QAD Inc.
Q4 2015 Earnings Call Transcript

Published: 13 Mar 2015

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the QAD Fiscal 2015 Fourth Quarter Financial Results Conference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to Senior VP of Finance and Treasurer, Mr. John Neale. Please go ahead sir.

[John Neale:]

Hello, everybody, and welcome to today’s call. I’m John Neale, QAD’s Senior Vice President and Treasurer. Earlier today we issued a press release announcing QAD’s financial results for the fiscal 2015 fourth quarter and the year ended January 31, 2015. The press release and associated financial statements are available through the Investor Relations section on our Web site at qad.com. Additionally, please be advised that this call is being webcast live on our Web site. Before I begin, I need to ensure that everybody understands that our discussion might contain forward-looking statements that are based on certain expectations and analysis. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. QAD undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this call. For a complete description of these risks and uncertainties, please refer to QAD’s 10-K and 10-Q filings with the Securities and Exchange Commission. Please also note that during this call we will be disclosing non-GAAP net income and non-GAAP earnings per diluted share which are non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in today’s press release, which is posted on the Company’s Web site. Now I’d like to turn the call over to Karl Lopker, QAD’s Chief Executive Officer.

[Karl Lopker:]

Well, good afternoon and thank you for joining us to discuss our fourth quarter results. Pam Lopker, President; and Daniel Lender, Chief Financial Officer, join me on the call. For the fourth quarter we are again happy to report total revenue above our guidance, with cloud subscription revenue growing 45% for the entire fiscal year. We also showed growth in licenses, maintenance and services and these were our best fourth quarter and full-year revenue performances ever. And combined with good expense control, our operating income was solid. We also completed the secondary stock offering which increased investor exposure and analyst coverage, which allowed increased trading volume and made our balance sheet even stronger as we pursue our growth opportunities. Daniel will give you the numbers and I’ll discuss the details. Daniel?

[Daniel Lender:]

