LivePerson, Inc. (LPSN) Q2 2016 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. My name is Sally, and I will be your conference operator today. At this time, I would like to welcome everyone to the LivePerson Second Quarter 2016 Earnings Conference Call. [Operator Instructions] Thank you. On the call today we have Dan Murphy, CFO and Chief Executive Officer, Robert LoCascio. I will now turn the conference over to Mr. Murphy. Please go ahead.

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 10-Ks, 10-Qs and other reports we file 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 which is available in the Investor Relations section of our website. With that, I will turn the call over to Robert LoCascio.

Thank you for joining LivePerson second quarter 2016 conference call. The second quarter in many respects marked the watershed moment for LivePerson. We accomplished something no other company has done. We brought the first enterprise live on mobile messaging, app scale and it was delivered on the LiveEngage platforms. This achievement coupled with now over 70% of our customer migrate the LiveEngage sets us up for really tremendous future. We did sacrifice some short term revenue for the year as our focus on accelerating migrations, had a further impact on over upsells to existing customer base. The impact was about 3% of revenues, additional 7 million from those delayed upsells for the year. Approximately 25% of revenues are already on LiveEngage, a total of 60% of revenues are currently in the migration queue and the remaining 40% are in process. The customer renewal rate is steady at 82% in the second quarter which is in line with our forecast and we continue to target returning 90% plus once the migration is complete. In fact, a small initial sample set up of full service customers generate on average a greater than 100% dollar retention rate within the first year of creating the LiveEngage. The real interesting thing is what happens when customers are on LiveEngage. First, they instantly get aligned through a mobile first strategy. Mobile counts for nearly 25% of all interactions on LiveEngage versus less than 10% on legacy. And same customer mobile interaction on LiveEngage increased by 19% in the second quarter over the first. Secondly, they use more functionality. Greater than 20% of our full service customers on LiveEngage are using more than just traditional chat. Superior mobile, easier campaign building and testing capabilities are more efficient in agent work space and our embedded window design are just some of the reasons LiveEngage is feeling healthy adoption. Finally, overall usage is up as same customer interaction on LiveEngage increased by 11% year-over-year in the second quarter. Interactions grew even faster for the enterprise and mid market segments. During the quarter we moved enterprise customers across every vertical including a leading financial services company that matches more than 100,000 chaps a months, a national retailer was more than 1,000 stores, a global developer of financial software with the 10-year history of our - on our legacy platform and multiple lines of business in several 100 agents. Besides striving usage LiveEngage is build to give us more scale and operating leverage as we can automate many of the processes that today are done by our professional services, organization like reporting the data analytics. We're seeing just some of these cost savings today. Based on our current forecast, total expenses in 2016 was approximately 12 million better than in 2015. There is also an additional 5 million in one-time migration cost in 2016 that we will able to recoup once we complete the migration. We made a few key assumptions around usage, scalability and mobile when we were developing LiveEngage three years ago. We are now seeing those assumptions come through. This lays the product and technology foundation for us to continue our leadership and accelerate our execution around what I consider to be one of the most important disruptions in digital, which is a shift from traditional analog voice to mobile interactions. The stage has been set for us to lead this disruption as we went live with the first enterprise deployment of mobile matching app scale in the quarter. When I mean scale we are already on a few million devices. I believe is the first enterprise app scale in the world's go live and I've never been more excited in the past 21 years of leading LivePerson. In some ways it is more exciting than we launched chat for the first time in 1997 because of the scale of the impact that we can have on digital commerce and care. Being the first is not guarantee of success alone, but being first coupled with delivering on our brand new platform, having substantial resources and install base to great customers puts us in the full position right now. If you remember on our last call this customer is a new customer and start as a mid 7 figure deal, we already added another small 7 figure deal during the quarter, an additional revenue opportunity. Other brands already following the example of this flagship customer. We now have agreed to deploy our mobile offering in the coming months with some of the largest telcos and financial services companies and additional verticals will follow. The second quarter will go down. It's a very important quarter for LivePerson. We had a landmark of that bringing live the first enterprise of scale on messaging customer and we execute our plan on almost every aspect of our business. Our mission for the remainder of 2016 is unchanged. We are focused on upgrading customers to LiveEngage and deploying other leading brands on the industry's first fully scalable mobile platform. As I look past the migration I see LiveEngage cementing our leadership in the traditional online engagement market which will provide a solid foundation for growth and profitability. Then on top of that strong foundation, we will have this tremendous new opportunity that is brand to consumer messaging. Messaging always shape customer care and meaningfully expand our addressable market. It offers the potential to increase the number of interactions on our platform in many times over. We are excited about this future and its potential to be quite transformative for consumers, brands and for LivePerson. And with that, I'll turn the call over to Dan Murphy who will discuss our second quarter results and outlook in more detail. Dan?

