Episode Transcript
[00:00:24] Speaker A: Welcome, everybody, to our latest metrosite. And today we're talking to five nine. In fact, the big guy here at five nine. Let me give you a little bit of background. I think everyone knows who five nine is. It's one of the leading ccas providers, and it's definitely, in my opinion, made its mark innovating in AI enabled technologies that support a lot of different functions, things like agent assist, things like automation. And as many of you know, Rowan Trollope has recently resigned his position as CEO late last fall. And Mike Birkland has taken over as CEO. And of course, with a lot of familiarity because he served as CEO of five nine for nearly ten years through 2017, when a health issue prompted his resignation. But he did stay with the company as a chairman ever since. So now, a couple months now into his CEO post, Mike is with us to give you an outlook on the company and the CX market, and we'll ask him a few questions. So, Mike, we're delighted to have you here with us today.
[00:01:31] Speaker B: Thank you, Robin. It's great to be here and it's great to see you again.
[00:01:35] Speaker A: Great. Yes. So let's start your first round as CEO of five nine. You really did have an incredible track record. As an example, you saw the company grow from 80 employees to 2000. That's a tough growth period. You really have to have some good skills as a CEO to be able to do that. And you oversaw the IPO as well. So I want to ask you a question. If you were to fast forward one year from just right now, what do you expect to be your most notable short term accomplishment as CEO in your second run at that time?
[00:02:12] Speaker B: Yes. Great. First of all, great place to start, Robin, and if you don't mind, I'll give you a little bit of history in terms of my decision to come back. As you mentioned, I've been here 15 years in total, ten as CEO and five as chairman of the board. You know, remained very close to the company through the last five years as chairman of the board. And frankly, when, you know, Rowan made his decision, it was a no brainer for me to come back and take the helm here at five nine. I'm healthy. But most importantly, I believe so strongly in this opportunity ahead of us. We are still in the very early to mid early innings in terms of this massive shift to the cloud, especially in a large enterprise, part of this market that is opening up and is still really early days in terms of the largest of the large enterprises opening up and moving to the cloud. It's being driven by really a number of things. One is the maturity of cloud platforms like five nine, for example. Our scalability has increased by Ten X in the last couple of years in terms of how many agents we can host on one tenant. That's just an example of the maturity of our platform and why it's become much more acceptable for these large enterprises to move to the cloud. It's also driven by the strategic nature of Cx and how it's become a strategic part of most enterprises differentiation strategy, as opposed to a cost center. Not to mention this AI and automation labor arbitrage opportunity. So there's a lot to unpack there. But I wanted you to understand that, you know, this decision for me to come back was one of bullishness on the future. And I think we've got 1520 years of durable growth ahead of us in the CCAAS industry, and we're well positioned in it. And to answer your question, I think in terms of what I'd like to see five nine achieve in the next year is quite frankly a lot. It's a continuation of the amazing growth that we've had for the last 15 years.
And that will come in many forms. It'll come in international expansion, it will come in continued March up market into larger and larger enterprises. But I think you mentioned it, the AI and automation is really the innovation story of the industry. But it's a wonderful part of our story because we're a leader.
The acquisition of inference that we made a couple of years ago gave us a complete leapfrog, head start, if you will, and has enabled us to become truly the leader in AI and automation in the contact center space. So I expect us to extend our leadership position there.
[00:04:58] Speaker A: Any specifics on growth numbers that you'd like to see?
[00:05:02] Speaker B: You know, it's interesting, you know, we've, as a public company, you know, when we talk about growth, we talk about our financial performance.
We have a very consistent message. And again, I think the, the long term goal for five nine, we've said this to Wall street, is to be a $2.4 billion revenue company in 2027. And you can do the math between here and there.
It's a great market opportunity. Again, I've been here 15 years. We've seen a kegger of close to 35% growth in revenue over that 15 year period.
It doesn't take that much growth to get to that $2.4 billion number.
Again, that's a long term target. We're also in a admittedly choppy macroeconomic backdrop, and we can't ignore that. So our expectations for 23 are based on that market backdrop continuing through the year. But we expect things to return to normalcy, hopefully in 24 and beyond.
