Thank you for joining the LivePerson's First Quarter 2018 Earnings Call. On the call today are LivePerson's CEO and Founder, Rob LoCascio LivePerson's CFO, Chris Greiner and LivePerson's VP, Investor Relations, Matthew Kempler. I would now like to turn the call over to Mr. Matthew Kempler. Sir, you may begin your conference.
Thanks very much. Before we begin, please note that we will make forward looking statements during today's call, which are predictions, projections or other statements about future results. These statements are based on our current expectations and assumptions as of today and are 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 the 10 ks, 10 Qs and other reports we file from time to time with the SEC. 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, which is available in the Investor Relations section of our website. I will now turn the meeting over to Robert CEO and Founder of LivePerson.
Thank you for joining LivePerson's Q1 conference call. We entered 2018 with a really strong start, exceeding the high end of our Q1 guidance ranges for both revenue and adjusted EBITDA. We increased revenues sequentially for the 4th consecutive quarter and generated 14% year over year revenue growth. Our return to mid teens growth is a great testament to the momentum we are building around LiveEngage. It's also a key milestone for LivePerson as we continue along our targeted path of generating 20% plus growth.
The leading indicators for continuing to push along this path remain promising. After closing our best quarter ever for contract signings in the Q4 and winning our largest deal ever, we once again saw strong demand in the Q1. Mobile activity continues to fuel our growth accounting for 45% of interactions in the Q1, up from 35% a year ago. Our trailing 12 month average revenue per enterprise and mid market customer continues to set new records, climbing nearly 20% year over year in the first quarter to more than $240,000 The LiveEngage revenue retention rate once again exceeded 100% and hit its highest level since we began tracking the metric. With another strong quarter of achievement, we are raising the low end of our 2018 revenue guidance by $2,000,000 We now expect 2018 revenue in a range of $239,000,000 to $243,000,000 up from $237,000,000 $243,000,000 previously.
We're also raising our 2018 adjusted EBITDA guidance to a range of $22,000,000 to 25,000,000 dollars from $20,000,000 to $23,000,000 previously. Updated adjusted EBITDA guidance reflects a favorable impact from the completion of our ASC 606 review, which is reducing our commission expense forecast for 2018. Chris will discuss this in more detail. The investments we are making in sales, customer events, partners and product are the underlying drivers of our renewed growth trajectory. They're expanding our sales pipeline, increasing product differentiation and fueling adoption with new and existing customers.
Case in point is a strong activity we generated in the Q1, which included signing upsells and new contracts with some of the world's best known brands. We discussed on the last call how early in the Q1 we signed strategic 7 figure expansion with Sky, a leading European entertainment company. Sky is extending LiveEngage beyond IVR deflection and broadly deploying messaging and AI across multiple business endpoints. This is a prime example of how customers steadily expand with LivePerson across use cases and messaging channels. Another example is a 2 year mid 6 figure expansion we signed with 1 of the world's top 20 largest financial institutions.
This global bank is looking to boost agent productivity and build stronger relationships by letting customers connect with them through conversational and messaging. This customer just went live on in app messaging and has subsequent plans to go live in Apple Business Chat and IVR deflection. There are also plans to introduce bots, enabling the brands to provide an even higher level of service by powering human and bot based conversation through one platform. We also signed a 3 year mixed 6 figure expansion with a North American based Fortune 100 telecommunications provider. This company has plans to eliminate more than 100,000,000 800 number calls over the next few years and it's a double productivity in its contact center by shifting voice to messaging and leveraging bot automation.
As part of this expansion, we are replacing 2 competitors across several internal lines of business. We anticipate steady growth from this customer over the coming years as we fuel continued adoption. With LiveEngage, our opportunities are extending beyond even traditional care. A good example is this is we are starting a pilot at 1 of the Major League Baseball stadiums with 1 of the large food and beverage concession companies. In this example, people will be able to order their food and beverages directly from their seats through Apple Business Chat using a bot on the LiveEngage platform.
