Dear ladies and gentlemen, welcome to the TeamViewer Conference Call for The Q1 2020 Results. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Carsten Keller of Investor Relations. Please go ahead, sir.
Hi, good afternoon, everyone. Thank you all for joining TeamViewer's earnings call for the first quarter 2020. Oliver and Stefan will guide you through our results in a minute. As always following the presentation, we're happy to take your questions. Before we start, I'd like to remind you of the cautionary note regarding forward-looking statements that you can find on page two of the presentation. Let me now hand over to Oliver.
Thank you, Carsten. Good afternoon to all of you. As always, before Stefan is going to present what we believe are very strong Q1 results in detail, I would like to take you through our achievements during the first quarter, talk about how the measures to contain the COVID-19 pandemic have affected TeamViewer, and of course, our global operations. If we go to page four, the mega trends and how we positioned. I think as you all know by now, our strategy is really built on the long-term drivers of digital transformation, the connectivity between an really ever-increasing number of devices, and the fast-growing demand for secure remote management solutions. During the first quarter 2020, we actually have seen all these mega trends significantly accelerated by the global efforts to fight the pandemic.
Clearly, to keep up productivity, businesses around the globe have implemented contingency plans, including remote work setups, now often for their entire workforce and not just for a portion of the people or certain departments. As we have to continue to live with these distancing measures, I think there will be a higher degree of working from home, and digital collaboration will remain the new normal from our perspective. The reduced mobility not only affects the office environment. Clearly, other than in the normal home office discussion, all kinds of services conducted by employees in the field as well as maintenance of distributed operation technology, infrastructure, all of these tasks, have been impacted, and companies had to find a way to deal with them, and this makes reliable and secure remote management, augmented reality solutions, more business critical than ever before.
We really believe the pandemic has created an extra push on development that otherwise would have been pursued by companies anyway. This clearly caused increased demand for these technologies. We believe that these technologies will help generate efficiency gain in future. Those are required to weather the crisis and to support a global economic recovery. We really believe what we deliver is key to companies of all sectors and in all countries globally. Therefore, from our perspective, we see TeamViewer in the middle of accelerated mega trends, uniquely positioned to tap into the growth opportunities they present. Clearly, our high-performance connectivity platform is expanding further, serves all sectors, all verticals, and all customer segments, as we have been discussing before. Especially our enterprise offering has grown substantially during the first quarter 2020, with more than 300 Tensor licenses sold globally.
Despite the global lockdowns to fight the pandemic, our operations have been largely unaffected due to the effective contingency planning that we had, virtual sales processes, and of course, also fast and fully remote deployment of our products. We can really effectively work from home in sales, in service, pre-sales, and also in R&D. I think that was very important that we have been able to organize that pretty quickly, and it worked out very well. All of this has manifested itself in significant subscriber base growing to more than 514,000 now, 75% billings growth, even higher growth and profitability, and a strengthened balance sheet, which Stefan is going to cover. As you can see on page five, we had significant extra demand in the first quarter 2020.
Billings were up 75% compared to Q1 2019, getting to a level of EUR 119.7 million for the first three months. This extraordinary growth was driven by significant extra demand for remote access and home working solutions since the outbreak, especially in March, and that resulted in overall very good performance. That came on top, I should say, on to very good performance already in January, February. Even without the pandemic, we had a very good growth in the first two months, also a very good traction in enterprise, and then the extra demand in March came on top of it. Naturally, in our business model, these extra billings translate then into extra profitability. Q1 EBITDA grew by 96% year-over-year to EUR 73.9 million. This is a margin of 62%, seven percentage point improvement over last Q1's margin, so very significantly.
On the back of this accelerated growth, we will continue to invest along our three growth initiatives: strengthening customer segment coverage, use case innovation, and geographic expansion, so very much unchanged. We are also screening external growth opportunities, through technology-driven M&A transactions. Smaller tuck-in M&A in technology areas which are interesting for us, are also unchanged to what we have communicated to all of you before. Of course, we had a little bit of time now after the immediate crisis handling to also broaden our scope a little bit and scan the market a bit more carefully. What we would say is that especially the investments into the enterprise segment are paying off. The key billings driver, and it is really an achievement, has been a jump for us, especially in larger deals and enterprise customers. Very pleased with that development.
When you turn the page, you can see the statistics that we like to show. As a reminder, we like to focus on two statistics here. One is the customers with annual contract value above EUR 10,000. Why is that? We, I think, explained that a large portion of our business is driven by our inside sales organization. This inside sales organization, in the past, probably a sweet spot of selling contract value between EUR 1,000- EUR 3,000. Now with the Tensor product, we have really successfully enabled them to also sell bigger ticket values items. Therefore, we see this trend continuing. We had in the first quarter or at 31st of March, we now had 1,183 customers with an annual contract value above EUR 10,000. That's an increase of 153% compared to end of March 2019, and also compared to end of December, that's a 69% increase.
