Hello, and welcome to the Q4 2018 Franklin Covey Earnings Conference Call. My name is Misha, I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the meeting over to your host Derek Hatch, Corporate Controller. Derek Hatch, you may begin.

Thank you, Myesha. Good afternoon, ladies and gentlemen. On behalf of Franklin Covey I would like to welcome you to our fourth quarter and full fiscal year earnings call this afternoon. Before we begin I would like to remind everyone that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management's current expectations and are subject to various risks and uncertainties including but not limited to the ability of the company to stabilize and grow revenues, the acceptance of and renewal rates for the All Access Pass and other subscriptions, the ability of the company to hire productive sales professionals, general economic conditions, competition in the company's targeted marketplace, market acceptance of new products and services and marketing strategies, changes in the company's market share, changes in the size of the overall market for the company's product, changes in training and spending policies of the company's clients and other factors identified and discussed in the company's most recent annual report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. Many of these conditions are beyond our control or influence, any one of which may cause future results to differ materially from the company's current expectations. And there can be no assurance that the company's actual future performance will meet management's expectations. These forward-looking statements are based upon management's current expectations and we undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of today's presentation, except as required by law. With that out of the way, we would like to turn the time over to Mr. Bob Whitman our Chairman and Chief Executive Officer. Bob?

Thanks, Derek. Good afternoon, everyone. We really appreciate you joining us today. This is the day I've been waiting for, for 3 years to be able to tell you that as a result of the continued and accelerating growth of All Access Pass and the resultant growth in the enterprise division which, as you know, makes up about 80% of our total revenue. We have now crossed the bridge in our business model transformation for the enterprise division and therefore for the company. If you've seen our press release you know that we finished strong, had a strong year and had a lot of good news. We had a particularly strong fourth quarter and year in the enterprise division which is really hitting its stride. But before I go into detail on our results, let me first just step back and share some perspective. 3 years ago we set out on this journey, we changed our accounting, disrupted the enterprise divisions prior attractive business model, we invested millions of dollars in new content, in new solutions, in new services, new portals, new implementation specialists and even a new ERP system to handle our expected growth and we did more too. And now we're really pleased to be really right where we expected to be. We are now climbing up a new mountain where we see tremendous growth and opportunity, we're really becoming a new kind of company, a company that will have tens of millions of dollars in recurring high margin subscription revenue, a company which can be the leader in the most lucrative and valuable strategic space in our industry. We have thousands of loyal clients for life and a company that will have hundreds of salespeople providing broad reach and deep market penetration. We also expect to be…

Thanks, Bob. Good afternoon, everyone. We are excited about our future. As Bob discussed, we expect net sales to grow high single digit in fiscal 2019 and expect it between 45% and 50% of incremental revenue will flow through to increases in adjusted EBITDA. Our FY2019 guidance is therefore, as you can see on Slide 20, and as Bob talked about, the adjusted EBITDA will increase from $11.9 million to a range of $18 million to $22 million in FY2019. The sum of adjusted EBITDA plus the change in deferred revenue on our balance sheet will increase from $23.3 million in FY2018 to a range of $30 million to $34 million in FY2019 and that net cash generated, as we defined it in the appendix, will increase from $15 million last year to a range of $18 million to $22 million this year. Now this guidance does not reflect the impact for the new revenue recognition Standard 606. We will of course report the exact impact of the adoption of that standard in our next quarter filings but for now, let me just say that we do not expect a material impact from the adoption of 606. And we expect that the immaterial impact will be slightly positive rather than slightly negative. So we expect a fairly insignificant impact from the adoption of 606. Now first quarter. Despite our investments in new client partners and new content that Bob talked about and the revenue drag of approximately $800,000 in Q1 from the expiration of the foundation contract in the education division, we still expect adjusted EBITDA to grow in Q1 by up to $800,000 to a range of $600,000 to $1.4 million. So as always, we've included some schedules in the appendix that give you the additional information that you need to complete your analysis of the company we think and please review that information along the filings that we'll make next week. So thank you, Bob.

Thanks, Steve. We had a beautiful slide on Page 21 but on behalf of all of us, I think everyone really do want to thank you again for taking this journey with us over the past few years and for your continued support and enthusiasm even as we get across the bridge and start to climb up this -- what we think is a very exciting mountain for this year and beyond. We look forward to bringing you ongoing good news and we'll try to report on these exact same metrics every quarter so you can follow and kind of follow the breadcrumbs up the mountain with us and we of course are excited about solving these -- the most valuable problem in the industry of achieving institutional behavioral and cultural change for our customers the way no other company can, so thanks very much and we'll now open it for questions.

