Limelight Networks, Inc.
Q4 2015 Earnings Call Transcript

Published: 10 Feb 2016

[Operator:]

Good day, ladies and gentlemen. Welcome to the Limelight Networks 2015 Fourth Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, we will provide instructions for those interested in entering the queue for the question-and-answer session. I will now turn the call over to Dan Boncel, Limelight’s Chief Accounting Officer.

[Daniel Boncel:]

Good afternoon and thank you for joining the Limelight Networks’ fourth quarter 2015 financial results conference call. This call is being recorded on February 09, 2016, and will be archived on our website for approximately 10 days. Let me start by quickly covering the Safe Harbor. We’d like to remind everyone that we will be making forward-looking statements on this call. Forward-looking statements are all statements that are not strictly statements of historical facts, such as our outlook for 2016 and beyond, our priorities, our expectations regarding pending litigations, our operational plans and business strategies. Actual results could differ materially from those contemplated by our forward-looking statements and reported results should not be considered as an indication of future performance. For more information, please refer to the Risk Factors discussed in our periodic filings including our most recent Annual Report on Form 10-K. The forward-looking statements on this call are based on information available to us as of today’s date and we disclaim any obligation to update any forward-looking statements, except as required by law. Joining me today are Bob Lento, our Chief Executive Officer; Sajid Malhotra, Our Chief Financial Officer and Mike DiSanto our Chief Administrative and Legal Officer. We will be available during the Q&A session at the end of the prepared remarks from Bob and Sajid. I would now like to turn the call over to Bob Lento.

[Robert Lento:]

