Earnings Call: Q1 2020

May 12, 2020

Dear ladies and gentlemen, welcome to the TeamViewer Conference Call for the Q1 2020 Results. At our customers' 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. 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 Q1 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. But before we start, I'd like to remind you of the cautionary note regarding forward looking statements that you can find on Page 2 of the presentation. Let me now hand over to Oliver. Thank you, Carsten. Good afternoon to all of you. As always, before Stephan is going to present the what we believe are very strong Q1 results in detail, I would like to take you through our achievements during the Q1, talk about how the measures to contain the COVID-nineteen pandemic has affected TeamViewer and, of course, our global operations. If we go to Page 4, the megatrends 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 and really ever increasing number of devices and the fast growing demand for secure remote management solutions. And during the Q1 2020, we actually have seen all these megatrends 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. And 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. But 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 have 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. So we really believe the pandemic has created an extra push on development that otherwise would have been pursued by companies anyway. So this clearly caused increased demand for these technologies. And we believe that these technologies will help generate efficiency gain in future. And those are required to weather the crisis and to support a global economic recovery. So really believe what we deliver is key to companies of all sectors and in all countries globally. Therefore, from our perspective, we see PPUA in the middle of accelerated megatrends, 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 Q1 2020 with more than 300 Tensor licenses sold globally. And 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. So we can really effectively work from home in sales, in service, presales and also in R and D. I think that was very important that we have been able to organize that pretty quickly, and it worked out very, very well. So all of this has manifested itself in significant subscriber base, growing more than to more than 400 514,000 now, 75% billings growth, even higher growth in profitability and a strengthened balance sheet, which Stefan is going to cover. As you can see on Page 5, we had significant extra demand in the Q1 2020. Billings were up 75% compared to Q1 2019, getting to a level of €119,700,000 for the 1st 3 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's resulted in overall very good performance. That came on top, I should say, on to very good performance already in January, February. So even without the pandemic, we had a very good growth in the 1st 2 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. So Q1 EBITDA grew by 96% year over year to €73,900,000 This is a margin of 62%, 7 percentage point improvement over last Q1 margin, so very significantly. On the back of this accelerated growth, we will continue to invest along our 3 growth initiatives, strengthening customer segment coverage, use innovation and geographical expansion, so very much unchanged. We're also screening external growth opportunities through technology driven M and A transactions. So smaller tuck in M and A in technology areas, which are interesting for us, also unchanged to what we've communicated to all of you before. But 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. It's a key billings driver, and it's really an achievement, has been a jump for us, especially in larger deals and enterprise customers. So 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 2 statistics here. 1 is the customers with annual contract value above €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 €1000 to €3000. Now with the Tensor product, we have really successfully enabled them to also say sell bigger ticket values items. And therefore, we see this trend continuing. We had in the first quarter or at 31st March, we now had 11.83 customers with an annual contract value above €10,000 That's an increase of 100 and 53% 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 Q4 is very strong now. We had a significant step up in the Q1 due to the strong start in January, February, but also then the extra demand. So that's very pleasing. That's the one statistic we like to track and show to you. And we're also showing here the continued development until the 30th April, just to give an idea on how the trends continued into the Q2. The second statistics 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. But also there, you see that the top 50 deals accumulated contract value was €5,500,000 in the last 12 months ending 31st March. That's 142% increase compared to last year's March and also 63% increase compared to December. So again, very pronounced effect on the large customer, large ticket size. And while at the end of December LTM, the range of the top 50 deals was 36 ks to roughly 300 ks, we now have a range of €53,000 to more than €500,000 So very significant improvement of the large ticket size, and we're very pleased with that, and we'll continue there. Just to give you an idea, talking about selected deals, you see here 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 good uptake of our pilot product, the augmented reality product that helps to remotely see field technicians out there in the field. So 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 won business with an Italian pharmaceutical and diagnostics company with activities in over 100 countries. They have chosen TIMEO 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-nineteen 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, 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, so everything that comes through 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. The company produces a range of self-service kiosks, 40,000 installations around the world. And Tencent not only enables the company to remotely access and support those kiosks, so they access really the kiosk in 80 countries without any human interaction. It also comes with improved security and audibility