Workiva Inc. (WK) Q4 2017 Earnings Report, Transcript and Summary

Good afternoon. My name is Jessie, and I’ll be your conference operator today. At this time I would like to welcome everyone to the Workiva, Fourth Quarter and Full Year 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Adam Rogers, Director of Investor Relations, you may begin your conference.

Thank you and good afternoon everyone. Welcome to Workiva fourth quarter and full year 2017 earnings conference call. This afternoon we'll begin with comments from Chairman and Chief Executive Officer, Matt Rizai; followed by Executive Vice President and Chief Financial Officer, Stuart Miller, and then we'll turn the call over to questions. Also on the line today are Marty Vanderploeg, President and Chief Operating Officer and Jill Klindt, Senior Vice President and Chief Accounting Officer. A replay of this call will be available until March 1. Information to access the replay is listed in today's press release which is available on our website under the Investor Relations section. As a reminder, today's conference call is also being broadcast live via webcast. Before we begin, I'd like to remind everyone that during today's call we will be making forward-looking statements regarding future events and financial performance, including guidance for our first quarter and full fiscal year 2018. These forward-looking statements are subject to known and unknown risks and uncertainties. Workiva cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the company's Annual Report on Form 10-K for factors that could cause our actual results to differ materially from any forward-looking statements. Also during the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations of non-GAAP to GAAP measures and certain additional information are also included in today's earnings press release. And with that, we'll begin by turning the call over to our Chairman and CEO, Matt Rizai.

Thank you Adam and thanks to everyone for joining us today to discuss our fourth quarter and full year 2017 results. We posted strong results in 2017. We are pleased to have surpassed the milestone of $200 million in annual revenue in 2017 and ended the year with more than 3000 customers. We continue to add new Wdesk users across public and private companies, state and local governments and universities and we continue to diversify our revenues sources. In 2014 non-SEC use cases represent only 25% of our subscription bookings. Non-SEC use cases are now 54% of our subscription bookings. This is a strong indicator of the success of our revenue diversification efforts and we expect this trend to continue. We continued to invest in improving our Wdesk platform and building our ecosystem to meet growing customer demand for broader based enterprise wide solutions, where we see great potential for widespread adoptions and long term growth. The power of Wdesk and the world-class service our teams provide drive our high revenue retention rate, which is among the best in the B2B SaaS sector. In 2017 we continue to augment our direct sales channel with partners. Our advisory and service partners, which include business process outsources and managed service firms, system integrators and global consultancy offer a wide range of domain and functional expertise that broadens the capabilities that Wdesk, brings scale and support to customers and prospects. In addition, our technology partners which include large and mid-sized independent software vendors enable more data and process integrations to help customers connect critical transactional systems directly to Wdesk, which becomes a central repository of trusted data with powerful linking, auditability and control features. Now I’d like to share a few examples of customer use cases that illustrate the breadth and depth of Wdesk. Crossland Construction Company will use Wdesk to build dashboards for project tracking, bidding, document management and M&A approvals. Black Hills Corporation is using Wdesk for reporting, required by the Federal Energy Regulatory Commission. One of the most premier, world’s premier pharmaceutical companies will register and file its benefits plan in Wdesk. Since mid-2014 we have continued to gain market share in the Sarbanes-Oxley Act market. We currently have over 600 SOX and internal controls customers which places us amongst the faster growing SOX solutions in the market. Recent customer wins include Wendy's International, Capital One Financial, National Vision and Teachers Insurance. We continue to see growing demand for Wdesk amongst private companies for a variety of use cases. New customers include companies and pharmaceuticals, construction, investment management and natural resources. We also remain encouraged by the growth opportunities for Wdesk in performance and management reporting. New customers in this market included the Dayton Power and Light Company, [Inaudible] Foods and the World Bank. We see growing demand and success in the capital market space as customers and advisors leverage Wdesk and our services for IPOs, debt and other equity offerings, and M&A deals to improve efficiency and increasing their transactions. We remain the leader in the SEC compliance market where we continue to add customers’ at large and small public companies, because Wdesk is widely regarded as the best practice for SEC reporting and XBRL. We are also seeing more demand for Wdesk from foreign private issuers that use IFRS taxonomy, because they are now required to submit their SEC Filings with XBRL tagging. New customers using Wdesk for IFRS include MiX Telematics, Anglogold Ashanti and Globus. We see increasing demand for Wdesk from state and local governments and higher education institutions. New customers in this market include public employee retirement systems, state government agencies, municipalities, universities and colleges and local transportation and water authorities. 2017 was also a great year for our employees. Last month Fortune Magazine named Workiva as one of the best work places for technology. Our Wdesk platform also won the GRC Innovation Award for Best User Experience for Policy Management from analyst firm GRC 20/20. In summary, our fourth quarter and full year 2017 results were strong. Over the past few quarters we have accelerated investments in our platform and talent and we continue to build our ecosystem. The critical pieces of our enterprise plan are now in place to meet our growing customer demand for broader based enterprise wide Wdesk platform. We are making solid progress towards selling larger size deals as shown by the data we are releasing today on the growing number of customers with larger annual contract values. We are encouraged by this trend and also by our pipeline of larger contracts. We are excited about the multiple growth opportunities in front of us and we remain focused on executing on our initiatives. With that, let me turn it over to Stuart Miller.

