Jive Software's (JIVE) CEO Anthony Zingale on Q2 2014 Results - Earnings Call Transcript

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Jive Software (NASDAQ:JIVE)

Q2 2014 Earnings Call

July 31, 2014 5:00 pm ET

Executives

Bryan J. Leblanc - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Anthony Zingale - Chairman and Chief Executive Officer

Analysts

Jobin Mathew - Deutsche Bank AG, Research Division

John Byun - UBS Investment Bank, Research Division

Jason Maynard - Wells Fargo Securities, LLC, Research Division

Jennifer Swanson Lowe - Morgan Stanley, Research Division

Heather Bellini - Goldman Sachs Group Inc., Research Division

Walter H. Pritchard - Citigroup Inc, Research Division

Michael B. Nemeroff - Crédit Suisse AG, Research Division

Matt Lemenager - Robert W. Baird & Co. Incorporated, Research Division

Josh Giles

Operator

Good day, and welcome to this Jive Software Second Quarter 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Bryan Leblanc, Chief Financial Officer of Jive Software. Please go ahead, sir.

Bryan J. Leblanc

Thank you. Good afternoon, and welcome to Jive Software's second quarter 2014 earnings call. We will be discussing the results announced in our press release issued after the close of market today. As the operator mentioned, I'm Bryan LeBlanc, Chief Financial Officer of Jive. And with me on the call is Tony Zingale, Jive's Chief Executive Officer.

During the call, we will make statements related to our business that are considered forward-looking under Federal Securities Laws. These statements reflect our views only as of today, and should not be reflected upon as representing our views of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our periodic filings on Form 10-K and 10-Q, which are on file with the SEC.

Also, during the course of today's call, we will refer to certain non-GAAP financial measures. There's a reconciliation showing GAAP versus non-GAAP results currently available in our press release issued after the close of market today, which is located on our website at www.jivesoftware.com.

With that, let me turn the call over to Tony, and then I'll come back at the end to provide details regarding our second quarter results, as well as our guidance for the third quarter and the full year 2014. Tony?

Anthony Zingale

Thanks, Bryan, and thanks to everyone for joining us today to review our second quarter results. We delivered second quarter revenue of $43.4 million, which exceeded the high end of our guidance, and represented year-over-year growth of 23%. Based on our second quarter performance and outlook for the remainder of the year, we are increasing the low end and midpoint of our full year guidance for revenue.

From a profitability perspective, we reported a non-GAAP loss per share of $0.07, which was better than our guidance of a loss of $0.10 to $0.12.

Short-term billings, which we define as revenue plus the change in short-term deferred revenue, was $46.1 million, representing 10% year-over-year growth. This was below our expectations due primarily to challenges we experienced trying to close several larger transactions in the quarter. We have already closed a few of these transactions in the third quarter. However, we expect the near-term sales environment will remain more challenging versus our prior expectations. I'll discuss this in more detail, but the high-level takeaways that we are adjusting our 2014 short-term billings outlook to mid to upper teens growth compared to our prior target of 20% growth for the year.

More importantly, as we look at the longer term, we remain optimistic about our opportunity to leverage our position as the leading pure-play vendor in the enterprise communication and collaboration market.

Accelerating our top line growth profile is our top strategic priority. We believe we are well-positioned to do so over time as we realize the benefits of our investments and focused strategy, while, at the same time, making annual progress towards profitability.

As we discussed over the last year, we have tightened our go-to-market focus on 3 use cases, where we see our customers deploying Jive most often, and where there is typically dedicated budget of business sponsor and the fastest time to value, portals, social internets and external communities. This has been an effective strategy as it has simplified our go-to-market messaging, making it easier for current and prospective customers to understand how deploying Jive can enable them to provide the enterprise collaboration tools today's workforce needs to work better together.

We remain confident that this strategy positions us to achieve our goal of returning to 20%-plus short-term Billings growth over time.

As I indicated a moment ago, we had a number of large deals targeted to close that pushed beyond the end of the quarter. Given the increasing importance of collaboration platforms within the enterprise, we saw a higher degree of scrutiny being applied from both procurement organizations and ultimate budget approvers at the executive level. In some cases, this is because they are making these purchase decisions within the context of a much larger enterprise transformation. They are taking time to understand the roadmap being put forward by Jive, but also Google and Microsoft, to understand how these solutions will work in concert.

While this dynamic is causing the market to move more thoughtfully in the near term, we view it as a positive development for Jive. We have made significant investments integrating into the next generation of enterprise systems, and believe that our open platform, combined with strong integrations into other leading cloud providers, provides us with a significant strategic advantage in the long term. We, and our customers, see a strong complement between collaboration solutions, like Jive, when tightly integrated into productivity solutions like Office 365 and Google apps, transactional systems like Salesforce and Workday and content solutions like Box and Dropbox.

