Feb 8, 2007
TRANSCRIPT SPONSOR
Executives
Tim Bixby - President & CFO Robert LoCascio - Chairman & CEO
Analysts
Nathan Schneiderman - Roth Capital Partners Brad Mook - Beonning and Scattergood Brad Whitt - RBC Capital Markets Michael Kern - Canaccord Adams Mike Shonstrom - Emerging Growth Equities Richard Fetyko - Merriman Curhan & Ford John Hickman - MDB Capital Group [Rizwan Ansari] [Stanley Hybrings]
Operator
Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to LivePerson's third quarter 2006 earnings conference call.
At this time, participants are in a listen-only mode. Later, we will conduct a Q&A session.
At that time, the operator will give you instructions. As a reminder, this conference is being recorded today, February 8, 2007.
Speaking on today's conference call will be Robert LoCascio, Chief Executive Officer of LivePerson, and Tim Bixby, President and Chief Financial Officer. I would now like to turn the call over to Mr.
Bixby. Please go ahead, sir.
Tim Bixby
Okay, thanks very much. Before we begin, I'd like to remind listeners that during the course of this conference call, comments that we make regarding LivePerson that are not historical facts are forward-looking statements and are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results.
Any such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. It should be clearly understood that the internal projections and beliefs, upon which the company bases its expectations today, may change, over time, and that we undertake no obligation to inform you if they do.
Results that we report today should not be considered as an indication of future performance. Changes in economic, business, competitive, technological, regulatory, and other factors could cause LivePerson's actual results to differ materially from those expressed or implied by the projections of forward-looking statements made today.
For more detailed information about these factors and other risks that may impact our business, listeners are referred to the reports and documents filed from time to time by LivePerson with the Securities and Exchange Commission including our most recent report on Form 10-Q and our upcoming report on Form 10-K. Also, please note that on the call today we will discuss some non-GAAP financial measures in talking about the company's financial performance.
We report our GAAP results as well as provide a reconciliation of these non-GAAP measures to GAAP financial measures in our earnings release. You can obtain a copy of our earnings release by visiting the Investor Relations section of our website.
And now, I would like to turn the call over to LivePerson's Chief Executive Officer, Robert LoCascio.
TRANSCRIPT SPONSOR
Robert LoCascio
Good afternoon, everybody. Thanks, Tim.
Good afternoon and thank you for joining us. We again deliver an extremely strong quarter.
During the fourth quarter of 2006, we generated record revenue of $10.3 million, up 64% from a year ago and up 16% sequentially as compared to third quarter of 2006. We finished 2006 with year-over-year revenue growth of 50%.
Earnings per share in the fourth quarter was $0.03 and a penny better than our guidance. This includes the impact of stock compensation expense and a tax benefit in the fourth quarter.
EBITDA per share was $0.04, also within the guidance range we provided in our third quarter earnings release. I want to now review the annual plan we outlined in the first quarter of 2006, and then I will speak about our goals in 2007.
In the first quarter of 2006, we expected top-line annual growth of 35%. Through strong execution we ended up delivering 50% annual revenue growth even excluding the impact of the acquisition we did of Proficient Systems, we achieved a 45% organic growth rate.
This acceleration in sales has been driven by a three-phase sales strategy. First, we're really focused on engaging the highest-level decision-makers we can at our potential customers.
What this allowed us to do was maximize the chances or making LivePerson a corporate-wide strategic initiative. After initial implementation, we then would widen our focus within the entire organization, and we strove to get as many business units as possible on the LivePerson platform.
And it usually was in the timeframe of about 24 months, so the first 24 months of the engagement. Then, finally, we looked deep in our penetration within each business unit by offering other communication channels like our new voice channel, our marketing addition product, our follow-up engine, and now our recent release of a new service package called Proactive Service.
All these are fully integrated and utilize Timpani's sophisticated real-time analytics engine. The sales strategy has enabled us to increase the average revenue per Timpani's sales and marketing customer by 50% over the last two years.
With strong executive sponsorship and tight integration with our customers' online sales strategies, we create a long-term value for our customers that goes far beyond features and functionality. We are also seeing comparable successes in our small business group.
Our SMB product line called LivePerson Pro continued to grow at about 40% a year. The driver of this growth is that small businesses are very aggressive at driving traffic to their websites from marketing engines like Google.
For a small business, maximizing visitor convergent rates from these marketing engines is critical for their success. And although our product is a premium price, the highest-priced product against our competitors, and it sometimes can even cost as much as what our customers are paying for their hosting fees, is one of the most effective ways in which they can convert visitors into buyers.
This product is sold and delivered in a very efficient way online, and we expect that we will continue to widen our margins and maintain our growth rates into 2007. Adding to our market share expansion in 2006 was our acquisition of Proficient Systems in July.
Proficient was a primary competitor to our Timpani product line. The strategy behind this acquisition was threefold.
First, to convert key clients from their Fortune 500 customer base over to our platform and then we would expand these customers and leverage our fixed costs. Second, is integrate their key concepts around real-time data analytics into future releases of Timpani and, finally, to retain key personnel to further accelerate product innovation and efficiency across our entire company.
The achievement of these three goals were the result of the acquisition being a long-term contributor to our overall success. This is our fifth acquisition, and we're seeing similar positive results we've seen in our previous acquisitions.
We plan to complete the full integration of Proficient Systems during 2007. Although we increased operating expenses in each area during 2006, our most significant investment was in our R&D team.
We nearly doubled its size. We expect to continue to invest in development resources but at a reduced rate in 2007.
We also expect to make further investments in sales and marketing in order to maintain our momentum in the market. Even with this additional investment, we currently expect EBITDA as a percentage of revenue to improve by nearly 40% from 18% in Q4 of 2006, and we'll go to approximately 25% by Q4 of 2007.
A key driver to our profitability is our professional services group's ability to reduce implementation times. In 2006, they focused on creating programs that provide our customers with tools to train their own operators and to facilitate their own expansions.
This group deployed 100 new enterprise projects in 2006 for new and existing clients and reduced deployment times by about 20% and increased the number of customers each account manager can handle from three to five to eight. So we're getting leverage now on our labor in that group.
We're going to expect to see the continued progress in efficiencies in this group into 2007. 2006 was an accelerating year of growth while we strengthened the core of our business.
Our financial goals in 2007 are to achieve revenue of approximately $49 million with year-end EBITDA margins of approximately 25%. We are also focused on reducing our already-low attrition rates and once again seek to achieve double-digit quarter-over-quarter sequential growth rates.
From an implementation standpoint, we want to continue to decrease deployment times by an additional 20% and, furthermore, we will continue to focus on the development of our new core products like voice, Marketing Edition, and Proactive Service. In closing, I want to personally thank everyone at LivePerson for working hard to make 2006 one of the most successful years in our company's history, and I look forward to another terrific year in 2007.