[Operator Instructions] Our first question is from Alex Paris with Barrington Research. Please go ahead. Your line is now open.

This is Chris Howe sitting in for Alex. Yes, I was just looking at Slide 9 and thinking about some of your comments around the annual revenue retention that continues to exceed 90% and the great stickiness you're seeing here. When it comes more specifically to these services attachment rates at 44%, what are the keys to driving this attachment rate higher and as you look to these next few years and the targets that you've set, how do you see that attachment rate progressing as you reach your goals?

I'm going to turn that to Paul Walker, as you know heads the enterprise division.

Hey, everybody. So it might be helpful just to take a quick step back on that. So the services that we sell and deliver to passholders fall under the following categories; the bulk of the services that we deliver are onsite training to clients that are implementing our solutions so they'll hire a Franklin Covey training consultant to do that delivery for them. Executive and impact journey coaching which was, when we acquired Robert Gregory it gave us the capability to do that. A third category is we'll occasionally customize content for clients for their specific need if they have a large initiative, they want it branded for their company in that particular initiative. We have services that we provide in the form of administering their implementation, doing some of the logistics for them and then we have services to help scale up and ramp-up internal client teachers or facilitators. And so those five service areas that we're talking about here and that's what's steadily growing and the strategy to grow the reason it's growing and the reason that we think those services will continue to grow as a percentage of over All Access Pass revenue, are really two reasons. One, as you know, we pair every passholder with an implementation specialist and the role of that implementation specialist is to get involved post-sale and to help the client get maximum usage from their pass and it's often in those discussions that we uncover with the client an opportunity where we can bring services to them that will help them get more out of their pass. And so as we run that process and we just get further down this path of now year two, year three, soon to be year four where our implementation specialists and our client partners are in there uncovering additional jobs, to which we can help the client with because they have access to all of our content already by virtue of having the pass, we just continue to uncover more opportunities to drive services and we really think that that will continue on its growth trajectory like it has. I don't know if that's…

And as far as the sales staff that's currently in place, the capacity is already there to reach your long-term targets, or how do you anticipate adding salespeople over the next few years?

Yes, yes, the capacity is there. As Bob mentioned a few minutes ago, we've actually hired a fair number here in the last couple of years and it's muted in the numbers that you see because we've also turned over about 25 that we had hired previously before the launch of All Access Pass and so we expect to add at least 20 this year. We've already added seven, just in the first two months of this fiscal year, and we've also talked on our previous call about some of the restructuring that we did within our sales force and our sales leadership to lay the groundwork for us to be able to then add significant numbers of client partners, not just this year but in the years to come.

There's big -- yes, just one other thought there, if you add 20 new client partners a year for five years, the incremental revenue just from those is a very big number; it's well over $50 million and only the first class would be ramped. We also have about 40% of our sales force still in ramp-up. So we've got the opportunity, one, to use accelerated ramp now of the salespeople we already have hired who are somewhere in that five-year ramp together with the new and over the last couple of years as we've been hiring, but now that we're firm on the All Access Pass we know it all works, we're now stepping up the hiring.

Our next question is Jeff Martin with Roth Capital Partners. Please go ahead. Your line is now open.

Bob, could you just speak to the competitive dynamic and how it's changed as you've transitioned to this new model? I would imagine it's somewhat disruptive to the industry but just want to hear from you what your thoughts are?

Yes, I think there are things happening kind of in 2 areas. If you're a traditional training company offering a single course in a single modality at the same price you can get for, per person, for the entire All Access Pass, I think it's a tough world and that's generally what is our -- our industry is made up of a lot of small single modality people and they have great content but I think it's a hard value proposition to compete against. If you're a larger one of those and have an invested like we have, $150 million in content and modalities, etcetera, it's a big investment and what we're hearing from salespeople who have come from many of those people to us, I think those organizations are not choosing to make those investments. And so I think the traditional industry, I think it's quite disruptive. You've got also other competitors who are particularly in this do it yourself, learner driven content that's all video-based that are doing well, I mean it's a big need at the bottom of that pyramid and I think they're doing well. That's further eroding, I think, the competitive position of traditional people because their platforms are compelling; they're not moving in to try to get large scale behavioral change but they are trying to provide me with the ability to drive my own skills. So I think there's a movement in the industry where even -- 95% of all of the revenue in the industry is driven by these traditional small people, one-off shops, these $2 million and $3 million and $7 million shops they have good people and good content. I think the world is a hard one for them and will get harder with -- between what we're doing and what some of these other technology based delivery companies are doing Jeff. Is that response…

How would you characterize and what level is -- how do you define and what level is your annual recurring revenue run rate right now?

