LivePerson is in a desirable position of raising revenue guidance and once again increasing our profit target. This improving outlook isn't simply fortuitous. It is the result of LivePerson setting a long term strategy and vision around conversational commerce and AI and then investing in and executing on a strategy to put our company in the right place at the right time with the right platforms. I also firmly believe that the inflection we are seeing and the shifts that are now happening in the contact center are going to be permanent. Once brands capture the lower costs, improved customer experience and increased scalability of automation, they are unlikely to backtrack to expensive inefficient physical labor and voice calls.
With that, I'll turn the call over to John to provide an operational update and more color on our guidance. John?
Thanks, Rob. I too couldn't be more pleased with how well LivePerson adapted to the new environment and capitalized on a demand inflection for our conversational cloud. LivePerson sharply accelerated revenue growth and delivered better than planned profitability and cash generation as the company executed on all key facets of its business. We built even stronger relationships with our customers by expertly guiding them through the crisis and helping them to maintain business continuity through a combination of AI and messaging. This strategy drove the revenue retention rate above our target range of 105% to 115%.
We increased and progressed the sales pipeline by successfully adapting our go to market strategy to virtual selling and enhancing our partner channels. As Rob stated, contract value signed in the quarter were among our highest ever. We enhanced operational leverage through increased efficiencies from automation and healthy rigor around expense controls, and we dropped the majority of incremental revenue straight to the bottom line. This resulted in a $15,000,000 year over year increase adjusted EBITDA in the Q2. We seamlessly transitioned to a work from home organization, maintaining strong productivity and alignment across regions and teams.
The adaptability of our people and business model helped us capitalize on the opportunities that drove record results in the 2nd quarter. As for those results, accelerated adoption trends for messaging and conversational AI increased revenue to a record $91,600,000 which was nearly $8,000,000 above the midpoint of our prior guidance range. Approximately 60% of the upside was fueled by our gainshare models, which as a reminder are typically the 1st contract types to monetize increased usage of our platform. The remaining 40% came from higher overages, favorable timing of contract signings, the consumer business and various other revenue streams. In terms of growth, revenue accelerated 29% year over year, nearly double the rate of the Q2 last year and up 17% sequentially.
B2B revenue grew 30% year over year and consumer grew 24%. Within B2B, hosted software grew 35%, while services grew 4%. The U. S. Grew 44% year over year and accounted for 65% of revenue.
International grew 8% year over year and accounted for 35% of revenue. From an industry perspective, consumer and retail, followed by technology, financial services and telcos made the strongest contribution to year over year growth. However, we saw increased demand across the board. All of our verticals reported higher monthly volumes in June than pre pandemic. We signed 7, 7 figure deals in the 2nd quarter and 134 deals in total.
Consistent with the strategy discussed in the prior call, in the Q2, LivePerson continued to prioritize helping existing customers successfully navigate the pandemic. The focus on securing our base yielded a high return on several key dimensions. Conversation volumes on LiveEngage increased more than 40% since the pandemic began in March, with bot based conversations up greater than 50%. Revenue retention for enterprise and mid market customers exceeded our target range of 105% to 115%. Trailing 12 month ARPU increased greater than 25% year over year to a record 395,000.
Existing customer deal counts increased nearly 30% year over year, driven by doubling in the number of enterprise deals signed. As for new logos, a 35% year over year decline in closed deals was in line with our expectations. Although we brought in a number of high profile new logos, including a multibillion dollar beauty retailer, a Fortune 500 consumer packaged goods company and a top 10 automotive OEM, our focus in the 2nd quarter was on helping existing customers navigate the crisis. Looking ahead to the Q3, with our customer base confident and secure and considering the strong pipeline generated in the 2nd quarter, we anticipate a rebound in new customer activity. Moving on to the bottom line.
As with revenue, adjusted EBITDA of $9,300,000 exceeded the midpoint of our guidance range by nearly $8,000,000 reflecting the adaptability and scalability of LivePerson's operating model. The profit upside was fueled by the combination of strong revenue outperformance along with rigorous expense discipline and efficiencies driven by internal automation. The strong execution also carried through to cash generation and we ended the quarter with a cash balance of $173,000,000 up $2,000,000 from the prior quarter. As I engage more closely with my colleagues across the business, it reinforces my confidence that there's meaningful room to build on this performance over the intermediate to long term. As previously discussed, Rob brought me in 2 quarters ago to modernize the CFO role by applying the lens of a data scientist to our operations.