for high efficiency. So we really moved or changed the process to make much more use of remote capabilities and all of that in a very secure environment. And also, we got good foothold also in the public sector. I think there was an extra push through corona in the public sector in municipalities and government authorities to think more and faster about digitalization. Here we had a key win, was the European Ministry with over 10,000 clerks and civil servants across the country. TeamViewer deployed instantaneously very comprehensive business continuity solution. So 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. So they didn't have, of course, company devices. So everybody can use its own device to remotely and securely connect into back end systems. And that's very important if you want to be able to perform your duties, which go, of course, beyond meetings, video collaboration or telephone contracting, these people have to access back end systems in order to issue transaction or handle cases, and that's all possible with our solution. So also a very nice win. On this page, as you can see, many more examples of TeamViewer connectivity helping customers around the world to their processes. And 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, and that turns out to be very successful and is one of the most successful growth initiatives. If we turn to Page 8, 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. And also, we're expanding our global partnerships and integrations. I think we've talked a lot about our integrations, back end integration into software, hardware and other technology plays this quarter. I think interesting to report is the integration Microsoft Teams, which we're working on, the integration into Elo, which is POS terminals and also IBM Maximo. So 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 Tencent with a remote access license, which I mentioned before. So that was the way to really roll out home working 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. So that's really if you see a situation through others 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. And of course, strengthening the innovation and development capacity is anyway a very important focus for us in 2020. And in that sense, we're also screening the market for interesting technology acquisitions. We hired lots of people. We built out our R and D force. It's now 286 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es. We also strengthened our IoT team by hiring a new leader and more dedicated salespeople. And 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. But 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. And we said in the next phase, we will do that also for the Americas, especially in 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 9, I think before I hand over to Stephan, 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 well-being of our employees and business partners. That always comes first. And of course, we've implemented very strict hygiene and safety guidelines. This also included very early on the group by working from home policy as well as travel bans. So we started with travel bans. Then we had to put people in the home office in China. So Shanghai office, and then the same sorry then the same rolled over into Japan and also Adelaide. And then 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. And it's also, I think, important to see that the organization, our people, employees have done a very, very good job in these very challenging times. So 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. And 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 of our customers and bring business in really. What was also important, of course, is many customers were turning to us to increase capacity and also many, 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 assessing 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 system. So in parallel to everything else, which we had to do, we also had to boost our routing capacity, both for the video conferencing part to the Bliss product, but also for the TeamViewer core part. And we've been able to do that in parallel to everything else what's going on. We also saw some significant extra requests for our video collaboration product. And we also found basically through personal experience that schools, universities around us are not in a great position to provide for home schooling solutions. And we decided very quickly to make our Bliss product available for free for schools and university, and we saw a good pickup there, and we were also supporting that. In turn, we also had to increase our router capacity. And 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. And we try to be as responsive as possible depending on market and segments to make sure that we keep our customers happy and adjust our processes to the needs of customers and society. So and 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. And 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. And 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. And 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 February started very strong, and then the corona related lockdown sharply accelerated our billings growth in March, and we pre announced that late March, as you surely have seen. So if we move on to Slide 11, the subscriber and billings dynamics in the current quarter or the last quarter. So based on the start and dynamics Oliver explained, we experienced a significant expansion of our subscriber base, growing by 62% year over year and we now have more than 500,000 subscribers, 514,000 in total. So since the end of last year, we added on a net basis more than 50,000 subscribers net of churn. And those subscribers really joined us from all customer segments in various sectors, which in the past we were somewhat underpenetrated, including larger government bodies, financial institutions and the likes. So really a very broad customer win across the globe and across all 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. And 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 9% or 290,000, 289,000 subscribers. So 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 billing growth of 25% to €119,700,000 year over year. We recorded nearly a doubling of new license subscriptions in the Q1 to around €42,000,000 And 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 CHF 3,500,000. 