You’re taking data and shooting it over to a hyperscaler to get some underlying engine that they have and be able to get back data that can then be leveraged and utilized to deliver an experience that hasn’t been realized before and so understanding who our partners were and how we’re working with them to deliver a joint solution. And the example is Google, right? That was a big factor, right? How do we leverage Google in much of the AI applications that we’re going to deliver for them? So it comes down to the comprehensiveness and our ability to deliver and support for a global organization like that. As you can imagine, they had many, many systems, hundreds of different systems. They’ve got dozens. As I mentioned in the prepared remarks, CRM systems, they want to make sure that we’ve got the platform, but really the expertise and wherewithal.
Mike has mentioned several times about our professional services team. That team comes with experience. Many have worked on their side of the table for customers, for large financial institutions putting in and operating on the customer side, large complex solutions such as this. They just felt very comfortable that we were the right fit and had the right direction to help them for decades to come.
Barry Zwarenstein: Have you mentioned academy? Yeah.
Dan Burkland: Our acquisition of ACS played a role as well. So when you look at that, that takes information, the data that’s coming from all the disparate systems that they have across those divisions, and brings it together, normalizes it and displays it so that the operator of the contact centers and the management that are making the strategic decisions don’t need to worry about what systems are behind that. I’ve oftentimes been in with those ACS customers and said, well, what data am I looking at? Is that coming off of a Navaya or Cisco or Genesis or 5.9? If we’re in the middle of a migration and frankly the operator doesn’t know and doesn’t care. So it helps us accelerate the move over. They don’t have to say, whoa, whoa, timeout.
I can’t let you cut over this division because it’s going to skew all my reports and I do my payroll based on certain metrics that come out of that reporting. Well, guess what? We don’t. It doesn’t matter. We can go behind the curtain and make that transition happen and it’s invisible to the user on the floor.
Barry Zwarenstein: And then, Tom, thanks, Dan and to answer the second part of the question. So for that re acceleration, I’m taking now three quarters, not just the second half. Just for ease of arithmetic, we need $116 million extra year-over-year growth. That $116 million is bifurcated, as we’ve talked about in the past, when we’re talking about the full year between the DBRR at $64 million of that $116 million and then the remaining part, the $52 million, comes from new logo deployments that you’re asking about. So the majority is the DBRR. Now and that, by the way, is prior to inflection. I’m using $110 million. The $52 million is largely in backlog, not totally. There are what we referred to in the past as GoGets in the next month or two that we still need to complement that to some extent, but largely it’s all in backlog and we talked earlier about the expertise and competence of our professional services team.
Operator: Meta Marshall with Morgan Stanley has the next question. I think Meta might be joining us audio-only today.
Meta Marshall: Yeah. Apologies. No video is better than frozen video. So I guess the question is, time to migration, obviously, as you get these longer and longer or larger and larger deals, is a consideration and obviously ACS helps with that. I just wanted to get a sense of, is there any way to quantify, like, how much ACS can shorten those migration cycles or and just on the service provider channel or service system integrator channel as you’ve used those guys to kind of help with migration? Are there — is the pace of those migrations kind of the same as you’ve seen with your own channel? Just trying to get a sense of, what trends are on pace of migration?
Barry Zwarenstein: Yeah, I’ll take the last part of that first. Thanks, Meta. When you look at the migration, it’s very much in sync. Whether there’s a systems integrator involved or not, they tend to help and take and offload a lot of the project management and program management, and help work with the customer through a large scale migration, but most of the actual work of the configuration and of the integration effort is done by our professional services team. Now we’re in the process of enabling those SIs to get certified and really get their skill set to where ours is. We have a very, very high bar that we set for what we require and demand, and we’re starting to get leverage from those. The goal is to ultimately move more and more of that off of our personnel and on to theirs, for obvious reasons, but that’s something that.
It’s really hard to shorten it too much. We’ve got the tools help, like I said in that last example, like ACS, but for the most part, it’s a matter of going as quickly as the customer can. We’d like to obviously move as quickly as they’re able, so that we can get to revenue sooner, but there’s a lot of planning, and oftentimes there’s a lot of changes that they’re doing and so they have to have a lot of internal meetings themselves in order to make some important decisions.
Operator: We’ll move on to Jim Fish with Piper Sandler.
Jim Fish: Hey, guys. Nice win to get the win on the board here and I’m sure you’re sick of answering the question about stagecoaches, Barry, but actually, building off of that last question, you guys mentioned incentivizing these SIs to lead with Five9 through. I think you called it project pull through. Can you just walk us through what you’re changing in terms of these incentives and any go-to-market changes outside of this that you’re planning on this year and with that SI aspect, kind of how we should think about SI contribution today, in terms of how much it’s pulling you guys in versus where you expect it could be over the next couple of years. Thanks, guys.
Barry Zwarenstein: Yeah, Fish, I’ll start. And Dan, feel free to chime in, but we kicked off project pull through, boy, close to 18 months ago, and that was really designed to lean into a lot of the SIs and other resellers that want the services revenue as part of this equation and if you look at our business, right, you look at our, we talked about subscription revenue. Subscription revenue is the key metric that everybody should be paying attention to. And as we offload some of these services to SIs and other partners, we’re not going to get that revenue and that’s why there’s a disproportionate growth rate in our PS revenue and our usage revenue compared to subscription, but that is our strategy. Its part of our business model we think is a very good thing from a margin perspective, but it’s also the reason we named it project pull-through was because we know that there’s an incentive on these SIs and other resellers.