My key focus areas are automating repetitive low value work and leveraging AI to enhance decision making under uncertainty. We are steadily progressing with initiatives that will remove entire arcs of production effort from internal teams and field support, accounting and FP and A. For example, we recently delivered systems for financial planning, commission calculations and product pricing and sales proposals that not only enable us to scale more efficiently, but also give people their time back to focus on creative and strategic work, and in the case of our sales team, more selling. A valuable byproduct of these new connected systems is clean, standardized and rarely accessible operational data. This data feeds more sophisticated algorithms that enhance the quality and timeliness of actionable information, which supports decision making and increases the predictability of our business.
For example, we have built predictive algorithms that can forecast quarterly contract sightings and per rep quota attainment more accurately than our financing field orgs. Tools such as these give us an ability to plan and react far more nimbly than we have been able to in the past. With this positive backdrop, let's turn to the outlook for the remainder of the year. For the Q3, we anticipate revenue in the range of $92,000,000 to 93,000,000 dollars representing 22% to 24% year over year growth. For the full year 2020, we are raising guidance to a range of 3 57,000,000 dollars to $361,000,000 or 22% to 24% growth, up from previous guidance of $340,000,000 to $355,000,000 or 17% to 22% growth.
The upward revision to revenue guidance reflects the combination of strong year to date contract signings, better than expected conversational volumes on our platform and a robust pipeline entering the second half of twenty twenty. We continue to balance our enthusiasm for what we see as a demand inflection for our platform with a healthy respect for evolving macro uncertainties. As for profitability, while most companies view investing in growth and driving higher margins as mutually exclusive, I think we're in a position to do both. We've made rapid and meaningful progress on the automation front and raised the bar for budgetary vigilance without reducing investments in core growth drivers, including AI, product innovation, go to market capacity and platform infrastructure. As a result, we are guiding for 3rd quarter adjusted EBITDA in a range of $5,000,000 to 6 $1,000,000 For the full year 2020, we anticipate adjusted EBITDA in a range of $16,000,000 to $19,000,000 up from prior guidance of $3,500,000 to 10,500,000 dollars We also continue to target cutting cash burn in half in 2020 and ending the year with a minimum of $135,000,000 of cash on hand.
I'll close by summarizing a few key points about the business. LivePerson is benefiting from a demand inflection as leading brands leverage our platform and expertise to power remote agents and automations. Our growth trajectory has improved. We outperformed 2nd quarter expectations and raised revenue guidance for 2020 due to the combination of a surge in platform volumes, compressed adoption curves for our technology and strong go to market execution. We've also accelerated our path to profitability and sustainable cash generation.
The early but impactful progress we've made on automating G and A and sales support functions has helped us scale efficiently, raised profit guidance consecutively and plot a long term course to reduce G and A expenses to single digit percentage of revenue. With that, I'll hand the call back over to the operator to take your questions.
We do have a question from Siti Panigrahi. You're now live.
Hi. This is I just wanted to ask about sales reps from last year sort of almost doubled the number of sales reps. I wanted to just talk about the capacity ramp so far and what your expectations of the sales rep saw productivity as in the second half? Thank you.
Sure. So in terms of quota carriers, we are flat relative to last quarter in enterprise and expect to approximately remain around that number throughout the remainder of the year. In terms of their rampability, as we previously called out, we have about 80% of our the capacity we added in 2019 ramped as of the end of the second
Next one on the line is Arjun Bhatia from William Blair. You are now live.
Hey, guys. Thanks for taking
my question and congrats on the great quarter. John, maybe this one's for you. The full year guidance calls for additional upside in the second half of
the year relative to what you
had previously thought. And the range is also meaningfully narrowed. Can you maybe just give us a sense for where you're seeing the most increased visibility that gives you confidence in that guide relative to what you knew 90 days ago? And how much of that is are you counting on the momentum of gainshare continuing versus some of the overages and upsells and contract values that are going to take place in the second half?
Sure. So with regard to gainshare, it's definitely a key component. About 60% of the upside is due to our gainshare models. And as discussed last quarter, the gainshare models enable us to recognize revenue almost immediately as volume increases. So, we kind of expected some of that as volumes continue to increase during the Q2.
Over time, of course, though, we expect elevated volumes to translate into upsells for other contract types. With regard to the remaining balance, the 40% of upside was really tied to a variety of different dimensions, including overages and other contract types, the timing of bookings in the quarter, the consumer business and other revenue streams.
