level than we have in the past. And as we've noted there are fewer counts on year-over-year basis in the mid-market, but values are up significantly there. So, that's contributing to the ARPU growth.

Chris -- William Blair -- Analyst

Got it, thank you. And this is a quick follow-up. You might have touched on this earlier. But can you give us a sense for what the average percent ACV uplift looks like on those contracting versions?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Yes, I will think more generally, we haven't provided that level of granularity. But on average, we certainly have upsells when we do the conversion.

Operator

Our next question will come from Zach Cummins with B. Riley. Please go ahead.

Zach Cummins -- B. Riley -- Analyst

So as the easing of COVID restrictions has progressed, has that had any impact on the consumer-oriented verticals like retail, in particular?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

No I mean, there was obviously a major shift, but we're very focused on the retail and marketing use cases, sales use cases. So, they're not going back. They're still doing really well, like I talked about, one of the largest jewel it's a public company, they have 3,000 stores, but we created a whole digital experience that rivals the store and consumers love it. And they're buying diamond rings and high-end jewelry and all that. So, we continue to see a push. And everyone's asking about it now even though once COVID, we're vaccinated and people get back. But consumers like it and brands really like it. So, I don't see it going back. It seems to be-it's just consumer behavior that continues forward. And we were really surprised is post the holidays, we always-like if I look at 20 years of traffic. We get this big bump in Q4, and then we come down off of it, and we didn't come off of it again. So, we bumped up and-we're higher now than we were at the holidays. So that tells us it's really the consumer behavior is changed and they're just using these, this wave of commerce than what they were doing in the past.

Zach Cummins -- B. Riley -- Analyst

Got it. And I guess like going back to one of the earlier questions about the guidance. I guess we're a little surprised that EBITDA guidance was-you guys kind of blew out of the water score. I guess we might have expected the guys to move up as well. And I guess is that a function of the investment cadence or you have mentioned that revenue earlier. But I guess like why wasn't obviously EBITDA moved up significantly?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

It's indeed because of the investment cadence and the growth opportunities we see on the horizon. We expected to invest more in the first quarter. So a big part of the upside on the bottom line was just due to the pace at which we could deploy capital. And part of that impacts the number of quota carriers that we brought on board. We certainly intend to continue focusing investments in that regard in the second quarter and beyond. So that-we think we will still spend what we expected during the remainder of the year.

Operator

Our next question will come from Mike Latimore with Northland Capital Markets. Please go ahead.

Mike Latimore -- Northland Capital Markets -- Analyst

Great, thanks. Yes great quarter. Just on that sales headcount are you, I think you were expected to get set to about $110 million by year-end. I guess is that still the goal? And I think there is also some thought you would invest a little more heavily in the mid-market. And is that still the idea?

John Collins -- Chief Financial Officer

Yes, both are still the goal. Most of the additional quota carriers we intend to bring on and up to that $110 million marker throughout the year would be in the mid-market.

Mike Latimore -- Northland Capital Markets -- Analyst

And why focus on mid-market enterprises going forward?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Well we have a good engine for enterprise right now. We have a lot of support from the partner network. And of course we've refined the playbook for gain share which is also winning deals in the enterprise. We see an opportunity to move upmarket within mid-market and that's what we're pursuing.

Operator

Our next question will come from Steve Enders with KeyBanc. Please go ahead.

Jack -- KeyBanc -- Analyst

Hey this is Jack [Phonetic] on for Steve. What kind of adoption are you seeing on the payments opportunity within your customers so far? And how do you plan to monetize these capabilities?

John Collins -- Chief Financial Officer

Yes as I mentioned I gave two examples of it. So yes so we're rolling it out. And on the pure monetization it's tied right now to an interaction for our CPI pricing. So that it's just driving more usage on the platform and it's also just a great experience like for the consumer and the brand. It used to be these clunky secure forms. And now it's a very integrated way to take a payment within the next few-but it's going to burn down doors and on the CPI pricing.

Jack -- KeyBanc -- Analyst

Okay great and then one follow-up. How are your-recent channel initiatives with Mphasis and Tech Mahindra progressing and how did they evolve you talk to customers that you can target?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

We still get it back...

John Collins -- Chief Financial Officer

Like as we noted. Go ahead Rob.

