Talend S.A.
Q3 2016 Earnings Call Transcript

Published: 11 Nov 2016

[Operator:]

Good day and welcome to the Talend Third Quarter 2016 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Cynthia Hiponia. Please go ahead.

[Cynthia Hiponia:]

Thank you. This is Cynthia Hiponia, Talend Investor Relations, and I am pleased to welcome you to Talend's conference call to discuss its third quarter 2016 earnings results. With me on the call today is Talend's CEO, Mike Tuchen; and CFO, Thomas Tuchscherer. During the course of today's presentation, our executives will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or our future financial or operating performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those contemplated by these forward-looking statements. Forward-looking statements in this presentation include, but are not limited to, statements related to our business and financial performance and expectations and guidance for future periods, our expectations regarding our strategic product initiatives and the related benefits, and our expectations regarding the market. Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release that we issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we should not rely on them as predictions of future events, and we disclaim any obligation to update any forward-looking statements except as required by law. Please note that other than revenue, or as otherwise specifically stated, the financial measures to be discussed on this call will be on a non-IFRS basis. The non-IFRS financial measures are not intended to be considered in isolation, or as a substitute for results prepared in accordance with IFRS. We have provided a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measure in our press release. Let me now turn the call over to Mike Tuchen, Talend's CEO.

[Mike Tuchen:]

