Venture Global, Inc. Q1 FY2020 Earnings Call

Good day, ladies and gentlemen, and welcome to the Vonage First Quarter 2020 Earnings Conference Call. For your information, today's call is being recorded. At this time, I would like to turn the conference over to your host Mr. Hunter Blankenbaker. Please go ahead, sir.

Great. Thank you, Elaine. Good morning and welcome to our first quarter 2020 earnings conference call. Speaking on the call this morning is Alan Masarek, Chief Executive Officer; and Dave Pearson, CFO. Also joining us is Omar Javaid, President of the API Platform; and Rodolpho Cardenuto, President of the Applications Group. Alan will discuss our strategy and first quarter results and Dave will provide a more detailed view on our first quarter and 2020 guidance.

Thank you, Hunter. Good morning. I’d like to extend best wishes to everyone. I hope you are safe, healthy, and taking all necessary precautions, and as you care for yourself, I encourage you to support others who may be in need. To our 2,400 employees, thank you for your commitment during these unprecedented times. I am proud of your response to the crisis, how you've supported the company, one another, and our customers. You enabled our business continuity plans to be executed virtually overnight, and our technology allowed all 2,400 of you worldwide to work productively in your own Vonage remote office. Great job, thank you very much. Regarding our results, the first quarter showed strong performance throughout the company. Business segment revenues reached $210 million, with API Platform revenues increasing by 44%, driven by high-value APIs. Application service revenue grew by 10%, slightly exceeding our expectations. In total, revenues amounted to $297 million, including $14 million in USF fees, and we achieved an adjusted EBITDA of $39 million. I want to emphasize that in the long term, we believe the responses to COVID will accelerate the digital transformation of the global economy, and we believe Vonage is well-positioned to support this transformation.

Thanks, Alan, and good morning everyone. Let's begin with a review of the first quarter on slide 7. First quarter Vonage business total revenue was $210 million, or $206 million ex-USF, which was ahead of guidance and represents 71% of total revenue and a 20% increase. I would note that beginning in this first quarter, we began reporting USF as a separate line item on our income statement in order to highlight our operating performance. USF revenues continue to be a pure pass-through that generate no gross margin. These pass-through revenues did decline in Q1, but for positive reasons as we concluded a study that determined that our offering is mostly software, meaning lower USF fees charged to our customers. From Slide 8, business service revenue increased 23%. Service revenue growth is our focus as we deemphasize access circuits and sell fewer desk phones. API Platform revenue, all of which is service, was $86 million in the first quarter, up 44% GAAP. First quarter total revenue from applications was $124 million, or $120 million ex-USF. Of this, $110 million was service revenue, which increased 10% GAAP.

Okay. Great. Thank you, Dave. Elaine, if we could please turn to the first question.

Thank you. We will take our first question today from Tim Horan of Oppenheimer. Please go ahead.

Thanks, guys, and thanks for the call and the guidance. Maybe I missed this, but can you talk a little bit more about the mix or percentage of revenue you think is at risk maybe in the restaurant business or travel business? And secondly, the API business is really strong. Can you just talk about how those trends have progressed here and at this growth rate is it anywhere near sustainable? Lastly, it sounds like Alan, obviously, you think it's very positive longer-term and some of the negative impacts you're seeing here will actually be major tailwinds in 18 months or so when we're through this. Can you talk about longer-term in the next maybe two or three years from now where you hope business service revenues get to? Thank you.

So, thanks Tim. Dave, why don't you take the first? And then I think Omar, you can speak to the API strength, and I'll finish off with sort of the long-term view.

Yeah, absolutely. So, the difference in API revenue relative to how we saw the year baked into the guidance we just gave is in the mid-teens millions of dollars. And that is primarily comprised of customers in the travel and hospitality industry. What we have seen is a drop-off in usage from those companies offset by two things: and that is almost entirely SMS usage, and that's been offset by the exploding video usage that we saw, and higher usage from primarily U.S. customers of the SMS product to interact with their customers. And those happen to be global digital leaders just not in the travel and leisure space. As it relates to apps, just to expand on the concept on exposure, we haven't given many credits, and the ones that we have given do tend to be concentrated in the hospitality and restaurant space. But those are customers that we're in very close touch with and we baked into our guidance, the request that they've made, and the request that we think we're going to get for credits.

And Omar, why don't you reference the – in Tim's question on sort of ongoing API strength and I guess the sustainability of these types of growth rates.