It's a unique use case, but really interesting when you think about how conversational commerce is going to be pervasive and how we connect and do commerce in the world. Other key wins in the Q1 include a new 7 figure contract with 1 of the leading online gaming companies and mid to high 6 figure deals with a top 10 automotive OEM, a leading European mortgage provider, several of the world's largest telecommunications companies, the credit arm of Fortune 100 apparel retailer and U. S. Auto and home insurance provider. The demand we are seeing stems from a need among large enterprise to transform how they communicate and connect with consumers.
Brands are under intense pressure to improve the customer experience and build lifetime value while simultaneously reducing operating costs. The legacy platforms they have traditionally relied upon to solve these problems, the 800 number and websites have just not lived up to their promises. Voice calls to 800 numbers cost large enterprises 100 of 1,000,000 of dollars per year and the end result is a frustrating experience for the consumer where they waste time on hold and often hang up feeling unhelped. Likewise, websites are delivering poor conversion rates on average less than 5%, even more alarming, they are they have unintended consequences when it comes to creating call volumes to customer care. About 60% to 80% of calls to customer care originate from the website.
LivePerson offers brands the tools to overcome these challenges as LiveEngage platform powers conversational commerce, which enables consumers to conveniently and intelligently connect with brands through a combination of humans, bots and AI over messaging. Our solution works across any channels by which a consumer refers to communicate, be it SMS, in a brand's app, on the desktop messaging, on the web, in IVR, Facebook Messenger, Apple Business Chat, LINE or in home devices like Alexa and Google Home. On March 29, we also participated in the beta launch of Apple Business Chat. This launch marks an incredibly important milestone in the evolution of conversational commerce as millions of iOS users are able to find and message brands directly on the device through Safari, Siri, search and even Maps. We believe deeply in what Apple has created and are working to help our customers scale their service experiences using Apple Business Chat.
Our customers such as Discover, Lowe's, The Home Depot and T Mobile are using business chat to connect with consumers for support and sales. Business chat enables consumers to see product information including images, prices and ratings, find the nearest store and items in that store, pay bills, apply for credit cards, schedule service appointments, all without leaving the messaging conversation. We believe that it is precisely this domain expertise and competitive differentiation that position LivePerson to power more business chat launch brands than any other platform and 2 out of the 3 featured brands on Apple's website were our customers. We held several customer events and webinars in the Q1 around our differentiated ability to scale business business chat Apple Business Chat alongside bots and other messaging channels. Attendance levels were very high as business leaders recognize that once consumers become accustomed to this high level of service and engagement, they will expect it from every brand.
We also held a major marketing event in London that centered on the work we are doing with another technology provider, provides the OS for other mobile devices. Panelists from Liberty Global, HSBC, IBM and Accenture shared their views on how to leverage LiveEngage to improve conversational experiences through rich mobile messaging experiences. The launch of business messaging with this technology partner will happen in a few months and will further advance conversational commerce native on mobile devices. With this launch combined with Apple Business Chat, close to 100% of mobile devices will have the ability to have direct messaging experiences securely with brands and this will obviously be a great catalyst in our space. Attendance at this event was double our initial target.
Brands are looking to LiveEngage as technology catalysts for conversational commerce with their customers. In fact, entire ecosystem is developing around this concept and LivePerson is at the forefront of it. To illustrate this, I just returned from Facebook's F8 Developer Conference this week, where I spoke on a panel with T Mobile's Head of Product about the great successes we are having together powering their conversational commerce experiences on Facebook Messenger. This is just another example of how our ability to influence the future of conversational commerce continues to strengthen. In March, it took another leap forward when Alex Spinelli, former Global Head of Alexa OS at Amazon, joined LivePerson as our Global Chief Technology Officer.
Adding Alex to our team is helping us attract even more amazing talent and we are excited to build out a tech hub now in Seattle that will capitalize on the heightened interest we are seeing for people to come here. Before I hand the call over to Chris, I'd like to summarize the opportunity that lays ahead. First, the wave of momentum that took shape during 2017 is building as seen from our return to double digit revenue growth in the Q1. 2nd, we are deploying investments into areas of high rates of return. The advancements we are making expanding our capability and capacity in sales and technology are directly driving our results and we'll continue to deploy our capital with that same mindset.