Thanks, Cynthia, and thank you all for joining us today. So we’re pleased another solid quarter with record revenue of $27.4 million up 40% year-over-year. Highlights of the September quarter review, our industry leading big data and cloud solutions delivered a combined subscription growth rate of over 100% year-over-year for a seventh consecutive quarter. As a result, our revenue growth continued to accelerate with Q3 up 40% year-over-year compared to 38% growth in the second quarter and 34% in Q1. Our subscription revenue grew 44% on a constant currency basis, as fast as it’s grown since 2012. We achieved free cash flow breakeven in the third quarter and were probably breakeven for the first nine months of the year. We remain on track to be free cash flow positive for the full year of 2016. And finally, we named Steve Singh, the Founder and CEO of Concur to our Board. Steve is an industry visionary, who brings extensive enterprise software and cloud leadership experience to our Board. To understand how our next generation integration solutions are driving these stronger results, let me discuss how companies are using the Talend data fabric. Our company wins in the third quarter included large enterprise customers choosing Talend, more companies trust with Talend for big data and cloud solutions, success in international market and sometimes examples of all of these things happening at the same time. We continue to see large enterprises adopting Talend. For example in Q3 we signed an agreement with [HD] Inc. As you may recall, in November of last year Hewlett-Packard, one of the world’s largest technology companies split in to two separate companies. As part of the split, there began the process of building their new separated IT infrastructure. This provided a unique, once in a life time opportunity for a multi-billion dollar company to design a modern IT infrastructure for today’s data driven world with rapidly increasing data volume. Not surprisingly they take their new architecture on cloud computing (inaudible). For their integration solutions specifically, they evaluated their incumbent vendor and talent side-by-side running it through complex suitcases and testing high volume and high velocity scenario. HD Inc. chose Talend for data management in their new and (inaudible) based enterprise data warehouse projects, which is the foundation that a leverage for a variety of additional plan projects. Some of the reasons they still like the Talend includes flexibility, expandability, the breadth of our platform and the maturity of our integration with Hadoop. We’re also continuing to grow internationally, including solid growth in our Asia Pacific market. One of the largest telecom companies in Japan selected Talend in Q3. They chose us deliver real-time capabilities, our tight collaboration with our chosen Hadoop [distros] which is MapR, and our ability to increase developer productivity. So leveraging real-time capabilities to offer premium services at the right time taking the customers GPS location. Delta productivity was also a chief differentiator for Talend, given the global shortage of skilled big data developers. In Europe, we had a great win with Accor Hotels, one of the world’s largest hotel groups with more than 4,000 properties and whose branch includes Fairmont, Sofitel and Raffles. Accor’s strategy is to test its standards for customer service across its brands. To achieve this, Accor is investing in new big data and cloud analytics programs to gain a 360 degree view of its customers and use that insight to deliver enhanced customer experience. This win is a great example of the power of our open source business model. Since the Accor team started their journey with Talend by using our free open source product support adopting the commercial Talend data fabric. We believe our ability to retain and expand subscription revenue overtime is an indicator of our position as a strategic solutions provider in the long term value of the Talend data fabric. In the third quarter, our dollar base net expansion rate was 121% on a constant currency basis. An example of this land and expand success in the third quarter was we signed a substantial expansion deal with one of our largest existing customers whose one of the largest healthcare providers in the world. These customers signed a major expansion agreement with us in the third quarter. To recap their story, they started working with a free Talend Open Studio in 2011 and became a paying customer in 2012 by buying a single module. Over the next several years, they purchased several more modules and became a $1 million per year annual subscription customer. And all of that was in just one division of the company. In 2015, last year, the Central [IT] team file an initial $1.5 million annual subscription which was the largest single deal in the company’s history and made them our largest subscription customer with an annual subscription of $2.5 million per year. And now and most recently, in the third quarter of 2016 this customer set another new record for the largest deal in our history, with an additional $1.7 million annual subscription as well as a new high watermark for our largest subscription customer in over $4 million per year in annual subscription value. This healthcare provider chose Talend both because of our ease of use and our ability to provide high scale and high performance with big data technologies. One of the major projects with Talend allows individual business units to analyze various forms of clinical data, so they can generate [hypothesis] and provide more [scalable] product to patients and clients. Another one of our large enterprise customers is Johnson Controls. They are an American multinational corporation that provides automotive parts and HVAC equipment for buildings with over 117,000 employees worldwide. Johnson Controls is using Talend to provide a new insight in to its customer’s purchases so it still can deliver better service. As a new customer, Johnson Controls made a significant purchase in Q2 which is one of our largest deals for that quarter, and just a few months later they signed a follow-on agreement in Q3, which is one of the largest transactions in that quarter as well. This is another example of the importance of our land and expand model, and our ability to grow our installed base quarter-over-quarter. Johnson Controls chose Talend as their global standard for both traditional data and big data integration. Now as many of you will recall, Talend uses free offer to drive general awareness and help foster a community of Talend users and developers. These downloads and trials also result to then qualify (inaudible) that sales and marketing can nurture and convert in to commercial subscription. We gave several examples today of some of our largest customers that have migrated to Talend data fabric from a free trial and open source product. We’re strengthening this open source model with the introduction of our latest Big Data Sandbox. The Big Data Sandbox is a pre-configured virtual environment that gives company the no-risk and zero cost way to try Talend for Big Data use cases. The new version is built on a ready-to-run docker environment for easily testing different Hadoop [distros] as well as the latest big data technologies including fast streaming, cost (inaudible) and machine learning. As with our other open source offerings, the latest Sandbox will allow the new range of developers and companies to begin their journey with Talend. Also in the third quarter, as I mentioned earlier, we were delighted to name Steve Singh to our Board of Director. As the Founder and CEO of Concur, Steve brings a wealth of experience in successfully disrupting markets, alien cloud businesses and global companies. Steve will be a valuable asset to Talend as we continue our high growth trajectory. In summary, we entered the fourth quarter with solid momentum, increasing customers adoption and strong product positioning. I am pleased we achieve free cash flow breakeven for the third quarter and we remain on track to achieve free cash flow for the full year of 2016. Let me now turn the call over to Thomas, who’ll discuss our financial results in more detail and provide our outlook for Q4 and the full year of 2016.

[Thomas Tuchscherer:]