Thanks. As Matt indicated, we are pleased with our results for the fourth quarter and full year 2017, which is where I’ll begin my remarks and then I’ll comment on our first quarter and full year 2018 financial outlook and thereafter will take your questions. We generated total revenue in the fourth quarter of $54.5 million, an increase of 17.5% from Q4 2016. Breaking out revenue by reporting line item, subscription and support revenue was $45.5 million, up 18.8% from Q4 2016. 50% of the S&S revenue increase in Q4 came from new customers added in the last 12 months. The remaining half of the increase came from deeper penetration of our existing customer base. Professional services revenue was $9 million in Q4, an increase of 11.3% from the same quarter in 2016. We expect the growth rate of subscription revenue to continue to outpace the growth of services revenue in 2018. Turning to our supplemental metrics, we finished Q4 with 3,063 customers, a net increase of 291 customers from Q4, 2016, and a net increase of 72 from Q3, 2017. Our customers are passionate and loyal supporters of our solutions as demonstrated by our subscription support revenue retention rate of 96% for the month of December 2017 compared with 96.5% in September 2017 and 95.4% in December of 2016. Customers being acquired or ceasing to file SEC reports, accounted for a majority of revenue attrition, consistent with our experience to date. With add-ons our subscription and support revenue retention rate was 107.6% for the month of December 2017, compared with 108.6% in September 2017 and 107.4% in December 2016. Today we are introducing a new metric to help investors track our progress in selling larger subscriptions. Each quarter we plan to share the number of our customers with annual contract value or ACV at greater than $100,000 and at greater than $150,000. As we define it for this disclosure, ACV equals quarterly subscription revenue times four. Our press release today includes the historical data for ACV of a $100,000 plus. We had 324 customers in the fourth quarter up 37% from 236 customers in Q4, 2016. For ACV of $150,000 plus, we had a 146 customers in the fourth quarter, up 52% from 96 customers in Q4 last year. Moving down the income statement, I'll talk about our results before stock-based compensation that is on a non-GAAP basis. Please refer to our press release for a reconciliation on our non-GAAP and GAAP results. Gross profit was $38.8 million in Q4, up 16.1% from the same quarter a year ago. Gross margin was 71.1% in the latest quarter compared to a gross margin of 72% in Q4, 2016. Now breaking out gross profit, subscription and support gross profit was $37 million, equating to a gross margin of 81.2% on S&S revenue compared to $31.2 million, or a gross margin of 81.4% in Q4, 2016. Professional services gross profit in fourth quarter was $1.8 million, equating to a 19.9% gross margin, compared to $2.2 million or a 27.1% gross margin in the same period last year. We increased the headcount in compensation of our professional services teams to support initiatives in new markets and distribution channels. Turning to operating expenses, research and development expense in Q4 was $18.2 million, an increase of 30.5% from Q4 last year, due to higher compensation and consulting expenses. R&D expense as a percentage of revenue increased this quarter to 33.4%, compared to 30.1% in Q4 last year, due to the higher level of investment in our platform to support our goal of accelerating our growth rate. Sales and marketing expense for the quarter increased 20% from Q4 last year to $21.1 million. Sales and marketing expense as a percentage of revenue this quarter rose 80 basis points to 38.7% from Q4 last year. Most of the increase is attributable to higher head count in compensation for our sales team, reflecting our investment in the rollout of our enterprise strategy. General and administrative expenses were $7.8 million in Q4, an increase of 41% compared with $5.6 million in Q4, 2016. G&A expense as a percentage of revenue in the latest quarter rose to 14.4%, an increase of 240 basis points from Q4, 2016, due to growth in administrative headcount to support regulatory compliance in growth in our line functions, higher compensation and one time severance costs. Consistent with the guidance that we provided on our last call, operating loss was $8.4 million in Q4, 2017, compared to the net loss of $3.7 million in Q4, 2016. Workiva's operating margin decreased 740 basis points in Q4, 2017, versus the same quarter a year ago, primarily due growth in headcount and compensation. Net loss was $8 million for Q4 compared to the net loss of $3.8 million in Q4, 2016. We posted a net loss per share of $0.19 in Q4, compared to a net loss per share of $0.09 in the same quarter year previous. Turning to our balance sheet and statement of cash flows, we are pleased to have generated positive operating cash flow in 2017. We expect operating cash flow to be positive again in 2018. At December 31, cash, cash equivalents and marketable securities totaled $76.7 million a decrease of $1.1 million compared with the balance at September 30, 2017. In Q4, 2017 net cash used in operations was $6.2 million, compared with cash provided of $10 million in the same quarter a year ago. A larger net loss, payment of cash bonuses to employees and an expansion of accounts receivable were partially offset by higher differed revenue in Q4. At December 31, 2017, total deferred revenue increased $5 million from September 30, 2017. Short-term subscription and support deferred revenue rose $4.7 million in Q4, driven by new sales and conversion of contract renewals from quarterly to annual terms. We continue to make steady progress on converting quarterly contracts to annual contracts which should wrap up