Five9's (FIVN) CEO Mike Burkland on Q2 2014 Results - Earnings Call Transcript

Aug. 4.14 | About: Five9, Inc. (FIVN)

Five9, Inc. (NASDAQ:FIVN)

Q2 2014 Results Earnings Conference Call

August 04, 2014, 04:30 a.m. ET

Executives

Lisa Laukkanen – The Blueshirt Group for Five9, Inc

Mike Burkland – President and CEO

Barry Zwarenstein – Chief Financial Officer

Analysts

Sterling Auty – JPMorgan.

Raimo Lenschow – Barclays

Richard Davis – Canaccord Genuity.

Michael Huang – Needham and Company

Brendan Barnicle – Pacific Crest Securities.

Operator

Please standby. Good day and welcome to the Five9, Inc. Second Quarter 2014 Earnings Conference Call. Today’s call is being recorded.

At this time, I’d like to turn the call over to Mr. Lisa Laukkanen. Please go ahead.

Lisa Laukkanen

Thank you, operator, and good afternoon everyone and thank for joining us on today’s conference call to discuss Five9 second quarter results. Today call is being hosted by Mike Burkland, CEO, and Barry Zwarenstein, CFO. During the course of this conference call, Five9’s management team will make projections and other forward-looking statements regarding future events or future financial performance of the company.

We caution you that such statements are simply predictions and actual events or results may differ materially. These statements are subject to substantial risks and uncertainties that could adversely affect our future results.

A more detailed discussion of these risk factors, you should consider in evaluating Five9 and its prospects are including under the caption risk factors and elsewhere in our filings with the Securities and Exchange Commission.

In addition, management will make reference to non-GAAP financial measures during the call. Management believes that this non-GAAP information is useful, because it enhances the understanding of the Company’s ongoing performance and Five9 therefore uses non-GAAP financial information internally to evaluate and manage the Company’s operations.

This non-GAAP information should be considered along with and not as a replacement for financial information reported under GAAP. The full reconciliation of the GAAP to non-GAAP financial data can be found in the Company’s press release issued earlier this afternoon.

Now, I’d like the turn over to Five9’s CEO, Mike Burkland.

Mike Burkland

Thanks, Lisa. Welcome everyone to our second quarter conference call. We are pleased to report solid second quarter results. Revenue for the second quarter increased 22% year-over-year to $24.7 million within our guidance range. Our bottom-line results were better than expected.

Our second quarter growth was driven by the continued demand for Five9’s cloud contact center software as more and more companies look to move away from their legacy premise-based solutions and into cloud.

We experienced strong momentum in adding new customers, including key enterprise customer wins in the following three industries, Financial Services, Healthcare and Education.

One example was a Nationwide Financial Services Company relocating their main contact center operation. They choose Five9’s cloud solution to meet aggressive time frames and minimize professional services, which would have been required if they had chosen to move the premise-based solution.

Other important factors in their decision were the elimination the periodic upgrade cycles they experienced with extensive IT and PS requirements, as well as the ability to right size in the future depending on market conditions.

Another example was a largest physician network in State of Colorado that chose Five9 to support their growing physician members and core hospital patient care functions. They are in the process of rolling out Salesforce.com service cloud to their teams and they did not want to go through a painful integration process with their on-premise contact center solution.

We were introduced into these opportunities by Salesfoce.com and Five9 was the only solution that could meet the diverse needs of the client which included voice blending and multichannel interactions.

While in most enterprise customer wins we replaced legacy on-premise solutions. We also from time-to-time replace competitive solutions. In one such case a large online digital marketing company abandoned their rollout with the cloud competitor during the implementation. Looking for stronger customer support they turn to Five9.

Our solution is now being integrated with the customer Salesforce CRM with the number of agents expected to scale to 500. We continue to pride ourselves on our team’s proven ability to execute from sales to implementation, to ongoing support. Five9’s cloud contact center software is highly complementary with CRM solutions.

Our deep integration with a number of leading of CRM solutions enables our clients to have seamless end-to-end solution for customer interactions and continues to help drive our sales momentum.