Thanks, Rob. Reiterating Rob's comments, our underlying fundamental point to solid execution on most of our 2016 objective. As with the end of the second quarter, we have migrated more than 70% of our customers to LiveEngage and we are very confident in meeting our goal of upgrading 75% of our customers by yearend. We are rapidly moving revenue on to the platform as we upgrade our largest brand and we're seeing positive results from LiveEngage customers, including strong mobile adoption and double digit year-over-year usage increases. It is a great indicator of customer satisfaction and future revenue growth potential. We stabilized the customer renewal rate in the second quarter and generated solid traction in the consumer and automotive verticals. We are also keenly focused on driving efficiencies throughout our business and we are on track to reduce expenses year-over-year by approximately 5% or $12 million of 2016. 2016 expenses include investment of approximately $5 million and one-time cost to ensure positive upgrade experience as our brand moves to LiveEngage. As we entered 2016, the user will be three key levers associated with pushing the upgrade to LiveEngage. Customer renewal assumption, the timing of migrations and the timing of upsells from the existing customers migrating to new platform. We've build our forecast to account the new levers based on detailed account plan to each brand and in depth customer level conservations. Midway to the year we are right on target with our renewal rate assumption, we are also tracking extremely well against our migration forecast with more than 70% of our customer now in LiveEngage. We have approximately 25% of our revenue migrated as of the end of the second quarter. As well our success having key mid market modifies reference customers onto LiveEngage has helped to accelerate migrations either in the form of customers upgrading piece of their business onto the platform more quickly, or having discussions about moving more quickly than we had anticipated. This is the positive development, which should contribute to fewer remaining legacy dollars needing to be migrated onto LiveEngage in 2017 than we had originally forecast. The offset is our customers typically refer the complete migration before spending the scope of the contracts as such we’re experiencing modestly higher than anticipated blaze in upsells from existing customers. As we continue to move larger customers over to the platform, I would expect the percentage of customers migrated to slowdown but the percentage of revenue migrated to increase. Taking this trend into account, a refresh of our assumptions around upsells suggest a forecast should be reduced by $7 million or 3% combined with an incremental $2 million foreign exchange headwind following the blazer. We see a roughly $9 million impact to our full year 2016 revenue guidance at the mid-point of the updated and previous ranges. Our goal for 2016 is to provide stable revenue and healthy cash flow generation as we focused on completing the migration. We expect second half 2016 revenue to be in line with first half while profitability strengthened half-over-half. With that, I will turn your attention to the second quarter 2016 operating results. Revenue of $56.7 million was in the upper half of our guidance range trailing 12 month average revenue per enterprise and midmarket held steady above 200,000 in the second quarter of 2016 and in line with the record result with probably the first quarter of 2016. We signed 117 deals in the second quarter and 36 of those were with new enterprise or mid-market brands. B2B revenues declined 5% to $52.4 million and consumer revenue increased 10% to $4.2 million. The B2B revenue breakdown by industry was retail 27%, financial services 22%, telecommunication 17%, technology 10%, and other 24%. Revenue from international operations accounted for approximately 32% of total revenue. Second quarter GAAP net loss per share of $0.14 and adjusted net loss per share $0.04 were higher than previously issued guidance. Diluted adjusted EBITDA per share of $0.08 was within our guidance range. Included in the second quarter GAAP net loss was $3.1 million of non-recurring cost primarily associated with IP litigation and cost rationalization effort. Second quarter gross margin was 69.1% in line with our expectations. The company's cash balance including restricted cash increased to $56.3 million at the end of the second quarter from $48.5 million in March. LivePerson generated cash from operations of $12.6 million in the second quarter of 2016 compared to $7.9 million on the year ago period. Cash flow has continued to benefit from our ability to move customers to cash payments in advance on annual billings. This shift was reflected in deferred revenue more than doubling to $29.4 million in the second quarter from $12.3 million in the year ago. The company repurchased approximately 185,000 shares of stock for $1.4 million in the second quarter and additional $15.5 million remained available under the share repurchase authorization. Capital expenditures totaled $2.1 million in the second quarter. I will now review our updated guidance and our detailed expectations are as follows; for the third quarter of 2016, we expect revenue of $54 million to $55 million, GAAP net loss per share $0.09 to $0.07, adjusted net loss per share $0.03 to $0.01 and adjusted EBITDA of $3.8 million to $4.7 million or $0.07 to $0.09 per share. For the full year of 2016 our expectations are as follows; revenue of $221 million to $225 million and revenue guidance includes negative foreign currency impact of more than 3 million from approximately $1 million previously guided. GAAP net loss per share of $0.34 to $0.28, adjusted net loss per share of $0.08 to $0.03 and adjusted EBITDA of $18.2 million to $20.5 million or $0.32 to $0.37 per share. In addition we expect to pay cash taxes between $1 million and $3 million in 2016. Furthermore as a percent of revenue for the year, we anticipate gross profit to be approximately 70%, sales and marketing at 40%, G&A at 16%, and R&D at 18%. Please refer to LivePerson’s earnings release issued earlier today for details on our full year 2016 assumptions. We have also published a supplemental presentation on the Investor Relations page of our website that reviews key points from the earnings call. With strong mobile momentum, favorable LiveEngage usage trends upgrades moving into the final stages and retention stabilizing, we are progressing solidly through our business transition. The completion of the upgrade for LiveEngage will not only position us to expand our lead on the web and target larger adjustable market but will also enable us those in the few greater profitability. As such we remain confident about our prospects for returning to growth and retaining our historic margins as we move past the migration. With that, I will open the call to question. Operator?

