Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to LivePerson's Second Quarter 2019 Results Conference Call. My name is Ian, and I will be your conference operator today. At this time, all participants are in a listen only mode.
After the prepared remarks, the management from LivePerson will conduct a question and answer session and conference call participants will be given instructions at that time. Please limit yourself to one question to allow us to accommodate all questions this evening. As a reminder, this conference call is being recorded. I would now like to turn the call over to Matthew Kempler, the company's Vice President of Investor Relations. Please go ahead,
sir. Thanks very much, Ian. Joining me on the call today is Robert Macassio, LivePerson's Founder and CEO and Chris Greiner, our Chief Financial Officer. Please note that during today's call, we will make forward looking statements, which are predictions, projections and other statements about future results. These statements are based on our current expectations and assumptions as of today and subject to risks and uncertainties.
Actual results may differ materially due to various factors, including those described in today's earnings press release, in the comments made during this conference call and in 10 Qs and other reports we filed from time to time with the SEC. We assume no obligation to update any forward looking statements. Also, during this call, we will discuss certain non GAAP financial measures. A reconciliation of GAAP to non GAAP financial measures is included in today's earnings press release. Both this press release and supplemental slides, which include highlights of the quarter, are available in the Investor Relations section of LivePerson's website.
With that, I will turn the call over to Rob. Thanks, Matt. Thank you for joining LivePerson's Q2 2019 earnings call. For the last year, we've been demonstrating LivePerson's leadership in conversational commerce. We see conversational commerce as a means for brands to build a direct lasting relationship with consumers where people connect via natural language using text messaging or voice commands.
It replaces the disconnecting experiences of waiting on hold for a transactional call with a phone agent or browsing in search and then clicking on an ad and being redirected to a landing page that lacks personalization. We expect conversational commerce to profoundly change how leading brands deliver care, sales and marketing experiences to consumers. That is why the largest technology companies in the world are also participating in this shift. We are not looking to just participate in this market. We're aiming to win it.
And from our recent results, we believe we're doing just that. We're moving fast and staying focused in order to close the gap from where we are today to reaching our mission. During this quarter, we definitely achieved a new inflection point. Here are a few highlights that showcase what underpins that positive inflection point. Total revenue of $71,000,000 in the second quarter exceeded our guidance range and accelerated fifteen percent year over year growth.
Total contract signings in the first half of twenty nineteen were at an all time high, increasing approximately 75% over the first half of twenty eighteen. Impressive growth was fueled by our enterprise sales team, which closed a record 9 7 figure contracts. This is 3 times more than previous periods. And our mid market team also set a record closing 10 6 figure contracts in the quarter. Similar to previous periods, the majority of the top 10 deals signed in Q2 were multiyear contracts.
This is key to providing high visibility into future recurring revenue. Nearly 50% of the enterprise customers on messaging and approximately 50% of messaging conversations include automation. Virtually all new deals are following with a blend of human and our Maven powered AI automation services. We've always had a vision for how the conversational commerce market would unfold, but based on the activity in front of us, we are now seeing an opportunity to drive even faster adoption and more rapidly monetize new platform capabilities. With this momentum in mind, we are raising our revenue guidance in 2019 and increasing investments to keep up with the demand.
I'll walk through the key points that support how we arrived at this conclusion, and Chris will provide more details on our guidance shortly. In 2019, we front loaded our expenses in both field and product with the anticipation that we would have a good measure of their potential impact by mid year. We're seeing a faster than anticipated ramp and a strong ROI from those investments. We're now going to pull forward another set of investments in order to add more quota carrying reps, marketing events and product teams to meet this increased market demand. We are starting to deliver on the next set of major platform capabilities that will fill in the white space of conversational commerce.
In Q3 and Q4, we have 4 to 5 major platform capabilities coming out around marketing, in store retail, social, a new agent console and AI analytics. We feel that the most efficient use of our capital right now is in building product versus acquiring it. And Alex and team are doing a great job in increasing momentum of our overall platform capabilities. Another momentum driver is coming from the established consumer messaging players who are delivering the front end consumer demand for conversational commerce even faster and to our benefit. For example, Apple previewed a new feature called chat suggest, which will give the consumer choice when they dial any phone number to instead of calling the brand to message them directly.
This would basically deflect calls even before they get to the brand's IVR. We expect Chat 2 does to help millions of consumers discover messaging as a communication option, which in turn will drive higher platform utilization and ultimately revenue per LivePerson. Subsequently, Google and many global telcos are now aggressively rolling out their RCS services, a next generation messaging standard that offers a native Android experience comparable to Apple Business Chat. With Android accounting for approximately 3,200,000,000 of the estimated 5,000,000,000 handsets in the world, RCS will be a material conversational endpoint. We have built RCS Connect to Inter LiveEngage and are working alongside Google and individual telcos to drive adoption of RCS.
Our sales teams are capitalizing on the drivers I just outlined as we further tap into this market opportunity. Sales pipeline is up nearly 120% versus a year ago and up approximately 75% since the start of the year. I want to now outline some notable customer wins in the quarter. In a groundbreaking win, we will be powering 1 of the first at scale conversational food ordering systems to 1 of the largest quick casual restaurants in the United States. They selected LiveEngage to power automated food ordering through messaging using our Maven AI engine and conversational builder platform.
The thesis is that we can reduce the ordering that happens in 3rd party food apps instead create a direct messaging relation with the brand that generates more loyalty and greater margin for the restaurant. The next example is from another win back of a former chat customer who left us during the migration. And this time, it's one of the largest telcos in the U. S. The telco signed a 3 year multimillion dollar commitment to digitally transform the customer communication across care, sales and marketing.
