Microstrategy Inc (MSTR) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MicroStrategy Third Quarter 2017 Earnings Call.

(Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to Michael Saylor, Chairman, President and CEO.

Sir, you may begin.

Hello.

This is Michael Saylor.

I'm the Chairman, President, and CEO of MicroStrategy.

I'd like to welcome all of you to today's conference call regarding our 2017 third quarter financial results.

I'm here with our CFO, Phong Le.

First, I'd like to pass the floor to Phong who's going to read the safe harbor statement and make some comments on our results for the third quarter.

Thank you, Michael, and good evening, everyone.

Various remarks that we may make about our future expectations, plans and prospects may constitute forward-looking statements for purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recently quarterly report on Form 10-Q filed with the SEC.

These statements reflect our views only as of today and should not be relied upon as representing our views as of any subsequent date.

We anticipate that subsequent events and developments may cause the company's views to change.

While the company may elect to update these forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so.

Also during the course of today's call, we'll refer to certain non-GAAP financial measures.

There's a reconciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after the close of market today, which is located on our website at www.microstrategy.com.

Onto our financial results for Q3.

Overall, we're happy with our progress in investing in our business for growth.

In Q3 2017, we began to launch major initiatives, including increasing corporate, digital and field marketing presence; continuing to strengthen our services organization with a focus on customer satisfaction; ramping up our recruiting presence on campuses in the U.S., Poland, and China; and improving employee engagement as evidenced by our most recent engagement survey results and labor market sentiment.

As we focus our effort investments in these initiatives, we expect it will take several quarters before the full cost of revenue impacts hit our income statement.

Let's start with more detail on revenues.

Total revenue for Q3 2017 was $125.2 million, a $4.7 million or a 4% decrease year over year.

Foreign currency effects in Q3 2017 favorably impacted our revenues by $1.5 million or 1%.

Total revenue increased $4.6 million or 4%, quarter over quarter.

Product license revenue was $21.6 million in Q3 2017, an $8.1 million or 27% decrease year over year, again a tough compare in Q3 2016.

We did experience sequential product license revenue improvement of $2.4 million or 13%.

This is particularly aided by recovery in our volume of big deals greater than $500,000.

We also derived a greater proportion of revenue from new customers in Q3 2017 compared to previous quarters.

Our North American business represented 58% of our total product licenses revenue compared to 74% for the same period in 2016.

Our subscription services revenue, primarily driven by our cloud customers, was $7.7 million in Q3 2017, a 1% increase over Q3 2016 and 7% decrease compared to Q2 2017.

We've had a number of customers convert from our cloud to our on-prem offering, which had a negative impact on our year-over-year and quarter-over-quarter growth rates.

Our support revenue was $72.9 million in Q3 2017, a 1% increase year over year and 3% increase quarter over quarter, with foreign currency changes favorably impacting such revenue by $0.8 million or 1%.

Our customer satisfaction levels and maintenance renewal rates continue to be high.

But recently, lower product license revenues had an impact on new maintenance revenues.

Our services revenue was $23.0 million in Q3 2017, a 14% increase year over year and 3% increase quarter over quarter, with foreign currency changes negatively impacting such revenue by $0.3 million or 1%.

As we continue to strengthen our services business, we're looking forward to welcoming a new head of worldwide services, Steve Holdridge, in early November.

Steve will be responsible for our consulting, education and support businesses.

Turning to cost, we're beginning to see increases in cost as a result of our recently announced growth in investment strategy.

Q3 cost of revenues were $24.4 million, a 6% increase year over year and flat quarter over quarter.

Q3 operating expenses were $80.2 million, a 4% increase year over year, and again, flat quarter over quarter.

Sales and marketing expenses increased 7% year over year with an 11% increase in headcount.

Research and development expenses increased 7% year over year with a 2% increase in headcount.

And general and administrative expenses decreased 3% year over year with a 4% decrease in headcount.

Specifically in marketing, we saw a 16% quarter-over-quarter and 37% year-over-year increase in cost as we ramped up activity and headcount associated with corporate, digital, and field marketing.

We had income from operations at $20.6 million in Q3 2017 and an operating margin of 16%, a 31% decrease in operating income from the same period a year ago, and a 31% decrease compared to Q2 2017.

Increase.

Increase compared to Q2 2017.