So again, this exact definition -- we'll give you the -- so we have about between -- we have both the All Access Pass and then we also have our subscriptions in the education business which are substantial. And so our total deferred revenue just for a second, looking at that, is between the 2 including billed and unbilled now around $75 million which is growing by $50 million over the last couple of years. So the recurring revenue is probably annually on the contractual side is probably in the range of somewhere around $70 million a year is the annual recurring revenue as it's defined typically. We haven't provided that definition, probably should, because that's a good one to track, we do track it internally but it's about that number.

Okay, and that excludes the licensing…

Yes, that excludes -- yes, the other $12 million, $15 million we have between licenses and the enterprise and education division, the different kinds of contractually recurring revenue that comes in every year too. So I mean, depending on how you count that, it's a bigger number.

Okay, and then I didn't see it, a total invoice, amount number tied to the All Access Pass and attached services, what -- do you have that number handy for the quarter and for the year?

Yes.

So it's just on pass and pass related for the year.

So I mean, for All Access Pass, we have the number, it's $66 million. So total pass and pass related sales were $66.8 million for the year, Jeff, for All Access Pass. And the education division subscription sales were about $26 million, I think. Steve, you can correct me on that last one, I'm not certain on that, but that's approximately it and Jeff when we talk after we'll give you the exact numbers.

And then my final question ties to the incremental investment in fiscal 2019 versus the $10 million in 2018. I wanted to get some clarity around how much of that $10 million investment from 2018 carries over on an ongoing basis. I would assume it's a relatively good percentage of that but just was curious to get your sense?

Yes so -- when Bob in his script was talking about we had an incremental investment of $10 million and then it was going to be an add-on incremental investment of $2 million, that's what he was talking about is that that specific -- the expenses that had the increase of $10 million, some of those are fixed, some of those are variable so that the increase next year in all of those expenses would be $2 million versus the $10 million increase that we had this year. And that's even…

You're asking you've got a great nuance as part of your question Jeff which is did we start some of these investments mid-year and on an annualized basis it will be more, the answer of course is yes, but that's -- those numbers that we talked about are kind of the year-over-year change in those categories.

Annualization is included in the 2…

The estimate of $2 million increase versus $10 million, yes, that was a good way to ask it but that's -- that was a good way to answer it too.

Yes, well I was just thinking since like you had investments in the plural that I figured some of that might not recur every year. I was just curious if that $10 million investment is an ongoing annual expense.

Well, it is ongoing in terms -- those categories we continue to invest in but take an example, implementation specialists. When we were ramping up going from none to many, today we have 23 or so Paul, implementation specialists. That was an incremental investment over 2 years to increase by about $4 million but incrementally now that will be a couple per year and so you'll be adding a few hundred thousand a year. The big one was the investment necessary for the ERP system, that will actually go down, all of the costs associated with that. We'll continue to make investments in the portal etc., but it's just a lot of upfront was these big efforts with casts of dozens and dozens of people on it and now you've got dedicated teams who they're just on it and there's ongoing investments being made but it's not the same and that's why we said, that's a big opportunity for flow through in 2019 and beyond is that we can keep the margins high and keep pertaining the revenue, there will be a lot of flow through from increased sales.

Our next question is from Tim McHugh with William Blair.

Just wanted to -- hey, how you doing? Can I ask about the contract signed number I guess, I guess specifically for the enterprise division? I apologize if you addressed this but I joined late. It seems like it's a seasonally important quarter.

So for the enterprise division and you'll see it for those who want to follow on Slide 26 Tim if you get access to that later or whatever, the invoiced amount in the enterprise division for the year increased by $15 million, $14.8 million which was 9.8%. So you -- and that was -- and it was 12% in the fourth quarter because we had been hovering kind of in the high 8's collectively through the first 3 quarters and moved it up almost to 10% million for the year on invoiced amounts and it was 12% in the fourth quarter. In the education division, invoiced amounts were flat when excluding -- when you take into account for the year, when you take out the big foundation contract that didn't repeat, otherwise it was up some but it -- the invoiced amounts that were relatively flat for the year up about 5% for the education division and the fourth quarter. Steve?

