Mimecast Limited (MIME) 2016 Q3 法說會逐字稿

Welcome to Mimecast's earnings call for the third quarter FY16, ended December 31, 2015. I'm Robert Sanders, Investor Relations Manager. With me on the call tonight are Peter Bauer, our Cofounder and CEO and Peter Campbell, our CFO.

Tonight's conference call is also being broadcast live via webcast. A replay of this call will be available two hours after the live call has ended.

During the course of this call, we will make forward-looking statements regarding future events and the future financial performance of the Company. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements contained in today's press release and this conference call. These risk factors are detailed in Mimecast's most recent Form F-1 filed with the SEC.

During this call, we will present both GAAP and non-GAAP financial measures. These non-GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results, and we encourage you to consider all measures when analyzing Mimecast's performance. A reconciliation of certain GAAP to non-GAAP measures is included in today's press release, which can be found in the Investor Relations section of our website.

The date of this call is February 8, 2016. Any forward-looking statements we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.

Now, I would like to turn the call over to Peter Bauer. Peter?

Good evening, and thank you, for joining us today on our first call as a public company. It is my pleasure to welcome our newest public shareholders and those of you who have supported our growth since we founded Mimecast in 2003.

For those of you who may be new to Mimecast, I would like to take a moment to introduce ourselves to you. We created Mimecast to make business email safer for organizations and to make protecting email easier for customers using cloud technology.

Today, we are the leading and only pure SaaS provider of next generation cloud security, continuity and archiving solutions for corporate information and email. Our global operations employ over 600 people in nine offices across Europe, North America, Africa and Australia.

This is important work, as the world is facing a growing and constantly evolving cyber security threat. Email is in the front line of attacks on corporate data and infrastructure. Email is important to us. For many of us, our day starts and ends with email. It's a critical part of how we communicate and share ideas and make decisions. And now, of course, mobility is extending email's importance.

As a result, email's a major focus for attacks. Email-based attacks and date breaches are becoming more common and sophisticated and ultimately, more damaging. Employees, data and business operations are exposed to risks daily. Mimecast's cloud solutions, or email security, archiving and continuity protect organizations of all sizes from the significant business and data security risks that the email systems expose them to.

We believe the important work we do represents a large market opportunity as organizations are looking to break with the expensive infrastructure intensive legacy on premises technologies that they depend on today to solve email security and storage problems. Aside from being expensive and complex, these legacy solutions also fail to protect organizations comprehensively from today's threats.

Our cloud service enables customers to decommission these separate technologies, improve their security and archiving protection, and benefit from one fully integrated service, which is paid for by subscription. Our service is proving popular and today, we protect the email and data of over 16,000 customers and millions of their employees around the world.

Mimecast email security is our most popular service, followed by our archiving and our continuity services. Several new services that we've launched in the last 12 to 18 months, are also proving popular, including large file send and secure messaging.

Of particular note, is the popularity with both new and our existing customers of our anti-spear-phishing service called Targeted Threat Protection, or TTP. Our TTP protects customers from a broad range of emerging and advanced threats, including spear-phishing with malicious URLs and of course, weaponized attachments.

Now, to our results: we are proud to announce strong third quarter results that were driven by new customer additions, upsells to our existing base and continued strong revenue retention. In the third quarter, we grew our revenues 32% on a constant currency basis year-over-year. We generated revenue of $37.1 million. Our gross margins rose to 71%, as compared to 68% in the third quarter of 2015. And finally, we generated positive adjusted EBITDA of $4.5 million, representing a 12% EBITDA margin.

The universal need for email security, archiving and continuity from organizations of all sizes, combined with a growing threat and a desire to move more core IP services to the cloud. This means Mimecast is in an enviable position because we offer an affordable cloud-only service that is scalable to meet the needs of all organizations.

We added 1,000 new customers this quarter, and when we win a new customer, we win because of our strength and security, the unification of our multiple services into one cloud suite and increasingly, because of our support for customers looking to move their email safely to Microsoft Office 365. And when we win customers, they stay with us and they tend to buy additional services over time.

This is evidenced by our strong revenue retention rate. In fact, in the third quarter we realized a revenue retention rate of 109%. Our newest customers span a diverse range of industries in both the public and the private sectors. In the last quarter, we added customers from sectors including financial services, airlines, pharmaceuticals and automotive manufacturing.

