BrightView Holdings, Inc. (BV) Q4 2016 Earnings Report, Transcript and Summary

Greetings, and welcome to the Bazaarvoice Fourth Quarter Fiscal 2016 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Linda Wells. Thank you. You may begin.

Good afternoon and welcome to today’s conference call to discuss Bazaarvoice financial results for the fiscal fourth quarter and full year ending April 30, 2016. I am joined today by Gene Austin, Chief Executive Officer and Jim Offerdahl, Chief Financial Officer. Following the prepared remarks, we will have a question-and-answer session. Please note that we are simultaneously webcasting this call on our Investor Relations website at investors.bazaarvoice.com. The earnings release with our results for the fourth quarter and full year of ‘16 was issued after the market closed today. Certain statements made during this call, including those concerning our business outlook and guidance, growth plans and opportunities, potential acquisitions, outlook on legal matters, sales execution and the ability to capitalize on our opportunities are all forward-looking statements. Forward-looking statements are subject to a number of risks, uncertainties and assumptions that are described in our SEC filings, including the Risk Factors section of our Form 10-K for the fiscal year ended April 30, 2015 filed with the SEC on June 25, 2015. Additional information will also be set forth in our future quarterly reports on our Form 10-Q, annual reports on our Form 10-K and other filings that we may make with the SEC. Should any of the risks or uncertainties materialize or should any of our assumptions prove to be inaccurate, actual results could differ materially and adversely from those anticipated or implied in these forward-looking statements. We do not intend or undertake no duty to release publicly any update or revisions to any forward-looking statements made during this call. The divestiture of PowerReviews was completed on July 2, 2014. As a result of this, PowerReviews revenues, related expenses and loss on disposal net of tax are components of loss from discontinued operations in the condensed consolidated statements of operations since our fourth quarter of fiscal 2014 and all comparative fiscal quarters presented. The statement of cash flows is reported on the combined basis without separately presenting cash flows from discontinued operations for all periods presented. Some of the numbers that we will discuss today during this call will be presented on a non-GAAP basis. Today’s press release, together with the accompanying tables, contains the calculations of these non-GAAP financial measures and a full reconciliation between the corresponding measure, the GAAP measure and the non-GAAP measure, including the reconciliation of GAAP to non-GAAP operating results from continuing and discontinued operations. I would now like to turn the call over to Gene.