We believe the weight and importance of the decision-making now being applied by IT is evidence that enterprises are leaving behind their investments of the past, and is further validation of the significant market opportunity in this space.

Jive continues to deliver quarterly cloud releases and has the most modern collaboration of platform on the market. This was most recently validated by 2 independent research firms:, Forrester and Aragon Research. For the second time, Jive was positioned as a leader in The Forrester Wave report, which evaluates the market's top enterprise social platform vendors. In particular, the Forrester report noted Jive thrives on user experience, something we see every day in our customer interactions.

Similarly, Jive was recognized as the top vendor in the leader category in the recently released Aragon Research Globe for Social Software Vendors. Aragon's report called out the noteworthy strengths of the Jive platform in areas like realtime collaboration and mobility, both highly differentiated from our competitors and sought after by customers.

We continue to push the pace of innovation in the enterprise communication and collaboration market. This is evident in the upgrade activity we are seeing in our most recent platform release, Jive 7 and Jive Cloud, where more than 65% of customer instances are now in production on Jive 7 or above. This represents by far the fastest adoption of a new platform released that we have ever experienced, and indicates the value customers see from our continued quarterly innovation.

We are looking forward to introducing our latest set of market-leading innovations this fall at our JiveWorld User Conference.

We also continue to deliver significant value to our customers. And during the quarter, we signed new and expanded business relationships with blue chip customers like Akamai Technologies, Artelia, Eli Lilly, Euroclear Bank, Gentex, Humana, Huntsman, Intercontinental Exchange, Modern Times Group, Persistent Systems, PricewaterhouseCoopers, ServiceMax, Sodexo, Morgan Stanley and Univision, among others.

We are seeing particularly strong customer activity in the external community market with the JiveX, our industry-leading cloud-based external community platform. Since the introduction of JiveX, we have seen very positive customer feedback in deal activity, and it is clear that external communities are now becoming a must-have for corporations today.

One example of the growing momentum behind JiveX in the second quarter was a major commitment from Humana, the third largest health insurance provider in the United States. Following a successful pilot, and after evaluating Jive compared to several other competitors, Humana signed a multi-year deal with Jive to standardize on the JiveX platform for all of its external customer communities across several major business segments. Humana made the strategic decision to adopt JiveX due to our proven ability to configure and scale multiple communities against multiple use cases.

A great example of a successful JiveX deployment is Esri, a global supplier of GIS software, who is a significant JiveX cloud win during the first quarter. We're now pleased to announce they successfully launched their JiveX community, customer and partner community, just 3 months later in the second quarter, and already have nearly 40,000 users, generating over 150,000 page views a day. Esri's new JiveX community underpins the company's strategic initiatives around customer support, partner enablement and developer collaboration.

We continue to expand our go-to-market reach, and we are very excited to jointly announce our relationship with Cisco earlier in the quarter. We're delivering Jive's industry-leading enterprise collaboration platform with Cisco's realtime technologies like WebEx and Jabber, providing customers a complete integrated platform for a company to engage their employees, customers and partners to work better together. It will take the partnership time to become fully productive as there is a learning curve and a pipeline-building process, but we are already seeing some early positive signs, including our first joint deal with Euroclear Bank, a world leading international central securities depository. The Belgium-based financial services company signed a deal with Cisco and Jive to drive enterprise-wide collaboration and a more effective paradigm for knowledge and expertise-sharing across the group.

To summarize, we are focused on continuing to enhance our go-to-market efforts, and believe we will be successful on achieving our long-term growth objectives. We have the most comprehensive product offering in the market and an unmatched track record of delivering value to customers. We know how to execute through the recent changes in the marketplace and deliver solid growth for the year, while continuing to take steps necessary to position Jive for increased growth over time.

Before I turn the call back over to Bryan, I'd like to make a few organizational announcements. First, Oudi Antebi, our Executive Vice President of Products, will be leaving the company during the third quarter to return to his roots founding a startup. Under Oudi's strong leadership, our product organization has delivered a tremendous amount of innovation that has extended our position as the clear product leader in the enterprise, collaboration and communication market. Our product organization will now report to Elisa Steele, our Executive Vice President of Marketing and Products.

We are also announcing that our Senior Vice President of Worldwide Sales, John McCracken, will transition out of the company at the end of the year. John has worked tirelessly for nearly 6 years to build a world-class enterprise selling organization that helped us grow from a small startup with big dreams through an IPO and into one of the leaders in enterprise collaboration market. Over the balance of the year, John will help the transition the leadership of our worldwide sales organization as he focuses his energy on supporting our strategic go-to-market activity with Cisco.

I would also like to announce today the promotion of Chris Masino to Senior Vice President of Worldwide Sales, reporting directly to me. Chris has been at Jive almost 5 years and has built an outstanding organization as vice president of our largest sales region, where he's been involved with many of our most significant customer wins and success stories. With more than 20 years of enterprise software sales leadership, Chris is the perfect choice to build on the strong organization we have in place today.