Our net income was $17.9 million in Q3 2017, a decrease of 33% from the same period a year ago and a 62% increase compared to Q2 2017.

Diluted earnings per share was $1.56 in Q3 2017, down from $2.31 the same period a year ago and up from $0.96 in Q2 2017.

We had cash, cash equivalents, and short-term investments of $646 million at the end of Q3 2017 and continue to have no debt.

We continue to believe that the investments we're making in sales, marketing and technology will improve our business and help to drive revenue growth in future periods.

We believe that the infrastructure we created in the past 3 years, and our products, processes and people have us well positioned to leverage these additional investments.

We'll continue to be smart about making additional investments or maintaining the flexibility to evaluate and refine our growth plan as it progresses.

Now I'd like to turn it back to Michael Saylor.

Thank you, Phong.

I'd like to share a few comments on my perspective regarding the results in the quarter and our plan going forward.

I think the pros of the quarter are we were profitable and had good cash flows, and I was pleased with the quality of the deals that we were doing.

In particular, I'm excited about the fact that we're doing really good business with some of the largest banks in the world.

We had good deals with some of the largest companies in the world.

We had some really good business with some of the most prestigious technology vendors in the world.

And the appeal of our product at an enterprise level appears to be fairly well balanced across just about every major industry and also lots of governments around the world.

So the products really I think is resonating with the marketplace.

I was pleased with the analyst endorsements we got from BARC and Forrester in the quarter.

The analysts make a difference in the industry.

And we had had some negative analyst developments in the past, and this was a nice turnaround for us.

And Forrester, just in September, gave us a really nice endorsement, and BARC just a few months before that.

And so that's been resonating really well in the marketplace both with the channel and also with our customers.

And I think it's an auspicious development for us.

In many cases, these analysts reviewed up to 20 of our competitors and anointed us as a leader or the leader in many of these spaces.

So I'm excited about that.

We see good things and good trends in customer satisfaction, where our customer satisfaction ratings that we're gathering from our installed base continue to trend north in the right direction.

I have had the opportunity to travel around the world just in the past few weeks, presenting MicroStrategy version 10.9, and we've been getting really good customer and partner response to 10.9.

And so I think that was really a nice pro.

And the services performance year over year was strong, and so we're pleased with that.

The negative is software bookings.

We're lower this quarter than this time a year ago, and so that we're not pleased with.

As I look at the business going forward, I think we've got a pretty good plan in place that makes sense for us to drive organic growth in the business.

And our plan consists of a variety of different strategies.

We're going to increase our investment in corporate marketing and digital marketing, especially by spending money across channels like Facebook and Google and Twitter and some of the other publications where CxOs have their eyeballs.

And so we've already started that process, and that will continue.

And we think that that will help us build our brand and drive additional leads and brand awareness in the marketplace.

We've got a pretty ambitious program to increase the degree of field marketing we're doing in the coming year, and that means both continue with our existing symposiums, as well as be present at a lot more trade shows.

With regard to field marketing, we're looking to target places where CxOs, and then also IT executives driving digital transformation and enterprise and analytics purchases will be.

So that means big data conferences, analytics conferences, digital transformation conferences, enterprise mobility conferences.

And then gatherings of CIOs, CTOs, and other IT executives and also CxOs.

This is dramatically ramping up versus where we were a year ago, and so I expect that we'll see good things come from that.

We're making investments in our sales organization to strengthen our sales capabilities everywhere in the world.

And that means in some cases additional field marketing personnel.

In others, additional channels, personnel, and additional sales leadership, and also product localization personnel.

These are investments we're making in China and Japan and Korea and Asia Pacific and in the Middle East, and in Europe and Latin America, and of course all throughout the Americas region.

And I think that given the arrival of our new product and product capabilities, this is a timely thing for us to do.

And I'm getting good feedback from all of our field sales organizations that this is a positive development.

So we'll continue with that.

We're going to make additional investments in our services organization, and we'll be bringing on more support professionals and support engineers and more professional services experts in order to raise the level of our professional support, and also to grow our professional services business.

And to proactively target our customers with an enterprise support offering, which will help them to get the most out of the MicroStrategy platform.

I'm really enthusiastic about our enterprise support approach because I feel like just about all of our customers will benefit from the developments we had made in our product and improvements we made in our platform, and also the best practices that we've been developing for how to deploy the MicroStrategy platform more effectively throughout the enterprise.

