阿卡邁科技 (AKAM) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Akamai Technologies Inc. First Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Tom Barth, Head of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining Akamai's first quarter 2018 earnings conference call. Speaking today will be Tom Leighton, Akamai's Chief Executive Officer; and Jim Benson, Akamai's Chief Financial Officer.

Before we get started, please note that today's comments include forward-looking statements, including statements regarding revenue and earnings guidance. These forward-looking statements are subject to risk and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements. Additional information concerning these factors is contained in Akamai's filings with the SEC, including our annual report on Form 10-K and quarterly report on Form 10-Q. The forward-looking statements included in this call represent the company's view on April 30, 2018. Akamai disclaims any obligation to update these statements to reflect future events or circumstances.

As a reminder, we will be referring to some non-GAAP financial metrics during today's call. A detailed reconciliation of GAAP and non-GAAP metrics can be found under the financial portion of the Investor Relations section of our website.

And with that, let me turn the call over to Tom.

Thanks, Tom, and thank you all for joining us today. Akamai delivered excellent results in the first quarter. Revenue was a record $669 million, up 11% over Q1 of last year, with strong performance across all sectors of the business.

Q1 non-GAAP EPS was $0.79 per diluted share, up 22% year-over-year. This very strong result was driven by the acceleration in our revenue growth rate, the impact of the cost reductions that we made in the fourth quarter of last year and a lower tax rate.

EBITDA margins in Q1 improved to 38% and non-GAAP operating margins were 25%. We expect further improvements in margins by the end of the year, in part because of the additional cost reduction actions that we took in Q1. And we're continuing our work to find a path to achieve non-GAAP operating margins of 30% in 2020 while also continuing to invest in the development of new products to fuel our future growth.

Our security portfolio was again the fastest growing part of our business in Q1 with revenue of $149 million, up 36% over Q1 of last year. The strong growth of our security business was driven by our market-leading Kona Site Defender and Prolexic Solutions as well as our new Bot Manager Premier and Nominum services. Each of these solutions has proven to be highly effective against very large and sophisticated cyber attacks.

For example, in February, we used our Prolexic Solution to defend one of our customers against what we believe to be the largest DDoS attack ever recorded, deflecting more than 1.3 terabits per second of attack traffic. It's always hard to comprehend numbers this big, but to put it into context, 1.3 terabits per second of attack traffic is enough to overwhelm most data centers and Internet service providers, and even many countries' Internet connections to the rest of the world. It's also more than double the amount of traffic we saw from the Mirai IoT botnet attacks in late 2016.

In another example, a few weeks ago, we used our Bot Manager Premier and Kona Site Defender Solutions to defend a large ecommerce customer against one of the most sophisticated bot attacks that we've ever seen. In this case, the attacker was attempting to buy out the site's entire inventory during a promotional sales event so that they could later resell the merchandise at a higher price on the gray market. The attacker deployed a very large botnet to generate 800,000 transactions per minute, more than 100x normal. But Akamai was able to accurately detect and filter out the malicious transaction request and only allow legitimate users into the site to buy the merchandise.

Bot Manager Premier uses sophisticated AI and machine learning technology to analyze the motions and actions on the requesting device in order to distinguish between human neuromuscular signatures and machine-generated requests. This technology is especially effective in forwarding bots that are trying to take over end user accounts.

At the recent RSA Conference in San Francisco, a leader at one of the world's largest financial institutions told me that when they deployed Bot Manager Premier, the number of their accounts that were compromised by bots dropped from over 8,000 per month to just 1 or 2 per month. That's not 1,000 or 2,000 per month, it's now literally just 1 or 2 compromised accounts per month. And that resulted in tens of millions of dollars in direct annual savings due to the decrease in fraud. As you might imagine, they are a very happy Akamai customer.

It's because of such impactful capabilities that the financial services industry is one of our largest and fastest growing verticals. Of the over 500 financial institutions that we service, over 400 use our security solutions, including all top 25 U.S. banks and 22 of the top 25 in Europe.

Another key differentiator of our security solutions is the enormous volume of data that we see on our platform. By analyzing and processing this data with advanced AI and machine learning algorithms, we can quickly identify malicious entities and then use that information to protect our customers from a wide variety of attacks.

For example, with the addition of Nominum, we now process 1.7 trillion Domain Name System, or DNS queries, per day for over 100 million domains. The DNS namespace evolves quite rapidly, especially for domains that are associated with botnets and other malicious activity. On a typical day, we identify 5 million new core domains, many of which turn out to be malicious. And we block access to over 1 million malicious domains every day, thereby, helping to keep our customers and their end-users safe.

Our suite of security solutions was an important contributor to the revenue in our Web Division. In Q1, Web Division customers generated $353 million in revenue, up 16% over Q1 of last year. Web Division revenue was also driven by the continued success of our flagship Ion solution, along with our new Image Manager and digital performance management solutions.

Across the company, we now have over 1,000 customers using our new solutions. The revenue from these solutions in Q1 was more than triple the revenue from Q1 of last year and is now on a run rate of well over $100 million per year.

Revenue for our Media and Carrier Division in Q1 was $316 million, up 6% over Q1 of last year. This much improved result is a consequence of the work we've been doing to improve our traffic share in the top 250 global media accounts. In fact, traffic growth on the Akamai platform overall in Q1 accelerated over the already high rates that we saw in the second half of last year, and it remains well beyond reported industry norms. The traffic growth in Q1 was especially strong in our OTT and gaming sectors.

Akamai has delivered several notable sporting events so far in 2018, including most of all the major sporting events online. In one of the most exciting, Akamai set a record for concurrent viewers of a sporting event with our delivery of the Indian Premier League's cricket match on April 25. As the exclusive CDN for Hotstar, India's largest premium streaming platform, we delivered video to nearly 7 million concurrent viewers, 98% of whom were using mobile devices and 89% of whom connected through a cellular network. We believe this is the model for the future: media companies relying on Akamai for secure delivery of high-quality video streams to many millions and someday potentially billions of mobile devices around the world.

In summary, I'm very pleased with our Q1 results. It was great to see the continued, very strong performance of our security business, which now has a revenue run rate of $600 million per year; the much improved performance and growth of our Media and Carrier Division; the acceleration and revenue growth for the company overall; the improvement in margins; and the very strong growth in the bottom line.

