SPS Commerce, Inc. (SPSC) Q3 2020 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. And thank you for standing by. Welcome to the SPS Commerce Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. After the speaker presentation there will be a question-and answer session. [Operator Instructions] I would now like to hand the conference over to your first speaker for today, Ms. Irmina Blaszczyk. Thank you, please go ahead.

Thank you. Good afternoon, everyone and thank you for joining us on SPS Commerce Third Quarter 2020 Conference Call. We will make certain statements and projections today, including with respect to our expected financial results, go-to-market strategy and efforts designed to increase our traction and penetration with retailers and other customers. These statements and projections are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. We note in particular that uncertainty regarding the impact of COVID-19 pandemic on our performance could cause actual results to differ materially from our projections. Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Please refer to our SEC filings, specifically our Form 10-K, as well as our financial results press release we furnished via Form 8-K to the SEC earlier today for a more detailed description of the risk factors that may affect our results. These documents are available at our website spscommerce.com, and at the SEC's website, sec.gov. In addition, we are providing a historical datasheet for easy reference on our Investor Relations section of our website spscommerce.com. During our call today, we will discuss adjusted EBITDA financial measures and non-GAAP earnings per share. In our press release and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP and adjusted EBITDA measures, including reconciliations of these measures with comparable GAAP measures. And with that, I will turn the call over to Archie.

Thanks, Irmina and welcome, everyone. We delivered a strong third quarter 2020, as retail activity continues to shift to ecommerce. This trend in consumer behavior is fast-track in the pace of EDI adoption among trading partners resulting in an acceleration in demand for order fulfillment automation. For the third quarter, revenue grew 12% to $79.5 million. Recurring revenue grew 13% and adjusted EBITDA grew 29% to $23.2 million. Supply chain disruptions caused by the pandemic earlier this year and risks of future outbreaks are driving a long-lasting impact on retail dynamics. In addition, with the holiday season on the corner, retailers are expanding their supplier networks and asking trading partners to implement or improve ecommerce capabilities. According to IBM’s annual retail index, the pandemic has accelerated the trend to ecommerce by nearly five years. But our indications, consumers will embrace via online, pickup in store, curbside pickup or drop ship as preferred shopping methods this season. Changing consumers shopping as preferences make fulfilling orders more complex for all trading partners, including retailers, distributors, suppliers and logistics companies. SPS’s expertise in automating order fulfillment for B2B relationships includes drop shipping. Currently, SPS has relationships with over 600 retailers to fulfil drop ship orders through our network. 2/3rds of these retailers also send order types through our network to suppliers. In total, we have more than 12,000 drop ship connections. SPS is committed to supporting our customers and optimizing their EDI systems across various markets. We recently announced a market leading Quickbooks EDI solution. SPS is the only EDI Company to partner with Right Networks, the leading provider of cloud hosting for Quickbooks Desktop Enterprise to deliver a turnkey product that makes EDI easier for 1000s of Quickbook customers. Combined with our expertise and partnerships with the most popular integration solutions such as Oracle NetSuite, SAP, Sage and Acumatica. SPS has a leadership position in fulfilment system automation across a significant portion of the market with exposure across all verticals. Our retail brands, parent company to two of the top five pet stores in North America recently partnered with SPS Commerce to create one consolidated EDI system that will handle all EDI transactions for pet value in that supermarket. The use of EDI will provide increased order visibility, inventory planning and a more efficient invoice reconciliation process. Coborn's a growing retail company runs more than 120 grocery, convenience, liquor and other retail operations across the Midwest. As expansion in growth result in operational complexities, Coborn’s engaged with SPS Commerce to implement electronic order fulfilment across their network of vendors to increase efficiency and accuracy, expedite payment terms and increased speed to show. Increasing order volumes also profited Liberty Sweets a chocolate producer to implement order automation to keep up with the demand. The company’s business more than doubled in two years and their products can now be found at a growing number of national retailers and grocers. With SPSs fulfilment with Quickbooks, Louis was able to scale without needing to update or swap out the current systems. They can also modify the solution as their logistics strategy changes. Over the past several quarters, we have seen an acceleration in demand for EDI. The SPS Commerce full service EDI solution integrates with any system and software to enhance automation, speed up processes and improve data analysis. SPS fulfilment supports 3PLs, shipping solutions like ShipStation and offers carrier service for companies who book shipments themselves. We connect our customers to 10s of 1000s of retailers and distributors allowing them to scale their business quickly and cost effectively. In summary, trading partners across the retail supply chain continue to rely on SPS Commerce to streamline their order fulfilment. As consumer preferences for omnichannel shopping accelerate, we are well-positioned to help our customers increase efficiency and automation in a rapidly changing environment. I’ll now turn it over to Kim to discuss our financial results.