We will replace their incumbent chat and social offerings with messaging and automation across numerous conversational endpoints. And we won the contract because of our unique ability to provide a holistic transformation that delivers best in class outcome across human agents and AI for inbound and outbound conversations. The final example highlights the growth opportunity we see with existing customers as they progress along the transformation journey into new messaging endpoints in these cases. Starting with the 6 figure chat contract 4 years ago, this financial services customer steadily expanded first deploying in app messaging and then web messaging. Most recently, they began testing Conversational Builder.
In a relatively short amount of time, it created automations that contain approximately 20% of all inbound messages, while closing conversations 3 times faster than their human agents. Following on the heels of this success, in the Q2, the company signed a multimillion dollar multiyear commitment to drive even more automation and to add IVR to messaging deflection. This is a really exciting time to be a LivePerson as we are in a very unique position, leading this emerging market with a clear vision of what we must do to create, execute and win the conversational commerce space. Our strategy has worked well so far. And because of that, we are now seeing an opportunity to accelerate the time between where we are today and our long term vision.
I will now hand the call over to Chris, who will do a deeper dive on our overall financial outlook. Chris? Thanks, Rob. After a strong start to the year, our execution accelerated in the 2nd quarter, pacing us ahead of our initial 2019 plan as it relates to contract signings, sales productivity ramping and pipeline creation. Before we get into each of those areas, I'll quickly run down a number of big picture highlights.
1st, on a total revenue basis, growth accelerated to 15% year to year and 7% quarter to quarter, exceeding the high end of our guidance range. We saw very strong renewals and upsells in the period, once again driving revenue retention well inside our target range of 105% to 115%. For the 5th straight quarter, our trailing 12 month ARPU growth increased by at least 20% to a record 310,000 continuing to demonstrate the increasing size of new wins and cross selling activity. From a revenue perspective, the telecommunications and financial services verticals once again continued to lead overall growth, climbing faster than 20% year over year. In terms of our geographic revenue, the U.
S. Accounted for 58% of sales and accelerated year over year for the 3rd consecutive quarter to 16% growth. Our overall international growth also came in at double digits growing 14%. The U. S.
Enterprise team led growth, increasing 30% year over year on the heels of Steve Investments we made last year, which are now approaching full productivity. In 2019, we're expanding these investments in the U. S. And bringing the same blueprint to our other regions. Consumer segment execution is very strong, flowing at a record 24% year over year.
With sales and marketing productivity metrics exceeding our expectations, we took advantage of a strong sales candidate funnel and hired above our 2Q plan. This impacted profit in the period with GAAP net loss per share of $0.38 and adjusted EBITDA and adjusted operating losses of $9,100,000 below our guidance. And adjusted EBITDA loss of $5,300,000 was within our issued guidance range. Finally, from the balance sheet perspective, we remain very well capitalized with total cash and equivalents on hand of $225,000,000 Deferred revenue reached a record $70,100,000 and on a trailing 12 month basis increased 42% year over year. On the back of this increase in momentum and ramping sales productivity, we're seeing multiple opportunities to drive even faster platform adoption along with new ways to monetize LiveEngage.
The combination of which is translating into increased revenue guidance in the second half and opportunities to pull ahead investment aimed at capturing surging pipeline demand. Toward that end, I want to discuss 3 areas in greater detail. 1st, the powerful ROI and sales productivity attributes propelling our strong execution. 2nd, the criteria we're using to step up product and go to market investment. And third, how each of these tailwinds are reflected in our updated guidance.
1st, we built our 2019 plan anticipating a market inflection based upon what we were seeing in our opportunity pipeline in late 2018. To capture it, we front end loaded investments calling for very aggressive first half hiring pipeline for jet pipeline generators, quota carriers, along with a packed global marketing event schedule. In each of these areas, our execution was flawless. In the first half of twenty nineteen, we increased quota carriers by nearly 80% from 50 to 89 versus our target of 75. Total sales capacity, including sales development reps and partner managers increased over 100% as compared to our target of 90%.
And our marketing events connected over 510 executives to LivePerson in cities such as Manhattan, Milan, Tokyo, Sydney, London, Chicago, Madrid, even Shanghai and Moscow. For past events or any indication of the future, we can continue to we can expect to convert approximately 40% of all opportunities coming out of these events. In order to quickly ramp and scale the new sales force, we created a rigorous onboarding and training program. We also armed our sales teams with productivity analytics, providing real time insights into best practices for progressing opportunities quickly through the pipeline. The early impact has been material and climbing.
In fact, in just their 1st several months on board, these newly hired sales reps have already created $70,000,000 of qualified pipeline opportunities. In total, the opportunities created by our pipeline generation team, which includes sales development reps and channel partner managers, now account for half of the aggregate pipeline. Since January, nearly 100 new starters in our field organization have enrolled in training and are in the process of completing their multiple certifications. And our training programs are contributing to bending the curve on sales cycles with the average number of days for closed won opportunities improving by 3 weeks as compared to a year ago. The culmination of investments in marketing, sales resources and training have in part translated into the record results we saw in the 2nd quarter.
To put things in further perspective, the 9 7 figure deals we signed in the 2nd quarter is equivalent to the total of all 7 figure deals signed throughout the entirety of 2018. Even more encouraging to us, the sales activity was widespread across our hunter and client partner teams. Total deals signed in the quarter increased 50% year over year with 72% growth from new customers and 33% growth from existing customers. And over the same period, our 2Q sales pipeline has increased 120%, well ahead of our growth in quota carry capacity. This strong demand means that even with the nearly 40 quota carrier hires this year, we still have insufficient capacity to address the opportunities in our pipeline.