Where normally, the step-up in the fourth quarter is very strong, now we had a significant step-up in the first quarter due to the strong start in January, February, but also then the extra demand. That's very pleasing. That's the one statistic we like to track and show to you. We're also showing here the continued development until the 30th of April, just to give an idea on how the trend continued into the second quarter. The second statistic we like to follow and track is really the accumulated amount of the top 50 deals. Just to really also show not just the broad sales motion for Tensor in our inside sales force, but also the success and the traction of our direct sales force in enterprise across the regions, predominantly, EMEA at this point in time.
Also there, you see that the top 50 deals accumulated contract value was EUR 5.5 million in the last 12 months, ending 31st of March. That's 142% increase compared to last year's March, also 63% increase compared to December. Again, very pronounced effect on the large customer, large ticket size. While at the end of December, LTM, the range of the top 50 deals was EUR 36,000-EUR 300,000. We now have a range of EUR 53,000 to more than EUR 500,000. Very significant improvement of the large ticket size, we're very pleased with that. We'll continue there. Just to give you an idea, talking about selected deals, see the deal sizes. You see that it's really cross-sector, cross geographies, very healthy ACV license type, mostly centered around Tensor.
Occasionally, also the, call it old corporate license, quite often a combination with remote access solutions for a larger group of employees for remote management of IT/OT equipment. We also saw a good uptake of our Pilot product, the augmented reality product, that helps to remotely see a few technicians out there in the field. This is very pleasing to see that we are able to gain traction in all different parts of Europe and U.S. also, although we are slower in building up the enterprise sales force in the U.S., but also this is now working quite well. Maybe to give you some examples, although we cannot give the names of the companies, but just to pick a couple on this page. We have one business with an Italian pharmaceutical and diagnostics company with activities in over 100 countries.
They have chosen TeamViewer for remote access to distributed diagnostics equipment located in various hospitals and community healthcare facilities all over the country. Basically, this allows medical experts to access and review test data, including, but not only COVID-19 testing from any iOS or Windows device. Thereby, critical support and swift test results can be provided while the risk of infection is reduced, of course, if you don't have to go there, but can do it remotely, and that's a significant advantage. The client benefits from the full Tensor feature set, of course, including enhanced security, single sign-on, data auditability, central account management. Everything that comes with the Tensor suite. It's 100% GDPR compliant, of course, and those were all key to win this deal. Another example, in France, the enterprise sales team has done an upselling to an existing client from a TeamViewer core license to Tensor.
Tensor not only enables the company to remotely access and support those kiosks, so they access really the kiosks in 80 countries without any human interaction. It also comes with improved security and auditability for high efficiency. They really moved or changed the process to make much more use of remote capabilities, and all of that in a very secure environment. Also, we got a good foothold also in the public sector. I think there was an extra push through COVID in the public sector, in municipalities and government authorities to think more and fast about digitalization. Here we had a key win, was a European ministry with over 10,000 clerks and civil servants across the country. TeamViewer deployed instantaneously a very comprehensive business continuity solution.
That was really in the moment of truth when they needed a solution. We immediately bundled the remote access, which is a single user license for small businesses to work from home into the overall Tensor framework, allowing users to access on-premise workstations using their own devices at home. They didn't have, of course, company devices, so everybody can use its own device to remotely and securely connect into back-end systems. That's very important if you want to be able to perform your duties, which go, of course, beyond meetings, video collaboration or telephone conferencing. These people have to access back-end systems and in order to issue transaction or handle cases, and that's all possible with our solution. Also a very nice win. On this page, as you can see many more examples of TeamViewer connectivity helping customers around the world to digitalize their processes.
We really see this development as a proof for our successful enterprise strategy, because that development wouldn't have been possible without the Tensor product. I think as we've explained multiple times, Tensor is really bringing the full manageability of connections, of connectivity, and that was the moment when enterprises could step more forcefully and broader into our solution. That turns out to be very successful and is one of the most successful growth initiatives. If we turn to page eight, I think it's also important to report what has been done in terms of working on our long-term growth initiatives. As you know, we've changed the picture here from the cube to a circle. One big area is customer segment coverage. We have continued to work on this clearly, enterprise penetration we talked about.
We've also increased the number of channel partners and resellers, which we've added to our business. Also, we expanding our global partnerships and integrations. I think we've talked a lot about our integration, second integration into software, hardware, and other technology plays. This quarter, I think, interesting to report is the integration in Microsoft Teams, which we're working on, the integration into Elo, which is POS terminals and also IBM Maximo. This is the move to be even more relevant to enterprise customers by having the relevant integration. Secondly, very important drive use case innovation. As you know, we continuously improve our product, and we really try to put the customer at the center of innovation. One thing was that we bundled Tensor with a remote access license, which I mentioned before. That was the way to really roll out homeworking solution very quickly.
