Aspen Technology Inc (AZPN) 2013 Q3 法說會逐字稿

Good afternoon. My name is Stephanie, and I will be your conference operator today. At the time, I would like to welcome everyone to the Aspen Tech third quarter 2013 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. I would now like to turn the conference over to Mark Sullivan, Chief Financial Officer. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone. Thank you for joining us to review our third quarter fiscal 2013 results for the period ended March 31, 2013. I am Mark Sullivan, CFO of Aspen Tech. Here with me on the call today is Mark Fusco, President and CEO. Before we begin, I will make the usual Safe Harbor statement, that during the course of this call, we may make projections or other forward-looking statements about the financial performance of the Company that involve risks and uncertainties. The Company's actual results may differ materially from such projections or statements. Factors that might cause such differences include, but are not limited to, those discussed in today's call and our Form 10-Q for the third quarter of fiscal 2013, which is now on file with the SEC. Also, please note that the following information is related to our current business conditions and our outlook as of today, April 30, 2013. Consistent with our prior practice, we expressly disclaim any obligation to update this information. The structure of today's call will be as follows. I'll begin with a review of our financial results for the third quarter, and then Mark will discuss some additional business highlights before we open up the call to Q&A.

Let me begin by reviewing the supplemental metrics that we provide, starting with term contract value, or TCV, which measures the renewal value of our multi-year term contracts. Growing TCV is a key focus for us, and we increase the value of the metric by adding new customers, expanding product usage, and increasing prices across our customer base. Our license-only TCV was $1.58 billion at the end of the quarter, which is up 12.9% on a year-over-year basis, and 2.4% on a sequential basis. As a reminder, beginning in fiscal 2010, maintenance is generally included as part of our subscription and term contracts. Including the value of bundled maintenance, total term contract value was $1.83 billion at the end of the third quarter, which is up 15% on a year-over-year basis and 2.8% sequentially.

Our annual spend metric, which is a proxy for the value of our recurring term license business at the end of each time period, specifically the annualized value of our term license and maintenance revenue, was approximately $322 million, which is an increase of approximately 11% on a year-over-year basis, and approximately 1% sequentially. As reminder, while there can be quarterly fluctuations, over time the growth of our annual spend metric should be slightly lower than the growth in our license TCV metric. The reason for this difference is that license TCV is calculated using each contract's terminal year annual payment, and therefore takes into consideration the total price escalation over the course of a multi-year time period, whereas annual spend only takes into consideration the current year's level of spend.

While our primary growth metrics were solid for the third quarter, both TLCV and annual spend results were negatively impacted by certain macro events in Venezuela which delayed the timing of large renewal with two government-owned oil and chemical customers. We've had relationships with both customers for over two decades. Since TCV and annual spend reflect the value associated with active contracts at a point in time, the fact they did not renew by the end of the quarter had an unfavorable impact on our quarterly growth metrics, as growth is calculated net of non-renewals. The delay in renewing these contracts was due to overdue receivables on the expiring contracts. Payment has been made subsequent to the end of the quarter, and we are now in active talks to renew these contracts. The delay in renewing these specific contracts also contributed to the wider deviation in growth rates between TLCV and annual spend than we typically see in a quarter. The reason for this wider gap is due to the fact that our average contract length is over five years, and these contracts average less than three years in duration. As a result, the impact on annual spend was proportionately more significant than on TLCV. Now let me turn to our financial results on a GAAP basis.

Total revenue of $79.4 million was up 29% from $61.3 million in the prior year period, and it was above our guidance of $71 million to $74 million. The revenue outperformance in the quarter was driven by a few factors. Our subscription and software revenue benefited from continued strong sales performance. In addition, we benefited from the timing of collecting customer payments on deals where we are recognizing revenue on a cash basis. Our services revenue was also above the expectations that were factored into our guidance. As we've discussed in the past, this area of our business can fluctuate from quarter to quarter. Finally, it is worth noting that a portion of our subscription and services revenue upside was driven by the timing of completing services work on a particular customer contract which triggered revenue recognition for amounts previously deferred.