Got it. Thanks. And then, Rob, maybe this one's for you, but the launch of the conversational cloud, can you just maybe give us kind of the objective of that? Is it to democratize AI so that customer service agents can use it and introduce more automation into messaging volumes than there is today. Just give us a sense for what's different and what the main objective is of launching this new solution?
Yes. So when we look at LiveEngage, LiveEngage is really about messaging and the messaging endpoints like Facebook Messenger and Apple Business Chat and voice to messaging. So we have that. But what we're seeing is there's a lot of focus on how do we automate conversations. So we built a set of services and put them together in the Conversational Cloud, which includes Intent Manager, which is a new service to ingest transcript data and then basically automate looking for intents and goals of consumers.
And then once again, you can we talked about democratizing bot building with conversation builders. So and then there's the functions capability to integrate into the back end systems. And that pretty much gives you what you need to really scale automations, whether you're a technology group or you're an agent group. And so we put it together in one single platform with 1 single unified experience. So you can create an intent and then that intent flows straight into Conversation Builder and then it's launched and then you can analyze that conversation and the automation of it.
So the idea was to really take a harder position on AI and automation and then separate out a live agent tool set, which is really a lot about LiveEngage.
Perfect. Thank you and congrats again. Thank you very much.
Next one on the line is Peter Levine from Evercore. You are now live.
Great. Thank you for taking my questions and congrats on a great quarter. So just 2 for me. So the 7 figure deals upgrades you had in the quarter, how did those deals come about? How long were they in the I mean, how long was the sales cycle, meaning how long when did these deals really enter the pipeline?
And was it more upgrades towards higher usage? Or was this kind of these companies deploying messaging across other business units?
Sure. So it's kind of a mix of all of the above. Certainly, our strategy is to land and expand these big accounts. And so, for the 7 figure deals within the existing base, that's precisely what's happening. In some cases, we're renewing at higher baselines of volume.
In other cases, we're adding additional products from the conversational cloud. And as you said, expanding into new departments and verticals within the enterprise.
Great. And then maybe just to piggyback off
the last question, can you maybe just talk about how you're going to monetize Commerce Cloud? Is it a per rep seat charge? Just curious to know how that differs from customers on loss of gauge. And thank you and congrats on the
quarter. So currently, we have certainly room to move with our pricing structure. But at the moment, it's not a per seat sort of structure. It's more of a cost per interaction structure. So, it's driven by increased usage, right?
And we have obviously, there's great demand among the customers to tap into various databases via API, to use our functions as a service product feature and these have a charge associated with those as well. So, it's really a usage based model, not a seat based model.
Thank you.
Next one on the line is Richard Baldry from Roth Capital. Please limit to only one question and one follow-up. You are now live.
Thanks. I wanted to note that it took you 7.5 years from your IPO to increase revenues the same amount you did in the last 90 days. So against that backdrop, I'm sort of curious what are the challenges to rapid scaling in a remote working environment? So there's not as much face to face or challenges to hiring, educating. Can you maybe talk about what you see in that given what looks like a pretty strong acceleration to your growth?
So if I unfold that a little bit, first is we are not going to return to offices. So we have decided as a company to change how we're working and obviously it's working quite well for us. So when we look at sales activity and marketing activity, on the last quarter's call, I said I wasn't sure how things would play out. Our marketing events, the face to face events mean a lot and then they drive a lot of deals closed. What we're seeing is that the demand for our products and our platforms is just outweighing the need to be face to face And we have such good referenceable customers in our base, as you know, that they're doing webinars for us and stuff like that.
So we feel very good about where we are and this concept of I don't want to say distributed work forces because we've been distributed, we've been globalized since 2000. Israel was our tech hub at one point. But we're just thinking of working a different way. We can go after a different set of employees. We can go after a different set of customers.
I don't know, things are just moving quite well for us. So we figured, let's continue operating in this mode. And I think you're going to see a lot more innovation on the marketing side also moving forward because we don't have the face to face. We're learning a lot about how we can really engage our prospects. And as you remember, we at the end of last year, we went into a partner focused strategy and that's played very well because our partners have their customer bases and we're able to access them.
So I think strategically, we just kind of nailed it on go to market with partners and the right product mix, the launch of the conversational cloud, it's all kind of playing out.
A follow-up on sort of that change in how things have to be done. When you look into the pipeline, have you seen any noticeable names that might have been people you wanted to get into, but were maybe resistant prior, but recognizing that things are changing are willing to open their doors? Like have you seen some early indications of that success? Thanks.