As I look to the future, I believe that Akamai has tremendous potential and that we're well positioned to capitalize on significant market opportunities in areas such as cloud security, mobile and web performance management, OTT video streaming and the Internet of Things.

We're continuing to invest in innovation and new capabilities to drive future revenue growth while also having the discipline to effectively manage costs and our effort to further expand margins and profitability.

We believe that our unique technology, unparalleled Edge platform, strong relationships with the world's leading carriers and major enterprises, highly talented and hard-working employee base, strong corporate culture and our relentless and personalized attention to customers and partners all provide Akamai with a foundation for a very bright future that creates value for our shareholders, customers and employees.

I'll now turn the call over to Jim to review our financials and guidance for the year. Jim?

Thank you, Tom, and good afternoon, everyone. Before I get into the highlights of our Q1 results, I want to start with 3 quick financial housekeeping reminders.

First, as I mentioned on last quarter's call, we adopted the new revenue accounting standard, ASC 606, effective Q1 2018. We adopted ASC 606 on a full retrospective basis so on today's financial results, all prior periods comply with the new rules.

As we told you in February, the new accounting standard does not materially impact Akamai's historical or projected revenue and income statement. And for clarity on the modest impact of the changes, we have provided detailed reconciliations on the Investor Relations section of the Akamai website.

The new standard primarily impacts the revenue timing of a few license software customer contracts, a very small component of our revenue. And while immaterial on a full year basis, the new standard may result in modest quarter-to-quarter revenue fluctuations. The new revenue standard also requires us to defer and amortize certain sales' commissions costs. And as I mentioned on our last call, our Q1 and full year 2018 guidance projections reflected the impact of the new revenue standard.

The second housekeeping item pertains to some detailed revenue reporting disclosures. As we outlined in the last call, we are now reporting revenue under a 2-division customer-centric structure: Web Division and Media and Carrier Division. This divisional dimension is the primary lens through which we drive and report the business.

Finally, as we also told you in February, we will no longer be providing a solution category revenue view because we no longer believe it is a useful measure in understanding our business performance, especially with the growing overlap between some of our Media Delivery and web performance product portfolios. We will provide additional visibility into areas of our business that we believe are important to understand as key drivers of future growth, which is why we will continue to break out our Cloud Security Solutions.

Now on to our strong Q1 results. As Tom outlined, Akamai had a tremendous first quarter, exceeding the high end of our guidance on revenues, operating margins and earnings. Q1 revenue came in well above the high end of our guidance range at $669 million, up 11% year-over-year or 9% in constant currency, and up 11% in constant currency if you exclude the 6 large Internet platform customers, an acceleration over Q4 levels. Revenue growth was strong across the business with the primary overachievement compared to guidance driven by higher media traffic volume than we anticipated going into the quarter. We also continued to see rapid growth of our security products across both divisions.

Revenue from our Web Division customers was $353 million, up 16% year-over-year or 13% in constant currency. We remain pleased with the strong growth in this division and the expanded product and customer revenue diversification across the company. And our Web Division customers now represent roughly 53% of Akamai's overall revenue. Within our Web Division, we continued to see strong uptake in our new product areas, namely Image Manager, Digital Performance Management and Bot Manager as well as continued strong growth in our core Kona and Prolexic Cloud Security Solutions.

First quarter revenue for total Cloud Security Solutions was $149 million, up 36% year-over-year or 32% in constant currency, another tremendous quarter of revenue growth and customer adoption of our Cloud Security Solutions globally. Entering the second quarter, our rapidly growing cloud security business now has an annualized revenue run rate of over $600 million and represents over 22% of our total revenues.

As Tom mentioned, we believe security presents a tremendous growth opportunity for us, and we plan to continue to invest in this area with a focus on further enhancing our product portfolio and extending our go-to-market capabilities.

Moving now to our Media and Carrier Division. Revenue for this set of customers was $316 million in the quarter, up 6% year-over-year or 4% in constant currency, and up a healthy 8% in constant currency excluding the large Internet platform customers. Revenue from the Internet platform customers was down from Q levels -- Q4 levels, as expected, while revenue and traffic volumes in the rest of the division were strong across all geographies and industry verticals and significantly exceeded our expectations in the quarter.

Traffic growth accelerated for the third straight quarter and was particularly robust from our video delivery and gaming customers. And as Tom noted, we also had a number of notable sporting events in the quarter that contributed to the strong traffic and revenue growth, each event with record-breaking online audiences.

As we have highlighted on the last several calls, our Media and Carrier Division management team has been focused on capturing more traffic share and improving the quality of delivery for the top 250 media customers that account for most of our traffic and revenue. Because of these efforts, traffic growth accelerated and exceeded market growth rates in Q3, Q4 and Q1, and we are now beginning to see the associated revenue acceleration.

Moving on to our geographies. Sales in our international markets represented 37% of total revenue in Q1, up 2 points from Q4 levels. International revenue was $245 million in the first quarter, up 22% year-over-year or 14% in constant currency, driven by continued strong growth in our Asia Pacific region. Foreign exchange fluctuations had a positive impact on revenue of $17 million on a year-over-year basis and $7 million on a sequential basis.

Revenue from our U.S. market was $423 million, up 6% year-over-year and up 9% excluding our large Internet platform customers, an acceleration from Q4 levels in our Media Division, notably.

Moving on to costs. Cash gross margin was 77% consistent with Q4 levels and in line with our guidance. GAAP gross margin, which includes both depreciation and stock-based compensation, was 65%, consistent with Q4 levels and also in line with our guidance.

Non-GAAP cash operating expenses were $258 million, down $2 million from Q4 levels and about $7 million below our guidance, partly due to higher software capitalization rates and partly due to early traction from our operational efficiency efforts. It is notable that we reduced operating expenses in the quarter while at the same time, absorbing the full quarter impact of the recent Nominum acquisition.

Moving now to profitability. Adjusted EBITDA for the first quarter was $256 million, up $11 million from Q4 levels. Our adjusted EBITDA margin came in at 38%, an improvement of 1 point from Q4 levels and 2 points above our guidance range, primarily due to strong revenue achievement and the accelerated traction and operational efficiency I just mentioned.

Non-GAAP operating income for the first quarter was $167 million, up $8 million from Q4 levels. Non-GAAP operating margin came in at 25%, up 1 point from Q4 levels and 2 points above our guidance range. As our margin expansion in Q1 highlights, our efficiency efforts have already positively impacted the P&L, and we are working hard to drive further operating margin improvements.