Thanks Mike. Today I’m going to review the financial results for the third quarter of 2016, as well as provide outlook for our fourth quarter and full 2016 fiscal year. Total revenue for the third quarter was 27.4 million, a year-over-year increase of $7.8 million. This increase represents continued accelerating year-over-year growth of 40% compared to 38% year-over-year growth in the second quarter of 2016 and 34% year-over-year in the first quarter of 2016. Subscription revenue for the quarter increased by $6.7 million to $22.9 million, an increase of 41% year-over-year, which is also a record increase of 44% year-over-year in constant currency. The growth continues to be driven primarily by big data and cloud, our fastest growing products, with an increase in combined subscription revenues of over 100% year-over-year. These solutions have now been growing at over 100% year-over-year for seven consecutive quarters. Another growth driver has been the Americas which has grown its subscription by 47% year-over-year and now represents 48% of our subscription revenue. Professional services revenue was $4.5 million for the quarter, an increase of 1.1 million in the third quarter of 2015. The increase was driven primarily by implementation services for new customers. For the quarter ending September 30, 2016, our net dollar based expansion rate was 121% in constant currency, consistent with the third quarter of 2015. Our net dollar based expansion rate has now been above 120% on a constant currency basis for the last 10 quarters. I would like to investors that our net dollar based expansion rate can fluctuate quarter-over-quarter reflecting the mix of new versus existing customers and the reported quarter. Before moving to profit and loss items, I would like to point out that unless otherwise specified, all of the expense and profitability metrics that I’ll be discussing going forward are non-IFRS results. A full reconciliation between IFRS and non-IFRS results can be found in our earnings press release issued today and available on our website. Our total gross margin remained at 76% for the quarter, consistent with the third quarter of 2015. Operating expenses for the third quarter was $26.1 million, an increase of $7.5 million or 41% year-over-year. The year-over-year increase is primarily driven by an increase a headcount which I’ll discuss further as well as additional expenses related to becoming a public company. Sales and marketing expenses were $16.8 million, an increase of 43% year-over-year. We continued to invest in regional sales positions and expansion markets as we focus on efforts aimed at continued growth. As we discussed in our last earnings call, there is a lag between the time we invest in sales headcount and its effect on subscription revenue. It takes approximately four to five quarters from the hire day of our sales reps to become fully productive. Also, our sales reps generate subscription bookings, which then also creates a lag as these are recognized as revenue over the term of the underlying subscription agreement. R&D expenses were $4.8 million, an increase of 33% year-over-year, and we’re driven primarily by increased headcount in France and Germany. We expect that research and development expenses will increase in future periods as we continue to invest in additional employees and technology to support the development and improvement of our products. G&A expenses were $4.4 million, an increase of 40% year-over-year, due to an increase in compensation expenses related to employees and an increase in professional services fees associated with being a publicly traded company. We ended the quarter with approximately 649 full-time employees, compared to 465 employees at the end of the third quarter of 2015. We incurred an operating loss for the quarter of $5.1 million, compared to an operating loss of $3.6 million for the third quarter of 2015. An increase in operating loss year-over-year was due primarily to an investment in sales and marketing mentioned earlier. Expressed as a percentage of revenue, operating loss stayed approximately flat at negative 19% for the third quarter of 2016 compared with negative 18% for the third quarter of 2015. Net loss for the quarter was $5.4 million compared to a net loss of $3.6 million in third quarter of 2015. Net loss as a percentage of revenue was also relatively flat and negative 20% for the third quarter of 2016, compared with negative 18% for the third quarter of 2015. Free cash flow for the quarter improved 14 percentage points year-over-year to $0.1 million from negative $2.7 million in the prior year period, as we continue on our balance plan approach. For the first nine months of 2016, we were approximately free cash flow breakeven. Turning to the balance sheet; as of September 30, 2016, we had cash and cash equivalents of $90 million. We believe we are well capitalized to continue our efforts to grow our business and expect to be free cash flow breakeven to slightly positive for the full year 2016. As we discussed during our IPO and on our last earnings call, we do not view calculated billings as a good measure of the performance of our business. Calculated billings does not take in to account changes in pre-billed subscription duration, professional services, and certain renewal dynamics. We believe our revenue guidance is a more meaningful and accurate reflection of our progress. We have managed our business a short and contract duration as we transition to cash flow breakeven, given the lower associated discounts and more efficient sales cycle. And the average duration can change from period to period. Our average pre-build duration for new ACV bookings reached 1.2 years this quarter, relative to 1.5 years one year ago. This was due to the record deal which Mike discussed earlier, which was a one-year subscription, as well as other large deals in the quarter that were less than one year in duration. We are ahead of plan in reducing our pre-billed subscription duration which impacts both short term and long term deferred revenue. Pre-billed subscription duration may fluctuate in future quarters, but as we indicated previously, we expect to continue to decrease pre-billed subscription duration over the next two years. Now for the Q4 and 2016 fiscal year outlook, which assumes similar business conditions and foreign exchange rates as of October 2016? For the fourth quarter of 2016, in spite of the currency headwinds experienced since the end of July, we are raising our outlook for total revenue to be between $29 million and $30 million. We expect the IFRS operating loss to be in the range of negative $6.7 million to negative $5.7 million. We expect IFRS net loss to be in the range of negative $6.9 million to negative $5.9 million. We expect non-IFRS net loss to be in the range of negative $5.7 million to negative $4.7 million. We expect IFRS EPS to be in the range of a loss of negative $0.24 to a loss of negative $0.21, based on a share count of 28.5 million shares. We expect non-IFRS EPS to be in a range of a loss of negative $0.20 to negative $0.16. For the full year 2016, we expect total revenue between $104.5 million to $105.5 million. We expect IFRS operating loss to be in the range of negative $26.3 million to negative $25.3 million. We expect IFRS net loss to be in the range of negative $26.7 million to negative $25.7 million. We expect non-IFRS net loss to be in the range of negative $23 million to negative $22 million. We expect IFRS EPS to be in the range of a loss of negative $1.06 to negative $1.02 based on share count of 25.2 million shares. We expect non-IFRS EPS to be in the range of a loss of negative $0.91 to negative $0.87. Thank you. Let me turn the call back to Mike for some final remarks.

