Vonage Holdings Corp.
Q4 2020 Earnings Call Transcript
Published:
- Operator:
- Greetings and welcome to the Vonage Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. As a reminder this conference is being recorded. It is now my pleasure to introduce; Hunter Blankenbaker, Vice President of Investor Relations. Thank you. You may begin.
- Hunter Blankenbaker:
- Thank you operator and good morning and welcome to our fourth quarter 2020 earnings conference call. Speaking on our call this morning is; Rory Read, Chief Executive Officer; and Steve Lasher Chief Financial Officer. Also joining us is Jay Bellissimo, Chief Operating Officer; Omar Javaid President of the API Platform; Rodolpho Cardenuto Head of Unified Communications and Contact Center; and Tim Shaughnessy, our previous Interim CFO. Rory will discuss our strategy and fourth quarter results. And Steve will provide a more detailed view on our fourth quarter and full year results and 2021 first quarter and full year guidance. Slide that accompanies today's discussion are available on the IR website. At the conclusion of our prepared remarks, we'll be happy to take your questions. As referenced on Slide 2, I would like to remind everyone that statements made during this call may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's expectations depend on assumptions that may be incorrect or imprecise and are subject to risks and uncertainties that could cause actual results to differ materially. More information about those risks and uncertainties is highlighted on the second page of the slides and contained in our SEC filings. We caution listeners not to rely unduly on these statements and disclaim any intent or obligation to update. During this call, we will be referring to non-GAAP financial measures. A reconciliation to GAAP is available in the fourth quarter earnings press release or the fourth quarter earnings slides posted on the IR website. Additionally, during prepared remarks today all comparisons to prior periods are year-over-year unless otherwise noted as sequential. So with that I'll turn the call over to Rory.
- Rory Read:
- Thanks Hunter and thank you to everyone for joining us today. I hope you and your families are staying safe and healthy. I would like to start by thanking our Vonage team members around the world for their unwavering support and commitment to our customers during these extraordinary times. Our vision is to accelerate the world's ability to connect. And 2020 presented many opportunities to do just that and to make a real difference for our customers. We helped our customers address unprecedented challenges by finding new ways to work, connect and engage. One example is StoryCorps, the national nonprofit that has brought together more than 600,000 people to record intimate face-to-face conversation about their lives and leave a legacy. It is the world's largest single collection of human voices ever gathered and it is preserved at the U.S. Library of Congress for generations to come.
- Steve Lasher:
- Good morning, everyone, and thank you Rory for the warm introduction. I'm honored and excited to be the CFO of Vonage. I believe there is a huge opportunity in front of us, and I am looking forward to working with Rory and the leadership team to capture more market share while driving operational excellence and profitability. Turning to our results. I'll cover the following topics
- Operator:
- Thank you. We will now be conducting a question-and-answer session. Our first question has come from the line of Ryan MacWilliams with Stephens. Please proceed with your question.
- Ryan MacWilliams:
- Thanks for taking the question. So just to dig in to start on the consumer division how are the interest levels during the sales process? And what was the valuation that you were trying to achieve here? And just given how extensive this review was, does this really close the book on Vonage potentially selling its consumer business?
- Rory Read:
- Hey, Ryan thank you for the question. There's no question we went through a comprehensive strategic review. First, we had to understand and we brought in accounting and professional consultants to really dissect the business and pull it apart, because it's always been our intention to give greater transparency to our investors so that they could understand VCP, the Vonage Communication Platform and the Consumer business. It was definitely robust approaching 70 strategic and financial sponsor, there's no question, we went through two rounds of discussion. And we had quite a number of interest, but at the end of the day Ryan, it really comes down to this is a very efficient access of capital for us. We can run it efficiently without distraction and this gives us real flexibility as we continue the strategic pivot of Vonage from its traditional heritage to this leader in the global communication platform space. There's no question, we'll continue to invest in VCP to drive faster growth, as I mentioned in the progression of the Rule of 40 over the next three years. And that's something we'll dig into at the Analyst Day on March 5. But I believe that this is clearly the right decision. And clearly, we closed the book on this one. End of discussion.