With that, I would now like to turn the call over to Tim so he can do an in-depth analysis of our financial performance. Tim?
Tim Bixby
Thanks, Rob. As you can see from the press release from earlier we again had a very strong quarter.
Revenue significantly exceeded the expectations set out on our third quarter call, while our bottom-line results were in line with our guidance. The Proficient acquisition continues to track strongly and is ahead of expectations on several metrics.
Nearly all acquired Proficient clients will be migrated to LivePerson by midyear 2007. Our gross and operating margins improved significantly quarter-to-quarter, from third to fourth quarter, indicating that we continue to succeed in scaling the financial model as we grow.
We'll give more detail on our expectations for the first quarter and the full year of 2007 a little bit later in the call. We reported record revenue in the fourth quarter of $10.3 million, a 64% increase versus the prior-year period, and a 16% increase from the third quarter of 2006, well exceeding our guidance range for revenue.
This upside performance was driven by better-than-expected small business sales, faster-then-expected completion of a small number of professional services engagements, and an earlier-than-expected go-live date for certain larger enterprise clients related to the holiday season. We also saw some increase in activity-based usage fees during the quarter as online activity increased also as a result of the holiday season.
Excluding the impact of Proficient, we saw organic revenue growth of approximately 15% sequentially and 45% year-over-year. This is the last quarter that we will break out Proficient results from the overall financial results as the integration of the two companies is well on its way to completion.
Our GAAP earnings per share for the quarter was $0.03. This was a penny better than our guidance, primarily due to a favorable tax impact in the quarter of $0.4 million.
Excluding this tax adjustment, results were right in line with our expectations. EPS, of course, includes the impact of stock-based compensation expense pursuant to FAS 123.
EBITDA per share was $0.04, also in line with our guidance from the end of the last quarter. I'll give a bit more detail on the results and the expectations in a moment.
They're also detailed within the press release from this afternoon. As in the past several quarters, we generated very good results in both signing new accounts and growing existing accounts.
We signed several new blue-chip clients during the quarter including Verizon Wireless, Panasonic, Sandals and Beaches Resorts, and Halifax Bank of Scotland. While we expanded business with several existing customers including the Royal Bank of Scotland, Bluefly, as well as one of the nation's largest home improvement retailers.
With our expansion at the Royal Bank of Scotland and signing of Halifax Bank, LivePerson now counts two of the top five banks in the UK as customers. Also through Proficient we have solidified or expanded business with other global leaders in the fields of technology services, Internet networking hardware, and financial services.
Our Timpani voice product line also continues to progress very well. We added seven new enterprise voice customers during Q4 for a current total of 10.
We are also starting to see potential for expansion in what are initially modest deployments. We also received a nice award for the voice product.
"Customer Interaction Solution" magazine named Timpani voice 2006 Product of the Year for Outstanding Innovation. Our small business group, our SMB group, as Rob mentioned, continues to perform very well, increasing revenue 10% in the quarter, 40% in the year, and also increasing revenue per customer more than 45% during 2006.
Our SMB group continues to represent 35% of total company revenue today. This is expected to keep pace with enterprise growth over the next year, such as we expect SMB will continue to represent more than 30% of revenue by year-end 2007.
We closed 32 enterprise deals in the quarter, down from 45 in the prior quarter but notably at an average of $100,000 annually per deal as compared to $65,000 in the prior quarter. This is up about 50%.
We clearly did fewer but much larger deals in the quarter. For Timpani sales and marketing, the average new deal size was $175,000 as compared to $120,000, up 45% as compared to the prior quarter.
With continued expansion in our most established clients, we currently see the potential to have a couple of clients nearing the $2 million annual revenue mark by year-end 2007. In terms of revenue mix, about 75% of new enterprise deals in the quarter and about 85% of new revenue in the quarter came from Timpani sales and marketing deals while the balance, about 30% -- about 25%, excuse me -- of the deals were contact center deals.
Eighty-percent of incremental revenue in the quarter came from existing clients while the remaining 20% came from newly added logos. We saw some significant gains from existing clients as these numbers highlight, supporting our view that we are still not nearing saturation at even the largest clients.
As I mentioned, the Proficient integration continues as expected and on pace. We eliminated the cash burn ahead of schedule and actually generated positive cash flow in the fourth quarter from Proficient operations in only the first full quarter of operations as part of LivePerson.
This is well ahead of our expectations set out last summer at the time we closed the deal. We expect the first quarter to be accretive in line with our expectations at the time of the deal closing.
The earnout, which will be the completion of the transaction closing for us, will be complete at the end of the first quarter of 2007, and we estimate, based on current information, that we will see about 80% of the maximum earnout achieved. And this is based essentially on revenue targets set at the time of the acquisition.
I'll now review a little more detail of the financial results on a line-item basis for the quarter ended December 31. For the quarter we reported record revenue of $10.3 million, which was a 16% increase versus $8.9 million in the prior quarter, and a 64% increase versus $6.3 million in the fourth quarter of 2005.
Excluding the impact of Proficient, revenue grew 15% in the quarter to $9.5 million, which represents a 51% increase from the prior year. We saw some seasonality in our business this year, as some customer implementations were accelerated to take advantage of the increase in online holiday traffic.
The result was that we saw a higher growth rate than anticipated in Q4 due to a shift of some revenue out of Q1 '07. This is better for us with the recurring revenue model, especially, to have customers accelerate implementations.
So I think it's appropriate to view Q4 and Q1 together from a growth-rate perspective in order to get the best sense of the growth trajectory for the company. Combining the quarters, Q4 and Q1, puts us right on track with our overall target of double-digit sequential revenue growth.
For the year we reported revenue of $33.5 million, a 50% increase from $22.3 million in the prior year, well exceeding our initial expectations for the year of $30.5 million. Excluding Proficient, revenue growth for the year was approximately 45%, well ahead of the 35% growth initially expected one year ago.
Deferred revenue at the end of the quarter increased by 10% to $3.3 million and was up 100% from a year ago at this time. Cost of revenue in the fourth quarter was $2.4 million compared to $2.1 million in the prior quarter and $1.3 million in the prior year resulting in an overall gross margin of 77%.
This is 100-basis-point improvement from just the prior quarter. Cost of revenue was $7.6 million in the year, as compared to $4.3 million in the prior year, and this resulted in a gross margin for the year of 77% as well.
This is as compared to 81% in the prior year. Though we've seen consistent improvement in our gross margin in recent quarters, we continue to focus internally on further improvements.