Capital expenditures in Q1, excluding equity compensation and capitalized interest expense, were $76 million or 11% of revenue. This was $6 million above our guidance for the quarter due to higher capitalized engineering expenses and the acceleration of some network build-out given the stronger-than-expected traffic volumes.

Moving on to earnings. Non-GAAP net income was $136 million or $0.79 of earnings per diluted share, $0.09 above the high end of our guidance range and driven by the combination of revenue performance, reduced operating expenses and a lower tax rate. Taxes included in our non-GAAP earnings were $35 million based on a Q1 effective tax rate of 21%. This tax rate is a couple of points lower than our guidance due to a higher mix of foreign earnings.

Moving on to our GAAP earnings. There were a few large and noteworthy items excluded from our non-GAAP results but impacting our Q1 GAAP results that I'd like to provide some color on.

First, as we highlighted in our last call, we recorded an additional $15 million restructuring charge in Q1, bringing our total Q4 and Q1 restructuring charges to $66 million. These charges are related to headcount reductions, facility closures and capitalized software impairments and resulted from decisions to deprioritize certain investment areas that have not achieved the commercial success and return on investment we expected, notably in our Media and Carrier Division.

We implemented some of these actions in the middle of the fourth quarter and completed most of the remaining actions in the first quarter. It is important to note these restructuring actions were taken to enable some rebalancing of our investments, divesting in some areas, investing in others, with the goal of positioning the company to meet our long-term objectives of continued growth and scale.

The second noteworthy item impacting our Q1 GAAP results was the decision to settle the long-standing legal disputes with Limelight. The terms of the settlement include a roughly $15 million settlement fee paid over 5 quarterly installments, but recorded in full within our Q1 results. This settlement allows us to finally put these disputes and the associated costs and distraction behind us and instead focus most of our efforts on the strategic priorities of the business.

The last item impacting our Q1 GAAP results were some onetime financial and legal advisory services related to the initiatives associated with our recent collaboration with one of our largest shareholders. Factoring in these various GAAP-only items, GAAP net income for the first quarter was $54 million or $0.31 of earnings per diluted share.

Now I'll review our use of capital. We continue to focus on the importance of returning capital to our shareholders. During the quarter, we spent $20 million in share repurchases, buying back roughly 300,000 shares. And just last month, our Board of Directors approved an increase in our current share repurchase authorization to $750 million, which we plan to utilize by the end of 2018. And given our strong balance sheet and cash generation, beyond 2018, we intend to continue our share repurchase plan to offset dilution from equity compensation plans and at times, to opportunistically return more cash to shareholders, depending upon business and market conditions.

As always, our overall aim is to deploy our capital to achieve favorable returns for our investors in a manner that we believe is in the long-term interests of the company and our shareholders.

In summary, we are extremely pleased with the revenue acceleration and margin expansion we delivered in Q1 and our momentum exiting the quarter.

Moving now to guidance. Looking ahead to the second quarter, we are projecting another strong quarter on the top and bottom lines. We do expect some currency headwinds from the recent strengthening of the U.S. dollar over the last couple of weeks. At current spot rates, foreign exchange fluctuations are expected to have a negative impact on Q2 revenue of just over $2 million compared to Q1 levels.

Coming off a very strong first quarter for media with several large gaming releases and sporting events combined with the foreign exchange headwinds, we are projecting Q2 revenue in the range of $658 million to $670 million. At these revenue levels, we expect cash gross margins of 77% and GAAP gross margins of 65%, consistent with Q1 levels.

Q2 non-GAAP operating expenses are projected to be $249 million to $254 million, down from first quarter levels as we see the full quarter benefits from our Q1 operational efficiency and restructuring actions. Factoring in the cash gross margin and operating expense expectations, we anticipate Q2 EBITDA margins of 39%, a 1 point increase from Q1 level.

Moving now to depreciation. We expect non-GAAP depreciation expense to be between $89 million to $92 million. Factoring in this depreciation guidance, we expect non-GAAP operating margins of 25% to 26% for Q2, an increase of roughly 1 point from Q1 levels. And with the overall revenue and spend configuration I just outlined, we expect Q2 non-GAAP EPS in the range of $0.79 to $0.83. This EPS guidance assumes taxes of roughly $35 million based on an estimated quarterly non-GAAP tax rate of 20% to 21%. This guidance also reflects a fully diluted share count of just over 172 million shares.

On CapEx, we expect to spend approximately $111 million to $116 million, excluding equity compensation in the quarter. This spend is up over Q1 levels as we expand our network capacity to support the traffic growth we were expecting on the platform.

Looking to the full year, we are anticipating revenue of $2.69 billion to $2.72 billion and at the midpoint, an increase of $20 million from our prior outlook. At these revenue levels, we anticipate EBITDA and non-GAAP operating margins of 39% and 25%, respectively, an increase of 2 points from our prior outlook, driven by the revenue achievement and accelerated traction in our operational efficiency initiatives.

Factoring in these revenue and margin levels and an expected non-GAAP effective tax rate of 20% to 21%, we anticipate non-GAAP earnings per diluted share of $3.15 to $3.25 for full year 2018 and at the midpoint, an increase of $0.25 from our prior outlook.

As a helpful reference, we will post our Q2 and full year 2018 guidance ranges on the Investor Relations section of our website after this call.

In closing, we're very bullish about the opportunities ahead for Akamai. We are confident in our ability to continue to innovate and add new capabilities to drive future revenue growth, while at the same time, drive margin and earning expansion in 2018 and beyond, which we believe will add significant shareholder value over both the near term and long term.

We will be hosting our annual Analyst Day on June 26 at the Boston Cambridge Marriott Hotel, and we look forward to sharing more details about our business strategy, market opportunities, product vision and our work to find a path to achieving non-GAAP operating margins of 30% in 2020, while also continuing to invest in the development of new products and capabilities to fuel our future growth. If you can't join us live, the event will be webcast via the Akamai platform.

Thank you. And Tom and I would like to take your questions. Operator?

(Operator Instructions) Our first question comes from the line of Mark Mahaney from RBC Capital Markets.

