Verint Systems Inc (VRNT) 2016 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q1 2016 Verint Systems Inc., earnings conference call. My name is Tevan, and I will be your operator for today.

(Operator Instructions)

I would now like to turn the conference over to your host for today, Mr. Alan Roden, Senior Vice President of Corporate Development. Please proceed.

Thank you, operator, and good afternoon, and thank you for joining our conference call today. I'm here with Dan Bodner, Verint's CEO and President, and Doug Robinson, Verint's Chief Financial Officer.

By now, you should have seen a copy of our press release that includes selected financial information for our first quarter ended April 30, 2015. Our 10-Q will be filed shortly. Each of our SEC filings and earnings press releases is available under the investor relations link on our website, and also on the SEC website.

Before starting the call, I'd like to draw your attention to the fact that certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws. These forward-looking statements are based on management's current expectations, and are not guarantees of future performance. Actual results could differ materially from those expressed or implied by these forward-looking statements.

The forward-looking statements are made as of the day of this call; and except as required by law, Verint assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements. For a more detailed discussion of how these, and other risks and uncertainties, could cause Verint's actual results to differ materially from those indicated in these forward-looking statements, please see our Form 10-K for the fiscal year ended January 31, 2010, and other filings we make with the SEC.

The financial information discussed today is primarily non-GAAP. A reconciliation of the non-GAAP financial measures to GAAP measures is included in today's earnings release, as well as under the investor relations link on our website. Non-GAAP financial information should not be considered in isolation or as a substitute for GAAP financial information, but is included because management believes it provides meaningful supplemental information regarding our operating results when assessing our business, and is useful to investors for informational and comparative purposes. The non-GAAP financial measures the Company uses have limitations, and may differ from those used by other companies.

Now, I'd like to turn the call over to Dan. Dan?

Thank you, Alan. Good afternoon, everyone, and thank you for joining us to review our first-quarter performance.

In Q1, we achieved $270 million of revenue and $51 million of operating income, with 19% operating margins. These operating results drove non-GAAP diluted EPS of $0.66, and $67 million of cash from operations. We are pleased with our Q1 results, including our strong margins, earnings, and cash flow, and are on track to achieve our annual revenue and EPS guidance. Looking ahead, we expect strong sequential revenue increase in Q2, and are targeting another year of double-digit revenue growth on a constant-currency basis.

We believe that our actionable intelligence market is in an early stage. As the volume of structured and unstructured information grows, organizations are looking for solutions to help them gain insights from big data, and turn those insights into actionable intelligence. Verint Solutions, which are used by more than 10,000 customers, enable decision-makers to anticipate, respond and take action, and make more informed, effective and timely decisions.

Last year, we discussed our strategy to expand our TAM, total addressable market, which is now $8 billion, by focusing on two actionable intelligence growth areas: customer engagement optimization and security intelligence. Today, I'd like to report our progress executing this strategy.

Also, we are excited to discuss our strategy in more detail next week at our investor day. The day will include management briefings, customer presentations, and product demonstrations, which will help bring our strategy to life. We hope that you will join us; and at the end of the call, Alan will provide more details.

I would like to start with the area of customer engagement optimization. During the quarter, we received multiple large orders from existing and new customers to demonstrate how we are becoming more strategic to our customers, including approximately $5 million in orders from a financial services customer in connection with their ongoing initiative to reduce fraud in their customer service operations; approximately $3 million in orders from an insurance customer in connection with their omnichannel customer service transformation program; approximately $2 million in orders from a banking customer in connection with their ongoing customer service optimization program; approximately $2 million in orders from a technology service customer that is implementing multiple modules from our portfolio, including our agent desktop, knowledge management, and case management solutions; and approximately $2 million in orders from a transportation customer for multiple modules, including quality monitoring, speech analytics, and desktop and process analytics. We believe these large orders were driven by our focus on innovation, and our expanding portfolio.

In Q1, we continued our innovation across two dimensions. First, we continued to enhance our large portfolio of applications to make sure we offer our customers best-of-breed solutions; and, second, we continued to enhance our platform, creating strong integrations across our solutions portfolio, as well as integrations with third-party applications. We believe that our ability to offer a large variety of best-of-breed solutions, combined with an integrated and open platform, differentiates us, and provides significant benefits to our customers.