Including CRM and other partner’ referrals contributed roughly a third of the enterprise deals in the second quarter. During the quarter, we continue to strengthen our partnerships with leading CRM vendors such as Salesforce.com, Oracle as well as Zendesk.

We announced our partnership with Zendesk in March and the results have been promising. In the first 90 days, we closed several new deals integrated with Zendesk. We have several more in trials and dozens more in the pipeline.

As both companies get more familiar with the joint offering and customers see the value and ease-of-use of our off-the-shelf integration, we expect to see continued momentum with our Zendesk partnership.

Another key milestone during the quarter was the release of our latest version of our cloud contact center software. The Five9 Summer Release 2014 includes new Native Multichannel Applications that support social, mobile, chat and email interactions.

The new multichannel capabilities are powered by Five9 Connect, a unique intelligent technology layer that helps categories prioritize and route customer interactions. Additional major enhancements provide more mobility for supervisors and move customize dashboards for better monitoring and reporting.

With the Five9 Summer Release 2014 business is going to improve customer engagement across more channels, while increasing agent efficiency and productivity within their contact center. The response so far from customer, prospects and analysts has been extremely positive.

Lastly, during the quarter we continue to enhance our cloud infrastructure under the leadership of our recently hired EVP of Cloud Operations, Scott Welch, we continue to upgrade our environment including additional and enhanced storage, improved carrier infrastructure and further improvements in network security.

Our investment in people, process and technology has resulted in strong uptime for the past several months. Our performance in the second quarter is evidence that our innovative cloud-based approach is disrupting a very large contact center market, which includes 14.5 million agents around the world.

Customers are drawn to the benefits of the cloud, the low up-front costs, ability to scale on demand, rapid deployment, as well as the ease of management and integration. Contact centers are mission critical to an organization, successful delivery of customer service, sales and marketing.

Using Gartner Data and our pricing, we estimate that the global market opportunity for our solution is $22 billion, and we are in the very early stages of penetrating this large market opportunity.

In summary, we are seeing strong traction for our comprehensive cloud software solution for contact centers. We continue to see strong win rates and believe that Five9 is uniquely positioned to capture a large portion of this market over time.

As we look into the second half of 2014, I’d like to provide insight into the revenue guidance that Barry will discuss further. Following the April 15, Affordable Care Act enrollment deadline we experienced a larger than anticipated decline in revenue from some of our key healthcare customers.

In addition, a number of our BPO customers experienced slowdowns in their business for a variety of reasons. These two factors resulted in our monthly recurring revenue being below where we expected it would be entering the third quarter, thus negative impacting our revenue guidance.

With that said, we are very encouraged by the clear success we are enjoying with our enterprise go-to-market execution. We had a great quarter in terms of enterprise bookings and built a strong pipeline for the second half.

While it take some times for these enterprise orders to go live and become revenue. They provide a solid foundation for longer term growth. Going forward, we remained focused on the following initiatives aimed at accelerating our penetration in the enterprise market.

First, enhancing our platform infrastructure and process to continue to maintain high-levels and uptime which was very strong in the second quarter.

Second, scaling our enterprise sales capacity by adding to what in my opinion is the best sales organization in this industry. During the second quarter, we saw continued performance in terms of sales productivity and pipeline growth.

Third, offering best-in-class products and enhancements to our customers through our ongoing R&D efforts. During the quarter we delivered Summer Release 2014 further extending our competitive advantages.

And fourth, improving execution and implementation of new enterprise customers. During the second quarter we upgraded our professional services organization under new leadership and we’re very pleased with the track that we’re on.

Given these initiatives along with our strong bookings momentum we remained enthusiastic about our long-term growth opportunities.

I will now turn the call over to Barry to provide some more color on the financials.

Barry Zwarenstein

Thank you, Mike. Before I discuss our results for the second quarter, I will begin with the brief review of our business model. Recurring revenue accounted for 97% of our revenues in the second quarter.

Recurring revenue is made up of monthly subscriptions, based on the number of agencies and of usage based upon minutes. Our subscription fees are generally billed monthly in advance, while related usage fees are generally billed in arrears.