Just 2 numbers questions, please. That international growth rate adjusted to 14%, that's solid. But that does show the deceleration over the last 2 years, I think, on an adjusted basis, like-for-like basis. So any color there on expectations going forwards? Were there any unusual items that may have depressed that growth rate? Any way to think about that going forwards on the international side? And then the other numbers question has to do with this revenue from the Internet platform customers of about $44 million. There may have been an expectations in the market that, that would stabilize around $50 million. Do you want to talk about if that's stabilizing currently around these levels, is a way to think about what that looks like over the next year or 2?

Sure, Mark. So the first one on our international growth. I think we're pretty pleased with the international growth of 14%. You are right, that that is lower than we saw on 2017. If you look at Q1 of 2017, we had very strong growth rates in Q1 of '17 of 21%. So this is coming off of a difficult compare. But we expect that our international growth rates to remain kind of in the mid-teens growth rates. So I think we're pleased with international growth. There's nothing notable to comment there. I think we have strong growth in Asia Pacific. We've had steady growth in our European markets as well, and we expect that to continue. And relative to the Internet platform customers, you're right. Last year, they were roughly $50 million a quarter. But if you recall, from Q4 of '16 to Q1 of '17, they declined about $8 million. So they do normally decline sequentially from Q4 to Q1. And so declining from roughly $50 million in Q4 to $44 million was in line with our expectations. And we would expect that they'll probably hover in kind of the low- to mid-40s throughout 2018.

Our next question comes from the line of Keith Weiss from Morgan Stanley.

I guess, one top line question and one kind of expense question. On the top line, it sounds like you guys are really seeing the volumes around OTT picking up and be very strong and definitely growing media traffic ahead of our expectations. Can you talk to us a little bit about the pricing side of the equation on how those kind of negotiations are taking place and sort of where pricing is farming out? And then on the OpEx side. It sounds like we're most of the way through, if I'm thinking -- hearing it correctly, most of the way through of executing the restructurings that you guys talked about in Q4 and into Q1. Am I thinking about that right of that, sort of most of the actions have already been taken? And if you give us a little bit more detail in terms of where were you able to find good expense reductions that weren't going to be impactful? And were areas like distribution off the table? Are you comfortable that you still have the same kind of distribution capacity going into some of these newer markets?

Sure, let me take that. So your first question around the pricing environment in media business. As we've said, for a long time, the pricing environment in the media business remains very competitive. So that hasn't changed. It hasn't gotten kind of worse or better. It's just a very, very competitive pricing environment with alternatives that are out there. And as we mentioned that last year, when we saw traffic growth slowing in the first half of 2017 we put a very concerted effort in place to go and drive strong traffic growth and work with customers to tune contract structures, and some of that was through a reprice and some of that was through just a more creative contract vehicle with them, to drive more traffic share. And we specifically signaled that at times it takes 6 to 9 months from traffic growth accelerating to seeing revenue acceleration. And so what you saw in Q1 was exactly what we said was going to happen, which was we saw traffic growth accelerate in Q3 and Q4. And now we're seeing the manifestation of that effort in revenue growth. So we feel pretty good about the progress that we're making in the Media Division. And relative to OpEx, yes, we took -- most of the actions were taken in Q4 and we finished the remaining actions or most of the remaining actions in Q1. But I wouldn't say that, that is the end of our operational efficiency efforts, that I would say that's the beginning of some of our efficiency efforts. There's areas that we're going to drive that I'll provide a little bit more clarity on at the upcoming Analyst Day. Some of those include continued reductions in facilities. And then there's some areas that we're going to drive around third-party vendor savings and then just driving broader efficiency actions in different areas of the business that we've talked about that we've always done a good job of driving costs out of the network. We'll continue to do that. So what you'll hear from me in June is I'll outline kind of some of our ideas around what's the work we think we can drive to try to find a path back to operating margins of 30%. Now obviously, it's going to be a glide path. But I'd say we're very, very pleased with the traction that we made in Q1. You saw margin expansion. We haven't seen margin expansion for many quarters. We are guiding to have margin expansion happen in Q2 and margin expansion for the full year. So we're pretty pleased with the progress that we're making, both from a top line and on efficiency to drive margin expansion.

Our next question comes from the line of Mike Olson from Piper Jaffray.

I had 2 questions, if I could. The first one, I wanted to ask another on OTT and maybe just slightly different from the previous question. Essentially, is the OTT inflection point really starting to show itself now for Akamai's media business? Or is it kind of still early days for OTT? And then second, with the more favorable environment for use of international cash, et cetera, do you see Akamai getting more aggressive on the M&A front? And if so, I'm sure you can't say specifically, but what kinds of add-ons from a high level could we expect you to be looking at?

Yes, I don't think we've seen a huge inflection point in OTT traffic. I think there's strong and steady growth. And as we talk about, we're certainly growing our market share there. We're growing at a much faster rate in terms of the traffic, and that's in part because of the focus on the top 250 media customers, in part because of the quality levels we can deliver, in part because of our unique scale. So there's a lot of reasons for that. But I'd say it's early days compared to where this can ultimately go. In terms of M&A, I'll let Jim talk about the cash, but our approach to M&A I think is the same as it's been. We're interested in companies that have technology that we can embed in our platform, bring to bear for the benefit of our customers, maybe an important and product adjacency for example, Prolexic, Cyberfend is another example there. So the kinds of things that we've been doing in M&A, I think, is what you'd see us continue to do in the future. And Jim, would you like to talk about cash?

Yes, I mean, we have $1.3 billion of cash on the balance sheet. We're a significant generator of free cash flow. So we have a strong balance sheet and a cash flow to be able to do M&A, and you've seen us do that. And as Tom said, that those are the areas we're going to continue to look at. And as far as our cash profile, most of our cash is in the U.S. and so we're not in a position where we have to repatriate a bunch of cash that's sitting offshore. Most of our cash is actually in the U.S. I think we have roughly $200 million of cash offshore. So we're in a good position to continue to execute against the priorities of the business, and M&A is certainly an area that we're going to be active in looking. And as we've seen and we told you in the past, we're active shoppers but disciplined buyers. We did 2 acquisitions in 2017, both product adjacency areas or one very much a product adjacency area and one kind of somewhat in our sweet spot with recursive DNS, but improving our security capabilities. So you should expect that we're going to continue to be active there.

Our next question comes from the line of Vijay Bhagavath from Deutsche Bank.

My question to you, Tom, is you do have live events that kind of perturb the traffic mix and also growth rates every now and then. So even if you look at the current results, how would you parse live versus nonlive? And where I'm coming from is this helps us understand the sustainable growth rate in Media Delivery either with or without live events.