Looking at revenue by line item, subscription and software revenue was $60.9 million for the third quarter, which is an increase from $42.4 million in the prior year period. Subscription and software revenue was $59.5 million last quarter. For the remainder of this fiscal year, we are providing further transparency into our consolidated subscription and software line, including additional details on a few of the components within subscription and software that have had quarter-to-quarter variability. During the third quarter, we had approximately $225,000 of subscription and software revenue that was related to perpetual licenses, and $2.1 million related to legacy term license arrangements not recognized on a daily basis. It is worth noting that this level of additional detail is becoming increasingly less relevant to our quarterly subscription revenue, now that we are past the halfway point of the revenue model transition, and as such we will not be reporting on these metrics beginning with the first quarter of fiscal 2014.

Our growing subscription business positively impacts our deferred revenue balance, which was $215.9 million at the end of the third quarter, representing a 23% increase compared to the end of the year-ago period. Finally, services and other revenue was $18.5 million, compared to $18.9 million in the year-ago period. To reiterate our previous commentary, maintenance revenue was increasingly being reported within the subscription revenue line as more contracts are converted to the aspenONE licensing model. As a result, we continue to expect the run rate in our services and other revenue line to be variable quarter to quarter, but trend downward as our revenue model transition completes.

Turning to profitability. Gross profit was $66.7 million, with a gross margin of 84%, which compares to $48.9 million and a gross margin of 80% in the prior year period. We are pleased that the Company has reached the midpoint of our long-term targeted gross margin of 83% to 85%, as we continue to benefit from the positive mix shift towards subscription and software revenue as our licensing model transition proceeds. Operating expenses for the quarter were $50.4 million. Total GAAP costs, including cost of revenue, were $63 million, which was down modestly from $64.2 million in the year ago period. Expenses were up modestly compared to $62.4 million last quarter, primarily due to typical expense seasonality, where we see an increase in employee-related benefit and payroll tax expenses at the beginning of the calendar year.

While overall expenses are down modestly, we continue to make investments across all functional areas within the Company, with a particular emphasis on R&D. Worldwide headcount is up nearly 4% compared to the same period last year. Much of this headcount growth has come by instituting a university hiring program in 2012. We've been pleased with the results of this program, and are planning to recruit a second university class of approximately 100 employees later this summer. Even as we continue to scale our organization over the next few years, we believe we can continue to do so efficiently, as we have done historically.

The combination of higher reported revenue and lower than expected expenses led to GAAP operating income of $16.3 million, which was well ahead of our guidance of $3 million to $5 million. This also represented an improvement from the GAAP operating loss of $2.8 million in the year ago period. GAAP net income for the quarter was $10.5 million, or $0.11 per share, an improvement compared to a net loss of $520,000, or $0.01 per share, in the third quarter of fiscal 2012.

Turning now to our non-GAAP results. Our non-GAAP operating income for the third quarter was $20 million, and non-GAAP net income was $12.9 million, both of which exclude the impact of stock-based compensation expense, restructuring charges, and amortization of intangibles associated with acquisitions. This represents an improvement from a non-GAAP operating loss of $37,000 and net income of $1.4 million, respectively, in the year ago period. Our non-GAAP income per share was $0.14 in the third quarter of fiscal 2013, based on 95.4 million fully diluted shares outstanding, compared to a non-GAAP income per share of $0.01, based on 96 million basic shares outstanding in the third quarter of fiscal 2012. A reconciliation of GAAP to non-GAAP results is provided in tables within our press release, which is also available on our website.

Turning to the balance sheet and cash flow. The Company ended the third quarter with $214 million in cash and marketable securities, an increase of $38.9 million from the end of the prior quarter. We also used $22.4 million of cash to repurchase common shares during the third quarter. We generated $58.5 million in cash flow from operations, and $57.9 million in free cash flow, after taking into consideration $600,000 in capital expenditures and capitalized software. As a reminder, the third quarter is typically our strongest cash flow quarter of the year, primarily driven by the timing of customer invoices. For the first three quarters of fiscal 2013, the Company generated $112.6 million in cash flow from operations, and $111.2 million in free cash flow. This represents a 30%-plus growth for both metrics, compared to the first nine months of fiscal 2012.

Our cash flow has been driven by solid business growth, lower than expected expenses, and strong working capital management. As a reminder, our quarterly cash flow has a degree of variability, due to the timing of cash collections. We will once again have a significant amount of customer payments that come due at the very end of our fiscal year, which increases the variability for the fourth quarter. Taking that into account, we are raising our fiscal year 2013 free cash flow guidance to approximately $130 million, which compares to our initial guidance of $115 million, and our previously increased guidance of $120 million. With that, let me turn it over to Mark Fusco. Mark?

