So once again, good afternoon, everyone. Today, we are gonna talk about key performance indicators of for the second quarter of 2023/2024 at Text Spółka Akcyjna. It's actually the first conference call that we are taking under the new name. Together, me, Łucja Kaseja, and Marcin Droba, we will present you the results shortly. That should take us 15-20 minutes, and then we are, as always, happy to answer any questions that you have. We're happy to see some old names, but also a few new people at the webinar. So in this quarter, the most important thing that took place was the change of the name. So we are no longer LiveChat, we are Text now.
The shareholders have agreed in August to change the name of the company, and that has happened in September. Now we are quoted under the new name and the new short new ticker, which is TXT. The vision mission stands as it was, so we are at text.com. We are text intelligence for better customer service. And with that, with that mission and vision, we help brands with their customer service, mainly focusing at text communication. With many, we have met already, but very briefly, few key facts about the company. So we are a global software-as-a-service business. We generate our revenues globally, and the majority... Well, not majority, but around 40% are from the United States.
Whereas, we, being based at, in Poland, we have slightly less than 2% of the revenues generated from here. We offer our services in B2B subscription model. We have a very unique customer acquisition model that has many channels. And that approach allows us to sustain quite high margins for long period of time already. We have co-founders still engaged within the company, the CEO and the people on the supervisory board. We pay dividends. We have a good track record of that. And the most important thing is the products that we have. So we have five products: LiveChat, ChatBot, HelpDesk, KnowledgeBase, and OpenWidget, which is the newest one.
I'm not gonna go into details about the products, because what interests you the most today are the numbers. I will jump straight into KPIs. The first and the most important KPI that we have is monthly recurring revenues, MRR, which is for the quarter July to September, $6.47 million. And that is an increase of over 30% over the year. And it is a flat number against the previous period. Now, although we do not present the estimated revenues, for comparison reasons, we have put these numbers into the presentation because this quarter is not the best quarter that we had.
But in order to give you full picture of how the things are at the company, if we counted the revenues in the old way, that would be close to $20 million revenues per quarter, which is a decrease over the last quarter. And now some of the numbers for the product.
Maybe just let's say that we are in the middle of the change of recognition policy. So we are going to change that, and that's why actually we want to present the data, but revenues will be counted slightly differently versus what we did in the past.
Yeah. The reason for the change is that, we used to, well, we still collect the annual subscriptions upfront, and previously that was all accounted towards the quarter. Because those numbers for annual subscriptions are higher, the auditor has suggested that we change that policy, and we should be able to present those with the semi-annual report.
Thank you.
Now we can talk about the numbers. So first, LiveChat. The number of clients at the end of the quarter was 37,838. So that is an increase of 73 clients per quarter. And it is not highly satisfying result. The summer months were, usually are, slightly worse in terms of the additions. But also what has changed over the last year is a higher churn, and that churn in the months of July and August was at the level of between 3.5%-4%. That has improved in September to below 3.5%, but obviously, the higher churn rates have influenced the net customer growth that we had in the quarter.
When you look at ARPU compared to the previous year, obviously it is higher. However, if you look at the numbers in the particular months of this year, it stays rather flattish with the value of $156.8 ARPU per in September this year. Also, I'm gonna present you the initial ARPU of LiveChat. It fluctuates with time, but in the last year, it is more or less at similar level. It has improved at the end of September, but as we have always been saying, it is actually influenced by the customers who come in that particular month. So whether we have smaller or one big one, this changes and varies in particular months.
A slightly different picture is with ChatBot. Actually, we are very satisfied with those numbers because the number of ChatBot clients increased by 136 paying customers at the end of September. And we see a lot of interest in ChatBot, especially in ChatBot 2.0. Quite a lot of potential customers are using it in beta phase, and also the queue or the signups for ChatBot 2.0 is actually quite good. So, not only us, but also our customers wait for this product to be not in beta phase, but like in full production, so to say. ChatBot ARPU has increased, and also initial ARPU of ChatBot is higher, so it actually presents very good numbers.