Thank you, Linda and thank you all for joining the call today. For the fourth quarter, we reported revenue above our guidance and adjusted EBITDA near the high end of our range. But more importantly, we saw solid improvement in most aspects of our business. Revenues for the quarter were $50.7 million, up 5% year-over-year. Adjusted EBITDA finished at $277,000, our third straight quarter of positive adjusted EBITDA performance. 2016 was clearly a transition year for Bazaarvoice as we worked hard to both stabilize our large and strategic reviews business, as well as launch a number of new initiatives to position the company for profitable growth. As we enter our new year, I believe our strategy is sound and that over time, we will return Bazaarvoice to stronger revenue growth while simultaneously driving improved operating margin performance. Less than 2 years ago, we launched our strategy to transform Bazaarvoice away from solely a ratings and review platform provider to a company with a powerful shopping network rich in consumer-generated content, content that creates greater consumer confidence and converts shoppers to buyers. At the same time, we invested in monetizing the shopping behavior in data we gather each and every day. We embarked on these initiatives all while our core reviews business underwent pricing pressure that was exacerbated by the unique circumstances surrounding our settlement with the Department of Justice. Years from now, when we look back on Bazaarvoice’s fiscal 2016, we will see it as one of the toughest years in the company’s history, but also the year where its new future anchored in profitable growth began. Let me outline some of our key achievements last year. We invested in improving overall customer satisfaction to drive improved dollar retention among our clients. All year, client satisfaction has been rising. And now we are seeing that trend favorably impact dollar churn. In Q4, dollar churn was the lowest since the second quarter of fiscal 2015. And as we look ahead, we clearly see an improving churn picture. We also expanded our retail presence with the acquisition of over 40 new retailers worldwide. More retail relationships will attract more brands to our network, especially in Europe, where we see further expansion opportunities. A year ago, we began to acquire the data rights to shopper behavior with new and existing customers. I am happy to report that we have exceeded our own expectation and have amassed over 100 million targetable shoppers across our network. We now have the critical mass necessary to substantially build our shopper advertising business and other exciting offerings backed by this valuable asset. We expanded our consumer-generated content offering to complement our reviews business, which have deepened many client relationships, allowed us to acquire more share of wallet and helped offset a tough pricing environment for ratings and reviews. For 2016, our additional CGC offerings grew to 23% of total product bookings, up from 15% in the prior year, excluding the discontinued BV Local offering. We have learned a lot about how to make new product successful. And in fiscal 2017, I believe our new innovations will fuel the first year-over-year bookings growth for Bazaarvoice in 3 years. And lastly, we ended 2016 with our first full year of positive adjusted EBITDA. We made prudent decisions on where to invest and managed our business effectively during this transition period. An ongoing focus on profitability and operating margin expansion is an important part of our business strategy. Despite our many achievements, our revenue growth in 2017 is going to be low as we work our way through the many previous quarters of elevated dollar churn and dampened bookings performance in our SaaS business, while ramping our new shopper advertising solution. In 2016, we felt the full impact of a new competitive environment as a result of the July 2014 settlement with the DOJ. The impact came in two areas: dollar churn with many contract renegotiations and some client losses, as well as an overall ASP reduction of approximately 20% in our core ratings and reviews business. Combined, these provide a tough environment for near-term growth as we are in the middle of working through their downstream revenue impact. Having said that, I want to reiterate that we believe we have put in place the investments, the people and the plan to return to higher growth in 2018 on our way to our goal of 15% to 20%. In fact, we see a path to double our revenues over the next 5 years. So, as we enter fiscal 2017, we now believe the elevated dollar churn is behind us and I am encouraged by our improving sales productivity such that we believe our SaaS business is now recovering and we are turning the corner. Let me elaborate just a little further. After lowering our number of sales reps this past year with the reduction in sales resources in small medium business, Asia-Pacific and our BV Local product, sales productivity per rep has improved in our core markets and