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LivePerson (LPSN) Q4 2018 Earnings Conference Call Transcript

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LivePerson (NASDAQ: LPSN)
Q4 2018 Earnings Conference Call
Feb. 21, 2019 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to LivePerson's fourth-quarter 2018 earnings conference call. My name is Ian, and I will be your conference operator today.

[Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference call over to Mr. Matt Kempler, the company's vice president of investor relations. Please go ahead, sir.

Matt Kempler -- Vice President of Investor Relations

Thanks, very much. This is Matthew Kempler, VP of planning and investor relations. Joining me on the call today is Robert LoCascio, 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 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 and the comments made during this conference call and in 10-Ks, 10-Q's 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.

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A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release. Both these 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.

Rob LoCascio -- Chief Executive Officer

Thanks, Matt. Good evening, and thank you for joining LivePerson's fourth-quarter 2018 earnings call. The fourth quarter was an amazing close to what has been an incredible year for LivePerson. Revenue in the quarter was at the high end of expectations, hitting record 65.7 million and accelerating at 15% year-over-year growth.

Equally important, contract signing seven new records, and this was against the previous high watermark. It is worth calling out that we saw strength in both enterprise, where we signed several seven-figure contracts, and midmarket-SMB in generating record demand after we increased our focus on selling conversational commerce solution to smaller businesses. The fourth quarter was one of those times where everything came together, reflecting strong momentum in our business. On our last earnings call, I shared the themes that have gone into reaching this point.

We are sitting on one of the richest data sets of conversational data in the world. Our data is our moat. It is what allows us to drive our AI strategy in powered things like maven, conversational builder, and live engage, as a whole. Within the past year, the major consumer technology companies, such as Google, Apple, Facebook and WhatsApp have all leaned in to conversational commerce, and integrated into our platform.

Opening our reach to billions of consumers and echoing that brand should include with their customers through messaging. We now have a well-established reference book customer base in key geographies and verticals, who have proven the ROI scalability of conversational commerce on our platform. These customers are actively shifting voice volumes to messaging, and they are advocating on our behalf. On this call, I want to shift our discussions to our LivePerson's headed because I firmly believe that these advancements have positioned conversational commerce at an inflection point.

In the fourth quarter alone, three of the world's largest and most admired brands in travel, retail and financial services took the lead to conversational commerce on live engage. It's a good indication that the industry is now rapidly moving past early adopters and into the mainstream. We expect that over the next two years just about every large brand will determined how they want to participate in conversational commerce. This digital adoption rate is going to be big, with a far-reaching implications to society, economists are calling the brand and together with AI business, the fourth industrial revolution.

Gartner just named conversational commerce top trend that impact the future of digital commerce. They projected that by 2022, at least 5% of digital commerce will only be dedicated and initiated by AI. We are leading a transformation when it comes to how brands engage with their consumers and have been making the product and market to continue into our momentum. Our aim is to be more than just driving force in the industry.

We want to dominate the marketplace and become one of those esteemed technology companies that decide its generation. For us to achieve that goal, we need to have the best product, and the right sales capacity to get in front of every companies involved that want to do conversational commerce. It's pretty easy to imagine now that most companies that want to be directly connected to a consumer through Apple Business Chat, WhatsApp, Facebook, SMS over the next few years. 2018 was a year of laying the foundation for this massive change.

We are now ready to add the next level investment to accelerate our revenue. One of the areas we want to start ramping is our sales group. We ended 2018 with approximately 50 quota-carrying reps, which is actually down slightly from 2015, before we even launched live engage. We've stretched the capacity of these resources as our pipelines have grown considerably over the past 12 months.

We're going to close this gap in 2019 by nearly doubling our sales capacity. And Chris will provide more details, but we'd anticipate that this investment will accelerate LivePerson's momentum and positioning to approach if not achieved 20% growth by the fourth quarter of 2019 and to generate at least 20% growth if not better in 2020. My conviction in these targets come from two points, that have been well established in 2018. First, conversational commerce is real and gives substantially very large opportunity.

Second, LivePerson is in the leadership position in this market, Let me elaborate a little further. We estimate that conversational commerce represented $200 billion total addressable market, and we are seeing validations of large TAM manifest itself in several ways. Foremost, is in our ARPU trend which reflect net new revenue as customers adopt messaging and AI to shift volumes away from phone calls. And even the web and apps.

For the trailing 12 months ended the fourth quarter, our ARPU for enterprise and mid-market customers set a record increasing by 25% greater than $285,000. Another layer of drill down to provide further clarity. When we look at the same base of customers that have also adopted messaging, our ARPU jumped to $0.5 million. This figure expands into the low-seven figures, once the customer has adopted more than one endpoint, like an Apple Business Chat or WhatsApp or SMS.

The second validation point is in the pace in which adoption trends accelerates. At the start of 2018, approximately 20% of our enterprise customers base had adopted messaging. By the end of 2018, the adoption rate is doubled to over 40%. Demand for AI is burgeoning.

At the start of 2018, just over 25% of messaging in conversations involved automation. By year-end, it was greater than 50%. During that same time, monthly AI-based saw interaction between five folds. All of the success has been driven before even the benefit of maven, our newly introduced patent pending AI engine, which is custom-built to power, successful outcomes in conversational commerce.