It is also the very first time that we present KPIs for HelpDesk product. In July this year, HelpDesk exceeded 1,000 paying customers, and for us, it is kind of a number, the magic number, a magical number, for the product. From now on, we will be also publishing the results for HelpDesk, so both ARPU and the number of clients. As you can see, in the last months, HelpDesk is actually growing at very good pace. It has added, if I remember correctly, 74 clients in the quarter. Actually, if you look at the base, it is a very good growth that we have for HelpDesk.
More than LiveChat in definitive terms. Yeah.
It's the first time when actually both of the products, HelpDesk and ChatBot, are having more additions than our flagship product.
Net additions, to be clear.
Net additions
To be precise.
To be precise, exactly. And also, if you think, if you look at ARPU of HelpDesk, you can see that it is at the level of $136. And maybe a little bit of background here. So HelpDesk was the first product that we started to increase prices. That was done in May last year, and you can actually see that on the graph. What we did was in HelpDesk, we had two plans. The very first one was just couple of dollars, and then the higher plan was $20-something. And what we did, we got rid of the cheapest plan, and we introduced just one plan with better features, and also the product was developed.
And since both of these actions actually allowed us to improve not only acquisition of customers, but also significant increase in ARPU. In terms of KPIs, that's all, but just briefly about the business updates for the quarter. So summarizing some of the numbers, we had monthly recurring revenues increased by almost 32%, year-on-year, but it was flat as compared to the previous quarter. We are revising our revenue recognition policy. But if you looked at it the way we calculated that before, it was $19.88 million , which is down from what we had a quarter ago.
During the quarter, all of our products got net additions, with LiveChat, 73 customers, HelpDesk and ChatBot actually getting more customers than LiveChat. Important things that took place also during this quarter is this change in the name. So we are no longer LiveChat, we are Text , as you can see on the T-shirt that Marcin has. We are constantly working on new functionalities in the products. ChatBot 2.0 gets a lot of attention, and it's tested by many of the customers. And they are actually giving us a very good feedback so that we can improve the product further. And also until next week, there is open application for Text Accelerated workshops.
It's actually the second edition that's taking place, and it's aimed at cooperating with startups and developers who have ideas in the text communication area that we can work together on and possibly introduce that in our marketplace. And this is the summary that we have for you today, and we are open for questions now. Thank you.
Thank you. We have the first question from Jos é Ignacio Carro. Good afternoon, Esther. Any specific reason for the lower estimated revenues in Q2 compared to Q1? So maybe I will take this one. I will start. So usually when you see the difference in, I will find that slide. If you see the difference between MRR and estimated revenues here, and if that difference in the dynamics, usually the reason was and is annual payments. So we going back to this our policy of revenue recognition.
So it means that we have, for example, more annual payments in the previous quarter, and when we look at MRR, it's spread around the 12 months, but it was booked for the given quarter. That's going to change. So probably if in the case that if the new policy would be already in place, then probably my guess, my good guess, because I see some numbers, probably we had some growth here in the quarter. I hope that answers your questions. The next question from José Ignacio Carro is: It is foreseen an increase in prices of LiveChat or chatbot in Q3 or Q4?
We are not foreseeing that the price increases until the end of the year. As we said previously, we are definitely going to do it more often, but whether it's a year or a year and a half after the previous one, we have no rule for that.
That maybe would be possible in the case if the new prices would affect only new customers. So definitely before the end of the whole cycle of change of prices. That probably wouldn't be very wise to go again to customers and with another rise. But that would be possible in theory for the new customers. And the way we definitely to address these matters, because we have a lot of questions about room for the price increase. And we think there is a room for that. Looking at the market, looking at the competitors, recently, Zendesk raised its prices.
We think there is the room, but at the same time, we want to go to the customers, and we want to communicate that we not only are raising prices, but what we did during that time, what we added, what value we created for them. So definitely, we don't intend to wait too long. We want to observe market. We want to be much more flexible when it comes to pricing. And so, probably something will happen, probably not in coming up weeks, but something will happen. As I said, probably not in the month or two before the NCS, but maybe the next year.
As we have our meeting here, that's the probably subject of the some discussions, maybe between our CPO and CMO or CEO. And we have discussion, we're thinking about it, we're working on that, we're looking at the market, and we hope that there will be place for that.