we are selectively hiring new salespeople in our SaaS business in both North America and EMEA. Our field team is adapting to the new normal in terms of both deal sizes and the number of transactions needed to get us back to growth. Client satisfaction is rising based on our strong commitment to product quality, our improved on-boarding experience and our strong set of service offerings. Customers are excited about our roadmap. Our new CGC offerings combined with our move into shopper advertising has customers talking again about our commitment to innovation in an ever-changing digital marketing landscape. We have important initiatives that we expect to launch in the second half of fiscal 2017 to further strengthen our SaaS lineup and deepen our relationships with retailers and brands alike. And lastly, we are producing positive adjusted EBITDA and operating cash flow on an annual basis. Not only do we see strengthening business metrics, but our vision and strategy are clearly resonating with our clients. Our vision is to create the world’s smartest network of consumers, brands and retailers. Our network is comprised of a vast array of brands and retailers whose products are viewed each month by over 700 million shopper devices worldwide. They freely move important content, including reviews, videos and photos, across the network placing this rich content in the most advantageous locations possible. This is content that creates smarter consumers with greater confidence to purchase and when combined with our network data allows brands and retailers to build smart campaigns for engaging in market shoppers. To give you an idea on how large our network has become, here are a few brief statistics that paint a picture of our progress over the last year. The total number of active and network clients grew in fiscal 2016 to 6,500, an increase of 25% year-over-year. The content our clients gathered across our network continues to grow with an average of 145,000 new reviews a day, an increase of also 25% from the prior year. Over 10 million curations’ photos were processed for display, more than 3x the amount in the prior year. We served 328 billion impressions of our content across our network, an increase of 15%. The insights, which can be derived from that volume of data and activity, are staggering and our opportunity to monetize is truly exciting and a foundation for the substantial growth we see in the years ahead. Given the massive footprint of our network, our strategy is quite simple, grow and maintain our strategic retailers and brands with a compelling lineup of consumer-generated content offerings and in turn monetize the huge amount of shopper data beginning with our shopper advertising initiative. Today, customers can take advantage of shopping behavior and trends. Already, over 40 brands and retailers have run shopper advertising campaigns. And as we have stated, we are seeing some very strong return on advertising spend results. In fact, one large consumer electronics brand has spent $750,000 with us in the last 6 months. We had made important additions to the advertising team and elsewhere, including our new Chief Revenue Officer and we are inserting more advertising D&A into key parts of our company. As a result, the business is in much stronger position as we continue to drive toward profitable growth. Already, we are pleased with our start in Q1 and expect shopper advertising to fuel the growth in our advertising business in fiscal 2017. Additionally, monetizing the data in our network goes beyond advertising and we are planning a SaaS-based offering for our retail clients later this fiscal year. We are currently in test with a large online retailer and I am very impressed with the results so far. I hope you are as excited as we are about the synergies between our core SaaS business and our emerging network monetization strategy. Our core CGC offerings allow us to build a large worldwide network of brands and retailers with hundreds of millions of shoppers engaging with rich content, creating consumer confidence in purchases. We believe this business alone can provide revenue growth in the mid to high single-digit range. As our network grows, the data inside gets more and more valuable and we will provide offerings via advertising and SaaS that allow both retailers and brands to engage shoppers based on their network behavior. These higher growth revenue streams together are designed to drive our overall company growth to our target of 15% to 20%. In closing, fiscal 2016 was a challenging, but pivotal year for Bazaarvoice as we invest in our future while managing to stabilize our core. In 2017, we expect the return of bookings growth, reduced churn and remain excited about the new and emerging opportunities to monetize our network. We will build on our accomplishments from fiscal 2016 to reach our goal for sustainable and profitable growth moving forward. I look forward to reporting our progress to you in coming quarters. And now I would like to turn the call over to Jim.