Thanks Mark, and thanks to everyone for joining us today. We are pleased with our performance during the third quarter, which exceeded our guidance again all key metrics. The Company's performance through the first nine months of fiscal 2013 has exceeded our expectations, and we believe we are well-positioned to finish the year with a solid performance in the fourth quarter. We are seeing solid demand across each of our geographies and major verticals, which contributed 13% annual growth in our total license contract value. While we are mindful of the macroeconomic backdrop our customers are facing, we have not seen any material change in customer buying patterns on a global basis.

During the third quarter energy, chemicals, and engineering and construction continued to represent 90% or more of the Company's business. Chemicals was the largest vertical contributor for the quarter, followed by engineering and construction, and then energy. Looking at our 10 largest transactions in the quarter, there was again a mix of engineering and manufacturing and supply chain driven deals. While our aspenONE platform is the most widely deployed solution in the industry, must of our customers are still only using a fraction of the functionality available to them, and very few are utilizing the full breadth of Aspen Tech's capabilities across our engineering supply chain and manufacturing solutions.

We also continued to invest heavily in the R&D, which is delivering significant levels of innovation. During the quarter, we released aspenONE version 8.1, which included the new Aspen inventory management and operations scheduling, or IMOS, an update to our PIMS refinery scheduling, as well as our new deployment assistant, which improves the productivity by enabling seamless upgrades to the latest version of our aspenONE platform. At our upcoming User Conference and Analyst Day, we will go into further detail related to our product innovation, which we believe is creating further distance between Aspen Tech and our competition.

During the third quarter, we also announced the acquisition of dock scheduling and pipeline scheduling software from Refining Advantage, which we plan to integrate into our petroleum supply chain solutions to help our customers better schedule their assets. This was our third tuck-in acquisition, following SolidSim and PSVPlus, which brought us solids process modeling and pressure release valve modeling, respectively. Given the fact that we have existing customer relationships with the world's largest energy, chemicals and E&C companies, these tuck-in acquisitions represent an excellent way to increase the functionality of our aspenONE platform, and they are a relatively low-cost way to achieve our strategic goal of driving increased usage of our platform among our customers.

While investing in our products is critical to driving growth of our total license contract value, we have continued to demonstrate good discipline with our expense structure. We are confident in the scalability of our business model, and our ability to meet our 30% to 35% non-GAAP operating margin target at the end of the revenue model transition. The combination of solid business growth and expense discipline has led to continued improvements in our cash generating capability and our balance sheet, which now has more than $214 million in cash, and no debt.

In addition to our small tuck-in acquisitions, we continue to use our cash to drive shareholder value through our share buyback program. With $22 million of stock repurchases during the quarter, we have returned more than $72 million to our shareholders by repurchasing nearly 2.9 million shares during the last 12 months. We announced today that our Board of Directors has authorized the expansion of our stock buyback program to the $150 million level, which is an effective increase of approximately $85 million, based on our remaining capacity as of the end of the third quarter. We will continue to monitor how to best use our cash flow to enhance shareholder value, a combination of stock buyback and M&A.

Finally, today we've announced an executive transition that will take place over the next two quarters. After serving as CEO of Aspen Tech for eight years, I am retiring to spend more time with my family. I'll be turning over the reins to Antonio Pietri at the end of the September quarter, which is our first quarter of fiscal 2014. Antonio has been with Aspen Tech for nearly 17 years, and for the last six years, he has served as our Executive Vice President of Worldwide Field Operations, which is the number two operating position at Aspen Tech, responsible for global sales and services. During his years at Aspen Tech, Antonio has continued to take on growing levels of responsibility.

He joined Aspen Tech through its is acquisition of Setpoint, where he served as a sales manager for the South American region. After serving in various operating roles in sales and global services, he relocated to Singapore in 2002, where he ran technical sales in our Asia-Pacific region, shortly after which he was promoted to Managing Director of our Asia-Pacific region. In 2007, I promoted Antonio to run Aspen Tech's worldwide field operations, and at that time he moved to our headquarters in Boston. In addition to his global expertise in sales services and overall field operations, Antonio has deep domain expertise in our products and target markets. He earned a chemical engineering degree from the University of Tulsa, and has an MBA from the University of Houston. I am very excited for Antonio on his well-deserved promotion, and I feel very good about the fact that Aspen Tech has an executive leader with a proven track record of delivering results to serve as the next CEO, driving the Company's growth initiatives.