Prior to Jive, Chris had significant leadership roles at Hewlett-Packard, Mercury Interactive and EMC. I am thrilled to see Chris taking on this role, and John will be working closely with him on the transition.

With that, let me turn the call back over to Bryan.

Bryan J. Leblanc

Thanks, Tony. I will begin by providing a detailed review of the quarter, followed by our updated outlook for the third quarter and the full year 2014. Total revenue was $43.4 million in the second quarter, up 23% year-over-year.

Breaking this down further, product revenue was $39 million, an increase of 24% year-over-year, while Professional Services revenue of $4.3 million increased by 18% year-over-year. Our revenue mix has continued to be more heavily weighted towards product revenue due to the increasing percentage of customers choosing public cloud deployments and the improved out-of-the-box functionality of our product offering. However, as we focus our Professional Services organization on strategic consulting and migrating existing customers from the cloud, we continue to expect Professional Services revenue, as a percentage of total revenue, will fluctuate from quarter to quarter.

Our short-term billings, which take into consideration the change in short-term deferred revenue, were $46.1 million in the second quarter, representing 10% year-over-year growth.

Total billings, which includes changes to both short term and long-term deferred revenue, were $40.8 million compared to $42 million in the year-ago period. The reduction in total billings reflects a higher mix of multi-year contracts signed with annual payments in the second quarter of 2014 versus a larger number of multi-year contracts that were prepaid in the year-ago period.

As we have mentioned previously, long-term billings growth can fluctuate quarter-to-quarter and be difficult to forecast due to the number and timing of multi-year prepaid deals, which is one of the reasons we focus on short-term billings.

Let me turn to the supplemental metrics that we share on a quarterly basis. We ended the second quarter with 903 customers compared to 890 at the end of the first quarter and 848 in the year-ago period. As we have said in the past, adding customers is an important part of our growth strategy, but our primary focus is to drive billings growth, which could be more heavily weighted towards new customer adds or by selling into our existing customer base in any given quarter.

Our dollar renewal rate for customers that spend over $50,000 annually was 89% in the second quarter when excluding upsells. When including upsells, our annual dollar renewal rate fell slightly below historical averages to 109%. Renewal rates were slightly below historical percentages due primarily to one large customer, who chose not to renew. We expect our renewal rates to return to their historical levels in the third quarter.

In terms of the mix of our business, internally focused communities represented 73% of our product revenue for the quarter, and externally focused communities represented the remaining 27%. This compares to a 70-30 mix, respectively, in the second quarter of last year.

With respect to how customers are deploying our enterprise collaboration platform, 68% of our product revenue for the quarter related to public cloud deployments and the remaining 32% related to private cloud deployments compared to a 63%-37% mix in the second quarter of last year. We continue to see increased customer interest in our public cloud offerings due in part to the fact that we are bringing significant, highly differentiated product innovations to market every 90 days.

As we move forward, we anticipate our mix of business will remain more heavily weighted towards public cloud deployments.

From a geographic perspective, the U.S. generated $33.5 million of revenue for the second quarter, representing 77% of our total revenue and an increase of 23% on a year-over-year basis. International generated $9.9 million of revenue, representing the remaining 23% of our total revenue and an increase of 24% on a year-over-year basis.

Moving down to P&L. Our non-GAAP gross profit was $28.6 million, which equates to a non-GAAP gross margin of 66%. Non-GAAP operating loss was $4.4 million for the quarter and above the high end of our guidance range of a loss of $7.1 million to $8.1 million. The earnings outperformance was driven by the revenue outperformance in the quarter, as well as the timing of investments, as we continue to balance between investing for growth and making progress towards profitability. This compares to a non-GAAP operating loss of $9.2 million in the year-ago period and represents the smallest quarterly loss in over 4 years.

Non-GAAP net loss per share was $0.07 for the quarter based on 70.2 million shares outstanding. This was above the high end of our guidance range of a loss of $0.10 to $0.12 per share. On a GAAP basis for the second quarter of 2014, gross profit was $26.7 million, operating loss was $14.4 million and net loss per share was $0.21. We ended the quarter with 686 employees, which is up from 645 in the year-ago period and 682 last quarter.

Moving over to the balance sheet. We ended the quarter with cash and cash equivalents and marketable securities of $139.2 million compared to $139.3 million at the end of the first quarter.

From a cash flow perspective, we generated $4.2 million in cash from operations and invested $3 million in capital expenditures, which led to a free cash flow of positive $1.2 million for the second quarter.

Free cash flow was a negative $1.7 million in the second quarter of 2013.