In fact, the average number of deals per enterprise quota carrier remains unchanged from 6 months ago at 15. Finally, we remain an entrepreneurial product led company, choosing to leverage our balance sheet to extend LiveEngage's technical leadership position organically over the near term. As evidence of this, we successfully built out one of the industry's most advanced AI development teams, including more than 100 machine learning, data science and automation engineers over the past 12 months. This team launched LivePerson's groundbreaking conversation bot builder in the Q1 and demand has been impressive. Nearly 20 enterprise customers and an additional 40 mid market SMB customers have already deployed the platform and are building AI automations as we speak.
In the Q2, they launched our Maven Assist solution with a leading airline and large cable company. Maven Assist features next best action, automation and content for human agents. Our product development machine is running at an entirely new level of productivity. And as Rob detailed, there's a robust pipeline of new products coming in the next few quarters. When you combine record contract signings, ramping sales productivity, surging pipeline demand and leading product capabilities, it's a recipe for strength.
In this case, it's translating to an accelerated view of revenue in the second half, even greater confidence in the timing and achievement of mid and longer term growth models and conviction to step up investments in proven areas of return. In that setting, we're raising 2019 revenue guidance to $288,500,000 $1,000,000 to $292,000,000 with the midpoint of guidance implying a second half growth rate of 17.5% and high teens to 21% growth in the 4th quarter. As mentioned, because the number of pipeline opportunities has once again exceeded our sales capacity models, we're pulling forward planned 2020 spending into 2019. In all, we're targeting approximately $10,000,000 of incremental investments, revising our adjusted EBITDA guidance to a range of $0,000,000 to 5,000,000 dollars The spend is allocated across the following categories. Approximately one half of the spend is tied to higher quota carrier and marketing capacity to meet increased demand.
We ended Q2 with 89 quota carriers, above our target of 75 and plan to end 2019 with well over 100. Approximately 1 quarter of the spend is tied to engineering investments to support emerging product opportunities such as social, payments and proactive sales. And approximately 1 quarter is tied to higher consumer segment marketing spend given the positive year to date returns. You can refer to our earnings release for additional details on our 3rd quarter and full year 2019 assumptions. Now let me bring all of this back to discuss how the positive forces unfolding today relate to our broader aspirations.
At our Investor Day in May, we outlined our strategic vision and how we plan to execute on it. By every growth measure, we're running ahead of plan. Our execution is underpinned by a company wide commitment to drive the achievement of key metrics with the same rigor every day as we would for the quarter or year, and we're seeing that play out in our results. And finally, every dollar of invested capital undergoes an arduous ROI betting and competes for future funding based upon payback models and proven outcomes. Our decision to pull ahead investments from 2020 into the remainder of this year stem some data that demonstrates that we could ramp those investments effectively and a belief that the pipeline opportunities in front of us are ripe for the taking now.
With that, we'll hand the call back to the operator to take your questions. Ian?
Our first question is from the line of Samad Samana from Jefferies. Samad?
Hi, good afternoon and thanks for taking the call. So one for you, Chris, and then maybe a follow-up for Robert. But just as I think about the pull forward of the $10,000,000 of spend, how should we think about that driving either incremental leverage or the impact to 2020 guidance that you gave at the Analyst Day? I believe you guided for 7% to 10% EBITDA margin for 2020. And should we also think about that 20% growth for next year having kind of an additional tailwind given those investments are being pulled forward and you'll start to monetize those?
How should we think about the 2020 guidance?
Yes. I think we want to be careful not to give 2020 guidance or updated long term model guidance every 90 days. But I appreciate the point. So let me spend the time on the answer talking about the areas that we're investing in and the ROI characteristics that they have. So first, the inflection that we're seeing, right, the first half contract signings over 75% growth, the growth in our pipelines, they're compelling us to add capacity, right?
We talked about the enterprise deals per rep right now back to where it was 6 months ago. That was something we were trying to alleviate and get down into the 9 8 to 9 area. We're investing in 3 areas right in the go to market side. First on marketing and the events, Let's take one just from our Investor Day, where we held 1 in Manhattan. On May 8, when you look at the Manhattan event, we had 85 attendees, 51 distinct customers, dollars 15,000,000 in new pipeline created from there and already 6 deals closed.
So it's already generated over a 2x return on the investment for us. From a sales development rep perspective, the other area that we're looking to invest and have invested, we're actually finding that those sales development reps are able to ramp up much quicker than we had modeled, in fact, closer to 3 months. When you look at North America as an example, where we see those investments first, I talked about the North American enterprise growth rate being over 30%. We have SDRs that have created more than a third of their pipeline right now and contributing to over 13% of their closed deals. And then finally, from a quota carrying rep perspective, our data is showing us that it takes about 12 months to ramp, which is about what we thought and what we expected, But we're bending the curve on the sales cycle, the training that we're giving them.
We've been able to cut 3 weeks out of the sales cycle in a year, which we think is pretty impressive. So we think the combination of all those areas of investment, the higher demand that we have, the inflection in the market that we're seeing, now is the to be investing. And as I mentioned in the prepared remarks, we have a high degree of confidence that we're running ahead of the longer term plan.
