Silver Spring Networks' CEO Discusses Q2 2013 Results - Earnings Call Transcript

Aug. 1.13 | About: Silver Spring (SSNI)

Silver Spring Networks (NYSE:SSNI)

Q2 2013 Earnings Call

August 1, 2013 4:30 p.m. ET

Executives

Tricia Gugler – VP, IR

Scott Lang – President and CEO

John Joyce – CFO

Analysts

Patrick Jobin – Credit Suisse

Simona Jankowski – Goldman Sachs

Jeffrey Osborne – Stifel, Nicolaus & Company

John Quealy – Canaccord Genuity

Mark McKechnie – Evercore Partners

Ben Kallo – Robert W. Baird

Operator

Good day everyone and welcome to the Silver Spring Networks Second Quarter 2013 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to the VP of Investor Relations, Tricia Gugler. Please go ahead.

Tricia Gugler

Thank you. Welcome to our second quarter 2013 earnings call. With me on the call today are Scott Lang, our Chief Executive Office; John Joyce our Chief Financial Officer and Carrie Kalinowski, our VP of Finance.

After the call we will post to our website at ir.silverspringnet.com, our prepared remarks, our presentation slides and an audio replay of this call.

Our comments today include forward-looking statements regarding future events and the future financial performance of the company. Actual events and results may differ materially from our expectations. We refer you to our SEC filings for a discussion of risk factors that could cause our actual results to differ materially from those discussed today. We make these statements as of August 1, 2013 and disclaim any duty to update them.

Throughout this call we will discuss both GAAP and non-GAAP financial measures. Unless otherwise stated the financial measures discussed will be non-GAAP. Our earnings release which is posted on our website provides the reconciliation of our GAAP to non-GAAP financial measures. We encourage investors to consider all measures before making an investment decision. All comparisons made in the course of this call are against the same period in the prior year unless otherwise stated.

Now I would like to turn the call over to Scott.

Scott Lang

Thanks Tricia. Hello everyone. Thank you for joining us today. We had a strong second quarter with 17% growth year-over-year. For the first six months of the year we have grown 20% and feel good about achieving our annual guidance of 18% growth and generating positive cash flow in the back half of the year.

I’m sure most of you saw the news that Commonwealth Edison has announced that it will be moving forward with their smart grid deployment. The road to this milestone is a great example of how perseverance, leadership and teamwork pays off. Following a successful pilot ComEd knew the business benefits to build a smarter grid for their entire service area were too great not to fight for. The support for this initiative was terrific with an overwhelming number of stakeholders supporting ComEd and their vision to bring the most advanced technology to their systems serving Northern Illinois. We are excited to partner with ComEd to realize their vision.

Earlier this week, we announced we were selected by SmartCo, a consortium of six line companies to connect 250,000 homes and businesses with our networking platform in New Zealand. New Zealand is a disaggregated energy market and our technology was differentiated in that it connects line companies, energy retailers and consumers, creating new business models and device choice. We look forward to partnering with SmartCo to bring the smart grid to New Zealand.

I’m very pleased with our quarter and even more pleased with the opportunity that is in front of Silver Spring Networks. The more I work with our development teams and the more I meet with clients around the world, I’m reminded just how large the market is for our technology. I recently heard someone say the best way to predict the future is to create it. I could not agree more. We launched the company by bringing innovative technology to the energy market. In this quarter with our recent streetlight win in Paris, we are realizing our vision to deploy our technology beyond the smart grid to smart cities and the internet-of-things.

Out networking platform is differentiated in that it supports multiple solutions today and has the capacity to support new solutions in the future. In addition the partner ecosystem forming around our platform continues to expand, providing more device choice and flexibility for our customers. During the quarter, we continued to execute on our product roadmap, adding more applications to our platform.

Let me take a moment and discuss some of our new products. First, advanced conservation voltage reduction, also known as CVR. This is a new application under our distribution automation product family in partnership with Dominion Voltage, a subsidiary of Dominion Virginia Power. We developed technology that enables utilities to improve the overall efficiency of their system by reducing unnecessarily high voltage levels. By using the power of distributed intelligence at every endpoint, advanced CVR helps utilities reduce voltage levels and save up to 4% in energy. That’s double the savings compared to legacy solutions.

Modesto Irrigation District has purchased this solution and we’ve seen significant interest from other utility customers.