[Operator Instructions] Your first question comes from the line of Richard Baldry with Roth Capital. Your line is open.

Thank you. As we kind of backup the onetime expenses, could you walk through which lines those will be in so we can see more of a run rate sort of operating expense level? And then where the continuing cost cuts maybe focused out to build the model? And then over on the operational side, can you talk maybe on the messenger a little about how you're seeing or finding your initial large-scale customers, is it vertical, oriented, who you kind of compete with on those deals maybe different than who we see you would compete within the past? Thanks.

So Rich on the onetime costs you’re referring to the 5 million that we’re talking about?

Right. And during the quarter it sounds like there is something around 3 million in sort of non-recurring expenses?

Yes, so we have about 3 million and it’s bucketed into two buckets. One is around litigation and the second is around what we call cost optimization opportunities. Some of its selling, some of its closing of offices that we used to have in place that we don’t need any more. Then as far as the 5 million, that’s predominantly in the sales and marketing line item related to the migration and there was a little bit in costs to good sold as well.

And then on the messenger side, today there are small amount of startups that are out there. But we're the first out on scale so when we’re working with this large enterprise, we’re dealing with thousands and thousands of potential agents and tens of millions of consumers and millions of devices, so - and our platform can handle that scale. So right now, we’re in a strong position in executing on delivering it.

Thanks.

Your next question comes from the line of Kyle Chen with Credit Suisse. Your line is open.

Hi. Thanks for taking the question. I guess Dan just on the $7 million reduction in the outlook, can we drill inside a little bit so it looks like there's delayed upsells related to existing customer migrations I guess what were you anticipating kind of ending the - going into the year in terms of upsell activity, I was under the impression that the focus was largely on migrations not so much in terms of new bookings. But you know maybe a couple words there and a little clarity?