By arming our field organization with maven, we expect to achieve our goal and reaching over 100% messaging adoption among our enterprise customers by 2020 with automation as a driving force of those conversations. The third indication of market opportunity comes from examining contract value. In 2017, LivePerson halted the sale legacy solutions and shifted to only selling live engage. Over the next two years, our ARPU for enterprise mid-market increased more than 40% and we added more than $150 million of total contract value during that time frame.

So basically, 24 months, we have zero revenue in live engage in messaging, and today, it's $150 million in two years. It's incredibly rapid adoption curve and the testimony to the value proposition and leadership position we have in the market. I'd argue that there isn't another company out there that can quantify as much demand being generated from conversational commerce. We had several powerful examples of this net new revenue generation in fourth quarter.

The first one highlights how our leadership in conversational commerce is opening up the travel vertical as a new opportunity. We are pleased to announce that LivePerson signed a multiyear deal with Delta Air Lines, which Fortune has named the world's most admired airlines for six straight quarters. We're looking forward to supporting Delta in their work to connect with customers on their channel choice through our new technology. This new brand, along with three other top 10 U.S.

airlines, joined our customer summit in Dallas last month. A great side of things to come in travel. Imagine a world, where you can make a flight reservation, upgrade seating or reschedule trip after weather delays all through contacting through messaging, on the way to the airport, in the airport, never picking up a phone call, never having to go even for -- to a counter and make that change, that's what we're talking about. We also had an amazing win with one of the world's five largest apparel retails -- retailers.

But started out as a bot only deploying to one brand, quickly transformed into a planned rollout of web messaging the bots across every one of the retailers brand. It's a great example of how LivePerson keep and brought within the enterprise by combining the power of both teams in a single platform. And delivering a roadmap that fully transforms the way brands communicate with their consumers. Another example is a major win with one of the largest banks in Japan, which marked a new milestone in the Asia-Pacific region.

When we are steadily building momentum, this new customer we work alongside our partner IBM to deploy messaging bots to its more than 40 million consumers. Our addressable market also continues to expand in ways we are not proven to consider when we built live engage. One example is in seven-figure when we have the telco in the Europe that will leverage live engage to send personalized bulk outbound WhatsApp messages to consumers. Unlike traditional outbound messages, there are notifications only, these can be fully enabled for two-way communication.

Another customer deployed the largest WhatsApp for business implementation globally by volume, our live engage. After a successful pilot, we also signed the expense agreement with Aramark, one of the world's largest hospitality companies to bring in-seat beverage ordering to several professional sports venues and to deploy order-ahead capabilities in corporate, healthcare and higher education dining. How about that one? From your seat, you can order a bear, a hotdog, water, you never have to leave your seat right through Apple Business Chat, using a QR code, using Apple Pay. A wonderful and beautiful make-your-life-easy scenario.

Finally, we signed a six-figure deal with the leading -- greeting card provider to enable consumers who's search for greeting cards using Amazon and Alexa. To summarize, 2018 was an incredible year for LivePerson, characterized by 16% full year-over-year increase in our revenue growth rate, record contract signing, multiyear loan revenue attrition and accelerating messaging in AI adoptions. Demand is beginning to surge as industry enters the mainstream adoption, we've made significant investments over the past few years to position LivePerson with the first user advantage and product leadership when this shift happens. Now that the moment is here, we need to fully capitalize on these tailwinds by building out our sales capacity, to ensure that we can showcase our leadership as each brand prepares to make their purchased decision.

This is incredibly exciting time for our company and with each passing quarter I've become increasingly convinced of our ability, not only to service, but also lead this potentially massive and transformative industry. I will now hand the call over to Chris, who would do a deeper dive on our overall financial outlook. Chris?

Chris Greiner -- Chief Financial Officer

Thanks, Rob. The momentum he discussed is tangible as evidenced by the 16-point swing in our revenue growth rate year-over-year and is building as illustrated by the continued acceleration of key performance predictors across our business. In early 2018, we recognized the importance of investing ahead. We knew expanding our product leadership through strong partnership with major consumer messaging companies and with innovation in advanced AI capabilities would be a differentiator.

We also sought to capitalize by building a demand generation engine, capable of tapping into the rapidly growing market of conversational commerce. In short, those investments are paying off. To start, we improved upon our initial 2018 growth outlook of 10% by 4 points, delivering mid-teens growth for the year. Coming back on those results, our total B2B revenues grew 15% in the quarter, and 14% for the year.

Within B2B, our enterprise business, which has been the focus of our investment, fueled our trajectory, increasing by more than 20% year-over-year. During the fourth quarter, we also began feeding the investments in the mid-market SMB organization. Which in turn, generated record 4Q contract signing. We expect this part of our business to return to growth, now that we've opened up a conversational commerce ecosystem for smaller businesses.

In our consumer segment, continued its trend to four straight double-digit growth quarters, posting a 12% increase for the year. Our ARPU set new highs, quarter after quarter in 2018, driven by enterprise and mid-market customers, as they replaced more of their voice calls with messaging. This resulted in trailing 12 months average revenue per customer of greater than $285,000 in 4Q, up 25% year-over-year, and representing the third straight 20% plus growth quarter. Compelling customer ROIs, high customer satisfaction metrics, rich agent experiences and a stable platform, is the recipe for stickiness.