Thanks, Archie. We delivered a strong third quarter of 2020. Revenue was $79.5 million, a 12% increase over Q3 of last year and represented our 79th consecutive quarter of revenue growth. Recurring revenue this quarter grew 13% year-over-year driven by strong momentum in fulfilment which grew 15% year-over-year. The total number of recurring revenue customers increased 5% year-over-year to approximately 32,000. For Q3, while it’s share was up 8% year-over-year at approximately 9500. For the quarter, adjusted EBITDA was $23.2 million, a 29% increase compared to Q3 of last year. We ended the quarter with total cash in investments of approximately $263 million. Now, turning to guidance. For the fourth quarter of 2020, we expect the revenue to be in the range of $80 million to $80.5 million. We expect adjusted EBITDA to be in the range of $21 million to $21.5 million. We expect fully diluted earnings per share to be approximately $0.20 to $0.21 with fully dilutive weighted average shares outstanding of approximately 36.5 million shares. We expect non-GAAP diluted earnings per share to be approximately $0.33 to $0.34 with stock-based compensation expense of approximately $5.1 million. Depreciation expense of approximately $3.5 million and amortization expense of approximately $1.4 million. We continue to monitor the uncertainty around the duration and magnitude of the pandemic and the impact that a second wave if infections may have on economic activity. We’re also taking into account the possibility of continued pressure on retailers, prolonged store closures and bankruptcies all of which would negatively impact our business. For the remainder of the year, we expect to see continued softness in analytics, however we expect fulfilments remains strong. For the full-year, we expect revenue to be in the range of $309.3 million to $309.8 million representing approximately a 11% growth over 2019. We expect adjusted EBITDA to be in the range of $85 million to $85.5 million representing 22% to 23% growth over 2019. We expect fully diluted earnings per share to be approximately a $9 to a $10 with fully dilutive weighted average shares outstanding at approximately 36.2 million shares. We expect non-GAAP diluted earnings per share to be approximately a $1.48 to a $1.49 with stock-based compensation expense of approximately $19.3 million. Depreciation expense of approximately $13 million, and amortization expense of approximately $5.4 million. For the remainder of the year on a quarterly basis, investors should model a 30% effective tax rate calculated on GAAP pre-tax net earnings. For 2021, we’ll provide detailed guidance on our Q4 earnings conference call, however for modelling purposes we expect to deliver $93 million to $95 million in annual adjusted EBITDA in 2021. Given our history of strong operating leverage and the resilience of our staff’s business model, we remain confident in our ability to achieve our long-term adjusted EBITDA margin target of 35%. In summary, recent trends in retail have accelerated the pace of EDI adoption. We expect this trend to continue as retailers and suppliers adapt and embrace ecommerce, driving demand for our fulfilment solution. With that, I’d like to open the call for questions.

Thank you. [Operator Instructions] We now have our first question comes from the line of Matt Pfau from William Blair. Your line is now open.

Taking my question. So, when we entered the pandemic and you guys had your earnings call in April, it seems like that you could expect or that you were expecting perhaps somewhat of a negative impact from higher churn in bankruptcies to tier growth rate. And then, when you reported your second quarter results, it seems like maybe you were thinking that it was going to be more neutral from the growth perspective. But now the commentary kind of seems like it that COVID could ultimately be providing a tailwind to your growth for 2020. So, maybe you could just sort of walk us through how you are thinking on the impact from COVID on SPS Commerce has had over the past seven months.