Yes, so - hi, Kyle. As you’re familiar with the business roughly 70% in the past of our bookings have been from existing customers and we did expect to take a little bit of a haircut on that or decent size cut on the upsell to existing customers. But what actually ended up happening, the good news is we have this in our control and it’s up to us. But the migration of customers and we’re actually have the ability to start moving customers over a little bit faster than we expected. And we were able to move over portions of the business or a line of business. And what we’re seeing early indications in Q2 and we’re moving those customers over, they’re holding off on a buying decision. And it's better for LP and better for our customers to move these migration and bite-size chunks as opposed to trying to do a whole line of business that’s relatively compacts all at ones. So from our perspective it is having an impact on the upsells and we are having our AMs account managers really focused on driving the migrations over the LiveEngage platform.

Okay, that's helpful. And I guess conceptually if we were to fast-forward 12 months and assume that you migrated all the customers that you intend to migrate over to the new platform and you make your way through the contract renewals, is I guess this quarter was like a 11% from a interaction perspective, growth perspective, is this sort of the bare minimum level of rev growth that we can expect to see if usage trend remains just as improper to correlate the usage trends with the minimum revenue growth going forward?

I'm not giving you specific guidance around what’s going to happen on LiveEngage. But we're actually pretty happy about the usage trends as far as the number of interactions, what’s happening with mobile. There is a correlation that we’re seeing you know as Rob talked a little bit about in his script. Although it’s a small sample size, we’re seeing small sample size of LiveEngage customers that actually come up for renewal. We’re at $1 renewal rate of greater than 100%. Again, small sample size but that's going in the right direction and what we’re seeing is those early indications. So following on the other answer our goal is to get the migration done as quickly as possible. And one of the assumptions that we had was around 75% of our customers been migrated on the LiveEngage - on the LiveEngage platform by yearend. And with us being about 70%, that target in reach. In addition, what we're seeing or what we’re expecting is less revenue we have to be migrating in 2017 than we originally anticipated. So a couple of positive trends there around the LiveEngage and migration to LiveEngage.

Okay. Thanks very much. Best of luck guys.

Your next question comes from the line of Brian Schwartz with Oppenheimer. Your line is open.

Great. This is [Cogey] [ph] for Brian Schwartz. Thank you for taking my question. Just a quick question on the remaining conversions that you have for LiveEngage, I believe you’re saving the largest enterprises to convert the LiveEngage last. Maybe if you could talk a little bit about what percentage of the remaining looks like 30% of those customers are the large enterprises that you have and maybe could you give us an idea of how long it takes to fully convert these customers over to LiveEngage?

So we’re already converting the large ones. So that’s the thing that started. So with large they can get they’re getting converted right now. We about 60% already in the LiveEngage queue to go of the total revenue base that’s the total revenue 70% of the total customer base. And so we're moving that quite quickly and that's our focus right now. So we have aligned aside a lot of control over the movement everyone’s got dates. So we feel good about where we are with that and we’re seeing more importantly as when we move them they have really good results. So there’s a confidence in the organization as they see more and more the large enterprise go live there’s a confidence that build with all the account managers and sales team and they just want to go because once they go that gives us an opportunity obviously to upsell cross-sell and do those things. So that's where we’re right now. 25% of revenues, 70% of the cost base up 60% line of sight better in queue to go. And the large enterprise is already being moved the largest of the large.

Okay. Great, Thank you for that. And a question for Dan I think, could you talk maybe a little bit about if there was a FX impact to international revenue in the second quarter?

There was an impact in the second quarter. It was minimal the pound actually held pretty steady and as you know we’ve pretty good exposure, descent file exposure to the great British pound. So there’s about $400,000 impact approximately $400,000 impact in the second quarter.

Great. Thank you. Thank you for taking my questions.

Your next question comes from the line of Glenn Mattson with Ladenburg Thalmann. Your line is open.

Hi. On the mobile platform the customer that you converted at scale, can you say and then the second customer you added, can you say what industry that was in and any other details or notes early about just the initial uptake anything like that?

No, I would rather not [indiscernible] we will do some pressing stuff shortly. But they’re in one of our top verticals of the banking, telco cable and travel. So yes, they’re one of the leaders in one of those four verticals.

And is it a global deployment or in any region of the world?