The other 3% of our revenue is comprised of professional services fees generated from assisting clients in implementing the Five9 solutions and optimizing its use.

Now, moving on to our financial results for the second quarter. Revenue for the second quarter of 2014 was $24.7 million, up 22% from the second quarter of 2013. Our revenue growth was primarily driven by adding new enterprise customers.

Our dollar-based retention rate for the period ended June 30, 2014 was 98% compared with 100% for the period ended March 31, 2014. The decline in the dollar-based retention rate is primarily due to the revenue reductions in May and June of 2014 driven by Affordable Care Act related decrease in healthcare business and the BPO contraction Mike mentioned earlier.

As a reminder, that metric is derived by taking an average of the trailing 12 months of the year upon year revenue changes from customers in our installed-based in the prior 12 months similar to same-store sales.

Gross margin adjusted to exclude all non-cash charges namely stock-based compensation, amortization and depreciation was 51.5% for the second quarter compared to 43.7% for the same period in 2013.

The improvements in our adjusted gross margin continue to be driven primarily by improved usage efficiencies, economies of scale, and the elimination of cost associated with our move and upgrades of our data centers in 2013.

It is important to point out that while usage revenue generates gross margins below our subscription margin, usage revenue comes with very minor incremental operating expenses and therefore generate considerable bottom line leverage.

Going forward, we are expecting further improvements to our adjusted gross margin to reach 65% to 70% in the long-term driven by the following: first improving usage margin beginning late this year as we expect to get a return on capital and expense investments we are currently making in least-cost routing and related initiatives.

Second, reducing the drag on overall margins, we currently bare from our professional services as we expect to see the benefit in 2015 and 2016, of various steps been taken for our new leadership in this area.

And thirdly, continuing and considerable benefits from expected economies and scale as revenue increases over time. Please note that reconciliation of the GAAP gross margin to adjusted gross margin as well as other reconciliations from non-GAAP to GAAP results is providing with our earnings press release.

GAAP R&D expenses for the second quarter of 2014 totaled 22% of revenue or $5.6 million, compared to 20% of revenue or $4.1 million a year ago. The dollar increased was driven by increases in personal related cost as we continue to enhance our industry leading platform that included Summer Release of 2014 launch.

GAAP sales and marketing expenses for second quarter of 2014 totaled 29% of revenue or $9.7 million compared to 36% of revenue or $7.2 million for the second quarter of 2013.

Our sales and marketing expenses have increased as we continue to scale our sales capacity and spend on degeneration both aimed at enterprise market opportunity. GAAP G&A expenses for the second quarter of 2014 totaled 14% of revenue or $3.5 million compared to 20% of revenue or $4.1 million for the prior year period.

Included in the second quarter G&A was a benefit from the reversal of a contingent sales tax viability of $2.8 million following a favorable ruling from a State Revenue Authority. The $2.8 million was accrued progressively in G&A expense on a quarterly basis from 2011 through the first quarter of 2014.

Excluding the $2.8 million reversal, G&A in the second quarter was $6.3 million. We expect G&A in the current quarter to remain at approximately $6.3 million partly as a result of savings from going live in the second quarter with systems to collect sales taxes on usage from customers rather than Five9 paying these taxes offsetting otherwise expected increases in G&A

Adjusted EBITDA loss was $6.9 million for the second quarter of 2014 compared to a loss of $6.1 million for the second quarter of 2013. GAAP net loss for the second quarter of 2014 was $8.7 million or $0.18 per share compared to a GAAP net loss of $8.3 million or $2.25 per share for the second quarter of 2013.

As mentioned earlier, included in the GAAP net loss for the second quarter of 2014 was a reversal of reversal of contingent sales tax liability of $2.8 million following a favorable ruling from a state revenue authority. This will lead to liability to reduce the company’s net loss per basic and diluted share by $0.06 for the three months ended June 30, 2014 and $0.10 for the six months ended June 30, 2014.

Non-GAAP net loss for the second quarter of 2014 was $9.5 million, or $0.20 per share, compared to a non-GAAP net loss of $7.2 million, or $1.95 per share, for the second quarter of 2013.