So the next questions are about ChatGPT, AI, and if I can, I'm gonna combine it with a third question. So, the first one is: Have there been any benefits identified from using ChatGPT so far? The second one is: How is AI used in our solution? And the third one, I think we can answer the three of those at the same time, is: You have also commented on AI implementation testing. Are you cooperating with some specific supplier of data? Shall we expect higher CapEx into your internal IT infrastructure people? So I think, we will be able to, to answer all of those, kind of at the same time.
So first of all, what we see is that the clients of all of our solutions, they can actually choose whether they want to use ChatGPT or not. So it's an add-in in LiveChat Pro product, for example. And what we see is that the bigger customers, the more corporates, they are quite restricted in the way they use it, or even they prefer not to have it at all. So it's quite surprising, to be fair. Also, ChatGPT basically or the solutions, the features that we have, they help with automation or rephrasing or writing in a right tone of voice, the answers to the questions that the customers have.
But it's not as AI makes all the work for the agents. Quite different story is with ChatGPT, with, sorry, with, ChatBot 2.0, where the whole ChatBot 2.0 is designed in such a way that most of the work will be done for the agent. So for that the scenarios or the answers will be built using AI. And we are actually managed to build our own model that and we do not really rely on third parties. Although, for example, for LiveChat product, it is OpenAI that we use.
And, the question that was whether that means there will be higher CapEx or higher costs connected with using the data, we assumed that at the beginning, that those costs will be much higher, but the usage that we see, it's actually lower than we expected. So it won't, will not change the magnitude or the costs in a big by big numbers, to be fair.
Yeah, adoption by our customers, probably yes, it definitely means higher costs. That's true. That will happen, but that won't be a bad thing at the end of the day. And we have, you want to add something to that question?
Um, mm.
Because we have also Guillaume with his hands raised, so maybe we will let.
Let's take questions from him.
Hello, Guillaume. You can speak now.
Hi, Marcin. Hi, Łucja.
Hello.
First, I don't think I understood or I know if you mentioned it. When will ChatBot 2.0 will be launched? Could you please elaborate a bit more on the changes that have been done between the actual ChatBot solution compared to the new one? Maybe some bit more color on the pricing side. And the second one is a bit more forward-looking. As last year in Q3, you implement some price increase that had, I mean, you implemented a bit before, but it has it, the real effect was visible on Q3. I know you don't give any guidance, but are you are you keen to maintain growth in second part of the year comparing the tough comparison based?
Okay. So maybe I will start with ChatBot. Yes, so ChatBot now is tested by some 250 paying customers. So that's a lot, and we are receiving a lot of feedback, a lot of requests. I think that's absolutely great because from what we are seeing, we will be able to add things people want from ChatBot 2.0. It will take some time, so that's why we really don't want to have, and definitely not to communicate any timelines for ChatBot 2.0. I think we have a huge base of users now, a huge base of companies using the ChatBot. So it's good.
We're happy with how it works. We have also a lot of interest. We have customers asking to get this beta, so we're really happy with that.
Marcin, sorry to interrupt, but what are the new functionality? I mean, what's the big change?
Yes.
I know you don't want to.
Yes. So definitely, I'm going to go into that because I think the biggest change, biggest change for user, for our customers, is the very beginning. So the current version of the ChatBot is a rule-based ChatBot. So actually, you start work with your ChatBot, with creating some scenarios. And we prepared a quite nice way to do that. So actually, it's, you know, it's drag and play. It's you don't need any coding skill for doing that. So it's nice. We like that. But it still takes a lot of time, and it's not as easy as it should be. So actually, I was doing that.
So actually, it takes a lot of time, a lot of your work. With ChatBot 2.0,
You mean it take a lot of time to the client in order to.
For the customers, yes.
Uh-uh.
Because ChatBot is not, like, ready for use ChatBot. Actually, it's a tool which is for building bots, actually. It's tool for building your scenarios. Actually, yes, we had some templates which could help you, but at the end of the day, is about creating scenarios for the bot.
Okay.