Great. That's helpful. And then maybe, Rob, as I think about the large deal activity in particular, it was very healthy in the quarter. I'm curious, are you starting to see kind of an inflection in what I described as look alike deals as well, where when you sign somebody like a Delta or T Mobile logo as you've called out before, are you starting to see companies that are their peers in their respective industries look at them moving to LivePerson and that bringing new customers to the table as they see potential competitors? And how do you think about that impacting this inflection in very large deal activity that we're seeing?
Yes. I mean, if you look at the first customer to go live was T Mobile. And if you look at we just signed 1 of the we have 4 mega telcos going to 3 now with T Mobile combined with Sprint. But obviously, we've put down another one that we have a lot of activity in that space. We've seen a lot in the airline space with obviously Delta, and we have some others in the pipeline.
We're just at the beginning. Globally, when you think about telcos, airlines, banks, we still have a lot of runway. And so yes, it definitely influences it once they go live and the competitors see the opportunity that now like with Delta, I don't know if you've used it, but you can literally message to Apple Business Chat, you want to call and be put on hold. If you're an airline, you see that, you want that, and you're going to need to do that, and we have the best platform for it. So definitely driving those use cases and references.
If you've been to our events, those companies end up speaking at our events as references in front of their peers also.
And our next question is from the line of Steve Enders from KeyBanc. Steve?
Hi, thanks for taking my question. Just wondering what you're seeing on the consumer side that's leading to the pickup of investments there and what's really driving the strength there?
So the consumer side, as you can see, is doing very well. Like the smallest of small business, people want a message with these experts. We found there's a millennial population that wants the message and get expert advice, whether it's health care advice, legal advice and spirituality, whatever it is, we're finding really good demand there. And so we funded more activity into that operation over the last couple of months, and they're doing great. I mean, they have a lot of runway also in their business, but we did add some funding into them in the last couple of months to grow that business.
Okay. And I just want to touch on kind of what you're seeing in other messaging channels. We hear a lot of talk about Apple and Android ramping. Just kind of wondering what you're seeing from customer adoption of Facebook Messenger and WhatsApp and kind of those other channels out there.
Yes. So I mean, in Europe, we're seeing tremendous activity with WhatsApp. I'd say they're really getting a lot of momentum in that region, South America. Also, the U. S, we see still a lot of activity in the in what Apple is doing now.
As I mentioned, Apple is about to launch shortly in the new iOS release chat suggests. So basically, what it is, if you know when you click on a phone number off of a website or and you get that little window pops up that says cancel or call, it's now going to say cancel call or message. So think of that, every phone number that's clicked on can become now text enabled and then that will send you right to Apple Business Chat. I think it's going to have a huge impact on the industry in what we're doing. And also, it cuts off calls before they even hit the IVR, which will be a major, major change in the contact center world.
And then the last part, obviously, we've got Facebook Messenger in the U. S. Is doing okay. We see more on WhatsApp because of the security elements of encrypted and all that, but we're doing pretty good with Facebook here. And then you've got all the RCS implementations globally that are rolling out with telcos.
That is SMS is now going to become a rich communication service. And there is brand ability for brands to connect into that. And we are in the middle of wiring into the telcos directly. And then Google also has their platform. We have a very tight partnership with Google.
So we're doing that. We've got WeChat. We've got a couple of customers who launched on WeChat. We've got LINE in Japan we've launched. So basically, all the messaging front end globally are now available.
And but once again, I think they're at the beginning. There aren't like thousands and thousands of brands on these platforms yet, and there'll be millions of brands one day, and that's why we're pretty excited about what we're seeing there. But they are driving volume for us and adoption for us.
And our next question is from the line of Brett Knoblauch from Berenberg Capital Markets. Brett?
Yes. Thanks for taking my question. Just one on the new features that you guys are investing in on the R and D side, specifically with the outbound marketing and the in store features. Can you just expand on that a little bit? And how you really expect that to drive maybe new deals and bring more customers to the table maybe in the end of this year or 2020, however that rolls out?
Yes. So our strategy has been up to now is to really beachhead in on care and then fan out from care. But when you start fanning out from care in sales and marketing and retail, you've got to have a certain amount of features. So if we put the sales and marketing, let's put them in the bucket today, that's really about outbound. How can we create campaigns that we can send outbound with intelligence?
So it's really 2 parts. 1 is gathering conversational intelligence that we can say, here's a consumer who may want something later on. So maybe they inbound it originally with care and asked a care question and 4 or 5 weeks later, you outbound to them with some sort of marketing or sales message. So we need the capabilities to have a sophistication to group consumers, send something to them based on data. It could be system data.
We know we've been testing some stuff with like one of our cable companies in Europe. When there's outages happening in an area, they can outbound based on system data to consumers to tell them, we know there is an outage, we're on it, you don't have to call us or even message us, so capabilities like that. So that's the outbound. The second part is retail. We are in the middle of rolling a couple of 1,000 stores here in the U.
S. With one of our customers in which when a consumer inbounds, it could be sales or even care, that could be redirected to a store. And then there's a store rep who has we built now an agent called an agent console that's on an iPhone or an iPad, and then they can message right from their own devices in the store. So you can imagine, we really want to tie that store experience that you messaged in or even there's an together. We're also there'll be an addition of social because we've heard a lot of our customers don't want to keep the social monitoring and messaging on a separate group.
They want to bring it into our platform. So we have a part of the platform come September, we'll be delivering the ability to bring all the social interactions from Facebook and Twitter into the platform also, outside of Messenger that is, straight out from the social feeds.