To that end, our revenue retention rate for enterprise and mid-market customers exceeded 110% in 2018, on the back of an expanding ARPU, combined with multi-year low attrition. Excluding the benefit of upsells, our revenue renewal rate across our B2B segment was approximately 90%. And our enterprise base, having even higher revenue middle rate in the mid-'90s, which we think is the best-in-class measure. We also saw our enterprise and mid-market customer acquisition engines begin to ramp, as we scaled our marketing and channel investments.

These investments contributed to a 50% increase in new customer wins in 2018. These wins allowed us to penetrate deeper into target verticals and geographies as illustrated by new relationships for us with five in the largest financial institutions in the world, two of the largest telcos, Delta Airlines, the top five global apparel retailers, and one of the leading online travel agencies. We also gained more traction with partners such as IBM and Accenture. In fact, the percentage of wins influenced by partners grew by more than 30% year-over-year in 2018, and accounted for nearly one-thirds of signed ACV.

From a geographic perspective, total U.S. revenue accounted for 61% of sales in the fourth quarter and generated 11% year-over-year growth, the strongest showing of the year, driven by 17% growth in North America enterprise. Our total international revenue accounted for 39% of sales, and delivered 21% growth, with international enterprise growing at 30% even against tough new compares. Our telco and financial services industry continue to leave growth in the fourth quarter, increasing at double-digit pace.

Our largest vertical in 2018 was consumer retail, at 25% of revenue, followed by telcos at 20%, financial services at 19%, auto at 11%, high-tech at 7% and other at 19%. Finally, in terms of profit in the fourth quarter, on a per-share basis, GAAP net loss of $0.11 cents, adjusted operating income of $1.4 million and adjusted EBITDA of $0.08 while within or better than our issued guidance ranges. Cash on hand held steady quarter-over-quarter at $66.5 million or approximately $1.06 per share. With these metrics in mind, we believe, we have a proven blueprint for investing in the capabilities and the capacity necessary to win the conversational commerce market.

We hear from our customers how much they value expertise and innovation. And in 2018, we delivered meaningful impact in each of these areas. Let me expand on that. From a technology standpoint, our investments were pointed toward innovation and operational excellence.

We recognize that scalability, stability and availability can be a focus not at the expense of innovation but alongside it. The fruits of our investments can be seen through many lenders. To begin, we hired a world-class leadership team with deep AI and data science expertise. We leverage their leadership to more than triple the number of messaging endpoints integrated on live engage, adding Apple Business Chat, WhatsApp, Google Rich Business Messenger, Google Ad Lingo and Alexa in just eight months.

And this is important to our business model because each endpoint brings new cross-selling opportunities to our expansive customer base. Our added engineering capacity allowed us to launch maven, our groundbreaking patent pending AI engine, which promises to scale messaging with even more efficiency and maintain -- if not extend what we estimate is a 12 to 18 months technology lead. And our continued focus on quality is paying of. That's illustrated by a 20-point increase in our most recent Net Promoter Score survey.

Turning to our go-to-market investments. In 2018, we focused on building market awareness and creating a scalable demand generation engine. To achieve this, we doubled the number of large-scale customer summits across the globe, and expanded the ecosystem from which new opportunities can be sourced. This combination had an immediate and substantial impact.

Since June 30, 2018, the aggregate contract value of our enterprise pipeline has increased 25%. And while impressive, it doesn't tell the whole story. Over that same period, the number of enterprise pipeline opportunities is up approximately 80%, driven by strong demand for our accelerated pilot program. These data points as Rob comment earlier that demand is surging.

Thanks to our investments in technology and channel, we have more products to sell, more partners to sell with, more references to support our selling efforts and in industry that is moving into mainstream adoption and ready to make purchase decisions. Combined, the demand in our pipeline is outpacing our sales capacity, which presented great opportunity as seen on Page 13 of our supplemental earnings deck. To illustrate this, LivePerson had approximately 50 global quota-carrying reps at the end of 2018, which was below the 55 we had in 2015. And as Rob said, that was, really, before we launched the conversational commerce.

Compared to industry benchmark, our average sales rep is currently handling two to three times the number of opportunities that would be ideal. This is why. We're confident that the time is right to invest in go-to-market capacity so we can go even deeper with our existing customers and has sufficient scale to pursue the enormous green space opportunity in front of us. This is a good opportunity to transition to guidance.

Focusing first on the specificities and timing of our investment profile; and second, on its return and contribution to our ramping growth rate and operating leverage during 2019, and into 2020. First, with respect to investment, our plan is to increase sales capacity by 90% in 2019. In order to maximize in-year productivity, hiring will be heavily weighted toward the first and second quarters, and is anticipated to be allocated as follows. We'll emphasized quota-carrying reps, sales development reps and partner managers.

Approximately 80% of the spend will be directed to enterprise and 20% to mid-market and SMB. And about one-third of the investment will be in North America and two-thirds internationally. From a program perspective, our marketing calendar suggests that front-end loaded 2019. With about three quarters of the spend on customer summit, taking place in the first half of the year.

First quarter, in particular, is active with events in Dallas, New York City, Berlin and Barcelona, along with multicity tours throughout Europe with our technology partners. From an in-year payback standpoint, we expect our new sales reps and customer event activities to produce an initial revenue contribution by the third quarter of 2019, a more meaningful contribution in the fourth quarter and then full contribution by early 2020. More specifically, we're issuing revenue guidance for 2019, in a range of 285 million to 293 million or 14% to 17% year-over-year growth. The linearity of our growth in 2019, is perhaps more important than the full-year range itself as it best demonstrates the ramping of investment returns and our exit rates going into 2020.