We're developing some good approaches to optimize our configurations, and we've developed new methodologies to deploy self-service on a MicroStrategy platform, which is a really high demand thing right now.

And we're also developing new methodologies to create additional environments that people can use to deploy mobile and IoT and embedded analytic applications and cloud applications.

Our services strategy is really integrated well with our product strategy and is integral, and I think that it will help us to grow the business.

And not just grow services, but grow software revenue.

So we'll add additional talent to do that everywhere in the world.

And I wouldn't want to leave out maybe one of the more important areas of our growth strategy, which is product development.

There are a whole set of product themes that we're investing in in order to grow the business, and we're going to ramp up those investments.

Certainly one area we're enthusiastic about is our dossier and Workstation.

I think the dossier is a dramatic advance in our interface.

And not only is it extremely modern and a great way to deploy mobile applications and analytic applications to the entire enterprise, but it also incorporates collaboration.

And as you see from our press release, we're really excited about collaboration.

It makes it much easier and much faster to embed analytics into workflow, and it will draw large, new user constituencies into our analytic enterprise framework.

And so the dossier is key.

Workstation is our tool strategy to dramatically improve the quality and the effectiveness and the efficiency of our tools.

And we're going to continue to drive that forward.

I expect that in 2018, we'll start to see good things come from that.

I've gotten really good feedback from our customers about Workstation.

They seem to be pretty enthusiastic about the potential of our new tool set to drive productivity and agility.

Another big theme in the market right now is data and connectivity, especially big data.

And in our latest releases, we've added upgraded drivers and gateways to support direct access to Hadoop and Spark and many of the new cloud-based data sources like Snowflake and RedShift.

And that, combined with new connectivity options we have for big data, new support for MDX data sources like MSaaS and other cubes and new functionality related to MDX, these are very auspicious.

They're going to help us in our growth strategy.

We continue to open up our architecture.

It's now possible with MicroStrategy 10.9 to turn a MicroStrategy environment into a data warehouse of sorts, so you can publish MicroStrategy data sets from one MicroStrategy environment to another MicroStrategy environment.

And this is really exciting development for us because it means that we can actually use our environments to federate data sets and federate KPIs to other MicroStrategy environments, which has been something that's been in high demand for a while.

Well, we've got an exciting agenda to improve and enhance our gateway and big data connections in the coming year, and I think that this is going to be a great growth area for us.

Dossier is a great underlying technology to help us turbocharge our enterprise mobility applications as well, and so I think mobility is going to be even more of a theme in 2018.

And the dossier allows you to very quickly build an application which renders very nicely on all types of mobile form factors, as well as web and desktop, and it's been generating a lot of excitement amongst customers as they see this.

The latest release of our product has some dramatic upgrades to our APIs for embedding our analytics into custom applications.

And sometimes that takes the form of building custom mobile or custom write-backs.

And in those areas are RESTful APIs and JSON API's been very popular customers.

We've also illustrated how you can actually serve up MicroStrategy federated data sets to other enterprise BI tools like Tableau or Power BI or Qlik.

And so it makes MicroStrategy a really good corporate citizen where we can serve as a data warehouse for them.

And that's exciting.

And we've shipped this new embedding API in 10.9, which makes it possible to take a dossier, and in a matter of minutes, embed it into a web portal or a blog or any HTML document, and people are really excited about that.

So we're going to continue to invest in embedded analytics APIs as we look forward in the year, and I think that that will be a source of growth for us.

Another source of growth in the market is the migration to the cloud, and especially the explosion of AWS and companies that have their own virtual private clouds in AWS environment.

Our latest release is the best version of MicroStrategy's platform for the cloud yet.

And now we're out actively selling and marketing MicroStrategy for AWS.

And the exciting thing about it is that any customer can deploy an enterprise-grade version of MicroStrategy in their own BPC.

They can integrate it back into their data center and they can manage it.

And they have the encryption keys, and they have all the administrative controls of it, so they have complete control over the environment.

It's also exciting because MicroStrategy for AWS means that any of our partners and system integrators can deploy the MicroStrategy environment in their BPC.

And they can become a cloud service provider, tapping right into the power of AWS, but then layering on their own managed services and applications in order to be a software-as-a-service vendor or a managed service center.