Regarding our tax rate, we have a substantial NOL balance that we will continue to utilize. We expect the dollar amount of taxes relating to our foreign subsidiaries to be approximately $120,000 for the year 2014.

As of June 30, 2014 cash and short term investments totaled $91.6 million. As of June 30, 2014 our debt totaled $27.4 million comprised of a revolver, term loan, note payable and capital leases.

Our DSO performance remained strong and DSOs for the period ended June 30, 2014 were 25 days compared to 24 days in the prior year. Cash outflow from operations for the first half of 2014 was $14.4 million and free cash outflow was $17.3 million after taking into consideration $2.9 million of capital expenditures in the first half.

I’d like to finish today’s prepared remarks with a brief discussion on our expectations for the third quarter and full year 2014. For the third quarter, we expect revenue in the range of $24 million to $25 million. GAAP net loss is expected to be in the range of $11.2 million to $12.2 million.

Non-GAAP net loss is expected to be in the range of $9.2 million to $10.2 million. For the full year, we expect revenue in the range of $99million to $101 million compared to previously provided range of $102 million to $106 million.

GAAP net loss is expected to be in the range of $38.9 million to $48.5 million compared to the previously provided range of $41.7 million to $43.9 million. Non-GAAP net loss is expected to be in the range of $36.2 million to $37.8 million compared to the previously provided range of $36.8 million to $38.8 million.

For modeling purposes we would like to provide the following additional information. For calculating EPS, we expect our shares to be $48.4 million for the third quarter, $48.9 million for the fourth quarter and $37.6 million for the full year.

Our CapEx is expected to total approximately $8.5 million for 2014. In summary, we had solid results for the second quarter with revenue in line with our guidance and bottom line results that were better than expected. We remain confident in our ability to achieve our long term operating model of gross margins of 65% to 70% and adjusted EBITDA margins of greater than 20% driven primarily by further improvements in gross margin and G&A.

Lastly, before we turn to your questions, I’d like to mention our upcoming conference participation. We will be presenting at the 2014 Needham Interconnect Conference on Wednesday August 6th and at the 2014 Canaccord 34th Annual Growth Conference 2014 in Boston on Thursday August 14.

And now, we’d like to open the call for your questions. Operator, please go ahead.

Question-and-Answer Session

Operator

(Operator Instructions). And the first question comes from Sterling Auty with JPMorgan.

Sterling Auty - JPMorgan.

Thanks, hi guys. Want to jump into the heart of the matter. So the issue related for the recurring revenues that’s causing us the change in the guidance, can you give us there – some quantification as to what part of the customer base this is exposed to in other words this is isolated or is it more broad based and specifically within those BPOs were those BPOs also supporting affordable care over those BPOs that you saw some sluggishness and supporting other areas that might be have an initiative to?

Mike Burkland

Great question, Sterling. This is Mike and I want to start off just by saying that this is really more about the shape of our revenue curve and the shape of the recurring revenue curve through the quarter than anything else. And it was fairly isolated in terms of a very small handful of healthcare related customers which by the way we have seen in the past kind of a Q4 bulge in terms of activity for open enrolment, the affordable care act really allowed that normal Q4 bulge to get carried in and through Q1.

And then the April 15th deadline had a larger impact on a few of these large healthcare providers that were working on the Obama care imitative. So it was really isolated to that group of customers and some BPOs that were also involved in that industry and then a couple of other BPOs that had specific kind of micro economic related issues with a couple of their clients, just timing of projects more than anything.

Sterling Auty - JPMorgan.

Because the question is getting asked already to me at what point did you see that visibility and why if you sell the fourth quarter bowls in this kind of career to [float] what had you thinking that this was going to be more sustainable and you weren’t going to see the dip that we ultimately saw?

Mike Burkland

Well again, it’s not that we didn’t expect to see a dip. We expected the issues to see some dip and if you look at our prior guidance for the quarter and why we were essentially in close to inline we expected some dip. But it was larger than anticipated and again by a couple of these larger healthcare related customers I will say this on a positive that our bookings momentum continues to be exceptionally strong. We had a very strong quarter, record quarter from an enterprise new customer bookings perspective.