Other improvements included the update of Pilot, which is the augmented reality product. We are among the first application to leverage the new iPad Pro LiDAR scanner, for example, for enhanced accuracy of the distance and the measurement. That's really if you see a situation through the camera of somebody else, that you have the most exact view of the world around you in order to be able to help that technician in the field as best as possible. Of course, strengthening the innovation and development capacity is anyway a very important focus for us in 2020. In that sense, we also screening the market for interesting technology acquisitions. We hired lots of people. We built out our R&D force. It's now 286 FTEs. We also strengthened our IoT team by hiring a new leader, and more dedicated sales people. Lastly, the geographic expansion.
As you know, we've opened the APAC offices. That continues to be very successful, especially Japan, during the recent months has been very good development. Also, our U.S. enterprise sales team is a big initiative now. You remember that we said we hired a good amount of enterprise sales people for EMEA. We said in the next phase, we will do that also for the Americas, especially the U.S., and we started to do so, and the first people that are on board are now also being productive and bringing in deals as you have seen on the list that I showed before. If we turn the page, go to the next, page nine. I think before I hand over to Stefan, just generally speaking a little bit how we have positioned ourselves in these challenging and uncertain times.
I think, clearly, first priority for all of us was the wellbeing of our employees and business partners. That always comes first. Of course, we've implemented very strict hygiene and safety guidelines. This also included, very early on, a group-wide working from home policy as well as travel bans. We started with travel bans. We had to put people in the home efforts in China, so Shanghai office. The same rolled over into Japan and also Adelaide. As the pandemic continued, we were rolling this out across the globe. Clearly, as the pandemic continues, we remain alert, and we adjust our measures constantly. So far, we could largely avoid infections, for which we are very grateful, really. I think the fast action-taking paid off.
It's also, I think, important to see that the organization, our people, employees, have done a very good job in these very challenging times. Imagine, of course, other companies have more hardship to carry than we do, but we had a significant increase in customer requests, both in sales and in service, at the same time when we had to send everybody home to work from their computers in all departments. I think there was significant effort by the company, and very high commitment, and that helped us to actually navigate through the crisis quite well with, on the one hand, protecting our organization and our people, but also run the business, serve our customers, and bring business in, really. What was also important, of course, is many customers were turning to us to increase capacity.
Also many free users needed the product to be able to connect. You might remember that very early on, we told the free users that we will be very relaxed in accepting commercial use. In fact, after a while, we decided to completely allow any personal use, and not check whether it could potentially be business use. That has increased, of course, the number of connections, has also increased the load on our systems. In parallel to everything else which we had to do, we also had to boost our routing capacity, both for the video conferencing part, so the Blizz product, but also for the TeamViewer core part, and we've been able to do that in parallel to everything else that was going on. We also saw some significant extra requests for our video collaboration product.
We also found, basically through personal experience, that schools, universities around us are not in a great position to provide for homeschooling solutions. We decided very quickly to make our Blizz product available for free for schools and university. We saw a good pickup there, and we were also supporting that. In turn, we also had to increase our router capacity. Last but not least, now a bit later in the crisis, of course, in quite some markets, we do see customers having issues with payments, asking us for more relaxed payment terms or installments. We try to be as responsive as possible, depending on market and segment, to make sure that we keep our customers happy and adjust our processes to the needs of customers and society.
We hope that with all these measures, we could show to our customers and free users that we do care, and that we try to do the best we can to help, and at the same time, run a business and grow the business, of course. Last but not least, of course, thanks to the good start, we built extra cash position. We were able to ramp down the leverage faster than we thought. We further diversified our business. Therefore, we believe we are very well-positioned for the year to come and the future. I think all in all, everything we did, and everything that happened in Q1 confirms our strategy, gives us confidence that we can overachieve our targets. Stefan is going to talk about it for 2020.
I'd now like to hand over to Stefan, who will lead you through the financials and the outlook in more detail.
Thank you, Oliver. Good afternoon to everyone. Clearly, we got off to a very strong start, as Oliver mentioned already. Trading January and February started very strong. Then the corona-related lockdown sharply accelerated our billings growth in March. We pre-announced that late March, as you surely have seen. If we move on to slide 11, the subscriber and billings dynamics in the current quarter or the last quarter. Based on the start, the dynamics Oliver explained, we experienced a significant expansion of our subscriber base, growing by 62% year-over-year. We now have more than half a million subscribers, 514,000 in total. Since the end of last year, we added, on a net basis, more than 50,000 subscribers, net of churn.
Those subscribers really joined us from all customer segments and various sectors, which in the past were somewhat under-penetrated, including larger government bodies, financial institutions, and the like. Really a very broad customer win across the globe and across all the segments. As we explained, the enterprise offering was clearly key to the success in Q1, and it allowed us to serve our customers with the required very scalable solutions, and therefore was a key billings contributor in the quarter. Those new accounts will also provide us with a significant cross and upsell opportunity going forward. As you can see, we also maintained our very good high single-digit churn rate of the 317,000 subscribers we had a year ago. We retained more than 90% or 290,000, 289,000 subscribers.