Yes. Thank you, Alan. Hi, everyone. I hope you're all well. As to the long-term sustainability, I think what we're seeing, if you just refer to Alan's opening remarks, is that what this crisis has really accelerated is a lot of digital transformation spending, and I think what you're seeing for a lot of companies and we're seeing this all over the world. Obviously, the industries that were affected the most, like travel and hospitality, let's set them aside for a second, but we're seeing a ton of interest and a ton of activity and real activity. Basically, these projects, the way that we've seen them, even with say long-term prospects, this was on their list. Now, this is on the top of their list, these digital transformation initiatives. And so we're – on the API side particularly, we're seeing a lot of that. So I think that bodes well for the long term.

Thanks, Omar. Tim, regarding the long term, I believe that the trends we've discussed are here to stay, particularly remote work. While some individuals will return to offices, the shift towards a virtual workforce will accelerate permanently. This also applies to services like telehealth and distance learning. Although people will still visit doctors and schools, these trends will undergo positive and lasting changes, growing faster than they did before COVID. We see both permanent and temporary changes. Impacted industries will eventually recover, although we lack clarity on the timing. Travel, hospitality, and consumer discretionary sectors will return to normalcy. In terms of long-term growth, we will benefit from ongoing strength, especially in API and digital transformation, as well as from reshaping our applications towards a stronger revenue base. In this quarter, 64% of our bookings came from mid-market and enterprise clients, an increase from 62% in the previous quarter, with growth at 39%. The changes in our booking composition will further bolster our business moving forward. Thank you for your questions. Let's move on.

Thank you. Our next question comes from Catharine Trebnick of Dougherty. Please go ahead.

Thank you for the presentation. I appreciate the chance to ask a question. Could you provide more details on the entire sales cycle? We are currently in Q2, and I want to better understand your earlier comments about the cycle slowing down. While you mentioned there have been many in-person calls, it seems that with your new video meeting application, you might have improved opportunities to close sales and conduct more online proof-of-concepts. Could you elaborate on this and clarify whether adapting to this new normal will be a long-term change? Thank you.

Let me start and then I'll turn it to Rodolpho. Our go-to-market traditionally, as I mentioned in my remarks, has been dependent on in-person events. I commented on 100-or-so sales force events, but there's several hundred beyond that in other partner events that we participate in. All of that is obviously virtualized. And so in our world, that has maybe been a bit more challenging. Now our products work really well in this environment, but that sales process has created some softness on the front end. We think that the softness is not that great on the one hand; our tools and the need for digital transformation we benefit from on the other. Over some period of time obviously post-COVID, these events are going to be restored. But let me turn it over to Rodolpho. He can give you more color on this.

Yes. Thank you, Alan. So, what we saw in the very beginning post-COVID was, of course, a lot of the companies were shopping around and trying to understand how to really engage with us, and how to regauge the sales cycle. So, and also how to manage the sales yield in terms of contracts, signatures, etc. So we had an innovation in the sales cycles in the beginning helped by our own technology, and actually demonstrating our own technology to engage with our customers. We improved the concept of the technology due to the concept of their unified communication in the contact center. And now I think of the sales cycle and of course as Alan said, we moved it from face-to-face engagements or face-to-face events to digital events. And now we are almost normalized, I would say, from a sales cycle perspective after a bump in terms of delaying the sales cycle.

Thanks Rodolpho. Let's go to the next question.

Yes. One more. So, your consumer strategic review, where are you on that?

Dave, why don't you take that?

Yes. Absolutely. That is going according to the plan that we laid out in February. There's no COVID-related delay to the process nor the hypothesis behind it. So the phase we're in right now is the one that we outlined, which is working intensively with our consultants and advisers to understand what the asset actually would be to divest of. Should we decide to confirm that path and exactly what the options are for how to do that? So, it's a lot of operational items and that is going according to plan and we'll update as we go.

Okay. Thank you. Keep the good work. Appreciate it.

Thanks, Catharine. Thanks, Dave.

Thank you. Our next question comes from Samad Samana of Jefferies. Please go ahead.

Hi. Good morning. Thanks for taking my questions. Hope everyone is doing well. You mentioned that there are various factors regarding vertical exposure. Could you help us understand what percentage of exposure you have to industries like hospitality, retail, consumer travel, etc.? This will help us consider it for the future.

Dave, why don't you take that?