To give you a feel for the scope and complexity of the tasks we accomplished within our server infrastructure, and this is the key driver of cost of goods sold and variability in our gross margin, in December 2005 we processed about 280 million unique website visitors and 2.8 million chat interactions through our servers. By December 2006, a year later, those numbers had increased by nearly 50%, so that today we monitor about 400 million monthly site visitors and more than 4 million chat interactions per month.
Our product development expense for the quarter was $1.8 million as compared to $1.4 million in the prior quarter and $0.7 in the comparable quarter in the prior year. Product development expense for the year was $5.1 million as compared to $2.7 million in the prior year.
As highlighted on our second quarter conference call last August, we have continued to build out our R&D organization to support our integration of Proficient capabilities as well as a further split between our enterprise and small business development teams, and we've also added additional horsepower to streamline the efficiency of our product implementation process. Our sales and marketing expense in the fourth quarter was $3.3 million, up a bit from $3.1 million in the prior quarter and up from $2.1 million in the prior-year quarter.
Sales and marketing expense for the year was $11.9 million as compared to $7 million in the prior year. We are now seeing significant leverage in the sales and marketing expenditure line, as this expense has declined from 39% to 31% of revenue, just the last two quarters.
We currently have 15 quota-carrying sales reps on the enterprise side of the business. This up two from the end of the last quarter.
We expect that to grow by five to six by year-end 2007. With this growth and the ramp-up of newer reps already on board, our assigned quota plan for 2007 will be at least 35% more than it was for 2006.
General and administrative expense excluding amortization of intangible assets, was $1.9 million in the fourth quarter of 2006, up slightly from $1.8 million in the prior quarter and up from $1.1 million in the comparable quarter in 2005. G&A expense was $6.6 million for the full year as compared to $4.5 million in the prior year.
EBITDA, or earnings before interest, taxes, depreciation, and amortization, was $1.9 million for the quarter, up 43% from $1.3 million in the prior quarter and the prior year. EBITDA for the year was $5.3 million, up 31% as compared to the prior year.
EBITDA per share in the quarter was $0.04, up a penny as compared to the prior quarter and the prior year, while EBITDA per share for the full year was $0.12, up 20% as compared to the prior year. We released a portion of our deferred tax assets based on current estimates of future taxable income resulting in a tax benefit of $0.4 million in the quarter and the year.
We expect an effective tax rate of 42% in 2007, and a cash tax rate of zero in 2007. The reconciliation between EBITDA and GAAP net income is provided in the financial statements accompanying our earnings release, and our net income per share in the quarter was $0.03 including the impact of stock-based compensation expense and the tax benefit mentioned previously.
As we saw last quarter, our results in the quarter showed continued improvement of our operating margins. EBITDA margin and net income margin both increased by more than 300 basis points as compared to the prior quarter.
EBITDA as a percent of revenue improved from 15% to 18%, quarter-to-quarter, while net profit margin increased from 3% to 7% before tax impact. Most of the improvement was driven by greater leverage of sales and marketing expenditures.
Though we currently have one of the strongest EBITDA margins of any company in the softwares of service market sector, we will strive for continuing improvement of this metric in 2007. Based on our current view of 2007, we expect to end the year with EBITDA as a percentage of revenue of approximately 25% by the fourth quarter, or an improvement of about 700 basis points.
There was a time several years ago when we were a $5 million or $6 million company, when we estimated we might eventually see EBITDA margins approaching 40%. While we've seen large improvements in operating margins over the last two quarters, we still see an expanding market opportunity in which we can maintain our leadership position if we continue to invest in our growth.
This means that today we are less focused on maximizing margins at the expense of growth and more focused on investing ahead of the growth curve. Based on improvements over the last six months, we believe that we can continue to show among the strongest operating margins of our softwares of service peers, while also continuing to invest in the areas that have enabled us to show 60% year-on-year growth rates.
Turning now to the balance sheet, our cash balance at quarter-end was up quite a bit by $2 million to $21.7 million from the prior quarter. Cash increased by approximately $4.6 million in the year, roughly in line with our EBITDA.
Our accounts receivable balance increased to $4.3 million from $3.6 million in the prior quarter due primarily to increased sales. DSOs were made low even with this increase in accounts receivable running at less than 40 days.
Let's now talk a bit about our expectations for the current quarter and the rest of 2007. As we told you a year ago, our goal for the second half of 2006 was 10% sequential quarterly revenue growth or better.
I am pleased that we have been able to deliver back-to-back quarters well above that mark in the third and fourth quarters of 2006. This acceleration in the back half of the year pushed us above the 50% annual revenue growth mark for 2006 and sets us up with a very solid starting point for 2007.
As mentioned, the holiday season impact on fourth quarter results will impact our first quarter 2007 expectations. The fourth quarter revenue increase exceeded our projections, and the first quarter will consequently be less than our target double-digit sequential growth rate.
The two quarters combined are right on track with this target. The acceleration of revenue into 2006 gives us confidence in a full year 2007 that looks very strong with nearly 50% growth currently expected.
Specifically, the company currently expects the following financial results -- for the first quarter of 2007, revenue of $10.8 million to $10.9 million, which is nearly a 60% increase as compared to the first quarter of 2006 and is up 5% versus the prior quarter. EBITDA per share of $0.05 and GAAP EPS of $0.02 for the first quarter of 2007.
For the full year, we expect revenue of between $48.5 million and $49.5 million, or approximately 47% annual revenue growth. For the full year as well, EBITDA of $0.24 per share and GAAP EPS of $0.09 per share is expected.
We also expect that share count, fully diluted outstanding shares, will increase by approximately 1.3 million additional shares as of March 31, 2007, based upon the revenue earnout provisions related to the acquisition of Proficient Systems. This is an estimate based on currently available information.
As mentioned previously, we expect an effective tax rate of 42% for 2007, and a cash tax rate of zero. These GAAP EPS expectations noted already include the estimated impact of a change in accounting policy related to FAS 123 as of January 1, 2006.
We expect that total stock-based compensation expense for 2007 will approximate $3.6 million. We expect that this will impact net income per share by $0.08 and $0.02 for the full year and the first quarter of 2007, respectively, based upon the unamortized stock-based compensation expense as of December 31, 2006.
This also includes the impact of share issuances related to the Proficient acquisition. This impact may change based on additional stock option grants and forfeitures, if any, methodology refinement, or other factors.
Capital expenditure in Q4 was $220,000 and totaled $650,000 for the full year of 2006. CapEx is expected to be approximately $750,000 in 2007.
Depreciation and amortization excluding stock-based compensation expense was $2 million in 2006, and we expect that to be approximately $2.1 million in 2007. I would also like to highlight the announcement of a stock repurchase program, which is further described in our press release.