- Ryan MacWilliams:
- Thanks. And the guidance for positive adjusted EBITDA for VCP was a nice surprise, especially like thinking about some of the wins in the video API segment. But since you are keeping Consumer and its cash flow, why is it important to you to have this positive adjusted EBITDA next year for VCP? And why not drive even more investment through the API business in fiscal 2021 to accelerate growth? Thank you.
- Rory Read:
- Yeah. It's just modestly positive, Ryan. There's no question about it. And we want to keep it in that range. The optimal model in terms of VCP is always going to be focused on growth at the top in terms of the service revenue. I want to make that strategic pivot. But we also over the course of the next two, three year journey is to make sure that business is very sustainable on an ongoing basis and can fund the investment and growth that we really want to drive in that space. We're not going to go heavy on the bottom line in terms of driving it. You're going to see we've tried to keep our firepower in terms of marketing and sales investment, quarter after quarter this year, to continue to improve that growth trajectory, right? And the work from Jay Bellissimo and his team as they come on with Rodolpho and Omar, Joy Corso on the sales – on the marketing side you're going to see us invest in velocity marketing to drive UC and CC and cross-sell and you're going to see continued focus to extend that API momentum as we go forward. I think that's a really important part of the ongoing strategic direction of the company. This is not a bottom line as you mentioned focus. We're going to keep it in that general range, but then continue to focus on capturing more growth accelerating the business over the next two, three years as we've improved our efficiency. And at the same time, Ryan invest in product innovation this year and next so that in 2022 and 2023 those years become the year of the product. And those product enhancements give our next leg up in terms of additional product growth. That's where we're going and that's the strategy we're on.
- Ryan MacWilliams:
- Thanks. Look forward to hear more at Investor Day. Good luck guys.
- Rory Read:
- Yeah, me too. Thanks, Ryan.
- Operator:
- Thank you. Our next question is coming from the line of Tim Horan with Oppenheimer. Please proceed with your question.
- Tim Horan:
- Thanks, guys. Can we delve into the API a little bit more? We're seeing kind of viral growth from a bunch of more developer platform-focused business models out there. Is this still an important part of the strategy? And maybe used to give kind of developer numbers that were working on the platform can you give us an update there? Thank you.
- Rory Read:
- Hey, Tim. How are you? Good to speak to you. Yeah. Hey, Tim. From the standpoint of API no question of about it, it's a key component of the strategy. The Vonage Communication Platform is built on that API platform. And really leverages those APIs to build once and sell many across the purpose-built capabilities. We see that same kind of momentum. And you saw Steve's comments about continued strong growth as you kind of looked at 1Q. We don't know exactly how the moderation of the pandemic will occur and we all hope that it moderates as soon as possible. But there's no question that the market and the way people work has changed forever and it will continue to be more and more virtually based and more and more communications-driven. So we think we're at the beginning of a five to seven-year trend in this kind of programming technique and this kind of approach around API. You're going to see us continue to invest in that platform using the dollars and capabilities of the business to enable us to continue to grow that. And you're going to see that. I think we'll take a piece on the developer background at the Analyst Day so we could kind of go deeper there. Jay, Omar, anything you want to add in terms of API going forward?
- Jay Bellissimo:
- Rory, it's Jay. I would just add also that we've got great diversity. When you look at our balance across the geographies, APAC 39% of our revenue; Americas 38%; and EMEA 23%. And we see a lot of great opportunity to really go across the geos and go deep in those geos. And that's providing some really good year-over-year momentum as well as quarter-to-quarter momentum. So we see a very positive outlook in terms of building that. And then the other point, I'd highlight is just the customer expansion. We're seeing more and more customers engage and use the wider portfolio of our APIs. With that over to you, Omar.
- Omar Javaid:
- Thank you, Jay. And great question. I'm glad that you recognize the power of the developer community. So I'll just share some insights there for you. We have the second-largest developer ecosystem in the space. We have over one million registered developers. And just to give you some recent facts here. We've got I think recently about 3.1 million documentation views, 10.3 million SDK installs representing about 13.5 billion API requests. And as Rory mentioned we are going to be highlighting a lot of this and go through this in a lot more detail in the Investor Day. But this is an area that we have been investing in for quite some time and we see a lot of great momentum from it.
- Tim Horan:
- Exactly, what I was looking for. Thank you. I look forward to the Analyst Day.
- Omar Javaid:
- Thanks, Tim.