Well, thank you, Karl. As Karl mentioned, we generated an all-time quarterly and full-year revenue record driven by strong growth in licenses and in the cloud, which is reflected in the subscription revenue line. Professional services grew nicely, while maintenance held steady in the face of a foreign exchange headwind. In other fourth quarter activity during January, we completed a secondary offering of 2 million shares of Class A common stock generating proceeds of approximately 37 million after deducting underwriting discounts, commissions and offering expenses. After the close of the year, the offering underwriters exercised in full an option to purchase additional shares. As a result, 450,000 shares of Class A common stock were issued, generating approximately 8.4 million in additional proceeds. Now looking at our quarterly results. Comparing to the same quarter last year, total revenue increased 8% to $79.6 million, up from $73.5 million. License revenue grew 14% to $16.7 million, up from $14.6 million. During the fourth quarter we closed nine license deals greater than 300,000 including five greater than 1 million. In last year’s fourth quarter, we closed six license deals greater than 300,000 with only one greater than 1 million. Subscription revenue increased 36% to $7.9 million compared with $5.8 million last year. We added 10 cloud customers in the fourth fiscal quarter. Maintenance and other revenue was $34.1 million compared with $34.5 million a year-ago. Foreign currency translation adversely affected maintenance revenue by approximately $1.5 million versus the prior year. On a constant currency basis, we increased maintenance versus the prior year quarter by approximately $1 million. Professional services rose 12% to $20.9 million, up from $18.7 million last year despite a negative foreign exchange impact of about $1 million. The improvement is consistent with our license and subscription revenue growth. Currency had a $3.2 million adverse impact on fiscal 2015 fourth quarter total revenue, a $1.2 million favorable impact on cost of revenue, a $1.3 million favorable impact on total operating expenses. Overall, currency had an adverse impact of 700,000 on operating income. Looking at total revenue by vertical, high tech and industrial represented 33%, automotive 32%, consumer products and food and beverage 19%, life sciences 16%. And by geography, North America 44%, EMEA 33%, Asia-Pacific 16% and Latin America 6%. Gross profit grew 7% to $45.7 million versus $42.8 million from the same quarter of last year. As a percentage of revenue, gross margin was 57% compared with 58% for last year’s fourth quarter. Sales and marketing expenses totaled $19.5 million or 24% of total revenue versus $18.9 million or 26% of total revenue from last year’s fourth quarter. The increase was primarily driven by personnel expenses due to higher headcount. As our cloud business continues to grow, commissions and variable compensation expense in current periods will also increase. As a reminder, our policy is to expense commissions in the period when a sale occurs. So when cloud sales are booked, we incur the expense with other related revenue in the period. In addition, our management bonus structure also includes compensation for cloud business for which no revenue has been recorded, thus increasing overall expenses as compared to current quarter. Sorry, to the current revenue in the quarter. R&D expense for the fourth quarter was $10.1 million or 13% of total revenue, virtually same as the fourth quarter of last year. General and administration expense was $8.2 million or 10% of total revenue versus $7.8 million also 10% of total revenue for the last year’s fourth quarter. Total operating expenses were $37.9 million or 47% of revenue compared with $37 million or 50% of revenue last year. Equity compensation expense was $1.2 million for the fiscal 2015 fourth quarter compared to $1 million for last year’s fourth quarter. Operating income improved by $1.9 million to $7.7 million, up from $5.8 million from last year’s four fiscal quarter. Other expense was $27,000 compared with $281,000 in other income last year. This brings net income to $6.9 million or $0.42 per diluted Class A share and $0.36 per diluted Class B share. Net income for last year’s fourth quarter was $4.3 million or $0.27 per diluted Class A share and $0.23 per diluted Class B share. Our tax rate for the fourth quarter of fiscal 2015 was 10%, which is lower than we were forecasting as a result of higher profit before taxes and the retrospective reinstatement of both the Subpart F look through rule and the federal R&D tax credit. We anticipate a tax rate of approximately 27% for fiscal 2016. Non-GAAP income, which we define as net income excluding stock-based compensation, amortization of purchase intangible assets, gain and loss adjustments on the Company’s interest rate swaps and certain income tax adjustments, and which is described in greater detail in the press release we issued earlier today was $8.7 million or $0.52 per diluted Class A share and $0.46 per diluted Class B share. For last year’s fourth quarter, non-GAAP net income was $5.5 million or $0.35 per diluted Class A share and $0.30 per diluted Class B share. I’ll now briefly review our full-year results. Revenue rose to a record of $295.1 million, up 11% from $266.3 million for fiscal 2014, even with a negative foreign currency impact of approximately $3.2 million. Gross profit increased 9% to $163.5 million or 55% of total revenue versus $149.3 million or 56% of total revenue last year. In our income statement, we’re now breaking out subscription cost of revenue. Subscription gross profit was 39% for fiscal 2015, up from 36% for fiscal 2014. Annualized subscription revenue run rate at the end of fourth fiscal quarter was $34 million. Total operating expenses amounted to $147.5 million or 50% of total revenue versus a $139.9 million or 52% also of total revenue at last year. Operating expenses were reduced by $1.3 million relating to foreign currency impact. Net income grew to $12.9 million or $0.79 per diluted Class A share and $0.68 per diluted Class B share. Net income for fiscal 2014 was $6.4 million or $0.41 per diluted Class A share and $0.34 per diluted Class B share. Non-GAAP net income was 19.9 million or $1.21 per diluted Class A share and $1.04 per diluted Class B share for fiscal 2015 compared with $12.3 million or $0.78 per diluted Class A share, $0.66 per diluted Class B share last year. Weighted average shares for the fiscal 2015 fourth quarter and full-year do not fully reflect the shares issued as a result of the secondary offering. As a reminder, we issued 2 million Class A shares as part of the secondary offering in mid January and an additional 450,000 shares in mid February as part of the underwriters over allotment. Moving now to the balance sheet. We ended the year with cash and equivalents of $120.5 million up from $76 million at the end of last year. The increase was primarily related to the common stock offering I mentioned earlier that was completed in January, in addition to strong cash flow from operations which generated $23.7 million this fiscal year. Accounts receivable equaled $78.9 million, up from $71.3 million at the end of fiscal 2014 primarily related to the record revenues I discussed earlier. Days sales outstanding using the countback method was 48 days for the fourth quarter of fiscal 2015 compared with 49 days last year. The quality of our receivables remains healthy. Our deferred revenue balance at the end of January was $102.7 million, which included $6.4 million of deferred maintenance. On a constant currency basis, converting at the prior year exchange rates, the deferred maintenance revenue balance would have been $5.8 million higher. It also includes $11.6 million of deferred subscriptions, $1.9 million of deferred license and $2.8 million of deferred professional services. Generally maintenance contracts are built annually and subscription contracts are built quarterly. At the end of last year, our deferred revenue balance was $104.2 million which included $87.3 million of deferred maintenance, $7.6 million of deferred subscriptions, $4 million of deferred licenses and $5.3 million of deferred professional services. Our business outlook for the first quarter of 2016 includes total revenue of approximately $69 million and including approximately $8.6 million of subscription revenue. We anticipate GAAP earnings per share of approximately break even and non-GAAP earnings per share of approximately $0.11 per diluted Class A share and $0.09 per diluted Class B share. For the full-year, we’re expecting total revenue of approximately $302 million and approximately $39 million of subscription revenue in that number. We expect GAAP earnings per share of approximately $0.49 per diluted Class A share and $0.41 per diluted Class B share, a non-GAAP earnings per share of approximately $0.91 per Class A share and $0.76 per diluted Class B share. With that, I’ll turn things back to you Karl.