Our board of directors has approved a stock repurchase program to give the company the ability to repurchase its shares as when appropriate. The stock repurchase program authorizes the company to repurchase shares of its common stock on the open market or privately negotiated transactions at times and prices considered appropriate by the company depending on prevailing market conditions and other corporate considerations.
The program limits the company to an aggregate purchase price of $8 million, and we expect that repurchases, if any, would be completed no later than the first quarter of 2008. And that, at this point, concludes our financial review.
We would now like to request that the operator rejoin the call and give instructions so that we can take any questions we have from our listeners.
Operator
[Operator Instructions] And we'll take our first call from the side of Nathan Schneiderman. Go ahead.
Nathan Schneiderman - Roth Capital Partners
Hi. Thanks very much.
Hi, Tim. Hi, Rob.
Tim Bixby
Hi.
Robert LoCascio
Hi, Nathan.
Nathan Schneiderman - Roth Capital Partners
A couple of questions for you here -- I guess, by my calculations, if I'm doing the math right, it would look like the acquired Proficient business declined sequentially. If that is correct, was there an issue there, or did you expect that dynamic?
Robert LoCascio
No, that's not right. There are two things happening with Proficient.
It had a partial quarter impact in Q3 and then a full quarter impact in Q4.
Nathan Schneiderman - Roth Capital Partners
Right, but I guess I had recalled about $860,000 of Proficient revenue in Q3, and it looks like it's more like 800 this quarter? Am I doing my math wrong?
Robert LoCascio
Yeah, in Q3 it was about 600, and Q4 about 800 -- just real approximate.
Nathan Schneiderman - Roth Capital Partners
Okay, and can you --
Robert LoCascio
Sorry, go ahead.
Nathan Schneiderman - Roth Capital Partners
Can you give us -- can you update us -- I guess you spoke to EBITDA margin goals, longer term, and I guess I'm scaling down expectations there. I guess it wasn't that long ago I heard you all talking about 35% EBITDA margin targets in '08.
How do you think we should be modeling the '08 in terms of EBITDA margin? What are your longer-term goals there?
Robert LoCascio
I think the long-term goals have not changed. I think the contrast that pointing out is one is our guidance for 2007 versus our long-term goal, and so our long-term targets have not changed.
What we're updating is our specific guidance for 2007, so I think we're really on track to progress towards those target margins. So if you look at several hundred basis points improvement in Q3, again in Q4, and then a 700% -- or 700-basis-point expectation between now and Q4 '07.
I think we're actually tracking pretty nicely towards the longer-term targets.
Nathan Schneiderman - Roth Capital Partners
Okay, but you're not expecting to end '08 at 35% margin anymore?
Robert LoCascio
We've given no guidance on '08 at this point.
Nathan Schneiderman - Roth Capital Partners
Okay, and then I wanted to confirm the EBITDA guidance for '07 is slightly above 10 million on a dollar basis?
Robert LoCascio
On a dollar basis? It's about right.
Let me confirm that, but I think that's about right.
Nathan Schneiderman - Roth Capital Partners
Okay, and then can you give us the cash flow from operations in '06 and what you're expecting in '07?
Robert LoCascio
Cash flow from operations was right in line with EBITDA, but it's not a disclosed number at this point. Those numbers only get disclosed in the 10-Q.
But our EBITDA is the best approximation at this point of information that's publicly available. Our CapEx, as I mentioned, was about $650,000, and that's the other material amount.
Nathan Schneiderman - Roth Capital Partners
Are you expecting the '07 cash flow from operations to be approximately EBITDA as well?
Robert LoCascio
Yes. That relationship will stay pretty close.
CapEx will only be up a little bit in '07, and our expected cash tax impact is zero, so those should be fairly close in line.
Nathan Schneiderman - Roth Capital Partners
Okay, and then final question for you -- what is your expectation for basic and diluted shares for '07?
Robert LoCascio
Today, what was published was 44.6 in the fourth quarter, and then the full year, 43.3, so we expect another 1.3 million, plus or minus, to come out at the end of Q1 and then normal additions, which historically have been 100, plus or minus, per quarter. So if you look at the increases over the course of 2006, that rate is comparable to what we would expect next year.
Nathan Schneiderman - Roth Capital Partners
Okay. Thanks very much.
I appreciate it.
Operator
All right. Our next question will come from the site of Brad Mook.
Please go ahead.
Brad Mook - Beonning and Scattergood
Thank you. Just because I may have read something wrong, Tim, didn't you disclose cash from operations in the press release at $4.4 million?
Tim Bixby
I'm sorry?
Brad Mook - Beonning and Scattergood
Didn't you -- isn't that cash from operations in the press release at $4.4 million?
Tim Bixby
Yes, on the reconciliation page, there is net cash provided by operating activities. That's correct, that is 4.4 million.
Brad Mook - Beonning and Scattergood
Okay, I just wanted to make sure I wasn't reading that wrong.
Tim Bixby
No, that's correct.
Brad Mook - Beonning and Scattergood
Okay, a couple of other things -- deferred revenue edged higher. Last quarter there was a pretty big jump, and you said there was a single prepaid deal of pretty significant size.
That should be rolling off a little bit, at least. So what took it higher in this quarter?
Was it more prepaid activity?
Tim Bixby
Yeah, that deal did roll off and converted to month-to-month, but there was additional large deals that came in, and so you don't see a significant drop-off due to that.
Brad Mook - Beonning and Scattergood
And those are other prepaid deals?
Tim Bixby
That's right.
Brad Mook - Beonning and Scattergood
Okay, and then the usage fees in the quarter -- what was that impact in Q4, just so we can normalize it?
Tim Bixby
It was pretty minimal. It was slightly higher than prior quarters but less than $150,000.
Brad Mook - Beonning and Scattergood
Okay, and then you talked about seeing some of the biggest customers, the potential, on the Timpani sales and marketing trending up potentially towards $2 million a year. I think last quarter you said you had about eight or nine customers over 600,000 adding about two to three a quarter.
Can you just update us on that and maybe the average Timpani sales and marketing number, which I think was 300,000 last quarter.
Tim Bixby
That average number -- that's a pretty big group of folks at this point, so that number has not moved materially, and I think the -- it's probably fair to say we've added maybe one or two to that range of half a million plus -- that level of account.
Brad Mook - Beonning and Scattergood
Okay, but you're clearly seeing upward pressure from the biggest ones?
Tim Bixby
Yeah.
Brad Mook - Beonning and Scattergood
Okay, and then on your pipeline activity, you guys have been pushing a little bit on the marketing front over the past period of time. Can you talk about inbound versus outbound activity?
I think you were 80% outbound the last quarter. Is that shifting at all, or are you still pretty much pushing it from your end?