in Q1 2019. Services deferred revenue remained flat from the prior quarter. Long-term subscription support deferred revenue decreased $363,000 in Q4. Recapping our full year 2017 results, total revenue was $207.9 million up 16.4% year-over-year. Subscription and support revenue was $169.3 million increasing 18.3% over 2016. Professional services revenue was $38.6 million, up 8.6% from the prior year. So our revenue mix is 2017 was 81.4% subscription and support and 18.6% professional services. Moving down to P&L and again focusing of non-GAAP expenses, gross profit was $148.8 million, rising 16.3% year-over-year and representing a 71.6% gross margin. Operating loss was $24.8 million compared with a loss of $29.3 million in the prior year. Operating margin improved 447 basis points in 2017 compared to 2016 results. Net loss was $25 million in 2017 and net loss per share was $0.60, which compares to net loss of $29.7 million or $0.73 per share in 2016. Now to provide some context for our financial guidance, I want to comment on our adoption of ASC 606, which is effective January 1 this year. We chose the modified retrospective transition approach. We will report under ASC 606 in 2018 and plan to provide a reconciliation between ASC 605 and ASC 606 each quarter during 2018. The guidance we provide today reflects our implementation of ASC 606. Application of ASC 606 will affect our income statement and balance sheet in 2018. ASC 606 will not affect our cash flow of course. Adoption of ASC 606 requires an opening adjustment to retain earnings on January 1. The opening adjustment will have a favorable impact on our retained earnings estimated to be in the range of $7 million to $9 million. We’ll share the details of the opening adjustment when we discuss our first quarter results. Application of ASC 606 for Workiva in 2018 includes acceleration of recognition of professional services revenue on certain contracts, longer deferral of the incremental cost of obtaining a contract and increases in accounts receivable differed revenue, accrued expenses and other current liabilities. We expect ASC 606 will have an unfavorable impact of approximately $2 million on professional services revenue in Q1. For the full year and assuming we deliver the same services in Q4, 2018 as we did last year, we expect the net impact of ASC 606 will not be significant on total revenue. Due to the deferral or the recognition of customer acquisition costs under ASC 606, we expect operating expenses to benefit by approximately $4.5 million for the full year 2018. In addition under ASC 606, we expect an increase in accounts receivable to be offset equally by a rise in differed revenue and accrued expenses and other current liabilities. Turning to our guidance for 2018, our guidance on a non-GAAP loss from operations and non-GAAP loss for basic share excludes the impact of stock based compensation. Please refer to our press release for a reconciliation of GAAP and non-GAAP guidance. For the first quarter 2018 we expect total revenue to range from $57.3 million to $57.8 million. Due to the adoption of ASC 606 we expect the growth rate for professional services revenue in Q1, 2018 to be in the low single digits relative to Q1 last year. We expect GAAP operating loss to range from $13.7 million to $14.2 million; non-GAAP operating loss is expected to be in the range of $7.8 million to $8.3 million. We expect GAAP net loss per share in Q1 to range from $0.33 to $0.34, non-GAAP net loss per share is expected to be in the range of $0.19 to $0.20. Our loss per share guidance assumes 42.6 million basic and diluted shares outstanding. For the full-year 2018 we expect total revenue to range from $234 million to $236 million. We expect the growth rate of our subscription revenue to continue to outpace the growth rate of our services revenue. We expect GAAP operating loss to range from $57.1 million to $59.1 million. Non-GAAP operating loss is expected to be in the range of $32 million to $34 million. We do expect to post positive operating cash flow for the full year 2018. We expect GAAP net loss per share to range from $1.35 to $1.40. And finally, non-GAAP net loss per share is expected to be in the range of $0.77 to $0.82. Our loss per share guidance for the full year assumes 43.4 million basic and diluted shares outstanding. Building an enterprise grade platform takes time and investment, which are necessary commitments to generate additional sales. As Matt indicated, we have accelerated investments in our platform and talent over the past few quarters to continue our plan of capitalizing on customer demand for an enterprise wide Wdesk platform. Our investments are focused on additional functionality, greater scalability, data connectors, talent training, packaging, partnerships and other initiatives towards our goal of accelerating revenue growth. Our guidance on non-GAAP operating loss today, reflects the full run rate of these investments. The crucial pieces of our enterprise plan are now in place, which is allowing us to slow the rate of hiring in 2018. Our plans to capture larger enterprise deals and achieve our long term financial targets remain unchanged. Our 2018 guidance reflects the fact that we’re in the middle of executing our strategy. As we discussed last fall, we expect to see progress from our enterprise strategy in bookings in the second half of 2018 and in revenue in 2019. We are encouraged by the growing number of customers with larger contracts and also by our pipeline of larger contracts. In summary, Workiva posted another strong quarter. Demand remains robust for our platform and we remain focused on executing our growth plan to capitalize on our multi-billion market opportunity. We are now ready to take your questions. Operator, we’re ready for the Q&A session.