And third, we are leading a very dynamic shift in the market towards messaging, bots and AI. We have a clear lead today, but are moving very fast to extend our product capabilities, sales capacity and overall leadership in the company in order to focus on winning the conversational commerce space. This is a very exciting time to be a live person. And now with that, let me turn the call over to Chris. Chris?
Thank you, Rob, and good afternoon to all of you. Before we delve into the quarter and discuss our updated view of the year, I want to take a brief moment to convey my excitement for what LivePerson is building. What attracted me to LivePerson and what has been reinforced since joining is the mission driven culture of the company and its obsession over innovation and customer success. I'm very impressed by the depth and breadth of technical and industry expertise at all levels of the organization and highly motivated by the opportunity in front of us to be a transformative leader in conversational commerce. In short, as a CFO, there simply is no better set of ingredients from which to drive long term shareholder value.
In that setting, I'm directing my attention to 3 primary areas in support of the company achieving its long term targets of greater than 20% revenue growth and adjusted EBITDA margins in excess of 20%. 1st, we will more broadly utilize data driven insights to strengthen quality, increase speed and improve productivity at global scale. These are the building blocks of sustainable growth and margin expansion. 2nd, we will evolve to an organizational framework that is designed to accelerate growth by becoming even more nimble in delivering innovation and servicing customer demand. And third, by becoming leaner operationally, we will scale margins while freeing up additional capital that can be deployed to areas of our business with proven ROI characteristics, namely customer summits, partnerships, go to market resources and technical expertise.
In fact, we're already seeing momentum build across a number of notable leading indicators due in large part to these investments over the last several quarters. Illustrations of this are as follows. We returned to double digit growth in the Q1. We had record contract signing We generated record ARPU, up nearly 20% year over year in the Q1. Deferred revenue was 68% year to year, up to 55,000,000 dollars And we experienced record 36% of full service customers now using more than one interaction type.
With these as a precursor to our discussion, let me now review our Q1 operating results and full year outlook in more detail. In the Q1, revenue increased 14.4% over year and 1.5% sequentially over the seasonally strong 4th quarter to $58,200,000 exceeding our guidance range of $56,750,000 to $57,750,000 Both of our segments delivered double digit growth with B2B revenue rising 15% to $53,600,000 and consumer revenue rising 12 percent to $4,700,000 The revenue upside was due to a combination of strong contract activity and better than anticipated retention as attrition reached a multiyear low. In terms of deal metrics, we're seeing a powerful combination of rising ARPU and increased wins with new and existing clients. We signed 98 deals in the Q1, up 32% as compared to 74% in the year ago period. Wins with new customers increased from 25 last year to 35 this year, reflecting strong market penetration.
Likewise, cross sell and up sell with existing customers also expanded, supporting our belief that we have significant untapped white space expansion opportunity across the portfolio. We are also making great inroads in each of our target verticals, especially in telecommunications, which rose to 20% of revenue in the 1st quarter, up from 17% a year ago. These companies are quickest to adopt our platform because they see firsthand data showing how consumers prefer messaging over voice. Consumer retail was 24% of revenue in the Q1, financial services 19%, auto 12%, technology 7% and other 18%. With respect to our geographic distribution, our international operations had an excellent quarter, accelerating to 26% year over year growth in the Q1 and accounting for a record 41% of revenue.
Additionally, our pipeline in Europe is very robust and we feel we are just scratching the surface in terms of our opportunity in Asia Pacific. U. S. Revenue growth also accelerated and grew 8% in the first quarter, up from 2% year over year growth in the Q4 of 2017. We will continue to invest in sales capacity in each of our geographies by deepening our client our industry expertise to delight existing clients, by aggressively building out our partner ecosystem globally and by even further expanding our capacity to capture significant new logo opportunities.
In terms of profit, gross margin increased 2 90 basis points to 76% in the Q1 from 73.1% a year ago, excluding non recurring items. This improvement reflects our more efficient next generation LiveEngage operations and data center leverage. Investments in R and D and sales and marketing as a percentage of revenue were up a combined 200 basis points year to year reflecting continued investment, while G and A as a percentage of revenue, excluding non recurring items, decreased 40 basis points year over year. 1st quarter GAAP net loss per share of $0.06 was ahead of guidance, while adjusted net income per share of $0.01 was at the high end of our guidance range. Adjusted EBITDA of $4,100,000 exceeded our guidance range and increased 26% year over year.