Sure, Matt. So, there is different puts and takes. On the fulfillment side, we’ve seen an acceleration there. So, our fulfilment growth in Q3 was about approximately 15% year-over-year which is an increase from what that growth rate was in Q1 and Q2. A lot of the dynamics we’re seeing there are related to sort of that digital adoption that we’re seeing retailers need to take maybe in a faster manner than the otherwise would have with their suppliers. So, currently we’re seeing a positive as it relates on the fulfilment side and adoption. Analytics we’re actually seeing a slower growth rate there. For the quarter we’re about a 4% year-over-year growth rates on analytics, so that is an area that we have seen softness and we anticipate continuing to see softness on going forward. As it relates to bankruptcies and churn, we have not yet seen an increase there but we do think that that is too early to really know what is going to happen there. That is something that potentially worried, we’d see that in Q4, potentially that’s something after the holidays into 2021. Again, just a little too early to know. Going back to the 2008, 2009 time period, where there was difficult economy. We were impacted about 1% to 2% from churn and bankruptcies. So yes, what we’ve seen demonstrated coming through, it’s very positive as it relates to fulfilment. Softness in analytics and we have not had an impact if we see that as it relates to churn and bankruptcies.

Very helpful. That’s it from me, I’ll pass on. And thanks, Kim.

Thank you. Our next question comes from the line of Koji Ikeda from Oppenheimer. Your line is now open.

Hey Kim and Archie, thanks for taking my questions. Great quarter, congratulations. I wanted to ask you a question on community enabled net campaigns and it looks like it is a really nice quarter there on the net customer ads, was about 560. Is there anything particular to note there? And then, I guess looking out further, how is the pipeline for community enabled net programs looking for over the next six to 12 months?

Yes, I would say in general there the retail scene has done a really nice job. And on both selling new retail programs but also implementing in a tough environment. And so, we feel really good about the performance of that team. They’ve staid very focused, they’re really done a nice job executing. And we foresee that that’s going to continue to be strong and it’s one of the reasons why fulfillment has been so strong.

Thanks, Archie. And I got one follow-up for either you Archie or Kim. Kind of taking a step back here. It really seems like the results here in the third quarter point to the shift to digital commerce, it’s benefiting the business. And I think this is a follow-up to an earlier question from Matt. And just thinking about would that imply if the world went back to normal tomorrow, say with this retail stores opening back up fully, would that mean this would be a negative for SPS Commerce or is there something bigger going on here really with the way that the suppliers and retailers are thinking about their supply chains for the future?

Well, obviously the move to drop ship and that’s created some tailwinds. But I would say Koji in general, just the whole focus on making your supply chains efficient, hands-free automated is been a forefront. Just small things like retailers having to at the early days of touching packing slips. That was a big deal to get rid of that. People are working now from home. Well, guess what? If you’re mailing bills and you’re mailing purchase orders, that doesn’t work very well. So, I think there’s just an overall trend which we did see in tougher retail clients in 2008 and 2009 towards automating the supply chain which is a positive for fulfilment.

Thanks, Archie. Thanks for taking my question guys, congrats on the really great quarter.

Thank you, Koji.

Thank you. Our next question comes from the line of Scott Berg from Needham. Your line is now open.

Hi Archie and Kim, congrats on the good quarter. I just have two questions here. Archie what’s there with partner impact? Obviously, you talked about the tailwinds both you and Kim about on the drop ship and the digital new involvement side. And my guess is even with our concept but you like to talk about is clearly taking hope today. But within your partner eco system, what’s their impact in your business been like over the last two quarters as the pandemic has rolled out?

Well, actually Scott, that’s been a real positive surprise. I mean that’s I think in the April time period we were very concerned about ERP implementations what was going to happen there. That seems to have been moving along fairly well. Now, remember that many times we’re later in the implementation. So, it’s an indication of some of it is an indication of what happened pre-COVID. But that team has also executed very well and has not been a headwind to fulfilment whatsoever.

Got it, helpful. And then, from a follow-up perspective, Kim. I noticed in the quarter, you’re almost touching 70% gross margins again. I think 20 basis points or so away from it. But how should we think about gross margins over the next couple of years. 70%’s kind of the first time we’ve seen net levels since 2012. Do you think you can get the mid-70s as you gain the proper leverage to over the next couple of years or there is 80% opportunity? I think helping frame that now that you’re getting closer to 70% would be helpful. Thank you.