[Operator Instructions] Your first question is from Tom Roderick with Stifel Nicolaus. Your line is open.

Yes, good afternoon. This is Matt VanVliet on for Tom. Thanks for taking my question.

Hi Tom.

Hi. So I guess obviously the increased disclosure around deal size is very much welcomed and you know the growth that you’ve shown there, pretty steady and pretty impressive. But I guess my question trying to dig in a little bit more. You know you’ve added a lot of sales headcount to go after these enterprise account, but how much of the growth that we’re seeing on these deal sizes is from sort of net new customers dropping into each of these buckets versus the hunter-farmer set up that you’ve had for a few years now, really cultivating those deals larger and larger across both use case deployments and being able to cross sell additional use cases.

So I mean if I can deconstruct your question a little bit. I think recall that we moved to a management structure from a hunter-farmer model and I don’t think we missed a beat there. We’ve always pursued the land and expand strategy. I’d say that most of the growth that you’re seeing and the larger contracts come from deeper penetration of existing customers as opposed to new logos they are viewing at those levels. So you know once customers get in and use Wdesk, they see the productivity benefit and it makes the follow-on sale a bit easier.

And then, I guess looking at your bookings performance in the second half of the year and the pipeline build, you know how much more improvement do you think you need to get to sort of where your targets are in the second half for those enterprise deals relative to you know just the extended sales cycles that those larger deals is needing to play out.

Can you just repeat the question, I’m sorry.

Yeah, where do you guys feel like you’re at in the progress of sort of improving and building out the enterprise level sales team? Where you are now versus maybe where you think you need to be to hit the targets that you’re talking about of accelerating bookings in the second half leading to revenue growth they are making?

Okay, I understand now. Sorry, I missed the word sales. So we really, we think we’ve built, you know really the pieces are all in the places and we’re in the market executing on the enterprise strategy. We invested pretty heavily or happen to be investing pretty heavily in the go-to market strategy and you know as I indicated in my comments, we’re at the full run rate of those investments.