What about -- I was trying to look at, I guess, the contract signed piece of that; reconcile those two because it looks like it was flat year-over-year in the enterprise division.

Okay, so -- so it went from -- the contract signed and invoiced amount went from $151 million to $166 million, an increase of $14.8 million. We also on contract signed increased the multiyear unbilled deferred so in total between the two years, you -- in terms of contracts signed including multiyear, it went up from $166 million to $173 million but with a focus on invoiced amounts this year. I mean…

Tim -- Tim I think also as you can see on this slide, even though the change in the unbilled deferred revenue that comes into the contact signed went down. That's still a really good story because in Q4 of FY2017, we were in a position that we had hardly ever sold multiyear agreements. So we went out with a fairly significant push in Q4 of 2017 and signed up a significant number of -- entered a significant number of multiyear agreements. So much that we even though that the amount that we would sign next year might be significantly different than this. So the fact that we had $14.7 million increase in 2017 and then $7 million in 2018 is really…

Well, replacing all of the runoff…

Yes, it's an indication that our multiyear contracting is going really well.

Can I ask on the capitalized curriculum development, it looks like it's -- I guess I would have thought last year was kind of a big year for you guys. What's the big projects as we go forward to this next year that, I guess, you guys are focused on underlying…

You ask Adam Merrill who heads our innovation group just to respond. Adam?

Yes, we -- we're excited very much about what we've done and launched this year. In the coming year, there are two larger efforts that we're making that will result in new products. One is around the topic of unconscious bias and releasing the talent of your team. And later on we'll also have one about execution and accountability which we think will not only increase the execution practice but will turbo charge everything else we're doing. We're also spending to localize the previous projects as well to make sure that we get that in 15 languages and moving forward.

Because we've added four courses this last year that were not in the original groups. So in the 16 languages we have four new courses and then we're adding another three languages this year as well.

Yes, we're consistently adding those new things to the pass and they're being very well received.

And then last, maybe two kind of numbers, one I guess one, I heard the EBITDA guidance or commentary for Q1 did -- I apologize if I missed it but did you say anything about the pace of revenue growth and secondly, is that kind of the severance ERP and other bucket are there still ERP costs and where are you at with, I guess when would that project kind of wrap up for you guys?

Yes, the ERP project is completed.

And the good news it's working.

That's the best news.

That's a good thing. So the first quarter we didn't give guidance on revenue, we just said EBITDA we thought would be up by as much as $800,000 in the first quarter. I think what we should look for is probably flattish revenue in education because of the decline and the drag of the carry-over drag, you may not have been on Tim for that but we said there would be about an $800,000 drag in the first quarter on the education division relating just to the spillover effect of that contract in the enterprise division, we'll be up in the high single digit range, 79% contracted range for the enterprise division of the first quarter. So it will get off to a good strong start; education, as you know, mostly doesn't contract until a little later in the year. So you're kind of there, you're taking in your deferred revenue and not adding a lot of new revenue but hopefully signing up some contracts. Going back also just one more thing on the multiyear, I think for us, as Steve said, we focused last year, we wanted to kind of get the sales force going on this whole idea of getting these multiyear and extended term contracts going and of course we did so, we signed $16 million worth in the fourth quarter. We recognize also we did some of that at the expense of invoice sales and so we decided this year, look, let's just have a steady thing that goes on quarter after quarter, no enormous push on any one quarter trying to get it going. It's increasing to now we're about 20 some odd percent, Paul…

Yes, approaching the mid-20% range, yes.

Of contracts being signed are multiyear and because that now is launched, we said, look, if we can, on the unbilled deferred, what we want to do is sign contracts that makes sense and there's no push on it but the fact that we're able to replace the runoff and add 30% or 40% to the thing, we felt like that was a good thing that's probably in the sustainable range, let's focus on invoiced and then on renewal get them added to. So you've got both numbers but we're glad that the invoice side finally came up into the -- if you round up from 9.8% to 10%, well at least maybe next quarter you can, and say we got to double digits again. Thanks.

Our next question is from Marco Rodriguez with Stonegate Capital Markets. Please go ahead. Your line is now open.

I was wondering if you could talk a little bit about guidance real quick here just on the revenue side. I'm not sure if I heard you correctly but I thought I heard that perhaps you were a little bit conservative on the growth rate going forward into 2019. If you can kind of confirm that first and then also if maybe you can talk a little bit about the pluses and minuses or potential growth factors and then the risks that you're kind of thinking about when you put together your 2019 guidance.