Second, we continue to add applications to our demand side management solution, helping utilities shed energy consumption during the most costly peak times. We recently launched UtilityIQ Demand Optimizer. This advanced application enables utilities to optimize customer demand response programs, forecast load and load shed potential and provide actionable analytics in near real-time. OG&E is ramping their use of this application enabling them to get additional value from their already award winning demand response program.

Another product under demand side management direct load control that unlocks what we estimate to be 40% greater benefits than legacy systems. This solution provides utilities with the ability to network energy intensive assets such as air conditioners, electric heaters, water heaters and pool pumps by leveraging our technology platform. Utilities and their customers can now work together to better manage loads during peak and we’re proud to launch this new product with Duke Energy.

And finally, our street light solution. During the quarter, we announced our first street light networking project in the city of Paris. We are pleased to partner with EVESA to make this happen. Cities can spend up to 35% of their overall energy budget on public lighting and our technology is a natural fit to help cities drive energy efficiency and operational savings. We think this is a large market opportunity with close to 300 million estimated street lights globally.

These applications are possibly because our networking platform is uniquely designed and is proven to run multiple solutions efficiently, a competitive advantage for us at Silver Spring. For our clients this means faster time to value for every additional solution they add to the platform. We expect our new solutions to generate strong growth with higher gross margins. I would describe the demand for these solutions to be quite strong, backed up by the number of active discussions that I see in progress with our clients. And we look forward to updating you on our progress.

Now I’d like to turn the call over to John.

John Joyce

Thanks Scott. Welcome everyone. As Scott indicated, we had a strong quarter. Non-GAAP revenue growth of 17% year-over-year, non-GAAP gross profit margins of 30% and non-GAAP loss per share of $0.10. Overall, we did better than we expected on the top and bottom lines as a few customers moved faster on their deployments because of the benefits they are seeing with our technology.

Q2 non-GAAP revenue was $86 million. Non-GAAP product revenue was 66 million, up 14% year over year due to the expansion of our deployments. Non-GAAP services revenue was 21 million, up 26% year-over-year. Non-GAAP professional services revenues was 11 million, up 40%, primarily due to new customers beginning their deployments. When customers begin deployments, the professional services revenue will fluctuate early on. Non-GAAP managed and SaaS services revenue was 9 million, up 11%. Through 2Q, we have delivered 17 million cumulative network endpoints. Recurring non-GAAP revenue cumulative network endpoint on a trailing 12 month basis was $2.14, up from $2.05 a year ago and relatively flat to last quarter.

We continue to see 100% of our customers renew their contracts. During the quarter, PG&E extended their managed service agreement for five years. We expect good managed and SaaS revenue growth in the back half of 2013 as the environments for our new customers go live.

Now on to our non-GAAP revenue by solution and geography. Network and AMI non-GAAP revenue was 76 million, up 13% year over year. Distribution automation and demand side management non-GAAP revenue was 10 million, up 58% year over year as expected due to new projects. Our U.S. business experienced good growth of 16%. International revenue grew 24% year over year to 13 million, driven by customers in Asia Pacific and Brazil. Non-GAAP gross profit was 26 million. Non-GAAP gross profit margin was 30.1%, up from 29.2% last quarter and down year over year as expected. Non-GAAP product gross profit margin was 29.1%, down year over year due to a high mix of lower margin customers. Non-GAAP services gross profit margin was 33.1%, up 8.1 points. Professional services gross profit margins were 25.6%, up 15 points due to the revenue growth related to new customer deployments and selling higher value services.

Managed and SaaS gross profit margins were 42.2%, up 3.3 points as we continued to scale this business. This gross profit margin improvement demonstrated the leverage we have in this business. Again, we added minimal costs for the revenue growth. We are pleased that our service gross profit margins are expanding as we expected. Overall, our Q2 gross profit margins have improved from Q1 and we expect them to continue to expand in the back half of the year. We are on track to achieve the 2 points of gross profit margin expansion this year.

Non-GAAP operating expenses were 30 million, up 4 million or 16% year over year. G&A was up approximately 2 million, primarily due to increased legal and deal related expenses. Sales and marketing was up 1 million, primarily due to increased headcount as we expanded globally. We ended the quarter with 589 employees, up 16 from a year ago.

Our non-GAAP net loss was 4 million and our non-GAAP loss per share was $0.10. We ended the quarter with 125 million in cash, down 17 million from last quarter, primarily due to the timing of working capital. We expect to generate positive cash flow in the back half of 2013.