Thank you, Gene and thank you to everyone who joined the call today. Today, we are reporting results for our fiscal fourth quarter and full year 2016 ended April 30, 2016. As Gene mentioned, we have made significant strides in building a strong financial foundation for Bazaarvoice throughout 2016, especially in terms of adjusted EBITDA and cash flow. We are pleased to have achieved our first full year of positive adjusted EBITDA of $1.2 million, a significant improvement from a loss of $8.7 million last year, driven primarily by continued improvement in our operating efficiencies and tightly managing our headcount. We are also pleased to achieve our first full year of positive cash flow from operations of $19.4 million, a year-over-year improvement of $36 million. This is a result of the improved profitability as well as very strong working capital management, especially in receivables. We ended the year with DSOs of 70, our best end-of-year performance in 3 years. We have come a long way in just 2 years, from nearly $22 million of adjusted EBITDA loss to over $1 million positive and from negative operating cash flow of $43 million to positive $19 million. This financial performance provides Bazaarvoice with a solid foundation upon which to support our future growth strategies that Gene outlined. Total revenue for fiscal 2016 was $199.8 million and SaaS revenue is $191.5 million, up 4% and 5% respectively from last year. Advertising revenue was $8.3 million, down 9% from last year. Our GAAP loss per share improved to $0.30 in fiscal 2016 from a loss of $0.44 last year. Our non-GAAP loss per share also improved from $0.19 last year to a loss of $0.05 in fiscal 2016. Now, let me turn to our financial results for the fourth quarter. We achieved total revenue of $50.7 million, up 5% year-over-year and above our guidance range of $47.9 million to $49.9 million. We achieved SaaS revenue of $49.1 million, up 6% year-over-year. This higher-than-anticipated SaaS revenue was driven by nonrecurring out-of-period revenue primarily related to expired or older contracts from which cash has been collected. We also had higher than typical revenue coming off hold for non-renewal or nonpayment related to the improvement in our customer satisfaction and quote to cash processes. The combined impact of these two items was approximately $1.6 million. Advertising revenue for the quarter is $1.6 million, down 25% year-over-year due to disappointing performance from our legacy advertising operations, which are comprised primarily of revenue from site monetization by a small set of retailers. As Gene noted, we believe our legacy revenue from site monetization has now stabilized and our investment is now focused on our shopper advertising revenue opportunity. Importantly, a large majority to ad campaigns that ran in the fourth quarter were based on our highly differentiated first party data, which we expect to continue going forward. We achieved positive adjusted EBITDA for the fourth quarter of $277,000, near the top end of our guidance and a significant improvement from a loss of $3.6 million last year. We also achieved positive cash flow from operations of $4.7 million, which is our third consecutive positive quarter. Our GAAP loss per share for the quarter was $0.08. Our non-GAAP loss per share was $0.01. We launched 76 clients in Q4, down from 98 in Q4 of last year as we have strategically shifted sales resources away from the small business market. Our strategy of focusing on our most important and impactful clients is starting to positively impact our client retention. We lost 60 clients in Q4, our best quarterly result of the year and our client retention rate increase of 95.7%. Note that half of these lost clients were relatively small, representing approximately 10% of our dollar churn in Q4. As Gene noted, our Q4 dollar churn was the lowest of the year and our best quarter since the second quarter of fiscal 2015. We are seeing our investments in customer satisfaction and retention payoff such that we expect our dollar churn to continue to improve in fiscal 2017. We ended the quarter with 1,399 active clients, up 5% from a year ago. Annualized SaaS revenue per average active client in the fourth quarter was $141,000, similar to each of the prior four quarters. Moving to our P&L, we continued to focus on operational efficiency in fiscal 2016 and expect that to continue in 2017, especially with respect to sales and marketing expenses. Our gross margins for the fourth quarter were 63.9%, the same as Q4 of last year, despite price pressure in our core ratings and reviews business. We expect our gross margins to remain in the low to mid-60s in fiscal 2017 as a higher mix of advertising revenue is offset by our higher amortization of capitalized software. Sales and marketing expenses for the fourth quarter were $17.3 million or 34.1% of revenue, down from $19.3 