Thanks, Dan, and good afternoon. Earlier today we announced our fourth quarter and full year 2015 results. This was a good quarter ending a year of significant progress despite some challenges. We entered 2016 confident we can continue to strengthen our position in the industry and improve our financial performance. Looking back to this time last year, our financial profile was improving. We began to achieve revenue growth rates inline with the market despite Netflix’s departure and our gross margins were expanding, all while enhancing our network resiliency and performance. At that time, our 2015 revenue guidance was – range was $156 million to $164 million and we had momentum in our business. At the same time, customer churn and employee turnover were declining but still too high. Customer satisfaction was improving, but still not at acceptable levels, network stability while better was still not meeting our expectations and we were planning catch up to where the industry had moved and not necessarily lading with innovation. Our back-office systems required investments; our monthly close cycles were long. There were many opportunities to improve our cost structure and our business was burning cash. A year later, I am proud of the great progress we have made. Today, we report revenue of $170.9 million for the full year of 2015, well above our guidance at the beginning of the year and within the range we reiterated last quarter. Full year revenue was up 15% excluding Netflix revenue in 2014 and the impact of foreign currency exchanges. I believe, we grew top-line at the high-end of the industry growth rates. Our full year results include revenue of $42.7 million for the fourth quarter 2015, up 5% from our performance in the fourth quarter last year and up 6% adjusting for foreign currency changes. And after taking a step backwards on margin last quarter, I am pleased that we returned to margin expansion in the fourth quarter with GAAP gross margin of 41% improving 140 basis points year-over-year and 320 basis points sequentially. We also delivered on our plan to lower our operating expenses this quarter and achieved breakeven non-GAAP EPS and importantly, with this performance we were able to generate $3.4 million of cash in the fourth quarter, increasing our cash balances to $73 million at year end. As you recall, we made cash generation a high priority in the fourth quarter. We are proud of these financial results. We made progress in other priorities as well. Customer satisfaction levels as measured by net promoter score improved significantly in our fall survey and was up over 60 points in the last three years. We generated meaningful revenue growth with our top customers and customer and revenue churn declined in the fourth quarter and was at its lowest level in many years. Employee attrition is now in a range that we believe sustainable driven in some part by our increased focus on employee development and training. We have introduced industry-leading purge capability, added self-service capability and partner to provide a comprehensive DDoS offering. We moved out of one of our two datacenters moving into a new state-of-the-art secured datacenter in the Phoenix area. We are closing our books in five days. We implemented a new billing system that is designed to meet many of the complex demands of our customers and provide better financial analytics. We beat our all-time monthly traffic record, which we established in 2014, ten times in 2015 while reducing incident and support tickets by 30%, a solid and proud performance. We also navigated well through some challenges as we ended 2015. As you recall, in mid-August, the US Court of Appeals with the Federal Circuit reversed its earlier decision in our favor and reinstated the 2008 jury verdict against us in our longstanding patent case with Akamai. Because of the complexity of this issue, Mike DiSanto, our Chief Administrative and Legal Officer joins us today for Q&A. But briefly, we intend to continue to vigorously defend against Akamai’s claims in the 703 patent case. The case is currently back in the District Court in Massachusetts. We recently asked the District Court for a stay of all proceedings pending the outcome of our petition to the Supreme Court of the United States, which we filed on January 26, 2016. We also notified Akamai and the District Court that we intend to challenge the validity of the 703 patent due to intervening changes in the law for patentability and indefiniteness. Because of the potential liability associated with the pending dispute, we maintain our unused $25 million revolving bank line as an additional source of liquidity, which we believe will allow us to continue to invest in the business and serve our customers as planned even with an adverse legal outcome in this case. I want to also briefly note that on November 30, 2015, we filed a lawsuit for patent infringement against Akamai and XO Communications in the Eastern District of Virginia. The patent issue covers a broad range of inventions that we believe are critical to the effective and efficient delivery of bytes by a content delivery network. This case is currently in its early stage. Nonetheless, we believe this lawsuit will provide future protection against and significant relief from this type of illegal competition. We also continue to strengthen our management team during the quarter. Nigel Burmeister, was appointed as VP of Global Marketing and Dan Carney, VP of Operations is now a member of the senior leadership team. Dan’s organization focuses on ensuring that we continue to build customer satisfaction across all products. Dan was recognized as a computer world premier 100 technology leader during the quarter. Also during the quarter, Pete Perrone step down as CFO and Sajid Malhotra is now serving as Interim CFO. During the quarter we had a few milestones and successes that I’d like to share. This quarter we continue to add important customers to our roster across all regions and across our key use cases of software download, video-on-demand and live streaming including the delivery of website content and DDoS protection. We achieved record high levels of daily traffic during the holiday season. In October, we were named the streaming media’s top 100 companies that matter most in online video for the fifth consecutive year. This honor acknowledges our innovative solutions for OTC providers, live broadcasters and video-on-demand providers. Also in October, we released our second annual state of user experience research report that showed that performance is still key in the digital experience and that consumer web page usage is increasingly mobile. In December, we continued our thought leadership research with our state of the online video report which uncovered consumer habits including expectations around over-the-top services and code cutting. I highlight this thought leadership research as it is both validation of our product offerings and the positive trends in our industry. Customer satisfaction was, is and will remain our top priority. The priorities we outlined this time last year remain unchanged with the exception of adding cash flow generation as a priority. We are focused on our customers, improving operations, reducing customer churn and employee churn over and delivering key product functionality, all while maximizing internal cost efficiency. As I said, last quarter, if 2015 is recognized for our return to revenue growth, I want 2016 to be the year that we generate cash. We have a strong team in place that is aligned and focused. Customer demand is healthy and market trends are positive. And this year we are focused not only on revenue growth, but also margin expansion and cash generation. Revenue growth is a two-part story, one is price compression. We made the business decision to forward price to large customers in 2015, which resulted in lower overall ASP. We have significant value to our customers, a resilient network and strong product functionality and we work hard to ensure that we maintain acceptable pricing. The second part of the revenue story is traffic and capacity. Many times, demand for our network exceeds our capacity. So our revenue growth is impacted by our server and egress capacities. As we continue to expand our network capacity, we expect to see increased traffic and higher revenue. I will discuss how we expect to achieve this in a moment. Our gross margin expansion effort is also a two-part story. One part is revenue growth as I just discussed, the other factor of course is cost. We expect continued savings from our core consolidation efforts even while expanding our network and its capacity through CapEx investments and new developments and our ability to optimize throughput with software enhancements. We will continue to work with our service providers to achieve unit cost reductions inline with the industry dynamics. To support cash generation, we plan to control expenses. We demonstrated our ability to do that in the fourth quarter of 2015 and we plan to continue that effort throughout the year. As I just mentioned, we expect to limit our cash investment in our infrastructure while maintaining our pace of capacity expansion through planned deployment of new innovative software enhancements over the coming months. In our lab, these software enhancements have shown that we could experience over 30% increases in server capacity on our already deployed infrastructure in 2016. We are excited about these developments from our R&D team as we expect them to expand capacity and therefore revenue with minimal additional COGS, expense or CapEx. With that as a backdrop, I will turn the call over to Sajid to discuss this quarter’s financial performance in greater detail and provide guidance for 2016.