Well, as we talked about before, live events, when you have a lot of them, can be helpful in boosting overall revenue. But the majority of OTT traffic and revenue is on-demand and linear is a component there as well. So live events are exciting. You see a lot of new technology there. You see the new traffic records take place there. They're very important to a lot of the big media companies. They generally turn to Akamai there because of the scale and the quality and our help getting a really good event to take place. But the lion share of the revenue is the day-to-day, the video-on-demand, and that's an area we put a lot of effort into as well.

And a quick follow-on would be on enterprise security. Would $100 million of enterprise security revenue just for example, be a reasonable target in terms of modeling? How would you look at enterprise security as contributing to your overall security business?

Well, as we talked about, it's early days for our enterprise security products, there are Enterprise Application Access and Enterprise Threat Protector. We think there's a very bright future for our enterprise security offerings and our success will be well beyond $100 million in revenue. We now are up to 100 customers, so very early days there. Very pleased to see the traction that our road map and viewpoint is having with customers around the notions of 0 trust and the future of enterprise networking and security, but still early days there. But optimistic in terms of the future.

Our next question comes from the line of Siti Panigrahi from Wells Fargo.

Just on the security side, that's pretty strong, accelerated to 36%. Just wondering how much was the contribution from Nominum in that -- in this quarter? And also, have you -- when do you expect some kind of meaningful contribution from products like Enterprise Application Access, I mean, and Bot Manager? Are -- also like how much was the contribution from the Bot Manager? Just trying to understand the Prolexic and Kona versus the newer product contribution.

Yes, we've continued to have strong growth in call it the core security business kind of excluding Nominum that we've been growing that in the high 20s and you kind of have a similar growth rate this quarter. Nominum was about $10 million, I think, of revenue in the quarter. We had a good Nominum quarter. So Nominum was certainly a contributor. But as Tom has talked about that we're doing well in security across all of the product categories. So we're doing well with Kona Site Defender. We're doing well with Prolexic. And we're doing particularly well in some of the new product areas, Bot Manager being one. Tom talked about it on the last call, talked about it again now that Bot Manager actually is becoming a meaningful contributor for revenue in the security business. So we're very bullish about the security business that I'd say the growth rates that we've seen here, we think we can continue to grow the security business in the high 20s, low 30s for the remainder of the year. So we're pretty bullish about the opportunities in security both this year and beyond.

And let me just add. Nominum is important to us for beyond just the direct revenue and of course, the carrier relationships. Because of Nominum, we now see an enormous number of the DNS transactions. And we're in a unique position to identify the botnets and malicious activities in close to real-time. And that's really useful for making our other security products where we're selling directly to enterprises be a lot stronger in terms of identifying malicious activities. In particular, Enterprise Threat Protector, which we can now leverage the data and the knowledge about the bad entities in Enterprise Threat Protector. So there's indirect benefits as well. It really, as you go forward, I think in cybersecurity, the access to the data and being able to process it in near real-time with the latest in AI and machine learning capabilities gives us a great leg up on potential competition.

That's great color. Just a quick follow-up. How much was the SOASTA contribution this quarter in Q1?

I mean, we're not -- we don't break those amounts out separately. That's -- SOASTA gets sold across both of our divisions. I don't recall the exact amount for SOASTA. But I would say that across all of the new product areas, SOASTA being one of them. As Tom mentioned, the new product areas that we've launched within the last kind of 12 to 15 months now are well over $100 million annualized run rate. So we're very pleased with the innovation that you've seen in the company. Some of it comes through M&A but a lot of it has come through just organic innovation that we've driven, that it's now becoming a meaningful contributor to the Akamai revenue stream.

Our next question comes from the line of Brad Zelnick from Credit Suisse.

I think I've got one for Tom and one for Jim. For Tom, some of your smaller competitors just recently in the last quarter or so introduced the ability to run code at the network Edge. Is this something you need to offer to be competitive? And how do you think about that opportunity?

Yes. Well, we've done that for a long time, a really long time. Now as we -- and we continue to work in that area, particularly as we support non-HTTP protocols, as we support containers at the Edge for IoT kinds of services. But that's not a new thing. I think some of the applications coming in IoT are pretty exciting that we'll probably talk more about that at the Investor Day.

Appreciate the perspective. And Jim, as we look at the actions that you took last year to capture more traffic share in media, they're clearly paying off. You've now seen accelerated traffic growth the last few quarters. But how should we think about the duration of that benefit? You talk about a focus on the top 250 accounts. Have all of those accounts been restructured and -- or is there still some way to go? Like do we get to a point where you anniversary the benefit? How do we think about the timing and duration benefit?

Yes, I mean, you're always renewing customers. So I'd say the majority of the customers that we've sought to kind of reprice, we've already done. We did that in the back half of last year and a little bit in Q1. But you've got to remember that what drives the media business is traffic volumes. And so, yes, there is an element of anniversary-ing kind of agreements but what you want to drive in the media business because the media business is about traffic and price. So you want the customer on the platform, then you want the customer to push as much traffic volumes as possible. And so you do that through giving them the right price point and delivering the best performance and quality. And so by doing that, we believe we're in a good position focusing on these top 250 customers and also focusing on maybe new emerging customers that we think are going to be big traffic pushers. And just making sure that again, they have the right price point and they have the right contract structure in place. And we think the combination of those 2 things are going to allow the media business to continue to grow. Now as we've said in the past, the media business is variable because the nature of traffic is variable. We had a good quarter this quarter. We had a good quarter in Q4 and in Q3. Some of this quarter, it was strong across the board. But some of this quarter, as I mentioned, we had a very, very strong gaming quarter. There were some large gaming releases in the quarter. We had a very strong quarter, as Tom mentioned, around video delivery. Some of that video delivery growth that was really strong came from these major sporting events that we mentioned. And while they're not by themselves a huge contributor to revenue, they do contribute, especially large sporting events like the Olympics that last for a couple of week time periods. So we're pretty bullish on the media business on the long term. If you look at this thing over multiple kind of years, this is proven to be a consistent revenue contributor. And we think that actually, the recovery we've seen here and the focus that we have are going to continue to fuel growth in the media business going forward.

Our next question comes from the line of Sameet Sinha from B. Riley FBR.