[Mike Tuchen:]

Thank you Thomas. Before we open up for questions, let me make a few closing remarks. The third quarter was our first quarter as a public company. Our July IPO brought us both a healthy cash balance and an increased brand recognition. You’ve already seen the benefits of the raised awareness with record recruiting across our company, record website traffic and significantly increased media and social visibility. As I look forward in to 2017, we believe a compelling solution and leadership in big data and cloud integration will continue to drive growth as we take advantage of the tremendous market opportunity created by the secular shift of big data, cloud, sales services and real time. With that Thomas and I are happy to take your questions.

[Operator:]

[Operator Instructions] our first question comes from Jesse Hulsing with Goldman Sachs.

[Jesse Hulsing:]

Mike you walked us through the progression of your largest customer to, I think you said over 4 million in annual spend. Have you started to displace legacy data integration vendors in that customer?

[Mike Tuchen:]

Right now our business there remains only on Hadoop, and we’ve been since there they started using Hadoop their data integration standard was Hadoop. So aside from them taking some of their data infrastructure and their data processing and running in to Hadoop that had been running in traditional data system. So some of sort scenario migration, no we are not doing any like-for-like displacements there.

[Jesse Hulsing:]

Any idea on what the total spend opportunity would be in a customer like that?

[Mike Tuchen:]

We are far less than 10% of their business there. That’s primarily an IBM shop and the $4 million that we’re spending there, as I said, represents far less than 10% of what they’re doing.

[Jesse Hulsing:]

And some software companies this quarter have seen some Brexit related softness in their European business, how was your European business in the quarter and has there been any disruption to your pipeline?

[Mike Tuchen:]

The UK team again beat their number. So we’ll have to inform the UK team, so we haven’t seen a Brexit related impact there. Thomas would you want to comment on the broader European business?

[Thomas Tuchscherer:]

Yeah, I think on the inset on the foreign exchange side, you do see a bit of a delta, in terms of the pound continued to decline from about 1.3 to about 1.2 on average, and the Euro decline slightly as well. So that’s why you see a delta which is on a constant currency basis of our subscription revenue growth rate between 41% and 44%.

[Jesse Hulsing:]

So it sounds like currency impact, but no fundamental impact so far.

[Thomas Tuchscherer:]

Correct.

[Operator:]

Our next question is from Mark Murphy with JPMorgan.

[Mark Murphy:]

I had noticed that in the Gartner Magic Quadrant you moved in to the leader segment of the quadrant, so it seemed like a nice improvement. You mentioned the IPO benefit that you’re getting. I’m wondering if that other improvement has translated in to any kind of higher visibility, better lead flow, because many of the corporate due to rely on this quadrant as they do their evaluations.

[Mike Tuchen:]

It’s a great point. We are finding that many of the large companies particularly conservative ones really rely on Gartner’s advice, and so us moving in to the leaders quadrant is we believe position us extremely well for the long term. It’s still very early days. They did that move in the middle of August and so that really gave us about six weeks from there to the end of the quarter. So I think it positions us well going forward, but in terms of having an impact on Q3 itself, I think it’s a little early to say.

[Mark Murphy:]

And then I wanted to ask as well, did you observe any change in the mix of cloud versus on-premise? And I realize it’s not the most straight forward aspect of your business try to measure, but anyway of just speaking to that directionally, have you seen much of a mix shift or how quickly is that evolving?