Yes. The thing that's just been very exciting is retail. And retail was never really a place for us to play because it's usually low margin products and they don't want to put labor in it. So now that we come to the table with automation and people can't don't go to stores, they can't enter stores as much, there's like a whole transformation of the retail world. We've been piloting with 1 of our big box home improvement companies, one of our customers, a virtualization of their stores.
So there's a store in New York now you can walk into. Every product there's a QR code. You hit the QR code with your phone and you start messaging an automation or a remote agent who is offshore, who is actually in the Dominican Republic. And they are servicing a store in New York. So we've been running it for a couple of months and it's been doing very well.
Consumers love it. They don't have to go face to face with somebody who works in the store. We're doing pickup at the curbside with this technology too. So I think the retail for us is something really exciting. Obviously, Chapulte, we announced what we're doing with them.
So there's a lot of action in there right now, more than we've had in the past because of the dislocation of that business and they're looking for something to change the game.
Thanks. Congrats, Ram.
Thanks a lot. Thanks.
Next one on the line is Steve Enders from KeyBanc. You are now live.
Hi, great. Thanks, guys. I just wanted to get a better understanding of what you're seeing on the gainshare side of the business and how you're incentivizing reps to push more and more of these agreements? It seems like they're accelerating revenue for you.
Yes. So maybe I can break out gainshare a little bit. It used to be something different in the past than what it is in the present and I think it's good to unfold that. The gainshare business is really a way for us to go into a customer and say, look, we have agent capacity, so we bring a partner who has live agents, but and we'll handle messages right off the bat, so we can get up very quickly and we use our platform the best. But actually what's very interesting is we're not competing as like a BPO or trying to get labor business.
Our goal is to take that labor and this is very specialized labor that we've trained and they work on automations. So if you look at all the gainshare programs we have, the goal when we walk in the door is like, look, we're going to automate 80% of these flows, but it starts with human agents taking the messages and learning about the intents and then using the toolset to automate. So we have a huge competitive advantage. We start out, let's say, at an equal rate of a BPO on a cost per message, but we'll drive the cost down over 24 months to half that price. And then over 36 months, a quarter of the price because we'll automate it and then we're getting more volume.
And so that's what's exciting about it, because it fits to our strategy. We're not looking for live agents here. They're only being used to create automated conversations.
Okay, great. That's helpful. And then just want to get a better sense of it does sound like you guys are seeing quite an uptick in usage. Just trying to get a better sense of what you're seeing from customers coming back to the table and beginning to renegotiate some of those contracts and better handle some of that uptick in usage that you've seen when we start seeing that flow through to more revenue?
So we highlighted a couple of, I think, key wins in the prior quarter and that general trend has continued. That is we've historically had enterprise license agreements that are essentially all you can eat contracts from a usage standpoint. And we've been rolling those over into cost per interaction contracts in over the course of upselling those customers. And so, given the increased baseline in volumes, we've had a lot of success in that particular strategy. On top of that, of course, we have many in the base on CPI contracts today, and they're renewing it at higher baselines of volume, as you might expect considering the volume increases that we've telegraphed.
Okay, great. Thanks. That's really helpful.
Next one on the line is Jeff Van Rhee from Craig Hallum. You are now live.
Great. Thanks. I'll add my congrats. A couple from you guys. To the new deal flow, I think you had messaged, you kind of hit your head down on dealing with existing customers and migrating existing customers.
Can you dive into that just a little more precisely kind of how it progressed month by month from sort of pre COVID right on through to where we are now in terms of just exactly what was going on in those new deals? Were the deals moving at normal pace? Was it just a function of you looking elsewhere and now refocusing back on those deals? Just trying to better understand the underpinnings of your expectations for those deal counts to come back.
Hi, Jeff. So the story is really what we described in the prior call, and that is that we had an intentional strategy to focus on the base. As I described in my prepared remarks, we needed there was a need for us to help guide them through the crisis to maintain business continuity and high levels of customer service. And I think it's important to note that that strategy really drove a 30% 25% increase in ARPU and higher revenue retention than our target range of 105% to 115%. So, I'd also add that existing customer deals were up 30% year over year as a result of that strategy.
So, there were really, I would say, a strong quarter on a lot of dimensions related to deal counts. With regard to new logos, we had some strength in various verticals and retail, I would say, is clearly one of those for the reasons that Rob has described in the prepared remarks and in the answer to a prior question. I think considering the sort of secure base we have now and the amount of ground we've covered already, in addition to the pipeline we generated in the 2nd quarter and the amount of movement there's been in that pipeline, that we would expect new logo activity to pick up meaningfully in the Q3. As to your question on whether things were slow, I would say certainly there's they were slow, but not canceled. And some new logo deals were certainly pushed into the 3rd quarter, which is another reason why we have increased confidence that new logo activity will pick up at that time.