Our strong cash flow performance in the quarter was driven by solid cash collections activity. Total deferred revenue was $143.6 million at the end of Q2, up $15.5 million from Q2 2013 and down $2.6 million sequentially.

Short-term deferred revenue was $116.1 million, an increase of 20%, compared to $96.8 million at the end of the second quarter of 2013 and up 2% compared to end of last quarter. Long-term deferred revenue was $27.4 million at quarter-end compared to $32.7 million at quarter-end last year. I'd like to finish with our financial outlook for 2014 starting with the full year. We are updating our total revenue guidance to $172 million to $176 million from $171 million to $176 million. This now represents year-over-year growth of 18% to 21%.

From a profitability perspective, we now expect to generate a non-GAAP loss from operations of between $24 million to $28 million compared to our prior guidance of a loss of $26 million to $30 million. This equates to a non-GAAP net loss per share of $0.35 to $0.43 for the full year 2014 based on 70.7 million shares outstanding compared to our prior guidance of a non-GAAP loss per share of $0.38 to $0.45.

We are maintaining our full year free cash flow guidance of a negative $15 million to negative $20 million.

In terms of guidance for the third quarter, we are targeting total revenue of $44 million to $45 million. We expect a non-GAAP loss from operations of $4.5 million to $6.5 million for the third quarter, leading to a non-GAAP net loss per share of $0.08 to $0.10 based on 71.1 million shares outstanding.

In summary, we are confident in our long-term strategy and working hard to deliver improved growth in the future, while working through some of our near-term challenges that were cited earlier. We are targeting a dynamic multibillion-dollar market opportunity, and we believe Jive's clear technology leadership positions us well to capitalize on this opportunity.

With that, we'd be happy to take your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] And we'll take our first question from Karl Keirstead with Deutsche Bank.

Jobin Mathew - Deutsche Bank AG, Research Division

This is actually Jobin Mathew sitting in for Karl. When I look at your guidance for the back half of the year, I know you've reduced it to the -- these short-term billings has come down to the mid to the high teens, but it still implies that the back half performance need to accelerate to over 20% in terms of short-term billings growth. What gives you the confidence that you have these in the bag? Or what gives you the confidence that these will come back in the second half?

Bryan J. Leblanc

Well, yes. So this is Bryan. Certainly, that is true. Obviously, with Q1 and Q2 compared to the full year percentages, we do expect that we will see a return to growth in the second half of the year in those ranges. It's obviously all the investments that we have been making and we've been making, and we continue to work on honing our go-to-market strategies. We've got several things that we have from a product perspective in the pipeline as well. All of those things, when you look at the activity that's been going on since the latter part of last year and into this year and think about the average selling cycle for a Jive software enterprise sale, the kind that we tend to do, all of those things tend to look at the back half of the year for that acceleration versus the front half. And as Tony mentioned, we still feel very good about our go-to-market strategy, the way we're positioning the product, the way that we're getting leverage from that messaging and all those things combined to give us that kind of visibility and that kind of guidance for the back half of the year.

Jobin Mathew - Deutsche Bank AG, Research Division

In terms of the usage slip this quarter, and you said you've kind of recovered some of them this quarter, what's the dynamic there? Is there pressure on pricing from some of these customers? Or are people -- or are just people balking [ph] at the size of the deal? What's exactly happening out there?

Anthony Zingale

This is Tony, and we languaged this in our remarks around the whole replatforming of the enterprise that's taking place, the movement to the cloud, the embracement of mobility, the embracement of collaboration platforms. Most of the IT organizations and significant enterprises around the world are in the midst of it. And it's not just Jive, it's all of the cloud-based offerings that are out there. The evaluation cycles are taking a little bit longer in several of the deals, as we've said. So that's what's going on. Professional procurement departments have always been involved, embracing a business sponsor. And the IT organization, in our case, has always been involved. And we're very good at navigating through that process. It just so happened that this quarter, there were several of those deals that we did not complete like we -- I had forecasted to be completed.

Jobin Mathew - Deutsche Bank AG, Research Division

Got it, okay. And then it seems like the trans -- or last question from my side is that it seems like the transition in management is still happening. So the question for me is, are you guys sort of growing your sales headcount? What are your plans for this year? Are they on track?

Bryan J. Leblanc

So this is Bryan. Our plans are absolutely on track. We continue to look at the strategic investments in the sales organization and certainly, in coverage, where it makes sense. We're certainly all about capitalizing on this market opportunity. The transition in leadership is largely an internal thing. It doesn't really change the way that we're thinking about the market or how we're going to market.

Operator

And we'll take our next question from Brent Thill with UBS.

John Byun - UBS Investment Bank, Research Division

This is John Byun for Brent Thill. I just had 2 questions. One, on the challenging sales environment, was that -- did you see that across the board? Or were there any differences between across the different product use cases or custom size or geography?