Here are some examples of our recent innovations. We added a new application to drive and measure employee performance using gamification. We added a new worker location optimization designed to ensure tasks are allocated to employees based on their skills, historical performance, and priority of the work. We improved visualizations in the workflows to increase agent productivity. We added more localization, including a Japanese version of our engagement management suite, further expanding our global reach.

We more tightly integrated our voice biometrics for real-time identity authentication to better address fraud. We enhanced our next best action capabilities based on insights gained from our speech analytics. And we added integrations to our platform to make it easier for our customers, and to lower their total cost of ownership. Overall, we have built a broad portfolio which uniquely positions Verint to help organizations meet the evolving consumer expectations.

We believe that the market for customer engagement optimization is in its early stages, driven by the evolution in consumer behavior, mainly in two areas. Today, consumers want to communicate through multiple engagement channels of their choice, and also consumers expect a quick, contextual, and personalized experience. More and more, organizations face challenges as they prepare for the evolution in consumer expectations; and they seek innovative technology. Verint was early to recognize this industry need, and has become a category leader in customer engagement optimization by combining workforce optimization, engagement management, and customer analytics.

We believe our differentiated approach positions us well to help customers achieve their operational and strategic objective, as well as for continued growth and market leadership. Next week, we expect more than 1,000 participants at our global user conference in Las Vegas, many of which have deployed only a small portion of our growing portfolio, and are joining us at the event to hear about Verint's latest innovation, and to discuss their needs as they evolve their customer engagement strategy.

Turning to security intelligence markets, we offer a broad portfolio of security intelligence solutions, and continue to see demand for our innovative solutions, driven by a variety of security threats around the world. During the quarter, we received a number of large orders, including orders for approximately $25 million from an existing customer, orders for more than $10 million from another existing customer, and orders for more than $10 million from a new customer. We believe these large orders reflect our broad portfolio of innovative solutions that address both traditional and emerging security threats, such as advanced cyber attacks. As we continue to expand our portfolio, we offer customers flexibility to purchase our security intelligence solutions discretely or as part of a more comprehensive security package.

Turning to cyber, next week during investor day, we will demonstrate our next-generation threat protection system, or TPS. Today, I would like to preview some key points that will be discussed at the event.

First, let me explain which part of the cyber market we are focusing on. Despite significant investments by organizations in cyber security products, advanced cyber attacks continue to cause significant financial, operational and reputational damage. Verint is focused on delivering innovative solutions to better protect organizations against advanced cyber attacks.

We believe that the market is seeking new approaches to address the well-known gap with existing cyber security approaches. These gaps include siloed detection and investigation tools; too many alerts, making it difficult to identify and respond to the right attacks; and insufficient automation resulting in long time from detection to containment.

Verint's threat protection system was specifically designed to leverage actionable intelligence to address these gaps. We believe that because advanced cyber attacks are well planned, targeted and stealth, the mitigation approach needs to be based on intelligence tactics. Building on many years of experience in security intelligence, the architecture of our threat protection system encompasses three dimensions.

Comprehensive coverage is the first dimension. TPS provides visibility and protection across multiple [attack surfaces] including networks, endpoints and payloads.

Integrated functionality is the second dimension. TPS includes detection, prioritization, investigation and prevention, all pre-integrated in a single platform.

And time is the third dimension. TPS includes both real-time and post-attack detection and forensic capabilities.

From a go-to-market perspective, we believe that both government and commercial organizations are subject to advanced cyber attacks, and are seeking an innovative approach to cyber security. In the government market, Verint is already a leading provider of security intelligence solutions, with a well-known security brand. We're gradually expanding our go-to-market focus to enterprises as well. While Verint has a very strong customer engagement brand presence in the enterprise market, we historically have not focused on the enterprise security buyer. Therefore, we will gradually invest to create awareness, and ramp up a dedicated enterprise cyber sales force, which, over time, will provide Verint an expanded market opportunity.

Overall, during Q1 we made progress executing our growth strategy. Our $8-billion TAM is split equally between customer engagement optimization and security intelligence, and we continue to invest in both areas. During Q1, we continued to hire; and today we have close to 5,000 professionals with approximately 1,500 in R&D, 1,500 in services, and close to 1,000 in sales and marketing, providing a strong foundation for continued growth.

Turning to guidance, due to typical seasonality, our revenue is usually lowest in Q1 and strongest in Q4, with sequential increases throughout the year. We expect the same trend this year, with strong sequential revenue increase of approximately $20 million in Q2. For the year, we are maintaining our prior guidance for revenue and diluted earnings per share. Overall, we believe we are well positioned to expand our market leadership, and are targeting another year of double-digit revenue growth on a constant-currency basis.