We expect continued mid-teens growth in the first half of 2019 as we build our sales capacity and drive more initial opportunities through low price accelerator packs. As these convert, and new sales reps become productive, we anticipate an acceleration in second half, toward high teens to 20% by the fourth quarter. On the back of that momentum, we then expect to generate at least 20% growth for the full year of 2020. From the 2019 profit perspective, our hiring activity will be heavily front-end loaded for both sales capacity and the continued buildout of our global product organization.

We expect the vast majority of our hiring in both areas to be complete by the end of the second quarter and anticipate minimal head count growth in the second half. Likewise, business plan, pacing of our customer events, or marketing spend in the second half should trend modestly lower than in the first half. With these revenue and investments dynamics in mind, we're guiding to a 2019 adjusted EBITDA range of 10 d to 15 million, which implies the margin of 4% to 5%. The pacing of adjusted EBITDA is expected to be as follows.

Given the immediate and consistent hiring quickly and heavy volume of first-quarter and second-quarter customer summits, we anticipate modest losses in the first half of 2019, with a double-digit margin in the second half, as hiring the base, marketing spend is low and our go-to-market investments begin to drive higher revenue. We expect renewed year-over-year margin expansion in 2020. We look forward to expanding significantly in 2020 and the long-term financial model at our upcoming Analysts Day planned for May 8th in New York City. You can refer to our earnings release for additional details on our full-year 2019 assumptions.

As we wrap up and take your questions, I want to close with a few overarching points of emphases. First, our disciplined test-and-learn approach to investing in technology and demand generation in 2018 worked. And we executed well on the full-year 2018 plan, exceeding even our own expectations. Second, we're applying those learnings as a blueprint.

We have to fully scale out our technology, demand generation and sales team. Our emphasis on completing those investments in early 2019 will create an exciting escape velocity for our financial business models and look to the 2020 and beyond. And, third, we're committed to capitalizing on our leadership position, continuing to bring exciting innovations, new used cases, rich experiences for our customers and increased value for our shareholders. With that, I hand the call back to the operator to take your questions.

Operator? 

Questions and Answers:

Operator

[Operator instructions] Our first question line of Koji Ikeda from Oppenheimer.

Koji Ikeda -- Oppenheimer and Company Inc. -- Analyst

Oh great. Thanks for taking my questions, and a great finish to the year. I had a question for either Rob or Chris. On proof of concepts, we really think proof of concepts is a pretty strong indicator of what you're seeing out there.

And, I guess, any sort of commentary on the proof of concept trends entering 2019 versus 2018 would be helpful.

Rob LoCascio -- Chief Executive Officer

Koji, Sure. Let me entertain the proof of concept with what we introduce as our accelerator packs, I think, they are one of the same. As we talked about on prior calls, we began the year, I guess, we launched our accelerator pilots in late first quarter, hit around 25 opportunities. That grew in the third to 65.

We are well over 100 now in the pipeline, and we're closing them. And more importantly than just closing them, we're finding that they translate into bigger engagements down the road. So, they continue to be a great selling tool to just make it easier to complete a transaction, get the customer to experience the returns on the platform quickly and then work with them down the road on how to adjust it in the scope of our platform to the services that they need. We had a couple wins this quarter that fell into that category.

Koji Ikeda -- Oppenheimer and Company Inc. -- Analyst

Great. And I guess I had a question, Chris. In your commentary you gave the revenue renewal rate was about 90% and enterprise was in the mid-'90s. And looking at my model here, I recall back in 2016 you gave a customer renewal rate of 83%.

I mean, is that pretty much an apples-to-apples comparison to that metric? Or is this a brand-new metric and something new to think about?

Chris Greiner -- Chief Financial Officer

Yes, let me -- it predates me a bit and Matt got the gray hair to answer the question here. He doesn't have the gray hair. But you're right. We're at the new metric, by the way.

The difference from our total revenue retention, which was 110%, we've previously discussed to be being greater than 100%. So, we're quite happy with where that is. And then the revenue renewal rate, also, a new metric, where we see 90% for the total company and in the mid-90% to enterprise. But, Matt, you want to make a comment on, I guess pre-live engage?

Matt Kempler -- Vice President of Investor Relations

Yes, I think pre-live engage, we're going through the migration, and we're trying to just give indications around what customers were moving to live engage and what we're seeing n the churn as we've forced that in the life, on the product. Now, we're, obviously, focused on the review build and accelerating growth. And so the metric that we're focused on is what percent of dollars are we keeping from existing customers and the up-sells where we're driving will be the ones that we're keeping.

Rob LoCascio -- Chief Executive Officer

Yes, I think -- and Koji, we mentioned in our prepared remarks but the Net Promoter Score increase of 20 points in our last survey, and the work that our technology teams and our infrastructure teams are doing to just continue to build, not only great innovations but a platform that's incredibly stable and reliable, that's probably the best proof point of the renewal rates that we're seeing right now.

Koji Ikeda -- Oppenheimer and Company Inc. -- Analyst

Got it, got it. And last one for me if I may. So mobile percentage interactions on live engage is particularly 54%. I guess, any commentary would be helpful on what percentage of that volume is coming from messaging transactions versus web chat transactions, and maybe how that grew from 2018 would be really helpful.