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Sorry, John. We feel very good about what's going on with them. We also like we opened up some consumer packaged goods companies which is not traditional for us, but it's traditional for them. There is some internal help desk staff that once again, is not traditional for us, is traditional for them. So, we're seeing some good traction out of the gate with them. So, we're moving out of the gate. And we're focused on it. So, we feel go about where we are with them, but they are opening up different opportunities and they're not-ones we are traditionally are going after, which is really good. And as I kind of outlined, like the Dunkin stuff, and what's happening now is, conversational AI is being adopted beyond care and it's being brought into many different use cases, even stuff that we didn't really envision back four-and-a-half years ago. And we launched it for the-first company out of the gate. So, it's kind of interesting. And they've got all these other different mix of companies that we don't, that they are going after and they're doing really well with and then, also outside the U.S. So, it's quite-I see it's quite impactful over the mid and long-term.

Operator

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

Jeff Van Rhee -- Craig-Hallum -- Analyst

Yes, two from me, real briefly, Rob. In terms of the competitive landscape, just how has it changed? And I'm particularly interested in the fundamental differentiators when you get to the finalist, the final, final stage of the break off yes boil it down to one key feature function of the platform. What is it that gets you over the threshold and gives you the win?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Its automation, it's the AI capabilities and automation that's what brings value. Obviously, we still have the best messaging platform in the world. And it connects to every messaging front end and it's truly asynchronous, but it's really the ability to automate conversations because most of the engagements we're doing right now, they're all AI-led. They all want to automate conversations they just don't want to do human to human conversations.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Got it. And then on the deal counts I mean obviously the ARPUs are surging and your customers that are getting on board absolutely they seem to love the platform from your numbers and from our checks that the offset to that is the deal counts are down I know the prior marketing model was the big weekend events at a referral-based customer. And I think you mentioned some of the new initiatives starting to kick in. I mean how do you balance the rise in the ARPU and drop in the customer accounts. What's fundamentally driving that? Is it that change in lead gen that you have yet to mature to drive more leads in that mid-market? Is it a conscious focus really to stay at those fewer deal counts with about much larger deals what's the balance there?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Hey, Jeff. It's really driven by strategic changes to our go-to-market motion for mid-market and small businesses. Within mid-market we're seeking higher entry points as I mentioned earlier and that's resulting in the higher annual contract values, but also lower deal counts and so that dynamic would increase ARPU increasing the numerator and reducing the denominator. For small businesses as we discussed last quarter where we launched the marketplace as a strategy to efficiently deliver the Conversational Cloud to literally tens of thousands of small businesses at scale and that's taking place today. And when we signed these deals it's really with a single marketplace entity not the tens of thousands of businesses that are actually getting value from the Conversational Cloud. And it's a similar dynamic with our partner network you know that the deal counts generally will reflect the agreement with the partner rather than all the end customers that they sign up so all of these factors are contributing to that the ARPU dynamic as well as the counts versus the total and in our contract values.

John Collins -- Chief Financial Officer

I will add that I do think we're leaving money on the table in the small business and so we're seeing such demand for large scale and it's exciting for us these messy implementations in AI that we wanted to do hundreds of millions of value on a platform in the years and so I think we're leaving money in the small business. And so I mean I think we're going to start to look there. There's definitely-there's a lot of demand everywhere right now especially like messaging. So I think we're going to get a little more aggressive there. But right now we're optimizing for growth and big slugs of revenue and big implementations that have an impact on our customers in the world at large and that's kind of our focus. But I will say there's definitely opportunity down in the small business. We moved our mid-market up. I mean our mid-markets could be a $1 million deal. So our mid-markets are not $10,000 a year and or $100 grand a year. There are some, but we've moved it up because they're good sellers. But they're really good sales folks and they're able to go after these larger opportunities. But there's still mid-market test because then the enterprise went up even bigger. So that's-everyone's was sort of moving up. But I think there's money on the table in the small business that we should go after.

Operator

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

Alex -- Needham & Company -- Analyst

This is Alex [Phonetic] on for Ryan MacDonald. Thanks for taking my question and congratulations on the quarter. Could you talk a little bit more about the mix of bookings that came from direct versus indirect channel?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Yes. So there are clearly some big drivers coming from our channels as we mentioned emphasis started to close deals within a growing pipeline for the first time this quarter. We also landed seven-figure deal through our partner network and on the direct side obviously the balance of those seven-figure deals, so I can give you-by direct and partners.

