James Hart - Vice President, Investor Relations Howard Lerman - Founder and Chief Executive Officer Jim Steele - President and Chief Revenue Officer Steve Cakebread - Chief Financial Officer.

Zachary Schwartzman - RBC Capital Markets Alex Zukin - Piper Jaffray Naved Khan - SunTrust Robinson Humphrey, Inc. Stan Zlotsky - Morgan Stanley Matthew Coss - JP Morgan Chase & Co. Brent Bracelin - KeyBanc Capital Markets Inc..

Good afternoon and welcome to the Yext Second Quarter Fiscal 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to James Hart, Vice President of Investor Relations. Please go ahead..

Thank you, Austin, and good afternoon, everyone. Welcome to our quarterly conference call. With me today are Howard Lerman, CEO of Yext; Steve Cakebread, CFO; and Jim Steele, President and Chief Revenue Officer. As a reminder, this call cannot be taped or otherwise duplicated without the company’s prior consent.

Before we begin, I would like to remind everyone that this call may contain forward-looking statements, including statements about revenue and non-GAAP net income guidance, cash flow, gross margin, our industry outlook, market opportunities, business performance, financial outlook and other non-historical statements as further described in our press release.

These forward-looking statements are subject to certain risks, uncertainties, and assumptions, including those related to Yext’s growth, evolution of our industry, product development and success, market opportunities and general economic and business conditions.

These statements reflect the company’s current expectations based on its beliefs, assumptions and information currently available to it. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call.

Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our most recent report on Form 10-K and our press release that was issued this afternoon. During the call, we will also refer to non-GAAP financial measures.

Reconciliations with the most comparable GAAP measures are also available in the press release, which is available at investors.yext.com. With that, we will begin by turning the call over to Howard..

telecom, auto, financial services, travel and hospitality, healthcare, food services, retail, the United States of America, Germany, The United Kingdom, Japan information around the world is moving from dumb documents where you have to do the thinking to smart databases that think for you.

For example, let's say you wanted to know LeBron James' scoring average last year. You go to NBA.com, you look for the stats section. You click on league leaders. You see a table. You scan the rows for LeBron's name. Then you look at the column headers to find points per game. You find the cell. You see the answers 27.5.

Your brain have to do the thinking, the interpretation of the data, the calculation. Now maybe that wasn’t too hard. But what if you want to know how many points Mason Plumlee scored last year? Now because he wasn't a league leader, he is many pages deep into the table.

With the document you have to hunt and find information yourself and not all information is in the document. What if you wanted to know how many points did LeBron score versus the Lakers last year or what's the Miami Heat all time record on Saturdays? Today the world is moving to smart databases. AI powered services that do the thinking for you.

There's an app called STAT News. You can ask any question you want about NBA stat and it uses NLP to understand your question, break it into a query, and it just tells you the answer directly. Their brain does the thinking, not yours.

Now while this app just tracks sports data, we see a database that thinks for you as the future of the world's knowledge about businesses as well. Today every business in the world has a giant document available for the public to read, that’s their Web site.

We see a world where every business is going to have a smart databases that does the thinking for you, that is their brain. And Yext is built to be every company's brain in the AI powered future. We provide the system of record.

The centralized nervous system that lets any company store all the [facts][ph], relationship they want the world, the outside world to know. And this information has got to be accessible across any device that consumers want to use, whether it's a web browser, a mobile phone, a voice based assistant.

In a recent blog post, the VP of Marketing for the Americas at Google pointed out that near me searches are starting to go way beyond just the query about location. She reported that searches on a mobile device using the term near me along with some combination of language indicating intent to buy have grown more than 500% in just two years.

Now to put that in context, our IPO was just about 18 months ago. So from the point of our IPO until today more people than ever are using their mobile phones to discover information about businesses with the express intent of buying products and services. Getting accurate and timely information to these consumers is table stakes for any business.