On the technology side, it has also been a successful quarter for Mimecast. In security specifically, we continued to extend our leadership both as a cloud-only provider and in the strength and breadth of our protection. We built our secure email gateway from the ground up for the cloud to offer unrivalled service integration, speed and safety for email and data.

Mimecast email security gives customers a comprehensive set of security capabilities, fully integrated into a single service that tackles existing and emerging threats, including extensive protection against advanced persistent threats. Our subscription-based cloud service enables customers to decommission the complex array of on premises or hosted hardware software and appliances that are offered by our competitors.

In Q3, Mimecast's email security monitored over 75 billion emails and files for customers, blocking 61 billion at the gateway before they even reached the customer's infrastructure. Our anti-spear-phishing technology, Mimecast's Targeted Threat Protection, has now been adopted by 12% of our customer base.

URL Protect blocks attacks against malicious URLs in emails and Attachment Protect tackles the threat from weaponized or malware laden attachments. That includes preemptive sandboxing to security check email attachments before they are delivered to employees and it can also convert attachments to the safe file format, neutralizing malware as it does so.

This means safe attachments are delivered to employees without the delays experience with competitor's solutions. We believe these services give customers the most comprehensive, easy to manage protection against these damaging email-borne advanced persistent attacks.

And finally, the deep integration of Mimecast's security services into Exchange, Office 365 and other email platforms, makes protecting email painless for employees too. So, there's no need for them to leave a familiar email environment to send and receive safe email and review quarantines or send large files securely. Even our spear-phishing protection happens right there in the native email application. And everything works on the device the employee selects; desktop, laptop or mobile.

But our competitive strength extends beyond security. In Q3, Gartner positioned Mimecast in the Leaders section of the October 2015 Magic Quadrant for Enterprise Information Archiving. This report provides a detailed overview of the Enterprise Information Archiving market and evaluates vendors based on completeness of vision and ability to execute. And Mimecast was positioned in the highest space on ability to execute in this leader's quadrant.

We cemented our commitment to leadership in archiving with the introduction of a 7-second search SLA. The strengths of our grid technology and proprietary cloud architecture means that our archive search performance now sets the standard competitively. This matters because fast access to the complete live and historical email archive on any device is important and valuable to customers. Mimecast's powerful search tools and administration console will offer very fast investigation of the complete archive for e-discovery and importantly, it also means that employees can search every email and document in the archive in seconds.

For this quarter, we are also one of the first independently verified cloud service providers to receive the ISO 27018 2014 certification for the protection of personally identifiable information in a cloud. This certification is a key consideration for customers concerned about data security and privacy.

Now, we've also seen competitors pull out of this market, leaving their customers looking for a strong, long-term email security partner and in Q3, we saw Intel retail the end of Lack roadmap for its MX Logic products acquired with McAfee. We've been picking up former MX Logic customers for some time, and Intel's announcement has generated increased interest in Mimecast. In fact, with the pipeline of business we've assembled from our targeted sales campaigns, we expect to see additional customers switch their services from MX Logic to Mimecast in the coming quarters.

Finally, Office 365 is seeing increased momentum in the marketplace and this is creating a significant opportunity for Mimecast. As customers evaluate Office 365, they realize the need to consider additional services to give them critical extended security protection, service continuity options in the event of downtime and a third-party verifiable additional data archive.

Mimecast gives them this in a complementary cloud-integrated service. There is no need to fall back on the on-premises technologies that they've worked so hard to leave behind. Currently 12% of our customers are using Mimecast services in conjunction with Office 365, and we expect to see momentum bolt here for our services, as Office 365 continues to grow internationally.

So in closing, I am proud of the results that we have delivered today and with our organization as a whole. The Company continues to perform very well and to progress in delivering our mission, to make email safer for our customers against the backdrop of a growing threat landscape where email is a key area of attack and concern for customers.

Now, I would like to turn over the call to Peter Campbell, our CFO, to discuss our financial performance in more detail.

Thank you, Peter.

We're very pleased to be delivering results today that include strong growth in revenue and customers. We continue to benefit from our very strong customer and revenue retention. Also, our gross margins were up this quarter, and we generated significant adjusted EBITDA.

During the third quarter, revenue grew 32% year-over-year on a constant currency basis. Revenue was $37.1 million in the period, compared to $29.8 million recognized in the same period in the prior year. This represents 24% growth on an as-reported basis.