Tim Bixby
It's still pretty much an outbound activity that we're doing just because of the natures -- even -- I said last year we're still educating the market. We've sort of invented this product, and we're signing up a lot of the larger retailers.
So there's still an educational process that's going on. But chat is an overall technology outside of Timpani sales and marketing, just looking at chat demand, there's a lot of noise inbound on just chat.
And then we'll educate them on the difference between service chat and sales chat. So I believe chat has a lot of inbound capabilities today, and we see a lot of it going to small business.
But Timpani sales and marketing is still a fairly outbound activity.
Brad Mook - Beonning and Scattergood
All right. I'm sure your small business group enjoys the inbound traffic and then adding additional channels to it.
Tim Bixby
Exactly. And about 50% of their inbound traffic comes just organic, which is somebody used LivePerson on one of our 5,000 customers and said, "Wow, this is cool, I'd like this for my site," and the other 50% is driven through primarily key words on search engines.
And then they are converting those into, obviously, into sales, into leads.
Brad Mook - Beonning and Scattergood
Okay. Thanks, guys.
Tim Bixby
Thank you.
Operator
Our next question comes from a side Brad Whitt. Go ahead.
Brad Whitt - RBC Capital Markets
Hey, good afternoon, guys. Thanks for taking my question.
Tim, just a quick clarification on the share count, the extra earnout, $1.3 million or so, I think you said, from Proficient. Doesn't that impact the June quarter?
It doesn't really impact the March quarter, does it?
Tim Bixby
The count date is March 31, so it would impact -- yeah, the quarter ending June. That's right.
Brad Whitt - RBC Capital Markets
Okay, I just wanted to make sure.
Tim Bixby
Yeah, it would be weighted, so it will have close to zero impact on Q1, that's right.
Brad Whitt - RBC Capital Markets
Okay. And, Tim, what's your expectations with deferred revenue as you move throughout 2007?
Would you expect that balance to continue to grow or flatten out or -- any idea how that should trend?
Tim Bixby
I think it will track more or less with revenue. We saw a fair jump, if you compare to a year ago, but I think the fact that it's driven by customers just choosing to commit up front versus month-to-month in terms of payment cycles, that trend is not changing, case by case.
So I think it could grow with revenue, maybe slightly ahead of revenue but not much faster than that.
Brad Whitt - RBC Capital Markets
Okay. And, Rob, could you give us an update on some of the new products you mentioned -- the Proactive Service and Marketing Edition, whether or not those products are ready to go, for customers ready, have customers logged today, just kind of give us the general update.
Robert LoCascio
Yeah, the Marketing Edition has been up and running with some of our retailers. As a matter of fact, we've got a couple that don't have chat, they're just using it for Proactive, basically setting marketing information.
So you're on a website, we use the rules to see where you're stuck in the process of shopping, and then you're giving some sort of marketing message to help you on the way. A couple of retailers are just using without even chat.
So that's already out there. The Proactive Service, I think, is fairly interesting, and it's going to be -- it's a pretty, I think focused initiative for the sales team.
Earthlink was one of the first customers. They are one of our largest service customers, and they went ahead and basically took the rules engine and used it in a service environment and actually applied it to knowledge base.
So when somebody is searching through a knowledge base query on the website, and they can't find what they want, we read what that knowledge base search is, and then when we see that they're getting stuck, they're given an invitation to chat. And what we've seen is that during this test phase -- they've been up for a couple of months -- there's been a reduction, almost one to one, between phone calls and chats.
Chats for them are about half the cost of a phone call. So they're really -- they've been now increasing where Earthlink was really a customer that was kind of flat on the revenue side, on service for a while.
Now they've increased their fees, actually started last quarter just increasing this product of service. So I think product of service may be beneficial for most of our -- even Timpani sales and marketing customers -- that also want to do service.
So I think there's a focus initiative. I think voice also.
We had about 100 new voice customers in the small business sign up for the quarter. There's a total of 400 now using voice, and that was basically signed up through the year.
We've got 10, now, implementations on the enterprise side, so that's starting to take off. So, yeah, I feel really strong about that.
As I mentioned on the call, our strategy is still going with the basic Timpani sales and marketing platform with chat, go wide across different divisions, and then go deep in each division with these different pieces like Marketing Edition and voice.
Brad Whitt - RBC Capital Markets
Okay, thanks Rob, very helpful. Also, along the same lines, are you seeing -- you mentioned, Tim mentioned, I think, a number of verticals, some of them seem like new verticals, but are you seeing any limitations as far as verticals?
And, also, are you seeing any need to customize a solution for verticals? Are you able to go with the standard solution?
Robert LoCascio
Well, there's always, like travel, was a sort of a vertical that started in 2006, and we still -- like Carnival Cruises, and there's a couple of other big travel sites that are using it. We haven't announced yet but when we first start in a vertical, let's take travel, usually the first one or two customers we start to get our hands around, what kind of rules to build and what's the flow of traffic and what's the sales process?
And so, with that, we customize the rules and, in essence, we're customizing the implementation. Then what we're able to do is go to the next person, next customer, in that vertical, and we have this basic rule set that works for that vertical, and then we'll customize for that specific company.
So there's definitely a level of customization with each vertical. Obviously, we do an amazing job at telco, because we've done it for a while.
Financial services is -- we've got it down pat. Hardware/Software, and then e-retail.
I think travel is obviously one big area. I think there's healthcare that could be one that I see sort of bubbling up, and so as we move forward, but there's definitely a level of customization there.
Brad Whitt - RBC Capital Markets
Okay, that's very helpful. So how should we -- the activity base, Tim, activity base -- would you expect that to go down sequentially?
Is that part of the guidance for next quarter?
Tim Bixby
When you say activity-based, do you mean the usage?
Brad Whitt - RBC Capital Markets
Yeah, the usage base revenue.
Tim Bixby
I think they're pretty small moves, but typically we'll see an increase in the fourth quarter, which is a little seasonal, but then they typically don't decrease to their prior levels. They might decrease to, like, a new, higher baseline, but there will be some sort of a -- a little bit of a holiday spike in there.
But we've got as many non-retail customers that have usage-based billing that really aren't subject to those -- strictly the shopping trends. And so that softens the volatility of that number.
Brad Whitt - RBC Capital Markets
I guess my final question, Tim, around the tax rate, you said a zero cash tax rate in '07. It seems like at one point back in '05, you were paying taxes.
Is that -- what's changed? Is it stock-based comp that's --?
Tim Bixby
Yeah, a couple of things there. One is this -- because we're now in '06, represents our third year of profitability, we started to do the analysis of our deferred tax assets, and so that resulted in an impact both in early '06 and then also in closing the fourth quarter of '06.