Yes, it’s a U.S. entity, it’s a U.S. company or only in the U.S. They have over 50 million consumers in their base of customers and millions of devices of their app into the out in the market today. So we're installed in that app. Like I said this is the first one that we believe in the wall has got a lot of scale. So there’s like -- there’s thousands and thousands of consumers tens of thousands actually its quite large hundred thousand actually. So…

Great. And just on the a real quick, make sure I have, you said 25% converted to 60% in the Q and 40 - you gave another number 40%, what was that in process, is that?

Are in process right now yes, so 40% are in process and so we are locking down the final dates and going through the final planning. We have target dates with them but they are the last, the sixth year they have been migrating, lines of business went live so those are where are we put code on pages and things are moving so that’s 60%.

Okay, great. Thanks and best of luck.

Your next question comes from the line of Jeff Van Rhee with Craig Hallum. Your line is open.

So, let’s see on the sales side obviously you have messaged you are going to really have guys focused on migrating at the expense of trying to drive new business and obviously one of the challenges there is sales people like that big incentive comp for new business. In terms of retention, what have you done and how have you done in terms of holding your people in their seats while they are really doing more customer migration than what I would call more of their typical selling rules.

Yes Jeff, that’s actually a great question and something that we gave a lot of thought to. And as we started to move towards the migrations in 2016, we actually adjusted the comp plan for a good portion of the sales organization to get them to focus on the migration. There is a portion of their compensation tied to that migration. So we made that change and from our perspective it was in our control to be able to take advantage of upgrading and migrating those customers on to LiveEngage platform. And if you guys know this goes out for an extended period of time, that’s not good for our customers, that’s not good for LivePerson. So we are getting much more aggressive in bringing these customers across to the finish line.

And we added as a resource for them from outsource resources which is part of the 5 million one time, we did a larger investment from outsource resources to do the migrations. So where we got that very standardized work for tagging and setting up accounts, we’ll set up a full account before they even go live. So it’s got all the data and everything ready to go and they just have to switch it on. So we actually increase the expense there which is part of that bucket of one time fees because once again we see we are ready to go, the demand is there and we just want to get the majority of it done obviously this year and we are on track to do that.

That's great. And in terms of the, you commented on the differed revenue and the improved cash flow as you look at this migration in the LiveEngage, now it's getting a little better sample size. How do you think about the percent that will likely be going forward coming with upfront payments versus not?

It’s a focus again of when it come up for renewal. It was an incentive for the team to move them to annual payments and I think we have actually done a pretty good job and I know a lot of AMs are probably listening on this call and I think they are doing a great job with the migrations, and they are doing a great job with our customers and navigating through this process but there is an incentive in there and definitely one of our corporate goals for annual upfront payments from our customers in order to drive cash flow and health of the business.

Okay. And then just a couple quick ones here. Then the CapEx guide for the year, I’m not sure if I missed it and then consumer, bit of an uptake there just very briefly what's going on there?

So you want to talk about, the consumer side we launched a mobile app for the experts and it’s doing quite well. So we also have been very mobile focused over there and we are just seeing a great uptake in overall usage across that division of our company.

You think that the growth rate is sustainable, is that how we should think about that piece from here on now?

Yes, you’ve been pretty - it’s pretty amazing what's happened on the demand side just by delivering it through an app. We feel good about this year and so we feel good about where the growth rates are and I think they could be sustainable going into next year.

And Jeff, for some CapEx it’s in the press release but it’s about $12 to $13 million per CapEx for the year. It's a little bit higher than we originally guided but we decided to put more money into APAC as customers start to give up and use more. What we are seeing is having a data center in country is getting some of our financial service and telco companies, more comfortable having their data within their borders and we are seeing the opportunity for increase usage there.

Got it. Great, thanks. Appreciate it.

Your next question comes from the line of Michael Latimore with Northland Capital. Your line is open.

I guess on the 60% number in the migration funnel, I guess what kind of timeline do you have attached, is that by year end or how long is that, what's time around that funnel let's say?