Before we move to guidance I want to highlight our GAAP revenue and gross profit margins during the quarter. We recorded GAAP revenue of 104 million, up 101% year over year, primarily due to product and services that were delivered and paid for in prior period but for which GAAP revenue can now be recorded. Our GAAP gross profit margins were 46.6%, up 33.7 points primarily due to service gross profit margins. Our service gross profit margins were 71.7% versus negative margin a year ago. Under GAAP, we defer the service revenue but do not defer the service costs which results in distorting gross profit margins. This is exactly why we don’t manage our business using GAAP revenue. This revenue has no correlation to cash flow, or the profitability of our products and services.

Now on to the outlook. Our revenue visibility has increased from our last call. We have significant amount of 2013 revenue under contract. For the full year, we are confirming our annual guidance. We expect non-GAAP revenue growth of approximately 18%, but a couple of underlying assumptions changed that we want to highlight. As you heard from Scott, we have ComEd beginning their deployment this year. At the same time, we have a few customers moving new solution projects out of the second half of this year into next year, many of which are already contracted. We still expect strong growth from new solutions in the second half of 75% year over year.

Moving on to gross profit margins, we expect non-GAAP gross profit margins of approximately 36%, up approximately 2 points from 2012. We expect second half 2013 gross profit margins to expand due to a greater concentration of higher margin products and services. Non-GAAP EPS to be approximately $0.14. We expect to have positive operating margins in the back half of the year and we expect full year share count to be approximately 41.4 million.

For the third quarter, we expect to achieve profitability with non-GAAP revenue growth of approximately 8%, non-GAAP gross profit margins of approximately 38%, non-GAAP earnings per share of approximately $0.06 and we expect share count of approximately 49.5 million. So overall, we are on track and continue to make great progress towards out long-term operating model.

Thank you for your time today. Now I will pass it back to Trisha.

Tricia Gugler

Thanks John. Operator, we will take the first question.

Question-and-Answer Session

Operator

Certainly. (Operator Instructions) And we’ll first go to the site of Patrick Jobin with Credit Suisse. Your line is now open.

Patrick Jobin – Credit Suisse

Good evening. Congrats on the quarter guys.

Scott Lang

Thanks Patrick.

Patrick Jobin – Credit Suisse

So a quick question on guidance. So John, you’ve mentioned before, you win a few pilots, some new awards and the new service contract extension. It seems like you have most of that, but you pointed to the new solutions, some of it being pushed in ’14. I guess it’s my understanding that was potentially some higher margin business but the full year gross margin was to retain the 36. Just help me understand the confidence level in the gross margin line? Thanks.

John Joyce

Thanks Patrick. It really blows down to the leverage we are seeing in our services business. And there is really two things happening there. First is on managed and SaaS, as we add revenue, again, we don’t need to add much costs because we’re adding that revenue to a cost base that we’ve built over the last couple of years. And so as we add the revenue the margins expand. And what will be happening in the second half is we have a number of new customers that will begin to ramp and deploy and that will help that revenue growth in managed service and SaaS as we move into the second quarter. But the second piece of the story on the gross profit margin is in professional services. What we are experiencing is that we are being able to sell and deliver higher valued professional services, and so A, that revenue growth will continue. We had good growth in the second quarter of roughly 40% and you should expect that to ramp again as we deploy these new customers in the second half. And as we ramp that revenue, I also believe you’ll begin – you will see gross profit margins expanding in professional services. And the final point on overall gross profit not versus prior guidance, but in the second half, we do have a higher mix of software in our product numbers and so you’ll start to see the product gross profit margins expand as well.

Patrick Jobin – Credit Suisse

Got it. Second question, the last one from me. Of course I have to ask about the UK, some news over the last few months, just kind of what your thoughts are or expectations as to that process, how it’s unfolding, just any thoughts there. Thanks.

Scott Lang

Yeah, Patrick, the process that DECC is running in the UK is really a strong process and it is a government run process and it would be inappropriate for us to comment on any specifics at this stage. I’ll just reinforce what I reinforced at the first quarter call, and that is we have a very strong partnership with Vodafone. We have put together a very good solution and we’ve submitted a very strong proposal.

Patrick Jobin – Credit Suisse

Right. Thank you.

Scott Lang

You’re welcome.