Because of our global footprint, we recognize revenue in dollars, pounds, rand, euros and Australian dollars. To account for changes in currency exchange rates, we look at constant currency revenue growth. This provides a better view into the underlying strength of our Business.

Our growth was driven by strong new customer additions across all geographies, as well as momentum in our existing customer base through the purchase of additional services. As Peter said, we added 1,000 new customers in the quarter, bringing our total customer count to over 16,000.

We are continuing to see strong customer adoption in each of our geographies, but particularly in the US, which is our fastest growing region. 99% of our revenue is derived from subscriptions to Mimecast services.

As a result of the recurring nature of our business, the quality of our service and the strength of our support teams, we experienced very high revenue retention rates. We calculate revenue retention by taking customers we have at the beginning of a 12-month period and subtracting customers that leave us or spend less. We then add revenue from additional services our customers buy during the period. This quarter, we experienced 109% revenue retention rate compared to the 108% recognized last quarter, and above the106% realized in the third quarter of 2015.

Turning to expenses and profitability, we recognized a GAAP gross profit of 71% in the third quarter, a healthy improvement over the 68% in the third quarter of 2015. This resulted from service delivery efficiencies and engineering gains related to our grid architecture. We anticipate our gross margin will remain in the 69% to 71% range over the next several quarters.

Operating expenses increased as we invested in our direct sales force, as well as in research aimed at the development of new services to support future growth. During the third quarter, GAAP operating experience were $28.6 million. I should highlight that these are impacted by stock option expense of $3.6 million, primarily related to the accounting treatment for stock option expense as a result of our IPO, as we stated in our recent F-1 filing. We continue to ramp our investments in R&D and sales and marketing globally with a focus on our US business, as we look to take advantage of the opportunity in front of us.

Adjusted EBITDA for the third quarter, was $4.5 million, compared to $5.9 million in the third quarter of 2015. Adjusted EBITDA margin was 12%, which we believe shows the leverage in our business model. As we continue to ramp our investments in R&D and sales and marketing over the next few quarters, our very strong adjusted EBITDA margins are expected to come down.

However, we do anticipate adjusted EBITDA will remain positive during this period of increased investment. Our long-term targets for adjusted EBITDA margins remain in the range of 20% to 22% as we said in our IPO road show.

GAAP net loss was $1.2 million, or a loss of $0.03 per basic and diluted share, based on $42.5 million weighted average shares outstanding. Non-GAAP earnings, which reflects our GAAP net loss exclusive of the effects of stock option expense, was $2.8 million, or income of $0.06 per basic share for the period.

As a reminder, all of our previously-issued preferred equity was converted to common shares at the time of our IPO. I wanted to call out the conversion of preferred equity to common shares, as some of the financial information services failed to pick this up from our Form F-1 on file with the SEC.

Looking to cash flow during the quarter, we generated $3.9 million in free cash flow. Reviewing the balance sheet, as of December 31, Mimecast had $106 million in cash and cash equivalents. This includes the $68.4 million we realized from the IPO. Total debt was $8.4 million at the close of the third quarter, of which $5.3 million represents the current portion of debt.

Now, I would like to turn the focus to guidance for our fiscal fourth quarter of 2016 and our outlook for the full-year. For the fourth quarter of FY16, we expect constant currency revenue growth to be between 24% and 26%, and revenue to be between $35.2 million and $35.8 million. Exchange rates in certain currencies we operate in have weakened in the period due to the strengthening of the US dollar compared to the same period in the prior year.

Fluctuations in these rates over the last three months impacted our revenue guidance by $2 million. Approximately 75% of this impact relates to this translational of rand-based revenue at the remainder relates to the translation of pound-base revenue. We believe the constant currency revenue growth is the correct way to measure the underlying strength of our business as it excludes these short-term fluctuations.

Regarding adjusted EBITDA, we expect adjusted EBITDA to be in the range of $0.1 million to $1 million for the fourth quarter. This reduction over our third quarter is consistent with our strategy to invest in R&D and the buildout of our sales and marketing organizations globally.

Now, from a full-year perspective, we expect revenue to grow between 28.5% and 29.5% year-over-year in constant currency and to be in the range of $140.2 million and $140.8 million. This is a function of continued strong demand we're seeing in our services in each of our core markets. We expect to see for the full-year adjusted EBITDA in the range of $15.3 million and $16.2 million.