Alex -- Needham & Company -- Analyst

Okay. Great.

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

These are seven-figure deals for the quarter.

Alex -- Needham & Company -- Analyst

Okay. And then could you talk a little bit more about the strength that you saw internationally?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Yeah. So as I mentioned international growth was contributed to both by a APAC and EMEA, APAC led growth in that regard within EMEA though we continue to accelerate beyond the fourth quarter. We also closed two seven-figure deals in that region, one expansion and one new logo.

Operator

Our next question will come from Peter Levine with Evercore ISI. Please go ahead.

Jon -- Evercore ISI -- Analyst

Hi, this is Jon [Phonetic] on for Peter. Congratulations on the quarter and I appreciate you taking the question. I wanted to loop back to the first topic on payment. Are you able to touch more broadly on any updates on the product, any initial feedback from data customers and something about your go-to-market strategy that you're able to share?

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Yes, as I mentioned before it's in the market now and I talked about two use cases when I was doing my initial script. So yeah, so we were out there with it. We're going to charge a dark force wards as a business model. We're now working with more customers. We're actually now expanding the voice payments, so we could do a voice conversation, take a payment. So we're expanding into outside the messaging channel into that channel. So yeah, we're continuing to drive that capabilities. We've also as somebody of you know as we launched a digital bank called BELLA which is also an extension it's more than an extension of this platform so we actually have a credit card in the market right now a Visa card and that's connected to a Conversational Bank that we built and so-and then the connectivity of the payments overall. So you know we have a vision here that these customers who end up using their credit cards on our platform to be also great to have and become a banking customer to us and use our credit cards. So we built more than just a payment system which is running. We also built the banking platform to support the use of our own credit cards, our own savings accounts our own checking accounts and so that's also in the market now too it's been in the market for 90 days a little over 90 days so.

Jon -- Evercore ISI -- Analyst

Thank you.

Operator

We've reached the end of our call today. I'd like to turn the call to Rob LoCascio for closing remarks.

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

Thank you. And just to give you a few perspectives as we executed in on our vision our financial outlook is obviously sharply improving. We've had now four consecutive quarters of 25% plus growth. Four consecutive quarters of double-digit margins and three consecutive quarters of reaching the Rule of 40. And I think all this demonstrates our ability to enhance the operating leverage, while aggressively growing the business. We're now seeing also an expansion of use cases outside of our beachhead and in customer care from Dunkin to automotive to healthcare to even in-home rapid COVID testing which is testament to the Conversational Cloud being the leading Conversational AI platform in the world. And I want to thank the team for just having an exceptional quarter obviously this is 38% growth is the highest growth quarter we've had in the history of the company and it's not just that we have an awesome platform which is the engineering team has done a great job with and they continue to. We also have a great go-to-market and our grow organization is really executing quite well and working with our customers.

There's just so much opportunity right now it's like every quarter it is like a new adventure for the company like there's just-like this city thing that popped up and so they're like look we want to get our employees back to work can you help us? And you do such a good job with our customers, can you get our employees to testing and do and bring them back to work and take these tests using a Conversational AI and we did it within weeks. We have our Conversational Bank out there so as a company we're not this one trick pony just in care. Care was our beachhead, but we really now are at this inflection point of seeing this type of technology go everywhere. And our ultimate goal is one day to put something in the home something that will rival and Alexa. And we're starting you know working on voice and working on how we can create some innovations to make voice automation something really cool and powerful. So with that we'll see you in Q2 and thank you for all your support. Thank you.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

Idalia Rodriguez -- Investor Relations

Robert LoCascio -- Chairman of the Board, Chief Executive Officer

John Collins -- Chief Financial Officer

Michael Berg -- Citi -- Analyst

Maya -- JPMorgan -- Analyst

Drew Foster -- Citigroup -- Analyst

Chris -- William Blair -- Analyst

Zach Cummins -- B. Riley -- Analyst

Mike Latimore -- Northland Capital Markets -- Analyst

Jack -- KeyBanc -- Analyst

Jeff Van Rhee -- Craig-Hallum -- Analyst

Alex -- Needham & Company -- Analyst

Jon -- Evercore ISI -- Analyst

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