Chris Greiner -- Chief Financial Officer

Yes, so at a high level, the growth is being driven primarily by messaging of the web, I think, IVR Deflections, Apple Business Chat and now WhatsApp. Web messaging, though, is something that we're increasingly selling into our customer base. We don't think anybody should be using chat anymore. And so we're looking to be replacing that with web messaging, we're seeing that adoption.

But the growth that you're seeing is primarily tied to the web.

Koji Ikeda -- Oppenheimer and Company Inc. -- Analyst

Great. Thank you very much.

Operator

And our next question is from the line of Richard Baldry from Roth Capital.

Richard Baldry -- ROTH Capital Partners -- Analyst

Thanks. We are half way through the first quarter. So can you talk about how you are doing on the hiring process, which seemed the economy is pretty strong. So it might be a bit of tough environments.

What types of backgrounds that you are looking at? And do you feel pretty good about what you've been able to bring in the first half?

Rob LoCascio -- Chief Executive Officer

Rich, hopefully, the new addition is doing well to the family. We are -- we're having really nice progress actually. We're looking at 3,500 candidates a week. So we couldn't be more pleased with how our internal recruiting teams are doing.

We went to lengths -- late in 2018, to build out that capacity rather than to have a reliance fully on agencies. The mix is about 50-50, between technology, skills and go-to-market sales resources. From a technology perspective the type of profiles we're looking at, following the two categories of data science and machine learning, skills that relate to bot automations and integrations, and then just an overarching strategy of building more vertical use cases for our platform. From a go-to-market perspective, this -- as I mentioned in my remarks is heavily emphasized to quota- carrying reps, think of, enterprise software reps, if you will.

Demand generation teams, I call them SDR is here, they are creating the top of the funnel and then progressing it to hand off to the sales reps, and then channel partner managers. Channel has been a really nice growing part of our business as we mentioned. It accounted for 30% increase year-over-year into sales, and with the third of our ACV. So those -- that characterizes the investments.

I hold off on particular profiles as they get part of the competitive advantage.

Richard Baldry -- ROTH Capital Partners -- Analyst

And, a follow-up for that. The -- there's a lot of focus on international. So how do you feel about sort of the rest of the infrastructure you have in place to support those new hires since sales and internationally?

Chris Greiner -- Chief Financial Officer

Yes, internationally, let's take it in two different parts because EMEA is at a different level of its maturity than APAC, which Rob mentioned, is really having some very nice wins and rapidly growing. The enterprise team has had for a while now, very strong management continuity. They have a very strong infrastructure that wraps around the go-to-market whether it's legal, pricing, human resources support. We're building that out more in APAC.

So the infrastructure that we need to develop is less focused on EMEA. They have it already. It's more focused on Asia, where we're building out those type of, call it, G&A support services teams.

Richard Baldry -- ROTH Capital Partners -- Analyst

Thanks.

Operator

And our next question is Ryan McDonald from Needham & Company.

Ryan MacDonald -- Needham and Company -- Analyst

Good afternoon, Chris and Rob. Just first, on the U.S. market, was impressed by the strength in the quarter, reaccelerating now up to, I think, you said, 11% year-over-year growth. Can you talk about what the driving mix of that was between enterprise and sort of mid-market SMB.

And then as you are looking at the investments moving forward, were you waiting those U.S. investments whether it be on the enterprise or the midmarket there?

Rob LoCascio -- Chief Executive Officer

Yes, Ryan. Earlier in the year, we had mentioned that we were going to make North America and even heavier focus of ours. And that was back when total North America was growing at 4%. So as you highlighted, the acceleration to 11% was very encouraging for us, within that 11% as I highlighted, North America enterprise grew 17%.

That was an acceleration even over the last quarter, which was in the mid-teens. We did see a decline in the SMB space. But, again, that was not up to this last quarter -- fourth quarter, an area of focus of ours, but what I would highlight if you looked at the bookings performance, not just globally, but really equally driven across North America and internationally, they had record bookings -- and it wasn't just two or three home run deals. It was very consistent, the linearity was consistent across each month of the quarter, and we're really pleased with the momentum that that team is building.

They've worked hard for it, and they're pretty excited right now on the field. So very happy with North America's turnaround. Obviously, enterprise growing to 17% percentage is great. International enterprise grew 30%.

So, we still think there is room to run there, but we're excited about what we continue to bring -- or what we can bring to the mid-market SMB group as well.

Chris Greiner -- Chief Financial Officer

Yes, I think, in our international, we're only in a small footprint of markets obviously, Europe and Asia, for now looking at South America, even in Asia we're obviously heavy in Australia, Japan and Singapore, but when we think of places like even Indonesia where they are heavy messaging to 300 million people, businesses. They already transacting through these messaging platforms, but they need something to make it truly business-enabled stuck especially for WhatsApp who's dominant in all these markets. I think, for us, we haven't really scratched the surface, I think, this year will take a bigger bite at the other markets, especially in South America, Brazil, Mexico, heavy WhatsApp users there. So that's following these -- them in the main technology messaging platforms then and working on scaling those different regions.

So...

Ryan MacDonald -- Needham and Company -- Analyst

Thanks. And then just a quick follow-up in terms of a technology. Obviously, maven was released into early access, and I think, is going to be reaching general availability earlier this year. As customers are evaluating sort of the new functionality and capabilities around the messaging channels, is there more of a drive to push maven to help manage multiple channels within messaging? And as -- can that be a growth driver as we're looking at '19? Or maybe that's more of 2020?

