Workiva Inc. (WK) Q3 2018 Earnings Report, Transcript and Summary

Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Workiva Third Quarter 2018 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. Mr. Adam Rogers, Director of Investor Relations, you may begin your conference.

Thank you, and good afternoon, everyone. Welcome to the Workiva's third quarter 2018 earnings conference call. This afternoon, we'll begin with comments from our President and Chief Executive Officer, Marty Vanderploeg, followed by our Executive Vice President and Chief Financial Officer, Stuart Miller, and then we'll turn the call over to questions. Also on the line today is Jill Klindt, Senior Vice President and Chief Accounting Officer. A replay of this call will be available until November 14. 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 fourth 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 and Quarterly Report on Form 10-Q 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 President and CEO, Marty Vanderploeg.

Thank you, Adam, and thanks to everyone for joining the Workiva third quarter 2018 conference call. We are pleased with our third quarter results, which exceeded guidance for revenue, operating loss and loss per share, reflecting our commitment to achieve profitable growth. We are raising our full-year 2018 guidance, which Stuart will discuss in more detail later in the call. We remain focused on adding new customers and expanding our footprint in our nearly 3,300 customers, and we continue to see an increase in average deal size as well as an increase in our number of large contracts, which grew by 32% in Q3. Wdesk is the only cloud platform that enables data assurance throughout the entire reporting process. Our customers have made very large investments in ERP systems, but still resort to manual processes to analyze and report performance data. The errors and risks associated with these manual processes are becoming widely recognized, driving the need for financial transformation in the office of the CFO. Wdesk is the only cloud solution that enables end-to-end data assurance in the last mile of financial reporting. We design the next generation of Wdesk to address the need for financial transformation and drive wider adoption of our platform. Wdata, which includes our new data prep tool along with data connectors and APIs, allows our customers to create direct connections to their data and bring large amounts of data into Wdesk. This removes manual steps in the reporting and analysis process, after the data leaves our customers' ERP and other data systems, and enables data assurance throughout the entire reporting process with an immutable audit trail. And just yesterday, Wdata won the Ventana Research Digital Innovation Award in the Office of Finance category. Wdesk workspaces allows our customers to have a trusted environment for teams and enables our solution-based licensing. Solution-based licensing offers unlimited cease-buy solution, which increases the value of Wdesk to our customers. Our improved user management allows much larger teams to be efficiently managed in workspaces than our customers deployments in general. These new Wdesk capabilities enable even larger teams to benefit from Wdesk core strengths, collaboration, control, accountability and data assurance. We believe Workiva's future has never been more promising. In the third quarter, we continue to take market share in SEC reporting, capital markets, management reporting, regulated risk, investment funds reporting, and SOX and internal controls. We are also seeing growth from our market expansion in EMEA and APAC as well as in local state and federal government agencies. Our SOX customers have been asking for an internal audit solution, and we delivered that solution in September. Unlike legacy audit systems, Wdesk is a born-in-the-cloud solution that offers real-time collaboration, documentation, workpaper management and workflow, which helps internal auditors gain new insights into risk management across their organization. We continue to augment our sales channel with advisory and technology partners as well as service partners. For example, in September, we announced an alliance with KPMG. We are already working along side KPMG in more than 10 companies on a wide range of use cases. We also held our largest Annual User Conference in September, where nearly 1,800 attendees spent three days of learning with our R&D and customer success teams. Many of you listening to this call attended our user conference, and you saw firsthand how much our customers love Wdesk and how much it has changed their lives. It is my great pleasure to work with extraordinary people every day. We continue to strengthen our collaborative culture throughout Workiva, and we continue to win Best Place to Work and innovation awards. In the third quarter, Workiva was recognized as Employer of the Year by American Business Awards. And Wdesk won a Stratus Award for cloud computing by Business Intelligence Group. As I said last quarter, Workiva is committed to pursuing profitable growth. We will continue to enhance our Wdesk platform, add new customers and partners and expand Wdesk across our customers organizations. With that, let me turn it over to Stuart Miller, our CFO. Stuart?