And then also the impact of stock options exercises can be fairly dramatic when the stock price is volatile, and so that -- we've had a fair amount of option exercises that reduce -- you know, that are tax deductible impacts, and so that has changed our estimates, over time.
Brad Whitt - RBC Capital Markets
Okay. Thanks for taking my questions.
Tim Bixby
Thanks.
Operator
And your next question will come from the site of Michael Kern. Go ahead.
Michael Kern - Canaccord Adams
Thank you very much, you guys. I wanted to ask you about your international operations.
I know you were getting those ramped up in the middle of last year, and with acquisition of Proficient, it gave you a UK customer base. Can you give a little more color on that?
Tim Bixby
Yeah, I think what we're seeing is, and you can see it the names we announced, we're getting some traction in the UK, especially with the most-established sort of financial institutions are the key ones there. There's a couple of others that we can't name at this point because they're relatively new, but things are going well with those as well.
So we've been able to both transition a couple of the Proficient customers in the UK as well as add, organically, our own. In terms of sales, we're running roughly 5% to 6% of revenue in the enterprise coming out of the UK now, which is a pretty decent number at this point of the evolution.
Our small business number, as you know, is quite a bit higher. It's about 15%, but today we're really focused primarily on the UK.
And over the course of this year, we'll start looking pretty hard at the next most likely territory, and that would be -- the primarily targets would really be Western Europe and Asia Pacific, and I would expect Western Europe to be the next territory.
Michael Kern - Canaccord Adams
Okay, and just quickly -- the seasonality that you saw this year -- do you expect that, going forward, and should we model an increase in Q4 and then a flattening out in Q1?
Tim Bixby
I think, yeah, we kind of look back at the last three years, and we saw fairly minimal impact three years ago, a little bit more last year, and then, obviously, pretty material this year. I think this year may have been a little bit of an outlier, but I think it would make sense to begin modeling some slight impacts due to that, because the trends we're seeing I don't think will go away.
People definitely want to take advantage of the higher traffic in the holidays, even if it's just general Internet traffic and not necessarily shopping traffic. And so we see people get very active in that September to November timeframe, which really impacts the fourth quarter, and then there's kind of a lull in the action during December, which can take the January numbers down a bit.
Michael Kern - Canaccord Adams
Okay, and my final question -- can you give a little bit more color, or are you seeing anything new in competition?
Tim Bixby
We're seeing a lot of talk, I think. What we're seeing is more folks who are in peripheral or related industries, people who have chat products, click to chat for customer service, those kinds of products I think are taking note of the high level of interest of big companies in the Proactive sector of the market.
So while we're not seeing a big change in terms of real products on the ground that are truly competitive with ours, we think that there's more interest from these companies because we're performing well, and there's a big opportunity. We think that we have a significant head start.
The way we've built relationships with very big leaders in each of these market sectors I think is really difficult to replicate and certainly difficult to replicate quickly. And we're just focused on maintaining our lead so that if and when somebody comes with a real product that can compete, whether it's a year from now or years from now that we just have to continue to maintain our lead.
Michael Kern - Canaccord Adams
Okay. Thank you very much.
Tim Bixby
Thank you.
Operator
Our next question comes from the side Mike Shonstrom. Go ahead.
Mike Shonstrom - Emerging Growth Equities
Hi, thanks, I think most of the questions have been asked, and just one quick one following on to the competition issue. As you push your integrated product throughout the enterprise, are you running into any pushback as you try to take, let' say, a chat customer into knowledge base or e-mail or something.
Are you seeing any pushback from competition on that side?
Tim Bixby
I think we're picking the areas that we think we can have strength in. I think voice, we felt, although like ATG has product out there, voice, we feel, is sort of an open opportunity, because we think it's not being done that well, and we think because marrying it with our analytics makes it very powerful, and I think that even goes for our product of service.
So I think we're kind of picking our battles where we know we can add real value, and that is a channel of communication like voice combined with the real-time analytics of the Timpani platform, and we're kind of avoiding the typical inbound e-mail or knowledge base because we just think those have a lot of pricing pressure on them. And so where we can go in, and we think we've got real value, we can win.
And I'll say one thing, is our sales team is now, let's say, on its second year of being together, and I they are really at a point where they're executing fairly well against competition in these very specific areas.
Mike Shonstrom - Emerging Growth Equities
And speaking of voice, you mentioned the 10 new enterprise customers in the quarter. How about on the Pro side?
Tim Bixby
Pro -- they continue to add. We had a big surge in the fourth quarter for the holidays.
It got us up to about 400 users on the voice platform, so that is continuing to grow pretty nicely.
Mike Shonstrom - Emerging Growth Equities
You are including -- go back and review with me the pricing on the voice when you add voice to a customer. What is your benefit there?
Tim Bixby
Well, there's two ways you can get it today. One is as an integrated part of the Pro product, which is contact center.
And so what a customer would typically pay for chat only as a small business is $100 per month. Fully integrated contact center, it's a 50% up charge, so $150 per month, and we're getting a significant proportion of folks taking the fully integrated suite rather than chat only.
And, as we mentioned, the average price -- average revenue per customer has nearly doubled in the last year, and voice is becoming a big part of the reason for that. On the enterprise side, it's similar pricing to our chat product in that there's usually a base fee, and then a fee is tied to activity, either site traffic that we're managing or, in this case, call minutes rather than chats, because we're obviously tracking voice minutes.
So, overall, a customer with similar activity happening via voice as via chat could be a comparably sized revenue customer for us.
Mike Shonstrom - Emerging Growth Equities
Well, great. Thank you.
Robert LoCascio
Thanks.
Operator
Our next question comes from the side of Richard Fetyko. Go ahead.
Richard Fetyko - Merriman Curhan & Ford
Hey guys.
Robert LoCascio
Hi Richard.
Richard Fetyko - Merriman Curhan & Ford
Just, for Tim, just a housekeeping question. Could you give me the breakdown of the stock-based compensation expense by the line items in the OPEX?
And then while you're looking that up, Rob, could you talk about the Timpani voice deals that you've had with enterprise clients? Are these voice only or are these clients that you have with the other Timpani Sales Edition or other products?
Robert LoCascio
Yeah, these are all chat customers, and then we basically layered on the voice on top of the chat. So, for instance, we've got a telco up in Canada that is using the product but had been a Timpani Sales and Marketing chat customer, and then in certain areas we want to do voice.
So what's great about the voice product is that we find in certain times in the sales process -- actually, I'll take a step back. Why do voice, I think, is a good question, or why even do Marketing Edition or Proactive Sales?
And what we found is that Proactive chat alone will only touch a certain percentage of customers. Let's say, 20% of all customers on a website, we think we can offer Product and chat, because maybe certain products are not good for chat, because they don't cost a lot as now in the margin.