[Mike Tuchen:]

Anticipating the question, we did go back and look and say, what percentage of our deals were cloud based in Q3 relative to what we’ve seen earlier in the year. And it was a little over a third, and I remember we had said anecdotally it was around 30% in the first half and so arguably it might be ticking up slightly, but we’re still in that - just now slightly over a third of our deals are specifically running in the cloud.

[Mark Murphy:]

The final question I wanted to ask you, just in terms of the business climate, in aggregate would you look forward and think about your expectation of the economy and Q4 and beyond. Jesse brought up Brexit, I think in terms of what you saw in Q3, but I’m curious looking forward and also post US election, you mentioned a couple of sizeable, discrete transactions in Q3, and I am just curios when you look at the pipeline and think about the business climate, is this suggesting that you’ll have some follow-through on that in Q4 and beyond?

[Mike Tuchen:]

Right now we see a very healthy pipeline going in to Q4. We are not dependent on any individual very large deals in Q4. We have a number of deals that are above $200,000 which for us historically is a very large deal, but we have no individual deals that are north of million, right now that we’re relying on for the quarter. So we really like to set up that we have going in to Q4. I’d say it’s super early to have any commentary on any political impact, but at this point the market doesn’t seem to be pricing anything in, let’s put it what way.

[Operator:]

[Operator Instructions] our next question comes from Bhavan Suri with William Blair.

[Bhavan Suri:]

I’m just trying to defer, despite that switch we’ve talked about it continues to come in nice. I may have missed if the question was asked, so I apologize, but what’s going on there, because it feels like despite - and the growth is really nice, the acceleration is fantastic. But don’t feel like deferred coming in better. Are those contracts still sort of switching to annual? How should we think about that dynamic?

[Mike Tuchen:]

Well, what’s going on right now is as Thomas mentioned, we are a little ahead of plan in reducing our duration, and so our duration target we thought for the year was going in to was going to be 1.4, but we ended up coming in at 1.2. And so we like how that sets us up for next year. This thing that we’re doing in the business that Thomas sort of alluded to, but I’ll put a little more color on is, we’re pushing for more so called co-term agreements. And any business that has a successful land in the expand model naturally is going to result in every customer having a number of individual contract. And if you don’t do anything about that, you could be in a situation where you have one or more contracts in every calendar of the year. And obviously that’s cumbersome for the customer, it’s cumbersome for us, and so to streamline that what we and almost every other subscription company ends up doing is looking to make the agreements go terms. And so rather than a dozen of individual agreements you have one larger agreement. And that co-terming can have an unpredictable impact on the duration in the given quarter, because you might have agreements like we had. This quarter we had a couple of five month agreement that we call the stub agreements, short than one year. You can also have agreements that are 17 months where they do the co-term or rather than the nearest upcoming renewal but for a year from that. So we had actually both those impacts where we had both left longer term deals and we’re now are really starting to drive for that co-term which is something that we’re going to continue to see. Now the fact that our overall billings came in inline despite those two being, suggest that we had a very healthy quarter which we did and yes that’s (inaudible).

[Bhavan Suri:]

Suggest business is pretty good?

[Mike Tuchen:]

Yeah, exactly, we’re very happy with the quarter and obviously the sales team is well ahead of number.

[Thomas Tuchscherer:]

And Bhavan let me just add to what Mike was saying, in terms of the billings we did have some FX impact as well. As you saw on our subscription revenue we had roughly about 3 percentage point impact on a constant currency basis, and that’s approximately the same impact on our total deferred.

[Bhavan Suri:]

Okay, that’s helpful. And then just turning to a product question, now the data-prep product had been out there a little while, other folks now starting to talk about data-prep a little bit more, a Tableau sort of thing. Maybe they want to use a data-prep product. Just two quick questions, how is uptick going vis-à-vis expectations of that product and sort of how does that competitive landscape shake out do you think?