Okay. And one just brief follow-up, the gainshare, where is it now as a percent of revenues? And just to have a sense of magnitude, roughly how many customers are on those kinds of programs, gainshare programs?
It's about 15% of revenue at the moment. And I would say generally dozens of customers.
Dozens. Got it. Okay. Thanks for taking my questions.
Next one on the queue is Mike Latimore from Northland Capital. You are now live.
Thanks. Yes, awesome quarter. I guess
just two things. One is,
can you quantify maybe how much the pipeline has grown since the start of the year? And then 2, you've mentioned partners a few times. Maybe give a little more color on how partners are contributing to the bookings in pipeline now?
Yes. So pipeline growth entering the 2nd quarter was, as we previously described, close to a record. And we've continued to develop really strong pipe throughout the quarter in addition to progressing that pipe as previously described. So, we're really happy with the health of the pipeline at the moment.
Great. And then on partners, can you talk a little bit how are they contributing to bookings in the quarter and the pipeline?
Yes. They're really contributing on 2 different dimensions. So one would be, we have obviously a lot more boots on the ground through the partner network and that's allowing us to tap into those partners' existing base of customers. They're also helping us importantly on professional services work today. So that's part of the strategy that we have to get leverage on the model through partners, both additional reps in the field and support for the low margin professional services work that we've historically had to do ourselves.
Did they drive any of the big deals in the quarter?
They're definitely driving deals. This quarter not they're not responsible for the 7 figure deals that we discussed.
Next one on the queue is Sterling Auty from JPMorgan. You are now live.
Hi, guys. This is Matt on for Sterling. Thanks for taking the question. So in terms of the cost savings and the EBITDA margin, how much of the cost savings from lower expenses do you think you're going to reinvest in the business? And really asking in context of the previous 7% to 10% EBITDA margin guide, how do you think about the next couple of years out in terms of the EBITDA from where it finished this quarter?
Well, we won't be commenting on a couple of years out or 20 21 during this call. But I think it's implied in our guidance that there's some reinvestment back into the business that we're contemplating in the 3rd quarter, given the step down in adjusted EBITDA relative to the 2nd quarter. And as I had previously suggested, some of that is going to support our infrastructure. After all, we have record volumes on the platform and those continue to be strong. And so, there's a need to reinvest to ensure stability and that we have a high level of service for our customers.
We're also investing in kind of the core growth drivers of the business, which include engineering, science and go to market capacity. But again, I would say that the magnitude of that investment is reflected in the guidance.
Got it.
And then one follow-up for me. In terms of the 50% of conversations that are now fully automated, how much of the ARPU increase is coming from customers adopting more automation?
So in terms of ARPU, it's obviously driven by the base. And as we've said, the base is adopting automation at really unprecedented levels relative to our history. So, clearly, that is driving increased ARPU. Got it. Thanks, guys.
Next one on the line is Koji Ikeda from Oppenheimer. You are now live.
Hey, guys. Congratulations on a really, really great quarter. I just wanted to ask a little bit on the back office automation strategies. It sounds like they're really beginning to take hold out there, especially in the finance department, automation and with the sales department automation too. I was wondering if you could provide any high level commentary on how we should be thinking about the ability to productize those back office automation technologies and when we could start seeing those being introduced to the market?
Hey, Koji. So I would love to give you an answer on that and it's certainly on our radar, but it's not something we're prepared to put a timeline on at the moment.
Okay, got it. And then just one follow-up from me. During the quarter, you did talk about some contract renegotiations.
I was wondering if you
could put a magnitude on the upside of the contract renegotiations in the quarter due to customers that were maybe coming up or bumping up against the overage threshold this quarter versus maybe years past? Thank you for taking my question.
Yes. The short answer to that question is that there's a distribution, right? And some are falling throughout the distribution this quarter, and that would include in the 7 figure range.
Next question is from Jonathan Kees from Summit Insights Group. You are now live.
Hello, can you hear me?
Yes.
Okay, super. I didn't think you could for a second. I'll add my kudos to the results to the great quarter. I wanted to ask first kind of, I guess, a follow-up. Last quarter you talked about your SMB business, about 15% of your revenues there that was afflicted by the COVID.