Over the same two year period, Google also has seen greater than 200% increase in mobile searches using the combined terms near me with open now. This highlights how urgent it is for a business to make their hours both easily discoverable and accurate as possible.

The business says it's open when it really is - if a business says it isn’t open when it really is, that’s lost commerce. And finally Google also reported a 900% increase in mobile searches over two years for queries like near me today or near me tonight. Now this could be something like what events are happening near me this evening.

No longer is mobile search just about location, it has expanded to include additional dimensions like time and circumstances relating to place and time. Now we recently issued our summer product release. It was packed with new features and tools. Perhaps, most meaningfully the general availability of our events product.

Yext for events allows a business to essentially create, approve and manage information about the things that are happening. Just as Knowledge Manager functions as the source of truth for information about a business’ products and people, our events product functions as the brain to store and manage all event related data.

It powers their own intelligent event calendars and other information across the event discovery system, because our platform put that information in places like Facebook, Eventbrite and Eventful.

We're selling Yext events as a discrete license on a per event per year basis and we develop packages with different levels of features in each tier and much the same way that our other licenses work. We believe events meaningfully add to our market opportunity, because it opens up a completely new type of entity for us.

Yext began selling licenses related to where a business is and when it’s open. We call that the location entity. We then broadened the platform to include the people entity. This captured all the relevant information about professionals like doctors and wealth advisors, attorneys, realtors and so on.

Events are a whole new license category that we can now market alongside these existing license types. And although it's difficult to measure the incremental value of event, we know that there are a ton of use cases. For example, our financial services customers talk a lot about having personal finance workshops, loan seminars, branch promotions.

In healthcare, there are health fairs, vaccination days, charitable events. In retail, there's product demonstrations, launch parties, celebrity appearances. We are in the very early days of rolling out our events and we're not expecting to see an impact right away.

The summer release also included 11 new skills for knowledge assistant, our conversational AI user interface that lets customers manage information about their business using Facebook or SMS text messages. The new skills include the ability to see reviews that are waiting for response and the ability to respond to them.

You can also see the number of phone calls or driving direction requests from consumers. And now there is a nudge feature that asks a business to confirm or update data so that consumers are always getting the most up-to-date information possible.

And that's our mission, to give businesses control over their digital knowledge and provide consumers with perfect information everywhere. We have data integrations with more than 150 digital services around the world. Services like Google, Apple, Facebook, Bing, Instagram, Baidu, WeChat, Tencent and TripAdvisor. And now we've added Amazon Alexa.

We recently launched our integration with Amazon and its market-leading family of voice-enabled echo devices. Now the tens of millions of consumers who use Alexa can receive accurate and timely and authoritative information sourced from the business itself and this was huge for us. It took a long time to get it.

Amazon is understandably very protective about its knowledge architecture. And they won’t work with just anyone. Their recognition of Yext as their trusted data partner is an incredible validation.

It says that they along with over 150 other services we work with, understand the value of our knowledge base and now with Amazon Alexa, we address all of the largest digital services that use voice search. And having this coverage changes the conversations we have when we introduced ourselves to new customers.

Alexa, can I please turn the call over to Jim Steele, our President..

first that awareness of our product is building, and second that the salespeople we brought in to the team are bringing their experience and past success in software to the sales motion here at Yext. We also feel very good about the pipeline that we're building for future growth.

Although we continue to see signs that the market is beginning to understand digital knowledge management, we still have to do a lot of education to help our customers see what we can do for them.

And the integration with Alexa now gives us a powerful way of demonstrating what we can do in that initial pitch meeting with our customers and our prospects. Imagine if these companies aren't even showing up in Alexa at all. We're also very excited about the potential events both with new and existing customers.

So we look forward to discussing our progress with you in future calls. With that, I will turn it over to Steve..

Thanks, Jim. As Howard and Jim have noted, we’re really pleased with the results for both this quarter in the first half of the year. Revenues grew 35% at $55.1 million for this second quarter. And if we exclude direct to SMB business, revenue grew 41% as compared to a year-ago.