Rob LoCascio -- Chief Executive Officer

You know, the big part about automation is what we're seeing is that even -- if I go back 24 months ago, we were very -- we were very focused on the shift of voice to messaging. And we've achieved some great results there. And we have customers that move 30 to 40% of their voice volume out. So first time the technology has been able to do that.

When you get to those levels, you got to have automation. And so it's necessary to have that type of platform and that's the maven really helps with. As we mentioned about 50% of our interactions right on the platform all automated, maven just gives a set of tools to enable that at a certain scale. And the other part is we have built in our own platform as we call it aid and assist, where it helps guide the agents in building blocks, it helps guide the agents on live interactions.

We'll see -- I'll be at Mobile World Congress next week. We're releasing maven for telcos there that they can put inside of their messaging android devices, a concierge of helper, and is powered by maven. And so we're using it in many different ways of technology, not just as a front-end for bot building, but it's assisted, and it's also we're using it for things like we're building our own bots to do scale within the telco vertical.

Ryan MacDonald -- Needham and Company -- Analyst

Got it. Thanks.

Operator

And our next question is from the line of Jeff Van Rhee from Craig-Hallum.

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

Great. Thank you. Several for me, guys. So I guess, let's see, where to start.

So the 150 million of bookings that you referenced, just to be clear, is that total contract value? Or is that 150 million in ARR?

Chris Greiner -- Chief Financial Officer

Total contract value to the...

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

OK. Can you just give a sense of just durations like, I know, you've been getting longer and longer contracts? But -- and at the same time, I know you point not to necessarily look to closely at deferred, but what's going on with durations?

Chris Greiner -- Chief Financial Officer

In general, they're getting longer, but I wouldn't be able to give you a precise number.

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

OK. Can you talk for a second about the accelerator packs, just -- what is a typical deploy look like there? I know, you're going for speed to get started and demonstrate the use case. But kind of, what does that mean in terms of an initial ARR is to be signing? And then follow on time to revenue? Just what are those look like a little more there would be helpful.

Chris Greiner -- Chief Financial Officer

Sure. So let's kind of go through duration first, think three to nine months in nature. In terms of price point, you're in the low six figures. Time to revenues, signed the contract and however long the implementation takes, call it three to six weeks.

And then the scope is really dependent upon the customer, right? We leave it open-ended, we offer the platform, that customer may choose two or three endpoints or all of them. And we're accommodating any scenario. We make it to where we begin to measure, we go in with the sales as a quantifiable ROI and then we measure it throughout the period. And its that measurement toward the period and continuing to put the ROI in front of the customer that allows us to preterm, go and make it a bigger engagement.

That is the model. That's the go-to-market model.

Rob LoCascio -- Chief Executive Officer

And lot of them are not human-based. We're doing a fair amount at our -- there just automation bot-based on, you know, basically the patients. So they're not even using human agents. They're using it as AI capabilities, and it does a lot of activity there.

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

Got it. And then on the sales capacity side, I mean, obviously, you've been messaging that you're kind of tapped there and the activity levels are super high. Just talk to me about the thought process on two-thirds of the incremental spend going international versus domestic. Is there something about the international TAM that's more addressable, more appealing? If you're tapped out everywhere, I would've thought maybe a little more balanced domestic, international, just talk about the thought process there.

Rob LoCascio -- Chief Executive Officer

Yes, fair point. I wouldn't go there to the TAM. I understand why you think that, but it was more a reflection of where we did our testing and learning on the initial deployments that where we're putting demand generation teams, for example, it was in North America first. So we tested and learned in North America and a lot of these sales expanding sales reps, expanding sales generation teams and adding channel partner managers.

So we don't have to do as much now. We're still adding to that list, but we already had a head start whereas internationally we did not do that.

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

Got it. And, Rob, it several quarters go, I know, you signed some really sizable deals, but you're looking at the yearly use cases and just look, it's a matter of time until we sign a $100 million contract just based on the value we're bringing to these call centers. What are you thinking in there now?

Rob LoCascio -- Chief Executive Officer

I had been in meetings where I've put it out. So I mean, it's -- we've talked it about -- it's there. It's going to happen. It's probably -- we're getting to a place now where we're looking at transforming banks, obviously to the level of healthcare organizations.

So I feel like we're -- we put it out. I've been in meetings where I've talked to decision-makers so I feel like there is a hunt going on. And I'd like to see that we -- in 2019, that we do something in that area. So...

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

Got it. If I could just one last quick one for you. You gave us -- thank you so much by the way for the incremental just a sense of how the year plays. How the leverage plays.

How the spend plays. You gave a little teaser on obviously, the out-year '20 in terms of 20% top line growth. But it looks like from the spending profile, you're going to kind of reach a peak on the spend in Q2, Q3 '19. So to the degree you're willing, just give us any sense of what the incremental EBITDA margins look like, even in that level of income.

How far can you raise that? Where does that get you because it sure looks like the incremental is going to be really good in '20.