[00:06:08] Speaker A: The macroeconomy has got everyone to confuse. But we're pretty perplexed because we've never really had an economy with these fundamentals that are happening right now. And I'll tell you, when we've did our research on technology, well, business spending going into 2023, we looked at a bunch of different areas of technology when we focused in that area and customer engagement technologies had the highest percentage of companies planning to grow their spending in 2023 and the lowest percentage planning to decrease. And this is ahead of things like security and network and collaboration and everything. So I know that everyone's concerned about the economy, and I have this, this research at my disposal. So when I look at it, I get a little excited about the CX space because it's still strong despite the uncertainty with the economy at best. Right?
[00:06:58] Speaker B: Absolutely, Robin. And I think you think of your spot on. I mean, these are unique economic times, and part of the dynamic in CX and in the contact center specifically is the labor shortage. Right. It's really hard to find agents for the contact center and hire them and retain them, and that is driving a need for automation and self service. And Iva, for example, the virtual agent technology that we acquired with the inference acquisition and have invested in heavily over the last couple of years to enhance that and round that out into a full AI and automation portfolio of products, that will be our focus going forward in terms of our innovation.
And I agree with you. I think there's a unique opportunity in the contact center and CX opportunity market, I should say, to really, it's a unique opportunity relative to other markets, let's put it that way.
[00:07:53] Speaker A: And it's interesting. So when we see companies in our research, if they're short, if they're short staffed in the context, and you bought up labor shortages, if they're short staffed in the context center, they're spending 52% more on CX technologies than if they're fully staffed. So you can see the companies already note that, okay, we can use technology to kind of help us to hedge some of this shortage that we're seeing in the labor force. So it's pretty interesting.
[00:08:20] Speaker B: Yeah, we see that. Sorry to interrupt there, Robin, but you struck a chord there. I mean, the labor arbitrage opportunity, if you will, the ROI that these large enterprises are seeing with our virtual agent technology. I'll give you some simple mathematic. You know, the average cost of a virtual agent in our customer base for our technology to provide a virtual agent is about dollar 400 per virtual agent per month in recurring revenue to us and cost to them. You compare that to the cost of a live agent, it's about ten x that say around 4000 depending on which market you're in, 4000 in compensation and fully loaded expense of a live agent. The ROI is staggering. These large enterprises are shifting to the cloud in many cases because of that labor arbitrage ROI opportunity that we're providing them. And that's been a real catalyst for some of the big wins that we've had over the last couple of years. We've added what we call some mega sized customers. These are tens of thousands of agents in terms of the size of these enterprises and their contact centers.
It's a unique time in our industry because of, again, some of the things I talked about before, but also that labor arbitrage opportunity that they see with our technology.
[00:09:47] Speaker A: Yeah, and I mean, given that and the whole macroeconomic issues that we've already talked about, I mean, do you see that there's a unique opportunity right now for you to be investing in acquisition new areas or just continuing in some of these other areas? There's so many startups in CX that are doing some cool stuff with technology. I mean, do you, do you see that as a, or is it sort of always something you're looking at, or is it something you're really focusing on in 23?
[00:10:12] Speaker B: I would say we're always looking at it, Robin, and we've done some great acquisitions over the last few years. Right. You look at inferences we talked about, we've made some other small acquisitions, some technology tuck ins. It's a great time. Tough economic times are kind of a wonderful time to look downstream, as we call it, and make some technology tuck in acquisitions. We're always looking. We're opportunistic about it, we're smart about it, we're strategic about it. But yeah, we'll continue to look at those opportunities.
But at the same time, given that we have a strong balance sheet, it allows us to do things like that. We're a very healthy, financially healthy company. And that's not just the balance sheet, but it's our growth and what we call balanced growth approach in terms of top line revenue and bottom line profitability. We've always run the business that way. And it's, it's helped us not get out over our skis in terms of expense, growth, outpacing our revenue growth, for example. And it allows us some freedom to probably do more than some of our competitors that aren't quite in as good shape these days.
[00:11:20] Speaker A: Yeah, the inference acquisition was a good one. I think a lot of your competitors were like, oh, man.