And now let me turn the call over to Doug.

Thanks, Dan; good afternoon, everyone.

Most of our discussion today will focus on non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is available, as Alan mentioned, in our earnings release and in the IR section of our website. Differences between our GAAP and non-GAAP financial measures include adjustments related to acquisitions, including fair value revenue adjustments, amortization of acquisition-related intangibles, certain other acquisition-related expenses, stock-based compensation, as well as certain other non-cash or non-recurring charges.

I'll start my discussion today with the areas of revenue, gross margin, and operating margin. In the first quarter, we generated $270 million of revenue across our three segments, with $147 million in enterprise intelligence, $92 million in communications intelligence, and $31 million in video intelligence. This compares to $269 million of total revenue in the first quarter of the prior year, with $167 million in enterprise, $76 million in communications, and $26 million in video.

In terms of geography, in Q1 we generated $138 million in the Americas, $82 million in EMEA, and $50 million in APAC. This compares to approximately $142 million in the Americas, $76 million in EMEA, and $51 million in APAC in the first quarter of the prior year.

Given the recent foreign exchange movements, we'd also like to discuss our revenue on a constant-currency basis to help investors better understand the underlying operational performance of the Business. In that regard, on a constant-currency basis our revenue in Q1 would have been $283 million, or approximately $13 million higher, representing 5% year-over-year growth.

Q1 gross margins were 65.2% compared to 66.3% in Q1 last year. As we have discussed in the past, due to product and revenue mix within or across segments, and particularly within the security business, overall gross margins can fluctuate significantly from quarter to quarter. For the full year, we expect gross margins similar to last year.

During the first quarter we generated operating income of $51.3 million, with an operating margin of 19%, slightly higher than the 18.9% in Q1 last year. Our EBITDA for the quarter came in at $57 million or 21% of revenue, slightly higher than 20.8% in Q1 last year.

Now let's turn to other income and interest expense. In the first quarter, other expense net totaled $5 million, reflecting $5.9 million of interest expense and a $0.9 million gain from foreign exchange, driven primarily by intercompany balance sheet translations.

Our cash tax rate was 8.5%. As we've discussed previously, we expect to enjoy a low cash tax rate for several years due to our NOLs and the amount of income we generate in low tax-rate jurisdictions.

For the quarter, we had 62.4 million average diluted shares outstanding. These results drove diluted earnings per share of $0.66 for Q1.

Now turning to the balance sheet: As of April 30, 2015, we had approximately $414 million of cash and short-term investments, including restricted cash. Q1 cash flow from operations on a GAAP basis came in very strong at $67 million, a 23% increase from Q1 in the prior year, primarily due to strong collections. We ended the quarter with net debt of approximately $397 million, excluding discounts primarily associated with our convertible debt.

Before moving to Q&A, I'd like to discuss our guidance for the year ending January 31, 2016. We are maintaining our revenue guidance in the range of $1.2 billion to $1.25 billion. Following typical Q1 seasonality, we expect a strong sequential increase in revenue in Q2 to a range of $285 million to $295 million, with similar operating margins to Q1.

We expect our quarterly interest and other expense, excluding the potential impact of foreign exchange, to be approximately $6 million. Given the continued volatility in foreign exchange rates, there could be a gain or loss related to the balance sheet translations in our future results, which is not included in our guidance.

We expect our non-GAAP cash tax rate to be approximately 9%, reflecting the amount of taxes we expect to pay this year. Based on these assumptions, and assuming approximately 63.1 million average diluted shares outstanding for the year, we expect earnings per share in the range of $3.55 to $3.75, unchanged from our previous guidance.

In conclusion, we are pleased with the execution of our strategy, our expanding portfolio of actionable intelligence solutions and strong competitive position, and we believe we're well positioned for continued growth. This concludes my prepared remarks. So, with that, operator, can we please open up the lines for questions?

(Operator Instructions)

Daniel Ives representing FBR Capital Markets.

This is Jim Moore in for Dan Ives. Just a question on the cyber side. It looks like you had some nice size deals. Can you talk a little about what you are anticipating around interest on the enterprise front for the back half and where you are at the moment in terms of building out that sales force?