If they’ve got the services revenue in a deal, they’re more likely to bring us into a deal. And we were quite frankly missing out on that opportunity 18 months ago. So that’s why we kicked it off. It’s been a very nice impact up market, and again, it’s still somewhat early days, but we’re getting, third parties are doing a very good proportion of our implementations these days, especially internationally, and a very good growth in our US implementations as well.
Operator: Baird’ Will Power has the next question.
Will Power: Great, thank you. Maybe to come back to the Fortune 50 win, great to see that. Congratulations. It sounds like professional services and your ability to execute are big pieces of that, but I’d love to get some color as to how important AI was, how focused were they on the IVAs and the capabilities you have there and what kind of stood out your platform on that front perhaps, versus others, and I guess kind of tied to this kind of mega deal thought process, any qualitative color as to how the pipeline is building for other dolphins and whales? I guess as you look forward.
Dan Burkland: Yeah, thanks, Will. When you look, I’ll start with that one, the dolphins and whales. When you take that large bank out of the equation, the pipeline is a record. We’re still at a record. If you take that out of the equation. Obviously that came in, so it dropped the pipeline down pretty significantly because of the size of the deal, but otherwise very, very healthy pipeline striving towards that. But if you look at AI, it was very key front and center for them in their decision. In fact, if you think about it, most banks, including this one, have a lot of automation and self-service already on their legacy platforms, and it just isn’t as good, right. It doesn’t have the accuracy rate. When you have speech enabled, I’ll call it speech-enabled IVR from 10 years or 15 years ago, you can do some basic things.
You can call in and do some banking by phone and check your balance and see if your checks cleared, but it’s just not as robust and not what you can get in today’s technology. A big, big, big part of it was how they would replace that with today’s next generation IVAs and thank goodness we have inference in that acquisition and the enhancements we’ve made to that platform to be able to then deliver what they felt was the market leading IVA solution for not just self-service, but for. And then when you combine, you take the IVA for self service, of course, but then you combine that with our agent assist and our ability, like I said, with that Google partnership to be able to take real time conversational data and be able to interpret it and then fetch the right data from the right source.
If you think about a large bank with dozens of CRM systems, we’ve got to go fetch the right data to be able to answer that customer’s question and those types of functions are way down in the weeds technically, but we came out very superior compared to our competition because of some of the things Mike said. The engine agnostic, the speed at which we’ve been able to work with these other engines, and then the flexibility, they actually were able to come to us and say, hey, in this particular use case, we want to use this engine. In that particular use case, we want to use another one and, oh, by the way, in this one we may want to build our own small one with just our data because it’s fast, faster at getting to the data. You don’t want to go search 23 databases, but if you know you have a specific use case, you want to build one that’s very personalized and customer specific, so that you can get the data very quickly.
Operator: We’ll now hear from Scott Berg with Needham.
Scott Berg: Hey, everyone, really nice quarter. Thanks for taking the question here. Mike, you’d made a comment on the summit status with Salesforce. I think that’s an interesting comment because they effectively partner with all your competitors in the space as well, and whether they’ve made investments in them or they’re really partnered, supposedly tightly, if you’re a company based in Seattle, if you’re the first one to the status, I think that’s kind of interesting. Help us understand a little bit more maybe what this can give you outside of an early look on technologies, etcetera. My guess is there’s some other commercial opportunities, but would like to understand that better. Thanks.
Dan Burkland: Yeah, Scott, I think it’s visibility, it’s technology. As we mentioned in the prepared remarks and summit status is very objective. It’s based on business we’ve done together, frankly. So in the end of the day, that’s how they measure that and that’s who gets that status and we’re the only ones that have it. It’s essentially a good metric to kind of get a sense for how much business we’ve done together with Salesforce. It’s a big deal. It’s a real big deal. It’s a big deal to them. It’s a big deal to us.
Scott Berg: That’s all I have. Thanks for taking my questions.
Operator: Moving on to Michael Turrin with Wells Fargo.
Michael Turrin: Hey, thanks, guys. Some encouraging commentary throughout here. I want to go back to the key metrics, Barry, and what needs to happen for those to trough. It sounded like flat to slightly down in terms of retention for Q2, but you’ve been talking about the second half move up. How much do you still need to execute to get there? And maybe you and Dan can just speak through confidence, visibility how that’s progressed from when you initially framed the ’24 outlook to where we currently sit.
Barry Zwarenstein: Yeah, it’s easiest to break it into three buckets; new, established and peers, installed base in peers. In terms of new, the backlog was largely there. It’s been added to somewhat in the intervening three months. Nothing dramatic there in change. Also, with respect, Michael, to the inflection that we’ve been referring to in the dollar based retention rate, yes, it did, as expected, go down one percentage point this last quarter and that is simply a fact of that. While the spot rates have been flat for the last three quarters, we now dropped off one of the higher ones and we now had a higher one that we had to compare with and we’re down slightly. But we can see now clearly that the flaw we expect can’t guarantee is in and just by the way, the last time that we had an increase in the dollar based retention rate was all the way back to the second quarter of 2021; so a long time ago.