Anthony Zingale

So this is Tony. It was not across the board. I think we languaged, again, in our remarks that the external customer communities with JiveX has a different competitive landscape to it. There aren't large incumbents present typically in those. There's a real, well-defined use case around customer service or a marketing brand. We highlighted the Esri case. It was a fundamental piece of their marketing strategy around their users and partners. The challenge we were citing had to do more with internal use cases once that involved complete enterprise-wide collaboration, a deliberation around cloud and mobility, the need to evaluate security when companies are moving to the cloud, particularly in the financial services and healthcare sectors that we do very well in. So that's where we encountered it. And so a little additional elongation there, but -- and again, as we said in the call, several deals.

John Byun - UBS Investment Bank, Research Division

Okay. And my second question was on the Cisco partnership. Where are you in terms of, I guess, training the Selsius on either side and then starting to generate the pipeline?

Anthony Zingale

Yes, on our side, our guys are very well-trained at Jive. As you may know, that Cisco's fiscal year ends today. So they'll be beginning their 2015 fiscal year tomorrow. So we are in the midst of enabling their channel on the combined solution as we speak. And as we said, again, in the remarks, we're at the beginning of enabling that channel. As you also know, probably, they have a large, vast partner network in addition to their direct global account management team. So we are in the midst of enabling all of that. They are a large, very segmented organization that we hope to move as quickly as possible through the enablement process.

Operator

And we will take our next question from Jason Maynard with Wells Fargo.

Jason Maynard - Wells Fargo Securities, LLC, Research Division

The question I had really is with your short-term billings guidance coming down to the mid-teens, and obviously, you're not talking about next year, but I think we have to assume. At this point at least, you're probably going to take a little bit more cautious in your fiscal '15. What are you guys thinking about on the operating expense side? Because you're effectively kind of maintaining the levels of profitability that you were looking at earlier. How does this sort of near-term pause and what your growth rate expectations change this view of cash flow generation and your path to breaking even on an operating income basis?

Bryan J. Leblanc

Sure, yes. So this is Bryan. Thanks, Jason. We're not going to give guidance for 2015 on this call. And certainly, we're going to continue to balance our investments, as we always have, between the things that we do to capitalize on growth in this market, as well as thinking about that path to profitability. I'll point out, and I think it was a subtle point, but I want to make sure that we hit it. This quarter, Q2 that we just finished, was the smallest loss on a quarterly basis that we've had over the last 4 years, and down substantially from the loss last year. From a loss per share standpoint, it's 50% better. And certainly, from a dollar standpoint, it's significantly lower. I think if you look at our expense growth over the last several quarters, we've moderated that expense growth not because of this dynamic uniquely, but obviously with this kind of focus in mind. I think we'll continue to make those trade-offs. Your point's well taken, and certainly, we've already been taking it into account. And I think if you were to look at how we're thinking about the business, it's always a blend. And there'll be an update on what we think about 2015 when we do the call and set our guidance, as we normally do, at the beginning of the year 2015.

Jason Maynard - Wells Fargo Securities, LLC, Research Division

And Tony, maybe the follow-up then for you is given the sales headcounts you have in place with -- obviously, when deals close, that drives sales force productivity metrics. Do you feel like you have enough capacity today even if you weren't going to be expanding the distribution side of the organization to grow the business in at least the 15% range or maybe even better, in the 20% range, which is the capacity you have on tap today?

Anthony Zingale

Absolutely, and thanks, Jason. We absolutely do a lot of capacity modeling. We understand the productivity of our sales force. We know that it's different in different parts of the world for us. And so we model that all in to the numbers, Bryan, provided we feel very good about that. In addition, that's probably -- we should probably make the point that we've made last quarter. And this quarter is that we've built no Cisco upside into our numbers whatsoever, the prior question around more in the beginning of enabling that channel in addition to our channel, the beginning of their fiscal year. And so we haven't built any of that in. And so, any view on sales capacity as we go into '15, as Bryan said, and we're not providing any of that guidance, we're hopeful it can be not only our direct selling force, but hopefully, again, in the future, some indirect selling leverage as well, which is why we did the partnership in the first place.

Operator

And we will take our next question from Jennifer Lowe with Morgan Stanley.

Jennifer Swanson Lowe - Morgan Stanley, Research Division

I wanted to follow up a little bit on some of the deals that slipped out at the end of Q2, and the commentary there in terms of the strategic value of enterprise social and how that sort of that replatforming is happening around communications. And then sort of on the other hand, one of the things that we've talked about with you all the last couple of quarters is this move towards trying to simplify the sale a little bit, focus on some of the easiest landing use cases like portal and external communities. And so as you think about those 2, which seem a little different, i.e. you're trying to simplify the sale, yet the sale is getting more complex. I guess, first question, do you still think that simplification strategy is the right one? And then secondly, how do you -- do you have any better ability to manage the deal flow and timing? Or is it still the same challenges even with some of these simplification efforts that we've been talking about?