If we move on to billings, clearly the new subscriber growth or the strong new subscriber growth, coupled with the extra demand for remote access and working from home solutions, led to this exceptional billings growth of 75%, EUR 119.7 million year-over-year. We recorded nearly a doubling of new license subscriptions in the first quarter to around EUR 42 million. We also still successfully migrate the long tail of our previous perpetual customers, but as expected, this is now fading out, but overall still a nice contribution of three and a half million EUR. Renewal billings, which includes additional capacity sales, are at more than 100%, contributing to our significantly increased net retention rate of 106% at the end of Q1. If we move to the next slide to provide billings breakdown by regions. Again, a very balanced picture.
All regions have contributed significantly and showed a very strong acceleration during the quarter. Americas leading the field again with 82% growth, followed by EMEA and APAC. APAC was 62%. We talked about APAC for quite some time, and also about our investments in those local markets. I think it's very satisfying to report that we had an exceptional month in Japan in April with the full lockdown effect. We experienced significant growth in April in that location or in that country. We also sorted our investments into sales resources across all regions, and go-to-market routes clearly contributed to success. Having sufficient sales capacities to deal with all of the customer requests was clearly a key success factor. All sales channels contributed equally strong. Clearly, the increased inside sales teams, which we expanded in EMEA, but also in the U.S.
The enterprise teams in Europe, the recently ramped-up enterprise team in the U.S. and APAC, and also channel partners performed extremely well under those remarkable circumstances. Once again, I think having local people on the ground and the ability to react fast was really very important. Would also like to take this opportunity to thank our employees from sales to customer satisfaction, as well as R&D, IT, HR, G&A, who were under severe stress in those times. They still were able to cope with all of the additional customer demand and the load on our systems. Big kudos to the teams. Fantastic team effort, really. This additional demand from the existing subscribers is also the key driver behind the substantial increase of net retention rates, now up to 106%, as I mentioned, due to the strong upsells driven by higher capacity requirements.
The churn numbers, local churn numbers, have remained largely stable, but obviously we are closely observing the situation to assess the impact of the corona-related economic hardship on our customers and how their renewal business might be affected with us. The dollar value churn remains very stable. Let's move on to the next slide covering the full picture of our Q1 performance. Q1 felt a little bit like a stress test regarding our ability to deal with unprecedented circumstances, I'm very glad to report that apart from some glitches here or there, we were able to adjust really, really quickly. The very strong growth in billings in combination with the scale effect across all functions and our efficient go-to-market model led to this exceptional growth of 96% in adjusted EBITDA to EUR 73.9 million compared to EUR 37.7 in Q1 2019.
I think the scalable technology platform, it was great to see how it was able to deal with the significantly increased traffic. Actually, thanks to our R&D and IT departments, who made sure that we added enough capacity in a very fast time, we've been able to deal with the significantly increased load on the systems. Our GP margins slightly increased to 93%. They were already pretty high in the past, even higher in this quarter. That being said, the investments into additional routers and infrastructure will mean that the GP margins are expected to revert to the usual 92% rate for the remainder of the year, because those new router costs really start kicking in our run rate for the rest of the year.
The other SGA costs, while significantly increasing absolute terms, decreased as a percentage of billings across the board, therefore the adjusted EBITDA margin also increased substantially from 52% to nearly 62%. I think we told you a few times that we continue to invest substantially across all functional areas, clearly with a higher focus this year on R&D and product innovation. To this extent, I'm super proud to say that we've been able to sign up more than 300 engineers in total now, so up like 30, 40 additional engineers on board now. Significantly up compared to the last few quarters. We clearly accelerated our hiring across all functions. Besides that, our enterprise team in the U.S. has also gained some critical mass.
I think we have now about a dozen sales reps who joined us the last few months, already showing some billings in the last quarter. Overall, sales headcount is up by close to 50 FTEs across all go-to-market routes and sales channels and geographies. We clearly also invest in other key areas like marketing, customer service, and infrastructure, as well as G&A. Re-accelerating all of the investments to capture the market opportunity. Based on this, the run rate effect of those investments and our continued capital allocation, we basically expect the full year EBITDA margin to be around last year's level or slightly better, but not at the exceptional level seen in Q1 2020. Let's take a look at the next slide and our cash flows. The quality of our earnings remain very high, and we had a very strong quarter in terms of cash generation.
Adjusted EBITDA of EUR 73.9 million, plus a positive change in working capital and CapEx in line with our guidance, resulted in this very strong cash conversation with a pre-tax free cash flow of EUR 72.4 million, versus EUR 33 million in the prior year, so more than doubling. Maybe on CapEx, an extended note here or remark here, remember that the EUR 25 million of planned CapEx for 2020 includes two one-offs. Both one-offs account for roughly EUR 16 million of total CapEx spend. One one-off is basically the new accounting CRM and e-commerce front end, and the new headquarters across the street from our current headquarters here in Göppingen. Thankfully, both projects largely continue in line with our planning, but also suffer from corona-related delays.