I'm going to have 2 questions here. So first one in terms of cost savings. Jim, can you help us think about the initiatives that you put into place in Q4? Q1 you'll obviously have some savings because you're not litigating against Limelight anymore. And then also, if you can add -- one of the arrangements you had with your activist investor was to hire a consulting firm to look more into these. Can you help us -- can you tell us whether that's already been done, where it's in the process or where they are in the process of kind of giving their recommendations? And my second question is, you've spoken about OTT gaming. I guess sports is part of OTT or video. So this -- I think this should be a good growth driver for the next couple of years. Can you help us think about long term? What other applications or use cases are there that can leverage your network so we can get a kind of good sense of what are the growth drivers longer term?

Well, I'll let Tom comment on the second one. But on the cost savings again, kind of a similar question to the gentleman that asked a few questions before. We took some actions in Q4. We took some further actions in Q1. Again, the employee actions are largely behind us. The actions are certainly much, much more than that, though, that there's actions we're taking around a bunch of different areas. And I mentioned facilities being one, third-party vendor savings being another. We're going to continue to drive those areas in addition to areas around driving more cost out of the network, being able to scale better on the network. And I'd say, relative to some of the announcements that we made in March with the settlement with Elliott that effectively, what we talked about was that we were going to form a finance committee for the company, for the board, that was going to oversee the work we're trying to drive to find a path or to see if we could find a path to drive operating margin to 30% in 2020. One of those things was to identify -- seeing if we can get a third-party consultant to help us. We have already made a selection on the consultant. They have not yet begun, they're going to begin this month. And so the work and the progress that we've made to date has largely been driven by the actions and initiatives we took really beginning in Q4, continuing in Q1. I think the work that we're going to do going forward are what are the areas that we can be smart about driving and scaling the business without doing anything that doesn't impact revenue growth. We want to make sure we're making the right investments in the business to fuel growth for the company. You talk about a lot of the areas already on the call and new product innovation areas that are fueling the growth for the company, making revenue much more diversified for the company, revenues much more diversified now by customer. It's much more diversified now by product. We think that's important for the long term. And we're going to continue to make those investments while we're trying to drive initiatives to drive scale for the business. And we think we can do both.

To your second question, we're just beginning with OTT and online gaming. We talk about some of these events that have still single-digit million concurrent viewers, tens of terabits a second of traffic, teens really. And those numbers can grow by 1 to 2 orders of magnitude. So huge potential future growth there. So it's not the kind of thing that I think about OTT and gaming and saying, okay, that's done. We're just at the very beginning there. And there's a lot of innovation that still we are working on to be able to deliver at enormous scales and make that be affordable, make it be really high quality and secure. In terms of things that are totally different and in the future, I think IoT is a very exciting area as billions of smart devices get connected, probably not communicating using HTTP, but need to communicate. You need real-time command and control data aggregation, alerting. These are things that Akamai is really good at. Having compute at the Edge close to the device, again, something that Akamai is really good at. And we'll probably be talking more about that at our Investor Day in June. But that's an area that I think we have a great future in. But really, really early days and an area that we're investing in.

Our next question comes from the line of Tim Horan from Oppenheimer.

Two questions. On the cloud-based, real-time multiplayer games, how well designed or equipped is your network to handle that? And do you have many competitors there? And then, secondly, on the security side, maybe a complicated question, but you have a bunch of security products. But is this maybe 1/2 of the potential products that you could have in security or 1/4 of the potential products? Just trying to get a sense of how much can you expand that portfolio of service offerings that you have on the security side?

Sure. In the multiplayer game, today, with our gaming business, the revenue is primarily derived from handling the software downloads and updates to the devices. That's the large majority of the revenue. I think as you look to the future, actually handling the metadata around the games is a very interesting challenge, especially as this gets done more in the cloud and maybe less on individual devices. And that's an area that we're certainly exploring. Whether we'd actually be delivering the video for a game where it's not being generated locally, I don't know. We certainly have that capability. That would come down to the economics. But all the control infrastructure associated, and again, this has to do with the Internet of Things as a whole. Gaming is one example of that. That's an area where we've got, I think, a lot of value to add. In terms of the security products, I would say for defending websites and applications against an aisle of service attacks and application layer attacks, we're really doing a great job there. Pretty unique in being able to offer the end-to-end solution that really works. Now of course, the bad guys are always upping their game. And that's, I think, why our bot management solution is being so successful today because it really can stop the account takeovers. And that has enormous value to a lot of our customers. I think -- so there's a lot of work to keep up in doing that and staying ahead of the attackers. Now a whole new area where we're just entering is in the enterprise security, and that's blocking malware, protecting the enterprise employees and data. It's enabling enterprise security in a world of 0 trust, where you just can't rely on your firewall anymore and you can't trust the entities inside the corporate network. That is a transformation of enterprise networking and security that is just starting and I think that is an enormous future market. You just see all the damage being caused today by the data breaches. Clearly, there is no end-to-end solution there today that really you can rely on or you wouldn't be having all these data breaches. And that's an area that we think, over time, we can have a comprehensive solution. Today, we're just in the first products to help combat that. It's an area we're making investments towards being able to really support an enterprise as they move beyond the traditional notion of a firewall and to protect them in a world of 0 trust. And that has very large -- I think, a very large potential market.

And just lastly, to clarify on the volumes. Are you back to kind of peak volume growth levels you were 3 or 4 years ago? Do you think you can get back there? Or maybe just a sense of where you are from where we troughed out to where you were a peak a few years ago or kind of where you think that can go?

You mean the traffic growth levels?

Yes.

Yes. No, our traffic growth has accelerated substantially, and it is at a very strong clip now and well ahead of other reports you can see about traffic growth. And especially in OTT, which is where we're putting a lot of effort. So I think we're very pleased to see our traffic growth rates.

Our next question comes from the line of James Breen from William Blair.

Just can you talk about, in terms of the growth in customer base, is the growth coming from existing customers or are you adding new logos? And have you changed how you go-to-market, whether it's with the direct sales force or through channels that has helped in terms of this acceleration of revenue?