Okay. That helps. And then just one more for me on just the $9,000,000 $1,000,000 plus deals that you guys signed in the quarter and $12,000,000 for the first half of twenty nineteen. Is this ahead of what you previously expected when you first gave 2019 guidance? Or how are you performing on the large steel front compared to what you initially expect to go in 2019?
They're definitely ahead. If you look at just the sheer volume of deals, so not just the aggregate value of them, but it was the highest on my sheet here, the highest I can go back to when you look at the total number of deals signed, but it's really nicely mixed between our farmer teams. So those sales leaders that are going out and hunting for new logos, it was up over 70% and then up over 30% on the existing side. So it was a nice mix of small and large deals. I think as Rob mentioned importantly, the deal durations are getting longer and longer.
These are now multi year deals on average that are happening versus a few 12 months, 18 months ago, they would have been 12 months in duration. So we're definitely ahead.
All right. Thanks for taking the question. Really appreciate it.
And our next question is from the line of Raimo Lenschow from Barclays. Raimo?
Hey, thanks for taking my question. Can I look, I get the investment and it makes total sense given the momentum that's in the market? Chris, can you talk a little bit about the so we're saying you took €10,000,000 out. Why not pick up more? And or like what's the what are the chances in Q3 you come back and just say, well, actually, it's €15,000,000 rather than €10,000,000 Just talk me through your thinking process there.
Thank you.
Sure. Hey, Raimo, good to talk to you again. Everything that we've done now for the pulling ahead of 2020 into 2019 was based upon all of the models that we put in place for the first half of the year. And we look at various different metrics. We look at what is the ratio of sales development reps to quota carriers, and we have a ratio in mind that we want to hold to.
We look at the number of deals in our pipeline per rep, and we have ratios that we aspire to get to that because our opportunity pipeline grew so fast and faster than we were able to hire, even though we did a great job on the hiring front, We're back to where we were 6 months ago. We'll look at the payback both on a pipeline created basis, how many of the deals are being created, how many of them are making in the late stage, how many are being closed, we look at them on individual per rep basis. And we're getting an idea for how quickly reps can scale. Interestingly, we've employed a new analytical capability that has accelerated our understanding of how long it takes a rep to scale. So we were waiting 6 to 9 months before to see that first deal close.
We now have the ability to detect in weeks based upon the pattern of activities. And that so we feel like we could be much more fluid and much more dynamic. It's a rapidly moving market right now. If you would have asked us 3 months ago if we saw the pipeline growing as much as it did just in the last quarter, I don't think we would have guessed it would have grown 120% year over year. So it's based upon data, it's based upon our experience in the 1st 6 months and we're fortunate enough to be able to look back at North America and see what full productivity looks like.
That was the area that we first seeded investment as you recall. We put SDRs in, we put quota carriers in, new client partners in, and that region of the world for enterprise just posted a 30% growth rate. So we feel like in total we've got formula figured out. And in terms of what it means for the rest of the year, it's largely going to be dictated on the demand environment. And if that continues to grow, it is.
Perfect. Okay. And then a follow-up question for Robert then. On the AI side, so I'm one of those Delta Messaging customers. And the like where are we in terms of AI understanding and giving us the right answer from what you see from your clients in terms I mean, maybe let's try innings.
Like where are we on that journey?
I mean, we design conversational Builder so that a normal contact center agent who has conversations can create the automation, deploy it and manage it. So as I've said in previous calls, since we launched it in the beginning of the year is when we launch an automation, it's about a 70% completion rate. And over about a forward period of time with the agent behind it, we get into the 90s. So basically, there still needs to be human hands to get it forward. We are releasing vertical templates for basically intense to goal.
So we've taken our data set and looked at verticals in financial services, telco and retail, and we're releasing into the platform that there's like preset intents and then the best conversations to get that intent to go. We can still modify it, but at least we'll get started on something that we know is based on the data that we have. I don't think we're anyplace close where things just run on their own. There's this like magic machine that just figures out intents and then processes them. But we have the mechanism to scale very quickly, and that's why half of our interactions already are automated in a very short period of time.
So we have definitely a way to do it.
Perfect. Okay. Thank you.
Thanks, Ernest.
And our next question is from the line of Richard Baldry from ROTH Capital. Richard?
Thanks. Without getting into guidance for 2020, I'm sort of curious if you can think about seasonality now because you typically haven't seen sort of the second half hiring acceleration like you're going to see this year, some of the spending coming in, in the second half at higher levels. So do you think it materially changes your thoughts on how the patterning on either revenue or expenses comes in 2020, particularly maybe on the revenue side given the faster closings? And then maybe as a follow-up, can you talk about these large number of new 7 figure deals, how you're sort of seeing the patterning in deployments of those? It's much more of them coming sort of sooner, quicker together.
Do you have the resources to kind of support that? Is there any change to durations of deployments, etcetera? Thanks.
Hey, Rich. I'll take the first and Rob can take the second. We're not seeing anything in terms of timing or seasonality change in the business. If you look back at the pipeline, right, and the close dates of the pipeline, there's nothing that would indicate it's heavy back end loaded or front of the year loaded. So we're not seeing anything there that's changed over what we've observed over the last several years.
On the deployment side, we are part of our hires is deployment. We need more deployment people, conversational designers. So we are hiring more people in the deployment area. So we do have, obviously, methods and frameworks to deliver based on what we've done over the last 2 years or so, but we definitely need more people here to help as we ramp these customers. And I think more importantly is on the hiring side, we have the client partners, the CPEs that work with our existing customers and they're currently at a ratio of, I think, 1:eight.