Anthony Zingale

Yes, so this is Tony. So we absolutely believe that the simplification around the 3 use cases is the right one. And as I mentioned in the remarks, the external use case, in particular, is becoming table stakes. Most businesses today require a customer-facing and partner-facing, if that's a big part of your go-to-market as a business, their customer and partner-facing communities. So that one is very straightforward. We know how to run that sales cycle. We talked about the continued momentum in our external community business with our JiveX platform there. On the internal side, I think what you're poking at a little bit is the commentary in and around the replatforming. And you have to separate the 2 points because there's still a need for an enterprise-wide social intranet to connect all of the employees in a company, particularly a functionally, distributed, geographically-distributed organization, such that they can work better together cross-functionally, find people, find information, executives can strategically align, et cetera, et cetera, is kind of the core of the Jive value proposition, and why we were determined as the leader in both the Forrester Wave and the Aragon Globe. The answer to that question is absolutely, hence, why it remains as a strong use case. On the portal replacements, same thing, strong use case replacing older-generation technologies. What I'm referring to when I talk about the replatforming is the evaluations are more significant than just the 2 use cases. Should we move from on-premise software like SharePoint, which is only on-premise and has been end-of-life to the cloud-based version that's included with Office 365? This was causing consternation in the minds of the IT executives making those decisions. While I make that decision, maybe I should evaluate Google Drive. While I make that decision, maybe I should evaluate Box and Dropbox. As I move off maybe older-generation Oracle and SAP HR systems, maybe I should evaluate Workday. So the entirety of the enterprise cloud-based strategy is being evaluated. Jive gets drawn into that because of the use cases that are so well-aligned with the need to replatform across the enterprise. And in several cases and a handful of cases, that elongated the cycle. So I appreciate large enterprises like yours that evaluated very significantly for months on end security ramifications of taking a Jive collaboration platform out of the cloud. It's something that we've always experienced here at Jive. In this particular case, it went longer than the Q2 quarter. And as I mentioned, several of those deals have already closed here in July.

Jennifer Swanson Lowe - Morgan Stanley, Research Division

Great. And maybe just one more for me. If you go into organizations now, how do you find that they've already had some experimentation with social maybe from other vendors like Salesforce and Microsoft with Yammer versus how much of the selling you're doing today is really to convince people of the value of communicating in a different way? Just curious how much Chatter and Yammer you see out there today versus a year ago.

Anthony Zingale

So 2 questions there. On the first one, yes, there have been a lot of failed implementations of Yammer and Chatter, and we take full advantage of those. And we actually don't see Chatter very much at all anymore, and Yammer has now been included as part of the Office 365 capability to some extent. So -- but the enterprises typically have had more exposure today than they did a year ago to enterprise-wide communication and collaboration and connecting with people in a different way, and certainly more than a couple of years ago either because they tried it with other offerings or the needs have become, like I mentioned, again, with the external communities, have become table stakes. There are better ways to connect and communicate and collaborate. And it's not just Jive. I mean, it's other vendors that are delivering capabilities in and around the collaborative platform that are making the point even more so than just Jive. And I talked a little bit about user experience and user centricity. This is a super important element of this whole movement, particularly when you go to mobility and pads. The experience is what matters most to clients. And again, with some of the other generation solutions you described, that's where they really fall short.

Operator

Next, we have Heather Bellini with Goldman Sachs.

Heather Bellini - Goldman Sachs Group Inc., Research Division

Great. I wanted to ask a little bit about, following up on Jason's question, about the productivity of the sales reps. And I guess, the first thing we should start with, I didn't hear you give a net new customer count for the quarter. I was wondering if you had that to share. And then I have a couple follow-ups.

Bryan J. Leblanc

Yes, so we gave -- we didn't give the exact number. We gave the -- the customer count was 903. Now I think that -- and if you go back and look at it, it's up 13 from the prior quarter.

Heather Bellini - Goldman Sachs Group Inc., Research Division

So then how do you think about -- how do you grade the productivity of your sales reps given the number that you're signing is either high single or low-double digits each quarter versus the number of reps that you had?

Bryan J. Leblanc

Yes, well, we don't think about it from a productivity sense as net new logos per sales rep. If we wanted to incent them that way or drive them that way or grade them on productivity that way, we'd probably focus their attention differently. They all have, as they always have, the mandate to grow their business. And in some cases, if you are the person that's curating a larger account that has lots of upsell opportunity, you're obviously going to think about net new customers differently and your time differently than if you're a person in a patch [ph]. That, frankly, is going off and kind of expanding that patch. When you blend it all together, that number for us is typically anywhere from the mid-teens to the kind of low to mid-20s in any given quarter. And we don't agonize over it. We look at it as kind of a side metric relative to what we really care about, which is new business growth and what they're doing. And I think -- but for the couple of slipped deals that we talked about in the early remarks, we feel good generally about the productivity of this sales force. And we don't really factoring the net new customer count as a way to think about how those guys are doing.