- Operator:
- Thank you. Our next question is coming from the line of Rich Valera with Needham & Company. Please proceed with your question.
- Rich Valera:
- Thank you. Good morning. At the risk of I guess front-running the Analyst Day, I'm going to ask a couple of questions on the apps business. First, I know you've had some initiatives to kind of shore up the base of that business particularly the VBE cohort and the micro SMB component. So I wanted to just kind of get your status updates on those initiatives. Have you seen some stabilization or improvement in that part of the base? And then just high level in terms of how you're thinking about go-to-market for MME there. I know historically you've really been aligned with Salesforce and going after accounts that were sort of standardized on Salesforce and leveraging that integration. Can you give us any high-level thoughts about how you're thinking about going to market and MME going forward? Thank you.
- Rory Read:
- Thanks Rich. Rich, there's no question that the focus to tailor that go-to-market by customer segment where the products best fit and where we apply the right go-to-market is the right strategy. You're going to see us continue to build out this self-service and e-commerce at the bottom of that and the micro and beginning with small then you're going to see a lot of work around the channel particularly in the second and third quarter as we introduce new capabilities, new incentives, new programs make it easier and better to win with Vonage. And then that powerful Salesforce that's what's going to drive that direct salesforce at the top of the stack at mid and enterprise. It's tailoring to each area to get the efficiency. And then the work that Joy Corso is doing from our CMO perspective to drive the velocity marketing particularly across micro, small and mid, we're seeing some really interesting traction on some investments that we've done here in the first quarter. And as we get that information, we'll accelerate that through the balance of the year. So why don't I pass that over to Jay and Rodolpho just to add a little bit more color.
- Jay Bellissimo:
- Rodolpho, do you want to start?
- Rodolpho Cardenuto:
- Yes. Thank you for the question. Let me -- I think you commented about the VBE and the micro business. It's important to knowledge that we are bending the curve as you see in the revenue progression since Q2 last year. We have been progressing from Q2 to Q3 and Q4 and we expect that to continue in -- during this year. This is because we are bending the curve in VBE and micro business. One important thing to notice in terms of the micro investments that we did in the e-commerce. Now we have an easy acquisition for our customers using e-commerce, self-provisioning so -- easy provisioning for the customer and self-support also. Those were the process and that we implemented to make a micro business very profitable and grow for us. And in terms of Salesforce, we are doubling down with Salesforce. We have the best experience with Salesforce now, but we are also implementing and actually evolving with ServiceNow and Microsoft. With Microsoft we have the two connections now, Microsoft Teams and Microsoft Dynamics. We have a very good integration with Microsoft Teams and used key solutions and we have a very good solution also for Microsoft Dynamics with TCaaS solutions, not to mention the ServiceNow that we are getting a lot of attractions with them. So we are moving from -- doubling down with the Salesforce contact center, but also moving with the ServiceNow and solutions with Microsoft.
- Jay Bellissimo:
- I'm sorry. I was just going to add a couple of quick points to Rodolpho. A couple of other things for the portfolio in the UC and CC space is, we've seen some really good sequential growth in the bookings and we're planning to exit the year in the high single digits in service revenue. And with that, we expect next year's service revenue to be in double digits based on the trends we're seeing today. Obviously, there are some unknowns with the impacts of pandemic, but we're feeling good about this business and the growth. And to Rodolpho's point, yes, Salesforce has been a key part. But as he alluded to, we're also looking at the partnerships with ServiceNow and Microsoft. Over to you Rory.
- Rory Read:
- Yes. And Jay, I think that's an important point. What you want to do look Rich is, let's see -- and we talked in Steve's comment that looks for the trough in 1Q. And then, we should see year-to-year bookings growth starting in 2Q. We should see a steady improvement into the mid high single digits in the 2021 time frame. And as we look into next year, I think we can get into that low mid-double-digit growth rate in '22 as we continue to progress through this transition.
- Hunter Blankenbaker:
- Thanks, Rich. Next question?
- Operator:
- Thank you. Our next question comes from the line of Meta Marshall with Morgan Stanley. Please proceed with your question.