And we are confident with our current pipeline that I think there is really not anymore improvements to be made so to speak. It’s just that a matter of the sales cycle to take a hold of itself and the execution of that and since the deals become larger, so the sales cycle gets a little longer, but the pipeline in any case to use, that we are pretty encouraged with the current activities for the second half of this year.

And then if I can slip one more in. You mentioned over 600 customers now on stocks and internal controls, you know what – where are we getting to in the point of total revenue mix of the SOX product now with all contribution?

So we have not broken that out historically and don’t really have any intention of doing so. You know one of the challenges there is that while the – a particular sales team may sell the application and it may get designated as SEC or SOX, the utilization of that seed after the fact is it doesn’t necessarily track the way it was sold originally there using for a lot of other things. So it might even be confusing to try to pull that information and communicated. We couldn’t be clearer in the way we do that.

Okay great, thanks for taking my question.

Your next question comes from Brian Peterson with Raymond James. Your line is open.

Good evening gentlemen, thanks for taking the question. So I wanted to hit on the revenue per customer dynamic a bit and I appreciate the disclosure on the bigger deals, but it looks like the subscription revenue per customer is up about 6%, 7% based on my math and you guys have the retention with up sales kind of in the 7% to 8% range. Given that we’ve seen a lot of this up sell activity to kind of these six figure deals, is there any offset in your customer mix to maybe suggest why that isn’t up in the double digits. I’m just trying to understand the moving parts there Stuart.

Well, remember about half of the increase in S&S is new logos and so they are not affecting with that on piece. So I mean that’s the math of it, so only half of that is coming into the second part of that equation.

Okay, just a question, as it relates to quotas, I know you guys said you feel that the sales team and the investments are kind of in place for success. Given these enterprise deals, like should we also expect an increase in quotas for the sales team and how should we think about efficiencies of that team into ’18 and then into ’19. Thanks guys.

So, as we mentioned you know we’re anticipating the enterprise strategy to be impacting bookings in the second half of the year and then showing up in revenue in 2019. So that would indicate our expectation of you know – to your question, we’re not going to discuss individual quotas, but we definitely have got teams going after larger relationships. Remember that we’re already in 70% of the fortune 500 and have got some really strong relationships there.

Got it. Thanks Stuart.

Your next question comes from Eric Lemus with SunTrust Robinson. Your line is open.

Hey guys, thanks for taking the question. You know as far as I can gather from what you’re saying as far as accelerating, your investment in sales and marketing for the enterprise wide product and platform, so it safe to say that it was really unexpected that you think that your product would be ready for the market for the enterprise class pollution.

Yes, absolutely.

Yep.

And so are these sales people actively selling this in the market or is it still coming on a beta type program.

No, there is a sales department in the market right now actively engaging with customers and the necessary people to you know make sure that pipeline is strong and executable.

Okay, great. And then just one last question on open data initiative. Are you guys still seeing any sort of tail winds in that particular aspect?

Are you talking about the mandate from the government?

Yes, exactly.

You know that’s another thing that has a long tail on it and we’re starting to see some activity, but it hasn’t impacted the revenues in a material way yet.

Okay, great. Thanks guys.

Thank you.

Your next question comes from Michael Nemeroff with Credit Suisse. Your line is open.

Two on for Michael, thanks for taking our questions. So just following up on Matt’s question, I believe Stuart I think you mentioned that most of the growth in the ACV by customer disclosure is driven by deeper penetration of existing customers and interestingly I believe that customer ads actually inflect it positively in 2017. So when I try and reconcile your revenue guidance within that customer add in 2017 and assume the same sort of cadence from a penetration perspective for the customers you just added, it doesn’t seem like your stemming a lot of net new customers in 2018. I guess the sort of the question is, is it just simply conservatism or am I missing something.

So you are making some forecast on larger customers in 2018.

I’m making some forecast because your net customer ads that just recently added, I’m assuming that’s at a lower ACV that the 150 K or 100 K plus ACV and if you just assume the same sort of line expense call it, it’s really easy I guess to get to your revenue guidance; that’s what I’m trying to get at.

Well, I mean again I don’t think we are providing any guidance of ACVs for 2018. I mean we’ll report it every quarter, but we are not going to provide any guidance on that metrics. So I don’t what else – I don’t know what else to say, but ..