But there are a few, I would say, metatrains that we see in our research that are risks are risk for five nine and some of your competitors as well. And one of those, I would say, is that companies are increasingly saying that their CRM provider is what they consider to be their core CX platform. Everything's got to integrate in with CX. That's where we're focusing, and that puts ccas providers at risk. How do you, you know, how do you address that?
[00:11:55] Speaker B: It's interesting, Robin, because I don't really look at this as a risk. CRM has always been, always, always, for the 15 years I've been here, has always been at the core of customer experience. And, you know, we partner with all of the leading CRMs. We've partnered and integrated tightly with all of the CRM providers and technologies for 15 years now, and we don't see that changing. We have to be better together, is what we call it in terms of our CRM partnerships. They need us and we need them. And while they are messaging to customer service and customer experience and contact center these days, they're not providing the depth and breadth and the telephony and the multichannel. I mean, they're doing, I shouldn't say that they're doing some of the multi channel and omnichannel, or, you know, we've called it many things over the years, but the digital channels, the CRM providers have done that for quite a while. We're a wonderful partner to the sales forces of the world, for example, because we don't encroach. We partner well with them. We understand what parts of the solution they want to own and which parts we need to own, and they need us for a lot of the infrastructure oriented parts of that solution in that stack.
[00:13:09] Speaker A: Maybe it's just a shift in the way people see it, because in the years, three years ago, the CCAAs or the contact center provider, that platform was their core. Now they're looking more over to CRM. And one of my theories on this is that companies are focusing a little bit more in on the digital channels, or at least that's the goal. But when you look at the reality, 73% of all interactions right now go through voice. Either start in voice, that's 65%. Most of them start in voice or end up having to be escalated into voice from a digital channel. So, you know, I think some of it might just be that, hey, this is where we'd like to go. We'd like to do more with digital channels with an acknowledgement that the CRM providers aren't going to be quite as good in voice ever, you know, potentially as the current CCAAs or contextnow platform providers are.
[00:13:57] Speaker B: I think that's exactly right, Rob, and I think it scares them. I mean, you know, doing software and telephony together, it's what we've done forever. It's not in their DNA, quite frankly. And you've seen, you know, some checkbox solutions on telephony from some of the CRM providers for years and years, right? And they, they tend to stick their toe in the water and then back off very quickly when they realize how hard it is to deliver five nines of reliability, for example.
[00:14:22] Speaker A: So another risk I see is a lot of companies, most of them in fact, want to integrate. They all say they want to consolidate providers. Of course, you go back and talk to them a year later, ten years later, in five years or whatever, and they still haven't done it because of a lot of. I think the goal is always to work with fewer providers and then the reality is it never really happens. But that said, most are saying that they do want to integrate UC collaboration capabilities with their contact center or customer facing capabilities and many of them want to use the same provider. So how do you address that? I mean, you think about the, you know, when the Zoom acquisition was in play, that was something that's like, oh wow, this combination could be really cool. So are you looking at yourself now just saying, hey, we're going to be the company that will let you go to any collaboration provider? Or is that something you want to have fully baked at some point into the solution? What do you think?
[00:15:13] Speaker B: Yeah, I see us remaining agnostic on this one, Robin. You see, as you've seen as really commoditized quickly over the last couple of years and even since that zoom transaction that we were contemplating, if you look in retrospect, it's a blessing in disguise that it never happened because again, we see the UC side of the equation as commoditizing very quickly. And we're going to, you know, we've already integrated with many of the UC providers. We will continue to be very agnostic when it comes to that part of the equation. The real value in CX is not in UC, it's in the things that we do, the things that the CRM providers do, it's in AI and automation around what we do. And those are high value applications and infrastructures that companies, quite frankly, are paying more and more for. If you look at kind of average revenue per user, our prices and average revenue per user has continued to go up.
And there's a reason for that. It has to do with the ROI we've been talking about. So when it comes to enhancing customer experience, which is truly strategic for these large enterprises, we're front and center. And I think they view, if you think about it, the UC part of the equation is really more around the employee experience within an enterprise, as opposed to connected to the customer experience. As long as we've got hooks and integration points back into all the mission critical applications within an enterprise, which we do through our hundreds of APIs, we're going to provide that kind of core technology and valuable technology for CX.