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. And 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. America is leading the field again with 82% growth, followed by EMEA and APAC. APAC was 62%. We talked APAC for quite some time and also about our investments in those local markets. And I think it's very satisfying to report that we had an exceptional month in Japan in April with the full lockdown effects. 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. Also the enterprise teams in Europe, the recently ramped up team enterprise team in the U. S. And APAC and also general 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. And we'd also like to take this opportunity to thank our employees from sales to customer satisfaction as well as R and D, IT, HR, G and A who were under severe stress in those times. But they still were able to cope with all of the additional customer demand and the load in our systems. So big kudos to the teams, fantastic team effort really. And 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 upsets 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 effective with us. The dollar value churn remains very stable. Let's move on to 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. And I'm very glad to report that apart from some glitches here or there, we were able to adjust really, really quickly. And a 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 CHF 73,900,000 compared to CHF 37,700,000 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. And actually, thanks to our R and D and IT departments, who made sure that we added enough capacity in a very fast time, we've been able to deal with this significantly increased load on the systems. Our GP margin slightly increased to 93%, already 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. And the other SG and A costs, while significantly increasing F2 terms, decreased as a percentage of billings across the board. And 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 and D and product innovation. And 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 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 FT feet feet feet feet feet feet feet feet feet feet feet Es across all go to market routes and sales channels and geographies. But we clearly also invest in other key areas like marketing, customer service and infrastructure as well as G and A. So really accelerating all of the investments to capture the market opportunity. And 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. In our cash flows, the quality of our remained very high, and we had a very strong quarter in terms of cash generation. Adjusted EBITDA of CHF 73,900,000, plus a positive change in working capital and CapEx in line with our guidance, resulted in this very strong cash conversation with a pretax free cash flow of CHF72,400,000 versus CHF33,000,000 in the prior year, so more than doubling. And maybe on CapEx, an extended note here or remark here. Remember that the €25,000,000 of planned CapEx for 2020 includes 2 one offs. Both one offs account for roughly EUR 16,000,000 of total CapEx spend. 1 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 Gripping. 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 whilst you're in the middle of a peak billings time, that doesn't feel like the right thing to do. So we decided to push it out a little bit and therefore had to extend the project timeline to reflect the current circumstances. And regarding the new building, 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 be somewhat above the initial guidance and more in the range of €25,000,000 to €30,000,000 versus the €25,000,000 we expected a couple of months ago. And 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. And in light of these, we have also relaxed our cash collection efforts and how strict we are in terms of standing and shutting off services. But 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 CHF 120,000,000. So the remaining exposure is very, very limited regarding our Q1 cash collection. Whilst talking about cash, let's move on to 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 2.4 times EBITDA by the end of the Q1 due to the strong cash collection and continued EBITDA growth. We delevered now 1.3x over the last 6 months, so very strong in accelerating deleveraging. We have cash of €105,000,000 on the balance sheet. RCF remains undrawn, so very healthy situation. And the continued substantial cash generation for the remainder of the year will basically mean that we can reconfirm our leverage deleveraging plans for the year and we expect to be significantly low 2x by the end of 2020. With that, I would move on to our increased and realized guidance on Page 16. So in summary, our market positioning, our product portfolio and the scalable business resulted in an exceptionally strong performance in the Q1. April continued to be strong, albeit the COVID-nineteen driven demand softened later in during April. But nevertheless, the strong trading during the 1st 4 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. And the new targets are basically billings of around €450,000,000 up from €10,000,000 to €20,000,000 or up €10,000,000 to €430,000,000 to €440,000,000 That was the old billing spend with now to around €450,000,000 And revenues of at least €450,000,000 so in line with billings. Previously revenues were guided towards being lower than billings. But 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 at least or of up to €450,000,000 And on the adjusted EBITDA, I talked about our investments and what this means going forward. And therefore, we expect an adjusted EBITDA margin of around 56%. And 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 first question we 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 $42,000,000 of new subscription billings in the quarter. How can we think about the phasing of that by month? Would a passing of $10,000,000 $10,000,000 and $20,000,000 in March be broadly representative of what you saw? And linked to that, when you talk about some softening in April, how far through the month was that? And was the reduced level of COVID-nineteen related demand still significantly above the run rate of