In case of ChatBot 2.0, actually, the very first thing you are doing, you're choosing a source of knowledge for this bot. It can be your website, it can be some document created for the bot. And then, actually, you can go to and make some coffee and drink your coffee, and you need to wait an hour or two, and when you will be back with your coffee, the scenarios, all that work will be done. And of course, a lot of work is still to be done. You have to dip into that. You have to check everything. You can polish a scenarios made by AI. But that, that's the huge change.
That's a huge change because I think the biggest, from our perspective, biggest difference between LiveChat and ChatBot is from the customer's perspective, is the LiveChat is absolutely very easy to embrace.
Uh-huh.
I'm pretty sure every one of you today can look for the first time at the LiveChat as a tool, and without any training, you can start work with LiveChat. With ChatBot, it's much more difficult, and AI is changing that. So that's a huge... That's a huge change.
Maybe a question in order for me to better quantify the efficiency gain for the client. How many time does it currently take to a client? I don't know. I know that it depends from one to another, whether if the strategy is difficult or no, but what would be the efficiency gain, sorry, with this new ChatBot 2.0?
So, of course, one thing is the time you need to create scenarios. Of course, that's the one things. But the second thing is, of course, is it gonna to work? And of course, is that, that's, that's two things. With the previous bot, well, it's very dependent on your skill and what you are doing and what, what your business is, and what, the purpose of the bot, because, of course, you can create bot who will be just directing, your customers to, to different source of communications. And you can, you can create, you can use easy template, pre-made template, for example, in the restaurants for, for, for bot who will be helping with booking. So, so really, really, it, it depends. Sorry, but that's the only right, right answer. For, for bigger companies, of course, that, the, the change will be much, much, higher.
On the other hand, in the bigger companies, you have people who can do that. In the small companies, time is probably more valuable. So yeah, yeah, definitely, we are convinced that ChatBot 2.0 is now really completely different products, especially at the very beginning of the customer adventure with that product. And that's very important, because we always looking today at the ChatBot. We, yes, we're losing a lot of customers or potential customers at the very beginning of the work with ChatBot.
Okay. Clear on that,
Yes, and the next question was about some guidance, and of course, we don't give guidance, but of course, traditionally, I'm not saying we are not happy with flattish quarter. Definitely, we are not happy. It's not something we would like to see. But when you look at last year, this quarter was also almost flat. And as usual, the vacation is just a bad time for the new business. And of course, at the Polish webinar, someone pointed out that 2020 and 2021 were much better. But sorry, these years were really different. I mean, we had this pandemic at hand and really, vacations look very different also for the businesses, for online businesses.
So I think now we're going back to the situation when we have more seasonality, not in our whole business, but when you look at the new business and customer acquisitions. So I really hope that the current quarter would be much better, especially in terms of LiveChat and the new customer additions.
Okay. So you're keen to, even if the comparison base is quite difficult, you're keen to, to grow on second half?
Definitely, we will be working on that. That you can be sure. You can be sure.
Okay, very clear. Maybe a last question. I mean, since you changed the name of the group, it was the first step, let's say. You talk about a bulk offer since quite a long time. Can you tell us a bit more on this project? Is it something that would be proposed within the end of the year, or when do you think it will be ready? And what's the next move after this name change? I think everyone have in mind that the potential dual listing in U.S., is it something you work on?
A lot of questions in your last question, yeah. So yes, definitely. I mean, changing name was really, it's not only about name, it's also about strategy. For now, we have the place where we're showing the whole portfolio. For us, that's a change. And more things, I think that the joint offer is the case for the future. The focus is elsewhere, honestly. The focus is on today's business. I think we have more pressing matters. We have now added a lot of new things to our products. We'll be thinking about pricing.
So I think the joint offer is not really our focus today, but at the end of the day, we have this one place when we're showing the whole offer, and for us, it's huge step. And of course, if you look at Text.com, you will see this place called Universe and API. And I think that's the strong guidance of the direction when we want to go in the future, when we saw some potential. So definitely, I think we don't want to go too deep into that today. Today, we are discussing the results. But definitely, if you look at Text.com, you should look at this part, Text Universe, Text API.
That's the important for us. That's the important for us. So thank you. Thank you for these questions.