Sure, Scott. So, going back a few years ago, we were in more of that sort of mid’ish type 60’s range. And we believe longer-term when we get to adjusted EBITDA margin approximately 35%. We think those margin can be at least in the low-70s to get when we’ll add again that sort of mid-30% to 35% adjusted EBITDA margin. The one Kelly yesterday was bring to you which I do say any type of question comes up, with our business it’s always better to look at some of those measures on an annual basis not as much specific on a quarter. In some quarters for example you may see a little bit less on the sort of hiring versus another quarter as an example. In Q4, we will be adding customer success resources to meet the needs of our existing customers as well as future opportunity. So, again our expectation is we’ll continue to make improvements to gross margin until we get at least to that low-70s. But again, looking at it on sort of an annual lens it’s probably a better way to look at it versus the specific quarter.

Got it, quite helpful. Thanks and Kim, congrats to you on the great quarter.

Thank you. Our next question comes from the line of Joe Vruwink from Baird. Your line is now open.

Great, hello everyone. Kim, if I heard you correctly, to start the initial thinking for 2021 EBITDA, I think $93 million to $95 million would suggest something less than the typical 20% EBITDA growth. And I can appreciate at the end of next year is the long way out. So, probably makes sense to be a bit disciplined on planning. But are there any specific assumptions for high and that type of performance or any discreets maybe expensive that need to work back into the fold in 2021 that might specifically be driving that type of number?

Sure Joe, I appreciate the question. A couple of things to think about when we’re looking for next year. First of all we’re in a position this year while we’re actually we’ve actually nicely exceeded relative to what our EBITDA expectations are for the year. So, the implied guidance we just gave is in excess of 20% which is a typical average that we gave, so we’re a little bit higher closer of about a 22%. Apart of that, is because there are some spend that are not occurring this year because of the pandemic. Think of it as discretionary spend. Obviously, people are not travelling for the most part. Also, our attrition levels have been lower this year, which is great. Because we’ve been able to have our employees prolong there which is fabulous and therefore you can get more output and more efficiency. When we think forward to what we’re seeing currently and what our expectations are for next year, we are going to be adding resources particularly in the sales area and the customer success area, again making sure we’re meeting the needs of our existing customers as well as future customers. So, there will be an increase relative to our headcount in those two areas. And then our hope is hard to predict but hopefully at some point in 2021 I think we’ll be a little bit more back to normal. And that certainly to the level of pre-pandemic. But we would anticipate that at some point folks are back to being in the office, travelling, et cetera. Again not back to sort of historical levels but certainly more than what we are seeing in 2020. So, those are really the two things that we’ve taken into account and that maybe a little bit different than some other years as we think ahead to the annual 2021 EBITDA dollars.

Okay great, that’s helpful. And then, thinking about your revenue growth and the quarter and maybe just decomposing it since the wallet share contribution to growth. The acceleration there, does that perhaps serve as any sort of leading indicator or point of contrast if you compare the current environment to ’08, ’09. So, my thinking is that the fact that your existing in-network customers are really leaning on SPS more. Of course, that does then prevent the possibility of churn later on but it was certainly seem to maybe imply that the model is much more durable in other words maybe we don’t have to worry about the 100 basis points or 200 basis point kind of church potential. Because what you’re seeing today is indicative of an environment that ultimately your existing customers could use more of your solution. But and I don’t know if there is a way to contrast that with ’08 or ’09 but what kind of does the wallet share today tell you about maybe the next 12 months?

Sure. So, when you think about our fulfilment customers, they’re going to fall on a couple of different buckets. So, there is a group of those fulfilment customers that are using us, think of it more documents more activity with retailers to more volume of how they’re using that than historical. And some of those trends show up in the form of the increase in drop ship, the increase in ecommerce as an example. And so, we’re seeing those trends which were positive to a sub set of our customers and are translating into more revenue from those customers. There are however some customers that are in verticals or industries that are more challenged in light of the pandemic than other areas. And so, what is unknown at this point is what happened to some of those retailers or some of those suppliers as we go through sort of a holiday season and into 2021. So, again for those customers that are in sections of retail that are performing extremely well as well as sections where they’re needing to be more nimble in a more electronic way. We’re seeing a positive and some other sections, I just think it’s too early to know what could potentially be the outcome in higher bankruptcies or higher term.

Okay, thank you very much.

Thank you. Our next question comes from the line of Tom Roderick from Stifel. Your line is now open.