[00:16:59] Speaker A: What about the whole movement that's really been picking up steam toward low code, no code applications, typically provided by cpaas?
The PE word CPaas providers is we're really seeing at an all time high, just the interest of that, for obvious reasons. So address that.
CPA providers doing it yourself.
[00:17:21] Speaker B: Well, when it comes to cpas, our strategy around AI is a perfect example of how we're providing that low code, no code approach to AI. For example, the studio product, which allows our enterprise customers to basically build out ivas and virtual agents without a lot of code and without data scientists. So our approach with AI is very much in that category of low code, no code. And there are multiple areas of that AI portfolio that subscribe to that approach. And our technology has always been that way. If you look at some of our indirect competitors, they really are built as toolkits and you need a massive team of developers to implement those competitive solutions. Ours is very out of the box and a low code, no code solution. And we've been that way from day one. While we're nothing, positioning ourselves as cpas, there's a fundamental approach that we agree with there. Let's put it down.
[00:18:33] Speaker A: That's the thing, too. So many people look at categorize companies into certain buckets. Oh, if you're in cpaas, you're doing low code, no code, but you can be doing low code, no code, even if you're not in cpaas, as you just mentioned.
[00:18:45] Speaker B: Absolutely.
[00:18:48] Speaker A: We've talked about AI innovation and all that you've done there. And I think that when you look at your executive team. I think you're walking into a very strong executive team and one that really helps continue to facilitate that AI innovation. You've got Jonathan Rosenberg, of course, you've got Callan heading the products, and Andy, who's now chief customer officer, and Jennifer on the marketing side, you've got really good, strong leaders. So what's next with this leadership group? First of all, any plan, any other new plans here on the leadership side that you can give us a heads up on? And if not, that's fine. But where do you see this group taking five nine and its innovations, if you can be specific, you know, more so than AI and automation, that would be great.
[00:19:35] Speaker B: Sure, sure. Happy to rob. So, first of all, I was, as chairman of the board of the last few years, I was personally involved in recruiting many of them.
We have relationships made it very clear that they want to be here for the long term. I want them here for the long term. You know, we don't expect to skip a beat relative to the team here. And frankly, it's been quite a wonderful enhancement. If you think about five nine, historically, we've always been known as world class, you know, kind of customer facing, go to market and professional services strengthen. Now, we also have matured our technology teams and our product teams and our marketing team. As you mentioned, Geneva, we have, in my opinion, the best team in the industry, and that is a huge advantage in terms of where we go next. And innovation wise, it is going to be in the category of AI and automation. I'll give you a little bit of just one example, AI insights. And you've heard about this product. It's a very recent addition to our portfolio. It's a great example of some of the innovation that we are adding to our AI portfolio. If you think about it, Iva is. I like to think about this as the phases of an interaction with a customer. And Iva is on the front end, the virtual agent is on the front end to potentially deflect a live call into self service, for example. Right. And then during the call, agent assist is helping. It's using, you know, AI to assist agents in understanding, you know, to basically better respond and answer to that customer. Whatever they're asking about or requesting, it's during call, if you will, and then post call. We acquired a little company that does workflow automation. These are things like follow up sms messages and things like that for appointments.
And this insights product is really a fourth phase and it's kind of that feedback loop or strategic diagnostic loop within this whole automation flow, if you will. Think about it as a diagnostic solution to help enterprises figure out which interactions, which customer interactions are best suited for self service and helping these organizations, these enterprises, get that insight so that they can understand which interactions to attempt to deflect. With the IVA, for example. So you think about that as kind of a pre interaction phase, almost the strategic planning and diagnostic part of it.
[00:22:24] Speaker A: That's music to my ears. I'm so into the analytics and insights. In fact, I'm in the midst right now just finishing my analysis on a study that we've just completed on customer insights and analytics and how companies are using it.
I think it's an area of weakness overall still within companies. I think they need to be doing so much more with this. There's so much data and information out there that they could be using to help make better business decisions that they're not doing. So I think products like this are really going to help there. So that's music to my ears.
Okay, so quick question on international global growth.