million or 39.9% of revenue in the same period last year. For the full year, sales and marketing expenses were 10% lower than the prior year as we chose to focus our investments on North America and EMEA enterprise in commercial markets. Going into fiscal 2017, we expect to gain further operating leverage as we continue to improve sales and marketing productivity, but also selectively add new sales territories. R&D expenses for the fourth quarter were $9.3 million or 18.3% of revenue as compared to $9 million or 18.6% of revenue in the same period last year. For the full year, R&D expenses were 8% higher than the prior year as we invested in new products and solutions. For fiscal 2017, we expect our dollar investments to be similar to 2016. G&A expenses for the fourth quarter were $5.6 million or 11% of revenue, down from $6.2 million or 12.8% in the same period last year. For the full year, G&A expenses were 11% lower than the prior year, primarily due to less bad debt expense related to our strong collections and receivables performance. Given such significant progress in fiscal 2016, we don’t expect the same favorableness in bad debt expense in 2017. Hence, we expect G&A as a percent of revenue to be similar to fiscal 2016. Annualized revenue per average employee was $258,000 in the fourth quarter, our best to date as a public company. We ended the year with 756 employees, down 70 from a year ago as we have tightly managed our headcount across all functions. Moving on to the balance sheet and cash flow, we ended the year with $95 million in cash, cash equivalents and short-term investments and a credit line balance of now $42 million, having paid down $15 million during the fourth quarter. As I mentioned earlier, we ended the year with DSOs of 70, a significant improvement from 91 as of last year end. We had another strong collections quarter and further improved our receivables aging. Our deferred revenue balance of $65.2 million at the end of Q4 compared to $62.9 million at the end of Q4 last year and $63.2 million at the end of Q3. We produced positive cash flow from operations of $4.7 million in Q4. CapEx was $4.5 million, which included $2.2 million for the awesome facility that we moved into in December and $2.3 million of capitalization of developed software as we continued innovation on our new products. As a result, our free cash flow in Q4 was a positive $212,000. Before we open up the call for questions, I will provide some context at our guidance for fiscal 2017. Regarding SaaS revenue, as we have previously noted, during 2016, we had significant price pressure in our core ratings and reviews business, which dampened bookings and we also had elevated churn. As a result, we expect our SaaS revenue growth rates for most of FY ‘17 to be minimal, but then began to increase as we enter 2018. We expect advertising revenue to grow in the 20% to 30% range in 2017 driven by increasing revenue from shopper advertising campaigns despite a lower relative contribution from our legacy advertising revenue. Regarding adjusted EBITDA, we expect to continue to gain operating leverage, while at the same time funding the revenue growth strategies that Gene outlined. I will close with our financial outlook. For the first quarter of fiscal 2017, we expect total revenue to be in the range of $48.8 million to $49.3 million. We expect adjusted EBITDA to be in the range of a loss of $500,000 to a loss of $1 million. Non-GAAP loss per share is expected to be in the range of $0.03 to $0.05 based on 82.2 million weighted average shares outstanding. For the full fiscal year 2017, we expect total revenue to be in the range of $201 million to $203 million. We expect adjusted EBITDA to be in the positive range of $6.5 million to $8.5 million, an improvement at the midpoint of over $6 million from 2016. Non-GAAP loss per share is expected to be in the range of $0.01 to $0.05 based on 82.9 million weighted average shares outstanding. In summary, as Gene outlined, we have made significant strides in delivering improved operating margins, achieving positive adjusted EBITDA and generating positive cash flow from operations, all while continuing to invest in key growth opportunities. We made a number of tough decisions in 2016 to establish a solid financial foundation upon which to support our future growth. We have many exciting opportunities ahead of us and I echo Gene’s enthusiasm for what the future holds for Bazaarvoice. Before I turn the call back over to the operator, I would like to remind everyone to please mark your calendar for October 6, when we will be having an Investor Day in New York City. Our leadership team, along with several of our customers, look forward to providing investors and analysts with a detailed review of our business and our strategies for long-term sustainable growth. With that, operator, please turn the call over for questions.