Our focus in growing small, single license accounts continues to be through our partner channel. And as a result, direct to SMB now makes up less than 10% of the base and we expect that percentage will decline.

Revenue growth continues to come from a mix of both new customers as well as expansions and upsells of the existing customers, as both Howard and Jim described. Our net revenue retention of 110% was an improvement from last quarter.

Retention and enterprise in mid markets has continued to be very consistent and the overall retention remain slightly below historical levels due in part to the impact of the Dex-YP merger last call. This is because retention is calculated on a trailing 12-month basis. And as we've discussed, it will take a time to recover from this impact.

Deferred revenues increased 52% from the year-ago quarter to $87.5 million. As of July, there are more than $32 million attributes on our platform. That's an increase of 41% year-over-year and translates to more than 25,000 new pieces of information added to our platform every day on average over the past year.

Our customers updated about third of all attributes on our platform during the quarter. On profitability, gross margins were 74.4% this quarter. That's an improvement of 30 basis points above the year-ago quarter. And we continue to expect gross margins will remain in this mid 70% range.

Total operating expenses in the quarter increased from $46.7 million in the second quarter last year to $62.2 million this year. Although expenses are increasing in line with overall growth, we continue to realize operating leverage from improved efficiencies and scale.

As a percent of revenue, sales and marketing improved 230 basis points from the year-ago quarter and G&A improved by 160 basis points from a year-ago. Quarterly GAAP net loss increased from $16.4 million a year-ago to $21.1 million this quarter.

On the basis of our $97.5 million, weighted average shares outstanding net loss per share of $0.22 this quarter compares to an $0.18 loss a year-ago. On a non-GAAP basis, results that exclude stock comp, our quarterly non-GAAP net loss improved from $11.4 million a year-ago or 28% of revenue to $10.1 million or 18% of revenue in the current quarter.

Our non-GAAP net loss of $0.10 per share this quarter compares to the $0.13 loss a year-ago. Please refer to the press releases for a comparison of non-GAAP results to GAAP. Now turning to the balance sheet and cash flow. Cash, cash equivalents and marketable securities totaled nearly $125 million as of July.

That's an increase of approximately $1 million from last quarter. Our net cash used in operating activities this quarter was $4.4 million, which is a meaningful improvement from the net cash used of $5.6 million a year-ago. And over the first half of the year, it improved nearly $11 million from the year-ago period.

As we’ve said before, cash flows will vary from quarter-to-quarter due to a number of factors, including deal flow, billings and collections and the timing of field marketing events. With our investment in ONWARD this quarter, we expect to use more cash in the third quarter than we did in Q2.

So we continue to look for the fourth quarter as our next opportunity for a breakeven quarter. Let's talk about expectations going forward. We expect third quarter revenue of between $57.5 million to $58.5 million. For the full-year, we are increasing our revenue range to $226 million through $228 million, which reflects growth in the mid 30% range.

In terms of profitability, we expect our non-GAAP net loss per share to increase modestly from what we reported in the second quarter. This is again due primarily to our investment in ONWARD as well as the timing of some other spending. Accordingly, we see a loss of between $0.12 and $0.14 in the third quarter.

This assumes a weighted average share count of approximately 99.4 million shares. For the full-year, we've improved our non-GAAP net loss per share range by $0.02 to between $0.41 loss and $0.43 loss based on an assumed weighted average share count of approximately 98.4 million shares.

With ONWARD and the opportunities we have to introduce customers to our new products and features, such as Events, we're excited about the second half of the year. Now back to Howard..

Thanks, Steve. As the world increasingly relies on conversational AI, it becomes mission-critical for a business to understand how consumers are interacting with technology. At ONWARD this year, we are building an agenda that will feature an incredible line-up of innovative executives and thought leaders from around the world.