So in spite of that again, we look at the shape of the revenue curve, I call it the jump off point as we’re doing our modeling looking at monthly recurring revenue. The good news for us is 97% to 98% of our revenue is recurring. We have great visibility in the near term in terms of what that means. And that in and of itself led to the guidance being lower. All that said, again, by far and away the best quarter we’ve ever had from an enterprise bookings perspective and a very, very bullish but a long term growth prospects.

Sterling Auty - JPMorgan.

Is there any sense if that’s exactly the point I wanted to get to is okay, so if you separate this out, it sounds like the rest of the business was strong. If you tried to do an apples-to-apples comparison on the rest of the business on a sequential basis, how much better are we talking about?

Mike Burkland

I would say that we are very much on track sequentially to our plans before this affordable care act impact, in fact, even more bullish on 2015 sequentially because of this.

Sterling Auty - JPMorgan.

Okay. And then last question and then I’ll turn it over and maybe jump back in the queue. Did you see this – I would imagine that this impacted both seats and usage, and so I’m just wondering if you can give some confirmation as its impacts one versus the other more in terms of the revenue contribution and that also contribute to a bit of a lift in gross margins as maybe the usage kind of came in late or the outlook being a little bit later than expected given the fall of from the Affordable Care Stuff.

Mike Burkland

Yes very good question, Sterling. Its comes in the flavor of seats and usage, but more in usage so the impact of these declines were actually more in usage but we felt it a little bit in the seats as well.

Sterling Auty - JPMorgan.

All right. Thank you.

Mike Burkland

You bet.

Operator

And the next question comes from Raimo Lenschow with Barclays.

Raimo Lenschow - Barclays

Hey thanks for taking my question. Maybe can I just say on that subject? So if I look to here – if I look at the guidance that we took in midpoint of the guidance down by about $4 million and that if I do the math then for Q3 and Q4 then in Q4 you are growing at about 11%. You sounded more bullish on next year, but how do you think about that, what sort of type growth company are you now going forward? And sorry for asking that very directly here now.

Mike Burkland

No that’s okay Raymond. Good question and again, Q4 is really the year-over-year comparison and Q4 is really driven because it was a tough comparison. If you look at Q4 last year, we had a very, very strong quarter revenue wise and if you just look at the hockey stick that we experienced last Q4 we’re attempting to be conservative going forward and that’s the way we model. So I’ll leave it at that.

Raimo Lenschow - Barclays

Okay. And then if you think about more question on the – you’ve done better on the cost side, have you – what are the actions taken to kind of after you saw what’s happening on the topline to kind of change the cost side or the cost side it was just kind of you were doing what you were doing and it just came in better?

Mike Burkland

Very good question. We definitely have visibility during the quarter and we certainly took steps to manage our expenses through the quarter and that’s what resulted in the bottom line data. I’ve said this before to many of you. I’ve been running this company for six and a half years. I had a very very good handle on the throttle that we need to have a handle on to manage our expenses when necessary and again, this is a short term issue and we took short term action to delay some hirings essentially. And I’m very, very bullish as I said about the future and our sequential growth.

Raimo Lenschow - Barclays

Okay. Perfect, thank you.

Operator

And the next question comes from Richard Davis with Canaccord.

Richard Davis - Canaccord Genuity.

Hey thanks. Two things, one I’m just trying to – I’m just seeing through the numbers here, so if we were at the middle of the range at 104, and 104.5 and we’re going to do 100, so that’s a formula and dollar delta and you said that enterprise bookings are materially better than expected, then maybe if everything had come through with a ACA you might have done 106 or 105. So does that mean the miss on our run rate four basis of the ACA impact is $10 million to $12 million? I’m just trying to kind of bracket it.

Mike Burkland

Yes thanks Richard because I want to make sure I connect the dots for you. Again, our enterprise new customer bookings were very very strong in the second quarter and by the way Q3 is off to a great start and I’ll leave it at that and the pipeline looks very, very strong. But most of the impact of that Q2 enterprise new customer booking activity will still be felt in 2015 revenue.