Adjusted net income and adjusted EBITDA are non GAAP measures that exclude $1,400,000 or 0 point in the Q1 of 2018 tied primarily to non recurring litigation costs. Please refer to today's press release for a full reconciliation of GAAP to non GAAP measures. At the end of the Q1, cash on hand, including restricted cash, was $57,700,000 or approximately $1 per share. LivePerson used cash from operations of $700,000 in the Q1 and spent $4,600,000 on capital expenditures. The company also repurchased $1,300,000 of stock and has $17,100,000 remaining on its share repurchase authorization program.
Now let me transition to our updated 2018 outlook. We are increasing guidance for both revenue and adjusted EBITDA following our strong start to the year. Specifically, we are raising the midpoint of revenue guidance to $241,000,000 from 240,000,000 dollars and now expect a range of $239,000,000 to $243,000,000 At the midpoint of revenue guidance, growth for the year is 10%. We are also raising adjusted EBITDA, taking up our guidance range by $2,000,000 to $22,000,000 to $25,000,000 from $20,000,000 to $23,000,000 previously. The midpoint now equates to a 9.8% margin, which is 140 basis points higher than 2017.
Our updated profit guidance incorporates the company's final view on ASC 606, which is immaterial to revenue, but should benefit commission expenses due to a shift in the amortization period over the contract life toward the average customer life, which we model as 3 to 5 years. The resulting benefit for 2018 is forecasted in the mid to high 7 figures with the range largely dependent upon revenue growth and in year contract signings. We anticipate that a portion of the commission savings will flow through to adjusted EBITDA, while the majority will be reinvested back into the business. As conveyed in the past, we believe LivePerson has a 12 month to 18 month lead in a greenfield market that presents a multi $1,000,000,000 revenue opportunity. We do not intend to sit on that lead.
Instead, we plan to expand it and we are directing our investments to proven areas of ROI, technology innovation, demand generation, sales capability and capacity expansion. With the payback on these investments increasingly evident, we view this decision as the best option for fueling accelerated growth while also delivering profit improvement. I will now review our detailed financial expectations. For the Q2 of 2018, we expect revenue of $59,000,000 to 60,000,000 dollars GAAP net loss per share of $0.13 to 0 point $0.01 adjusted EBITDA of $3,500,000 to $4,100,000 or $0.06 to $0.07
per share. For the
full year 2018, our expectations are as follows: revenue of $239,000,000 to $243,000,000 GAAP net loss per share of $0.29 to $0.23 adjusted net income per share of $0.11 to $0.15 and adjusted EBITDA of $22,000,000 to $25,000,000 or $0.37 to $0.42 per share. Furthermore, as a percentage of revenue for the year, we anticipate gross profit to be approximately 76%, sales and marketing 41%, R and D 23% and G and A excluding non recurring litigation at 14.5%. As a reminder, due to changes under the Trump Administration Tax Cut and Jobs Act, we are applying a 25% tax rate to our non GAAP income in 2018 as compared to 35% last year, and we estimate that this more closely aligns with the expected long term tax rate of the company. We expect to pay cash taxes in 2018 of $2,000,000 to $4,000,000 Please refer to LivePerson's earnings release issued earlier today for additional details on our full year 2018 assumptions. We have also published a supplemental presentation that reviews key points from the earnings call on the Investor Relations section of the website.
Now as we conclude and prepare to open up for Q and A, I will briefly wrap up. First, we have a clear, aligned vision that guides our capital deployment decisions in a conversational market that's accelerating in size and scope. 2nd, we are attracting the industry's best talent and repositioning the company to be more nimble in accelerating software development cycles and capturing customer demand. And third, we are building toward a financial business model that we believe will sustain our double digit revenue growth, while generating greater operating leverage. In summary, LivePerson is executing well on its strategy.
With that, I'll hand the call back to the operator for us to take your questions. Operator?