We decided to push out the rollout of the ERP migration, because taking a step back, doing an ERP migration while you are in the middle of a peak billings time, that doesn't feel like the right thing to do. We decided to push it out a little bit, and therefore had to extend the project timeline to reflect the current circumstances. Regarding the new building, we're very happy to report that it seems that we should be able to move into those new offices during Q3, but also slightly later than expected, because clearly the construction side also suffered from some corona-related delays and less workers on the ground there. Therefore, we expect CapEx to be somewhat above the initial guidance, and more in the range of EUR 25 million- EUR 30 million, versus the EUR 25 million we expected a couple of months ago.
Finally, let me comment on Oliver's comments regarding the data management. We clearly acknowledge that many of our customers experience very difficult times with significantly reduced revenues and significantly reduced cash reserves. In light of this, we have also relaxed our cash collection efforts and how strict we are in terms of stunning and shutting off services. Despite this, I'm very glad to report that as for today, we basically already collected a very significant amount of our Q1 billings of close to EUR 120 million. The remaining exposure is very limited regarding our Q1 cash collection. Whilst talking about cash, let's move on to the next slide, the net debt and the leverage. Balance sheet has been strengthened significantly. Deleveraging is ahead of plan.
Net leverage has now fallen to 2.4x EBITDA by the end of the first quarter due to the strong cash collection and continued EBITDA growth. We delevered now 1.3x over the last six months, so very strong and accelerating deleveraging. We have cash of EUR 105 million on the balance sheet. RCF remains undrawn, so very healthy situation. The continued substantial cash generation for the remainder of the year will basically mean that we can reconfirm our deleveraging plans for the year, and we expect to be significantly below 2x by the end of 2020. With that, I would move on to our increase in revised guidance on page 16. In summary, our market positioning, our product portfolio, and the scalable business resulted in an exceptionally strong performance in the first quarter. April continued to be strong, albeit COVID-19 firm demand softened later during April.
Nevertheless, the strong trading during the first four months supports our confidence in overachieving the original full-year guidance. That being said, I think we should keep in mind that the continued macroeconomic uncertainty clearly reduces visibility for the remainder of the year. On this basis, and provided that we see a certain general economic recovery, we have raised our outlook for the full year 2020. The new targets are basically billings of around EUR 450 million, up from EUR 10 million-20 million, or up EUR 10 million-20 million from EUR 430 million-440 million. That was the old billing spend with now to around EUR 450 million. Revenues of at least EUR 450 million, so in line with billings. Previously, revenues were guided towards being lower than billings.
Due to the significant first quarter billings intake, this will result in higher subscription deferred revenue releases before year-end, and therefore we have increased our revenue guidance of up to EUR 450 million. On adjusted EBITDA, I talked about our investments and what this means going forward, and therefore we expect an adjusted EBITDA margin of around 56%. I think that concludes our presentation. We would open the lines for any questions.
Ladies and gentlemen, we will now begin our question and answer session. If you have a question for our speakers, please dial 01 on your telephone keypad now to enter the queue. Once your name has been announced, you can ask your question. If you find your questions answered before it's your turn to speak, you can dial zero two to cancel your question. If you are using speaker equipment today, please lift the handset before making a selection. One moment please for the first question.
The first question received is from George Webb of Morgan Stanley. Your line is now open, sir. Please go ahead.
Good afternoon, Oliver and Stefan. I've got a few questions, please. Firstly, in terms of what you saw in Q1, looks like you added EUR 42 million of new subscription billings in the quarter. How can we think about the phasing of that by month? Would a pattern of EUR 10 million, EUR 10 million, and EUR 20 million in March be broadly representative of what you saw? Linked to that, when you talk about some softening in April, how far through the month was that? Was the reduced level of COVID-19 related demand still significantly above the run rate of January and February? Lastly, in terms of Tensor, has there been any change in the breadth of your large enterprise sales in terms of the penetration into whether you're selling to a specific department or are these now higher level discussions within these businesses? Thank you.
Should I take the first two ones, and you take the Tensor ones? Yeah. Hi, George. Thanks for your questions. Stefan speaking. In terms of the new billing split, that's actually not a bad assumption. Clearly, I think we told you that in Q1, we got off to a very good start, and if you take our new billings over the past year and the pattern, we typically arrange ahead about EUR eight to nine million in organic billings. That's new and upsell billings. I think your overall split of 10, 20 is not that bad. In terms of how April compared to January, February, clearly beginning of April especially, was significantly better than January, February. Still seeing some customer demand to basically enable operations to work remotely. That then faded out, but more in the second half of April.
In the second half of April, Japan also contributed very strongly. Now I think as of May, we are back to more normalized billings level.
Yeah. Maybe on Tensor, I'm not sure I fully got the question. The type of discussions we have, I think it's fair to say that over the course of the last quarters, we have elevated the level of discussion and the breadth of the discussion across companies. If I go back at the first quarter, very different types of discussions of all natures. We have the very technically oriented solution for field service enablement based on TeamViewer Pilot, which is primarily with the operations department, field service department, of course, supported by IT. We also have that for the retail organization for warehousing in other companies. Really function by function, broad level discussions. We also have C-level discussions, of course, where there is a broader deployment of TeamViewer for different use cases.