- Meta Marshall:
- Great. Thanks. Just a little bit more on the UCC business. Just is there any different trends that you're seeing between maybe the contact center piece of the business and the UC piece of the business? I know they're fairly well integrated at this point, but just any commentary there? And then the second piece would be, just on kind of the gross margin. Clearly, you're doing well with the higher-margin API business -- or you're seeing a lot of growth kind of in that higher value API business, but the gross margins of the segment just continue to kind of fall off. So just, what are we seeing in terms of the competitiveness or the margins of the rest of the API business? Thanks.
- Rory Read:
- Thanks, Meta. This is Rory. So, first comment would be on the UC CC, we're seeing some very good cross-sell activity across that portfolio. And again, where we see the CC strength, it's definitely in mid and enterprise, where we can definitely leverage the strength of our direct sales force to go to market. UC, we have it's not only there on that cross-sell, but then across the bottom of mid, small and into micro, where we're going to use those more efficient techniques with the channel and with e-commerce to drive that growth. I think CC is -- continues to have strength particularly as it's related around Salesforce and then the expansion of the TAM with ServiceNow and Microsoft that opens up more opportunity. That's really going to be a direct Vonage sales play and to leverage that continued growth. And when we gave those kind of feel for the next several quarters, that movement of the business is really a UC CC combination going from the trough here in low single digits into the mid and high single digits across the 2021 time period and then further in '22. But I'll let Steve Lasher give an update on gross margin I think to give you a feel for where we're sitting on that. Steve?
- Steve Lasher:
- Great. Thank you, Rory. And thank you Meta for the question. As we look at our VCP gross margins, when we take a look at first at where we are, we had strong growth in API, 33% growth from a revenue perspective, and then also from a UC CC perspective 4% growth. And if you look at the margins across the products, they were relatively stable. And it purely is a mix within our product offerings within there. So again, with the mix within the API-oriented businesses, our goal is obviously to improve margin. But we're really looking to drive the API scale as we go forward. And I really think that as we continue to expand the business, get -- and use the power of the global reach and the portfolio, we will also at the same time look to improve the margins as we go forward.
- Hunter Blankenbaker:
- Thanks, Meta.
- Meta Marshall:
- Thank you.
- Hunter Blankenbaker:
- Next question?
- Operator:
- Thank you. Our next question has come from the line of James Breen with William Blair. Please proceed with your question.
- James Breen:
- Thanks for taking the questions. Just a couple. One on the balance sheet side. I think you said that you're looking to get below sort of 2.5 times leverage sort of implies paying off around $30 million or so of debt this year. Is that sort of the goal, operating cash flow generation on the consumer side is around $120 million based on your estimates and sort of running VCP at breakeven?
- Rory Read:
- Steve?
- Steve Lasher:
- Yes. Sure. Thank you very much really for the question. We are. As we look to continue to operationalize the business, we are looking to pay down debt. Obviously, we want to make sure we are optimizing the business. And if there are other opportunities for acquisition or the like, we will make sure we prioritize those. But as you've seen we've made some real strong improvement in our profitability. And as we've given the guidance as we move forward towards the end of 2021, we want to be second half profitable and full year profitable. So again within that, we're going to evaluate what do we do and continue to pay down the debt is one of our priorities.
- Rory Read:
- And again on that one really the focus again is, if there's opportunities for us to do strategic M&A we're going to look at that hard and then also the work to invest for faster growth across VCP. This gives us more firepower and more flexibility.
- James Breen:
- Thanks. And then just on the sales side relative relationship with channel partners and agents etcetera how -- can you just give us some color on how that's progressed maybe quarter-to-quarter year-over-year in terms of being invited into more deals and maybe the win rate?
- Rory Read:
- Yes. So from the standpoint of the channel I spent a lot of time over the past six months meeting with various channel partners across the ecosystem to really understand how to be a better partner with those channel partners and what would create that momentum. Both Rodolpho and Jay have a long track record of leveraging the exponential power of the channel to drive growth, to drive expansion while we're sleeping across the planet right? That's the power of the channel. We targeted and looked at our products our portfolios our documentation over the last four or five months. We're making changes to all of that, additional capabilities and then we're working right now with -- in concert with feedback from our channel partners on the right next set of incentives and really drive that growth. You'll see that launch for 2Q and then we'll see us continue to build that out this year. It's suffice it to say that this is going to continue to be an even more important driver of our growth. As you see us move up that curve from a VCP Rule of 40, exit of 2020 at 15% at 2021 at the 20% range and then in 2022 in the mid-20s. That is a key piece of it. So you're spot on that and we'll look forward to giving you updates as we go forward.