What we find is that by combining all these channels we're able to touch more customers. If we touch more customers as more chatters, we get more revenue because there's more operators online.
So that's really the idea behind it. What we're seeing is that guys are using chat where there's a much more of a complex sale.
In one of our customers, they're using it to do DSL but with the satellite dish. It's a very complex sale.
They want to use voice. And so we're able to apply that at that right channel.
Richard Fetyko - Merriman Curhan & Ford
And then I assume the fact that it's got a combined -- all-day reporting helps as well.
Robert LoCascio
Exactly, exactly. And I think it's interesting, what was on the last question that somebody brought up is that I think small business is very interesting right now with voice, and I think overall they're interesting.
When we launched the product in 2001, we charged about $20 a month, and if you told Tim and I where could we go with our product, we would have probably said he can get to $25 a month, because it would commoditize fairly quickly. It's just click to chat.
Today we're getting an average of a little over $200 a month per seat, and so -- I mean, per customer, where it used to be $20 a month, and a lot of that is driven by now they're taking voice, now they're taking e-mail, and the other dynamic we're seeing is attrition rates are really going down in that product line because it's really sticky. Where, if they were just taking Chats, and they had a low amount of Chats, well, now, maybe, they get a certain amount of voice calls, a certain amount of chats, a certain amount of e-mail, and all together it makes for a product that they want to keep.
And so that's what I think is also driving a lot of the growth in that product line as well as the enterprise.
Richard Fetyko - Merriman Curhan & Ford
I was curious about one of the reasons why you acquired Proficient was their technology with the real-time data mining technology. That was, I think, you sort of increased the speed of some of these configurations of your enterprise client deployments.
I'm wondering if that's been integrated into your Timpani platform? If it's working well?
What kind of success or experiences you've had with it?
Robert LoCascio
The RTDM platform, our real-time data mining that they have, it's not integrated yet. It's being built, but we're using -- what we've been doing with this is using the engine, because the engine actually, in itself, is kind of like a stand-alone engine, which you can run data through, and then we can see what rules to build.
So we're able to use it like that, and then we have to hand-build the rules within our system. So where it's going to go is it does more in the Proficient platform, it automates to task.
It looks at the rules, sort of builds them on the fly, and sends them out on the website, and that's what we're doing right now on the development side. But we can see -- I think, at first, we thought, "Hey, this has some really good potential."
I think now we're sitting here and saying, "It's kind of better than what we thought," and we're moving quick to integrate it and get it across our platform.
Richard Fetyko - Merriman Curhan & Ford
So the idea is that it obviously makes your deployments, I guess, would it expedite the deployments of some of your enterprise deals?
Robert LoCascio
Yeah, it would. One of heavy-lifting parts is building rules.
So it automatically builds rules for you, and so it will lessen the impact of our implementation and, as I mentioned in my part of the talk, there was a real focus in Professional Services to decrease implementation times, and that's one of the drivers, obviously, in that group is getting RTDM up and running and integrated.
Richard Fetyko - Merriman Curhan & Ford
And the lastly on the Marketing Edition of the software, is this like you already have -- it's just beta launch right now, and then how do you price it?
Robert LoCascio
Yeah, Marketing Edition is still, I would call it in the development phase. The product -- the technology exists, but in development in terms of how a large customer will use and execute, so I think it's sort of right behind voice in terms of being market ready, and I think later in 2007 we'll see more focus on it.
But the interest level, I think, continues to be high, but we have a lot of interest in the core product and the voice today, and so those are getting the bulk of the focus in terms of rollout for existing clients.
Richard Fetyko - Merriman Curhan & Ford
How would you price it?
Robert LoCascio
Because there's typically not a chat happening, it's based, again, in two pieces. A base fee for the amount of activity that's happening, and that's related to visitors that we're monitoring and can engage, and then also number of engagements.
So sort of a base fee and a usage model.
Richard Fetyko - Merriman Curhan & Ford
Okay. Do you have that stock-based compensation breakdown?
Robert LoCascio
Yeah, I can clarify a couple of things. One, on the stock-based comp you'll see the expense in the quarter was about $600,000.
And the breakdown of that is cost of goods sold is 67; sales and marketing is 188; G&A is 180; and R&D is 165. That should total up to 600 for the quarter.
And then also to clarify a couple of the points raised earlier, I think on the call somebody mentioned a 2007 EBITDA number of about 10 million, and I think if you look at our guidance for EBITDA per share, our revenue guides for the year, it should come out to something more like 11 million, a little north of 11 million -- so just to clarify that. And then in terms of a share count, I think I can refine that number a little bit.
We have the Proficient impact, and then we have made some estimates in terms of other share impacts. So I think for the year, for modeling purposes, I think it makes sense to use a number north of 46 million.
So between 46 million and 46.5 million weighted shares for the year. That should be able to sync up all the guidance with that.
Richard Fetyko - Merriman Curhan & Ford
Thank you.
Operator
Our next question comes from the site of Jon Hickman. Go ahead.
John Hickman - MDB Capital Group
Hi. All my questions have been answered except one.
Could you just review a little bit -- you said that 80% of your new business in the quarter came from existing customers. And then you said something about how you were continuing to, like, go deeper and deeper with these existing customers, and you didn't see any -- what do you call it -- any -- like, you're not hitting a wall there.
Could you go through that again?
Tim Bixby
Yeah, I think we typically, each quarter, give a breakdown of what comes from the growth in the enterprise business that comes from new customers versus existing, and you'll see it fluctuate back and forth between usually 80/20 and 20/80, basically. The last two quarters it's been fairly heavy in the 70% to 80% range for existing customers, and so what we've seen is that we added -- with the buildup of a new sales team 18 months ago, 12 months ago, a lot of newer logos coming in at that time, and then those customers growing, over time, and so we saw greater proportion of growth in the second half of the year of 2006 coming from existing customers.
So that will swing back again in the coming quarters, but that is in line with what we've seen in several of the quarters in the past two years. In terms of maxing out, that's one thing we keep an eye on so that we can update our estimates of what we think the total market size is, and I think the ability to grow larger customers just continues quarter-to-quarter, and so our largest customers sort of passed the million-dollar mark early last year, and I think we can see $2 million to $3 million over the next several years.
There's obviously a limit, but we're not bumping up against that limit even in our largest accounts.
John Hickman - MDB Capital Group
Okay. That’s it for me.
Thanks.
Operator
And we’ll take our next question from this site of [Rizwan Ansari]. Go ahead.
Rizwan Ansari
Thank you. A couple of clarification questions, and then a few on the guidance.
Tim, you said the Proficient contribution was about $580,000 in the third quarter, if I got that right, you imply the organic sequential growth was probably 12%. And I guess in the press release I see 15%.