The largest customer win we had at the beginning of the year already was something like this. You can think of it like an enterprise license agreement where the customer has the right to use TeamViewer for almost any workplace or any employee in different departments. When Corona came, when it was imminent, it went all the way to, frankly, emergency calls, emails by C-level to our C-level sales or myself, asking for a broad-based remote access employee home working solution across the company, where they figured out that they work VPN based, but that's not secure enough, not fast enough, not flexible enough, and doesn't enable enough employees to work from home and have access to the back office functions. That also happens.
I think with the Tensor product, we are in the right spot of the right discussions, which doesn't mean that we're not also selling Tensor or smaller tickets, EUR 15,000 departmental still happening, but more and more we are in broad C-level discussions.
Great. Thank you.
The next question received is from Mohammed Moawalla of Goldman Sachs. Your line is now open, sir. Please go ahead.
Great. Thank you very much. Hi, Oliver. Hi, Stefan. Two questions from me as well. First, just in terms of your caution in terms of the reduced visibility, can you help us sort of frame that between what element of the demand you saw in March and April or the sales you generated was for proof? Or is it caution around perhaps some of the kind of SMB customer base? I know you alluded to payment terms, but do you think there's a sort of risk around churn rates later in the year because of business failures? Just maybe help us quantify or further clarify that sort of conservatism in the guidance. Secondly, it was nice to see the net renewal rate tick up. Could you give us a sense of what are the kind of use cases or what are the kind of cross-sell and upsell?
I know deal sizes have gone up in enterprise, but any other color around what's driving that uptick in renewal rate and how sustainable that is would be helpful. Thank you.
Sure. Let me start with the first one. This is Stefan speaking. In terms of whether the new guidance is conservative or not, I think the key topic is clearly the decreased visibility or the limited visibility for the remaining seven and a half months. I think the year still has quite a few months ahead, and I think it's fair to say that probably this remainder of the year feels less secure and visible than at the same time of the prior year. I think nobody knows at this point in time how severe and long the economic recession will be. That's very tough to quantify, frankly. If we take a step back, what we've basically seen is we've now significantly outperformed our first quarter by probably EUR 20 million, give or take.
We'd expect the growth to be anywhere between 30%-40% in any given quarter. Now we're at 75%. In absolute terms, it's around EUR 20 million. We now increased our guidance by, if you take the previous midpoint by EUR 15 million, which basically indicates to the market that we expect a substantial amount of that outperformance in Q1 to remain for the entire year. We basically expect a trading for Q2 and Q4 to be in line with past trading, i.e., around a 30% growth. The EUR 20 million outperformance, we certainly also include some amount of demand which has been pulled forward. That's hard to quantify. I think you can only quantify that ex-ante, not ex-post. That's going to be tough for us. We have assumed that our cross-churn rates remain fairly stable. As you know, Q4 is a big renewal quarter for us.
So far, we have seen dollar churn exactly in line with past trends. Our assumption includes that this is the case going forward, and we just don't have enough data points if the churn remains at that level or changes. That's basically the key foundation for our guide for the year.
Maybe on the second question, more upsell, cross-sell, net retention rate, what happens more generally speaking, I think very much different by company type. I think the classical situation was that either new customer, but often in this phase of net retention, existing customer that will come to renewal at some point or is already a customer for a long while, basically goes through the employee base, works through the emergency planning, tries to understand how many people potentially could work from home or from remote locations, and how the new setup should look like, and then calling us to understand how much more or to ask for more capacity. That could be the old corporate pricing world where they need more channels because they want to have more parallel connections at the same time to a smaller percentage. The biggest percentage was Tensor-based, more users.
When they go into more adjacent business functions, so for example, remote management, they wanted to have an extra remote management license to be able to remotely control and manage OT and IT equipment. Some companies needed the Pilot license or wanted the Pilot license because they also wanted to enable field service better, maybe the first time, or maybe better enabling the field service to be supported by somebody else or support customers. They went for the Pilot license. Some companies tried or wanted to add meeting, the usage of meeting into the bundle and the license they had because they wanted to significantly step up the use of TeamViewer Meeting or Blizz, and therefore have increased the license. Different pieces that either resulted in upsell of just more people, more channels, more capacity, or also adding new types of licenses in the cross-selling.
I would say that the product that, of course, naturally got less attention during the crisis time was the IoT arena with new IoT project, new proof of concepts. I think on this one there, not much was happening. Same level of activity than before but no step up, I would say. Are your question answered?
Yes. Thanks.
Okay. We take the next question. It's from Sven Merkt of Barclays. Your line is open, sir. Please go ahead.