- Hunter Blankenbaker:
- Thank you. Next question.
- Operator:
- Thank you. Our next question comes from the line of Mike Latimore with Northland Capital Markets. Please proceed with your question.
- Mike Latimore:
- Great. Thanks. I guess just two questions here. You just threw out the notion of strategic M&A. I guess can you give a little more detail on what you're thinking as a potential kind of criteria there. It seems like your product portfolio is pretty well-rounded out now. So just kind of curious what you might think about in terms of strategic M&A? And then second in terms of new bookings opportunities for your API business, how important is this notion of cross-selling into the application base there? It seems like a lot of the growth is just coming from direct at this point.
- Rory Read:
- Sure. So let's talk about M&A. M&A is opportunistic. We always are looking to potentially augment our technical innovations and there's lots of opportunities out there. But it has to make sense, if it expands our reach, our revenue base and our capabilities in terms of routes, that's also attractive. At this point we've done a really good job over the past 3, 4 years and strategically pivoting the business, Vonage Communication Platform. I think we've got the base products as you pointed out Mike. I think if there's any of that activity. It's opening up market expansion and TAM where it's augmenting technical innovation. It's going to be opportunistic and we're going to look at that going forward. Then from the API standpoint I'll swing it over to Omar.
- Omar Javaid:
- Hi Mike. Thank you for the question. I think what you were asking for how big is the opportunity in cross-selling APIs to apps and vice versa versus focusing on APIs? I think as we've laid out even before the opportunity within API is very strong. We continue to focus on it. Rory, Jay and team I candidly wouldn't have it any other way. However, we see -- we've invested a great deal and we have a strong customer base on the app side and it would behoove us to figure out how to become stronger at selling those solutions within those customers. So I think that's an opportunity. But we are very, very focused on being great at the API business as well.
- Hunter Blankenbaker:
- Thank you. Next question.
- Operator:
- Thank you. Our next question comes from the line of Catharine Trebnick with Dougherty. Please proceed with your question.
- Catharine Trebnick:
- Thank you for taking my -- yes. No sorry. I had you on mute. Thank you for taking my question, I have two. One is, it seems you have added a lot of the senior management team recently. Are you moving to a more traditional management structure with CTO, engineering, sales and marketing and away from more what was happening a year ago, where you had two centers of power, I would say, with API and then the UC and CC Group. I'm just trying to understand the new organization structure. And how that pans out for responsibilities and roles?
- Rory Read:
- Sure Catharine. Hey, there's no question. I love the power of the Vonage Communication Platform, an API-based platform with global reach leveraging, this global carrier network, a cloud-based infrastructure around the world. We can reach any customer, any partner, anywhere. And our APIs give us this build-able base. And these purpose-built applications, built on top of it. And UC and CC, that's the power of Vonage. It's diverse, in terms of the geography, representation of revenue, the industry representation, let's leverage that. That's the power and one of the differentiators of Vonage. And when you have the opportunity and you get into this. And we're going to drive a culture around accountability, collaboration, trust and driving excellence. We're going to do what we say. And own what we do. And that's going to be our culture. Want to make sure that, we augment an already strong senior leadership team, with really amazing talent. I mean, first Joy joins us, in terms of CMO. Then we go. And get, Jay, Steve Lasher, look at the scale there. And then, Savinay Berry just yesterday. These are opportunities and combination with the skills that we already have on board, that are now building a company, not for today but for the next three years, and the next five years. That's the kind of idea that we're tackling here. And we want to leverage that, Vonage Communication. That's what customers are looking for. Communications are going to rule the day, over the next five to seven years. We're in the right place, at the right time, with the right team. And then, under that, the technical team that we have in engineering and product, I'll go into any battle, with that team anywhere. Thanks Catharine.
- Catharine Trebnick:
- Yeah. And then, the follow-up is on, could you parse for us what the high-value API gross margins are? I know at one point in time, I was thinking the video, API was around 60%. Any possibility you can parse some of that information out for us? Thanks.