Thanks, Marty. I'll start by reviewing our third quarter results, which featured a substantial improvement in Workiva's operating margin. Thereafter, I'll comment on our fourth quarter guidance and then provide a preliminary viewpoint on what we expect next year 2019. One reminder on accounting. As discussed on our calls earlier this year, we adopted the new revenue recognition standard, ASC 606, using the modified retrospective method. Our Form 10-Q provides a reconciliation of the impact to the adoption of ASC 606 on our third quarter and year-to-date financial results. Now to our revenue. We outperformed our revenue guidance for the quarter. We generated total revenue in the third quarter of $60.9 million, an increase of 16.9% from Q3 2017. Breaking out revenue by reporting line item. Subscription and support revenue was $51.3 million, up 18.7% from Q3 2017. 51.7% of the S&S revenue increase in Q3 came from a deeper penetration of our existing customer base. The remainder of the increase came from new customers added in the last 12 months. A broad set of use cases showed strength. Professional services revenue was $9.6 million in Q3 2018, an increase of 8.1% from the same quarter in 2017. Turning to our supplemental metrics. We finished Q3 with 3,289 customers, a net increase of 298 customers from Q3 2017, and a net increase of 67 customers from Q2 2018. Our retention rates continue to be strong. Our subscription and support revenue retention rate was 95.9% for the month of September 2018. Customers being acquired or otherwise 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 was 104.7% for the month of September 2018. This metric can be lumpy because it annualizes just 1 month of data and can be affected by true-ups and other factors. Going forward, we expect this metric to be affected by some capital markets customers, renewing at a lower contract value the year after their initial filing. On the other hand, we expect implementing solution-based licensing will have a positive impact on this metric over the next few years. As a reminder, we currently calculate revenue retention rates using monthly ASC 605 revenue under the legacy accounting standard. We'll start reporting revenue retention rates using quarterly ASC 606 revenue under the new accounting standard when we have comparable data next year. We expect the new quarterly measurement to reduce the variability of this metric that, to date, we have been calculating monthly. Our progress with larger contracts is encouraging for annual contract value of $100,000 plus. We had 398 customers in the third quarter, up 32% from Q3 last year for ACV of 150k plus. We had 173 customers in the third quarter, also up 32% from Q3 last year. Moving down the income statement, I'll talk about our results before stock-based compensation or a non-GAAP basis. Please refer to our press release for a reconciliation of non-GAAP and GAAP results. Gross profit was $45.5 million in Q3, up 23.9% from the same quarter a year ago. Gross margin was 74.8% in the latest quarter compared to a gross margin of 70.6% in Q3 2017. Breaking out gross profit. Subscription and support gross profit was $43.3 million, equating to a gross margin of 84.5% on S&S revenue, up from a gross margin of 80.9% in Q3 2017, due to a higher utilization rate and better pricing. Professional services gross profit in the third quarter was $2.2 million, equating to a 23% gross margin, up from 20.4% gross margin in the same period last year, due to a higher utilization rate. Both our customer success and professional services teams ran lean in Q3. We don't expect to run as lean in Q4 because we are investing in international markets, new use cases and the transition to our new platform. Moving down the P&L, research and development expense in Q3 was $18.4 million, an increase of 8.5% from Q3 last year, due to higher compensation. R&D expense, as a percentage of revenue, improved this quarter to 30.2% compared to 32.5% in Q3 last year. Sales and marketing expense for the quarter decreased 1.1% from Q3 last year to 22.7%. Sales and marketing expense, as a percentage of revenue this quarter, improved 680 basis points from Q3 last year to 37.2%. The improvement was due mainly to lower marketing cost and the capitalization of sales commissions