Yes, I mean, I would say that you can -- most of the growth that we're seeing is from our existing customer base. We've made good progress on the new customer area. Actually, from a new customer bookings perspective, we actually had a strong quarter in the first quarter that I think we talked to you guys in the past that we've been tuning the go-to-market model to try to drive better new customer penetration. And I'd say early days suggest we're making some traction in that area. I think we have more work to do. That's notable in our Web Division where generating new customers is really important to drive growth, not just through expanding with existing customers, but landing new customers. And we announced, I think it was maybe just a few weeks ago, that we brought on a new leader for our Web Division to run sales, Scott Lovett, who has tremendous experience in driving both new customer penetration as well as kind of land and expand models. And so we're happy to have him as part of Akamai, driving kind of the Web Division activities. And we're pretty bullish that we'll make progress both in new customer penetration and in existing customer kind of penetration of our existing offerings.

Our next question comes from the line of Heather Bellini from Goldman Sachs.

I just had a follow-up on the seasonality of the media business, which this quarter saw much better seasonal trends than you normally see in a Q1. I guess I'm wondering if you could share with us how we should think about the seasonality trends for this segment as the rest of the year shakes out? And how much of that uptick in better seasonality as a result of those fine-tuning of the contracts that you mentioned?

Yes, good question. You're right, we actually had a great Q1 relative to kind of seasonal patterns. You usually see seasonally Q4 to Q1, the media business softens a bit. And I think all the efforts that we've put in place over the last several quarters, you're starting to see the benefit of that. And you saw that manifest itself in Q1. And that was including kind of the Internet platform customers coming down. So a very, very strong kind of result. Now we talk about a lot of them that I think in general, we've made good traction across all of our verticals. We had a particularly strong gaming quarter and I think as we talked about in the past, that gaming releases don't happen linearly throughout the year. So we had a good gaming quarter in Q1, a continued good quarter around OTT. For sure, the sporting events did have some contribution. So in an element of Q1 that more sporting events happened this Q1 than typical. You don't have an Olympics every year, that being maybe one example. But as far as the seasonal patterns through the year, I think you'll probably see a little bit Q1 to Q2, maybe a little bit less seasonal that usually I think media grows sequentially Q1 to Q2 pretty significantly. But because of the strong Q1, you won't see as much of that. The summer will be typical. You'll see patterns in the summer where media from Q2 to Q3 will kind of go down in volume just because there's less consumption of content in the summer months. And then you'll see in Q4 a big uptick from Q3 to Q4 relative to the holiday season. The holiday season doesn't affect just commerce, but it also affects our media business as well. So call it maybe a little bit less seasonal Q1 to Q2, typical seasonality Q2 to Q3 with it coming down and then a big Q4.

And then just a follow-up. Is the World Cup a bigger revenue event for you guys than the Olympics typically?

No, no, it isn't. And actually, the World Cup straddles over 2 quarters. And so it actually -- the funny part of it is it all depends upon the team, to be right frank, as far as the viewing and who's winning. And so to some extent, it depends upon that. But it doesn't drive the same level of traffic volumes. It does in some of the international markets, in particular, that they tend to be bigger consumers of the World Cup than the U.S. market. And so you'll see that a bit. But it doesn't have the same impact than say an Olympics.

Our next question comes from the line of Sterling Auty from JPMorgan.

Back to the platform customer contribution in the quarter, the down 14%. Was any of that exacerbated by contract renewals? And are we kind of free and clear of those for the time being?

Well, we're always renewing customers that -- and we did renew our largest customer in the first quarter and they'll be contracted now for another 2 years. And so the good news is that our largest customer is now secure on the Akamai platform for the next 2 years. And I think the other piece of it is revenue came in pretty much in line with what we expected. We expected Q4 to Q1 to come down. And as I said, we expect this customer base to be in the low- to mid-40s for the remainder of the year.

All right, great. And then you talked about the other actions that you're looking to go forward and complete. How do we think about how those savings layer in? Because I imagine some of them are international, some of them are domestic and probably all don't come out at once. So what should we think about in terms of the pace of those savings getting layered into the expense lines?

Are you talking about (inaudible) expense savings? Yes, I mean, it's -- as you can imagine, every quarter is a bit unique, that some quarters you have more events. When I say events, internal events. It could be an Edge conference or a customer conference or a customer conference. So spending isn't necessarily linear. But I think what you can expect is that we're going to drive or try to drive operating margin expansion between now and the end of the year. So I think maybe by the end of the year, Q4, we'll probably be at our peak operating margins for the year. Some of that is due to the fact that Q4 has an uptick in revenue from Q3 to Q4. And then, I think, again, I'll outline more of this in late June when we have our Analyst Day that getting back to 30% margins or striving to get back to 30% margins by 2020 is going to happen over time. And it's not just linear like every quarter progresses up. You might have -- it might pop up 1 point a quarter and then it flatlines or it maybe goes down. It's -- but I think you're going to see the general trajectory of operating margins expand from 2017 to 2018, from 2018 to 2019 and then 2019 to 2020. And we're going to work like heck to try to find a path to find 30% margins by 2020.

Our next question comes from the line of Michael Turits from Raymond James.

I would like to come back to enterprise security, both on the product side and on the go-to-market side. First of all, on the product side, Tom you mentioned network security, where you don't have that much going on right now. I was wondering if you can drill down on that, especially around Secure Web Gateway, which I believe is something that you've acquired into a few years ago, and lately we've got a company [buying] security come public there, Zscaler. It's a very high profile. Plus more specifically on network security and Secure Web Gateway. And then a little bit more on go-to-market since that's not a place where you have a traditional channel. What do you need to do in order to really effectively go-to-market in that very, very different kind of a product area?

Yes. So we had today Enterprise Application Access and Enterprise Threat Protector. The next version of Enterprise Threat Protector will incorporate Secure Web Gateway functionality and strengthening that. And I think the foundation of the 0 trust model to protect enterprises, that starts with Enterprise Application Access where the access to the internal application by the employee or the consultant would come through Akamai. And then, we layer on top of that products like Kona Site Defender and Bot Manager for that matter so that we apply the same level of defenses to your internal apps from your internal employees as you would for an external app that clearly is subject to attack by any entity. And that's based on the belief that today, the bad guys can get around pretty much any of the traditional enterprise defenses. Now in terms of go-to-market, it's -- one of the reasons we're so excited to have Scott Lovett join us to run our global web sales is that he's got a lot of experience in selling a wide variety of security products, both from McAfee and from Cisco. And he's engaging very quickly there. And I'm excited about his ability to help us in terms of helping establish that industry. It's very early days in the next generation of enterprise security, and I think he'll be a great leader in going to market there.