[Karl Lopker:]

Well, thanks for that great news Daniel. As we mentioned, we did quite a bit better than expected in the fourth quarter in all revenue lines, especially important compared to a strong fourth quarter last year. Our services increase of 12% was largely driven by implementation and upgrades, as in the recent past. Although the revenue was affected by currency, since many of our services are delivered in Europe. And although we have a larger services capacity than last year, our services revenue was unlikely to grow the total revenue due to the strength of the dollar. We like the fact that licenses and maintenance continue to be steady during our transition to a greater portion of business in the cloud, even with the effect of currency on these items. Still the most exciting area for QAD is this increase in cloud subscriptions. This has been a major focus for QAD and we can see the results. We’ve been -- we’ve continued to bring in cloud subscriptions growth in our target 40% to 50% range for the full-year and we book 10 new sites this quarter for QAD cloud apps. Our total funnel was up over 20% from last year at this time, while the cloud apps now representing around 40% of the opportunity, up from 25% last year. The increase in cloud apps funnel is mainly driven by a few larger global deals which have longer sales cycles and are more difficult to predict, than a large number of smaller opportunities. The majority of our funnel for cloud apps remains to be for conversions from on-premise. Conversions generally produce cloud subscription revenue faster than new accounts since existing customers usually cut over to the cloud at a faster pace than new customers. Although conversions do affect maintenance revenue, we’ve been able to keep maintenance at historical levels due to higher license revenue and a solid renewal rate. Our revenue mix by region was in line with historical averages, and our automotive vertical performed somewhat better than the other verticals. Full time employee headcount of 1,600 was up around 4% from last year mostly due to increases in our cloud operations group, North American services and global sales. On top of a very busy quarter, we have the successful secondary stock offering which was well received. I want to thank our employees and investors for all the hard work done to present and review our story. Now I’ll turn it over to Pam for a closer look at the cloud activity.

[Pam Lopker:]

Thanks, Karl. As Karl said, we had 10 new wins in Q4. We had both new logos and existing customers either converting to the cloud or adding additional sites. We also had a large opportunity with the brand new customer, where the deal ended up going on-premise. The customer was making a large investment in their IT infrastructure across multiple systems were ERP was a part of that. As a result of this, the deal ended up going on-premise. However, given the flexibility of our deployment options, we believe this customer will transition to the cloud sometime in the future. This also points out to why we believe it is important to maintain both the cloud and an on-premise offering. Now a bit of color on a couple of cloud deals in the quarter. The first one I want to mention is the new Logo and so Midwest base manufacturing of medical devices. It’s a Class 2 device for the treat -- treatment of acute sinusitis. The company recently IPO. It was a competitive sale, which is what that really makes me excited about this plan was it shows because of two reasons. One, our industry is focused in expertise and FDA regulated companies. And two, that there are top three competitors are also QAD customers, so exciting. I just love to see industry tracks and details that really helps in the sales and customer success rate. The second company is an existing QAD customer that converted to the cloud. A $1.2 billion company that produces flexible, packaging products for consumers, industrial and agricultural applications. They have 15 manufacturing facilities. Upon learning about our new capabilities, particularly in pricing promotions and trade management, the company decided to do an upgrade. The company then decided to move to the cloud as part of the upgrade as they viewed it as a better deployment option to upgrade their capabilities and stay current with the latest versions of our software. Before I turn it back to Karl, I do want to make a pause for up and coming Explore Conference. It’s our annual user conference, which will be held May 3 to 6 in Washington DC. We are expecting strong global attendance, customers and future customers to learn about the value of QAD cloud ERP and upgrading to the latest version of our software. They will have the opportunity to network with peers to share best practices and meet with QAD R&D services, support and executive. Customers will discover how they can better leverage their investment in QAD. That Explore will be unveiling Project Channel Islands, which is our vision for the future of QAD, cloud ERP. Thanks, Karl. Back to you.