As for me, I am very proud of the achievements the Aspen Tech team has made during my tenure as CEO. We moved from many different point solutions to the industry's only best-of-breed integrated suite with the delivery of aspenONE. We simplified our business model, and transitioned our revenue model from upfront revenue recognition to a subscription model characterized by growing levels of visibility and predictability. We have improved the growth profile of the Company, generating consistent double-digit growth in licensed TCV. We have significantly improved the Company's profitability and cash flow. We delevered our balance sheet, and now have more than $200 million in cash, along with no debt, and all of this contributed to a significant increase in shareholder value.

These significant achievements were made possible through the hard work of the entire Aspen Tech team, and Antonio's leadership played a key role. I will be working closely with Antonio in the coming months to ensure a seamless transition, and I am confident Aspen Tech will continue to execute at a high level and build on its market-leading position in the process optimization industry. Antonio will be participated with me in our upcoming Investor Meetings and conferences this spring, including our Analyst Day next Monday in Boston. For those of you who have not met him, our Analyst Day conferences and non-deal road shows will be an excellent opportunity to do so.

To summarize, Aspen Tech's third quarter results reflect the continued strength in the Company's operations, and we are confident in our ability to meet our raised TLCV profitability and free cash flow guidance for fiscal '13. We believe we have made good strategic investments around our product portfolio that will enable the Company to continue delivering a strong financial performance. With that, I will turn it back to Mark.

Okay. I'd like to close out with some additional thoughts regarding our financial outlook for fiscal 2013. We started fiscal 2013 with a growth target for total license contract value of double-digit growth. We are refining this guidance to 10% to 11% for fiscal 2013. As we've discussed many times, we believe our non-GAAP metrics, license TCV, annual spend, and free cash flow are the most meaningful growth measures of Aspen Tech's business during our revenue model transition. As I shared previously, we again raised our free cash flow guidance to $130 million range for fiscal 2013. With respect to our P&L, we are raising our fiscal 2013 revenue guidance to approximately $305 million to $308 million, which is above our prior guidance of $295 million to $302 million.

From an expense perspective, we now expect total GAAP costs and expenses of $257 million to $258 million, which is below our prior guidance of $263 million to $270 million, and our initial full year guidance of $265 million to $275 million. Taken together, we now expect GAAP operating income of approximately $48 million to $50 million, which is an improvement from our prior guidance of operating income of $31 million to $38 million, as well as from an operating loss of $15 million for fiscal 2012. Or updated forecast for GAAP net income is approximately $29.5 million to $30.5 million, or $0.31 to $0.32 per share, which is an improvement from our prior guidance of $0.18 to $0.22. From a non-GAAP perspective, we are now targeting non-GAAP operating income of approximately $63.5 million to $65.5 million for the full fiscal year, which is an improvement compared to our prior guidance of non-GAAP operating income of $46 million to $53 million. We now expect non-GAAP income per share of $0.41 to $0.42 for fiscal 2013.

Turning to the fourth quarter, we currently expect revenue of approximately $77 million to $80 million. From a profitability perspective, we currently expect non-GAAP operating income of $11.5 million to $13.5 million, and non-GAAP EPS of $0.07 to $0.08 for the fourth quarter. On a GAAP basis, we expect fourth quarter operating income of $8 million to $10 million, and EPS of $0.04 to $0.06. With that, we are now happy to take your questions. Operator, let's begin the Q&A.

(Operator Instructions)

Your first question comes from the line of Tom Ernst with Deutsche Bank.

Hey, guys, good afternoon. It is actually Stan Zlotsky the sitting in for Tom. Mark, first of all, wanted to wish you a happy retirement. I guess you'll get a little bit more time to play hockey.

Yes, I need get a little bit more fit before I want to get out there.

Great. So on the couple of deals in Venezuela. Was it economic turmoil that caused the slippage, or was it something more geopolitical-related?

Well, there's a lot going on in Venezuela, as you know. We are not the only company that's been caught up in a few little things here and there. In this case, we have a business rule, which is we don't renew a contract if there are outstanding invoices on prior contracts, and at the end of the March quarter, as Mark said in his prepared remarks, they had an outstanding payment that they owed to us. They have subsequently made that payment in early April. So we are an active talks now to renew their business, and as Mark also said in his prepared remarks, they've been customers of ours for well north of 20 years, so we expect these things to renew. But they didn't get done by the end of the quarter.