[Operator Instructions] Our first question comes from Scott Berg from Needham & Company. Please go ahead.

Hi, Gene and Jim. Sorry about the little bit of background noise where I am at, but congrats on a good quarter. Couple of quick ones for me is – and I am sorry, I am trying to avoid this noise. Now, it’s going away. That’s better. Sorry about that. I guess, the first is on the attrition side. You talked about attrition improving, but I get how that works to the model a little bit next year and we are not getting revenue growth on a substantial basis. Can you give a little bit more color on what you are seeing on the attrition side to give some comfort that it clearly is kind of a rearview mirror issue?

Yes. Scott, is that your only question? I thought you said you had two or is that only one?

Yes, I got a follow-up to that one when you are done.

Okay. So I mean, I think the – one of the things about hindsight being 20/20 is we can clearly see the bubble we have had in elevated churn based on the Department of Justice settlement and the unique environment we have had. And in Q4, we saw significantly down client dollar churn. And as we look into Q1, we see a similar trend. And when you start looking at the PowerReviews specific churn results, you are seeing dramatic improvement in our ability to both compete on new business. And I think that’s frankly us getting used to the fact that we have a much broader set of solutions, a better story. And at the same time, we are competing much better on the services side when it comes to servicing our clients. So, we are going to continue to have a competitive environment, obviously. And PowerReviews still has points in the settlement that they have access to our network for another couple of years. But we really think that our ability to compete and effectively win is much higher. And the impact of the settlement on churn when you look back now is much lower. In fact, I think this will probably be the last call that we spend any time on this settlement as a part of our business, because as we go forward, we see a new normal of competing. We see a new normal of growth and being effective in our marketplace.

Got it, okay. And I guess my follow-up question then is moving to the advertising business. When we look back a year ago you guided to the ad business up 60% year-over-year in ‘16 over ‘15 and obviously that come in this year for different reasons. You sound as excited about the ad business as I have heard in a couple of quarters. But trying to understand what gives you a little bit more confidence in that segment heading into this year relative to the last couple of quarters. It sounds like the legacy business is stabilized. We are just trying to make sure that, for lack of a better term, ‘17 doesn’t give us a little bit of a head fake in the advertising segment like it did last year? Thank you.

Yes. And I mean, Scott, we are measurably more confident in our advertising business than we were 6 months ago. I think it comes from both significant additions to the team. It comes from ginormous growth in our targetable shoppers, up over 100 million in targetable shoppers. And we are seeing that – and that growth is coming from significant customers of ours buying into the strategy, right. Remember that they have to give us data rights and they know why they are giving us data rights, because they believe in what we are trying to do. It also comes from the fact that we are seeing people vote with their dollars. Now obviously, there is risk to it. And so you can see that reflected in our guide. And we are trying to be smart about how we set up and talk about ‘17 on the guidance side, because we want to be – we want to make everybody responsible about how we look at the year going forward. But we are feeling good about where we are with our advertising business. I am very pleased with Q1 so far in our shopper advertising. I think we have made great progress just in this quarter alone. So – and I think one other thing I want to say is for all of you that the data side of our business is going to be a significant advertising opportunity. But now that we are starting to get critical mass, we see SaaS opportunities as well and that’s something that we want to talk to you all more about in coming calls.

Great, that’s all I have. Thanks for taking my questions. Congrats.

You bet.

Our next question comes from Kevin Liu from B. Riley. Please go ahead.

Hi, good afternoon.

Hi, Kevin.

You have talked about the sales productivity starting to improve here and kind of your willingness to add additional headcount on the sales side. Maybe talk about what sort of percentage increase you might anticipate in sales reps over the course of this year? And with the renewed bookings growth that you would expect, can you give us a sense for whether you think to get back to this 15% to 20% aspiration growth rates in ‘18 or would it take a bit longer than that?

Well, I think the thing to realize as we look at ‘17 from the SaaS basis is each year, our sales performance is stair stepped, right. The lowest is usually Q1, the highest is normally Q4. And so coming off of a tough ‘16 from basically a higher churn dampened bookings performance, while we are starting to see the type of sales productivity in this new world, if you will, that we want to see, it is going to be a stair step process on the sales front. So that’s why when you take the dampened performance in ‘16 and you take our normal first half sales ramp, that’s why the growth in ‘17 is – really doesn’t start to pick up till the end of the year. We don’t really talk about sales capacity additions. And so we are not really at liberty to kind of talk about that, but we will be making selective additions in both U.S. and EMEA. We're beginning to look at additional countries than our classic countries of France, Germany and the UK. We are actively in the Nordics now and we are looking at other areas. We think the brand opportunity in the U.S. remains good for our SaaS solutions and gets even better when we talk about shopper advertising and then we think the retail opportunity worldwide remains good. So my point is that we have had a big downgrade in ASPs as an organization. And adjusting to selling into that world and also at the same time trying to sell a bigger portfolio of solutions has taken time. But I feel much more comfortable about our ability to carry that message, win business. I mean, we are starting to see the win rates that I want to see over and over again. And so generally feeling like the SaaS business continues to turn the corner.

