Zendesk, Inc.
Q4 2017 Earnings Call Transcript

Published: 7 Feb 2018

[Operator:]

Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Zendesk Q4 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the call over to Marc Cabi. You may begin your conference.

[Marc Cabi:]

Mike, thank you, and good afternoon, everyone. Welcome to our fourth quarter and full fiscal year 2017 earnings call. We’re pleased to report a solid financial results. Joining me on the call today are Mikkel Svane, Founder, CEO and Chair of the Board; and Elena Gomez, our Chief Financial Officer. Before we get into the results, let me pass along a few reminders. Our Shareholder Letter is available at our website, investor.zendesk.com, which details our full results and commentary. As we detailed in the Shareholder Letter, we ended fiscal year 2017 on the historical revenue recognition standard of ASC 605 and have adopted the new revenue rec standard of ASC 606, effective January 1, 2018. Our first – fourth quarter and fiscal year 2017 results discussed on this call are according to the historical revenue recognition standard ASC 605, while forward-looking guidance is in accordance with the new revenue recognition standard. We elected to adopt ASC 606 under the full retrospective method for comparability restated financial statements under ASC 606 for the full year of 2016 and the full year and quarters of fiscal year 2017, are provided in the deck available on our website, investor.zendesk.com. All future reporting and guidance will be under the new standard only. During the course of today’s call, we may make forward-looking statements such as statements regarding our future financial performance, product development, growth prospects, ability to attract or retain customers and our ability to compete effectively. The assumptions, risks and factors that could affect our actual results are contained in our earnings press release in the Risk Factors section of our prior and subsequent filings with the Securities and Exchange Commission, including our most recent quarterly report on Form 10-Q and our upcoming Annual Report on Form 10-K. We undertake no obligation to update these statements after today’s presentation or to conform these statements to actual results or to changes in our expectations, except as required by law. Please refer to today’s earnings release for more information regarding forward-looking statements. Finally, during this call, we will present both GAAP and non-GAAP financial measures. The non-GAAP financial measure should be considered in addition to, not as a substitute or an isolation from our GAAP financial information. You can find additional disclosures regarding these non-GAAP financial measures, including reconciliations with the comparable GAAP financial measures in today’s earnings press release and in our Shareholder Letter and for certain non-GAAP financial measures for the prior period in the earnings press releases of those such periods, all of which are available on our website. With this brief introduction, I turn over to Mikkel.

[Mikkel Svane:]

Thank you so much, Marc, and welcome, everybody. I’ll keep this brief. As I look back on 2017, I am very proud of our achievements. We expanded our product line. We increased our market penetration and of course, we rapidly grew our business, all while delivering strong progress in moving upmarket to serve larger companies. In a sign of that progress, we reached 38% of our monthly recurring revenue coming from our cost core product came from customers with the 100 or more seats. This is up significantly from a year earlier where it was at 34%. So along with our revenue growing 38% annually in 2017, we reached two important milestones for the year. It was our highest ever annual net cash flow from operating activities, and for the first time ever, we became full year free cash flow positive. The results speak to our ability to execute on our goals and it also increases our confidence in our plan to reach $1 billion in revenues in 2020. The year ahead for us is one where we are very focused, super focused onto corporate priorities across all aspects of our operations. First, we aim to accelerate our upmarket business, both by closing larger deals and increasing our penetration with enterprise customers. Larger companies are increasingly turning to Zendesk for digital transformation and focused on improving the customer experience across the business. We believe both our product family and our go-to-market strategy are well positioned to take advantage of this opportunity. Our second priority is to further mature our omni-channel offerings so that our customers can deliver the best possible customer experience. Consumers today have individual channel preferences and they want to be recognized across any and all channels that they choose. We built a product family that can unify all these disparate channels and departments and can simplify the process of delivering consistent customer experiences, and we will be deepening our omni-channel capabilities even further here in 2018. We entered the New Year with a lot of optimism, thanks to the team, thanks to the sales opportunities that we’re pursuing and thanks to the product innovation that we have in development. So I look very much forward to sharing our progress on our 2018 priorities in the year ahead. So with that, back to you, Marc.