And your first question comes from Koji Ikeda with Oppenheimer.
Great. Thanks for taking my questions and I welcome to the team, Chris. My first question is for Rob. The new enterprise and mid market deal metric of 100 in the Q1, I think that's the best first quarter absolute number we've seen in a long time. And based on the ARPU metric too, it looks like much bigger customers.
So I guess my question is, thinking about the new customers that are coming to the platform and I guess in aggregate, what sort of initial penetration are you seeing at the customers to start? And what I'm really trying to get at I guess is that I'm trying to understand the motion of the potential expand opportunities in these new deals.
Yes. I mean, it's this is a huge opportunity. I mean, it's when you start out, we'll start out usually in a single channel like IVR deflection in app, could be something with Apple Business Chat. And when I look at where we can go with these customers, it's even stuff I didn't envision 100% over a year ago when we launched the platform, which is we're doing retail for 1 customer where you can message back to people who are in retail operations. Apple Business Chat opens up a whole bunch of stuff that we're going to be able to do on selling.
I was just at the Facebook conference. There's a whole push for there's now a messaging ad unit on Facebook that you can advertise messaging and you click on it and it gives you right to messenger. So we're really even if we look at the calls we're trying to deflect out of care, we'll start out getting to try to target 5%, 10% of them, and we're ultimately trying to get to 80% of them. So we're really at day 1. And then all these other opportunities are opening as Apple Business Chat, Facebook, now Google is coming out with their messaging product.
So it's sort of a very much day 1.
I think just in terms of the metrics, we actually closed a bit over 100 in the 4th quarter, but that growth rate pales in comparison to where we are now at 32%. And just for a bit of color, the new deals signed with new clients, new logos was up 40% with the cross sell and up sell up 29%. So it was really pretty broad based.
Great. Thanks for that color. And I guess one question for Chris here. Looking at the balance sheet And prepayments are the big deals or I just trying to think about that long term deferred on there?
Yes, you broke up a bit. So if we if
I don't fully answer your question, just you can go ahead and repeat it. But yes, I mean, deferred revenues is quite strong. I think what you're seeing there is the success of stringing together multiple quarters of really good contract performance, but also more upfront payments in some of the longer term deals that we're making that we're striking.
Okay. I think that kind of addresses the long term deferred revenue on there, right? You had some multiyear prepayments this quarter?
No. The payments reflect the cash advance typically on annual contract value, not on multiple year.
Year.
And your next question comes from Richard Beldry with Roth Capital.
Thanks. In the past, at times, sort of sporadically, you've talked about the growth in cohort usage sort of on a year over year basis of people that are on the LiveEngage platform. Sort of curious if that's still a positive sort of tailwind for your revenue growth on the usage side?
So if you're talking about customers that have moved over and what their trends are after they move over to LiveEngage, Rich? Right. Yes. So absolutely same customer usage growth is greater than 10%. It's been consistently greater than 10% since we've been reporting that metric.
And as you can see, the mobile side of the business with mobile interactions reaching a record 45%
is one
of the key drivers of that. But I think you're seeing that translate into the ARPU that we've been reporting, which has been increasing sequentially for the last several quarters, being driven by customers who have come on to the platform, expanding usage as well as the larger new deals we're signing.
And with the record bookings you've had in the last two quarters, seasonally and combined, can you talk a bit about how you feel the sales team is in terms of maturity, tenure, how much you think is still sort of has a lot of room to kind of grow into their quotas to give us a feel for the capacity?
Thanks. In the U. S. Operations, we just added a Hunter team last quarter. So they're getting up to speed on pure new logos.
So there's a lot of capacity there. In Europe, you have a very seasoned team, but there's just a tremendous amount of opportunity. So same with Asia, what we do in Asia Pac. So it's just there's a lot of demand in the market for this technology. I think once again, the acceleration are also the Apples, the Googles, the Facebooks, now Alexa we integrate with all those front ends out there.
So there's just a lot of demand and I think there's a lot more capacity we have left in the sales force and where we're going. We did add some more headcount to the sales force this quarter. I think we're up to about 48, which is our I think a high for us. So we're starting to add back into that area because we see the demand in the market.