Yes, Mike, let's break this down a little bit, right. So as of the end of the second quarter we got about 25% of revenue and I talked a little bit about earlier, we are moving that in some bite sized chunk. So including that 25% might be a line of business of a customer that has five or six lines of business. And so we might have move two lines of business, maybe three lines of business over. And so what we do have line aside as we're moving those lines of business over is additional lines of business with more revenue that we can move over. So they've already migrated the portion of the business and there is more to come and that's how we are getting about 60%. The 25% is done already and there is another give or take 35% that we expect to get us to 60%. And then on top of that, we have line of site to the other 40% of the revenue through account planning, conservations with customers, migration dates, timing et cetera. So as far as the timing to get to that 60% our expectation with that, we expect to get a majority of that revenue over by year-end. And so we are confident in the process that we've gotten in place, we are confident in the people that we have in place and it's further emphasize by the money that we are putting behind the migration for outsource resources to drive that migration.

But the majority of revenue will be over, will be done - we'll have this behind us, so we have a small portion going into next year.

Yes, okay. Then just the pricing model to LiveEngage, is that changed much since the start of the year, or is it still a fresh model you laid out earlier this year?

The pricing model as we are primarily same, obviously, we're always looking at it, but it's still the same. And as we talked about on previous calls if the customer is on legacy and they are paying for seats, we are not looking to have a commercial discussion; we are looking to get them on to the LiveEngage platform as quickly as possible.

All right, okay. And then how about just outside of the upsells to current customer dynamic, how were the - how were just for the new logo, new bookings related to new logo sales in the quarter?

Yes, we are excited. The guys are out there, they are all LiveEngage sales of course. We had about 36 deals. And as Rob talked a little bit about, the large messaging deal that we have, we actually have decent seven-figure deal starting the rest of the platforms behind messaging to this customer. So we are happy with the trajectory and the direction. And our team are focused on getting those new customers across the finish line. And as further with our ARPU around $200,000 which is consistent with Q1, so $200,000 Q1, $200,000 Q2, so all going in the right direction.

Okay. Thanks.

Your next question comes from the line of Craig Nankervis with First Analysis. Your line is open.

Thanks. Good afternoon. Can you reveal why the migration was faster than expected, I am not sure it's entirely clear to me.

So from a migration perspective Craig, we talked about getting the 75% of our customers by the end of the year on the LiveEngage platform and right now we're at roughly 70%. So from a customer perspective, we hastened and pushed through from a migration perspective to more customers. In addition, I think one of the question little bit earlier was around the timing of mid market and enterprise and we've actually starting to move a good number of mid market and enterprise customers over. It's not always as easy as just they left in shift and as I talked about there are lines of business that already have the capability to move over in a customer that might have five or six lines of business moving us off. So that's what happened in the migration perspective and that's one of the reason we are fast forwarding and an important statement that I made that I just want to reiterate, although that we're greater than 70% of our customers migrated as at the end of second quarter and 25% of revenue, I do expect the customer percentage to slow down as we move some of those larger customers over, but I also expect the percentage of revenue to increase as we move some of those larger customers over. So that's the path that we are going down and the last piece of that puzzle is, we have an expectation of revenues going into 2017. We still have that expectation but just not as much. So that's the of migration fact to our migration. So that's the hastening over the speeding up or the fast forwarding of migration.

You made in the quarter sometime - you made some sort of conscious decision to accelerate migrations and you choose to do that, I am not exactly sure why you chose, but it sounds like you made a conscious decision to accelerate them for whatever reason?

Yes, the biggest drivers for the acceleration is features is delivering the platform with the set of features that can drive that and then the readiness of the customer that they got their resources aligned to us and we pushed very hard to get those resource align in many different ways. And obviously incentivizing the account managers we added more resources on our side, they were part of these one-time costs and then being able to move that customer very quickly against their resources, we want to accelerate. There is obviously we know once we get everyone LiveEngage, we have a whole new business and we are off to the races so we wanted to just move it and we did it. Like I said it was little bit in fact the price of we can't - so we are going to take a little bit of an impact, but when the customers get on the platform they study and that's the most important thing they grow. And they are using more things, their mobile enabled them to ready for the vision. And then that vision now we also have intact within enterprise customers who is live and having success. So we got a referenceable customer in our vision. So we got to go because I said this before I think we got a 24 months to 36 months play with this company and in the industry where we are in which is having us take larger enterprises and get them live on mobile messaging and change the dynamic of how they're connecting with their consumers, this is a quick play. There's many people looking out for space. There is a lot of talk about this space and we are the first to be up in this space. So we got to get migration way behind as quickly and move to our vision and scale the company to next level.