You guys have mentioned in one of your recent ten qs that the bulk of your revenue comes from the US, UK, Canada, Latin America, Australia, I think. But you have operations and also associated costs in other countries. So moving forward now, where are you going to be focusing most globally and any sort of expectations for revenue growth in areas other than those that I mentioned?
[00:23:19] Speaker B: Yeah, so I would say, Robin, you're right on. I mean, we have historically been very domestically focused until the last few years when we've really expanded internationally. And our growth internationally is absolutely wonderful. I mean, we did 78% bookings growth internationally in the third quarter. We announced that on our earnings call. It's still, you know, international in total is still a fairly small part of our business, a very fast growing part of our business, and growing more rapidly than other parts. If you think about focus in which regions internationally we are going to invest more in, it's EMEA first. That's still. We're still very early in terms of our scale and penetration into those markets. And the growth in EMEA was even greater than that 78% last quarter. So it's a wonderful market opportunity. We've got a great international go to market team and we've expanded our data centers globally, and it's a great time to be expanding internationally and becoming a true. And part of this is driven by our large enterprise customers, which are, and have been for years, multinational in terms of their presence.
[00:24:34] Speaker A: All right, so I'll wrap up with one last question.
Competition obviously is very strong in this space, there's all different providers, all different players wanting to get into the cx world for obvious reasons.
If I am a chief customer officer at a company and I'm trying to decide on a provider to use, why do I select five nine versus any other provider who, you know, there's great companies in this space, there's great providers from a technology standpoint, from a customer service standpoint, hopefully from a customer service standpoint, because that's what you deliver. Right, but why do I select Hive?
[00:25:10] Speaker B: Macd? Yeah, I think there's multiple reasons, Robin. And I would say first and foremost, these large enterprises are, they're definitely shifting away from these legacy providers. First of all, you've seen the news, you've seen what's happening to some of the legacy providers, some of their announcements around end of life in certain products. So there's a real catalyst to move to the cloud. Once large enterprises decide that they're going to go through this digital transformation and move to the cloud, which many, many of those enterprises are doing these days, it is a pretty simple choice. Most of the times when we compete and win, and again, our win rates against our chief competitors are north of 75%. We win on scalability first, the scalability in our platform is two x. Our direct competitors we could put into the tens of thousands of agents on one single tenant. Competitors can't do that. They can't come close to that. Scalability is key for these large enterprises. Reliability, living up to our name of five nines of reliability, is also a huge differentiator.
I would say the breadth and depth of our solution, including our AI and automation portfolio, which we've spent a lot of time talking about, we've leapfrogged the competition in that area. So we're out ahead. And I would say that the next big component of why we win is our customer first culture and the partnership approach that we take.
I was on a call with a customer, CIO from a customer yesterday, and he and I both were talking about how they don't view us as a vendor, they view us as a partner. This is software as a service.
We're an extension of their team, and we use the partnership term, not the vendor. We don't call ourselves a vendor and they don't treat us like a vendor, and they don't expect us to be a vendor as much as a partner. So I think our customer first culture and our team, our ability to truly partner with those enterprises in the end of the day, Robin, people do business with people, and that's usually why it's a big part of why we get selected as well.
[00:27:22] Speaker A: Absolutely. Once you can get that, yes, you're a partner or you're a trusted advisor, even better.
That's when you know the relationship's really working.
[00:27:30] Speaker B: Well, that's exactly right. And I will add that we, you know, since I've been here 15 years, we have so many of our people. We don't, we've had a lot of people that have stayed here 1012, 1314 years. And the reason is that the culture that we have as a company, but it's also the expertise within that team that we have, it's very unique compared to our competitors, and I'll leave it at that.
[00:27:56] Speaker A: Well, Mike, thank you so much. This has been a really good discussion, as I knew it would be. So thank you very much for joining us today and sharing your outlook on five nine and also on CX.
[00:28:06] Speaker B: Overall, thank you for having me on the interview, Robin. Really appreciate it.
[00:28:10] Speaker A: And thank you to all of our viewers and listeners today. We appreciate your time and everyone. Have a great day.
[00:28:16] Speaker B: Thanks all.