They will come to share their perspectives and help our customers understand the trends that are affecting their business today and into the intelligent future. It will be our largest event and we invite investors to join us.

We are going to share our vision of how the world is moving from a document driven web of today to the AI powered future of tomorrow where smart databases will provide solid answers. When we started Yext, more than a decade ago, our first publishers we are all document based like Yahoo and Citysearch.

And over the past decade there has been a tremendous shift in consumer engagement. Today it's all about Snapchat, Instagram, Uber, Alexa and Google Assistant. And if you fast forward 10 years into the future, the services people use are going to change again. There's going to be cutting-edge user interfaces and algorithms in these technologies.

But every single one of them will need to have a complete set of facts about every business to deliver their service deal. And for more than a decade, Yext is innovated to put our customers in control with perfect information about them everywhere in every service, in every device around the world. We always have and we always will.

Operator, can you please provide the instructions..

[Operator Instructions] Our first question comes from Mark Mahaney with RBC Capital Markets. Please go ahead..

Hey, it's Zachary Schwartzman on for Mark.

Howard and Jim, can you talk about your early learnings from the Alexa partnership? Do you believe this will serve as a catalyst to bring more licenses on for the Yext Knowledge Network? And is this baked into your updated guidance for the full-year? And I’ve one more follow-up question on international after. Thank you..

There are tens and millions of users that use Alexa every day. We put Alexa into our base package to roll it out to every single customer. We are really excited about it. As Jim said, it's certainly a catalyst for getting a conversation going, which is a really exciting thing for us. It's certainly baked into our guidance..

Yes, in terms of guidance, keep in mind when we introduce new products or new publishers like this, it does take a while for our customers to understand it, learn it and adopt it. So when we gave guidance, we consider a whole lot of things. So, yes, it's in there to some degree.

But also it will take a while for customers to get in and start to use the product and get the subscriptions..

Got it. Thank you. And Howard, you mentioned some notable international brands in your opening comments. Can you talk more about the progress in international markets? And outside the U.S., which markets are you most excited about through the back half of the year? Thank you..

The exciting thing about digital knowledge management, the space in which we are defining, it's a global opportunity. Every company -- every country around the world needs to have digital knowledge management.

Every company that has a Web site is going to need to structure their information, moving in from that dumb document that’s their Web site to a smart database that intelligent services can understand and give answers from. And when we look at that, where we’re seeing great progress, it's in Europe, and it's in Japan.

We mentioned a couple of brands I think that we closed in the Q Deutsche Telekom in Central Europe and Germany, it’s tremendous brand for us. It's an iconic brand in Central Europe and then we mentioned also Yamato Holdings in Japan, that’s like the FedEx of Japan. They’re the biggest shipping company in Japan. We closed them in the quarter as well.

We are really excited about both those markets, and then we’ve got great progress in the United Kingdom and great progress in Southern Europe as well. We see really strong signals around the world as businesses begin to understand that their Web site is not where people are. The action is happening on third-party intelligent services.

Services like Alexa, services like Google Assistant, Google Maps, Siri, Instagram etcetera. And we're really well-positioned to capitalizing this global opportunity..

Thank you..

The next question comes from Alex Zukin with Piper Jaffray. Please go ahead..

Hey, guys. Thanks for taking the question and congrats on another strong quarter, so maybe one for Jim, 80 new logos, pretty impressive. It looks like 33% sequential growth for last quarter, so I’m curious what's driving this kind of magnitude of uptick.

Can you talk about -- you mentioned average selling price or average contract values in the prepared remarks, I’m curious how that looks like versus the year-over-year period. And just as a clarification, when you refer to contract value, are you talking about annual or total. And I’ve a quick follow-up..

Alex, this is Jim. On the enterprise deals that we're seeing, I think, what we're seeing really is the focus on the platform and that we're a solution, we're not a point product. And with the summer release, we added lots of new features and functionality.