as required under ASC 606. Adopting ASC 606 accounted for 250 basis points of the improvement. For those of you looking at quarterly sequential data, please recall that the third quarter is our seasonal high point for marketing spend due to our Annual User Conference. General and administrative expenses were $8.3 million in Q3, up $2.2 million compared to Q3 2017, due to higher headcount, higher compensation in the executive ranks and investments in leadership in EMEA and APAC. Operating loss was $3.8 million in Q3 2018 compared to an operating loss of $9.1 million in Q3 2017. Workiva's operating margin improved 1,130 basis points in Q3 2018 versus Q3 last year, primarily because revenue growth exceeded growth in compensation expense. Headcount grew less than 1% year-over-year. Investing in new talent will be necessary to pursue the attractive growth opportunities that we see. However, we intend to continue to manage headcount growth carefully. Net loss was $4 million for Q3 2018 compared to the net loss of $9.4 million in Q3 2017. We posted a net loss per share of $0.09 in Q3 2018 compared to a net loss per share of $0.23 in the same quarter a year ago. Turning to our statement of cash flows and balance sheet. In Q3 2018, net cash provided by operating activities was $7.6 million compared with cash provided of $5.2 million in the same quarter a year ago. At September 30, 2018, cash, cash equivalents and marketable securities totaled $97 million, an increase of $16.3 million compared with the balance at June 30, 2018. Short-term subscription and support deferred revenue increased almost $10 million due to bookings growth and conversion of customer contracts from quarterly to annual payment. Long-term subscription support deferred revenue decreased by just over $1 million in the quarter. Short-term customer deposits, which represent prepayment of professional services, increased modestly in Q3. So turning to our guidance for the rest of 2018. Our guidance on a non-GAAP loss from operations and non-GAAP loss per share excludes the impact of stock-based compensation. Please refer to our press release for a reconciliation of non-GAAP and GAAP guidance. We are providing our fourth quarter guidance and raising our full-year guidance. In the fourth quarter of 2018, we now expect total revenue to range from $62.4 million to $62.8 million. We expect GAAP operating loss to range from $11.5 million to $11.9 million. Non-GAAP operating loss is expected to be in the range of $4.3 million to $4.7 million. We expect to post operating cash flow gains in Q4 and the full-year 2018. We expect GAAP net loss per share in Q4 to range from $0.26 to $0.27. Non-GAAP net loss per share is expected to be in the range of $0.10 to $0.11. Our loss per share guidance assumes 44.6 million basic and diluted shares outstanding. Our full-year 2018 guidance is as follows: we expect our full year total revenue to range from $242.3 million to $242.7 million. We expect GAAP operating loss to range from $53.5 million to $53.9 million. Non-GAAP operating loss is expected to be in the range of $17.1 million to $17.5 million. We expect GAAP net loss per share to range from $1.24 to $1.25. Finally, non-GAAP net loss per share is expected to be in the range of $0.40 to $0.41. Our loss per share guidance for the full-year assumes 43.7 million basic and diluted shares outstanding. Now turning to 2019. So on a preliminary basis, we expect to post total revenue in 2019 of $278 million to $280 million. We expect the growth rate of subscription and support revenue to continue to outpace the growth rate of professional services revenue. We expect to show a single-digit margin on non-GAAP operating loss in 2019, building on and consolidating the progress we have made in 2018. In addition, we expect to report higher operating cash flow in 2019. Finally, some housekeeping. You'll see disclosure in our Form 8-K regarding Rule 10b5-1 plans adopted by Marty Vanderploeg and Jeff Trom. Marty and Jeff are selling shares to repay debt and for tax and financial planning purposes. The shares to be sold under each of their plans represent less than 10% of their respective current beneficial ownership. So we are now ready to take your questions. Operator, you're ready to begin the Q&A session.