There was the second part of the question about the U.S. listing.
Aha!
Nothing changes here. It's a long-term plan or ambition of the CEO of the company to be listed on the U.S. market, but it's not that we took any further steps to make that happen.
So don't expect any news on that in the coming months. But definitely, I think, yes, I, that's the ambition for the very long time. We chose Warsaw because we were too small. Hopefully, we'll be very happy to start to work on that, but today, no news on that. No update on that. Thank you. And we have William Sewell, which is also raised hand. Hello. Hello, William. You can speak now.
Hi, can you hear me?
Yes.
Yes.
Hi. Hi, Marcin. Hi. Hi, Łucja. I've got two questions.
Mm-hmm.
First question: You described how you have ChatBot 2.0, and you also have AI features on the LiveChat platform. Can you describe, out of 37,000 customers, how many of those customers are using AI features at the moment on LiveChat?
So, for the LiveChat, it was introduced to the higher plans, and it will be... Well, I'm thinking whether we can give the exact numbers.
I don't want to guess.
Mm-hmm.
So it's available for enterprise and business customers, but definitely not only for those who opt in. And really, honestly, I don't have this data. I don't know this data for now. It's definitely not all of them. We were surprised that at some point we were surprised that really not all of them, maybe not all of them, a lot of them didn't jump on it. But now, I think it's a good thing. I think it's really good to know that these companies are very careful. They have a lot of questions about data security, usage of this data, and I think some of them are waiting for some regulation, some of them are preparing some internal regulations.
So the lesson is, adoption of the AI features by the market is probably slower than expected, which is not necessarily bad thing for us or for market and for business. It will happen, but not as fast as we expected at the beginning of the year. So yes, these features are used, but I hope that at least partly answer your questions. Not all the customers who have these features are using that.
Just quickly, are they paying anything extra when you give them these features, or is it just on top of their normal package?
It's on top.
Okay. Okay, thanks.
Yes, for now, and we're stating that it's beta. So actually, they have to pay to know, and maybe that which is stopping some of them because it's branded as a beta, as something which is during some tests, not the final version.
And this is separate to ChatBot 2.0 as well?
Yes.
Yes, yeah. Okay, got it. Got it. Got it. Perfect. Yeah, and then so just my second question is on the churn. You talked about how the churn had gone up in August to 3.5%-4%. Does that mean that, would you say. I know you don't like to discuss, like, the gross additions quarterly, but is it fair to say that the, you know, you're still seeing the same dynamics as before in terms of gross additions, like people are still signing on? Or has that also been weak in the last quarter?
With some seasonality addition, I would say so. So yes, as for July and as for August, it wasn't so bad as the gross level. So yes, good thinking, definitely. At the same time, I think that a lot of what's happening with churn is also the effect of the current mix of the customers. So we're seeing a now market more dominated by small customers, and the churn in that category of customers is higher. Not only because value for these customers is lower somehow, but also because a lot of these customers are using tools like that for some given period of time, just for some project from time to time.
In those months of Q2, we actually seen different dynamics in terms. Well, the additions, they were more or less on the same level for all of the months, but we've seen quite different behavior of the clients. So there were actually more upgrades in July and August, less of those in September. And actually, in September, there were quite a few downgrades, whereas the churn was better, as in it was lower. So it really is that the summer months are slightly different in terms of the behavior of the clients. And although for the last two years, so to say, COVID years, everything that we said in the past was different.
So it is back to the usual, so to say, that July and August are not really the best months in our business. And having said that, also in terms of the deals that the sales team signs, actually, for the sales team it was quite a good quarter, to be fair, and because they were able to sign quite a lot of medium-sized customers. But again, we will see the effect of those summer months, so July, August, when not that many deals were started. And the effect of that, we will see in Q3, probably, that there will be less leads for the new deals.
At the same time, you're, when you look at the RPO with that comments, you can be somehow surprised because the RPO was lower. But also we lost one from our bigger customer at some time. So that affected RPO. And of course, that's the bad thing, but at the same time, I think that there is some hope that we will see a better trend with more medium-sized customers at hand. I think I would say, and saying that once again, of course, our business model have this effect that we don't have a really that great ability to forecast. We are not forecasting, but we don't have a huge pipeline of long-term project.