You obviously heard about the Alexa addition that was the number one requested thing that we do for our service. And so we are delivering just like building a platform, you know it starts with a product and then you add to the products and it becomes a platform and our customers are big customers.

The big branding customers that Howard talked about, they see us as a platform play. They see the innovation that we're adding and that's what we’re hearing.

Plus, I think it's a combination not only of the product and how we’re delivering on that with the platform play, but also the tenure of a lot of our sales people in the enterprise, last year we went through quite a transformation. We hired a lot of new enterprise people under Dave Rudnitsky in U.S and Brian Distelburger in international.

And we're seeing the results of -- it takes a while to really understand this market from a seller point of view. Even the experienced software sellers are coming to Yext. I mean, they have to kind of deprogram themselves to some degree and learn a whole new way of delivering a solution here and we’re the evangelists on this, we’re the pioneers.

So it takes a lot of explaining to the customers what it is that we do and then we show them the results and what happens is we end up with larger contract. So it's a combination product and the tenure of the sales force. I will let Stephen answer the question..

It's ACV, TCV. Yes, okay, so it’s full contract value..

Total contract. Okay. And then ….

Yes..

… just a follow-up for you Steve, you saw a nice bounce back in deferred revenue growth this quarter versus last, I’m curious how should we think about the seasonal dynamics in the back half of the year or any kind of nuance to billing terms or dynamics that you expect that for us to kind of keep in mind or should we look at last year's sequential growth?.

That’s a good question. I mean, typically Q1 in terms of the one transaction we had was a bit of anomaly. We continue to drive to more often annual, semiannual billing. We still do have monthly and quarterly. So there's some mix in there, but, yes, Q3 and Q4 are big quarters for us. You guys see the numbers seasonally.

So we’ve got of kind of get on and hustle. I don't see any seasonal trends changing right now and I don't anticipate any deals that would move that number around. But if it happens like we did in Q1, if we’ve a great customer with a good opportunity, we will take it. But that's not our normal course of business and I wouldn’t plan on that..

Great. Thank you, guys..

Thanks, Alex..

The next question comes from Naved Khan with SunTrust. Please go ahead..

Thanks a lot. Just coming back to the strength in the number of logos you signed on, are you seeing any changes in the sales cycle duration? Are you seeing a shortening, if any? Any contribution from that? And then I had a follow-up..

Hey, Jim, you want to do that?.

Yes. So we’ve seen some shortening of the sales cycles in certain cases. Like in Japan we didn’t even have our first enterprise seller until February and so they've had a 6-month ramp and they’ve already closed a couple of significant enterprise deal. So I think we’re better at demonstrating the value and helping to show the metrics behind that.

So the real lift that we’re delivering to the customer. In terms of increased traffic to their Web site and increased foot traffic that converts to revenue.

They’re clearly seeing the value of having a consistent brand experience across all these different digital services and the efficiency of having all of your -- all of the important information about your company, all of the information about your products and services and being able to update that in real time, having it at one place makes a difference, and they see that and that -- and then having a system that helps them drive and improve brand image, because they -- CMO's have been very frustrated that they've lost their control over the brand that used to be able to control it on their Web site, now they’ve lost control and Yext brings them back to help them manage the digital image that they projected to the world.

So those things are really taking effect and I think we’re better at articulating that and showing customers the real lift that they’re getting in their business. So I’ve seen it. I can't say it's -- it's everywhere, but we definitely seeing great signs of it.

Plus we've gone through a completely different focus as a sales organization where we spent a lot of time on discovery rather than kind of showing up to our customer and talking about all our products and speeds and feeds.

We go in and listen to what your challenges are and then we address your challenges by delivering a solution that's very unique to each of them. And that has helped definitely in driving these big deals..

Okay. That's very helpful. And then can you just update us on the sales headcount in terms of where you’re versus what you were targeting? And also maybe a talk about the productivity, the sales -- new sales people that you're hiring..