[Karl Lopker:]

Okay. Thanks, Pam. As you can see, we’re excited about the prospects for QAD cloud apps and our goal is to continue to grow subscription revenue while maintaining profitability. We are keeping an eye on the global manufacturing economy, which appears to be improving as measured by the country Purchasing Managers' Indices. The U.S. is still performing well. But with flat growth in some of the other major economies and the strength of the dollar against major currencies, we’ve to keep a watch on what’s happening especially in the Eurozone, China and Japan. That’s -- as far report; as usual, now we will take questions. Operator, can you please give the instructions?

[Operator:]

Certainly. [Operator Instructions] We will begin with the line of Richard Davis from Canaccord. Please go ahead.

[Richard Davis:]

Sorry about that. You there?

[Karl Lopker:]

We are here.

[Richard Davis:]

Yes, sorry about that. Trying to hit the mute button. I can’t do that, can’t trust me. Hey, so you have a combination of conversion and kind of a growing number of new logo wins. When you kind of look at the competitive front, what percentage of these deals are competitive and who do you see most often, because if I was a salesman for you guys, I’d like try to keep it in the family, so to speak. So just help us understand how that process is working? Thank you.

[Pam Lopker:]

A lot of our conversion customers are not competitive. So existing customers looking at upgrade -- upgrading and our sales reps talk to them to going to the cloud instead of just doing an on-premise upgrade. Still some sales to do there, but not necessarily that competitive. All new logos, I think most all new logos are competitive. I can't think of any that just called us and placed an order. That would be nice. And it’s kind of over a broad spectrum of companies. Lot of our med device companies are startup companies, they’re small companies. So they could be looking at things like Microsoft dynamics. They might look at one or two we’ve seen looking at Netfleet, and then they’ll look at SAP, Oracle, Epicor, whatever else products are out there, there is not that many in the landscape.

[Richard Davis:]

Got it. Thanks. And one quick follow up. With regard to sales headcount on a percentage basis, so if you guys talked about kind of roughly how much that figure is likely to grow this year?

[Karl Lopker:]

I’d say it will grow with our normal headcount growth which is not going to be that large, but…

[Richard Davis:]

Just kind of single -- single digit -- yes, single digits. Okay, cool. Thank you.

[Karl Lopker:]

Yes.

[Richard Davis:]

Perfect. Thanks a lot.

[Operator:]

And we’ll now go to the line of Bhavan Suri with William Blair. Please go ahead.

[Bhavan Suri:]

Hey, guys. Thanks for taking my call. Can you hear me okay, Pam and everybody else?

[Pam Lopker:]

Sure. Yes.

[Bhavan Suri:]

Great. So, nice job on the numbers. I guess the one thing that was interesting is, you had a stronger than expected license quarter and you certainly pointed out the one customer who opted for license because the infrastructure spend, but yes given how you’ve incentivized the sales force to push for the subscription model were you surprised by the strength in license or is that telling you that they will bounce around a little bit. Just a little a color on how we should think about that for the period and then clearly going forward?

[Karl Lopker:]

Well we did have a stronger license quarter than we thought and a lot of that comes because a lot of our customers are very large companies that have their own data centers and so they’re expanding the use of QAD or they are moving licenses around or it’s just, they’re not necessarily ready to go to the cloud. We do have a number of very large cloud opportunities where even large companies need to upgrade their hardware, so that’s not to say that we can't sell those people on the cloud but it just so happened in the last quarter, we had a lot of people that were just adding to their licenses and adding new modules which we have from our divisions and also modules that we already have existing. So did happen and then the sales effort from a cloud deal versus a license deal to a new customer is similar. We have to sell them on the benefits of QAD and then for the cloud we have to sell them on the benefits of going to the cloud and we believe that more and more people will be seeing the benefits of the cloud. And just in this case it didn’t happen.