Richard Davis - Canaccord Genuity.

Got it. Great…

Mike Burkland

And then….

Richard Davis - Canaccord Genuity.

And then secondly we have EBITDA break even sometime in early 2017, is it possible that you could pull that number forward without hurting your revenue growth kind of given the increased volatility of the revenue numbers that we are now seeing or how do you think about that?

Mike Burkland

I feel like we always have the ability to pull that forward, Richard. But again, this gets back to the market opportunity, the success that we’re having going against that enterprise market opportunity. I don’t want people to get lost in the numbers here. We had as I said a record quarter in second quarter. I expect to continue to have exceptional win rates against our competition of Primus and Hybrid Cloud Solutions.

We believe we’ve got a significant competitive advantage going into a very very large market opportunity the $22 billion market opportunity. So we couldn’t be more bullish about the long term growth aspects and opportunity, we’re going to continue to invest in that. That said, as you saw during this quarter we have the ability to throttle where necessary and could potentially move that break even point and if we chose to.

Richard Davis - Canaccord Genuity.

Okay. Thank you.

Operator

And the next question comes from Michael Huang with Needham and Company.

Michael Huang - Needham and Company

Thanks very much. In terms of your comment around the strength of bookings, was wondering was this a function of just the tails ramping even more – on or was the strength of pipeline, pent-up demand around Summer Release, maybe help drill into kind of why your teams have strengthen and obviously it seems like its going to be – as well.

Mike Burkland

Yes, I do think its just more of the same in terms of execution plan, Michael, as I’ve said many times we are investing and scaling our sales capacity to go after this enterprise opportunity and its paying off. We’re seeing sales productivity across the enterprise sales team and bringing in new business that we just haven’t seen afore because we’re adding to the sale capacity we’re continuing to see great performance on the booking side of things.

So I would say it’s really the continuation of our execution story. I think it clearly helps to have our Summer Release be launch in the buzz that came along with that. The customer traction we’re seeing and response we’re seeing from the Summer Release is been wonderful specifically when I look at the attach rate of email and chat to our deal flow as well as our installed base. It’s early. But the indications are very, very good. I’d like what I see in terms of attach rate.

Michael Huang - Needham and Company

Got you. Okay. And so would you say with respect to Summer Release, I mean, is that more of a benefit to kind of the new customers or is that a driver more primarily with existing customers right now?

Mike Burkland

It’s really for both, Mike. Any contact center that is looking to add multichannel capabilities from Five9, existing customers can do that as well as our new customers.

Michael Huang - Needham and Company

And could you share with us just kind of perspective around kind of how pricing could tick up as your selling this in more channels?

Mike Burkland

Yes. Again we see a modest opportunity to continue to look at the average across our base in terms of the recurring revenue per seat. And as I believe we’ve told you guys in the past, we get about a $190 per seat per month in terms of both subscription and usage from our customer base. And we do see some upside in that as we deliver additional products like the ones in SR14.

Michael Huang - Needham and Company

Got you. Okay. And last question from me. In terms of competition I was wondering if you could share what you’re seeing there. I know that you are – you would kind of provide some examples around displacing both on-premise and cloud, but what were you’re seeing out there, has any changed and maybe you just comment on win rate against them?

Mike Burkland

Yes. We continue to see a couple of players in the hybrid category. We clearly compete with the large three premise players of Avaya, Genesys and Cisco and replace them. But as I mentioned we continue to see couple of hybrid companies predominantly there’s one that we see more than the other. And I’ll give you an example, we saw this one particular competitor 11 times during the quarter and we won eight out of those 11. So we’re very, very satisfied with our win rate against them.

Michael Huang - Needham and Company

Great. Thanks so much.

Operator

(Operator Instructions) The next question comes from [Nickolai Belov] with Bank of America.

Unidentified Analyst

Hi, guys. Can you please share with us what percentage of your business comes from the healthcare and BPO vertical?