Anthony Zingale

Remember, we quota -- this is Tony, Heather. We quota our salespeople on overall billings, which is inclusive of upsells into their installed base, which has long been a hallmark of the Jive strategy of land on a use case and then upsell from there, number one. We quota them on new business, to your point, not new logos, new business, which many times will start off as a smaller transaction initially, and then over time, will build into the upsell opportunity. And then lastly, they are responsible for the renewals, which are a big part of our business, as you know, and something that we're very proud, typically even though we were down 8 percentage points this quarter, but 90%, which is typically our average, and 110% with upsell. So they're responsible for all of those dimensions, and that's what we quoted them on, and that's what we feel generally good about without giving you any metrics. I assure you, we're looking at that pretty granularly on an operational basis.

Heather Bellini - Goldman Sachs Group Inc., Research Division

Okay. And then the follow-up would just be the customer that did not renew that, I guess, drove the sequential decline in the renewal rate x upsells, can you walk us through what the reason behind that was?

Anthony Zingale

Yes, it's pretty straightforward. It was a very successful Jive deployment for a social intranet, and we lost our business sponsor, who left the company. And when the renewal time came up, the IT organization took responsibility for that and did a larger, all-inclusive buy with one of the stack vendors instead, and took an inferior replacement to the Jive offering, and our sponsor was not there to defend it.

Operator

Next question comes from Walter Pritchard with Citi.

Walter H. Pritchard - Citigroup Inc, Research Division

Tony, I'm wondering if you could talk about any changes you're making in terms of the go-to-market here? It seems like 3, 4 quarters ago, you did make some changes and had some success there. And I guess, I'm trying to get a sense of this sort of reset here. Is this something where you step back and make significant changes or do you generally march ahead in terms of the strategy you had in place, and just look to keep an eye on deals better to the pipeline?

Anthony Zingale

Yes, there's no reset. It's really continued and continuous refinement of our go-to-market strategy, along the use cases we described, taking advantage of the Jive Cloud offering and the Jive 7 release from an on-premise delivery capability, which is still unique to Jive. A lot of the work that Elisa Steele has done with respect to refreshing our brand and a lot of what we kind of alluded to that we'll be announcing on the road towards JiveWorld in October, around new products and new offerings for our existing customers and our propective clients. So again, refinement and continuous improvement. We're pretty set on the changes we made over a year ago in and around our use cases, the cloud, mobility being very important, external communities being very important, focusing our sales force on upsells and new logos, and getting the renewals to the best of our abilities. So that's what we're riveted on.

Walter H. Pritchard - Citigroup Inc, Research Division

Got it. And then just as it relates to hiring on -- you asked earlier about productivity. Just from a hiring perspective, can you expect to just sort of dampen the level of hiring as you go into the second half year, just to make sure your productivity remains where it is? Or any commentary around the strategy there?

Bryan J. Leblanc

Right. We're not going to comment specifically on rep hiring. We never do. But I would tell you, we're always looking at balancing investments for growth versus that dynamic, that Jason mentioned, around short and near term kind of path to profitability. We'll always be building capacity for growth to the extent that we want to make sure that we're capitalizing on the market opportunity we've got. But I think there's lots of other places to look besides just the sales organization as you think about where you can get leverage from the existing investments that you've got, building product, and certainly, all of the marketing activities we're doing. These are all things that give us leverage over time. So you've seen in the last couple of quarters, we've moderated our hiring and spending. I think that's prudent, but we're certainly not falling back on our desire to invest to be able to make Jive a big, successful company over time.

Operator

And next, we move to Michael Nemeroff with Credit Suisse.

Michael B. Nemeroff - Crédit Suisse AG, Research Division

Most of them have already been asked, but recently, I read an IDC report, and I think the analyst there had mentioned that they expect the enterprise social industry to grow about 24% in 2014. I'm just trying to square that up against the high-teens billings growth that you're kind of guiding to these days and wonder, is there something changing competitively? Is it just -- is competing against free with Yammer impacting you? I'm just trying to get a sense of that.

Anthony Zingale

Yes, the -- each of the industry analysts takes a different cut on it. I'm not exactly sure what is all included in the IDC number. Is it just 100% of what Jive does? Does it include anything with respect to file sync and share market and content? Is there any drag from email add-on systems? I have no idea. But the market, as we see it, back to an earlier question, remains pretty robust. I keep coming back to external customer communities and partner communities becoming table stakes for most businesses, the need for movement to the cloud and supporting a mobile workforce with an enterprise-wide social intranet capability around a whole set of use cases. So we think the market's still robust, and I wouldn't draw a direct line of sight to an IDC growth number, vis-a-vis our growth number, with all the moving parts and our client base and our product line around the world.