[Pam Lopker:]

Yes, we were surprised, I mentioned that [large] [ph] customer specifically, because we were surprised that it ended up going on-premise. We had expected that company to go to the cloud and it was I guess a decision of the Board kind of [indiscernible] that they decided to keep everything on-premise because they had lots of other systems that they would have to have on-premise because they weren’t cloud available and just made that decision. So I’m sure our sales reps were quite disappointed because they would have made much larger commissions have that gone to the cloud.

[Karl Lopker:]

Right.

[Bhavan Suri:]

I guess -- and then just to follow up a little bit on Richard’s question. When you look at the net new customer wins you have, if you looked at ones that are new sort of spinouts or startups across the board whether it’s automotive spinouts or life sciences startups versus guys who are existing companies and you look at the cloud offering, any trends there, is it mostly the new companies like opting the cloud or have you seen some of the traditional guys start to pick the cloud as an option for their supply chain.

[Pam Lopker:]

No, I think it’s both. We’re definitely seeing some large customers. We had a very large customer in here a couple of weeks ago that is seriously looking at the cloud. I do think, my thinking is if you’re a new customer just starting up med device company or start up any company you’re going to pick the cloud. The last thing you don’t want to do is put in a on-premise system and new - and existing large, even large companies are looking at that and saying, hey, we don’t really want to be doing on-premise and house systems either. So I think over time that is going to be the chosen platform for nearly everyone.

[Karl Lopker:]

Yes, and you mentioned spinouts and that’s good business for us also when they de-merger, they don’t want to necessarily give their licenses to the acquiring company, so a lot of times they will go to the cloud or if they’re expanding in countries like Vietnam or China even or India, they’re all flat opportunities for us.

[Bhavan Suri:]

Yes, and it’s helpful. And then I’m throw one in competition before I jump in a couple of financial questions, but the first one is, you gave an overview of your competition. I just want to ask directly, were there any replacements of Oracle SAP specifically with the 10 new customer wins this quarter?

[Karl Lopker:]

No.

[Pam Lopker:]

We certainly competed against SAP, was one of our main competitors on a large deal. I’m trying to think of replacing SAP, we’d have to look into that.

[Karl Lopker:]

Yes, that also happens on spinouts.

[Bhavan Suri:]

Yes. Okay, and then one quick for Daniel, Daniel gross margin was down a tad marginally, but given the strength in license, given the maintenance came in a little better even despite FX and I might have missed it. Was there a reason why that was down just marginally?

[Daniel Lender:]

Some of it is related to revenue mix, Bhavan. That was the main - the main contributor to why it was down a little bit.

[Bhavan Suri:]

Okay. Thanks for taking my questions guys. That was helpful. Thank you.

[Daniel Lender:]

Thank you, Bhavan.

[Operator:]

Thank you. We’ll next go to the line of Jeff Captain with Stifel. Please go ahead.

[Jeff Captain:]

Hey, guys. How are you doing?

[Karl Lopker:]

Great.

[Pam Lopker:]

Great.

[Jeff Captain:]

I just had a quick question about guidance for next year. I was wondering if there is, if you guys are factoring any sort of FX headwind into the 302 revenue number?

[Daniel Lender:]

No, definitely I mean that’s -- and that’s clearly a challenging aspect. There is two revenue lines in particular that are affected for us. One is the maintenance revenue and the other one are services. So during my prepared remarks I mentioned, for example our deferred maintenance revenue would have been $5.8 million higher at the end of Q4 at the rates that we had at the beginning of last year. So there is definitely, we’re baking in right now where we see the foreign currency rates and as I mentioned the two main areas that are affected are maintenance and services. We do get a good natural hedge on the services side in particular because those services are delivered by local resources that are also based in the same currency, and we have some other natural hedges across the company in other departments given our scale and our global operations. We did get as I mentioned -- in the quarter - we did get affected by currency by $700,000 or $800,000 on a net basis in terms of the operating income. So, yes, we are definitely baking in a number of foreign exchange rates into that guidance.

[Jeff Captain:]

Got it. Thanks, that’s really helpful. Then I had one quick follow up on the cloud. Previous or in the past you guys have mentioned how vertical wise life sciences companies tend to seem to be more open to purchasing the cloud product. I was wondering if there’s any change in that if any other verticals are kind of becoming more open to this.

[Pam Lopker:]

Well, certainly.