This is going to help us move our cloud value proposition everywhere in the world.

It means that local partners of ours in Japan and Korea and international, they can all create their own tailored versions of the MicroStrategy cloud offering, tailored for the local political and legal environment, and tailored for the local language and solution environment.

And so we see this as being a nice breakthrough in scalability, and will allow us to grow our cloud revenues over time.

And the last area that's worth highlighting in this call is the advances we have made with regard to mobile identity and communications and telemetry in the Usher product line.

And we feel like that's the best we've had so far, and it's starting to work really, really well, and we're generating lots of enthusiasm throughout the customer base.

And the potential of mobile communication and mobile identity to either turbocharge the analytics frameworks, or to improve their enterprise mobility solutions, or to deploy standalone communications and security applications on mobile devices.

So our growth strategy in a nut shell is ramp up our marketing, strengthen our sales, strengthen our services organization, focus more services on our enterprises, and continue to make substantial investments in the product platform riding on these waves of mobility of big data, of embedded analytics and cloud and then IoT.

We'll spend more money on engineers and on professional services people and sales and marketing professionals in order to pursue this agenda.

The cost will ramp up during the coming year, but I believe it positions us well for revenue growth.

So looking forward, we're heads down, executing on our growth plan.

I'm more excited about the future than ever, and I'm looking forward to 2018 and what the year will bring.

With that, we'd be happy to answer questions, if there are some.

(Operator Instructions) Our first question comes from Abhey Lamba with Mizuho Securities.

In the quarter, when we look at your deal metrics, it seems like big deals accelerated, and revenues from smaller deals are experiencing year-over-year decline.

What drove the dynamic?

And it's a little bit different from the previous quarter when large deals didn't come through.

So what really kind of share tilted the scale this quarter?

I think we have some normal quarterly variability, and we've seen it in the past, and I think we see it now.

I don't think there's any particular macrodynamic that we can put our fingers on that we would choose to call out right now.

I think the business is just variable from time to time and quarter to quarter.

I think Abhey, Q2 as you know is a pretty low large-deal quarter for us and a low bookings and revenue quarter on product license in general.

So if anything, that was an anomaly.

What you saw in Q3 was more typical of our business.

Got it.

And from the expense plans, it seems like for the quarter they came in better than where we guys were modeling you guys at.

I understand you don't give guidance, but maybe you can talk about how did your expenses come out this quarter versus what your plans were, especially in light of the increased investments you wanted to make?

And how should we think about your expense plans going into the next few quarters, as well as in 2018?

I think we've laid out some thoughts around where our run rate expenses might go over the next year.

And we've talked about last quarter that we could see a place, and we're open to our margins going down to the single digits.

Q3 was really just a ramp period.

If you think about a lot of our expenses coming in the form of headcount in areas like technology and marketing and consulting, we opened positions.

And you could probably go and look at our job boards and see the increased number of positions here and in Warsaw and in China, specifically.

But the hiring will take time.

You'll see the first set of folks show up incrementally in Q4 and then over time.

And then on the marketing side, which is where a lot of our other expenses will show up, I think I had mentioned we saw a 16% quarter-over-quarter increase in marketing and 37% year-over-year increase.

And we expect that to be even higher than that as we enter Q4 and beyond as we see more of our activities take place.

But we don't have a set exact amount we want to spend, so much as a willingness to spend if we find activities that are giving us high ROI and high return in terms of leads and opportunities.

Got it.

And my last question is, Mike, you have a pretty heavy balance sheet.

It's significant amount of cash you have on the balance sheet, and the stock is at a pretty low multiple right now.

Why not do some buybacks at these levels?

That's it for me.

We continue to monitor the situation, and I think we're pleased to have the option to do a buyback at the right time.

We've taken our time a number of issues, and it's something that's important to us.

And at the right time, it's something that we would consider doing.

Our next question comes from Karl Keirstead with Deutsche Bank.

I've got two.

Michael, I know license growth by geo can be quite variable.

But I guess it was quite a contrast in 3Q where I think international license growth up 20%, but domestic down 44%.

So maybe just focusing on the domestic down 44%.

Does that speak to any change in the end market?

It sounds like it doesn't, given your comment that you really don't see any macros.

So, was there something internally perhaps at MicroStrategy that contributed to that license performance?