Good afternoon. Hi, Oliver. Hi, Stefan. Thank you for taking my question. Firstly, you mentioned you have been more lenient around the free to paid conversion. Do you expect this to support out to your growth or at least kind of offset potentially if there has been a pull forward of revenues? Secondly, I'm guessing this is what you're seeing in the competitive or how you see the competitive environment evolving. I mean, there's with increased remote working, there are now potentially more competition entering the market. Is that something that you're seeing? Then also, have you seen competitors being more aggressive in their marketing and customer acquisition spend, and is this impacting you at all? Thank you.
Yeah, I can take that. Free to paid conversion, I think if you look at how we run our business typically is that there's always a certain portion of free to paid where we use our algorithms in the back end to understand whether the usage and connection behavior of users, free users, does actually look like personal use or looks more like business use. Then we prompt these users to pay for a license. First we remind them, then we remind them a bit more forcefully. At the very end of the chain, we might also block them from using the license if we have very strong indication that it looks like commercial use. We have done nothing of this over the last, I think almost two months now or so.
We started in China when this came up, then we were basically rolling out the same way of not executing these policies across the globe. This is still the status we are in at the moment, except for some very small start of testing in China because China is arguably through the crisis. Having said that, of course, the additional usage during corona leads to the growth of the ecosystem, more activity in the ecosystem. The way forward I would describe is what would happen is either the company then over time, the company of a certain employee buys the license, enables their employees to work from home, and such that this personal user would actually become a business user, but under the license of the company. That's one case.
The other case is that that personal user continues to regularly use the product, and we are behind the corona crisis, and if that continues behind the crisis, then I think at some point we will have the opportunity to also ask that user to pay for a license. That's still some time out. I would say it's never bad if you have a growing ecosystem, and it's also not bad that if, remember, in the past EUR 15 million-EUR 20 million maybe of our billings were generated from these free to paid conversion. We haven't done almost any of this during this year. From our perspective, that's a good thing. Secondly, competitive environment. Do we see more players? I think there is more competition, especially in the video collaboration space.
I think the fact that so many people were leaning towards Zoom, with all the discussions around Zoom, I think that has generated quite some interest from Microsoft and others to actually go more forcefully into the segment. I wouldn't say that we see increased demand in our core segments, remote control, remote access, remote monitoring. They have always been different solutions. We strongly feel that we have extremely capable solution, very versatile, that can cope with very heterogeneous environments. That proves to be the case. I think we have heard many customers that told us, "I have something, but that's not good enough. I need more. I need a better solution. I need a more ubiquitous solution." In that sense, competition is the same as before. Every now and then, I think there was a bit more noise, I think especially in the U.S.
The U.S.-based players, I think, made quite some noise around offerings for free, promotional for free, which maybe had an impact here and there, but not really noticeable in our numbers, because we were actually growing, as Stefan said, across markets, very successfully.
Great. Thank you.
Before we take the next question, just a reminder, if you would like to ask a question, please press zero one on the telephone keypad. The next question is from Stephan Klepp of Commerzbank AG. Your line is now open, sir. Please go ahead.
Yeah. Hi, gents. Stefan speaking here. If you can talk us through the quality of clients that you gained, particularly in March and beginning of April. Is it actually the client that you're targeting off or going after big enterprises and IoT? You said as well that IoT is not really much happening. In other words, should we be afraid that these clients just look for a tool that they can use not to go into the office, and we see cancellation rates increasing at a later point in time? Secondly, I'm surprised to see that you're only guiding for a margin of 56%. I heard you, what you said, obviously, that's all clear, but it implies a margin down to 54% for the rest of the year despite economies of scale.
Can you basically be more precise what you expect to invest into that the margin quality deteriorates slightly?
I take the first one. Stefan goes to margin. Quality of client, I think, I would really say it's a very healthy mix of clients we would expect. I wouldn't be afraid of later cancellations. Of course, there's always certain cases and certain circumstances where there's an emergency deployment, and then people change their mind. I think from a mix sectors, functions, what customers have been asking us for, I think we have a good mix, and I wouldn't be worried about this one.
I would actually say that the customer mix in March and April was potentially more geared towards larger enterprises.
Yeah. It was due to larger companies-
Correct
Which generally come with lower margins, as I should say. Yes.
Yeah. Does that mean that, for example, people looking for just a simple tool would have gone to a cheap competitor like AnyDesk or something like that, where licenses are even cheaper and just give a quick fix, and so they should have seen the lower quality part of the market to come, or is it wrong to assume that?
I can't comment on those, frankly. I think what we see is that the people who are asking for our solution have typically understood very well where the complexities are and where the limitations of existing solutions are. The example of a CIO of a big bank understanding extremely well what contingency planning they have. You can imagine banks have significant contingency planning.
Sure.
Understanding immediately, okay, I can only enable so many people, limited to these functionalities, and I have the following security problems. I need something which is more capable. It can run in parallel, or in addition to my VPN set up, but I need something which helps me for more employees, more access, and also to troubleshoot my other solutions, and also to cope with bring your own devices situations, for example. That's actually pretty complicated. We were immediately in the middle of security discussions, architecture, Tensor, managed connectivity, and so forth, and I cannot see how cheapo solutions can handle that. That's why.