Understood. And just from a modeling perspective, you talked about kind of the 25% growth rate expected for advertising. Obviously, the comparisons are a little bit easier in the second half of ‘17 than the first half. So, is that something we should take into consideration or do you feel like your shopper advertising initiative is taken off enough to the point where you could start to see strong growth right out of the gate?

Yes, I mean, in the fourth quarter, we had some pretty good shopper advertising business. So, we expect that to ramp throughout FY ‘17. But clearly, the second half is a stronger half. And not only driven by the momentum around the targetable shoppers, but just a general ramp in repeat business we are starting to see. So we see that ramping throughout the year. And of course, Q3 is typically our strongest quarter because of the holiday season.

I think the thing that we see on the shopper business is that we – our legacy advertising business is stabilized, but we were not – we don’t believe it’s growing. We think it’s going to be flat, perhaps maybe a little down. And so when you look at that 20 to 30 number, we expect shopper advertising to exceed that by quite a bit. So that’s kind of the mix that we have got going on our advertising business.

Got it. And just lastly for me, you guys did some restructuring within the quarter. Have we already seen a full quarter’s worth of savings there or should we expect the Q1 expense rate to step down a little bit?

Yes, I think in general, in my remarks for the years, sales and marketing is – we are expecting more from there as well. But from a quarterly perspective, it will be felt a little bit more in Q1 than it was in Q4.

Got it. Congratulations on a strong quarter.

Good. Thank you.

Our next question comes from Nandan Amladi from Deutsche Bank. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. So Gene, in your prepared remarks, you talked about how consumer generation content, I think contributed 33% of bookings from ‘15 a year ago. What are your expectations for this year just more broadly for new products contributing to bookings rather than to the core ratings and reviews, which also I guess last year didn’t have much bookings growth? So if you look ahead, what sort of expectations do you have?

Right. Yes, I mean, ratings and reviews has been a tough bookings environment for us, mostly due to ASPs. We continue to see a lot of transactions, which is good. There is lots of demand for what we do. But the ASP market for – the ASP situation has been fairly tough. The number actually, Nandan, was 23% for FY ‘16, up from 15%. And that’s excluding a product that we discontinued in February of this year, calendar year called BV Local. The news on our mix is that North America is way ahead of that number. And Europe is far behind on that 23%. So, we have an opportunity on – to get Europe to a much healthier place and a plan in place to do so. And in North America, I am pretty pleased, to be honest with you, I think we are doing a good job of representing our full portfolio. I think the product that we still have work to do to get more penetration on with CGC is what we call Spotlight. It’s turning out to be a fairly important product for us. It’s also the deal sizes are fairly large, but it is in the area of SEO, which is a new area for us, but one that I think we are ramping well. We have added resources to our SEO bench, and the clients that are on Spotlights have seen some pretty impressive results. Again, Spotlights is designed to allow our clients review content and other content to perform stronger in search engine optimization arena. So generally speaking, I am happy with the new products. Obviously, I have got more plans in place. So, we continue to worry about how do we continue to scale our portfolio in a scalable way? But now that we have a critical mass of data, I think some of the SaaS offerings that we are looking at for the second half of the year open up even a brighter SaaS portfolio for our bookings growth. So right now, we feel pretty good about how we are positioned.

Thank you.

Our next question comes from Jeff Houston from Northland Securities. Please go ahead.

Hi, guys. Thanks for taking my questions. Jim, I was hoping you could – it sounds like a lot of the upside at least on the – for revenue in the quarter came from a few one-time items. Could you – you talked about it briefly in your prepared remarks, but can you elaborate a bit more on those? I think you said it was $1.6 million that drove some of the upside, just breakdown a bit of what that was.