We intend to launch the product next week. We are ramping up the sales force gradually. Our focus is still very much on the government market which is where we have seen strength, and we have a large sales force that has already been trained on the product. We are now launching next week a next-generation threat protection system. So the product is also more enhanced in capabilities, but at the same time as we said before, we are going to start to bring the product gradually to the enterprise market. We re-leveraged our enterprise sales force and we're launching the product in our Enterprise Global User Conference, but at the same time we are very cognizant to the fact that our sales force is not focused on the enterprise security buyer but on the enterprise customer engagement buyer, so we will leverage our customer base.

We have more than 80% of the Fortune 500 customers and of course, our product is focused on the high end of the market. So there is a good overlap between our target cyber customers and our existing customer base. But in order to sell the product we will leverage a dedicated cyber sales force of cyber experts which we have started to build and will gradually ramp up. In terms of expectation, we do expect in the first half to get orders. We have already shown the product even before it was ready for launch to customers and got a lot of interest. The sales cycle, we expect the sales cycle to include our pilots end POCs. It is a high touch sales process, but we do expect some orders this year. At the same time, most of our cyber revenue this year will still be generated from the government sector, and we hope that we will ramp up the enterprise sector over time.

Great. Thanks for that. And then just on the workforce optimization front. Are there any other opportunities for M&A out there on that side of things? Or is there anything else you'd like to add over the next year or two?

We certainly have a strategy of building our portfolio. We already are very differentiated in the fact that we combined workforce optimization, engagement management and customer analytics in a portfolio that really no one else has so our sales force has a lot in the bag to sell. When we look at our pipeline, of course when we have more to sell, we also see large projects that we hope and expect to close later in the year. So the strategy is to be able to offer more solutions and more based on the pre-integrated platform. And of course as we are executing on this strategy, we would like to add more modules into our customer engagement portfolio both through organic innovation and M&A. The market is still fragmented. There are a lot of point solutions and potentially we can make some acquisitions. And of course we are making make-or-buy decisions where we have the opportunity, and sometimes we will decide to develop. We have a large R&D organization and sometimes we will acquire.

Nandan Amladi representing Verint.

That should have been Deutsche Bank, but nevertheless. What drove the earnings beat in this quarter, even though licenses obviously were impacted by FX, as you discussed in the script?

We see Q1 as being our seasonal quarter, and we expect overall to be on track for the year and on track for H1. I mentioned before that we expect strong sequential growth in Q2 for revenue of $20 million, but also, as Doug mentioned, on similar margins. So in terms of operating results in Q1, it is about timing, and we expect our operating expenses to ramp up in Q2. And while we have strong revenue increase we will be on track overall for H1, both in terms of revenue and operating results. (multiple speakers)

Some of it had to do with the expense timing in Q1.

Okay. So these are expenses that you didn't incur in the first quarter that may come in second?

Yes, exactly. We expect to be on track with revenue and expenses for H1.

We had a good beat in Q1, very strong operating results, but for the year we did not raise our earnings guidance. It is just the question of timing of the expenses.

Right, okay. And then one question on the product side, in this world of multichannel or omnichannel customer care, how competitive is your offering compared to your main competitor and specifically on the chat function?

We have a very large portfolio and we are executing on two strategies in part. One is best-of-breed, so we are investing in making each module in our portfolio very competitive to what is out there in the market. But at the same time, we see more and more customers buying into the vision that they do not want to buy a lot of best-of-breed solutions from different vendors and then integrate those themselves. And they find it also very difficult to integrate because those are products from different vendors and they do not lend themselves to integration that easily. While we offer not just best-of-breed, but also a platform that connects a lot of these modules on a pre-integrated basis and also platform that has pre-integration with third-party components like ERP and customer database and self-automation.

So, there is a tremendous benefit for our customers from buying a point solution on a pre-integrated basis based on a platform. And I can certainly discuss what we do in chat and how it compares to other chat products, and we feel we have a strong chat solution for customer service operation. But I think more importantly is our ability to offer our customer a path to an optimization which will allow them to optimize the customer experience across channels. Because many customers start on the chat and then they decide to send an email and then a call and then they say something on social media. And the real question is, what was the customer experience on different channel. If they have a different experience on each channel and if the organization is not aware of the prior experiences on the other channels, then obviously they cannot optimize their results.

So, we believe that the way to optimization is omnichannel that is working together through an integrated platform, and also supported by analytics, supported by real actual intelligence about what is really happening in each general and how to optimize. For example, organization typically prefer that a customer goes to self-service channels, because that is the least cost. But for certain questions the self-service channels work very well and for others, it will be much better to have a live response where you can get the customer satisfied and upsell another product or service. So, the intelligence about the quality of the engagement and how to optimize the engagement across the channels as well as how to personalize and give the customer contextual results is really where we shine, where we differentiate.