And I'd just add, it's not just the scaling of the direct sales force, which obviously speaks to the 48, but if you look at what we're doing globally as well, there's a tremendous focus on expanding the indirect and the channel relationships that we've had.
Yes.
So Q1s are typically pretty seasonally tough for you, but you grew sequentially pretty solidly. If we look back to last year, your sequential growth dollars in the Q2, Q3 were very strong. Is there anything unusual in the seasonal patterning either last year or even in this quarter that we should be careful about when we're rebuilding our models? Thanks.
Yes. Rich, I think when you look at last year, we hit a trough, right, when we were approaching end of life on the legacy solutions. So you saw we had our Q4 call and we talked about that final $15,000,000 that wasn't going to come along for the ride. So you saw that flush out, which set us up for, I think, for some stronger sequential compares. And we talked about in the Q2 of last year, some one time revenue that came through, which helped us.
And then we also had some in the Q3 some PFP revenue that was in advance of our expectations. So that's some of the pieces on the sequential side last year.
Okay. Thanks and congrats on a great quarter.
Thanks a lot, Rich.
And your next question comes from Jeff Van Rhee with Craig Hallum.
Great. Thanks for taking my call. So, a couple can you hear me?
Yes, you broke up a little bit, but go ahead, yes.
Okay, hopefully you can hear me. The ASC 606 change
and the benefit you're seeing on the
S and M line, if I heard it mid to mid single digit millions benefit there, I guess, you're flowing through 2 of it. Of the incremental portion you're keeping, just spend maybe a minute longer specifically where you're putting that and how you're prioritizing where you're spending that?
Yes, certainly. Thanks, Jeff. This is Chris. Great question. So just to kind of recap what we said, yes, mid to high 7 digits.
You can assume that that's roughly spread evenly across the year, but it's obviously largely dependent upon the revenue and the contract signings during the year. In terms of what's getting passed down to the bottom line, you're correct, it's about $2,000,000 Where the reinvestment is going to go, think about it really in 2 categories. There's an element of what we were planning to do that we've now accelerated hit the accelerator button on, if you will. And that's really around a lot of the hires that we've made, both in technology and in sales. These are just incredibly impressive people from premier brands that want to come do what we're doing.
I think Rob talked about that with the fact that Alex is here and the type of talent that he's attracting. So that's kind of the acceleration component, hiring faster and sooner than we were counting on. 2nd category I'd characterize is really doubling down. A good example of this is what we did in the Q1 when it became apparent that we were going to have this benefit. We took what was typically a regional customer event in London.
We made it global. We doubled it in size. And I think as we've commented on in the past, those are expensive ventures with higher ROI and they're $1,000,000 events. So it's going to be in those same categories, more summits, bigger summits, more partnership expansions like we have with IBM and looking to extend that with others, certainly sales capacity and expansion, particularly in Asia and in North America as well as building out our technical expertise.
Got it. And then on the telco side, you referenced a deal where you replaced 2 vendors. Who did you replace? Maybe just talk a bit more about that deal.
So one of them was a large ERP provider. They also space in the contact center. And the other was a a small solution that, that company had bought thinking they could solve the problem.
Okay.
They were chat providers that we took out with messaging.
Okay. All right. And then just last for me on the revenue retention, you've commented that it's over 100, but you did say it was a record. Can you just fill in maybe a bit more about the magnitude of the upside or the record, if you will?
Yes. I think we'll stick to just characterizing as greater than 100, but attrition hit a multiyear low. It's I think it's just a testament to the stickiness now of the new platform and the adoption rate that we're seeing with our clients.
Got it.
So it's very strong.
And your next question comes from Peter Levine with Needham.
Great. Thanks guys for taking my questions. Rob, you kind of alluded to it earlier, but a lot of the checks from this quarter seem to kind of come back more prevalent on the fact that a lot of brands and retailers are now using messaging and chat more in the frontline for sales reps. And a lot of these brands came back and said they're really seeing an improvement in their kind of customer acquisition cost. As you sell it as more of a sales channel, how does that change your sales process and how do you look at the upsellcross sell opportunity into other departments once you kind of land within an organization there?