Sure. First of all, we didn't give guidance on revenue per se in the -- what we basically said was, hey, we've said many times we thought we could maintain long-term growth in the high single digits. What we said, we said I think was in the range of 7% to 9% that we would drive really accelerated growth in EBITDA and cash flow and that's not suggesting that our sales force doesn't have revenue goals that exceed 7% to 9% or our leaders or us. But we didn't give guidance on that specifically because our -- our focus was really -- we believe now that we can grow EBITDA and cash flow at 40%, 35%, compounded for a long time this year more, next year more, and so focusing on that, we're saying -- I think what we're trying to say is, and I didn't say it very well, is even if revenue only grew in the 7% to 9% range, we think we can meet the targets, the EBITDA and cash flow targets that we've laid out. Obviously if we grow revenue a little bit higher, and you just saw the enterprise division did, in this last year if we were able to do that, then obviously the flow through would be incrementally even higher still. So we didn't give revenue guidance but we did give quite a bit of guidance on EBITDA, EBITDA plus change in differed and net cash generated all of which we feel good about. So those are the metrics that we're going to try to focus on, on guidance and just tell you that at 7% to 9% you can hit them but that doesn't mean that's our revenue goal.

Okay, so to be clear, so the 7% to 9%, that's just a theoretical number you're talking about, not necessarily what you're projecting or looking to target for fiscal 2019?

I think that's fair to say. I mean, you were saying -- we said it in the meantime that we think we can grow 7% to 9% for a long time and so that's what we're simply saying is we think we will grow revenue by at least 7% to 9% this year.

Marco, if you -- if you do the simple math and take -- how -- the way we ended this year and add 7% to 9% revenue growth and take 45% to 50% flow through that Bob talked about, you'll get to our -- essentially our adjusted EBITDA guidance.

Okay, kind of -- I'm sorry?

Does that make sense? Does that make sense?

Kind of shifting gears here, just talking about the business model itself and the fact that obviously you're generating a lot more revenues from a recurring nature, just trying to get a better sense as far as when you think you start to see the quarterly cadence kind of flatten out a little bit more?

On the subscription sales?

Well, in general, I mean one of the things in the past you've always had is just this big hockey stick in Q4 and granted you still kind of have a little bit here in fiscal 2018. Just kind of wondering when that's going to kind of level off?

In the enterprise decision I think it's already leveling because of the high All Access Pass sales, we still have -- whatever we have left from the legacy facilitator business does tend to happen in the fourth quarter because it's getting less and the subscription is getting larger. Our revenue is flattening out substantially in the enterprise. Education has continued to be -- have more than half of their revenues come in the fourth quarter but there's actually an effort there in which Sean has been carrying out, which is to start anytime -- we've kind of have the idea that hey, you have to implement this stuff at least in North America when it's summer and they'd come through -- we've all been working together on it but they've done a great job of coming through with a new idea of start anytime and figure out how to do that. And so with the idea of doing exactly what you said. So I think enterprise is going to flatten out. It already is flatter and it's going to get flatter and flatter as we move forward so it will be -- I think the second quarter for us will always be a little light just because of the holidays but otherwise I think you'll start to see that. It already is converging. Education I think over the next 3 or 4 years with a combination of this start anytime with our divisional model which is more of a light -- I mean, where they buy kind of a pass or a district, I should say district, will buy effectively an All Access Pass but it's a Leader In Me membership that will be amortized. Those things were reflected in the fourth quarter, the education divisions subscription revenue grew 26% driven by those kinds of things. And so I think it will probably take us a couple of years before it's -- before education is substantially more flat but I think enterprise already is and will continue to be. Will continue to flatten I should say.

And the last question, just -- I don't know if I missed this on the call but can you provide a little bit of an update here on the international licenses just kind of where you are in the process of transitioning them over to the All Access Pass model?

You bet. Paul?

So we talked in the past about the biggest barrier for them was getting the portal up and running and available in all languages, that's now done and so that work has been done that the -- all of our content now is in the -- with the exception of the 4 -- the 4 new solutions we launched, what we're working on is now all localized and translated. They're off and running. We had a big partners conference to kick off the year in September, did additional training with them and so they are underway selling the All Access Pass and have sold 40 or so passes so far and we continue to -- we want to run the same process there that we've run in our English speaking direct operations and when we say international licensee partners, Japan and China would be in the same camp even though they're direct operations. They're on a similar time schedule with our licensee partners all really running now fully on All Access Pass.