[Sajid Malhotra:]

Thanks, Bob and good afternoon. Fourth quarter 2015 revenue was $42.7 million, cash gross margin was 53.6%, and adjusted EBITDA was approximately $5.3. We had no Netflix revenue in the fourth quarter of 2015 or 2014. In the quarter, the impact of foreign exchange fluctuations was approximately negative $500,000 year-over-year and was not material sequentially. Excluding foreign exchange rate fluctuations, our revenue increased 6% year-over-year and 2% sequentially. In Q4, international customers accounted for 44% of total revenue and approximately 20% of our fourth quarter revenue was in non-U.S. dollar-denominated currencies. Revenue from our APAC region continued to be particularly strong. Our average selling price is heavily dependent on traffic of our delivered product and volume from a largest software and gaming delivery customers fluctuate significantly based on timing of new releases. Year-over-year, our average selling price declined, but was offset by a significant increase in volumes. Sequentially, while traffic decreased in the fourth quarter 2015 compared to the record traffic we delivered in the third quarter of 2015, our average selling price increased. The increase in average selling price is largely due to decreased gaming volumes and increased volumes from streaming customers who pay higher prices because of the use case demand’s high quality and reliability. In Q4 2015, our top 20 customers accounted for approximately 60% of total revenue and 90% of total traffic. Consistent with our focus on our largest customers, revenue related to these customers grew year-over-year at a much higher rate than the company average. Our delivered product family accounts for the vast majority of our revenue and was 77% of total revenue during the quarter. GAAP gross margin of 41% is up 140 basis points from 39.6% in the prior year quarter and up a very strong 320 basis points sequentially. These gains included $110,000 of COGS-related one-time charges from our previously announced workforce reduction. Without these charges, gross margin would be up 170 basis points year-over-year and 347 basis points sequentially. As we mentioned last quarter we forward priced a couple of large customer contracts. We entered into these high volume contracts with lower average prices based on a confidence in our ability to take out cost and improve the profitability of these contracts over time. We are beginning to see the benefit of our datacenter consolidation effort as our co-location costs have decreased on a year-over-year and sequential basis, even while increasing our capacity. Bandwidth expense as a percentage of our revenue were higher than the fourth quarter of 2014 due to the increased traffic volume primarily related to these two large forward price customer contracts. Bandwidth expenses decreased sequentially as we delivered the software and gaming traffic in the fourth quarter. Cash gross margin, which excludes network depreciation and stock-based compensation was 53.6% in the fourth quarter of 2015, up 300 basis points year-over-year and 380 basis points sequentially. In the fourth quarter of 2015, GAAP operating expenses were $21.3 million or 49.9% of our revenue and included $360,000 of previously announced workforce reduction-related charges. In total, operating expenses decreased $700,000 or 2% versus the fourth quarter of 2014. Sales and marketing expense decreased by $1 million or 11% versus the year ago quarter. G&A expense decreased by $700,000 or 11% versus the year ago quarter. These decreases are primarily related to lower incentive compensation and third-party consulting fees partially offset by higher litigation expense. R&D expense increased $700,000 or 11% year-over-year, primarily due to higher payroll and related costs as we have added employees to support future product enhancements and increased network resiliency and capacity. Compared to Q3 2015, GAAP operating expenses declined $2.9 million or 12% as we control our spending to improve profitability. Other expense was $400,000 in the fourth quarter of 2015 compared to other income of $800,000 in Q4 2014, other income of $500,000 in Q3 2015. Fluctuations are primarily driven by changes in foreign currencies. Adjusted EBITDA was approximately $5.3 million in the fourth quarter of 2015, up from $1.5 million in the fourth quarter of 2014 and $300,000 last quarter. On a non-GAAP basis, we broke-even per share in the fourth quarter of 2015 compared to a non-GAAP net loss of $0.02 per share in the fourth quarter of 2014, and a loss of $0.04 per share last quarter. The non-GAAP results during the fourth quarter of 2015 includes approximately $500,000 of severance expense related to a reduction enforced in October. Moving to the balance sheet, for the first time since we sold our web content management business eight quarters ago, our cash and marketable securities balance increased. Cash and marketable securities as of December 31, 2015 increased over $3 million sequentially to $73 million. During the quarter, we spent $4 million in capital expenditures, and for the year, our capital expenditures were $24.7 million. In the fourth quarter 2015, we utilized $2 million of vendor financing to purchase capital equipment. This brought our total CapEx both cash paid and financed to $6 million for the quarter and $26.7 million for 2015. We have not drawn on our $25 million line of credit. DSO at the end of December 31, 2015 was 52 days versus 47 days at the end of 2014 and 57 days at the end of the third quarter. As of December 31, we had approximately 102 million shares outstanding. Total headcount