So this is sort of the magic of messaging and this is what makes it quite powerful is that when we start out, although we may go into one area like customer care, predominantly where we're beachheading in, we actually align all the groups before we get started because messaging is because it's asynchronous and the consumer is always connected to the brand, there's no break in the action. So a consumer who goes through a care flow then comes back and asks to buy something and we see this today. So it's a natural it's just a natural part of it and it becomes this mesh of the pieces of the business like one of the big telcos in the U. S, we've got the retail folks in there now. We've got the care folks, obviously, we started their sales, but it's just one continuous conversation with the consumer.
So it's a natural thing and it allows the organization to align with that also. So it's not like we need to do we do a lot of work upfront working with these enterprises to make sure the right people in the room so that when we go ahead and lock down a deal and these are obviously becoming much larger deals, there's a hope and promise that we're going to deliver on a unified connection with the consumer, a unified way to sell, market and service with them. That's what we see today. We're also seeing the beginnings of something that's also very unique to messaging, which is productivity. We have brands that are using it to go outbound to the consumer for some event.
So we had one of the big broadband providers in the UK, they use it to promote a fight that was going on. They also did outbound for care when there was services outage, so consumers would get a notification. So we did a retail case here in the U. S. Where we took dormant customers of Telco and these customers, they're customers, but they just don't they're not buying stuff.
We did outbound to them on SMS, and we got a very high conversion rate back to getting people into the stores. So that's kind of the other hidden part of messaging, which you don't get in chat, which you don't get in and obviously you do outbound telemarketing on phones, but most people don't want to get telemarketed to. But we find when a consumer gets a message, like, oh, this is cool, and I'll come back and I'll answer that. So we're seeing some good results there.
Great. And then I guess finally, longer term, you're investing in sales and marketing this year, as well as in R and D. But can you talk about where you think messaging can go in the next, say, 2 years, right? I mean, what kind of products could we expect that you guys could launch, if not acquire, but just technology rise, right? A lot of checks of well this quarter came back as knowledge management, experience management, really helping the customer engage, but also on the back end.
So just curious to know what we can expect in terms of functionality over the next 2 years?
There's a couple of pieces obviously. There's I think we're getting to a place where we've got almost all the front ends taken care of. So whether you have voice the voice in home virtual assistants like Alexa connecting with that all the way to the Facebooks to in app to SMS to IVR. So we're kind of we're doing there's a lot of I don't know how much more we're going to need on the front end, especially when Google launches chat and we've got Apple Business Chat. So that's those parts.
The second part is when the consumer comes in, we have automation that happens. So we're doing routing bots and concierge bots to figure intent from the consumer. Then we're going to route that intent either to a live agent or to another specialized bot. So you have to build those bots and we're doing conversational design around those areas. But I think there's some specialization in those technologies that we see that you need.
Our acquisition of Bot Central is actually giving us some good tools to design those, I'll call them bespoke bots. And then the next step down is, I'll call it, the consistent use cases that run across every brand. For instance, Bill Pay, Track My Package, things like that. And those are connected to back ends. And so those are things that we want to build, we want to unify across all of our customers.
So there's like one way to pay a bill between telcos, all the telcos and the consumer has a great experience. So those are the areas. And I actually think and I don't really love the word CRM, but it's going to shift, I think, because the conversation becomes the knowledge of the consumer. And so the concept of CRM where you save some data into a database, it changes dramatically when we're looking at a real a conversation that happened, what do we get out of that conversation, so we use technology to look at the insights. And then we're going to look at next best action.
So an event happened at the business that says sell somebody something or give them something proactively And that can all happen on the platform proactively and through the conversation. So I actually think there will be a shift in CRM that will happen in the next 24 months, but it's exciting. I was just at the F8 conference and I did a panel there with the Head of Product from T Mobile. We talked about the results they're getting on conversion rates on Facebook Messenger far outweigh their website. And so what I put out last quarter, as I said, I think there's an opportunity here that a lot of websites and functionality of websites get consumed or into the messaging framework.
So we have that, we have phone calls. So we're really at day 1 and it's exciting, but just every week there's a different opportunity.