Rob LoCascio -- Chief Executive Officer

Jeff, you broke up a bit. So, I'm going to do my best to rephrase what I think, you're asking just let me know if I didn't get it right. You're asking with -- and you're correct, with the front-end loading of our investments because we want to have a size that productivity and contribution for those return TAM as much as '19 as we can that then creates a leverage environment of our business in the second half, right? As that revenue then ramps and as that spend begins to flatten out, that should create leverage. What we talked about was that we see double-digit margins in the second half of the year, not ready to go into detail in 2020.

We will on May 8th, but we'll say that we will have margin expansion in 2020.

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

Got it. Thanks.

Operator

Our next question is coming from Mike Latimore from Northland Capital Markets.

Mike Latimore -- Northland Capital Markets -- Analyst

Thanks. Yeah. Great. Great results outlook.

On the -- did you say you expect the SMB segment to start growing again? Or is it already started growing?

Rob LoCascio -- Chief Executive Officer

It will start growing again. It was a really nice growth this year.

Mike Latimore -- Northland Capital Markets -- Analyst

And what's the main driver there? I mean I think you touched on it a little bit, but just clarify?

Chris Greiner -- Chief Financial Officer

Focus.

Rob LoCascio -- Chief Executive Officer

Yes. We went out of the gate, two years, 24 months ago with -- we really don't need to -- have to go out on the enterprise, I mean with those two mobiles and companies like that. And it just was we focused down on need of that. And then now that that's going, we know there are a lot of companies in the world that want to take part in this.

And so we then started to briefly open up funding like midyear, and then we saw a strong Q4 on the bookings side, better than they have ever had. And then, they continue to do that, their ramping their sales teams and their SDR teams, and their marketing. And so they are very excited about what they're seeing. So we're just -- no that was damping down growth rates overall, we just separate the enterprise that is well over 20%, which I always talk about.

So we're right now, that's moving in a very, very positive and strong direction.

Mike Latimore -- Northland Capital Markets -- Analyst

Great. And how about any color on the auto vertical? How that's trending?

Chris Greiner -- Chief Financial Officer

Yes, it's good now. We did an acquisition of AdvantageTec. I think that has really helped that vertical. We now have end to end through messaging by car, and you can get your car serviced.

And it just opens up a whole another area of addressable markets and also resellers. We made a LivePerson auto. So it's got a new brand on it. But we have very good leadership over there too.

But I think, it's also going to be growing at a nice rate, and obviously, using stuff that we're doing on the AI side. And with maven, they're, also, incorporating that. So they're doing a lot of activity over there.

Mike Latimore -- Northland Capital Markets -- Analyst

And just a clarification on one comment you made. You said -- I think, you said something about having record signings in the quarter? Is that -- does that refer to number of accounts they signed? Or that is referred to like the ACV of bookings?

Rob LoCascio -- Chief Executive Officer

You can apply to both.

Chris Greiner -- Chief Financial Officer

Both.

Rob LoCascio -- Chief Executive Officer

The number of deals, yes. The number of deals was very strong, especially in the new customers that we're bringing in platform, but that also translated to ACV.

Chris Greiner -- Chief Financial Officer

Yes. If you look at Q4 -- Q4 of last year -- last year of '17 year, a big quarter but it was really driven by one or two big, big customers. Very interesting now, it was not a big customer one. Not one big customer and it was just a healthy, like we didn't have to worry about who's coming in, who's flipping, whatever.

We had a nice just overall good enterprise customers than even on the commercial side. So it feels good. That's why when you see that, we now have the pipelines grow like they have over the year. We want them down now to accelerate that.

Mike Latimore -- Northland Capital Markets -- Analyst

So yeah, that's a great sign. Thank you.

Operator

And our next question is from the line of Zach Cummins from B. Riley.

Unknown speaker

Hi, this is Sarki Sung on for Zach. Thanks for taking my question here. I know you guys mentioned the accelerated pace of investments for the sales team. Can you maybe give us some incremental color on may be some product development and investments that you peak to make up for fiscal '19 and '20?

Rob LoCascio -- Chief Executive Officer

Yes, I mean, the -- when you look at how we're investing today, we're investing in really three major areas. One area is end point. So we keep building out all the endpoints over the next WhatsApp, we have not We Chat that's going live. We have Line in Asia.

We have obviously WhatsApp, but also those platforms get better and better each month. So they're adding more features like payments and stuff like that. They're -- these items have a long way to go. If I look at my visions they like where -- how we should be doing conversational commerce.

They're building things in so we have to develop against those. The second part is used cases. So we're developing around predominantly, it is where we beachhead into care, where all the voice calls are. But now we're fanning out into sales and marketing.

And so as I mentioned in my remarks, we did a deal on outbound. So like you can upon markets through messaging, using our platforms, and that's really a marketing event. So that's more used cases. Then the third driver is automation and human conversations on the platform.

So how do we make deals, especially the automation ones richer. How do we make sure that these automations that we're doing, they can complete up full and automation in the high '90s. That's kind of our confidence intervals up in the '90s. We've got a good bot in the market.

So these are kind of the three areas that we're constantly investing in with the platform.

Unknown speaker

Great. Thanks for that. Another kind of follow-up. Can you maybe talk about the pipeline generation from the T-Mobile customer event in the fourth quarter.

Maybe, what's the expected conversion rate on opportunities from an event like that?

Rob LoCascio -- Chief Executive Officer

So the -- I won't give you a specific number, but they're very, very high because there are rates in those. And anyone who is there, it was an amazing event. They just basically showed the power of the platform and their operating model, which is expert so. They are presenting -- we also owe and about 10 other customers do presentations, and we caught first.