But if you take like a Delta Airlines, can a rep really handle more than 1 Delta or 2 Deltas, let's just say 2 airlines? So we're seeing is that we're going very deep with these customers and it's not just care. It's conversationalizing and automating the business. So we're trying to bring down the ratio so the CPEs could be more focused on more of a 1:4, 1:5 ratio, even lower than you see when you go deep into the big, big enterprises, maybe just by one account for the next 3 or 4 years because there's so much upside. So that's part of that team that's doing the implementation, and we're landing and expanding in those very, very large enterprises.
Great. Congrats on the acceleration.
Thanks a lot, Rich.
And our next question is from the line of Ryan MacDonald from Needham. Ryan?
Yes. Hi, Rob and Chris. Congrats on a good quarter. I guess, just a 2 part question here. I guess, first, on the additional or incremental marketing progress for Chris.
Previously, a lot of the customer segments, which you've obviously had some nice conversions out of, it seemed like the purpose for that was really to help educate the marketplace. Now that you're seeing increased demand and sort of an increased velocity there, is the goal to lessen those numbers of events or lessen the investment in those events as well as you sort of increase corporate bearing sales there? And then for Rob, from a technology perspective, with this Apple chassis get IVR deflection has been a very popular seller, I believe, for LivePerson. Just wondering what potential impact that has on sort of adoption for that moving forward? Thanks.
Hey, Ryan, good to talk to you again. On the marketing front side, our team has done an extensive ROI analysis, not just on the heads, but on the marketing events themselves. And interestingly, what we're finding is there's certainly a correlation with how closely together they're held or in some cases, how much distance you did between them to create and then close. You're right that in the beginning, those events were about creating and building brand awareness and educating the market on the category. I would say now they've evolved to where their progression and their closing events.
And they're not just all large scale anymore, right? We're increasingly starting to take them directly to customers, giving them their own custom events. So do I see us decreasing the number of events? No. I think right now, we're starting to figure out a formula for what our pipeline looks like, how many attendees we can get there and at what stage in the pipe they're in and using them as closing and progression events.
And then Rob? So when it comes to test to test, it's awesome. I mean, we do have Logitech, which when a call comes in, we then all throw up press 1 instead of taking a phone call proceeding phone call, get messaged. But if we can just take it right at when somebody dials and bring it right into Apple Business Chat and then right on our platform, we don't even have to have that step of press 1. It's kind of like it's there.
It's built into the operating system, into iOS. It's just I keep thinking what brand in the world is not going to be there. Like you're going to start seeing every brand you're going to call or a lot of brands you call, you're going to see, okay, they're letting me do something else. CEOs are going to see that, heads of marketing are going to see that heads of cares are going to see that and going like, why don't we do that? So just from that standpoint that you think about the billions of people, the hundreds that have iOS devices, they're all going to have access to this.
I think it will drive a greater adoption in the market. And once again, we're wired in, obviously, to Apple Business Chat to handle those types of ramps and flows. Got it. Thank you very much.
And our next question is from the line of Mark Schappel from Benchmark. Mark? Hi. Thank you for taking my question. Rob, question
for you. In the prepared remarks, you noted that you're seeing more opportunities to build new products and capabilities rather than going
out and buying them.
And I was wondering if you could just give
some additional color on what you see out
there that's driving that decision. Well, I think there's 2 parts to it. One is, I think we've taken a leadership position not that I think we've taken a leadership position on building live engage early, and we've got great talent here that continues to add features to that. And I just think that talent is some of the best in the industry for what we want to do in conversational commerce. So as we've looked out into the market for other features or whether we're doing an outbound feature, We just don't see anything that's compelling to buy based on even valuations that are out there.
It's also like the valuations of private companies are fairly high right now, and it doesn't make sense to us. I'd rather put the money into our people. It's less risk. It's going to have a higher return. It's fully integrated into our platform.
And so right now, we decided, obviously, we raised over $200,000,000 a couple in February, and we're like, we should use this capital, not all, obviously, we don't need to, but we should use it to deploy and build the things we know we need to finish and to get the Conversational Commerce where it should be. And even the Commerce angle of payments, we're starting to look at the payments side of the platform and all the ability to do payments and messaging, which doesn't exist today. So we are really focused on how do we bring payments onto our platform because 100 of 1,000,000 of dollars is transacted on our platform every year, and we're not capturing those on the platform. They sort of go off platform. So there are some big things we're working on with Alex leading that team.
And many of you met him and a group of people are doing a great job globally on the platform. Thank you. That's helpful.
And our next question is from the line of Zach Cummins from B. Riley FBR. Zach?
Hi, good afternoon. Thanks for taking my questions and congrats on the strong quarter. I was interested in hearing more about the automated food ordering system that you did for a large QSR customer. Can you provide a little more color around that solution and maybe the potential interest that you would have from other customers within that market?
Yes. So this is what's, I think, pretty cool about what we're doing is that we didn't envision, like, food ordering. We envisioned customer care at the beginning, if I go wind it back to 5 years ago when we started thinking up this concept of this platform. So we approached one of the quick casual restaurants actually who came through an acquisition we did with the guys. Conversable.
Conversable. They had quick casual. We have Fridays like on that platform doing Alexa stuff with TGI Fridays and things. So through that acquisition, we found a customer that was picking a little differently, which they're kind of looking at most people are just walking in the door and buying. There's usually lines.