[Operator Instructions] And your first question comes from the line of Tom Roderick from Stifel. Your line is open.

Hey guys, good afternoon. Thank you for taking my questions. I'll start by saying congratulations. I mean, you guys are doing it. You're generating the growth. You're doing it with more leverage. So the plan is coming together nicely. So congrats on that. It's, sort of, an extended question off of that topic. And, Stuart, I appreciate the quick look into 2019. As you've been creating leverage in the model and making more with less. I guess, the concern would have been going into next year that the growth rate would, sort of, naturally slow and you're not necessarily calling for that to happen. Can you talk a little bit about what you need from an additive capacity standpoint as you think about incremental investments on the sales side? And as we look for the leverage in the model to continue to show up next year, should that predominantly come from the R&D line? Or will it be sort of largely split on the OpEx between the three items?

Sure. Tom, thanks for your comments. So couple things. One on the revenue side, the visibility on professional services revenue is not as good as it is on the subscription side of the business. And as we indicated, subscription, we expect subscription revenue growth to exceed professional services revenue. So that's sort of baked into our viewpoint on 2019. Secondly, your comment about on OpEx or our growth. We're comfortable. We see we're in the pipeline, but it is early for us to be much more specific about where we're going to be seeing the growth. I mean, Marty can talk about particular areas. But in general, it's pretty early, but we like what we see in the pipeline, particularly on the subscription side. On the operating leverage side, we do see this as mainly growing the topline to leverage the cost infrastructure that we'd have. We've made a lot of progress already this year. The incremental investments that I referenced are going to appear, probably, mainly in two areas. They're going to be on the, probably, professional services line and then also in the sales and marketing line, not on the R&D line.

Wonderful. That's great detail. Appreciate that. And let me sort of turn the question. And I'm not sure if this is better for Marty or Stuart, you want to take this one as well. You guys have been pushing on the notion of value-based pricing here a little bit more. And I'm curious if you have any thoughts, feedback from the customer base on the new pricing approach as it's sort of resonating through. You're just coming out of your user conference. Maybe you could talk a little bit more about what value-based pricing means to you, it means to customers? And how that's working out?

Sure, Tom. Happy to – this is Marty. We call it now solution-based pricing. And that we've had a change in how we label it, and it's turned out to be a very positive thing for us and the customers. The customers like it because when you're pricing by seats and they have lots of users who might only use the tool several times a quarter, it's hard for them to justify the cost. So what we've done is, by solution, given unlimited licenses, and we obviously increased the value and the cost of that solution. But then they are able to spread it across the lot of casual users, if you will. So in terms of how it affects us, it's a very positive thing because more people see our platform and it draws more interest. In terms of the customer, they like it too. We've interacted with hundreds of customers now. Very, very positive response. Most of them view it as a no-brainer. So it's been a very, very key move for us.

Great. Last really quick one here. Just thinking about the Gen 2 platform, you guys have opened that up to ISVs, and you now have some nice partnerships, there are SAP and KPMG. Maybe a little early to talk about what those partnerships mean, but just more broadly, what does the Gen 2 platform do in terms of flexibility and attracting other partners? And to the extent you're seeing traction out at the field already with those two partnerships that you announced, would love to hear about it.

Again, it's early days, but our new platform is all API-based. So as these partners need access to our platform either to extract data or put data in, it's easy for us to open those up, and we have opened up some already to them. So it gives us a lot of flexibility to integrate partners. In terms of starting to see traction, I alluded to that in the prepared remarks. But the thing – since it is early, but the thing I'm most enthusiastic about is that these partners see a real way for them to make services, monies. And when it's a win-win, it can really drive success. We've seen that in other SaaS companies. And so we finally have the right formula we feel, where we can go in and do things like financial transformations or statutory reporting or other types of use cases. And if the partners not only provide domain expertise but also take the services load, then it's a win-win. And so we're seeing excitement from the partners like we've never seen in the past, where they actually see a way to make money from this. And it's great for us because obviously, as we've always said, we definitely want to minimize our services component of our revenue stream.

Wonderful. That’s great. Thank you, guys. Appreciated. Nice job.

Thanks Tom.

And your next question comes from the line of Rob Oliver from Baird. Your line is open.

Good afternoon. Thank you. This is Matt Lemenager on behalf of Rob today. The number of customers over $100,000 and $150,000, both had sequential changes that were greater than the recent quarters in the year-over-year comparison, so those were up nicely. When a customer crosses those thresholds, I guess, what I'm wondering is, what does a typical profile look like, things like average number of products? Or have those customers adopted the new solution-based pricing? I guess, is there anything that could be helpful, like what do those customer profiles typically look like?

Well, Matt, it's a mixed bag. We have some customers that are in excess of $150,000 that only have one solution, just based on the size of the customer. We have customers that will cross that threshold and have three or four solutions. So it's really quite a mixture of things. The solution-based licensing is in early days. We've converted a small percentage of our user base. And so that really isn't seen in those numbers yet, but it will affect them, obviously. And remember, sometimes when customers – if it's a big customer and have four or five solutions, then we're way above $150,000 in total revenue from that customer. So it's really a broad-based support for that number.