Okay. I mean that’s fine and then on the services revenue, the $2 million unfavorable impact in Q1, how should we think about services seasonality under ASC 606 for Q2 to Q4?

Yeah, it’s a fair question. So we do a fair amount of work in the fourth quarter in anticipation on delivery in Q1 and that’s why the $2 million that normally would have recognized in Q1 is not going to get recognized this time and if we continue with the same cadence, we would expect to pick up most of that or all of that in the fourth quarter later this year. So that is really – Q1 is obviously the busiest time for us, because a high percentage of our SEC customers are filing their 10-K in Q1, but there is this work that goes in Q4 in anticipation of that.

Got it, that’s very helpful. Thanks for taking our questions.

Thank you.

Your next question comes from Rob Oliver with Baird. Your line is open.

Hi guys, thanks for talking my question. So on the 600 plus number count on the SOX customers that’s you know by our quick math 25% growth year-over-year, so great job. There, we were just wondering if you guys could maybe without obviously giving numbers provide a little bit of color on some of the other areas other than SOX where you are starting to have conversation and see some traction. So certainly among our coverage universe, as well as conversations we are having with companies, we are hearing a lot more interest peculating around compliance, vendor compliance, risks and controls and it seems to feed nicely into your sales. Just curious qualitatively beyond SOX and SEC of what you might be seeing. Thank you.

Well, in the market palace we are seeing a lot of interest in expansion around financial reporting, that last mile financial reporting and how that fits into all the financial transformations that are talking place in the industry now, and it’s really a key piece, a way of unique functionality and so we are seeing a lot of interest in that realm. The SOX interest continues, you know SOX is a market that’s on the expense side, so it’s never given the focus that some of the other strategic stuff is, but its tracking nicely and we see activity in using our platform for a lot of the different use cases we’ve discussed before. But in the new areas we continue to see interest in providing things that really customers haven’t had in the past in terms of the features we have on the platform.

And we are also seeing quite a bit of interest from the partners that we are developing relationship with through their customers and as you know these days to sell our cloud based product businesses are really looking for best-in-class of certain types of capabilities and this ecosystem of partnership, partnering with you know whether it’s the technology partner or integrators is really helping both of us, our partners as well as customers. I think that’s the new way of deploring the capabilities, the technology in to businesses, so we are pretty encouraged by that as well.

Great. Thanks Matt, thanks guys.

Thank you.

Your final question comes from Stan Zlotsky with Morgan Stanley. Your line is open.

Thank you so much for talking my question. Good afternoon gentlemen. So thank you for talking my questions. So very impressive growth on the large customer account and maybe if you can just qualitatively help us kind of get a sense for how big is this greater than 100 K ACV base as a percentage of your overall company ACV, subscription ACV?

Yeah, we certainly, we just sort of disclosed what we are going to on that and not going to roll it out. I mean we obviously have lots of customers that are quite a bit larger than that.

Okay, got it. So as far as us looking at these numbers and your investment plans, when – and given the large customer dynamics, right, when could we start to see revenue retention really start to take-up? Is it a matter of waiting until 2019 when the up-sell motion really starts to kick in in the back half of the year, of 2018?

Yeah, so when you say, I think you mean revenue retention with add-ons right?

Yes correct. I mean maybe returns to like the 110 plus range.

Yes, you know we don’t give guidance on any of those kind of measures, but you know recall what I said that we think that we will see the impact in the second half of ’18 on bookings and then in 2019 on revenue and that’s – again, this is something that’s been in the work for quite a while, working with customers and really have been driven by customer demand. This is not a build it and they will come thing.

Got it, understood. And then last one from me and I know you guys, you don’t like to talk about it very much, but billings and – I have to ask the question. If you look at the total billings, current billings, you know I mean if you exclude the long term differed aspect just with the current billings, current billings slowed to 2% growth year-on-year and Q4. Anything that we need to keep in mind that happened in Q4 this year that would drive just the outcome there? Thank you.

Thanks Stan. No, not really. I mean again the apples to apples comparison or sort of using billings to predict bookings is going to get a lot easier once we get substantially all of our customers on the same maturity of contract, which should be around Q1 of 2019 as I indicated as we make those conversions, we finish those off.

Got it, alright. Thank you.

Thank you.

In closing I want to thank you for joining us today. Operator you may now end the call.

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