January February? And then 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 there any to now higher level discussions within these businesses? Thank you. Should I take the first two ones and you take the 10th ones? Yes. Hi, George. Thanks for the questions. It's Stefan speaking. In terms of the new bidding split, it'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 range ahead about €8,000,000 to €9,000,000 in organic billings, that's new and upsell billings. So I think your overall split of €10,000,000,000 is not that bad. And then in terms of April, how April compared to January, February. Clearly, April beginning of April, especially was significantly better than January, February. Still seeing some customer demand to basically enable the operations to work remotely. That then faded out, but more in the second half of April. And then in the second half of April, Japan also contributed very strongly. And now I think as of May, we are back to more normalized billings level. Yes. Maybe on Tensor, I'm not sure I fully got the question, but just kind of 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. So if I go back at the Q1, very different types of discussions of all natures. So 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 and other companies. So really function by function, broad level discussions. But we also have C level discussions, of course, where there is a broader deployments 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, e mails 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. So I think we really 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 smaller tickets, 15 ks departmental still happening, but more and more we are in broad C level discussions. Great. Thank you. The next question we received is from Moham Khmelwala 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 sort of your caution in terms of the sort of reduced visibility. Can you help us sort of frame that between what element of sort of the demand you saw in sort of March April for the sales you generated was sort of proof? Or is it caution around perhaps some of the kind of SMB customer base? I know you alluded to sort of payment terms, but do you think there's a sort of risk around sort of churn rates sort of later in the year because of sort of business failures? Just maybe help us kind of quantify or further kind of clarify that sort of conservatism in the guidance. And then 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 up sell? 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. So 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 7.5 months. I think the year is still 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. And that's very tough to quantify, frankly. So but if you take a step back, what we've basically seen is we've now significantly outperformed our Q1 by probably €20,000,000 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 CHF20 1,000,000 And we now increased our guidance by if you take the previous midpoint by €15,000,000 which basically indicates to the market that we expect a substantial amount of it outperforms in Q1 to remain for the entire year. And we basically expect a trading for Q2 and Q4 to be in line with past trading, I. E. Around a 30% growth. The €20,000,000 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, so 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. So 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. So that's basically key foundations for our guidance for the year. And then maybe on 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 the space 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. So 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. And then 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 work to be supported by somebody else support customers. So then 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 have, because they wanted to significantly step up the use of TeamViewer meeting or blitz and therefore have increased the license. So 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 concept, 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 questions answered? Yes, thanks. Okay. Then we take the next question is from Sven Merck 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 leaned around the free to paid conversion. Do you expect this to support out of your growth or at least kind of offset potentially if there has been a pull forward of revenues? And then secondly, 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? And then also have you seen competitors being more aggressive in their marketing free to pay conversion, I think, free to pay conversion, I think if you look at how we run our business typically is that there's always a significant or not a significant, there's always a certain portion of free to pay 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 and then we prompt these users to pay for a license. And first, we remind them and then we remind them a bit more forcefully. And 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 started in China when this came up, and then we were basically rolling out the same way of not executing these policies across the globe. And 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. So that having said that, of course, the additional usage during corona leads to growth of the ecosystem, more activity in the ecosystem. And 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. So that's one case. And 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. But 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, €15,000,000 to €20,000,000 maybe of our billings were generated from these free to pay conversion. We haven't done almost any of this during this year. And 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 this 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 an extremely capable solution, very versatile that can cope with very heterogeneous environment. 