[Marc Cabi:]

Thank you, Mikkel. Normally, we take questions, but I would like to remind everyone that restated financial statements under ASC 606 for the full year 2016 and the quarters and full year of 2017 have been provided in a deck available on our website and all new future reporting will be under the new standard only. So let me just reiterate our guidance based on that. For the first quarter of 2018, we expect revenue in the range of $125 million to $127 million, which compares on a quarter-to-quarter restated basis to Q4 2017 to revenue of $121.9 million, and on a year-over-year comparison, to Q1 2017, it’s a revenue of $93.9 million. For the full year 2018, we expect revenue in the range of $555 million to $565 million, which compares year-over-year to a restated fiscal year 2017 revenue of $430.2 million. Additionally, for the first time, we are sharing a new guidance measure. It’s our target for full year 2018 free cash flow. We expect it to range between approximately $25 million to $30 million in 2018, and this will be an annual outlook only. Finally, as part of our infrastructure migration, we will continue to incur expenses for both AWS and our colocated data centers while we host customers in both environments during the transition period. We expect to incur up to approximately 100 basis points of additional depreciation and related costs in each period while the migration continues. We expect to finalize our migration plan during the first quarter and we’ll disclose information about these schedule and how that lays out in expense recognition during our first quarter call. And with that, we are ready to take questions.

[Operator:]

[Operator Instructions] Your first question is from Bhavan Suri with William Blair.

[Bhavan Suri:]

Hey guys, congratulations. Nice job there across the board. Just, Mikkel, maybe starting off with you, just at the high end, as you look at the enterprise additions of Chat and Talk, how are those tracking and sort of what have you seen as you move upmarket because obviously that move has been quite successful, but some color, is it service or using Chat and Talk? And what are those deals typically look like? Some color there would be really helpful.

[Mikkel Svane:]

Well, I think we’re very excited about having now aligned our product plans provides a lot of simplicity for our customers, makes it easier, and we’re very excited and very happy about the progress of our – both our Chat and our Talk product. Especially the Chat Enterprise saw a really, really good adoption in the market. We still believe that the Talk is a long play for us, but still very excited about that opportunity. That also means, like at the call of it, we still lead with our call support product as we move up. And we are aware that, especially in the world of call centers that customers may have very varied needs that we – sometimes can solve through our own products, but also that we have a very good partner ecosystem to help with them with these things and make sure that we get the possible experience regardless of the underlying technology. We try to approach the market with like a customer-first perspective on that. But I think the bottom line is that these products are maturing dramatically, and we’re very, very happy and content with the progress of margin.

[Bhavan Suri:]

Got it. One quick follow-up for me, obviously, it’s only been a month that you had Norm on board. But just any sense of any sort of changes in sales structure, any plans near-term or long-term, in terms of what you plan to do there? And then I guess, as you think about you’re touching that partners are becoming increasingly important, sort of what does Norm sort of plan to do there? And if he’s there, I’d love for Norman to answer. But sort of the thoughts around sort of the on boarding, the changes in sales and maybe comp and things like that long-term and near-term and then sort of involvement in partner channel.

[Mikkel Svane:]

All the question. So Marc, you can add some color here, too, but it’s been really great getting Norm on board, like that kind of stability that we really focused on invested on in the organization during the second half of 2017, having Norm naturally kind of glide into that and continue the great execution of that we have with that team. We’ve been very successful with that. There’s been great acceptance of Norm throughout the organization and it’s just a pure pleasure to working with Norm. And yes, we are executing on our partner strategy and we have a lot more coming around that, and Norm plays a big role there. I don’t know if you have – Marc, anything you want to say about the sales organization.

[Marc Cabi:]

Before – as we said last year, as Norm entered, that we would try to maintain continuity in the sales organization and make sure those established relationships continue with our customers. And Norm is fully committed to that. Over time, he will make adjustments to make sure we’re growing appropriately, but that is one of his big focus areas. Elena, do you want to add anything.

[Elena Gomez:]

Yes, I think the other thing, Bhavan is that we saw the transition of Brian and the team delivered flawlessly in both Q3 and Q4. And I think you’ll find the same focus on execution from his team there, a very tenured team. And we’ve been able to maintain the capacity on the Street as well as just the strong leadership there. So I feel like Norm is going to glide right, and it’s too early to suggest any kind of change in our structure or anything. Obviously, he’s evaluating, but we at this point do not anticipate any material change to our structure.

[Bhavan Suri:]

Thanks, Elena. Yes, clearly the team is executed really well throughout Cox’s departure. So congrats again, guys. Thanks for taking my questions. Nice job.

[Marc Cabi:]

Thank you, Bhavan.