Michael B. Nemeroff - Crédit Suisse AG, Research Division

That's helpful. And then maybe just a follow-up for Bryan from me. Just to kind of give us comfort in the second half implied or billings guide, can you just give us a sense for the magnitude of the slipped deal? Was it $5 million, $10 million? I'm just trying to get a sense of if all of the deals that you really thought were going to close this quarter, what kind of a number would you have put up, I guess?

Bryan J. Leblanc

Well, yes, I don't want to get into the exact number. But I think if you look at largely where we were last quarter from a percentage growth standpoint versus where we came out, the problem is that you're dealing with a fairly small base number. So the percentages feel a lot more dramatic than the overall -- a couple of million of dollars matters a lot from a percentage standpoint. So I think to give you some idea, it's not -- the magnitude is not gigantic, but it does matter obviously in timing for those deals at June 30 versus early July from an overall revenue standpoint. Actually, it has almost no impact, right? So you could see in our revenue guide, and certainly where we're thinking about the back half of the year from a revenue standpoint. It's not -- you don't have that same dynamic.

Operator

We move to Steve Ashley with Robert Baird.

Matt Lemenager - Robert W. Baird & Co. Incorporated, Research Division

Great. This is Matt Lemenager on behalf of Steve. Just a question around external communities and JiveX. We've heard a lot of positive comments. Are we seeing that, that is mostly being deployed with new or existing customers? And then for the go-to-market, who is that being sold to? Is it a help desk, the buyer -- what's -- who's the buyer and the budget?

Bryan J. Leblanc

Yes, so I'll start with the latter. The buyer is typically the customer service executive and/or the marketing executive are either both together involved because it's customer-facing, customer-touching. So both of those organizations or one of those organizations, in particular. And then always the information technology group as it relates to the overall strategy for collaboration in the company. And it's why Jive is very well-positioned because most enterprises are evaluating a complete platform to address every audience that they encounter, both customers and partners, which is what the external community does, as well as employees, which is what the internal community does. So the budget usually emanates from one or both or all of those departments, customer service, marketing or the IT group. It can vary based on the company. For example, in the Esri case that I mentioned earlier, that we sold in Q1 and was deployed in Q2, the budget actually came from the IT organization. But the marketing organization was the business sponsor to make it happen and introduce it and roll it out and deliver all the requirements and the look and feel, and is measuring all of the success of the deployment. I missed the first part of your question. I forget what it was.

Matt Lemenager - Robert W. Baird & Co. Incorporated, Research Division

So is that being deployed -- is that going to be for mostly for new or existing customers...

Anthony Zingale

It's both. The beauty of Jive is it's always been both. When we talk about land and expand it, a straightforward way to enter a company. And the sales cycle is less than the internal sales cycle. It's with an external community. Less amount of time is what I meant. On the flip side, we've seen many, many situations, for example, I think, also in the first quarter or maybe it was in the fourth quarter of last year, I don't recall. We started with an internal deployment in the cloud at FICO. And then a quarter later, they purchased the external community to go touch their customers and partners. So that is a pretty typical scenario when we upsell. So it's both the new customers, as well as existing, to answer your question.

Matt Lemenager - Robert W. Baird & Co. Incorporated, Research Division

Great, that's helpful. And just around pricing on that, how are you pricing it? Not a specific number, but what is it based on? What is the pricing based on?

Anthony Zingale

So our external communities are based on the volume of page views that go through those communities. And we do that because many communities, obviously, benefit from pages that are viewed by people who aren't registering and logging in like you would for an internal community, where we do it on registered users. But it's the same concept, and there are bands of page use based on the size of your website or the size of your community and the traffic that goes to that community. So we base it that way.

Operator

Our next question comes from Tim Klasell with Northland Securities.

Josh Giles

This is Josh in for Tim. So you mentioned the commentary around the larger deals having elongated sales cycles. Are you seeing that in the smaller deals that you're seeing as well?

Bryan J. Leblanc

This is Bryan. I think smaller deals, obviously, have a different dynamic to them. I mean, if you think about what Tony was talking about around executive sponsorship and procurement, these things tend to be more of a factor at larger companies for larger deal sizes. That's not to say that every deal follows the same pattern, but in general, the smaller deals in the mid-market have a different dynamic than the bigger top end of the pyramid from an enterprise standpoint.

Operator

And it appears there are no further questions at this time. I would like to turn the conference back over to management for any additional or closing remarks.

Bryan J. Leblanc

Thank you, and thanks, everyone, for spending time with us today. We look forward to talking with you on our next earnings call. Take care.

Operator

And ladies and gentlemen, that does conclude today's conference. We do thank you for your participation. You may now disconnect.

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