Is something that I'm leaving out here?
Tim Bixby
Well, if you take out -- there's two ways to look at it. If you take our Proficient from both quarters, Q3 and Q4, you get the 15% number.
Rizwan Ansari
Yeah, I'm talking about the third quarter, though, not the fourth quarter. Third quarter I'm getting 12% sequential organic.
If you take about 570,000 of Proficient.
Tim Bixby
Q3 versus Q2?
Rizwan Ansari
Yeah, yeah.
Tim Bixby
That should be about correct.
Rizwan Ansari
At 12%, okay, that's what I thought. In terms of the Proficient earnout, my understanding is that you would be showing $2.1 million based on the earnout.
Now the share count that you're talking about is 1.3 million. Is that a change in that or can we --?
Tim Bixby
Yeah, the update there is the maximum earnout for the total deal -- or the maximum payment for the total deal was 4 million shares, and that was broken down into 2 million up front, which was last July, and then up to an additional 2 million based on the earnout. And so based on where we are today, we believe that an additional 1.3 of that second 2 million potential is likely to be issued, which would -- so that would result in a total of 3.3 million shares if we were to continue to track that way.
Rizwan Ansari
Okay, so does it mean that we're taking some time back up the hill, or is that just the 1.3 for the whole year?
Tim Bixby
For the share count itself?
Rizwan Ansari
Yes.
Tim Bixby
It would be as if -- you should treat it as if it's issued on March 31, and so it would be one day of weighted impact in Q1, and then a full quarter of impact in Q2 and forward.
Rizwan Ansari
Okay, and then in terms of amortization expense, I see that (inaudible) and 72,000 in the fourth quarter. Should we expect to annualize it for next year or -- that seems like you had depreciation and amortization to the light, even that it picked up -- amortization picked up in the fourth quarter.
Tim Bixby
It will be -- because we had some amortization rolling off in the year, that will offset some of that increase that you saw. So, total expectation for next year is a little bit higher than '06 if you combine depreciation and amortization.
But that's the driver there -- there's some amortization that we had in early 2006 that goes away before 2007.
Rizwan Ansari
Okay, and just one final question -- you talked about the seasonality, you expect things -- fourth quarter a bit quarter -- can you give us some sense for how seasonality might play out in the second and third quarter? Because I think this year you are selling out with mid single digits sequential revenue growth.
Tim Bixby
I would expect no real seasonal impact. I think if our message was really -- if you look at Q4 and Q1 in combination, we're tracking right on target for the double-digit growth, and our guidance for the full year is because we're 12 months away from year-end is a little conservative relative to our performance in the second half of '06.
But I think we would expect to be back on track with what we saw on average in 2006 by Q2. So I think the most volatility you'll see is in this Q4 to Q1 swing.
Robert LoCascio
Yeah, we're looking at -- our pipelines and implementation pipelines and everything is very, very strong, and that's why we're guiding close to 50% organic growth in 2007 as a year, because we can see Q4 was a big quarter. It sort of, you know, trend revenue model sets us up nicely for the entire year of 2007.
Operator
Our final question comes from the side of [Stanley Hybrings]. Go ahead.
Stanley Hybrings
Hey, Rob, can you give us an update on a trend you started to talk about a few quarters ago, and that's pricing complexity. As we see moving necessarily away from a standard per-seat model for chat, as you add products like voice, which is now, I guess, being charged by either a seat and/or a base fee, activities fees, and then marketing, as you're adding visitor monitor fees and engagement fees.
With your larger enterprise clients, how is this consolidating into a more simple pricing model, and how are you looking at that in terms of moving forward?
Robert LoCascio
I think we've been -- if we take one of our largest, let's say, financial services customers, I take 50% of their fees are not seat-based anymore. So they're traffic-based, they're usage-based, we're like an engine to drive sign-ups from mortgage applications.
We get a certain amount of money for every mortgage application. There's a whole thing.
So we're kind of looking at each customer, and we think -- we want to capture what we call that "upside." And so I think the sales team is pretty focused on -- chat, it's very easy to just charge a seat, but as you move outside into voice, Marketing Edition, follow-up engine, Product of Sales, you can get more on a transaction level.
So right now the overall impact on our revenue is probably -- between 5% and 10% of our revenue comes, let's say, non-based seats. But it's moving upwards since probably I talked about it a couple of quarters ago.
Stanley Hybrings
And at the highest level, at the enterprise level, were they pretty amenable to a transaction-based pricing model as opposed to a more budgetable fixed seat or some types of commitment level?
Robert LoCascio
It's sort of like the -- unfortunately the more -- let's take financial services. I would love to take a piece of every mortgage application, and I would take no seat fees, because we can tell conversion rates, and we can see what our overall revenue could be.
But they're fairly conservative about how they want to buy, you know, let's say, even marketing, you know, technology. So they like the, you know, we're going to pay a certain budget for the year.
We want to use that budget, whether it's seats or transactions. We could get more of the e-commerce players, a little bit more mavericks when it comes to, like, "Look, we'd love to do this with you; we'll take a cut of revenue," and we're doing that with a couple of the e-commerce -- our e-commerce guys.
So I think they tend to be a lot more flexible. As you get towards financial services, they kind of like more of a yearly budget, and let's use that budget.
So that's kind of what I'm seeing right now.
Stanley Hybrings
Okay, so it's kind of on a case-by-case basis, and you don't see any clear trend as to where that may lie on a standard scalable model?
Robert LoCascio
Not yet. If I could, I'd take a cut of every transaction, because we generate a lot of money overall compared to the fees we charge sometimes.
But we can only push our customers so much. So we try as hard as we can but ultimately got to work with the structure in which they like to buy stuff, or we're not going to get them as a customer.
Operator
We have no further questions at this time.
Tim Bixby
Well, normally, I would just say goodbye, but I sort of wanted to just say that I've been here 12 years, obviously, and I think this has been an interesting quarter, and I think 2007, actually, is going to be an interesting year for us. And I think part of it is when you're looking at the company, there's a strategy that you're trying to execute, and we started two years ago on our strategy, and then sometimes it just so happens to match with a very solid execution.
And I think we're seeing that today, and I'm real proud of what everyone is doing. I think, more importantly, we just had a company meeting a couple of weeks ago, and one of the interesting things is that the business leaders in this company and everyone here, I think, still has a focus on even getting better.
So even though you can see we're growing at 50% a year, and we are focused on operating margins, too, there seems to be a lot more that this company can get out of itself. I'm kind of looking forward to 2007, and I think it's going to be an exciting year for us.
So I look forward to sharing that with you guys, and I'll see you on the next call. Thank you.
Operator
This does conclude today's teleconference. You may disconnect at any time.
Thank you and have a great day.
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