In summary, we had a very strong third quarter and believe that Mimecast remains well-positioned to maintain momentum for the remainder of our fiscal year and into the next one, driven by continued global customer demand for our services.

So with that, I would like to open the line to your questions. Operator, can you please pull for our first question?

(Operator Instructions)

Our first question comes from the line of Heather Bellini of Goldman Sachs. Your line is open.

Great, thank you. And thank you, gentlemen. Welcome to the public markets.

I wanted to ask a couple questions. One, I know you're focused on very specific geographies, but wanted to see if you could give us a sense of any change in deal closings that you might have experienced as the quarter progressed? And in particular, given the rough patch for the market in the month of January, just wanting to see how things progressed and if customers are getting more nervous about signing?

And then the second question I would have would be related to -- you gave some stats -- a couple of stats at least about your ability to cross sell. You mentioned the 109% up-sell rate. I'm wondering if you could share with us some of the other -- some of the add-on products and the momentum you saw in attaching those to existing customer contracts? Thank you.

Thanks, Heather. It's Peter Campbell here.

On your first question, with respect to sense of change in the deal closings as the quarter progressed, we have continued to see a strong demand for our products. And you referenced the security market as a whole. We haven't seen any effects from that really due to the fundamental nature and the value of the services that we deliver.

We added 1,000 new customers this quarter. That is a considerable amount of new customers to add in the quarter. We're continuing to add new customers. You referenced into Q4, so we're continuing to build and add new customers in the quarter.

With respect to industry movements as a whole, in each of our core geographies we are continuing to see very strong demand for our products. We're continuing to build and add significant numbers of new customers in each of those geo's. We're going to continue to build and grow on that.

With respect to the cross-sellability and the up-sell rates, you would have seen in Q3 that we closed with 109% revenue retention rate, which is above Q2's 108%, and above the prior year's 106%. Our churn and our down-sell rates remain relatively stable and consistent with prior periods at around 3% each. So, the increase that we're seeing there comes from the sale of new products into our existing base.

In particular, some of the new products that we talked about on the road show -- Targeted Threat Protection, large file send and secure messaging -- we're seeing very good uptake of those new products. And Targeted Threat Protection in particular is a very strong growth product for us. And that, I would say, is what led the increase in our revenue retention rate over the period, with additional sales of that product into our customer base.

Great, thank you so much.

No problem.

Thank you. Our next question comes from the line of John DiFucci of Jefferies. Your line is open.

Thank you. First question is a question on profit. Including cash flow, it was much stronger than we anticipated. Part of it, obviously, had to do with the strong top line, which was also hit with foreign exchange.

I wonder how much benefit, guys, did you see due to foreign exchange on expenses? And was there something more to that, because it seems like it was so strong that there was something else there, too.

Good question. Thanks, John. I think it's a good question.

Certainly, ForEx is a fact of life for a global business like ours. And you mentioned our profit and our cash flow was stronger than you had anticipated, and I think part of that relates to ForEx. As we said before, our gross margins are typically in line with our revenue, so there's not a lot of ForEx impact that you see on our gross margins. Although we will see some ForEx impact below the line, particularly in R&D, which a lot of that is in the UK -- and some in sales and marketing, and in G&A. But more or less, those move in line with our revenues.

I think you're right in saying -- was there something else there? And I think it has to do with the ramp of our investments as we built out our R&D, and our sales and marketing, organizations. And we have continued to invest in those areas.

We started to see some of the effects of that in Q3, but I think we will see more of that in Q4. So, a lot of the hiring we did and a lot of the investments, some of the marketing investments that we did with respect to the timing of the accounting, moves that from Q3 into Q4.

So, you're right in that we did have a very good and a very solid adjusted EBITDA, profit and non-GAAP operating income and cash flow in the period. And that really relates to the increase in our investment, which is going to impact more in Q4. You're going to see that come in more in Q4 than in Q3.

And I think those results in Q3 really do show the strength of the model. But we will be investing because it's such a very strong and compelling lifetime value is our customer base, and we will be investing in that in Q4. And you will see that come down a bit. But still, the adjusted EBITDA will remain positive in that period.

Okay, great. Thanks.

And if I might, just a follow-up -- it kind of goes on the back of Heather's question about upsells, but not just upsell. You talked about good attach with new customers, too, and with some products; you mentioned TTP. And you also mentioned upsells into your current customer base.