[Operator:]

The next question is from Jesse Hulsing from Goldman Sachs.

[Jesse Hulsing:]

Yes, thank you guys. The enterprise business really inflected in the second half and it looks like, by my math, even accelerated. And I’m wondering how much of this acceleration is just a function of stability in the sales force versus a change in the market or change in the types of deals that Zendesk is getting pulled into.

[Marc Cabi:]

Yes, I’ll start. I think there’s both a combination of products really reaching their maturity in terms of serving enterprise type of customers across all of the products, which really strengthens our portfolio as we go to customers. But I do also think that, as you know, we’ve been working through a ramping productivity of our sales teams throughout 2017. And it’s really good to see that sales team really ramp up that productivity and feel successful as they exit 2017.

[Mikkel Svane:]

Yes.

[Elena Gomez:]

Yes.

[Marc Cabi:]

That was an easy answer, I guess.

[Jesse Hulsing:]

Sounds like a consensus with that one. Maybe another one for Marc, maybe this is for Mikkel. Looking at your customer counts for Chat, the net adds have really slowed down this year, and I’m wondering, one, why that would be. And in general, how you’re feeling about your positioning in that Chat business? And how much it’s been contributing to growth over the last year. Thanks.

[Marc Cabi:]

So our Chat business actually, we feel really good about what we’ve been doing there, which is, elevating its capabilities to serve our bigger customers. With that, in the third quarter, we increased prices on our Chat products, deemphasizing some of our lower end in exchange for moving to higher ASPs. And so that’s been the strategy and that will play out in the number of Chat customers added as we kind of start bringing in the higher quality customer. There is a large component of cross-sell as well in our Chat business. We believe that some of our large customers can benefit from multiple products in their product family, and so that’s been a big focus of our Chat activities. And we’ll continue to reevaluate making sure that Chat is very attainable for our low-end customer, but at this point, some of those price increases have had an impact on customer count.

[Jesse Hulsing:]

Thanks, Marc, very helpful.

[Operator:]

The next question is from Stan Zlotsky from Morgan Stanley.

[Stan Zlotsky:]

Hi, guys. Good afternoon and thank you so much for taking my question. So just a high-level question, so when we look at Zendesk, the enterprise metrics that we look at, they all look outstanding, right? So revenue, big beat on revenue, which typically indicates enterprise business, is doing great. Retention rate ticking up, the MMR from greater than 100 seats also ticking up. The one measure that didn’t really do a whole lot was the deals greater than 50k and then grew 25%, which is somewhat similar damage what we saw in Q4 a year ago. And at the same time, also the average value of those deals ticked down a little bit year-on-year. Just maybe help us reconcile the difference between what we’re seeing in all the other metrics versus in this 50k metric and then I have a quick follow-up.

[Marc Cabi:]

So if you look at that metric, in any one quarter, it’s really hard to predict its outcome. We do want over time to see more deals in that category. If you recall, Q4 a year ago, we did have a pretty strong quarter as deals that would have closed in Q3 also pushed into Q4 of 2016. So there is a bit of a comparison issue we’re going into. But in general, we’re really pleased with the results. What we’re seeing is that we’re seeing many more opportunities across various industries. And within those, we’re seeing a lot more large deals. Remember, we have kind of a land and expand methodology, so sometimes deals get broken up into two or three parts rather than all land in one quarter. And so that number will vary. We track it to make sure it’s healthy, and in this quarter, we had good customer growth with some on average smaller deals, but we know that there’s huge expansion opportunities in this coming year as a result of landing those customers.

[Stan Zlotsky:]

Okay, perfect. And just a quick follow-up, how much is ASC 606 adoption helping the operating margin guidance for 2018? How much of a tailwind is it?

[Elena Gomez:]

So there’s – we restated, so there’s about 200 or so basis points or only 50 basis points from that, but we have not really forecasted it for the future, so more to come on that, but for 2018, that’s the impact.

[Marc Cabi:]

And, Stan, I’ll add that despite, our current guidance to be breakeven to slightly profitable, we anticipated that we would end 2018 under the old accounting standard, approaching those levels as well.

[Stan Zlotsky:]

Got it. Thank you.

[Operator:]

The next question is from Derrick Wood from Cowen and Company.

[Derrick Wood:]

Great. Thanks and congrats on the quarter. In the Shareholder Letter, you mentioned that you’ve simplified the buying experience across the product family. Could you just walk through what kind of impact that has had? And is it more on the transactional side or the upmarket side?