That's helpful. And then on the partners, kind of following up on what Tom asked, but Marty, what you talked about in your prepared remarks with KPMG, the alliance of KPMG and working to more than 10 companies on a range of use cases, were those deals that you think maybe you wouldn't have even got to take a look at before without this KPMG? I guess, I'm just wondering, did that introduce these financial transformation project that may be just wouldn't have been on your radar before?

Well, a couple comments. First one is that the KPMG relationship so far has primarily been in the SOX and audit space. And just for that clarification, but also it's very fair to say that KPMG and a lot of our smaller managed partners, which there is over a dozen of those I believe, drive a lot of business we would never see without them. They have the relationships. They have the domain expertise. They bring a ton of value when we go in, in the sales process. And certainly in the GRC space, the SOX and audit and that space, they are a big contributing factor to our growth at this point. On the financial transformation, we're working with a lot of different partners that we haven't really talked about yet. But we expect the same phenomena there as we get further down the road.

Got it. Thank you.

Thanks Matt.

And your next question comes from the line of Eric Lemus from SunTrust Robinson. Your line is open.

Thanks guys. Thanks for taking the question. I appreciate that early look into 2019. And specifically on that revenue range that you guys provided, can we just unpack that a bit, how much of that is attributable to gaining new customers? How much is selling into the customer base? And is there anything attributable to the change into the solution based pricing? Anything grind into that guidance?

Hey, Eric. It's Stuart. So the $278 million to $280 million, we're not disaggregating that. We haven't even done that on a quarterly basis. But historically, we've been running about 50/50 on incremental subscription revenue growth is being from existing customers and new logos. I mean, that could change, but that's been the case now for quite a few quarters. We certainly have a balanced offensive attack, if you will between selling to existing customers and new logos. I don't know that we have any particular reason to believe it's going to be any different next year.

Okay, great. And then switching over to SAP, you guys have talked about that's kind of a multistage process becoming a partner with them. So I guess what inning are you in with that particular partnership? And how is that progressing? Was that potentially going to be somewhat of a reseller relationship, a referral, or technology integration? Can you just explain on that?

Well, this is Marty, Eric. I think that we've sort of commented on that before. For us, it's already been a very successful relationship because we have direct integration with our system. And they're helping us build that integration and we showed that at the user conference and it's something that really, really enables us to go into SAP accounts, whether they go in or we go in and provide that data assurance I've been talking about where the data just comes across automatically, populates all your reports, all your spreadsheets, all your presentations, all your dashboards just in one fell swoop and takes out all that manual process. So for us, we've already hit the home run in my mind. But in terms of the other business relation part, we're in early days and obviously, we sort of have to show what can be done in their ecosystem in terms of distribution. So that's early days. We have some accounts we're working together jointly, and when the time's right, we'll update you on that. But there's really no other definitive data on that.

I've got one thing to add. So I think it's also the relationship with SAP, and the tight integration there, the OEM relationship, has validated our technology with the IT departments, which are very important constituents to us, but have not historically been the focal point of our sales and marketing effort.

That's a good point. We got kudos from many of our customers at that announcement just because they knew that the integration would be there. The technical support from both sides would be there. And so like I said for us, it's already been a huge success in terms of enabling us to do a lot more with our customers. The business stuff is early days, and we'll keep you posted.

Got it, great. Thanks, guys.

And your next question comes from the line of Brian Peterson from Raymond James. Your line is open.

Hi, thanks for taking the question. So just wanted to start on this European opportunity, I know it's coming up for you guys. How should we think about sizing that? And if we look at getting in front of the customers, does that need more investment or are you going to try to partner to attack that? Just how should we think about that?

Well, Brian, here's the thing about the way we start to look at Europe is that, it's always more expensive to go in there, as you know. You have some language issues and other things like that. But when you really look at it, the market size is similar to the U.S., okay? And we have a fairly small footprint. We have some very good logos there that really let us learn the market. And so for us, it's a Greenfield market in many ways. And so we have some very good leadership now that's really made a difference. And so we're bullish on EMEA, just because it is Greenfield. And when you start up aggressively pushing a set of products and with the sales team and a Greenfield account, you always expect to see good things. So we're very excited about it.