Can you give us a little bit of information, or I'm not sure how much you want to disclose, but on the ASP, your average sale price per seat, what is happening there? Are we seeing that start to drift up here or not yet? It sounds like some things are happening that are in place that could see that happen. Is it happening?

So, I think that's a good question. I think we are certainly seeing good uptake in some of those new products. TTP, we're seeing good uptake in our existing base, but we're also seeing that with new customers, and when new customers come on. That's certainly a product that is attractive to new customers as they sign up with us.

With respect to those ASPs, they're fairly in line with what we get on security. I think there is a big potential for that product, not only to our existing base but into the market as a whole. I think it solves a need -- an existing need now that not a lot of companies address.

And so, I think we're going to see some continued good uptake in that product, both in existing base and in new. So, I think there's a lot of potential there. Right now, we're seeing it more or less in line with what we do with security. It's just a very attractive product to the base.

Okay, great. Thanks, guys. Nice job.

Thanks, John.

Our next question comes from the line of Matt Hedberg of RBC Capital Markets. Your question, please.

Thanks, guys, for taking my questions. It sounds like you had really nice attached of Mimecast to Office 365 this quarter. I'm wondering, is the pace of Office 365 adoption increasing within your SMB base, and maybe could you talk about the win rates that you're seeing there?

Absolutely. Thanks, Matt.

We are seeing an increase in adoption rates for Office 365, particularly in the SMB market. That's exciting for us. In terms of win rates, we are having a very successful time talking to companies who are wanting to move to Office 365, and really have to deal with the legacy of on-premises point solutions that they've typically had installed around their on-premises email server technology.

So, it's a great time for us, as people are rethinking their email infrastructures and their overall architectures in general, and being able to present these customers with a cloud-based configuration that's really well integrated and optimized to work in an Office 365 world, and cover a variety of different use cases and risk requirements that the customers have in one single integrated platform that they can purchase on a subscription basis at an attractive price point relative to their Office 365 subscription.

That's helpful. And then maybe a question for Peter C. Obviously, you're not talking about FY17 yet, but given the movements in currency, I'm wondering if there's a way that you could help us think about FX headwinds as we move into next year -- maybe the linearity of the headwinds thinking about as you get into Q4 and you start to guide for FY17?

Foreign exchange is a difficult thing to try and predict. With respect to certainly our guidance for Q4, we are seeing some effects from it there, which is, as you know, why we talk to constant currency and constant-currency growth rates because we think it's a better measure of the underlying strengths and growths of our Business. We're certainly seeing some ForEx headwinds there.

As you know, when we give guidance, we give fairly recent foreign exchange rates which are in effect in order to calculate that guidance. And most recently we used January 31, with respect to the guidance that we put out in the press release.

And so, it's difficult to predict the way in which that's going to move. Certainly, when we're looking at coming into the next year, we're going to take the prior-year rates into account, and we're going to look at the way that the rates are moving, and accommodate the guide accordingly with respect to how the rates are moving at the time. But we will try and give as much information to you as possible to provide any clarity that you might need in order to better understand our results.

That's great. Thanks, guys. Congrats on the quarter.

Thank you.

Our next question comes from Saket Kalia of Barclays Capital. Your line is open.

Hi, guys. Thanks for taking my questions here.

Maybe starting with the customer additions metric -- 1,000 customer net adds in the quarter, up nicely quarter over quarter. Peter, can you just talk about any seasonality in the customer additions that we should think about, especially as we go into March? Maybe you saw a little bit of seasonal strength here in December because it's a fiscal year end for most other companies. How should we -- not looking for specific guidance, but directionally how should we be thinking about that for the fourth quarter for Mimecast?

That's a good question.

With respect to seasonality of customer adds, Q3 and our Q4 are both big quarters for us. We expect to see very strong customer additions in the fourth quarter as well, as we saw in the third quarter. And as you know, because we are a very high revenue retention, very high subscription revenue model, we recognize our revenue ratably.

So, while we do expect to see strong customer additions into Q4, the revenue from those customers -- you really start to see the impact of them in the beginning in the first quarter of our next fiscal year, as we recognize revenue from the delivery of services to those customers subsequent to bringing them on. Does that answer your question?

Yes, absolutely. And then for my follow-up, maybe for Peter Bauer, you'd mentioned the momentum from McAfee's end of life of the MX Logic product. Can you help us think about how you think about that opportunity -- what it could be in terms of total revenue, timeline for when customers ultimately have to make a decision?