I think, it's really important we, kind of, branded first. It's like all these customers want to be the first of something. There is this telco in Europe, that was the first to scale WhatsApp at this huge rate, and move voice calls for WhatsApp. There's T-Mobile, the first to go live ever on messaging and really scale and go with operating model.

Aramark, the first that has in-stadium ordering through messaging, bots and AI, and go on. And so this is really what we see. There are presenting and they're very proud of it. So that's a very exciting thing, and I think that drives a lot of adoption because everyone else wants to be first of something else, and they want to get there quickly.

So we see very good results that's why we are investing heavily on the marketing events like that throughout 2019.

Chris Greiner -- Chief Financial Officer

Just -- I just add what we did say on our last call was that from Birmingham all the way up to T-Mobile. There is no reason to believe T-Mobile being different. Is that when we have our customers at the summit, we convert them over 40% of the time. If you think about those summits, you can almost pack three to four months of a sales cycle into two days, right? You've got your hands-on tech demos.

You've got customers securely being referenced. You've got used cases -- different used case being illustrated. You've got transformation journey workshops there. So keep access to key decision-makers.

So that they continue to be a very important, not just creation of opportunities engine for us, but progression of opportunities as well.

Unknown speaker

Thank you for that. That's helpful.

Operator

And our next question is line of Mark Schappel from Benchmark.

Mark Schappel -- The Benchmark Company -- Analyst

Hi, guys. How are you doing? Just a couple of questions here, most of my questions have been answered but I do a few. Chris, the company had excellent success in the past year ramping up the channel business. And I was just wondering as you plan to continue to build up that organization.

How is that going to change in the coming year? Or is it going to change? Are you just trying to sign up as many partners as you can right now? Or is there a focus on just kind of consolidating, which have?

Chris Greiner -- Chief Financial Officer

Yes. Thanks for the question. Good to speak with you. It depends on where you are in our different go-to-market spectrum.

If you're in -- if we're sparking specific to the small, medium business, there, we are rapidly expanding the number of customers. So that is a volume gain and the old lady 20 rule would apply. If you go up the stack to midmarket and enterprise, it's up, of course, you want to expand in the new partnerships, but it's how do we continue to leverage the terrific pipelines that are being created by the likes of IBM, Accenture and others, and just start converting them. So it really depends on which end of the go-to-market spectrum you're on?

Mark Schappel -- The Benchmark Company -- Analyst

OK. And then, Rob, we're starting to hear other contact center focus for vendors, start to talk about messaging and then conversational commerce. And maybe you can just give us an idea some of the other competitors that you're seeing in the messaging space?

Rob LoCascio -- Chief Executive Officer

Yes, I think, obviously, as we removed voice calls from those large voice platforms, they're, obviously, going to try defending that. But I've said this before. They're just -- they're kind of like evildoers in the world. They basically promote voice.

They don't want to cannibalize themselves. They -- when they do things like messaging, it doesn't work, by the way, and they do it at small little thing and they are sure it doesn't work so they can get more voice on and say, this is just a toy. So those are the guys right now that we have a target on to get rid of. And we have good referenceable customers.

We know consumers don't want to pick up the phone so and dial and being put on hold. As we mentioned last time, T-Mobile removed their IVR now as of primary way to get to them they go straight to a human through messaging or voice, even voice. So those are the guys that you are right, they're going try defending themselves. But are they willing to destroy themselves to grow.

Even we, we took a hard pivot as you know because they don't believe check against their, and we kind of took the hard medicine to get here. I don't think they're willing to take the hard medicine.

Operator

And ladies and gentlemen, it seems we have reached the end of our call today. I would like to turn the call to Rob LoCascio for closing remarks.

Rob LoCascio -- Chief Executive Officer

Thank you, operator. So 2018 was a year for the record books in so many ways and our key metrics, including ARPU, 11-year retention, new logo sign, messaging and AI adoption and total revenue hit new highs. Conversational commerce is moving into the mainstream now. With next 24 months, we expect virtually every large brand to decide how they want to participate in this.

And LivePerson is making the right investment to accelerate momentum by capitalizing on its leadership position with these industry tailwinds. We expect our revenue growth rate to ramp toward 20% by year-end in 2019 and to exceed it 20% in 2020 as we take a greater share of emerging multibillion-dollar market opportunity. I've been, obviously, on helm long time and I haven't said, if we are at start-up and just launched our platform two years ago and generate 150 million in contract value, you would be at pretty hard start up. So obviously, we've been around a while, but I think we're running, we need to run now as a hard start out.

We need to check the market and win it, and I think, we're in a great position to do it. So, thank you, everyone, for their support, and we'll see you guys on the Q1 call.

Operator

[Operator signoff]

Duration: 57 minutes

Call Participants:

Matt Kempler -- Vice President of Investor Relations

Rob LoCascio -- Chief Executive Officer

Chris Greiner -- Chief Financial Officer

Koji Ikeda -- Oppenheimer and Company Inc. -- Analyst

Richard Baldry -- ROTH Capital Partners -- Analyst

Ryan MacDonald -- Needham and Company -- Analyst

Jeff Van Rhee -- Craig-Hallum Capital Group LLC -- Analyst

Mike Latimore -- Northland Capital Markets -- Analyst

Mark Schappel -- The Benchmark Company -- Analyst

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