Okay. Just I don't know if you can comment on it, but if hypothetically they had renewed, what would you estimate the TLCV and the annual spend numbers would have been, what the impact would have been to those numbers?

Yes, the TLCV would have been just under 1% additional growth, which would have put us above last year's result. From an annual spend perspective, it would have been just under 1.5%, or just over 1%. So it had a material impact on the quarter. As you know, we have very high renewal rates. We've not, during my tenure anyway, ever called out one of these things, but it was out of the ordinary. We do expect them to renew, but time will tell.

Okay. And then last one, the cash basis recognition of a couple of deals. What was the impact to the revenue, to the subscription revenue line?

Yes. I mean, all the items that I listed, none of them were particularly large. I mean, so typically on the second -- between the second and third quarter we talk about some really large cash basis deals that could swing either way. This was a number of small deals. We tend to take a fairly conservative view of when cash basis customers will pay us. They happened to pay in a fairly timely basis. So it was a bit -- we got it a bit faster, but it is just timing, and it's, again, all those items were -- none of them were really an outstandingly large item. They were all kind of $1 million here and there.

Okay. Thanks, guys.

Sure.

Your next question comes from the line of Peter Goldmacher with Cowen.

Hey, guys. Mark, I think you and Antonio are probably the only two happy guys on this call. (Laughter). Let me ask you just a couple of quick questions. Sullivan said that Venezuela was a little bit of a negative, and then you also talked about the services business closing early, accelerating some revenue. Did they net out? Did they net each other out, or was there a big swing either way?

The deal in Venezuela hit the TLCV and the annual spend number, but they didn't necessarily -- they wouldn't have necessarily had a big impact on the GAAP financials for this quarter. So they are sort of non-related, and they wouldn't be nearly in the same size category. And in services, as Mark said, we just had a couple of services deals that finished up, and we started to take some revenue, one of which was reasonably large, and we had not forecasted it in the quarter.

Okay.

Nothing sort of out of the ordinary.

Okay. Let me just ask you a little bit deeper questions. You guys have done a few of those little tuck-in acquisitions. Can you give us a little more color on how you feel those are impacting your business? Are they changing your customers' perception of what you guys are capable of? Are customers feeling like you are becoming a more important vendor to them? Any color you can give on that would be helpful.

I don't want to speak for customers. They probably all have their own opinion. I think about it, Pete, in a couple of different ways. So first, just in the way that we want to grow our business on an organic basis. We want to grow our products on an organic basis as well. And we've spent a lot of time, as you can see from the investment in R&D over the years, a fair amount of money growing the portfolio of products and deliverables that we have. The guys are quite proud, as I am, of the every 90-day deliverable now of software to our customers, which makes sense, given the business model that we have. We are a usage-based Company, and we want customers using our software as quickly as possible.

So we release, and if you look back on the number of different new items that we've released, and upgrades to things, and usability items that have come out over the past 12 months to two years, much of which, or many -- under many patents as well. We are developing lots of new things homegrown, which is important from an innovation perspective in the future. As far as the tuck-in acquisitions go, I think it is an important part of the investment theme that we have, which is get technology into the portfolio, and then ultimately get it out into the customers' hands. We have delivered the first batch of Solid modeling software. The rest of it will come out soon. That's an important piece of the growth driver.

We have seen good uptake of the SolidSim functionality by our customer base. We do track it every week to see how things are going. Of course, we haven't released the other software that we bought yet, but I do know of at least one customer, because of the acquisition of one of the -- one that isn't up yet, has moved forward to do some things with us that they had put on hold for a while. So I think people are positive about how Aspen Tech is doing its software. We have much improved quality, much improved functionality, integration, and lots of new IP. So I think the whole thing together leaves us really with a very robust product pipeline, great products that are out with customers today, and we are going to continue to focus in this area to build great products with new IP. So I think it is changing the perception. I'm not sure that I would say it is acquisition-related specifically. I think it is in totality.

Okay. Great. Thank you.

Sure.

Your next question comes from the line of Richard Davis with Canaccord.

Thanks. So two questions. One for Mark. How long have you kind of been seriously considering retiring? Then two, just more broadly on the business. Are you guys seeing any kind of specific benefits from kind of commercialization of the Bakken and other gas formations or anything like that? Or can you speak to that on the business side? That's it, thanks.