- Rory Read:
- Yeah. At the product level, we're not going to kind of get into that, kind of level. Suffice to say, high value is definitely on the higher end of the portfolio, in terms of the mix. There's no question. And we're growing a higher-and-higher percentage of that, as we go forward. But there's no question. It's the power of VCP. And with the new disclosures now, you can see that business much more clearly, over the past several years, how that's progressing and growing. And then, with the work that we're going to do at Analyst Day, we kind of set the vision for, where we're going to go over the next three years. Thanks, next question.
- Operator:
- Thank you. Our next question comes from the line of George Sutton with Craig-Hallum. Please proceed with your questions.
- George Sutton:
- Thank you. Rory you gave about a 1,500 basis point suggestion of improvement, in your Rule of 40 over the next three years. I wondered if you could just break that down into, growth versus margin plans.
- Rory Read:
- George, how you got to look at that, as we kind of talked about at the beginning with Ryan. Growth has to be the optimal driver. In an optimal kind of model, if we were looking three years down -- three years down is a ways away. But as you go for that 30% or better number in that timeframe, you're going to want to look for something in that mid-20s range on growth. Obviously higher is better, but that part. And then, you want to be in that mid-single-digit on the bottom. There's no question that the opportunity is on the growth side. We're in the high teens today, on VCP revenue growth. We need to accelerate that, over the next several years. Bottom-line there's lots of ways to make those numbers, but we definitely want to orient ourselves towards that growth driver. Does that help George?
- George Sutton:
- That's very helpful. Thank you.
- Rory Read:
- Okay, next question.
- Operator:
- Thank you. Our next question comes from the line of Will Power with Baird & Co. Please proceed with your questions.
- Will Power:
- Okay. Great. Thanks. Yeah, I guess, a couple I'll try to sneak in here. I guess, Rory, now that you've concluded the consumer strategic review. I wonder if you could just remind us, of the strategic importance of having API. And the UC contact center businesses together, how intertwined are those? And could it make any sense to look at strategic alternatives, for the UC Contact Center business, just to help shine a brighter light on the API segment?
- Rory Read:
- From my standpoint, Will there's no question, we're better together. The power of Vonage is in that reach and scope. I have no hesitation, at that, at all. The Vonage Communication Platform will be based on, API-based platform. And we're going to use that global carrier network, that global infrastructure reach to be able to reach any customer, anywhere, anywhere around the planet. And then, what we're going to do is, use those APIs and build those ones. And then, build those into the UC and CC capabilities, as we move forward. Sure. There's no question that there's some different sellers, but we already are seeing examples and I referenced a couple in the prepared remarks where customers are definitely seeing the power of UC and CC in that combination and we're seeing a lot more in terms of our Salesforce flow in terms of combined cross-sell opportunities. But then they love the API work to build out and give them scale and reach as they build out this communications reach. Does that help?
- Will Power:
- Yes. No that helps. Thank you. I guess, maybe just a second quick follow-up. As we look at the API segment and guidance I think you all are expecting an acceleration in revenue growth from what was just reported. So I'd love any further color as to kind of the key drivers behind the API outlook?
- Rory Read:
- There's no question from an API standpoint. We've seen some impact in the -- from the pandemic around hospitality and travel. But we've also seen acceleration in video and voice and verification and some of the others. It's a little bit hard to predict how the moderation of the pandemic will occur across 2021. We all want it to moderate. It's the best. There's no question that this change way -- in the way business is done is going to continue. But I think that kind of momentum is just going to continue to go. And what we've done is prudently look at the full year balancing what we're seeing in the short-term with the unknown of the moderation of the pandemic. At the end of the day we want to make sure we're delivering information that we are going to execute on and execute with excellence. Thanks, Will. Next question.
- Operator:
- Thank you. Our next questions come from the line of Michael Rollins with Citi. Please proceed with your question.
- Michael Rollins:
- Thanks and good morning. Two if I could. First, I was curious if you could provide an update on how you see the addressable markets in terms of revenue for the key product categories if you were to look out over the next three to five years and just take into account the evolving ways in which enterprise firms and their customers are engaging with each other? And then the second question goes back to just the management of the business. And curious if you're going to run -- now that you've done the strategic review, you illuminated more financial disclosures for consumer. Are you going to run consumers essentially a company -- a smaller company within the Vonage portfolio? And it will have its own balance sheet and its own specific objectives that are separate from the way you run and manage VCP? Thank you.