Okay. Thanks for taking me through that. And then that you would caution me either Rob or Dan you would caution us to think that you could have - I don’t know 80%, 85% of customers if you are ahead of things now in terms of the customer migrations, could you be - at a pretty high number theoretically not like you are guiding to or anything but just theoretically you know?

On a public call, theoretical is kind of hard but we can do it.

Look, I mean is it conceivable, you can - let's use that word, is it conceivable you could be on 80s in the 80s in terms of your percent of customers migrated by the end of the year?

I think you can look where we are now and just make how you want to look at that. We gave 75% that's our target. I want to stay on that. Obviously, we are putting a lot of focus on this so to stay with what we got and then if we beat it's great.

Okay. That's all I have. Thank you.

Your next question comes from the line of Mark Schapp with Benchmark. Your line is open.

Hi, good evening. Most of my questions have been answered, just one question for you Dan. Regarding the customer renewal rate, when do you think we will start seeing - seeing this start to take higher?

We are on target with our internal assumption that we made around customer renewal rate. One of starts that Rob gave was just around renewal rates. Although, it's a small sample, we are seeing customer renewal rates and dollar renewal rates higher than legacy right now. And mark for risk that we've identified in the beginning of this process and one of the levers is as you are going through an upgrade process, there is a risk of attrition. As you are going through customer and talking to a customer and getting them to move to LiveEngage platform, some are naturally going to pick their head up and take a look around. So it's a right thing and wrong thing to do, we obviously thinks it's wrong thing to do, but we do know customers go through that process. So that’s again another reason we're seeing strong encouraging early signs on the LiveEngage platform, stronger renewal rates, stronger mobile and then selling our customers up to get them to start to adopt messaging as we just launched this large from our customer.

Thank you.

Your next question comes from the line of Kyle Chen with Credit Suisse. Your line is open.

Hi Dan, just a quick follow-up. You’ve talked about Brexit in the form of FX impact on the outlook, but just wondering what you're seeing from a demand perspective and what you're hearing from customers given your material exposure to Europe and their region. And I guess to what extent have you properly handicapped in the revised outlook? Thanks.

Kyle it’s actually a great question, and Rob spent a lot of time in Europe when in was in Europe at the end of the quarter as well. We did go around talking to a lot of customers. We don't think it has an impact on the decision making, at least we haven’t seen it have an impact on decision making process yet, but we think we've built that in from our guidance, but I think there's still a lot more uncertainty that Europe has to go through especially around supporting the currency and other things we’re doing. So right still moving forward we haven't seen any slowdown on decision making yet.

Okay. That's great to hear, thanks.

Your next question comes from the line of Glenn Mattson with Ladenburg Thalmann. Your line is open.

Hi, also follow-up related to the retention. Are you seeing any increased aggressive pricing or aggressive marketing efforts by competitors on people you haven't converted yet and I guess related to that have you ever seen just as we're trying to confidence around the projected conversion dates or anything, have you had any customers who had conversion dates who were then - who then dropped out of the program.

Just on our last one, Glenn what you mean dropped out meaning?

I mean they had a conversion day, they told you we want to get up and live by September of '16 but then all of a sudden they got plugged away by a competitor.

We can't talk about anything being plugged away by a competitor. We are constantly monitoring our customers and all our competitors. They know that we're going through this transition. And they know that we’re upgrading our customers to a significantly better platform then they have and some of are out there taking advantage of it and trying their best to take advantage of it. And again that’s why from a customer renewal rate we made certain assumptions, and that’s one of the latest that we talked about is always an opportunity for a customer to pick up their headwind where going through migration and another reason we’re trying to – to do this as quickly as possibly can, to not leave ourselves exposed.

Okay, thanks.

There are no further questions at this time. I will turn the call back over to the presenters.

Thank you for joining our Q2 2016 call. And we'll see you on the next call. Thank you.

Thank you.

Thank you, ladies and gentlemen for your time and participation. This concludes today's conference call. You may now disconnect.