Great questions, Saket. It's rumored to be perhaps $80 million to $100 million of revenue that was spent on those McAfee products that are coming end of life. Of course, they're not all coming end of life tomorrow morning; it is a phased end-of-life process, as you would expect from a company like Intel McAfee. It's really an opportunity that will roll on for a while.

I guess we were surprised by how quickly customers are concerned to find their alternative and to find their next plan. So, that was really interesting to us, that many customers are not looking to wait it out but are interested in what are the alternative solution that they could have in play fairly quickly. And that's consistent amongst the partner community, too, who, I think, saw the Postini situation and really didn't want to be caught out on the slow end of that.

We're seeing in-bound inquiries. We've got out-bound campaign. We're having a lot of conversations with McAfee customers. And so, we're excited about what that represents as a revenue opportunity, both in terms of replacing what customers did have with McAfee with a superior offering, but also being able to sell additional solutions to those customers.

You may perhaps have just bought basic anti-spam, anti-virus type solutions from McAfee. We obviously, with our fully integrated suite, have the option to solve more problems for them, like archiving, like email continuity, and importantly, like protecting them against more sophisticated and targeted attacks with our TTP suite.

Understood. And if I could just squeeze in one more housekeeping, because I think it's important for the guidance. Peter Campbell, can you just remind us what percent of revenue is billed in South African rand and British pound, roughly?

It's sub-20% in rand. That's where we saw some of the more significant impact of movement in foreign exchange rates, as the rand moved down quite sharply over the quarter and into this one.

And you know, with respect to British pounds as a percentage of our revenue, that is less than 40% of our revenue now, as not only the foreign exchange impact affect that, but our strong US growth pushes our US dollar based revenue as the most significant component of our overall revenue.

Understood. Thanks very much, guys.

No problem.

Thank you. Our next question comes from the line of Shaul Eyal of Oppenheimer. Your line is open.

Thank you. Hey, guys, good afternoon, and congrats on mine as well for making it to the public market, and absolutely solid results and guidance.

A couple of quick questions on my end -- so, Peter Bauer, I think a nice 80,000 seat win in APAC and I think Australia, public sector. Is that a displacement? Is that a greenfield? Can you provide us with a little bit more color about that nice win?

Absolutely. That was a really exciting win for us, done with one of our major partner system integrator in the region. This was a company that had -- sorry, an organization that had a significant on-premises investment and a number of on-premises technologies in place for archiving and for email security. Also responsible for running a pretty sprawling Microsoft Exchange infrastructure.

And then contracting with our partner is a strong global system integrator, but very strong in that region, who took a full outsourcing contract to deliver email, security and information management services to this customer. So, we were a very successful part of their bid, and part of the overall security, resilience and archive information management equation for that customer.

Got it. Maybe a housekeeping for Peter Campbell -- just in terms of the shares outstanding number for the March quarter, how should we be thinking along these lines? [Without it], I think it's going to be a little higher than what we had in the December quarter -- just probably help us guide a little bit?

It's a good question. So, obviously it will be higher. We did our IPO in mid-November, and we're looking at shares in the quarter.

And the weighted average shares in the quarter, you'd only get a partial period of having those IPO shares in the total number of shares outstanding for the quarter, in the third quarter, and they will be outstanding for the entire quarter in the fourth quarter. And the same for the preferred shares, which converted. We're looking at about 54 million for the quarter, weighted shares outstanding.

In terms of the assessment of any exercises or anything along those lines, we have taken that into account, and assess that any of those exercises would happen after the lock-out period. So, we're going just with the full number of shares that were outstanding at December 31, and I would use that for your weighted average share calc for the fourth quarter.

Got it. Thank you so much. Good luck.

Thank you.

Thank you. And at this time, I would like to turn the call over to Mr. Bauer for any closing remarks.

Thanks, folks, for joining our call today. Obviously, exciting for us to present our first results as a public company.

I also want to say a big thanks to our staff and to our partners for their work this past quarter in getting us into position to put such strong results on the table. Folks, then we look forward very much to sharing our next set of results with you, which will be for our full-year FY16 in a few months' time on a similar call. Thanks very much for joining today.

Thank you, everybody.

Thank you, sir. And ladies and gentlemen, that does conclude your program for the day. You may disconnect your lines at this time. Thank you so much for your participation, and have a wonderful day.