[Mikkel Svane:]

Well, I think having the same language in describing the different additions and the plans of the products has been helpful, not only for our customers at self-serve, but also for customers that help – that is being helped by our sales organization. So we see – and I think it’s one of these things that just makes everybody’s lives easier, especially the sales organization, and has helped with the productivity there. And it is something that we also have learned from and we are definitely going to do more to kind of simplify some of that experience here in 2018.

[Derrick Wood:]

Okay. And you guys also talked about an accelerating focus on the enterprise side as you enter 2018. Is your sweet spot still to target companies with kind of 1,000 to 10,000 employees? Or do you see more of an opportunity to go even higher into large enterprise?

[Mikkel Svane:]

Well, sweet spot is hard to define for us because we have such a broad customer base. So like some of our organizations are very large and we may – some of those larger organizations may have a very small implementation for digital innovation project. And I think that – so we focused much more on kind of the counter projects we’re involved in and the kind of customer service operations we’re involved in. And like, when we get into tens of thousands of seats, we know that customers have, like historically, they do things very, very differently and it’s not always we can solve all of the problems with a kind of standard base solution. But that doesn’t – that leaves a lot of room. That’s like we have no problems, we feel very comfortable about going into multi thousand seat implementations and we are increasingly good at covering the whole spectrum both with our own services, with partner services and with a product portfolio now that is really, really mature and hardened for the enterprise.

[Derrick Wood:]

Okay, great. Thanks.

[Operator:]

The next question is from Brent Bracelin with KeyBanc Capital Markets.

[Alyssa Johnson:]

This is Alyssa on for Brent. So your MRR from enterprise customers with over 100 agents have risen from 38% from 34%. I was hoping you could tell us about what portion of the mix shift was driven by up sales and expansions of existing customers versus maybe new customer lands?

[Elena Gomez:]

Definitely 2017 was a year of expansion for us, but we still continue, as Mikkel and Marc have alluded to, having smaller lands, which allow us to continue to be successful in expansion, but definitely, I would say, there’s more of a focus on expansion this year, but we are mindful of both metrics internally.

[Alyssa Johnson:]

Okay. Thank you. And then hoping for a follow-up. Can you talk a little bit about your – the interest you guys have had in Guide and Answer Bot, maybe particularly since you’ve rolled out Answer Bot to web forms last month?

[Marc Cabi:]

That’s been a really exciting product. So if you recall, Zendesk has a desire to always grandfather some of the features that were available before. Our Health Center product was rebranded Guide Pro. All our new customers do acquire that product as part of the process and it’s part of the revenue we generate from those customers. Our previous customers are all grandfathered. Going forward, we will be introducing, as you saw in the Shareholder Letter, an enterprise version of Guide, which will elevate capabilities of our Help Center knowledge management center and capabilities. If a company – if our customer has developed a really good set up for their knowledge base and their Help Center, Answer Bot is a very valuable tool. So we have two parts in that. One, Answer Bot really enables us to make AI, ML technology easy to adopt. It’s almost like they can take it out of the box and work with it very quickly, and that’s really what our customers love. And then secondly, we showed them ways to improve on their capabilities and improve the success rate of Answer Bot by helping them organize their knowledge center to be able to answer more questions correctly. And so the fact that we priced it based on success and are really upleveling our capabilities in the Help Center market have really been welcome additions to the product family.

[Alyssa Johnson:]

Okay. Thank you.

[Operator:]

The next question is from Philip Winslow with Wells Fargo.

[Philip Winslow:]

Thanks for taking my questions and congrats on the great finish to the year. Just a question on the price environment. Obviously, you mentioned some of the price increases on the Chat product, but when you figure just across your portfolio, one of your comments on sort of pricing / competitive environment, and in particular when you think about the add-ons, your chat and text when adding onto support, how are you thinking about that there and what are you seeing?

[Mikkel Svane:]

So you’re asking about the add-ons, like the ability to add on…

[Philip Winslow:]

Both the core and the add-ons, yes.

[Mikkel Svane:]

Both of the core and the add-ons. I think you’re talking about attach rates, is that correct?

[Philip Winslow:]

Just the pricing environment you’re seeing with the core and sort of the pricing and attach rates on Chat and Talk.