Mike Burkland

Yes, very good question, Nick. We do track within our CRM solution industries where little soft in a way we do that. But we lump together healthcare and pharma and its – as a percentage of our total recurring revenue high single-digits to low double-digits as a percentage of our total.

Unidentified Analyst

And do you see any change in the sale cycle outside the healthcare and BPO verticals in the quarter?

Mike Burkland

No, we did not see real changes in the sale cycle. They continue to be about what they’ve been for us in the past. And again, even in enterprise our sale cycles are not too elongated.

Unidentified Analyst

And can you give us on update on the hiring of and develop of the enterprise Salesforce is hiring according to plan. Are you ahead of plan or below plan? How hard is it to find good sales people selling cloud software this day?

Mike Burkland

Yes, good question we are right now track in terms of continue to scale our enterprise sales organization. A big reason I think are for success and our continued success to scale this enterprise go-to-market effort is our ability to attract the best and the brightest. Remember we’re in industry that’s been around for very long time. If you look at the legacy premise players that have been in this industry for a quite a long time, we’re recruiting the best and brightest from those vendors. Our sales leadership here is very well connected in that sector and we continue to really succeed because our ability to attract the best and most of these are known quantities to our sales management. They’ve worked with them in the past. They know the sales people are proven success if you will.

Unidentified Analyst

Couple of more from me, the multichannel capability that you’ve announced, are those priced separately, are they are separate module or its part of the overall solution?

Mike Burkland

Yes they are price separate and an add on module.

Unidentified Analyst

Got it. And lastly you can comment on our international expansion plans specifically Europe?

Mike Burkland

Yes later this year we will be building out our first European data center and beginning go to market effort late in the year which will begin to reflect in 2015 revenue.

Unidentified Analyst

Got it. Thank you.

Operator

And the next question comes from Brendan Barnicle with Pacific Crest Securities.

Brendan Barnicle - Pacific Crest Securities.

Thanks so much guys. I wonder if you just kind of go to the timing on this. So ACA registrations stopped mid-April you guys updated guidance in mid-May. So in that month in between do you are not seeing that much of a change that accelerated after mid-May or did you think it was going to change course or something also can you give us any more color on that process?

Mike Burkland

I’d say, it’s very accurate timing Brendan and that’s about what it takes. It takes us probably 30 days. We don’t have visibility on a daily basis I would say we have visibility on a monthly basis.

Brendan Barnicle - Pacific Crest Securities.

And if we look at the guidance now for this year, it looks at about 19% for the full year. So following up on Raymond’s question, should we be thinking about the company going forward as more of a high teen growth than 20%, 25% growth.

Mike Burkland

No I would say again in a few words we are more confident than ever in our ability to accelerate revenue growth in 2015.

Brendan Barnicle - Pacific Crest Securities.

And then, I know you guys didn’t share with us bookings growth, but is there any way you can give us any more color on the strength you said that it’s you are very confident and it did accelerate, it accelerated by a certain amount I mean what more can you give us to hang our head on to look back at that booking growth.

Mike Burkland

Yes we had healthy acceleration in our enterprise, net new bookings during Q2.

Brendan Barnicle - Pacific Crest Securities.

What about over our bookings?

Mike Burkland

As well as SMB, they continue to be very strong. So again, while I’d say slower growth opportunity for us we continue to have very good bookings in SMB as well.

Brendan Barnicle - Pacific Crest Securities.

So overall bookings right across the company accelerated going in Q2?

Mike Burkland

I mean yes, but again the SMB I would not get too excited about modeling a big impact from that it’s mostly in enterprise.

Brendan Barnicle - Pacific Crest Securities.

And then lastly, any outages in the quarter?

Mike Burkland

No, we had a great quarter very good uptime.

Brendan Barnicle - Pacific Crest Securities.

Great. Thanks guys.

Mike Burkland

Yep.

Operator

And it does conclude the question and answer session. I’ll now turn the call back over to management for any additional or closing remarks.

Mike Burkland

Well thanks everyone for joining us on this Q2 earnings call. We’ll look forward to future conversations. Thanks again, take care now.

Operator

Thank you. And that does conclude today’s conference. We do thank you for your participation today.

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