One last thought here is, I think we're very well differentiated with our omnichannel approach. With the fact that we have a very robust workforce optimization solution because it is very rare to find happy customers of organizations that don't have happy employees. You really need your workforce to be happy and engaged in order to deliver good experiences for your customers, and there is a very, very strong correlation between the two. Therefore, the ability to optimize the workforce, to apply customer analytics, and to provide the chat and email and social media channels all in one platform is so important. And that is why we hear from customers as well as industry analysts that the customer engagement optimization strategy resonates with them and that is the way of the future.

(Operator Instructions)

Michael Nemeroff representing Credit Suisse.

Looking at the seasonality in the enterprise business, it seems to be a little bit more pronounced this year, even after we back out the contribution from KANA in Q1 last year. Just wondering, and especially in North America, I was just wondering if there was anything significant that we should look into that. And then just a question, a couple questions on the cyber security products. I'm still trying to understand, how did you find the right people inside your customer base for the beta testing. And then, Dan, based on your comments it sounds, and forgive me if I am misreading this, that you're backing off expectations for the enterprise product in this fiscal year. Is that based on feedback from the beta customers, or are you just trying to manage our expectations down for that new product?

Two questions. Let me take the first one. Yes, there is something, I think unusual in the seasonality, and let me take you through the numbers here. In Q1 we had revenue of $270 million and, as Doug said, this is $283 million on a constant currency basis. So, overall we grew about 5% year-over-year on a constant currency basis. However, it is a tough compare to Q1 last year, which was unusually strong. And you may remember, Michael, that we significantly overachieved last Q1 by $50 million.

We guided to $255 million based on expectations for typical Q1 seasonality. However, we ended up achieving $269 million, almost $15 million higher. We believe that this overachievement at the time was probably due to KANA customers waiting for the deal to close, and that drove a very unusual level of 15% growth over the same period the year before. In other words, a tough compare.

If Q1 last year had a typical seasonality that we expected at the time, of course the numbers we reported today would show double-digit growth year over year. Tough compare, but not a surprise. This was baked into our expectations, as this was a year ago. And despite what is a tough compare at the beginning of the year, as we said before, we are still targeting double-digit growth this year on a constant currency basis as this is not a surprise. I think that?s maybe what you are looking for in terms of unusual seasonality. It?s not so much unusual this Q1, but it was unusual last Q1 due to the behavior KANA customers.

That?s very helpful; thanks, Dan.

Okay. So let me turn now to the next question related to cyber. It's not that difficult to do beta testing or pilots with customers at enterprise. It is clear that enterprise customers are looking for new approaches. They are making a lot of investments, but it is pretty obvious right now that the traditional investment in perimeter protection are not sufficient and they need to do something about advanced cyber attacks. So, as a vendor that has credibility on the government side when we get to customers and tell them we want to come in and show them something, typically they are very excited about looking at what we have.

I think that where we are setting expectations for this year is the fact that like any new product, the product needs to mature, which we are going to do over the next few months with several customers. And then as we gain more confidence as the product is maturing, we will ramp up the sales force and build up the revenue stream. So I can tell you that we are being conservative, because we really need to go through the process like we do with every new offering and make sure that we can deliver on our promises.

However, I just want to make sure that the audience understand that we?re talking about our next generation product, so it?s not a product that we developed from scratch. It is based on a lot of experience with our actionable intelligence platform, and it is based on our success with government customers, but it is still a pretty significant undertaking that we have with this version. And I think the people that hopefully will join us next week in investor day as we demonstrate the product, I think you will appreciate that there is tremendous effort going into the product and it is very comprehensive.

Saliq Khan representing Imperial Capital.

First question that we had for you was, you commented earlier regarding your focus on cyber security and you anticipate that you are going to go more so in the enterprise market as well. In regards to that, what challenges are you envisioning on the enterprise side that you don't see just yet on the government side?

There are some market challenges and there are specific Verint challenges. Let me start with the Verint challenges, because I think they are obvious. In the government market we have a sales force, we have a brand, and we know how to access that market. And we also believe that the government market is much more ready for fighting advanced attacks because clearly, government understands that a lot of these attacks are offshore attacks. And it's the government's responsibility to protect the government and eventually also to protect enterprise. So, the government market is an obvious target for Verint and also it's an early adopter of advanced solutions.