Thank you, and then I've got a quick follow up.

My view generally is we've been under investing in the business, and we need to invest more in marketing, more in sales, more in services, and more in product development.

And if we do all those things, we're going to see revenues grow.

And so there's no one thing I put my finger on.

I think we just need to be more aggressive in our investments.

And we've been a bit on the conservative side, and that's the primary reason license revenues aren't growing faster.

And then Phong, I might have misheard you, but when you were talking about the subscription business, did you say that in the third quarter, you saw a little bit more migration from cloud to on-premise?

I might have misheard you, but if you said that correctly, that sounds a little sort of contrary to the normal pattern.

Perhaps you could clarify.

Yes, that's exactly right.

And as you know, our subscription business isn't a huge business for us.

It's about $30 million annually in revenue.

So when we see, as an example, a customer who is providing us $1 million ARR in cloud migrate to on-prem, staying as our customer, that has a pretty significant impact to our quarterly revenues.

And that's what we saw in Q2.

We saw a couple of large customers migrate from cloud back to on-prem.

And for the most part, those are not decisions about a MicroStrategy cloud product or a MicroStrategy on-prem product, but it's a strategic decision with those particular companies.

So that is what we saw.

I wouldn't point to it as a particular trend in our business or in cloud confidence overall, but one migration makes a big difference in our income statement.

Our next question comes from Walter Pritchard with Citi.

This is Tyler Radke on for Walter.

Michael, I was just hoping to take your pulse on version 10.9 and some of the features you sound excited about with dossier and the workstation.

Just was hoping to get how this compares to your excitement with the initial version 10 wave.

Do you see this as a catalyst to reaccelerate growth?

Just would love to get your thoughts there.

Thanks.

I think 10.9 is the beginning of a new set of product releases that are really focused upon the dossier-Workstation paradigm.

And I think 10.9 was the strongest release we've have in many, many years, and so I am enthusiastic.

And I think the dossier and Workstation offering is going to usher in a new level of productivity and electricity in our product offering.

So I expect it will kick off a new product cycle that's going to be beneficial to us in the year 2018.

And a follow up to that.

Phong, you mentioned that you saw a higher number of I guess new customers in the quarter.

Is that right?

I assume that's net new customers.

Can you just provide some more color there?

Did they come in through the free desktop program?

Were they excited about version 10.9?

What drove that?

I think the big driver is we're increasing -- throughout the year we have, and now you're going to see more of a step function increase in our marketing and our marketing towards prospects, whether it be through our symposium efforts or our field marketing efforts or acquisition of prospect list, or focusing on our account executives or our inside sales folks and prospects.

We're starting to do more of that as an organization.

And with that, we have a better story to tell in terms of our product roadmap and in terms of our capabilities.

I think it is sort of a culmination of many different things that we're doing, and we hope that trend continues in the future.

And then last question on operating margins.

Phong, you mentioned the willingness to go into the single digit op margin range if necessary.

Any thoughts as to the timing or duration of that?

Is this a one-quarter event?

Next year going to be a multi-quarter or a multiyear event?

I don't think we're quite ready to provide quarterly direction on what our margins will be.

I do think it's not going to be a single -- if we were to approach that, it's not going to be for a single quarter.

I think it's a long-term investment strategy.

And our way out and above single digit margins will be mostly driven by revenue growth over time.

Our next question comes from Frank Sparacino with First Analysis.

Just wanted to go back on the cloud subject for a moment and get a sense as to do you feel like the lack of growth in the cloud business has been held back by MicroStrategy?

It seemed like, given the talk around the AWS, and just sort of the general industry trend, particularly from some of the storage and processing guys moving to the cloud as well that inevitably, you'd start to see that impact on the front end.

So just trying to figure out maybe why you aren't seeing the same type of demand from moving to the cloud as others are.

I guess I would say there that our cloud business is just a small portion of our overall business.

And there's going to be a large on-premises business in enterprise software for a long time to come, and so we can't really underestimate that.

I think in general, our growth is going to be driven by our sales and marketing and our service programs in the nearer term and our product programs over the midterm.

And so when we look at our overall license bookings, the best thing we can do is ramp up our sales and marketing and our services program to drive those.

And that's going to drive cloud growth, as well as on-premise's growth of the business.

I think another piece, Frank, is our cloud strategy has evolved over time.