[Karl Lopker:]

So, in fact 50% of our deals in the quarter were life sciences deals of the cloud deal. So we have definitely seen that continuing. So that’s -- we see -- we not only are they open but our offering has an advantage with, as it relates to life sciences deals.

[Pam Lopker:]

What is more interesting this quarter is that we only had one auto deal which typically we’ve more autos but it was a good spread with 50% life science, 3% industrial, 1% food and beverage and 1% auto. So we did basically get all of our verticals in there, so that life science seemed big.

[Jeff Captain:]

Got it, great. Thanks guys.

[Karl Lopker:]

Thanks, Jeff.

[Operator:]

We’ll now go to the line of Mark Schappel with Benchmark. Please go ahead.

[Mark Schappel:]

Hi, good evening. Nice job on the quarter. Karl, starting with you, with respect to the 10 new cloud deals in the quarter. I was just wondering if there are any discernable trends among those deals. For instance were they weighted toward a particular geography or a particular industry? I think in the previous question it was mentioned that life sciences was particularly strong.

[Karl Lopker:]

Yes, life sciences was particularly strong in the number of deals, although industrial was big in the amount of money that we’re getting. They tend to be larger companies in industrial and if we can convert them, that’s really good for us. As far as geographies, I don’t necessarily have that here. Do you?

[Daniel Lender:]

No, it was -- in the quarter a good percentage of the deals came from the U.S. we did get some deals from Europe and Asia Pac but the majority of the deals came out of the U.S. geography. Europe was quite strong earlier on in the year and they do have a good funnel going forward, but in this particular it was more U.S. base than other geographies.

[Mark Schappel:]

Good. Thanks. And then, Daniel with respect to the five large deals in the quarter, the $1 million plus deals, any mega deals in that mix say of the $3 million plus variety or they’re just closer to the $ 1 million range?

[Daniel Lender:]

One was very close to the $2 million number in terms of licenses and the other ones were closer to the $1 million number.

[Mark Schappel:]

Okay, great. And then finally one for you Pam. With respect to the rollout of your upcoming HTML5 user interface, maybe just give us a heads up of what we can expect in the coming year here with respect to that?

[Pam Lopker:]

We’re just getting, our early adopters are us signed up, I think we have like 16 people, 16 companies that want to be early adopters. So we will be getting them on-boarded here in the next couple of months and we will be selling to the explorer in May and expect to have GA of that sometime next year.

[Mark Schappel:]

Great. Thank you.

[Pam Lopker:]

Okay.

[Karl Lopker:]

Thanks.

[Operator:]

Thank you. [Operator Instructions] We’ll now go to the line of Stan Berenshteyn with Sidoti & Company. Please go ahead.

[Stan Berenshteyn:]

Good afternoon.

[Karl Lopker:]

Hi, Stan.

[Stan Berenshteyn:]

Just to revisit our gross margin on the blended basis looking at subscriptions and maintenance together just based on how it has been historically. The fourth quarter came in a bit light about 69% gross margin compared to a historical average of about 72%. Can you explain what exactly caused the decrease in the fourth quarter?

[Karl Lopker:]

Yes, so if you look at our subscription cost of revenue actually the subscription cost of revenue was a bit higher in the fourth quarter than it was in the third quarter. And in that particular line item, I’d expect that we’re going to see some variations on a quarter-to-quarter basis, for the year it did improve by 2% or 3% but in the quarter it was a bit higher. So, you will see a bit of variability there. Looking at the maintenance cost of revenue alone that it may have also something to do with foreign exchange, but I can't give you any more granularity than that at this point, Stan.

[Stan Berenshteyn:]

Okay. And bio estimate, what percent of subscription sales growth is coming from existing clients upgrading compared to just new logo ones?

[Karl Lopker:]

So when you look at our overall business a bit over 50% is our customers that are converting and 50% or slightly less maybe is new customers or prior or customers that were new in recent quarters that are expanding their footprint.

[Stan Berenshteyn:]

Okay. Thank you.

[Karl Lopker:]

Sure.

[Operator:]

And Mr. Lopker we have exhausted all questions in queue at this time. I invite you to please continue. End of Q&A

[Karl Lopker:]

Okay, great. Well, thanks for your attendance and questions. I’ll update you again in May with our first quarter results. Goodbye for now.

[Operator:]

Ladies and gentlemen, this conference will be available for replay after 04