Well, on my side, it is just really very recently that I've sort of made up my mind. I've been here a long time. These jobs that are in global companies are challenging, and at some point, I've got young kids. Haven't been home as much as I'd like. So at some point, you just make a decision to do something different and head on home to be with them. As far as the business goes, we are seeing lots of activity in the shale gas and the shale oil, especially in part of our -- for some of our engineering software. And I think that will benefit us going forward. We've talked a little bit about this in the past in prior quarters, and I don't think it will change the Company, one way or the other.

We have a big install base, and we are primarily a downstream Company, although we do a lot of engineering software upstream. So it will help, and will change things, and as our customers want to build chemical plants and things here in the United States to take advantage of low gas prices, that will help as well. I sort of see it as, whether it is here or whether it is somewhere else, we are a big player in the market, and we intend to be with our customers there and help them do their job better.

Perfect. Thanks a lot.

Your next question comes from the line of Richard Williams with Cross Research.

Congratulations, Mark. Not many people get to go out on top. It is been an impressive eight years.

Thank you.

Wondered if you can give an update on how Mideast sales progress is going?

We tend not to talk too much about any of our geographies on a quarterly basis because the results bounce around quarter to quarter, and they generally work themselves out over the year. I'm happy with how our team in the Middle East is performing. They've had a very good year so far with double-digit growth. So we are pleased with what they are doing. I think we have a good team now, and as you recall, we've been selling directly now for more than three years in that market. We have a big team there, and a good team, and they are doing a nice job. So they had a nice quarter. But again, we try not to get too fixated on it quarter-to-quarter, because it does bounce around a bit.

I would imagine you will say similar things about the manufacturing supply chain, but any color would be appreciated. Thanks.

Yes, I make the same comment usually about that as well. As you know, usually we are about two-thirds engineering business and one-third MSC. We were actually a little bit more MSC as it related to the overall than normal. So it was a very good quarter for MSC, but growth was good on both sides of the business. But other than that, we've had a good year so far at MSC, we think it will continue

Thanks very much.

Your next question comes from the line of Mark Schappel with Benchmark.

Hi, good evening. And Mark, again congratulations on your retirement. We wish you well.

Thank you.

Just on the question, switching gears a little bit here. It's been about a year since you acquired SolidSim, and I was wondering if you could just talk a little bit about how that acquisition's proceeded, whether it is met expectations, whether their product's been fully integrated into the core suite yet?

Yes, I think it is been a very good acquisition for the Company on multiple different levels. First, the folks that came with SolidSim moved here to Boston and have been part of our R&D team, and they are going to stay with us after their original contracts are expiring. They're going to become a core part of our R&D staff going forward, which we think is terrific. They are great guys. We've integrated this thing, I think, very nicely and quickly. We did release some before in December. We have some more, as I mentioned a minute ago, coming out here shortly. We've gotten very good response from our customers during the alpha and beta programs that we ran late last summer and into the fall. And I expect that this is going to be -- if I had to say acquisitions that we will want to do, I think this is a very good one, it was a great one to start. I think our team here is has executed it well, and the guys that came from Germany that live here now are really a core part of our team going forward. So I hope all the acquisitions can look like this one.

Okay, great. And then one last question. In the past you've talked about Europe and that you haven't seen much of a downturn over there, even in places like Spain. I was wondering if that trend held up in the quarter as well?

Yes, Europe, we really haven't seen too much in the buying pattern, which is a best surprising, given the headline risk that you see from time to time about things going on there, especially in Southern Europe. Europe's had a pretty good year for us so far. When we think, given their pipeline for the fourth quarter, that they will finish strongly. So overall, we really haven't seen a degrading of demand, or a degrading of the pipeline. Things bounce around quarter to quarter, but it is been a good year for us so far.

Okay, thank you.

Sure.

(Operator Instructions)

Well, wrapping up here tonight, I just want to say thanks for all the support to me during the past eight years. I'm not leaving, I will be here for another five months, and I'm looking forward to seeing you coming up here on the road. We've got lots of investor-related activities here in the spring. Also want to thank the employees for another great quarter, and I look forward to talking with you on our employee call tomorrow. Thanks again to everyone. We will see you soon.

Thank you. This concludes today's conference. You may now disconnect.