Thanks Marty. Maybe as a follow-up, just on the solution-based pricing, obviously, we don't have the contract-by-contract or customer-by-customer details, but when would you expect the full customer base to kind of be migrated over to the new model? And what should we be thinking about or maybe in terms of 2019 that's implied in the guidance? How much do you think would be its run the new pricing model at that point?

Well, I think that some of the contracts we have with customers are multiyear. And so some of this we approach them early and let them do it voluntarily, and we've seen some success there. But in general, it's going to take two years or more to convert the bulk of our customers. That's actually fine for us that you want to take the customers through the learning curve understanding what they're getting. And it will just be a nice natural transition. So it will be over two years to get them all migrated. We have adopted that for our go-to-market for new customers, and it's having an impact there as well for the new logos.

Good to hear. Thanks Marty.

Thanks Brian.

Thanks Brian.

And your next question comes from the line of Mike Grondahl from Northland Securities. Your line is open.

Hey, thanks guys. Any update on the value pricing initiative you sort of rolled out earlier this year?

This is Marty. I mean that's what we've been talking about when I say solution-based licensing, and I apologize we switched that acronym on you after last call. But we did that just because of the customer communication. We found that solution-based licensing was a lot better than value-based pricing. And so yes, it's been very successful for us. We're very excited about this. We think it's going to really help our expansion in these accounts just because of the visibility of our tool and also provide more value, more stickiness and giving them actually a lower priced per seat, but us higher revenue number. So we're very enthused about it.

Great, great. Okay. And then any new use cases to call out in the last quarter or so?

Well, I don't know, if they're new, Mike. But certainly there's some we're going to focus on lot more. We've sort of found that finding a use case that has a really nice addressable market, and we look at it as a very finite way. Its number of people we can sell it to and how much we can get per installation, but finding those in increments of tens of millions of dollars and then seeing how well our platform fits it. We've focused in on a couple. One clearly is going to be this financial transformation that we're just getting a lot of buzz about in our user base and driving some of those $100,000 plus new companies you're seeing in the numbers. And so financial transformation is something we're very excited about and we're doubling down on and focusing on. We also are optimistic about investments reporting, and we're focusing on that market as well. And in statutory reporting, we're starting to see sales there organically, and so we're going to also focus on that. So those are probably the use cases that have the nicest TAMs associated with them. As we've always told you, our biggest issue has always been choosing the markets to focus on. There's so many places that this platform is applicable to. It's more about us focusing, so that we get the right type of return on investment. We don't have unlimited resources. So we are just trying to find those, and we think we've found some. They are going to really have a nice ROI for us.

Good, great. Thanks and congratulations guys.

And your next question comes from the line of Hamza Fodderwala from Morgan Stanley. Your line is open.

I just wanted to dig in a little bit on the partnership, not necessarily just KPMG, but the technology partnership. How has those been ramping in Q3? And when can we see that become a more meaningful portion of the business?

Well, the technology partnerships that we've announced, Anaplan and SAP in terms of when it's going to impacted, it's a ways off, but we're seeing some really good joint go-to-market activities with Anaplan internationally. We feel a need for them and they feel a need for us. So we're very optimistic about that and we're seeing a lot of cooperation between our sales team. And then with SAP, I commented earlier, we're definitely seeing some joint go-to-market opportunities. And so those things obviously are something that take time to develop. If you look historically at other companies that have put these relationships together, it takes years not months to build. But the early signs in terms of interest from both sides, all of these partnerships take win-win. And so many of them you go in to, you don't find that formula. But in these, we're definitely seeing that.

And then just a follow-up on the 2019 outlook. So you mentioned single-digit operating margin, that's single-digit positive operating margin, correct? Just want to make sure?

Yes. No, that was single-digit negative operating margin.

Okay. Okay, all right. Thank you.

Gotcha. Thanks, Hamza. End of Q&A

And there are no further questions at this time. And this concludes today's conference call. You may now disconnect.