I guess with this quarter, you're seeing strength across all verticals, all industries here. I wonder if you can give some color in terms of that, especially for the afflicted industries. They're back to normal. Have they normalized in terms of their spinning patterns? Assume that they've rebounded and that the bottom has been reached and that it's been improving every month.
But just, yes, some more color in terms of the impacted industries from COVID.
Yes. So I think the one thing that we've recognized is, like we didn't have to talk about customers not paying us or customers defaulting or they're going out of business and I mean, this is maybe a bold statement, but if they're on our platform, it means they're in the future of trying to transform their business anyway. So I think even the airlines that we have on our platform, they're doing a lot of work on the platform and to automate and change the game. So unlike other platforms where I think they're kind of the past of how you engage a consumer, the ones that are on our platform, they're paying us and even if they're SMB, they want to have this relationship and create these conversations at scale some scale and have a deeper relationship. And we're investing in some more platform capabilities in the SMB area because we see this group really want to get close to their customers, especially if they have stores and stuff and people are not walking into the local store.
They want to have a conversation with them and stay connected beyond a website and a physical store. So I just think we're seeing good stuff up right now across the board and people on our platform are just they're transitioning their businesses, they're transforming them. Okay.
All right. And I think you that was helpful when you said they're not asking for payment deferrals like in the previous quarter. So that's great. My follow-up question, I guess, is also related to last quarter. You brought in a new EMEA head from sales force.
And then you talked about for this quarter, decreased last quarter in terms of year over year growth. When do you see the impact in terms of the new EMEA head and the efforts there?
I mean, they did a very good job in sorry, John.
No, go ahead, Rob.
No, John, you go first.
Yes. So bookings were
bookings were actually ahead of schedule in EMEA. While there was a slight step down in revenue, we expect that given the changes that the new leader is making, some additional capacity we've onboarded there that we're going to see the results of that investment play out over the next couple of quarters.
Okay, great.
Next one on the queue is Zach Cummins from B. Riley FBR. You are now live.
Yes. Hi, good afternoon. Congrats on a strong quarter and thanks for taking my questions. Thank you. Focusing on the uptick you've seen in conversational volume of 40% since the onset of the pandemic, can you give us some insight into expectations for conversational volume as we go into the second half of the year?
And Rob, can you talk about maybe investments needed to be made in hosting capacity for this uptick in volume?
Yes. So we continue to see growth. So growth continues up week over week, month over month. So we have that massive 40% and then we're continuing to grow, not at that rate, but still going up quite nicely. We are looking to add public cloud capacity.
As you know, we run our own clouds around the world because of security of data and all that, but we need to supplement our clouds with public clouds and we'll be choosing 1 of the big public cloud providers shortly. And then we'll get more capacity there because we to ramp at the level that we're seeing, ordering hardware and putting it into cages and everything, it's just not efficient. And we want more flexibility to handle the spikes we're seeing. But what's very interesting in the spikes we're seeing, they were very different than the past. And this goes back to automation.
Basically, a customer in the past would sign up and say, I'm going to put a 1,000 agents on your platform. We know a 1,000 agents can generate X value. But today, they get our platform. I mean, I saw this, there's a customer down in South America who's a logistics company. I don't even I don't know who they are.
We just they're not a known name to us, but they're a midsize level logistics company in South America. And their volume is in the top 10 or so of our volume because they're running a tremendous amount of automations around shipping. And so they don't have a live agent pool. They just have a bot agent pool and it's driving so much volume on our platform. So what's happening now is whether it's a large telco or mid market, doesn't matter, they drive these huge spikes in traffic and we don't have a lot of ways to control it and we don't want to obviously put a cap on it.
So we're focused on being able to spike capacity with that. So in the next quarter or so, we'll be talking about what we want to do with public cloud capacity and adding it in. And then we'll add it in and then I don't we're not going to do a massive migration, put everyone on that, but we'll add it in and then start migrating customers on to that or pieces of their business on to that as we move forward.
Understood. That's helpful. And then just the other question for me is, can you talk about some of the opportunities into these newer verticals? I mean, specifically on the government side with you breaking into there with a new state pipe contract?
Yes. Obviously, between unemployment insurance and there's a lot going on with COVID still testing and government, and they had to fire up these contact centers and they tried to do with human labor and they just can't hire people quick enough. So with one of our big partners, we fired up with one of those states on the Northeast, their whole response to unemployment benefits. And so I think we're going to be we'll be doing a lot more with this partner in that area and we're seeing more demand around use cases like that. So that's quite exciting.