Yep
I'm also very confident that these people will stay because they've gone through the exercise. If it would've been so easy, they would've just done something else. It's not. That's maybe. Then margin, Stefan?
Yeah, maybe on the adjusted EBITDA margin guidance, I think it's important to understand that this margin guidance is unchanged from our guidance beginning of the year, depending whether you take midpoint or higher end, but it's largely unchanged. Clearly Q1 margin was significantly better. If you take a step back, basically, the new revised billings guidance implies billings growth for Q2 through Q4 of just below 30%, 28% or so. Somewhat lower billings contribution for the remainder of the year. If you then take a look at our cost base and the continued investments into especially R&D, but also enterprise sales, you should assume a slight increase in cost base. If you add this up, then you basically arrive at our adjusted EBITDA margin of around 56%, maybe slightly better. Really the margin guidance is completely unchanged.
I think we always said that, yes, margin might increase over time, but if we see opportunities to capture additional market share or accelerate billings growth, then we would go after that. Very consistent with our past guidance.
Yeah. Thank you.
Again, as a reminder, if you would like to ask a question, please press zero one on your telephone keypad now. The next question is of Miro of JMS Invest. Your line is now open, please go ahead.
Yes. Hi. Thanks for taking my question. The first one is your new license, the remote access license, was this roughly a third of the price of your standard license otherwise, which was introduced during March. How was the pickup of this license? Could you give us a number there in terms of how many licenses you already have? The second one would be the FX loss that you have shown. Could you shed some light on how this will develop during the rest of the year? Thank you.
I think the first one, I think there's a misunderstanding. The remote access license was built I think more than a year ago. That was a single-user license effectively for a limited number of endpoints to enable solo users to access another computer effectively. What we did now is we've taken that concept, one user being able to connect to a limited number of devices, and we bundled that into the Tensor architecture, which comes with full manageability, connectivity, and so forth. That solution was then sold to enterprises that use that as full-blown, call it home working or remote working, wherever you are working solution. That Tensor piece got a significant share. I wouldn't know the exact number, that was of course a very attractive offer that we gave to the market. The pricing is a customer-specific pricing.
It's not the pricing that you would find on the list price if you go to our website, because that website is a single-user product. We have actually bundled that into a Tensor bespoke pricing scheme.
Then with regards to the second question, the FX loss, I guess you're referring to the unrealized FX loss in the P&L that's solely relating to our debt structure. A significant amount or 80% of our debt is denominated in U.S. dollar. As the U.S. dollar strengthened slightly in the last quarter, we realized or we had to account for a unrealized FX loss. EUR 8 million of that. Obviously, clearly, if the US dollar remains at the current levels, we would have that EUR 8 million as an unrealized FX loss for the remainder of the year. If it weakens or strengthens, that might move up or down, but it has no cash flow impact.
Thank you very much.
It serves as a hedge for our US dollar denominated EBITDA, which is quite significant. That's the reason for the US dollar denominated loan.
Thank you very much. Very clear.
We receive the follow-up question of George Webb of Morgan Stanley. Your line is now open again. Please go ahead.
Thank you. I've just got a couple of follow-ups. I mean, firstly, you mentioned screening for tech acquisitions. Is that when you look at your portfolio of products thinking there's a gap we need to fill within the existing products we have, or is that more looking for which products or what sort of technologies could we introduce to our broad user base and device base and cross-sell? Then just secondly, in terms of just G&A expense in the quarter, that did tick up quite significantly even over Q4 last year. Is there anything in particular we should be thinking about for that? Thanks.
Yeah. First question, screening for tech acquisition, I would say it's really both. Of course, we have the platform and there might be adjacent tuck-ins offerings, which would make sense to extend the platform and offer the whole range of services to our customers, be it SMB or enterprise, could very well be. Also the other piece, of course, which is we have something, for example, AR Pilot, and we have significant development resources there, and we continue to innovate with the example of the LiDAR technology that we're now using. We find a team that could significantly accelerate our efforts in a certain space, and that could be equally interesting. Both is true, but again, early stage, more in screening mode, I'd say. The G&A question, maybe Stefan.
Yeah. Maybe on G&A, I think the increase in G&A compared to Q4 base reflects the continued investments into IT security, GDPR, the whole compliance functions. You might have read some announcement that we have strengthened our legal team. We appointed a new CISO, so very significant investments into that, yeah, as we talked about in the past. That drove up the run rate, but it's very good investments overall. Then secondly, clearly Q1 with this level of performance, the general accrue levels for bonus and certain one-offs for our CSAT operations and the likes increased significantly.
Thank you.
There are no further questions, I hand back to the speakers for some closing remarks.
Thank you very much for joining. Thank you very much for your interest. I think we will be on the road virtually over the next couple of days, so we look forward to speaking to many of you. Thank you very much.
Thank you.
Thank you all. Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.