Hey Kim, hi Archie. Thanks for taking my questions. I like to offer congratulations. You clearly weathered this storm and come out stronger on the other side. And Archie, I think it’s been a long time since we heard you use the phrase acceleration as it relates to the demands of your retail partners. So, I’d love to hear a little bit more about that dynamic. And Koji asked a question kind of hitting on it but maybe I’ll go just a level deeper and ask what gives you the sense that this is less temporary and more sort of secular in their acceleration of sort of transforming your business. And maybe you could talk a little bit some of that some of the other things that they’re doing with your strategies beyond just EDI. Are you seeing ERP upgrades, are you seeing ecommerce upgrades, are they making long-term project commitments that are really sort of looping you in from a multiyear commitment as opposed to just kind of patch fix it and get things up and running for drop ship or ecommerce or things like that. Talk about the secular trend here a little bit if you don’t mind.

Yes. I think, overall when we segment the retailers instead of just segmenting into grocery and pet stores et cetera. We’re really looking at there is businesses that are retailers that are accelerating through this. There is retailers that are performing kind of more normal and then there is retailers that this is been a big negative to especially in the luxury goods side. So, they all have a little bit different dynamic time as to where they are. If they are on the acceleration mode, they’re doing things out of completely out of need and they need to build the onboard suppliers quickly. They need to make sure that there are suppliers are automatically and quickly automated. They don’t have the capacity to re-see product into the distribution center with packing slips and not no barcode labels that it weren’t knowing when it was coming and how it was packed. They need responses real quickly. So, in those cases, there is a big retail demand to be able to automate the supply chain. I think and those are very interesting. There is increased for instance we’ve highlighted in the past is increased demand for something like COSCO to onboard suppliers even faster than they’ve had in the past which was 48 hours. Now we’re looking at sometimes hours to make sure that they can receive an order and get going. That then the ones in the middle, I think there is just they are needing to adjust with drop shipping, if they haven’t done it then they need to adapt to that because for the supply chains they need to add suppliers. They need to go back to their suppliers in increased efficiency and there is just an overall I think awareness on supply chains being efficient. There’s been so much written and so much focused on the supply chain. And then, there is a little bit different sales cycle for this supply the retailers that are I would say more in the hurting camp. If you can get them to be think past the pandemic, then they are also looking at drop shipping. And there’s just a lot of dynamics. So, I think there is just an increased focus on supply chains and making more efficient. I think the other dynamic is that suppliers and retailers are more likely to buy from the industry leader. And more of the clear industry leader by a long shot here and it’s very obvious to them that with a strong balance sheet and 79 quarters in a row of growth. Profitable growth, that we’re here for the long-term and they can buy their solution set and not worry if SPS is going to be around and what’s happening to them, and we’re not a small private company that doesn’t give out financials. So, I think our sales team has also done a very good job of differentiating SPS Commerce from the rest of the pack.

Yes, that’s really good. And the momentum I mean so it’s a clearly a ton of momentum on the fulfilment side which is fantastic to see. When you look at analytics, you’ve clearly got one foot on the brakes on that even though that’s back to growing a little bit this quarter. But what do you think is the sort of secular dynamic that changes the demand level for analytics and sort of reignite that segment of the business. Is that just a time period that we’re in, is that the nature by which analytics is consumed because it’s that nice to have. What changes the demand structure for analytics?

I think the biggest demand structure will be confidence that their business is going to remain strong. Under that underneath the covers, we have customers that back in April look like they were just crushed. Right, I mean you think about different industries that were dead, I mean the golf industry is one that they were dead, there was no golf courses open, they can’t play golf. The golf industry just came off an unprecedented year. So, we had analytics customers that did actually try to reduce their contract, look at what they really needed and now they’re actually adding. And so, I think it’s more of a confidence level of saying are we done with this, are we going to remain strong. Are we going to continue to see the demand. But things changed pretty quickly from when you look back and you say what the world look like in April, May, and what it looks like today. I mean, there’s some industries that were again, we just completely closed down in April and May. And they’re actually just can’t keep up with demand now. And then there’s other industries that obviously have stayed down as well especially in the luxury goods and the apparel, is really and because people are home, people are dressing up. I mean that you’re not buying a new suit, you’re not buying fancy purses et cetera. So, I think it’s more confidence that they’re that they can do that discretionary spend and that they got to have time to implement it and get the value.

Yes, great commentary. Thank you, Archie. I’ll jump back in the queue but that was fantastic, I appreciate it.

Thanks. Thanks, Tom.