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. So in that sense, competition is the same as before. Every now and then, I think there was a bit more noise, I think, which maybe had an impact on the which maybe had an impact here and there, but not really noticeable in our numbers because we were actually growing, as Stephan said, across markets very successfully. And the next question is from Stefan Klepp of Commerzbank AG. Your line is now open, sir. Please go ahead. Yes. Hi, gents. Stefan speaking here. I just wanted to know if you can talk us through the quality of clients that you gained, particularly in March beginning of April. Is it actually the clients that you're targeting off or going off to big enterprises in IoT? You said to sell that IoT not really much happening. So 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? And 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 into that the margin quality deteriorates, I think? I'll take the first one, and then Stefan goes to the margin. So quality of clients, I think I would really say it's a very, very healthy mix of clients we would expect. So I wouldn't be afraid of later cancellations. I mean, of course, there's always certain cases and certain circumstances where there's an emergency deployment and then people change their mind. But I think from a mixed sectors function, 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 April was potentially more geared towards larger enterprise. Yes, it was a bit to larger companies, generally come with lower churn, yes, I should say. So does that mean that, for example, people looking for just a simple tool would have gone to cheap competitors 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 wouldn't 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. So I mean the example of a CIO of a big bank understanding extremely well what contingency planning they have. You can imagine banks have significant contingency plan. But 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 setup, 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. And that's actually pretty complicated. And 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. And that's why I'm also very confident that these people will stay because they've gone through the exercise. If it were so if it would have been so easy, they would have just done something else, but it's not. So that's maybe and then margin, Stefan? Yes, 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. Now clearly, Q1 margin was significantly better. But if you take a step back, we basically there's a new revised billings guidance implies billings growth for Q2 through Q4 of just below 30%, 28% or so. So somewhat lower billings contribution for the remainder of the year. And if you then take a look at our cost base and the continued investments into especially R and D but also enterprise sales, you should assume a slightly increase in cost base. And if you add this up, then you basically arrive at our adjusted EBITDA margin of around 56%, maybe slightly better. But really, the margin guidance is completely unchanged. And 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. So very consistent with our past guidance. Guidance. No, thank you. And the next question is of Maira of JMS Invest. Your line is now open. Please go ahead. Yes, hi. Thanks for taking the question. The first one is your new license, the Hypnosis license, was this roughly onethree of the price of the 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? Then the second one would be the FX loss that you have shown. Could you shed some light on how this will develop during rest of the year? Thank you. I think the first one. So I think there's a misunderstanding. The remote access license was built, I think, more than a year ago, and that was a single user license effectively for a limited number of endpoints to enable SOHO users to access another computer effectively. So what we did now is we've taken that concept, so one user being able to connect to limited number of devices, And we bundled that into the Tensor architecture, which comes with full manageability, connectivity and so forth. And 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. And that tensor piece got a significant share. I wouldn't know the exact number, but that was, of course, a very attractive offer that we gave to the market. But it's 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. And then with regards to your second question, the FX loss, I guess you're referring to the unrealized FX loss in the P and L that's solely relating to our debt structure. A significant amount or 80% of our debt is denominated in U. S. Dollar And if the U. S. Dollar strengthened slightly over in the last quarter, we realized or we had to account for an unrealized FX loss. So €8,000,000 of that, obviously, clearly, if the U. S. Dollar remains at the current levels, we would have that €8,000,000 as an unrealized FX loss for the remainder of the year. But if it weakens or strengthens, that might move up or down, but it has no cash flow impact. Thank you very much. It's the hedge for our U. S. Dollar denominated EBITDA, which is quite significant. That's the reason for the U. S. Dollar denominated loan. You very much. Very clear. And we received a 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. 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? And then just secondly, in terms of just G and A expense in the quarter, that did tick up quite significantly even over Q4 of last year. Is there anything in particular we should be thinking about for that? Thanks. Yes. First question, for TAC 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. But 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. But we find a team that could significantly accelerate our efforts in a certain space, and that could be equally interesting. So both is true, but again, early stage, more in screening mode, I'd say. And the G and A question, maybe Stefan? Yes. So maybe on G and A, I think the increase in G and 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 C. So very significant investments into that, yes, as we talked about in the past. And that drove up the run rate, but it's very good investments overall. And then secondly, clearly, Q1 with this level of performance, the general accrual levels of BONI and certain one offs for our CSET operations and the likes increased significantly. Thank you. As 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. And I think we will be on the road virtually over the next couple of days. So we look forward to speaking to you as to many of you. Thank you very much. Thank you. Thank you, Arndt. Bye bye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.