Like I said, the retail vertical is going quite well right now. Telco verticals, the telcos are really doing quite amazing work on transitioning a lot of their volume to automation. So we're seeing that with our large telco customers. But sort of across the board, there's a lot of interesting use cases that we're doing right now around different verticals.
Great. Well, thanks again and congrats on a strong quarter.
Thanks a lot.
Next one on the queue is Mark Schappel from Benchmark. You are now live.
Hi, good afternoon. Nice job on the quarter. Very
nice job.
Bob, question for you. Following up on the prior question on your international business, is the slower growth you're seeing overseas due to just internal operational issues you're having or is Europe just behind the curve on messaging and automations?
We just felt it was a leadership issue and things got a little slow over there, but it's not the demand in that market over in Europe, Asia. Now we also have feet on the ground in South America, But the new head over there, they exceeded their bookings numbers for Q2. So he came in and I think he's going to have he's an impact player. But no, Europe's not behind. In some cases, Europe's way ahead of us because there's a lot more competition in markets.
Like telcos in Europe, there's a lot more telcos competing versus we've got now 3 in the U. S. So there's a lot of like they always want to beat each other out. In the last 5 years, I've seen a huge shift. So we should start seeing in the upcoming quarters a return to growth there.
And obviously, the U. S. Market is growing above 40% and they're doing very, very well. But we should see the same sort of growth.
I'd like to see
the same growth over in Europe and beyond.
Okay, great. And then shifting gears a little bit with respect to the conversational cloud platform that was announced. It sounds like there's some meaningful customer benefits in the solution, but what are the benefits to LivePerson per se?
The benefits are the win in conversational commerce, which is our strategy, which is we believe that commerce will transition from e commerce to c commerce or conversation commerce, that will be driven by automation and the scale of automation. It will not be driven by human agents messaging and chatting. And so for us, it allows us to tap the volume that's out there. Like you talk about retail, like we're tapping volumes of conversations in retail that we weren't really after before, but that will move from e commerce to conversation commerce. So that's what's going to do.
It's going to this is what we saw in the quarter. It drove really the results we saw in this quarter and it's going to drive the future of our strategy. So it's basically what I say is the foundation for getting this to be a multibillion dollar business in revenues.
For the next question, we do have Ryan MacDonald from Needham and Company. You are now live.
Hi, this is Alex on for Ryan. A few weeks ago, the company discussed moving away from an office centric workplace. And you mentioned that it costs approximately $10,000 per employee per year to be in a traditional office. So what percent of the workforce do you expect to remain working from home? And then how should we think about those cost savings going forward?
So, yes, so just to put some color around it, out of our 1200 or so employees, half are already working in their home before pre COVID. These are field facing people. And so there's about 600 that were working in offices. And we spend about 10,000,000 dollars to 12,000,000 a year on office space. We are now working through with there's a group internally of employees that are working to create the frameworks for operating in this environment without physical office space.
Now, we'll probably we're going to push down a certain amount of that money into employees' hands and then let them to decide what they want to do. Like they may, as a group, maybe 6 of them want to get together and for the next 6 months, they're going to have an office that WeWork or something like this. Or maybe one person says, I want to work 3 days a week in some sort of physical location and then I want to be in my home. And that's where I think it's going to be. It's much more of a flexible environment for people to work.
But we're working on that right now. So I don't think 100% of the cost savings will come back. Right now, we want to take that budget and put it in the hands of our employees to just operate the best that they can be. And it's challenging still, especially people who have families and the kids are at home, single people who are in small apartments. But we're seeing a migration right now because we made a commitment.
This is what I think is important. We made a commitment not to go back to the office. I'll tell you why we did that. I
don't like
false hope and telling our employees to hang on for till September, then January, but we're not allowing them to make the choice that's best for their life. And we found there are people who are living in cities who would move out of a city and go live somewhere else in the world if they weren't thinking we were going to open the office again. And we're not. There's no way to get back unless we have a vaccine. And we're not kidding ourselves about social distancing.
So it's opened up a whole world of thought about also recruiting. You can find the best people from different places in the world. And so I'm pretty excited about it. And it's not really a cost savings measure right now. It's more of we'll probably put a fair amount of that money back into the employees to make this work.
And so that's how as shareholders we should look at it today. Okay. That makes sense.
And then, will that result in any one time charges for early lease termination?
Potentially, we're negotiating with our landlords. The good thing is we don't have first of all, just to put out that our landlords cannot make our offices safe. And that's the problem that they have built these offices that are not allowing us to come back to work and be safe. And they're not willing to put money into offices to make them safe. And they will figure it out one day.