at the end of the quarter was 509, down 47 from the end of the third quarter and down 11 from the year ago quarter. The decline in headcount this quarter reflects the reduction enforced of 44 employees announced in October. Looking ahead, we have a great deal of confidence in our ability to grow the business and more importantly improve our margin profile. Let me explain this, as we believe this is at the core of almost any investment thesis. Last year, revenue increased 5%, traffic was up 50%, and price compression was higher than we modeled at the start of the year, but while we delivered 50% more traffic, our COGS expense increased only 4% primarily because we were making our infrastructure more efficient. For example, in Chicago, we have multiple sites. We exited one, where we had 14 racks, 243 servers and moved 90 servers to an adjacent site, kept all of the capacity and reduced spend by over $300,000 per year. In Washington DC, we went from 85 racks to 44 racks, from 1200 servers to 880 servers, kept capacity at the same level and achieved $350,000 of run rate savings. In Amsterdam, we went from 55 racks to 29 racks from 690 servers to 260 servers, kept capacity at the same level and reduced annual spend by over $800,000 per year. We did similar moves in Frankfurt, Tokyo, London, New York, Los Angeles, Dallas and San Jose. This efficient management of our COGS continues to help us keep our cost in check and manage price compression. We have also invested heavily in R&D. We believe we can improve the capacity of a server by over 30% by implementing newly developed software changes. Our confidence in the success of this implementation on a global basis allows us to plan for a 30% reduction in CapEx in 2016 even as we plan to increase capacity by a similar amount. We are determined to deliver gross margin improvements and have evidence of early success. We are turning down deals where we find pricing unacceptable. Our cash, and GAAP gross margins should move in tandem. Only at EPS do we focus on the non-GAAP numbers in greater detail, so that the impact of stock-based compensation and our litigation expense which has a wide range of outcomes can be clearly spelled out. As of December 31, 2015, we had approximately 963 active customers worldwide including four of the top five media companies, five of the top eight technology companies, and three of the top five gaming companies. To serve these customers, we operate on a global basis, one of the largest content delivery networks, one of the largest SSL CDNs, one of the largest IPV6 networks. We’ve helped deliver some of the largest live events, software upgrades and game downloads in the history of the world. At almost 50 petabytes, we have one of the broadest cloud storage deployments in the world. The Limelight Network has over 15 terabits of egress capacity. It is directly connected to over 800 unique networks and based on a variety of measures, it’s one of the top three CDNs in over 25 countries. Our backbone wraps around the world and is one of the largest private global backbone networks for CDN. Without CDN, we have likely delivered some content in the form of a video and image, a website, a software download, a game or a live stream to almost every connected device in the world. We have unique capabilities that differentiate us from our competitors like the ability to push files in near real-time and we back this with our SLA and don’t just provide it on a best effort basis. We deliver billions of objects everyday and our cache hit ratio is over 97%. Our customers have experiencing service improvements and is getting deflected in the material improvements in our NPS course. There is a lot of pride in what we do and how we do it. We are focused on our core capabilities and intend to grow at market rates and improve our margins and profitability profile and generate cash as we did in Q4 and we fully intend to drive shareholder value in 2016. We are in an attractive industry. We believe we have one of the most valuable networks in the world. We do understand the implications of an unfavorable outcome in the longstanding legal battle with Akamai and have taken steps that we believe will address an unfavorable outcome even as we strongly believe our arguments have merit and should prevail. Like you, we are frustrated by the $20 million enterprise value for our company. We expect 2016 to be the year we prove to the marketplace that we can create superior offerings for our customers and generate attractive returns for our investors. As for 2016 guidance, based on current conditions, we expect revenue in the range of $180 million to $195 million. We expect to improve GAAP gross margins by over 200 basis points on a full year basis and achieve non-GAAP EPS between negative $0.05 per share and positive $0.05 per share. We expect operating expenses excluding litigation expenses to remain flat relative to 2015 and we expect to be able to lower our capital expenditures in 2016 to approximately $20 million while continuing apace of expanding capacity, upgrading our network and improving its performance. During 2016, revenue, gross margin and non-GAAP EPS are primary drivers of variable comp for management. We believe this plan fully aligns management with the objectives of our shareholders. In closing, we would like to emphasize that we are optimistic about our ability to deliver additional improvements to our financial performance. We believe we have an achievable plan, favorable market trends and the right team with shareholder aligned incentives in place. With that, let me open the call up for the questions. Operator?