They don't have an app or the app they have is limited to use. And obviously, a lot comes through the 3rd party aggregators, seamless and stuff like this. So we just kind of came up with a joint strategy with them that we can do food ordering with automation. So the menu comes up, you basically can automate it and buy and you can have it delivered and you walk in and you get it. And it's just going to create a more direct relationship.
Once we get people food ordering through that, then we can proactively go back to them. We've got something new. How about something special for you? How about a reorder? We find like we found with the TGI Fridays and Alexa a lot of reorders, like huge amount of reorders, high return on investment with those.
So it's so much more we can do once we're in the pocket of the consumer and there's nothing in between them and the consumer. They're not having somebody take them through a 3rd party app. So that's really where we started. And these guys are in the top 30. They're very large.
They're a big brand. We would all know them. But they're like in the top 30 of quick cash flow in the United States. You know they're really well known. And I just think of 1 through 29, like we can go 1 through 29.
How often do you like you walk into a McDonald's and you have those kiosks and stuff and you're waiting online and you have to go to a kiosk, but hopefully it doesn't make sense. You should be messaging in, you walk in, the food's there. It's kind of like the brew to you model in the stadium that we do. You order, new stuff comes to you. And so that's the type of thing that we're doing.
So we'll see how it goes. We're very excited. We're very excited. I think it'll launch in about a month or so, but we'll see how it goes.
Great. Thanks for that, and best of luck in the second half of the year.
Thanks, Zach. Thanks, Zach. Thanks, Zach.
And our next question is from the line of Jeff Van Rhee from Craig Hallum. Jeff?
Great. Thank you. A couple from me here, Rob. So on the I guess at a high level, you have a lot of questions about messaging. Certainly, you're there early.
There's tons of noise about bots and automation, a lot of it coming from very big brands with deep pockets. You talked about a lot of the features, but maybe just give us a quick pitch on what are the defendable barriers to entry? Where are your biggest advantages when you sit down to pitch a deal? What are the core fundamental differentiators where people just now and say, got it, we're buying from you? If I look at the platform, first, we are integrating to every endpoint out there on the 3rd party endpoints like Apple and Facebook and all that.
We have, I think, very special relationships with all those front ends, and we're co developing with them and doing a lot of things, I think, strategically versus other smaller players. Or even some big players, you'll find, like in Apple's case, they've been removed now from the program because they were not bringing customers to the table like we have. And so I think that's a big part is having that strategic relationship. The next thing is that we know how to take a live conversation, an automated conversation and make it happen at scale. And if you look at our automation capabilities, there were all these startup bot providers.
You're right. It was so noisy for about the last year or so. And it's really died down because a lot of brands, it's like picked stuff up and start playing with it, and it couldn't deliver on any real scale with it. We saw a lot of bad bots in the world. We've all seen them.
We've played with them. With our technology, it's really about we have a great way to design, deliver, deploy and manage the bots at scale. And we're able to do it with these with the agents who normally have these conversations. We have a lot of integrations with that technology. And so we're able to use AI and bots, I think, in a different way that allows us to automate now 30,000,000 conversations a month.
And then on top of that, we have this data set. And so having this data set of 100 of millions of messaging and chat conversations gives us in our data science groups a way to create more and more value out of that. As I was saying, we got these pre built intents that we're delivering shortly. We have an analytics now, part of our platform that's all intent based, so people can like build an intent based business. So all that data and managing it and making value out of it is something that I think is very unique to us and creates a strong ROI for using our platform over someone else's.
And that's why we're, I think, scaling the way we're scaling today. Yes. I appreciate that. Okay. And then just one other sort of area I want to dive a little deeper on.
The 9, 7 figure deals in the quarter, from a number of angles, how many of those were new versus existing customers? And what was kind of the distribution of use cases? Looking at we'll have to do the math on the new versus existing, but kind of going off the top of my head pretty evenly split, I'd say. But the use cases ran the spectrum of care and sales and marketing. Also, I was just going to say also pretty evenly split.
Yes. Got it. And were the on the ultimate use cases in the service side, I mean, were these what were the primary pain points? Were the bulk of these coming in on IDR Deflect? Were they in app?
Was it driven by some inbound messaging, WhatsApp, Facebook and kind of a little more on the core drivers? It depends on in which market we're in, but IVR Deflect is still a big point because people are calling and now they have a way to get out. We can move pretty much 30% of call volume will move immediately when we implement on the IVR Deflect. That's just people and 30% of the population saying, I'd rather take a message instead of a phone call. Then behind that, in app is also pretty big.
A lot of the telco brands here, you see a lot of volume. Over in Europe, though, WhatsApp is huge. Like we're seeing WhatsApp actually soaking up in app and also against other third party messaging platforms. So WhatsApp in certain countries has 90% penetration, 80% penetration. And so the consumers prefer that and they're using that instead.
Got it. And so and then if I could also on those deals, sort of a typical I'm assuming that's ARR, but I wanted to just clarify that 7 figure ARR, 9, 7 figure ARR deals. And then in terms of the composition of a deal in, say, year 1, how much of that is I mean, you've got a heavy recurring revenue model. How is that different in year 1? How much of that is PS versus recurring subscription revenue?
Most of it's subscription. It's a small portion. 15% or so over the lifetime of the every year would be PS. It's we kind of evenly split the PS hours across the year, but it's predominantly all recurring revenue or mostly recurring revenue. So I don't know Matt if you have anything.
Even our services component has a high subscription piece to it. I think those customers are signing up for teams that have been helping optimize and move them along the transformation journey.
And our next question is from the line of Koji Ikeda from Oppenheimer.