Yes, definitely. On the API side, our exposure to travel and hospitality is about 20%, which is typical for the API sector. It's important to note that there are some offsets, such as ride-sharing companies, which have reported a decline in ride-sharing but an increase in food delivery. We view the softness in this area as temporary, although it's difficult to predict the exact timing of recovery. We're taking a cautious approach to this. Additionally, we have a geographically diverse presence, which has been beneficial since COVID has impacted different regions at different times. On the application side, our exposure to those industries is lower. We do have clients in retail and the restaurant sector, which are typically larger clients. We have a good understanding of their likely credit needs, but they represent a smaller percentage of our overall application business compared to what we have on the API side.

Great. That's really helpful. And then Alan, I think I heard you mention a new integration with ServiceNow. Clearly, they're one of the best owned companies in enterprise software. I'm curious if you could maybe double-click on that and just help us understand what the relationship there is and if there will be any joint go-to-market efforts, etc.?

Thanks, Samad. Let me ask Rodolpho to take that.

Yes. The short answer is yes we will have a go-to-market engagement with them. The relationship that we are developing with ServiceNow is very similar to the relationship that we have with Salesforce.com. So, we have developed the integration. We have deep integration into ServiceNow CSM now and as you know, some of the CRM customers they are also CSM customers that are from ServiceNow and we intend to engage deeply with them. We do have a go-to-market and we have more announcements coming next week and I'll follow-up on that.

Great, that's exciting. Thanks for taking the questions and congrats on the good quarter.

Thanks, Samad. Thanks.

Our next question comes from Rich Valera of Needham & Company. Please go ahead.

Thank you. Good morning and congratulations on a nice sprint in a challenging environment to say the least. I was hoping you could provide a little more color on the percentage of total API business that comes from the kind of high-value applications, kind of where that is today and if you could give any sense of where you think that could go over time since it's clearly a faster-growing cohort of that business.

Let me ask Dave to answer that.

Yes, absolutely. Omar can certainly provide some color. So, high-value right now is in the mid-teens percent of our API revenue base. And again, that's growing dramatically faster than SMS and most any other product that we have. The other thing I'd point out is that high-value is a much more U.S.-oriented product. It works everywhere but the success we're having is disproportionately in the U.S. whereas our SMS base has historically been disproportionately in APAC. So, if you think about our strategy of moving to more high-value products and being more geographically diverse, which includes a bigger base in the U.S., this trend that we're seeing right now is helping us execute on both parameters of that strategy.

Got it, that's very helpful. And just in terms of the near-term headwinds you guys are seeing, I wonder if you could in any way try to quantify a little more what you're seeing in terms of bookings or pipeline changes as you've entered the second quarter in the month of April relative to entering the first quarter of the year just to give us any sense of how those business conditions have changed over the last quarter.

Dave let me ask you to take that as well?

Yes. Rodolpho can provide more details, but I mentioned a mid-teen difference. If you consider quarters two through four, I'm referring to a mid-teens difference in API compared to the previous year, which is fairly modest in the non-subscription business. On the applications side, our guidance reflects a high teens difference from what we observed at the beginning of the year. This difference can be categorized into two areas. One area is that installs and bookings are simply lower. The other area is churn, which I would describe mainly as down-sell churn. We’re not witnessing high levels of logo churn. However, some customers are opting to reduce the number of seats they planned to add or to remove some seats temporarily while still remaining customers. Thus, the difference in our guidance is approximately equally attributed to lower installs and bookings on one side and down-sell churn and credits on the other. Rodolpho can further discuss the specifics of the bookings environment.

Yes. Yes. My comment is just like you said. We bake it in everything in our guidance now. But what we see is a challenged environment in Q2 due to the business closures and business that are not open for us to do business. So, there is discharge of business in Q2. But we are benefiting from Q1 because we are actually harvesting in Q2 what we see that in Q1. But Q2 is going to be a challenged one. So, then we recover in Q3 and then we'll recover even better in Q4. There is this slope in Q2 due to the COVID social distancing policies.

Great, that's very helpful color. Just one more if I could for you Dave. Can you say how much access and product revenue is baked into the Q2 business guidance and the full year?

I'm not going to provide a specific number, but it is decreasing gradually. First of all, those figures I mentioned in my prepared comments would drop regardless, and they're going to experience a slightly greater decline due to the impact on overall service revenues and customer behavior. However, we do not anticipate any significant or disproportionate changes. For example, we're not seeing customers reducing their seat counts while also removing access. It remains closely linked to access. On the product side, I expect it to decline a bit more rapidly because of COVID, as many of the installations currently taking place do not include desk phones. This factor is also incorporated into our guidance.