We have, we can look at trials, we having now and to look at how, how some KPIs looks like, how many of these trials are there, credit cards, how many of them start chatting, and really forecast how the next two weeks will be look like. Looking past the two weeks, honestly, is much more difficult for us now at this moment.
Thanks, guys. That's super helpful. Thank you.
Thank you. Thank you. We can go back to written questions.
I think, the answers to those vocalized questions were, gave also answers to at least two of those questions about the net adds and the number of clients and churn.
Yeah. So yes, we have questions from Radim Kramule. Could you please comment on the number of clients and churn? Do you expect an improvement going forward? Do you plan any sales marketing campaign? So I think mainly answering the last questions. Well, we usually have more marketing activity in that quarter, in our Q3 or in Q4, calendar Q4. That's usually the most important period for us. We have a Black Week, extra marketing actions. That's the most important time for the new e-commerce. So nothing new, nothing huge, but yes, more activity from our side, yes, probably. As every year, because that's the most important part of the year in the terms of new business for the e-commerce .
And Piotr Czuborski would tend to call, what's the reason for weak live chat net ups in to second quarter? And I think we also added the churn definitely didn't help. So I would say higher churn, especially in the July and August. September wasn't great either. And if you have any more detailed questions, will you, of course, let us know. Thank you for being here with us. The next question from Radim. Go.
Any comments on your market share versus peers? Is the market as such growing in number of clients or the overall market is flat? Thank you. So the market share versus peers, it's not so easy to track it down. That, that's the kind of a problem that we've always said, that there are no really good numbers to compare. But if you, we cannot really track the number of clients of our competitors either. But overall, the market is growing at 15%, when we look at the revenues, for example, of the companies on the market. So there is still new customers, and also there is this AI boost, that the market that moves the market.
So if you look at the annual dynamics, 30%, we are still, it's, it's not so bad, definitely. We are not seeing really in this quarter an extremely interesting things on our market and a huge changes. As you know, Zendesk raised its prices in effectively in the July, which is probably a good thing. We definitely think that there is a room for us to look at the pricing. And we have some, no. Okay, so question from Piotr Czuborski. Do you expect the churn recorded in 2Q to be a long-term issue visible in the upcoming quarters? What's the reason for increase in the churn rate?
So the, maybe first I'll answer about the, so to say, about the past. So we've seen the increased churn levels throughout, well, last year. So pre, in the previous year, we've seen a churn rates below 3%. Now it has always been above 3%, with quite high numbers. In November, when we introduced the new pricing, and now in those summer months of July and August. In September, these numbers, the, the churn rate is lower, so it's below 3.5%. So we will, hopefully stay there. We'll see how that goes into, the, the rest of the year, of the financial year. Although we cannot really predict, how the customers will, will behave, to be fair.
So July and August was unpleasant surprise, and we were surprised, so definitely, probably we are not at the position to firmly forecast something at this moment, honestly. Hopefully, it will get better. I mean, vacation is always the most difficult part of the year, maybe with exception for January. But also, this beginning of the year is always, sometimes is different. It's not only the same pattern every year. So we, of course, there is hope that we are entering the more busy period of the year, when the tools like ours are the more needed, they're more useful than usual.
And usually, in that part of the year, we, we used to see a much higher usage. We usually have more chats at this part of the year, more interaction, more tickets handled by HelpDesk. So, so we, we'd like to be careful. But, but, but of course, we hope that that's the no, not new reality. That's, that's 3.5%-4.4% of that, of the chat is not a, a new, new reality for us. That, that obviously would be a bad thing, but we will see. I, I think that's definitely the, the KPIs we will look very closely at, at the, at the coming months. And I think we answered all questions.
But there's always chance to ask the last question, if you want to.
I think not. I think not. So thank you very much. Thank you for being with us today. Thank you for all your questions. We're happy to have you here. And see you in the three months. I hope that we will be able to discuss better results, the better quarter. And have a good day. Have a nice evening. Thank you. Thank you very much.
Thank you.
Goodbye.