Our next question comes from the line of Jeff Kvaal from Nomura Instinet.

Two questions, I think. One is, would you mind refreshing us on where you are in the security attach rates to your enterprise business, the performance business? And where you think that may take us in the next few quarters or years?

Yes, well our security attach rates now for the company across all customers is around -- a little bit less than 40%. And so we've got a long way to go. You know that it wasn't that long ago I was telling you that number was 20%, 25%. So we're continuing to make steady progress in security attach rates. It's also important to note that when we talk about attach rates, that's attaching at least one security product. And as we talked about on this call, our security products are growing in number. And so it's not just about attaching one security product now, now it's, even for customers of the 40% that are buying security, there's not -- there's only a smaller percentage of them that are buying multiple security products. And so the good news is that we can sell more security products through our customers that already buy security and there are a lot of customers that we don't -- that are already in the install base that haven't bought a security product. Not to mention the ability to sell security outside of the install base that are customers. And so we think we can continue to drive both expand rates within our existing customers and new customer attach rates. So I think it'll continue to be our largest growing and fastest growing product category for the company. It'll probably grow in, call it the high 20s, low 30s this year. I think it'll continue to be again a 20s grower for the company for the near future.

Okay. And then, secondly, there's been a lot of highly publicized weakness in linear video subscriptions at some of the cable companies and other satellite firms. How correlated do you think the performance of those subscription declines are with your own media business?

Well, obviously, the more people that are subscribing and watching video online, the greater potential market for Akamai. And we have a large share of that market. So no, our business, as we talk about, is rapidly growing in terms of overall traffic and now growing in terms of revenue. But the more video subscriptions there are, the better that is, generally speaking, for Akamai.

Do you see that right away? Or is that spread out over a few quarters? How does that relationship work?

I think pretty near term. As people subscribe and start watching, traffic would flow across our platform if we're carrying it, and often, we are. And then we'd be billing for that traffic as it flows. So I would say it's a very close correlation in terms of people watching and ultimate revenue to Akamai.

Our next question comes from the line of Jeff Van Rhee from Craig-Hallum.

Just one from me, guys. On the CapEx front, you came in a little heavier this quarter and you're certainly guiding to some pretty meaningful CapEx. Just spend a minute and talk about how you think about maybe the year and in particular, just sort of your visibility and your thought process as you put together the CapEx plan for the forward quarter and the forward year. How much can you see? How do you see it? How much is a leap of faith based on sort of higher level modeling that you might do? Just a little visibility there would help.

Yes, it's a good question. Just to remind folks that obviously of our CapEx, that our CapEx is in 3 areas. There's network CapEx, which I think is what you're talking about, then there's capitalized software. Then there's other CapEx for, say, facilities and IT. We spend about 17% of revenue, 16% to 17% of revenue on CapEx. Call it 6% of that is network CapEx, roughly 7% is capitalized software and the remainder facilities and IT. But on the network CapEx front, as I mentioned in my kind of prepared remarks, that we did kind of spend a little bit more than we had guided in Q1, and that was very purposeful. And it was purposeful because you saw we had a great media quarter. And what we did was we began more CapEx purchases in the quarter. I guided to Q2 that you'll see that's a step up in CapEx in Q2. And you can expect that we'll continue to build out for the remainder of the year. We will stay within the, call it the 16% or 17% of revenue number. So for the full year, our CapEx will be about 16% or 17%. And the way we think about network CapEx is we have reasonable visibility given the efforts that we've done around the top 250 customers. Call it within a range. And what we try to do is we're going to try to build out the networks to support the higher end of a range that you expect to have from those customers so that you can make sure you have capacity available for them. And that's the way we've done it and that's the way we'll continue to do it, which means we should probably be within -- and those ranges are roughly where we've been historically, call it somewhere between 15% and 17% of revenue and that's probably where we'll be this year.

And I guess, just to follow-on that then long term, as you see your business evolving, certainly with the enterprise push as well as the strength in security, is there anything inherent in the structure of the business going forward that you think drives that CapEx number higher or lower if we look over sort of intermediate to longer term?

Yes, I think over the intermediate term, we're going to stay probably in the 15% to 17% range. That's about what I expect. That you actually may have given all the innovation we're doing, you actually might actually even see a bit of an uptick in capitalized software. You might see a downtick a little bit in network. And one thing that's probably important to note, and I'll talk about this more at the Investor Summit, but we're building out or will be building out a new corporate headquarters here in Cambridge. And so you'll see some onetime CapEx here late in 2018 and much more notably in 2019 as a result of building out the headquarters. But I'd say in general, 15% to 17% of revenue is what you'd expect for CapEx.

Our next question comes from the line of Will Power from Baird.

Nice job on the margins in the quarter. I guess the question is, as you look forward, we're at 38% EBITDA margin in Q1, guiding to 39% in Q2. Is there any reason that wouldn't continue to uptick in Q3 and 4? I think per a previous question, you referenced some of the positive leverage in Q4. And I guess what I'm getting at is it feels like the 39% for the year could be conservative. So I'm just trying to understand kind of the second half outlook.

Yes, as I mentioned, it isn't a straight line as far as every quarter that it just is going to tick up. I think the third quarter, in particular, will potentially be a more difficult quarter for the company. It is a quarter that the company does a seasonal kind of salary increase for its employees. And so you will see a natural lift in spending from Q2 to Q3 when we go through that. And so I think that 39% EBITDA, 25% operating margins felt about right for us. I'd say if we're tracking more to 26%, which is the high of our range in Q2, might you be able to round for the full year to 26%? Maybe. I'd say that -- I don't -- I think we're more comfortable guiding to 39% EBITDA or 25% operating margin. We don't want to get too far ahead of ourselves here that it isn't, like I said, it isn't quite it grows 1 point every quarter. It just doesn't quite work that way. But I think we're confident that by the end of the year, you'll be exiting at the highest operating margin level for the company and you'll have that going into 2019 and then we have work to do in 2019 as well.

(Operator Instructions) And I'm not showing any further questions. At this time, I'd like to turn the program back to Tom Barth.

Thank you, Jonathan. In closing, we will be presenting at several investor conferences in May and June. And as Tom and Jim have mentioned, holding our Analyst Day here in Cambridge on June 26. Details of these can be found on the Investor Relations section of akamai.com. And thank you for joining us and have a nice evening.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.