[Operator:]

[Operator Instructions] Our first question comes from Michael Turits from Raymond James. Your line is open.

[James Westman:]

Hey guys, good afternoon. It’s James Westman sitting in for Michael. Bob and Sajid, I wanted to touch back on one of Sajid’s comments in the prepared remarks, I believe he said that traffic had declined quarter-over-quarter, this quarter but ASPs were up. Why was that the case that traffic was down quarter-over-quarter if I heard them properly. Is that typical for 4Q? And can you talk about traffic trends year-over-year?

[Robert Lento:]

So, this is Bob. The traffic was up year-over-year in the fourth quarter of 2015 over the fourth quarter of 2014 in a pretty material way. Traffic was down in total from Q3 versus Q4 of 2015, basically based on a couple of factors. There were some really large operating system and game releases that happened in the third quarter and while those exceeded throughout the fourth quarter they weren’t as large in nature and didn’t last as long and so, because we had less of that traffic as part of the total, it’s the impact on ASPs such that the ASP actually floats up, because there is less of that kind of traffic. So it’s just a traffic mix difference on the ASP side, more of the live streaming and video on-demand traffic as a percent of the total versus Q3 and the reason for the traffic being down again the less of the gaming and operating system updates in Q4 versus Q3.

[James Westman:]

Great, and then, Bob, I just wanted to touch on the competitive environment, you guys saw in the quarter. Did you feel there were any changes in 4Q versus 3Q? Are you guys seeing anymore of some of the other players out there, whether it’s in EdgeCast or in Amazon? Can you touch on that competitive environment?

[Robert Lento:]

Yes, so from a competitive standpoint, we were actually surprised to see that Level3 commented that their CDN revenues were down year-over-year and I think, just had time to take a quick look at Akamai’s release and their median delivery business which closely aligns with ours was also down year-over-year and so, we are taking up some market share just on a numbers basis. In terms of new competitors, it’s the usual EdgeCast Level3, Akamai, I think it would be fair to say that we are seeing Amazon more now than maybe we were a year ago. But, for the type of customers that we’re trying to serve which is to larger enterprise that needs global scale, certain level of support, certain level of software feature functionality, it tends to be that same handful of service providers.

[James Westman:]

Great, and then, one last question, guys and I’ll see the line. On pricing, I think, Sajid had mentioned in the prepared remarks that, in 2015, you saw more pricing compression than you would anticipated at the beginning of the year. Can you talk about the pricing environment in 4Q? Did you feel like the declines were stable? Was there anyone rationally pricing in 4Q versus 3Q? Any color there would be helpful.

[Robert Lento:]

Yes, I don’t think we would say that there was any difference between Q3 and Q4. The comment that Sajid made at the beginning really had to do with our own internal planning expectations and in mid-year as we talked about in the last conference call, we forward priced a couple of pretty large contracts relative to our size that had a material impact on our average selling price. So we took that on ourselves. In terms of the competitive environment, clearly, ASP will continue to decline as it always has in this industry and I think that’s an important factor for the growth of the industry. But clearly, it has to be managed with the right focus and discipline, so that, those declines match as best as they can, the efficiency that we get in terms of the cost side of the business. So I don’t think that there is anybody out there that’s being irrational or anything that’s materially different from Q3 specifically to your question. Sajid do you have?

[Sajid Malhotra:]

The other thing.

[Robert Lento:]

Okay.

[Sajid Malhotra:]

I mean, the price compression that I talked about was back to our planning. And I think when we put our plans together at the end of 2014, we were not thinking forward about what might come in Q3 2015 and we have talked about that in detail.

[James Westman:]

Great, thank you guys.

[Sajid Malhotra:]

Yes, thank you.

[Robert Lento:]

Thanks, James.

[Operator:]

[Operator Instructions] Our next question comes from Jonathan Charbonneau from Cowen and Company. Your line is open.

[Jonathan Charbonneau:]

Great. Thanks for taking the questions. In terms of margins, for 2016, you said you expect GAAP gross margin to improve by about 200 basis points versus 2015. Will this improvement be fairly evenly spread throughout the year or will it be more back-end loaded, front-end loaded, just trying to make sure I am modeling it correctly? Thanks.