[Marc Cabi:]

Yes, so I don’t think the pricing – look, so we work on our pricing on the Chat side because we wanted to really align the value we’re providing with the product. We didn’t really change any of our other pricing, although we aligned each of the product so that there’s a low end, middle end and an enterprise version of each. And so now our sales people can go in and kind of present more of a portfolio. Eventually, we would hope that improves our ASPs, but we need to prove that out. And I think that’s kind of where you’re trying to touch on, Phil?

[Philip Winslow:]

Exactly, bingo. Thanks. You phrased it better than I did. Thanks, Marc.

[Operator:]

The next question is from Jennifer Lowe with UBS.

[Jennifer Lowe:]

Great. Thank you. First, I just had a quick housekeeping question, and I just wanted to clarify, for the guidance for $25 million to $30 million, there’s a little bit more color in the Shareholder Letter and it sounds like that includes capitalized software expense that would be comparable to $18 million in 2017. But I just wanted to clarify because I think it wasn’t as clear in the press release, can you just make – can I just check that I’m thinking about that appropriately?

[Marc Cabi:]

Our free cash flow includes capitalized software, correct. It’s – yes.

[Jennifer Lowe:]

Great. Perfect. And then just looking at the net retention rate, which has been pretty consistent for a while, but as you start to have more of a story around on omnichannel and a broader set of products, I’m just curious, as you look at the dollar-based net expansion rate today relative to where it was a couple of years ago, is it still largely a seat-driven metric at this point? Are you starting to see more of a lever from upsell in that number as well?

[Elena Gomez:]

So that’s a good question. So expansion continues to come from both seats, as you described, but also from new products because we’re launching new products and as well, just from customers moving up on the plan. So we will continue to see more and more of that new product as we roll that out all these products. But the lion’s share still continues to come from the growth in our customers, i.e. growth in seats.

[Jennifer Lowe:]

Great. And maybe if I can just slide one more in there. One of the questions that we’ve been getting a lot is looking at tax reform and corporations potentially having a few more dollars in their IT budget as a result. I’m just curious if that’s coming up at all in your customer conversations? Or if you have a view on how the IT spending environment in 2018 might look relative to what we all saw in 2017?

[Mikkel Svane:]

I’ve not had any direct feedback from any of our sales teams, positive or negative from that at this point, but I think it’s still early. As we develop to the year, maybe we’ll be able to ascertain some trends around that. Anecdotally, we’re seeing that corporations are giving back, that our taxpayers giving back to both employees and reinvesting, so we would hope to be a beneficiary of that.

[Jennifer Lowe:]

Great. Thank you.

[Operator:]

The next question is from Alex Zukin with Piper Jaffrey.

[Scott Wilson:]

Hi guys, this is Scott on for Alex. So 2017, there’s a lot of debate around the achievability of that long-term billion-dollar target. I noticed that you’ve kind of called out additional confidence in hitting that goal in your investor letter this quarter. Can you just kind of speak to what’s giving you this added confidence? And if you’re able maybe kind of also speak to what the product adoption outside of core support looks like to be able to hit that. That would be great to hear.

[Elena Gomez:]

Sure. So I can speak to that. So couple of things. One is, as you saw through this quarter, we continue to execute on our enterprise traction. So we view that as a critical part of achieving the $1 billion, but we also continue to have products that we want to cross-sell so that also continue to add, and that’s not completely baked into our run rate because, as you know, the majority of our revenue continues today that come from support. And so as the combination of those products come together, we believe that those will help us accelerate into that $1 billion. So I think it’s a combination of both move it up market as well as the product portfolio that we’ve matured.

[Scott Wilson:]

Got it. And maybe just one more quick one. Can you kind of speak to the shifting kind of payment terms, but you guys are focused on this year? I believe kind of going from monthly or quarterly to more annual terms, anything that you’re kind of seeing that’s may be impacting retention rates, sales cycles or maybe a changing seasonality cash flows next year as well.

[Elena Gomez:]

Yes. I mean, I think as you would expect, as we move upmarket, that the natural default tends to be annual billing. So if you see movement, it’s more likely because of that. And it’s not often, if anything, it’s the expectation it’s not really slowing down our sales cycles. And in terms of seasonality, you’ll start seeing the typical back end loading of the enterprise business. So we talk about Q1 being a more transactional quarter and the back half of the year being more enterprise heavy, that’s no different for us. So just we take that into consideration in all of our guidance.

[Scott Wilson:]

Great. Thank you so much.