Our next question is from Samir Patel with Askeladden Capital.

So I was going to ask Paul about multiyear but you already talked about that. Are you still having the Investor Day on January 17?

We are and we'll be starting to get the information out about it but yes, we're having it on the 17th. The thought is to -- we'll have a dinner the night before for those who want to come in early and we'll get -- we'll have a schedule out here in the coming weeks.

Okay, cool. And since I somehow managed to beat Patrick in the queue, I will steal his usual question and talk about buybacks a little bit. More -- you know more a comment than a question guys, but look -- so just using -- and I know 8% is conservative, right, but just using 8% as the revenue growth number, you run a DCF at a fair value on your stock is something like $45.00, $46.00 a share, right? Maybe it's $50.00-plus if you do well, maybe it's high $30.00's if you don't, but the market's brain damaged from pricing your stock at $23.00 a share. And then I look at your balance sheet and you've got less than half a turn of net debt to EBITDA and considering all of the visibility in your business model, I don't think there's any incremental risk really in taking out another turn or two of EBITDA, right? And so if you did that, you'd be able to buy back 20% of the -- 20% of the stock is basically half of its fair value. So I'm just curious if you -- I'm leverage versed, I know you guys are too but I'm curious if you would be willing to devote kind of more than your excess cash generated to repurchasing stock at these levels?

Yes. Yes, we would.

Cool. We'll do it, that's all I have to say is go do that, I don't care if it's a tender or open market or whatever, but just do it.

Yes, we would. I mean we'll be conservative on the debt but you just outlined exactly the case and we have the liquidity and we're headed the right direction. We have capacity and can add to it so we agree with exactly your analysis. Although you said it much better than we would have said it.

And our next question is from Patrick Retzer with Retzer Capital Management. Please go ahead. Your line is now open.

So I'm particularly excited about your outlook for the adjusted EBITDA growing from $11.9 million to $36 million by fiscal year 2021 and I -- I the past you've had slides that address this but I'm won -- I'm hoping that you would indulge me and just in broad strokes talk about why you think you'll achieve that with the earnings leverage, the CapEx declining as a percentage of revenue et cetera?

Yes, so I think really what's driving it, and that's what I think the formula that Steve talked about. If you take 7% to 9% growth, actually that math, you take the two-- if you just take the range of 7% to 9% growth and think those are the outside boundaries on a 2x2 matrix and say the flow through percentage of 45% to 50% for two years and then 40% in the third year, that's the math and so what's behind it, those five drivers I talked about, but really I think the things that's driving it is that you've got on the revenue side of course, to help you do that, you've got the ramp up of existing salespeople, the productivity of -- the productivity of the people who are ramped-up, the ramp-up of those we've already hired and the hiring of new who will drive new pass sales that then tend to repeat at -- on the subscription side at very high, above 90% levels and then you're adding services onto the top of that. And so when you make a sale, it can -- it stays there and that's one thing driving it. The decline in the traditional onsite facilitators is now moderated substantially. It's so low that it's not very meaningful so you don't have the drag there, and so if you ramp up the sales people, keep more than 100% of the revenue from between your retention and add-on services, have very high margins and commissions, commissions that you pay the salespeople on the incremental revenue obviously your contribution on incremental revenue you generate is very high. And so even with investments, ongoing investments and content I mean, we're not saying that we're going to reduce the investment level, we're just saying the incremental investments are really small, we're still making really substantial investments and even with that we think there's, like you say, there's very high flow through because you've got less growth in investments plus all of this leverage in the model that which is the reason why we were willing to disrupt the old model which is actually pretty good and go for this one is that we think there's just a lot more leverage in this model.

The only fault I can find is your first slide that shows the climber still over the abyss and I would argue…

I started a month ago Pat, we were still over the abyss and now we're across.

A few months ago you never were still over the abyss. Congratulations and I'm looking forward to the ride.

Thank you. We have no further questions at this time. I'd like to hand it back to Bob for closing remarks.

Great. Well, again, we just wanted to thank everyone for your tremendous support and we hope today was helpful and trying to get in light of the fact that it's been opaque during the transition with our accounting and everything else, now that we feel like we really have strength of understanding of what's going on and that's real and has now got three years behind it accelerating, we feel like today is probably a good time to give increased visibility into what we see for the future. So we appreciate this and we're looking forward to a good year and look forward to talking to you next quarter. Thanks so much.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you all for participating. You may now disconnect.