- Rory Read:
- Yes. So, Michael, I'll take the second one first and then you can remind me of the first one guys on the screen. The second one in terms of the consumer business in terms of that we definitely run that almost as a separate business today. There is some synergies across that, but they're relatively minor. This runs well. It's efficient. We have a strong small team that's working that. And I believe that we can run that business with -- well and without distraction. So you should think about that as a separate business segment set off to the side running where it makes sense. We'll use some synergies. But for the most part that's pretty standalone. And then the market opportunity around API, that in terms of and in terms of the Vonage Communication Platform, there's no question. From my standpoint it's the reason I came to Vonage. I believe that this is a secular change in the way communication and programming is done across multiple modes of communication to embed in every workflow, every application, every business process. It's going to change. And the pandemic as unfortunate as it's been has only accelerated that. And we're going to see that continue to happen for the next three to five years. We are in the right place at the right time. Thanks, Michael. Next question.
- Operator:
- Thank you. Our next questions come from the line of Samad Samana with Jefferies. Please proceed with your question.
- Samad Samana:
- Hi. Good morning. Thanks for taking my question. I'll just squeeze one in since we're already over the 930 mark. But if I think about the changes in the senior management team as you mentioned, you've deepened the bench you've made a lot of changes over the last 18 months. How should we think about maybe the turnover rate in the quota-carrying sales rep organization? And maybe what was the churn or retention there in 2020? And how should we think about in terms of backfilling or supplementing that in 2021? And then just -- I know you have an Analyst Day coming up in a few weeks and don't want to steal the thunder from that. But maybe how should we think about any additional strategic changes as it relates to the management of the business?
- Rory Read:
- Yes. I feel good about the org structure and how we built the leadership team. As there can always be small modifications, we've done the major work over the past six months. I think with the four additions, I think, we're in the right place. In terms of the first question and Samad you talked about our sales team. My experience in every business I've ever been part of the number one driver of sales productivity and the reason you're asking, it is spot on. It's time and patch. We've seen strong continued flow-through. So the longer someone is selling our products and our capabilities the more productivity they have. We want to create that environment where they want to be part of that and continue to grow with the business. We've seen at/or below industry levels of attrition over the past two years and over the past 12 months it's actually declined. But it's something that -- I know Jay believes in big time in terms of driving that productivity comes from time and patch and we're going to definitely manage that. So the data on that one you should think that we're having the team at industry or lower attrition rates. And that we're keeping those players focused to grow that business.
- Hunter Blankenbaker:
- Thanks. Next question?
- Operator:
- Thank you. Our next question comes from the line of Sterling Auty with JPMorgan. Please proceed with your question.
- Unidentified Analyst:
- Hi. This is Drew on for Sterling. You've mentioned this e-commerce self-service platform that will drive growth with micro businesses and SMBs. Is that a completely new solution? And if so could you provide some more color on the strategy surrounding that?
- Rory Read:
- Sure, Drew. Great question. And I really want to emphasize there's two pieces to it. It's not only the capabilities that we introduced over the past several quarters. It's something of the strategy that Rodolpho has been on and building out and at micro in the beginning of small segment. The other part of it is the work that Joy Corso and the marketing team are doing to drive velocity marketing around that. And as I mentioned in first quarter, we've implemented a number of new marketing -- velocity marketing tactics and we're seeing some very good signs. We're going to double down on that to drive that growth. But that's been our strategy since Rodolpho got here at the end of 2019 and he's been driving that change. We'll cover that in a little bit more detail at the Analyst Day.
- Hunter Blankenbaker:
- Thanks, Drew.
- Operator:
- Thank you. There are no further questions at this time. I would like to turn the call back over to Rory Read for any closing comments.
- Rory Read:
- Hey, I want to say thank you to everyone for participating. As committed, we communicated greater and more transparent disclosures. We closed on the strategic review of Consumer and we delivered a solid quarter in fourth quarter. We have a strong leadership team and a committed Vonage set of team members that want to create a better Vonage going forward. We're excited to tackle 2021 and beyond. And we look forward to sharing more information with you at our Analyst Day on March 5. I want to thank everyone for joining and the entire team that answered questions today. We appreciate it. Everyone have a great day. Stay safe and stay strong. Thank you everyone.
- Operator:
- Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.
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