Okay. Thanks for the clarification. Thanks guys.

Thank you.

Thank you. We take our next question from Alex Kurtz of KeyBanc.

Thanks guys. So I guess no three or four questions for me. I just hope that you're all safe and healthy.

Thanks, Alex.

So the full year guidance, why provide that? I mean, I think it's pretty clear that a lot of your peers, all of your competitors are pulling full year, so maybe a little bit of context around that. And then on the API side, just pricing in the marketplace. It's always been a discussion point about your platform relative to your largest competitor and how you're thinking about margins and pricing going forward through the rest of the year? Thank you.

Dave, why don't I ask you to take that?

Yes, definitely. I believe Omar can address the API pricing. Regarding full year guidance, our main considerations are that we have good visibility on our business. We operate a subscription model on the application side, and we are currently experiencing significant activity related to bookings. Many impacts from the second quarter will influence the remainder of the year, and actions taken in the latter part of the year will also affect 2021. Therefore, we have clarity due to our subscription business model. On the API front, we’ve noticed that one of our peers has removed their annual guidance, although they are not in the subscription sector. However, we are confident in our visibility to provide a range, albeit a broad one due to global uncertainties. Given the geographic diversity and the four months of data we now have, we felt prepared to share that figure. Additionally, we believe it is important to communicate our observations and best perspective in this context.

Let me elaborate a bit on the API side. I believe your question was about our approach to margins and pricing for the rest of the year. So far, especially when looking at Asia Pacific, we feel quite positive. In general, we are confident about margins and pricing for the remainder of the year. This confidence comes from our observations in Asia Pacific, and if the trends we see there are reflected globally, we have not experienced any pressure on margins or pricing. So far, our outlook for this year remains unchanged.

Okay. Thanks, Omar.

Thank you. Our next question comes from Sterling Auty of JPMorgan. Please go ahead.

Hi, guys. This is Matt on for Sterling. Thanks for taking the question. In terms of the possible implementation delays, what parts of the product portfolio do you see having the greatest risk? And what is happening on the average implementation time frames? Thanks.

So Rodolpho, why don't you take that? Your question really is limited just to the applications side because similar for the install issues don't exist on the API side. Rodolpho?

Yes, sure. What we see now is a delay there is this lagging, especially the CCaaS world that our companies are committing to us. So we are signing the contracts, but they are waiting for their business to actually recover or to reopen to start the installation. So while we see now, the lagging of the installation, it's different than the lagging that we saw before, which was more of a professional service or implementation side of the business. Now it is more of a recovery or reopening of the business. That's also baked into our outlook and our guidance.

Got it. That makes sense. And then just one follow-up for me. In terms of headcount, where are you guys trending in terms of your plan for the next couple of quarters? Has that changed relative to what you had previously? Thanks.

I'm glad you asked that question, because the simple answer is our headcount plans are virtually unchanged. To be very specific, we are making no COVID-related layoffs and do not anticipate furloughing our employees. We currently have around 225 open positions that we are actively recruiting for across the organization. A key point here is that included in our EBITDA guidance is a continued investment in what I refer to as long-life assets, which involve product engineering and sales capacity. At the same time, we are also investing in marketing, which includes both media efforts and personnel, to ensure we can rebound effectively post-COVID. This strategy is clearly reflected in our EBITDA guidance.

Great. Thanks so much guys. Appreciate the color.

Thank you.

Thank you. Our next question is from Meta Marshall of Morgan Stanley. Please go ahead.

Hi. This is Erik on for Meta. Thanks for taking our questions. Maybe just going back to the strength we saw in applications in the quarter. Was that largely more contact center functionality, or were there other drivers that were more impactful there?

Erik, thanks for the question. Let me ask Rodolpho to take that.

In terms of the strength of the quarter in applications?

In Q1, I think.

In Q1, we had a very strong quarter in the contact center, closing 41 enterprise deals, with 15 of those exceeding $1 million in total contract value. The strength of our offering comes from how we effectively utilize our portfolio, particularly when we combine unified communications with the contact center. This integrated approach highlights the robustness of our solutions, leading to significant gains when we leverage our entire portfolio.

Okay. That's helpful. Thank you. And then maybe just on some of the areas where you have kind of managed costs. I know you noted that a large number of those has been largely just due to variable cost in nature, but have there been any areas where you can maybe made more permanent changes and kind of efficiencies that we should be mindful of?