Two years ago, we were focused on hosting a private cloud for our customers where we would host severs.

We would host -- we would provide support and we provide the licenses.

And as you know, we migrated to an AWS-focused strategy where AWS would provide the cloud hosting, we provide the cloud support, and we provide the licenses.

And we continue to, based on our customer demand and what's best for our business, we're evolving that towards a what we call MicroStrategy in AWS, where the customers have the direct relationship and cloud hosting and cloud support.

We really provide the licenses.

So as we evolve our strategy, we do see sort of unsteady or uneven revenue growth in cloud.

Also, the other piece is we have greater exposure to what I'll call Fortune 500 companies than what you probably see as cloud BI providers out there who are selling to much smaller companies.

The larger companies that we deal with aren't necessarily as comfortable, especially financial services institutions, moving their entire BI and data warehouse environments to the cloud.

We do, as Mike said, have a lot more customers who just want to stay on-prem.

Or like we saw in Q2, they've made a 1.5-year experiment to move to the cloud and they moved back to on-prem based off of that.

And Phong, maybe just lastly.

If I have the numbers right, sales and marketing headcount, 635 at the end of the quarter, is down slightly from Q2, despite some of the investments you're making.

Are those figures correct?

I would have expected it to be up in Q3.

Obviously you just started to invest, but just wanted to make sure on that sequential change.

That's right.

It went down I think from 642 to 635.

So a very small decrease.

I think 1%.

And like I said earlier, we do plan on increasing our headcount.

It'll take time to hire.

But the other thing around marketing is most of our investment that you'll see in marketing is just coming in the form of external third party dollars.

So whether it be trade shows or whether it be just corporate marketing and brand marketing.

And so a lot of the investments you'll see there are going to be more just in terms of dollars and cost as opposed to headcount.

Our next question comes from Greg McDowell with JMP Securities.

Just one quick question.

I was thinking about the Q4 operating plan.

And if revenue came in above your internal expectations, would you ramp up investments faster, or would you just take kind of a wait-and-see approach?

And likewise, if revenue in Q4 was below your expectations, would you ramp up and bring some of these investments in sooner than you expected for your 2018 operating plan?

I was just wondering the sensitivity of how Q4 plays out and how that would potentially impact how you're thinking about the pace of investments in 2018.

Thanks.

I don't think we're planning our investment strategy on a quarter-to-quarter basis, meaning we're not going to say we're going to decrease or increase our investments in Q1 because we had a good or bad Q4.

I think we're thinking about this in much more strategic and long-term perspective.

The things that'll cause our Q1 investments to go up or down will be the success of what we do in Q4.

So if we see high ROI in a particular marketing campaign or channel, we may increase it going into Q1.

If we don't see something that's effective, we may decrease it.

But it won't be driven by our revenue.

I think we're thinking about it much more long term than that.

That's fair.

Thanks.

And last question.

The strategic hires you need to make, and it sounds like it spans across sales and marketing and product development, but how does the candidate pipeline look?

Have you already started sourcing some of those candidates, or do you really wait until the beginning of 2018 to look in earnest for some of these candidates?

Thanks.

I think we've increased our candidate pipeline significantly.

We've hired a new head of talent acquisition in Q3 that we're very excited about, and she's starting to build a bigger recruiting team around the world.

A lot of this is campus hiring.

So imagine 50 people in China, 50 people in Warsaw, 50 people in the U.S. across campus hiring.

Those folks will get offers in Q4, depending on -- they're getting offers right now.

And depending on whether they're ready to start in December or January or the fall of next year will be when the costs show up.

So a lot of it is from that side.

And then the other big push is on experience hiring with executives around the company to fill in spots that we've needed.

I would expect to see -- obviously you didn't see a big ramp up in Q3.

I wouldn't have expected to see a big ramp up in Q3.

You'll start to see some of that in Q4.

But the timing is usually people are starting in November, December, so you won't see a lot of costs show up.

And you'll see the costs probably show up more as you go throughout the next year.

(Operator Instructions) And I'm currently showing no further questions at this time.

I would like to turn the call back over to Michael Saylor for closing remarks.

I want to thank everyone for their time and their support.

We look forward to speaking with you again in January.

Have a great holiday season.

Ladies and gentlemen, this concludes today's conference.

Thanks for your participation.

Have a wonderful day.