Just a question here on the hiring plans and timing. So hiring for quota bearing sales reps went really well in the first half. And in fact, you went beyond the goal, which I think is a good sign for pipeline trends in the future. And in fact, you're upping the goal for the year end, I think by to around 100 plus and that's a big target. And we hear from a lot of software businesses out there that hiring is really tough out there, especially with enterprise reps.
So my question is, why has LivePerson been so successful bringing on new sales capacity? And how should we be thinking about the hiring the timing of hiring from here on out for the rest of the year and into next year, too? Thanks for taking my question.
Yes. I mean, we have had I remember sitting with Rob and some of my colleagues and putting our hiring plan in front of them and it was daunting. It was daunting on January when we started going to do a full year hiring in 6 months And we outpaced it in May. And that was because we had a great funnel of candidates. Interestingly, I was just in the talking to my Head of HR a few hours ago and she let me know that on a year over year basis, we're actually down $1,000,000 in agency spend.
So I think we built out an internal recruiting engine that's been able to largely bring on these candidates. You're right, we set a goal at the beginning of the year of 75%, we hit 89%, and we see ourselves going in excess of 100. Interestingly, if you look at North America and all the hiring that we've done in North America, we've only had one regrettable attrition. So not only are we being successful in hiring, but we're keeping them. And I think that's a reflection of the onboarding process that we're following, the training that we're giving them and the continued development opportunities throughout their 1st 3, 6, 9 months in the company and making sure that they're successful in getting paid.
But it's like if we get down to its our top reps are making 7 figures and they've got a whole I've said this before, there's a $50,000,000 deal out there. There's a $100,000,000 deal out there one And so you have reps that are trying to look at the world like that, and that's hard to find in software. And then you're in a dynamic market where you've got calls, you've got customers saying, okay, my competitor went live, why aren't I on that? So it just creates a it's a good opportunity. Salespeople want to go where they can make money and ramp and scale themselves and their commissions, and this is a good place for that right now.
So not to simplify salesperson, but that's it.
And our next question is from the line of Peter Levine from Evercore. Peter?
Thanks for taking my questions. Just to piggyback off of the prior quarter. So on the enterprise side, it seems like a pretty attractive proposition for partners to want to work close with you all as these deals get larger, more transformative. It would seem like you have some currency with implementations, deployments that are kind of starting to build up. Kind of talk about your conversations that you're having?
Or how are you accelerating those conversations today with ESIs, if not already having them?
We have a good many of the big ones already are partners of ours, and we're doing selling. They're doing some implementation for us. We do have we'd like to get more pushed out. If we can move more of the implementation and transformation out to partners, it's our goal. And so I think we're doing an okay job for us.
I think we are very focused obviously on perfecting things and getting things right for us And then taking that knowledge and getting it out to partners and we're doing we have a lot, I think a long way to go to get them to scale with us. But that's the opportunity right now is we haven't really even turned on the partner that will come up on the enterprise side. In the mid market, they've got hundreds of partners, and they're doing really well, especially internationally. But in the enterprise side, they're doing good, but there's a ton more to do with them. No, I think as well said, it's a lot of opportunity there still.
Yes. And just a final question here. Obviously, geo expansion is a focus of yours, but we've heard from a number of software companies this quarter that they witnessed a slowdown in Asia Pac and the well, not so much a slowdown, but just elongated sales cycles and obviously a mix between executions and macro issues. But you went obviously in line with WeChat, and that's huge in HF, but more of a sudden, HVAC just to see how that region is performing versus your expectations?
I mean, we feel good about APAC right now. Our international operations are doing well. We have a new leader over in Japan who took over the reins a couple of months ago. He's done a really great job. We have, I mean, disclosed a ton of really quality brands, retail, banks, telcos.
So we're seeing some good stuff. We're actually going to make further investments with what Chris was talking about, the $10,000,000 We are going to put more money into that region and specifically into Japan right now and the other areas. We have Singapore now. We have a person in. So we're only at the beginning of all of this.
So it's we're not feeling anything right now in markets. It's just it's our ability to focus, fund and execute. That's our risk. That's why I thought it's not like macro. We have to focus, fund and execute on whatever everything we do.
So each market is an opportunity for us to grow, and that's what we're doing with it.
And we have reached the end of our call today. I will now turn the call over to Rob Locascio for closing remarks.
Thank you, operator. So just to end with a few key points. We are seeing unprecedented demand and activity in the conversational commerce space, and this is obviously translating to record contract signings and surging sales pipelines. The industry and our business is definitely at an inflection point, and we're being presented with an opportunity to compress the timeframes of how quickly we can deliver on our vision and transform the brand to consumer communication and relationship. I'm really confident that our investments in the increased investments, and we don't take it lightly making these investments, but that we need to make them, that they're going to things that are known.
These are things that our salespeople, product and things that we know our customers want from us. And finally, as I was saying before, we have 5 airlines globally and 3 in the U. S. Think of those 100 that are going to need just in that vertical conversational commerce enablement. And this goes for every industry globally.
And this is why we have such a tremendous opportunity ahead of us, and we're working now to just accelerate the overall momentum of the business and just capture the market as quick as we can, Aligning with our shareholders and obviously all of us, even in this room, our shareholders, I think all of us want to get every customer on our platform. We want every airline. We want every bank. We want every telco. We want every retailer.
And that's where we're after right now, and we can see we can do this. We just need to focus, fund and execute. So with that, thank you, and we'll see you on the next quarter.
Ladies and gentlemen, this does conclude today's conference call. We thank you greatly for your participation. You may now disconnect.