Let me address that as well. Our adjusted EBITDA guidance reflects what I previously discussed with Matt regarding ongoing hiring. The structure of our organization, particularly our cost structure, is highly variable. For instance, we are unique among application providers in that our infrastructure is almost entirely based on public cloud, with minimal reliance on private cloud. As a result, this infrastructural cost becomes fully variable. This is just one example of how we've managed to maintain profitability despite some anticipated softness in back-end revenues. We are also seeing a positive impact from reduced travel and expenses, as people are unable to travel. This combination of a variable cost structure and reductions in lower-impact areas like travel and expenses has been beneficial for us. However, I want to reiterate that COVID is likely a temporary setback. The long-term prospects for our business remain very positive. Therefore, we are committed to continuing our investments in long-term assets, especially in engineering, product development, sales capacity, and marketing, which are essential for a strong recovery post-COVID. This has been our guiding principle as we move forward and create our new outlook for the year.

Helpful. Great. Thank you.

Thank you. We take our next question from Ryan MacWilliams of Stephens Inc.

Thanks for taking the questions. Just one for me today. Alan, impressive to see business churn decline in the quarter, and I like your comments on the long-term pull forward of cloud adoption across communications. From your point of view, how do you see this increased demand playing out for customers who have so far been hesitant to move to the cloud? Would UCaaS maybe see stronger initial adoption versus contact center? And would you expect this pull forward to happen quicker with SMB customers compared to large enterprises? Thanks.

Ryan, thanks. Great question. The long-term trends that I cited are really very positive for cloud communications in general and Vonage specifically because those two trends are, again, remote work and remotely delivered services. In my view, the remote work side, clearly, there's going to be greater demand from employees for the opportunity to work remotely. This crisis is going to sort of undeniably accelerate that trend, which existed pre-COVID, but it's going to accelerate that trend. But I think the business continuity concerns are what are going to be really interesting, particularly among the large enterprises, and I mentioned this in my comments. As those in cloud communications, as we played with large enterprises, cloud has been the most successful in large enterprises that have very distributed workforces or distributed locations. So take for example a 5,000-person company, but it's a retailer. And so maybe those 5,000 people are spread across 500 retail stores. In that scenario, cloud is absolutely necessary and a far lower cost of ownership than prem. Now, if those 5,000 employees were sitting under a single roof in one location, that's been really where the premise-based competitors have focused. And in my view, COVID is going to be a tipping point for even those concentrated large enterprises because of business continuity concerns. You can just imagine the audit committees, particularly at public companies, looking to their management teams and saying, are you prepared, God forbid, this ever happen again, whether it be pandemic or natural disaster like a hurricane? I think we've hit that tipping point where things are going to move to the cloud. And again, I think the broader topic about remotely-delivered services, I think, that's a tipping point as well, where you're going to see, again, the need to program in communications. I've cited examples around video and I leaned in hard to telehealth, but we see this in the education market, tutoring, just everywhere. I mean, I see it globally. We think this trend is going to be an ongoing permanent trend as well. So we fundamentally believe the world is going to be a changed place and the way we're structured as a company, as this cloud communications platform able to address both trends. I think we're uniquely set up to benefit from it.

Appreciate the color. Congrats on the quarter. Thanks.

Thank you.

Thank you. We take our next question from Will Power of Baird. Please go ahead.

Okay. Great. Yes. Just a couple of quick follow-up questions. I think, Al and Dave, probably both of you, as you reference on the customer credits, deferred payments, is that principally allocated or related to the Applications Services segment, or are you seeing that on the API side as well? So I just want to get a little more color there to start.

Dave, why don't you take that?

Yes, when we mention credit, we are specifically referring to the applications side. Typically, a customer might ask if they can receive a credit because their restaurant is closed for the month, and it’s generally a straightforward process. We have accounted for both known factors and potential future issues. Additionally, we recorded a $1 million bad debt charge for the quarter, which applies across the entire complex. We maintain a bad debt accrual at all times and increased that accrual by $1 million to cover bad debt from both applications and APIs, in addition to our existing accrual.

Okay. Got you. And then I wanted to just come back on Applications Services, the guidance for the second half of the year and the challenges you expected. I'm wondering if you could just help us unpack or break that down between what you're seeing or expecting in SMB versus enterprise. Because you referenced some of the SMB-related pressures, but you also referenced lengthening sales cycles, which I suspect is more enterprise-centric. So I just wanted to try to get a little more color there as to how that breaks down between those two segments.