But today, they just want us to pay and go back and potentially harm our employees, which we're not going to do. So, we're negotiating with them. But one of the things is, I got personally, we got back in 2,001, we were long on real estate and almost hurt the comp, almost bankrupted the company and we never went long on real estate since 2,001. So we don't have some big tower. We don't have a lot of exposure with something we built, this giant thing.
We don't have that. So we're negotiating out of our leases as we speak. But like I said, our landlords cannot provide a safe space and we're forced to go and now take alternative measures.
Okay. Thank you.
Thank you.
Next one on the queue is Brett Oblach from Berenberg. You are now
live. Hi, guys. Thanks for taking my call. Hope you guys are all well. Maybe one for John.
Could you
talk a
bit about the mix in revenues? It looks like B2B cloud hosting really accelerated in the quarter relative to services. Is that dynamic something you would expect to continue for the remainder of the year?
Yes, it is because of the strategy we have to get more leverage in the model through partners. We expect that they will handle increasing size of our professional services work going forward.
Okay, perfect. And maybe one just on the payment related investments you guys highlighted in February. I guess maybe an update there how is it progressing? And I maybe what percentage of those investments have been completed in the first half thus far?
Yes. So we have begun some testing with live customers with the payments products and we'll be able to release more information as we'd previously discussed after the Q3.
Okay, perfect. Thanks so much.
Next one on the queue is Samad Samana from Jefferies. You are now live.
Hi, good afternoon. Thanks for taking my question. I'll echo the strong quarter comments. Most of my questions have been asked, but maybe just a housekeeping one. I was curious if you guys could give us the breakout of hosted services business revenue growth.
I'm not sure I saw that in the materials or heard on the call. And then also just a question kind of similar on the geo side, but slightly different. For the geographies that have started to experience reopening and where people have maybe gone back to work outside of the U. S. And other countries, are you seeing any change in customer behavior or moving in and out of the pipeline?
Thanks again for taking my questions.
With regard to the latter question, I think in general, the answer is no. As we've said previously, there's been some friction with new logos that I think we're overcoming now. And as discussed, the pipe that we built in the Q2 and the progress we've seen gives us confidence that 3Q will overcome those frictions we saw earlier.
And in regards to hosted versus professional services, so hosted services were up 35% year over year, professional services were up 4% year over year in the Q2.
Great. Thank you.
And there are no further question on the queue. You may continue.
Thank you, operator. So I'll end the call by reemphasizing a few key points. Our model is inflecting as leader brands in the world turn to LivePerson to navigate the massive changes that have happened and our revenue growth is expanding with that change. Obviously, I think the coronavirus has really exposed the inadequacies of legacy voice contact centers and I've talked about this before. They're like factories where people sit 2 feet from each other and get a widget of a call in their ear every 5 minutes and they're expected to work under those conditions.
And now they can't and they've been sent home. So I think obviously our stuff is now the must have and the AI capabilities to automate that is also part of that must have. We believe that conversational AI is really what's going to win in the market. And obviously, we put out our platform now, the Conversational Cloud, to take all of our AI components. And it's interesting because ultimately that platform will not just be about our data set as in stuff that's generated off of LiveEngage.
Our customers will be able to use the conversational cloud as tool sets to power AIs in many different conversations. They may be even using one day a different messaging platform And they are going to ingest that into our conversational cloud and then they can build the AIs around that. So we it's a much more open system and we have a bigger vision about how AI is going to play in the enterprise. I'm very excited about the impact that John's had in a very short period of time. Many of you know it was sort of a risk putting someone who didn't have a CFO background into that role, but I think he's just done a phenomenal job.
And if you want to, Andreessen Horowitz on their website wrote an article about the CFO role and the changes that are happening in it. It's called the CFO in crisis, and that's the title. And they talk a lot about what that role will be and how it will be data science driven and analytics driven. And I think John's done a great job so far in being an impact player with his team on the automations of many business processes. And then finally, we've charted through we've definitely charted through a very difficult macro environment.
And I want to thank all the employees for working hard and staying focused even in work from home and there's massive shift, but staying very focused on delivering our vision and delivering on our lofty goal of one day owning the conversational commerce space, which as I said is, as I think, one of the greatest shifts from e commerce to c commerce or conversational commerce, which we are definitely just doing an extraordinary job at. And I'm proud of everyone who just executed this quarter. So with that, thank you for your time. And we will see each of you in hopefully in Q3. Thank you.