Thank you. Our next question comes from the line of Jason Celino from KeyBanc Capital Markets. Your line is now open.

Hi Archie and Kim, thanks for fitting me in here. Retailers typically put off some of their bigger projects for Q4 to focus on the holiday season. Was any in the stream that we found Q3 maybe some pull in at all or?

It’s a fascinating question because I know our tech team use the Cyber Week as just an incredibly busy week. And I think because you have things like drop ship, at one time that was our volume we’re seeing triple the normal volume and now it’s still strong, it’s more than double on the drop ship side. You’re really wondering or what does the holiday season look like is or an acceleration. I think some of it that was just other need. And what’s interesting is although we’ve seen the activity sometimes lower in Q4, underneath the covers we’re signing up enablement campaigns and getting work done to be able to kick those off in Q1. So, when you see a difference in strong numbers in Q1 from community enablement campaigns, those are probably deals that were signed September through December 31st. So, underneath the covers this activity is just when the roll out and implementation comes. But I just I don’t know. I think we’re in a more fluid environment of what the holiday season is going to be like. And I do know that many retailers are very nervous about getting supply chains or again under focus can I get product. And by the way if I do drop ship it, what’s the capacity of the FedEx and UPS is that they will can they get it to my customers in two days. And if you want product at somebody’s house on December 24th, I would recommend that you not place the order on December 22nd, you’re probably going to be disappointed in to 2020.

Yes. That’s makes a lot of sense, yes more products than just relative to what people will need. And I think my second question, a lot of talk around the accelerated pace of EDI’ed option. Help me understand some of this incremental spend, is it just some of these retailers who’re doing quite well right now, are they –- it seems sounds like some of them are reinvesting some of these dollars but and are they standardizing on one EDI provider, are they upgrading the version, it sounds like some are adding drop ship. Maybe you can talk about this dynamic a little bit more?

I think there is really two a couple of different dynamics. One is they are investing and expanding their footprint, others are just expanding their supplier networks, the number of trading partners they have. Because they’re looking for different new drop ship suppliers, they’re looking for new suppliers that can drop ship. So, they are expanding what we consider to be expanding of our total addressable market which is really monetized by the total number of trading partner relationships. So, I think you see a lot of that and I think you just see that there the suppliers that they are doing business with manually, they are feeling significantly more pain in a work-from-home or you have a supply chain that’s already stressed. If you have a stressed supply chain, you need to automate it and you need to automate it today or you’re just not going to be able to move product to the distribution center because you either need to build another distribution center which you can’t do overnight and it’s also very expensive. So, I think there’s a lot of focus there. As far as focusing on the way most retailers work or all the retailers are putting their work is they do build a rule book and they do more or less mandate that the suppliers use that rule book. As far as requiring a certain EDI provider, we don’t know of anybody that does that. Now, what we want the retailer to do is have one provider and that would be SPS Commerce be the onboarding agent for all of their suppliers. So, they can either use SPS Commerce or they can use a competitor or a legacy software and we would test and certify it. I think that’s really the only way for a retailer to be effective because if they try to force their suppliers to use a specific EDI provider, what happens when they have a multi-billion dollar large supplier that has their own EDI solution to force them to use SPS Commerce, we would advise them against that. So, we always do a non-inclusive approach and we think that’s the right long-term approach for our customers.

Okay, great. No, I – thank you, for the call.

Thank you. Our next question comes from the line of Pat Walravens from JMP Securities. Your line is now open. Q –Unidentified Analyst: Hi, this is Joe on for Pat. Thank you for taking our question. We’re just curious around how you guys are thinking about M&A in the current environment. Any comment here you can further?

M&A I would say we continue to be very focused on our three main criteria which is 1) Pure customer acquisition, 2) is Geographic expansion and 3) is really product roadmap acceleration. This environment is although different, it’s very much the same and the fact that we’re going to remain disciplined. There is the valuations are higher which is making people think about selling. Some are doing well, some are hurting, so we’re approaching it like we have in the past. We continue to be out in the market, we continue to be active, we continue to make sure that our small competitors know that we have capital and are ready to deploy it. So, we’re very much stay in the course. Q – Unidentified Analyst: Great, thank you.

Thank you. [Operator Instructions] Thank you ladies and gentlemen. This concludes today’s conference call. Thank you for participating, you may now disconnect.