Great. Appreciate it. Thank you very much, guys.
Thanks a lot. Thanks.
And your next question comes from Glenn Mattson with Ladenburg.
Hi. Thanks for taking the call. Most of my questions have been answered. I'm curious, Chris, you mentioned some of your initiatives as you take the helm here. I think one thing you said was a framework designed to support growth.
So I'm just curious, do you need to do as you kind of make your initial assessments, do you see a major investment that you need to make at any level to either support your department or the sales function beyond what's already been put in place?
No. I mean, look, I think, kudos to Dan. Dan really did a superb job in building a really solid infrastructure to support the company. So there's always fine tuning and personal preference that someone has, but there's nothing structural that needs to change. But what we did observe what I did observe is that we have an opportunity as a company to take the center of gravity and push it even farther out to where software development is happening and where sales and client interactions are happening.
So if you can picture it, you kind of just pushing that weight out to the side and that's where we're going to direct investment. We believe that, that will improve quality. We believe that will improve our speed of execution, not just internally, but with our clients. And both of those yield productivity. At least in my experience, it's the combination of those forces that lead to sustained growth and real powerful operating leverage.
It's just not kind of ripping cost out and doing it one time. I think those are the ingredients that allow it to last for a while. So that's going to be the focus is, and there's a lot of buy in from the company. I couldn't be happier with the leadership's openness to thinking about it this way. I mean, we're investing in them rather than taking away.
So it's exciting time. Do you think there's too much opportunity right now to let it go
by. Great. Thanks for that. And Rob, this might not be fair, but I'll ask it anyway. You had the biggest deal, I think, in company history last quarter.
Obviously, average deal size are going up clearly from the results. But could you talk about the pipeline for other kind of large mega deals as it matured and developed further over the course of the
year? Thanks. Yes, I mean, obviously, where the enterprise is doing big game hunting and we have a model to get large deals and to show return on investment for our customers when they remove those voice calls. So most of these large deals we're working on, it's a commitment of the organization to transform to digital and that digital experience through messaging with and especially bots and AI, obviously. So these deals, I think, could get bigger.
There are deals one day that will be $100,000,000 deals and very large deals, because like a large telco, our bank will have $1,000,000,000 worth of cost in taking phone calls. And if we can cut those down by 60%, 70% and think of the savings and what we can gather in value for our company. So that's what we're playing for right now. So I don't know where the cap is on the deal size. I know they keep staying large.
That was our largest, but I would think somewhere through this year, we'll have something that becomes the next largest.
Okay, great. Thanks. Good luck for the rest of the year.
Your next question comes from Mike Latimore with Northland Capital.
Great. Thanks. Great quarter. Just to clarify, did
you say that the bookings in the Q1 were a record high for a Q1, is that what you said?
Yes, that's correct.
Okay, great. And then T Mobile is one of your bigger customers. They're merging with Sprint. Is that sort of an opportunity there or non event or?
Yes. I mean, I can't obviously comment on the merger, but they're acquiring them. If you I read the press releases and they're talking about their care model and their care model is a real leverage point for them. So we view it as an opportunity. Obviously, it's going to take a while, but that's as far as we know today since it just happened.
And then you mentioned adding that Hunter team earlier in the year. How many people are in that group?
We haven't disclosed specifically the number of people in the Hunter group, but we added you could think we added anywhere between 5 to 6 to the group in the Q1. So a good size addition to the team.
Got it. And then are you seeing any of your current customers as they add messaging, does the messaging tend to be incremental to kind of what they're paying you for or does it tend to replace the chat volumes?
You mean on the base? Right now, I
mean, it's pretty incremental because chat is the reason we pivoted the business. And our best customer chat was 10% of all volumes. We had 90% still stuck on voice. So if you look at chat really is web and we actually end up flipping web synchronous chat into web messaging and then we go into the IVR or their app, we pick up incremental volume today. And so that's what's happening today.
Okay. Thank you. Okay. Thanks. Thanks,
Mike. And we have no more questions at this time.
Thank you everybody for being on the call and we will see you at the beginning of August for the next call. Have a good day. Bye.
Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you for your participation.