[Operator:]

The next question is from Tom Roderick with Stifel.

[Parker Lane:]

It’s actually Parker Lane in for Tom. Thanks for taking my question. I’m curious if you can update an update on the integration process of Outbound whether or not you’ve seen any upsell of your own products into their customer base? And if that acquisition gives you any confidence about doing further tuck-in M&A as you pursue the $1 billion target? Thanks.

[Mikkel Svane:]

I think it’s too early to talk about our results with that. They still have a business and its like – in its current brand, but we will have a lot more to talk about that in 2018, and Outbound, small acquisition, small team, some great technology that we’re very, very excited about and also definitely something that has influenced our future roadmap and how we think about on other things. So has it changed our acquisition? [Indiscernible] I don’t know, but it’s been great and some good guys and great impact on the company, and product wise, we can speak more about that in 2018.

[Parker Lane:]

Great. Thank you.

[Operator:]

The next question is from Pat Walravens with JMP Securities.

[Matt Spencer:]

Hi, This is Matt Spencer on for Pat. Thank you for taking my question and congratulations. Could you please highlight one particular vertical or geography or products that outperformed in the quarter? And perhaps highlight one that could’ve done a little bit better? Thanks.

[Marc Cabi:]

We are really horizontally oriented, so we saw good outcomes across many of the areas that we participate on. What we do see is, that as we have success stories around different companies and industries, we are able to use those success stories for engaging with other customers in that same industry. I think in 2018, we’ll start to be a little bit more deliberate and strategic around those activities, but we’ve been really pleased across the board in 2017. We’ve gained customer references across a wide variety of industries, and now, in 2018, we can plan to be more strategic on how we go after certain verticals.

[Matt Spencer:]

Great. Thank you very much.

[Operator:]

[Operator Instructions] The next question is from Kirk Materne with Evercore.

[Kirk Materne:]

Hi, yes. Thank you very much, and thanks for taking my question. A quick one on Answer Bot actually, I’m curious, in terms of this sort of initial use cases you’ve seen at Answer Bot, are you seeing traction with sort of pre-existing customers, perhaps a little, I guess, bigger customers, I guess, is the question? Or are you seeing some traction across the board when you think about your customer base? I’m just trying to get a sense on whether Answer Bot might be a higher catch at the enterprise level? Or it’s something that you guys feel can succeed at all levels of your customer base? Thanks.

[Mikkel Svane:]

I don’t necessarily have data that supports that Answer Bot is being more sold to the enterprise rather than to the midsized companies. We do see kind of some patterns in like type of businesses that really appreciate Answer Bot, like high volume, mass consumer, place where they know that by making things just a little bit easier for their customer, they can gain big, big, big productivity gains. And like the appeal of Answer Bot, like this configuration so that they just turn it on and instantly it gives them – it gives that customers a much better experience. It’s really, really appealing. So we’ve been very, very excited about the attach rate we’ve seen for the Guide Product and for Answer Bot and the results they’re providing. And I think – what’s specially appealing is that we’re still in the very, very early innings of billing that product and we have a lot more to come here in 2018 that really will close the loop in helping our customers provide like this seamless experience, this seamless self-service experience with that customer. So it’s a good first indicator, it’s a good early indicator of the possibilities that are really using our data set to help our customers engage much, much smarter with their customers.

[Kirk Materne:]

If I could just ask a quick follow-up for Elena. Elena, you mentioned earlier that obviously enterprise customers in natural inclinations for more annualized billing cycles. I was just curious as you start selling in the bigger and bigger enterprises, have any of them started asking you all about sort of multiyear contracts even if they are just billed annually and just your thoughts on going down that path.

[Elena Gomez:]

Yes, absolutely. It’s a fair question, yes. We are starting to see more and more of that. It’s not a huge number for us yet, but we definitely are starting to see for the right – if you can get that commitment from that customer, that’s what we want. We want a mutual commitment so we can continue to build upon that relationship and over time, expand with them. And we have a better opportunity to do that if we have a multiyear deal with them because we’re both equally committed to their success.

[Kirk Materne:]

Great. Thanks very much

[Elena Gomez:]

Sure.

[Operator:]

There are no further questions at this time. I will turn the call back over to the presenters.

[Marc Cabi:]

Thank you, Mike. We’d like to thank you everyone for joining us for our fourth quarter call. And we look forward to speaking next quarter.

[Operator:]

This concludes today’s conference call. You may now disconnect.