[Mike Tuchen:]

On the first one, we launched the products in July, so it’s on the market for a little over two months, the commercial product, we had the pre-product out sooner. We’re seeing a kind of traction in the pre-product, some have interest in it, and we signed a first few deals of the paid products, we have a healthy pipeline going in to Q4. So we like the early momentum. But since we only had two selling month on those products, it’s very early days for that. In terms of the competitive environment, the way we look at data prep is something that falls in between the classic data management vendors like ourselves and the BI and visualization vendors. So I expect that both sides as you’re seeing with Tableau and I’m sure we’ll soon see with [Click] and Microsoft PowerBI and all the other players there, they’ll play role in the market and all of the infrastructure players will play a role as well. And on a scenario by scenario basis, I think it may make sense for customers to choose one or the other. The customers that we’re working with are looking at it and saying, how can I make sure that the data preparation solving that last mile problem is consistent with the rest of their enterprise architecture and allows them to have a consistent approach to governance, and security and metadata and so on. Customers that are much more BI and visualization centric will say, how can I make that as close to a unified experience with the visualization tool. And I expect that individual companies will go either way in that spectrum based on what’s more important to them. So I don’t think there’s a black and white answer, but I think it’s going to be a large market and we’ll each take a healthy share there overtime.

[Bhavan Suri:]

That’s helpful. Now there’s only been two months, but as you look at that, you are doing a sales team ramp, is the sales team ramped and the sales cycle short of a data prep? Is it too early to tell? It just feels like it should be shorter and both so you guys to ramp as well as sort of the sales cycle itself, but love to get any color on that?

[Mike Tuchen:]

Yeah, it’s super early. Since we won’t have a separate field to sell data prep or we have a unified sales force, there won’t be a different ramp. But in terms of sales cycle, I’d say ask me again in three quarters or so and we’ll have enough data points still to give a coherent answer, at this point it’s way too early to say. The fact we closed a couple of deals in a short period of time is good, but let’s see how it goes over the next little bit.

[Operator:]

[Operator Instructions] our next question comes from Walter Pritchard with Citi.

[Walter Pritchard:]

Two questions, first for Thomas, can you just help us understand on the currency for Q4 how much your guidance is impacted by currency, maybe either in absolute or relative to what you were expecting before from a revenue perspective?

[Thomas Tuchscherer:]

Sure. If we compare it to the end of July, which was when we did our last guidance or end of July to end of October, we’re seeing roughly about $0.4 million impact on subscription revenue line.

[Walter Pritchard:]

And then for Mike on sales headcount, is there any way for you to help us understand how fast you’re growing sales headcount as we look in to next year? I know you’re not going to guide me for next year. But either - I don’t if you - and maybe if you don’t give out sales headcount, some sort of sense of total headcount and how sales headcount might relate to the growth in total headcount.

[Mike Tuchen:]

I’d reiterate a comment that we made over the course of the IPO, and I think on that last earnings call, which is relative to the revenue growth rates that you’re seeing as print right now. We continue to grow quota capacity that’s higher rate, and that’s how we’ve grown from 34% growth rate in Q1 to 38 in Q2 to 40 in Q3, and I’d only comment that we’re continuing to grow quota capacity faster than that 40%.

[Walter Pritchard:]

And then last question, this one is for Thomas. Mike talked about the co-terminus type contract, is that some understanding that’s become more common this year and you expect more of them in to the future. But do you expect there’s an incremental sort of trend there where that happens even more next year. I could see just as you get a bigger vendor may be these become just more common place. I am wondering that if we should think about that as an incremental impact next year as well.

[Thomas Tuchscherer:]

As Mike pointed out and well ultimate it’s really part of our - you tend to have these co-term agreements when you have a land and expand model. And as we continue to penetrate existing customers and further upsell and cross-sell additional products, yeah I would expect that we probably will see additional co-term subscription agreements and/or subscription agreements that are co-term to an underlying master one.

[Mike Tuchen:]

I’ll comment there a little bit as well, it really is an opportunity for us to the company to streamline and it results in our ability to have just easier renewals with fewer people on our side to do it. And so it’s kind of a no brainer. In the end its giving a little bit of an optical issue which is why we are calling it out right now. But because its operationally the right thing to do, it’s something that we are doing and we’ll keep doing.

[Operator:]

That concludes today’s question-and-answer session. At this time, I’ll turn the conference back to Cynthia Hiponia for any additional or closing remarks.

[Cynthia Hiponia:]

Great. Thank you everyone for joining us here today, and we look forward to updating you again on our next call.

[Operator:]

This concludes today’s conference. We thank you for your participation. You may now disconnect.