Yes, I would say the -- we are not giving quarterly numbers in terms of what we have that we've been hiring aggressively and we will -- our plan to show that at the end of the fiscal year, but we are not seeing any shortage of quality candidates, year and half when I came in, my biggest challenge was two things.

One is just the visibility of Yext, not that many people knew about it, so we had to really be outbound and now we’re getting a lot of inbound candidates.

And secondly, just the capacity and the reach, both will mostly geographical and having enterprise class people that came in with kind of a portfolio of customers that they had great relationships with. We are finding that we're able to hire at a much higher quality rate than we hired in the past.

And on top of that we've got a very focused enablement program and training program and on boarding program that has led to an improved ramp time.

So we are excited about all that and plus it helps to have a number of great customer logos and customers that are willing to share their experience, that they’ve had with Yext and talk about the real results that they've achieved. So those are all areas that have driven both our capacity up, as well as our effectiveness.

And I don't think we're giving out any efficiency rates or productivity rates. But, I measure it obviously in terms of time to close first deal and we've -- we measured very carefully. We just aren't sharing those numbers publicly at this point..

Great. Thanks a lot..

Our next question comes from Stan Zlotsky with Morgan Stanley. Please go ahead..

Perfect. Thank you so much, guys and congratulations on a nice quarter. A couple of questions from my end. First one maybe for Jim. Once again nice enterprise momentum inQ2 and it sounds like Enterprise sales productivity is ramping nicely under your leadership for last year and a half.

How is the enterprise logo pipeline looking for the second half of the year?.

Yes, thanks. We are not sharing our pipeline information right now. But I can tell you what’s really nice is our existing customers are seeing lots of new innovation and new products like we talk about events obviously.

But we have our four different categories of offerings from starter and professional through ultimate and we have lots of upsell opportunities within our current customer base.

We also have customers that are expanding geographically now that we one of the things that Howard talked about just this impressive growth internationally with -- in Europe and places we've had the U.K for -- Northern Europe based out of U.K for a couple of years now, but France and Southern Europe and then Germany and the DACH regions are really just in the last -- a little over a year and we’re just seeing tremendous success and growth internationally now Japan in the last six months.

So we see tremendous opportunity geographically, a lot of our customers that started in the U.S are now saying, Jeez, we’ve locations overseas. And it's great that you have customers at 160 or so different countries. Let's consider more of a global rollout.

So we're really seeing tremendous opportunity in our existing base and obviously we have tremendous success in a number of verticals and we're going to those companies that are not yet customers and we’ve got a strong case to deliver to them. So I’m excited about the future, but I can't give you any specifics on pipeline..

Bummer. I was hoping you guys could share just a spreadsheet with the entire pipeline..

Nice try, Stan. Better luck next time..

All right. I will give it a shot. So maybe just a couple of quick -- very quick follow-ups. Just on profitability, very impressive 10 points improvement, almost 10 point improvement year-on-year, but the outperformance in profitability was not as much as we saw in Q1.

Is it a function of in investments ahead of the ONWARD conference more or more aggressive hiring? Just where are the incremental investments going now and as we get into the second half of the year?.

Well, it's not been inconsistent with what we’ve told you before. I mean we continue to hire in sales and marketing as Jim described. ONWARD is certainly the biggest marketing event, but there's also other marketing events that go on in Q3.

So, if you look historically our Q3, there's a lot of cash burn and a lot of our losses tend to not be the lowest of the year. So, we just got -- we’re on track. We are moving forward. We do have to fund some of those stuff forward, but it's a lot about sales and marketing hires and a lot about ONWARD and other events..

Got it. And just a very quick clarification question just on the Amazon partnership and the very first question was asked on the Q&A. I just want to clarify that you don't charge directly per data aggregation source, right? It's more of -- right, so I just wanted to clarify that particular point..

Yes, they’re in the same category as all the other big publishers that we have..