We have a very scalable solution so some very large government customers find our solution can scale much better than others. There's a lot of things that work for us in the government market and this is why we started there. Now, as we expand into the enterprise market, there is first the question of whether enterprise customers are willing to invest in these sophisticated solutions. We see signs that more and more they are because the risks to the enterprise are pretty significant with the advanced attacks. These are not just random attacks. These are attacks by well-funded groups that are targeting an enterprise and they plan the attacks for many, many months. And if they can't go in from one area, they will find another area. They are stealthy, it is well funded and it is targeted.

So, enterprise realized that they are being targeted and they have no choice to invest but it is not something that they have done before. The investment before was predominantly around perimeter protection, which is more an infrastructure play. With advanced cyber attacks, enterprises need to get ready to approach the issue differently. They need to have cyber analysts that are working more like intelligence analysts. They have to gather intelligence about the attack. It is not just incidence response for the detection take months. And the defense requires also data gathering, data recording, so they have the perspective, the historical perspective, a lot of analytics, a lot of investigative effort, and the ability to contain and remediate requires an integrated approach.

So, we see certain enterprise customers that are more ready to adopt the new approaches and others are still investing in infrastructure upgrade which are more effective against perimeter security but less effective against the advanced attacks. We believe the enterprise market will mature, and we are certainly going to target those customers that are on the maturity cycle ready to adopt this type of solution.

That was very detailed. Appreciate that. Your combined focus on the government side, as well as the enterprise market size, certainly opens up the overall TAM that is out there for you. Does this put you in a position now to still be on track at double the cyber security orders during this current fiscal year? This is something that you alluded to last quarter.

I think what we alluded to and we still maintain the same message is that we expect to double our revenue from cyber. We also said that many of our security solutions are being bundled and bought as a comprehensive package. So it is not that simple to say this is a cyber order or this is a situational awareness order and so forth. But we do believe what we identify as predominantly driven by cyber security reasons is going to double this year, but still will be less than $100 million. And as I mentioned before, still will be predominantly government and with little contribution from enterprise.

The third question that I had for you is, someone had asked a similar question earlier regarding the fact that the product, the solution that you have for workforce optimization, how does it differentiate versus your competitors? My question is a little bit different which is, what are you doing now to essentially create the competitive mode for yourself five quarters, six quarters down the road that maybe your competitors are not looking at?

That is actually very good, because we are investing quite a bit in preparing the market to adopt this vision. We refer to this as a new category. Workforce optimization is actually -- if you go back six, seven years ago, we created workforce optimization after we combined with Witness. We had recording; Witness had workforce management and we said it is time for the market to buy them together, and we created workforce optimization. Of course, now it's an industry term. It's a category and its people are on the same -- on this wagon. We believe that the same way it is now time to move up from workforce optimization to customer engagement optimization, and the main reason is not because we say so, but it is because the consumers are now expecting the same thing from organizations.

We talked about the omnichannel consumer expectation and as well as they want more personalized and contextual service. So this consumer -- what we do now is we do a lot of customer briefings and explain to them our vision about what is changing with the consumers and how it is going to affect them. We get very strong feedback from customers that they agree and they like that vision. And our job is really to convert that agreement to business, so convert that to new buying patterns where they buy those modules together from a single vendor rather than buying them discreetly from different vendors the way they did before.

The last question I have for you, which is really building upon your comments and my most recent question, which is, within that workforce optimization, as you are talking about the move over to the customer engagement side of things, what are you seeing? Which segment with the workforce optimization are you finding out of the adoption rate is the fastest, or the conversations you are having around the table is the fastest between the branch, the back office, and financial creating portion of it?

Right. So where we see the most reception to this is in the B2C part of the market, the business to consumers. Those are large organizations such as financial services, insurance and telecom where they need to more quickly adapt to consumer expectations because of the need to differentiate from their competitors based on strong personalized and contextual customer service. So clearly the B2C market is adopting our messages faster.

Great. Thank you; I really appreciate it.

There are no further questions.

Thank you, operator. Before ending the call, I would like to provide a few details for our investor day next week. Our investor day is taking place on Tuesday in Las Vegas at the Paris Hotel, the same location as our Global User Conference. The event will start at 10:30 in the morning and should end around 5:00. If you have not registered yet and you would still like to come, please go to our website under the investor relations portion. We're very excited about the event and we look forward to seeing you all there next week. Have a great night. Take care.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.