[Sajid Malhotra:]

Jonathan, I think that – thanks for the question. I think that if you think about modeling this out, and look at the performance of the company over the course of 2015, you will see that, our margin expansion and improvement is relatively even in Q1, Q2 and Q4. I think we’ve got a relatively easy comp in Q3 where our margins actually dipped. And so, if you were to go ahead and spread that out, I think we’ve got an easy comp in Q3 and then flat over the other three quarters.

[Robert Lento:]

The one thing that I would add is, is, of the four quarters this year, we will probably see the least amount of improvement although improvement in Q1 many of the co-location moves that we are in the process of completing and some even that we did completed in 2015. Those leases don’t come due until the end of this month. So the savings don’t hit the P&L until March, the full month of March and so, the first quarter is going to be a little bit handicapped versus the other three. So, and that’s a fair way to think about that.

[Jonathan Charbonneau:]

And then, just one follow-up. In terms of our model also, how should we be thinking about, I guess, legal cost this year? How would you recommend we model that? Thanks.

[Robert Lento:]

That’s a hard question in terms of modeling it. We do know, we have an expectation about what are sort of – they are not specs, but what our monthly expenses are likely to be, but until we get some indication from the court, on both of the cases, it’s really hard for us to comment on that. I don’t know, Sajid, you or Mike have anything to add?

[Sajid Malhotra:]

We do break out the legal expense you saw a number north of $400,000 in Q4 and I think that the range of outcome is well in excess of $1 million and not approaching double-digit million. So – but within that, we will continue to spell it out as we deliver and hard to say what it precisely might be within that.

[Jonathan Charbonneau:]

Great. Thank you.

[Operator:]

And we have a follow-up question from Michael Turits from Raymond James. Your line is open.

[James Westman:]

Hey guys, James Westman again. Thanks for taking the follow-up. Just wanted to go back to traffic for a second. Did you guys feel like your year-over-year growth this quarter accelerated, particularly given the two large deals that you guys signed in 3Q or did you feel growth was about stable year-over-year at 3Q? How did you feel it was there?

[Robert Lento:]

On a year-over-year basis, Q4 was probably lower traffic than Q3 was year-over-year, again for many of the same reasons. I don’t see that as any change in momentum in the business. It’s very specific to some of the big events we talk about that happened in Q3.

[James Westman:]

Got it.

[Sajid Malhotra:]

When you talk about the state of the industry, I mean, you can imagine that there is a lot of demand. I mean, it’s just not us, I am sure, all our competitors are experiencing traffic growth at rates that are somewhat similar to ours and we saw 50% traffic growth. So, the industry is healthy. I think the ability to take cost down and drop the prices creates new use cases as you’ve heard Bob talk about. And so, we think that that trend has been in place for a few years and should very much remain in place for the coming years.

[Robert Lento:]

Yes, the other thing I would add and just to reiterate, I mean, the exciting thing for us this year is we believe that we can add a significant amount of capacity to handle the increase in traffic based on software optimization improvements to our software that will drive better throughput of our servers and that has tremendous benefit from CapEx and operating expense perspective.

[Sajid Malhotra:]

And performance.

[Robert Lento:]

And performance.

[James Westman:]

Great, and then, Sajid, just two quick housekeeping questions for the model. One, I just wanted to make sure you guys do still expect to be free cash neutral to positive in 2016?

[Sajid Malhotra:]

Correct.

[James Westman:]

Thanks and then, I wanted to make sure I didn’t miss it, but in the press release you guys didn’t give 1Q guidance. Are you guys – do you guys have a revenue range or an EPS range for 1Q? Or are you just sticking to the full year guide?

[Sajid Malhotra:]

We give the full year guidance. We did not give the first quarter guidance. So, but, you heard Bob talk about the fact and you heard me, we are talking about 200 basis points, over 200 basis points of gross margin improvement should be relatively even. You’ve got except for the Q3, same as to if you begin to take any of end of your model from a revenue standpoint. We had a strong Q3 and a slightly less than perfect or I would say, slightly weaker Q4 in terms of the trends that we typically see in our business. When you look at the four quarters and there is no reason to believe why the four quarters in 2016 should be any different. We typically have a strong Q4, a good Q1 and Q2 and Q3 is typically the weakest.

[James Westman:]

Great. Thank you guys.

[Operator:]

Ladies and gentlemen thank you for participation. This concludes our Q&A session and conference call. You may all disconnect. Everyone have a great day.

[Robert Lento:]

Thank you very much.