Dave, let me ask you to start on that.

Yes. In terms of the division between upmarket and downmarket, Rodolpho can provide insights on that as well. We are experiencing some increased churn among the small and medium-sized businesses, but this is being balanced out by improved churn rates in the upmarket segment. The dilution we mentioned earlier, which pertains to non-logo churn, is more pronounced in the upmarket area. Consequently, the overall impact is being felt fairly equally between upmarket and downmarket, especially during the challenges posed by COVID. Our strategy remains focused on strengthening our presence in the upmarket, where we see greater utility, business continuity, and advantages linked to remote work.

Yeah. Okay. That makes sense. Thank you all.

Thanks, Will.

Thank you. We'll take our next question from James Breen of William Blair. Please go ahead.

Hi. Thanks for taking my questions. Just a couple, on the discussions that you're having with the channel partners one, is there any noticeable difference in terms of the competitive environment given what's happening right now? Are enterprises focusing on certain providers that have scale and size? And then, do you see sort of a pent-up demand where there are enterprises currently dealing with the pandemic saying we should have switched to a Vonage product earlier and we didn't. We’ll be back there in the fall or whenever this sort of alleviates. They give you sort of confidence that there is a little bit of a bubble built there that they will be back to guys once things normalize a bit. Thanks.

Rodolpho, why don't you take that on, both the competitive environment and the likelihood of there being pent-up demand.

We haven't noticed much change in the competitive landscape; it remains largely the same. As I mentioned earlier, we expect some decline in the second quarter due to business closures and social distancing measures. However, as Alan mentioned, we're optimistic about a rebound in the third or potentially the fourth quarter. We are preparing for this recovery and have been engaging with our customers and channels to ensure everyone is ready for either partial or full recovery by the end of the year. Our readiness is particularly strong with our channels, especially as we expand our total addressable market with ServiceNow in addition to our existing Salesforce offerings. The channels are very excited about this opportunity.

Okay. Thank you.

Welcome. Next question.

Our next question is from George Sutton of Craig-Hallum. Please go ahead.

Thank you. Having not been more than a few miles from my house for weeks, and having no haircut etc., I'm reeling a bit from your permanence comments, Alan, but I get your point. So relative to the channel, one of the issues that we always have is getting clients to understand the differences among all the providers. And we've picked up a couple that we thought were important. I just want to see if you could address them and that's smart number capability. And some of your security protocols seem to be differentiators in the market. And I wondered if you could elaborate on that?

Yes, I believe that when we engage with the telecommunications sector, particularly through our master agent channel, we emphasize that if they encounter Salesforce, they should associate it with Vonage, as it stands out in the market. It's challenging for channel partners to distinguish a basic UCaaS implementation, especially for around 100 employees, since a straightforward UCaaS solution tends to be less unique. However, we possess a significant advantage in our contact center offerings, particularly when integrated with Salesforce, which increasingly drives demand for UCaaS. That's why I mentioned our recent release of an integrated UCaaS and CCaaS solution, enabling unified call control, user management, presence features, and directory synchronization. This means that both agents and employees can use the same system seamlessly. These unique features are what we promote through our channel and, based on our close rates, they appear to enhance our success rates. I apologize for the lengthy response, Rodolpho, do you have anything you would like to add?

Not much, but you covered it all. A significant differentiator is the embedded almost-native solution of Salesforce. We are doing the same with ServiceNow as we launch our partnership. You'll see CRM and CSM with embedded almost-native integration in the system. The channels and the market have recognized this. Additionally, our own integrated UC and CC, as mentioned earlier, is a major differentiator for us. We refer to it as the 3Cs: continuity, contingency, and compliance, especially in regard to security, which are our two main focuses. Everything is packaged with compliance, data privacy, and security for our customers, which is crucial for enterprises. This is why we are witnessing strong adoption among enterprise clients.

Thanks, Alan, and thanks, Rodolpho.

Thank you. And now I'd like to turn the call back over to Mr. Hunter Blankenbaker for any additional or closing remarks.

Okay. Great, that wraps up the Q&A portion of today's call. And we look forward to visiting many of you in the coming months at several virtual investor conferences which will be webcast. You can follow our comments on the Vonage Investor Relations website. Please contact us if you need any additional details and thank you again for joining today.

Thank you. Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation. You may now disconnect.