Okay, perfect. Right. Thank you, guys..

Thanks, Stan..

Your next question comes from Mark Murphy with JPMorgan. Please go ahead..

Hi. Good afternoon. This is Matt Coss on behalf of Mark Murphy.

On the 80 enterprise, nearly 80 enterprise logos, were some of these prospects in the pipeline for a while? And perhaps a different way to ask about pipeline, did -- was there any notable pull forward of enterprise logos in the quarter? Is there anybody that closed earlier than you might have thought?.

No, I think all the deals -- as Jim has described, there's a couple things. We need to educate people. We need to make sure that our solution meets their needs, which I think the improved sales team is doing. And they need to have budget. So all of those are confluences that you need to bring together to close a deal.

It's very tough to pull big deals up, it's really as hard. So, Jim, could speak to it more on what he is doing, but I think we have a pretty good pace on closing large enterprise deals. And customers do have a need, they’re starting to realize it more. And as they start to put budgets in, that’s going to make us more successful over time.

But no real difference in timing of deals..

Okay. And then a little bit separately, your stock-based comp as a percentage of revenue continues to climb as the stock has risen.

Do you expect additional corresponding increases in stock-based comp should the stock continue to fall?.

Well, I do expect the stock to keep going up..

Yes, definitely..

The answer will be yes to that. I mean, that is the reason why we’re really focused on non-GAAP here simply because it's not an operating thing we control. The stock price itself we don't control as well either, but we deliver the results. And I think customers and investors are starting to see the great opportunities that we have.

So, yes, I would anticipate stock comp continues to grow. If you look at our weighted averages outstanding that we’ve given you there, they're not extremes. So I wouldn’t anticipate we're not any different than any of the other SaaS companies in terms of granting RSUs to new hires and existing employees. So nothing there. It's really about stock-price..

Got it. And then finally, as you mentioned, sales and marketing spending as a percent of revenue has scaled pretty nicely. You’ve already shared some of the leading causes of that.

Are there any new or additional contributors, traditional sales and marketing scale?.

I think we are starting to settle down and get to a pace where we hire people on a routine basis where the sales team is getting the proper training and understanding. So it's more operational. And to be honest at 70% plus we're at the high-end of sales and marketing spend.

So it wouldn't be surprising over time that we're going to get some efficiencies just as we set our processes in place..

Thank you..

[Operator Instructions] Our next question comes from Brent Bracelin with KeyBanc Capital Markets. Please go ahead..

Thanks for taking the question. A couple here. I will start with Jim. As you think about the 73 deals north of $100,000 you closed in the quarter, I know you had obviously 80 new logos.

How much of those larger deals were tied to larger lands versus larger kind of expense, given you said that that's -- that actually included both new and renewal deals?.

Yes. Hey, Brent. It was definitely a balanced performance. We had a number of new logos, we had a number of upsells. So we track it very closely because we want to do both, right. We don't want to just sell to install base. We want to bring in new customers.

So we had the exciting thing was like, you look at Japan and Europe, a lot of those deals are just new logos. We are getting our name in countries that a year or so ago one knew about it. So we're seeing a very balanced performance.

And that’s really -- the other thing we're seeing is the distribution of our sales team, I'd say a year plus ago we had a handful of sales reps that closed large percentage of the deals.

Now we are seeing a much better distribution across our organization, so it's not just concentrated with a few heroes, it's very balanced performance that speaks a lot to our training and on boarding and our hiring..

Interesting. Very helpful. And then, I guess, Steve for you, as we think about the business, x SMB plugging along here at really strong 40% plus growth deferred up over 50% again. I guess, my question really is around the direct SMB business. I know you talked about that, it looks like that might be a slightly bigger drag than we thought.

I know it's small.

Is there intent to deemphasize the direct SMB business more? And if so, at what point do you think that could be less than 5% of the mix, just given that the strength on the enterprise side?.