Sure. About $900,000, that was an out-of-period revenue. We had some errors in the timing of a rev rec and where the services was performed and the cash was collected and it was getting hung up in deferred. That was $900,000. Another 600 – and it’s clearly nonrecurring. Another $600,000 was from – basically better operating process. We have been working on that and certainly it’s shown up in bad debt expense – favorable bad debt expense this year. But when we have revenue on hold for nonpayment, if they don’t pay us, if they are more 90 days past due, we put it on hold. And of course, if a client does not renew on a timely basis, then we put that on hold until we get a new contract in place. Both those numbers came down in Q4 basically releasing about $600,000 in revenue. That’s a little bit more – that’s more than usual and that happened in Q4, but that’s a result of our processes just continue to get better internally.

Great. And then I guess shifting over to the number of targetable shoppers, could you provide some more color? I think you said before, you are looking at your – how many of your customers currently share their data – the rights to share their data. How should we think about that? How it’s – it’s clearly at a place where you can monetize it at this point But how should we look at that progressing as we go through your fiscal ‘17 and the targetable shopper number that you provided should – what are you expecting in that to grow at in fiscal ‘17?

Yes. I mean, the way to look at the targetable shopper, we have a couple of numbers we throw out. One is 700 million shopping devices. Those are actually your laptop, your phone, your iPad, what have you. So you could have multiple devices per individual. And then we have the 100 million targetable shoppers. These are individuals, right? And so I think the best way – I mean – to give you what I think is going to happen in ‘17 is kind of hard at this point. I think the most important thing is we have reached critical mass. We do expect the number to go higher. My understanding is the number at Amazon is about 180 million, which would be the only comp I could give you. So, I think we are in pretty good shape. I think our focus now is to add shoppers in the European arena. And that’s going to be a big part of ‘17. We are going to continue as we renew clients. We are going to continue to add shopper data rights on our – in the U.S., we are going to try to – we are going to push ahead on data rights in Europe. But I am not as worried about that total number now as I am about getting the innovation around those – that data asset right, meaning making sure our shopper advertising remains compelling and some of the new SaaS offerings that we are talking about later on this year. So, a little bit of a shift from data rights acquisition into execution on that data rights. It’s everything from selling to innovating and making sure we make that asset as valuable as we know it is.

Got it. Alright, thank you.

Our next question comes from Stephen Ju from Credit Suisse. Please go ahead.

Hi, guys. This is Chris on for Stephen. On the shopper advertising piece, can you walk us – me through mechanically, how you guys are selling your ad inventory to brands right now?

I mean, we are – we walk into the brand and we basically can quickly show the brand how effectively they are competing and who are they competing against based on who is reading what content about each brand? And then we devise what is the segment that they want to go after. Maybe they want to go after those that are not looking at their brand and only looking at the competition or those that are perhaps looking at two or three brands. We devise that segment and conceptually saying, I want to talk – I want to be – I want to put an advertising campaign in front of someone who has looked at my reviews or competition’s reviews in the last x days, right? And then we execute an advertising campaign. The creative – we know the creatives that have consumer-generated content in them perform even better than just kind of standard creative. But once a creative is done, we execute and we buy inventory on the web just like any other advertising ad tech play – ad tech company would. So, there is nothing magical about how our inventory works. The magic is about how we target shoppers that are in market based on certain qualifications.

Okay. Thanks, guys.

[Operator Instructions] And our next question comes from Ilya Grozovsky from National Securities. Please go ahead.

Thanks. I just had a clarification. I don’t think you guys mentioned the client retention rate in the quarter, what was the percentage?

Yes, it was 95.7%, I believe. That’s the best quarter we have had all year.

Perfect. Okay, thanks guys.

And if there are no further questions, I would like to turn the floor back over to management for any closing remarks.

Okay, thank you all very much. A reminder of our October 6 Investor and Analyst Day and look forward to seeing you all there. So thank you, again.

This concludes today’s teleconference. Thank you for your participation. You may disconnect your lines at this time.