Well, the math is going to change the percent of revenue, obviously. I don’t know that there's a deemphasis. We are just shifting our business to other partners that are better suited to handle the single license small business. And we do have people that can come direct and subscribe to us. So we are still going to serve businesses of all sizes.

It's just that there's different efficiencies and different channels and we’re going to continue to use all those to make sure that we capture all the customers..

Got it.

So no deemphasis, just that part of the business isn't growing as fast or probably hasn’t some compare issues?.

Well, just keep in mind, we said direct SMB, so this is the amount of business that we do direct with small businesses. We continue to move that to our partner channel. So we are still doing business with small businesses, but not directly..

Got it. Okay. Fair enough. And then, Howard my last question for you is just really around now that you've locked in kind of Amazon Alexa as the number one request that your customers kind of had as a new publisher source.

What’s the number two request on the things that customers kind of want? Is there one that is right next to Amazon Alexa or is there -- is it kind of fall off the list relative to popularity on what customers want next?.

Brent, first off I want to thank you for actually asking me a question. It's been a while since I've gotten to answer one on this call. And now Jim and Steve can hang out for a second. I guess everyone else has learned their lessons with asking me questions. Look, Amazon Alexa was the number one requested publisher from our customers.

Tens of millions of people in the United States and Europe use Alexa, it's the number one selling smartphone speaker, and business search is a big deal. And with our 32 now million attributes, it was clear that as one of the trusted data sources for the world we are in a great position to deal with the put customers in control on Amazon on Alexa.

But here's the funny thing about this. We started the company a decade ago with literally the exact same idea to put a business in control of information about them in third-party services.

And the first services that we signed up were Citysearch, MapQuest and Yahoo!. To date, nobody really uses those services. It's all about Instagram and Snapchat, Alexa and Uber and the services have changed. You can book rides, you can use social media, you can use augmented reality with Snapchat, you can use different types of map applications.

There's all sorts of different things that these services do for you. And the changes are coming from the user interface layer and the AI layer. That's where the innovation is happening. In interfaces like mobile phones and augmented reality and AIs that are getting smarter and able to do more types of things for you and more predictive.

But everyone of these services needs a knowledge base. They need to have all the facts about the world. They need to have all the facts about every business.

And today every businesses facts are hosted on their Web site, but we see a future where every businesses facts are hosted on a smart database on a brain type system that can provide intelligent services with all the facts about what time Burger King is open or is there a location in Shanghai with the drive-through that’s open right now that serves the Jalapeno King Whopper.

That’s the type of detail that people want to know as the world moves to voice search as they ask longer and more precise questions. And so the world continues to change. If you fast forward a decade from now, we’re going to look back and we're going to see a completely new set of publishers.

We are going to see -- maybe not a new set of companies, but a new set of publishers. We are going to see some new ones for sure. But we’re going to see advancements in AI and in AR. I think AR, by the way, is going to pair really nicely with voice search. It's a supernatural way for you to interact with a computer.

It's the ultimate way so you're not hunched over your phone typing all the time. But here's the thing, every one of these new services is going to need knowledge. They’re going to need facts about every single business in the world to be able to deliver the best service they can to you and that's our opportunity.

That’s the amazing opportunity, the transcendent gigantic opportunity that we have in front of us, which is to put all of these customers, every business in the world that has a Web site in control in the future, in intelligent services, and we don’t know what that future is going to look like in terms of the type of services people are going to use.

But we do know that every one of them is going to want the facts about every one of our customers to be able to deliver the best possible service to you. And we're going to be there to help them do just that..

Gentlemen, your thoughts are always appreciated. Thank you..

And at this time, I’m showing no further questions. So I would like to turn the call back to James Hart for any closing remarks..

Thank you, Austin, and thank you everyone for joining us today. We are grateful for your presentation and look forward to speaking to you in a few months. Hopefully you get to enjoy the last few days of summer..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..