Operator

And we’ll next go to the site of Simona Jankowski with Goldman Sachs. Your line is now open.

Simona Jankowski – Goldman Sachs

Hi, thanks very much. Can you just give us a little more color on what were some of the types of solutions that slipped out of the second half and went and drove those pushouts?

John Joyce

Thanks Simona, this is John. The – it really kind of correlates with the fact that customers are really asking to deploy faster and it’s kind of a bit of a workload issue in many cases, the customers are saying let’s get the network up and then we’ll move to DA and DSM. So it’s DA/DSM and they just pushed from the second quarter into 2014. And obviously that bodes well for 2014 and so moves out from the second half into – second half of ’13 into 2014. And it’s just the timing of when we’ll start to ramp those. Still good growth of 75% in the second half of 2013 but some of it didn’t push into ’14 and like I said, some other things pushed into 2013. So overall we’re reconfirming the 18% revenue growth for the year.

Simona Jankowski – Goldman Sachs

Okay. And then your AMI revenues were up 13% year over year and I think the endpoints shift were down over 40% year over year. So can you just outline some of the drivers of the upside then? And I imagine it seems like ASP mix and additional content but if you can just give more color.

John Joyce

Sure, okay. So I’m going to start with total revenue per endpoint. So and I’ll do it from – we’ll do it from – we’ll go quarter to quarter. So in the second quarter – in the first quarter it was $102 per endpoint and in the second quarter it was $173 per endpoint. And the reason for the increase are a number of things. First of all, new solutions being a higher percentage; second, more software; third, increase in third party devices and then also an increase in managed appliance. And we really haven’t talked much about managed appliance, so I just want to kind of explain what it is before I kind of summarized.

The managed appliance is actually the hardware that we deploy when we are doing a managed service contract. So there is – so we deploy the hardware and then we manage it. And so that’s up because our managed services revenues are going to be begin to further accelerate into the second half. So we deployed a fair amount of managed appliance revenue. So they are the primary reasons for the increase. And I would go on to say that you should not expect that 173 for the full year. We think it will be coming in roughly around 150. So it will begin to fall off a little bit as the number of third party devices fall off as we go through the second half of the year.

Simona Jankowski – Goldman Sachs

And just to be clear when you talk about new solutions, were you referring to things like water meters or the lighting product or what specifically is in that bucket?

John Joyce

Primarily DA/DSM, street lights would be in there, but that’s pretty small in the second half. We do have the Paris engagement but it’s not a significant piece, and also SilverLink.

Simona Jankowski – Goldman Sachs

Okay, thanks very much.

John Joyce

Thanks Simona.

Operator

And we’ll next go to the site of Jeff Osborne with Stifel. Your line is now open.

Jeffrey Osborne – Stifel, Nicolaus & Company

Great. Good evening. Congratulations on the results. I just want to better understand the mix in the second half John, on the assumptions for international customers ramping up, in particular some of the new ones in Southeast Asia and maybe the recent New Zealand win, how should we think about the timing there?

John Joyce

So the international business will continue to grow faster than the U.S. business. And I don’t want to get into just splitting what I can – growth of one versus the other would be but I would – you should just assume it’s going to be faster. And usually when I get this question, the next question is what are the gross profits like? And with SmartCo and with Singapore and Masers, you should expect those gross profit profiles are pretty much the same as they are in the U.S. So a little bit faster growth internationally and we also and at the end of the year we’ll talk about backlog. But from a signing standpoint you should also expect the signings also to be stronger internationally and we’ll talk about that on our fourth quarter call.

Jeffrey Osborne – Stifel, Nicolaus & Company

Great, two other quick ones here. How do we think about what the red line is internally on gross margins for the services business? You mentioned there is still some opportunity to expand that going forward for both classic services and professionals. My sense would be that given FPO and PG&E are kind of slowing down as a percentage of revenue would be my assumption and newer customers are ramping up, that’s where that really kind of kicks in for you, is that a safe assumption?

John Joyce

That’s a good assumption. And what we are finding is, we have Masters, we have Singapore, you had CPS, you have ComEd, you’ve got a lot of new – ramping of new deployments. And there’s two pieces of it, there is the upfront piece where we prepare and that’s where we get a lot of professional services revenue. And then you have the deployment which is when the managed and SaaS kicks in. And so you should see good growth in both of those as we go into the second half, and you should see some expanding margins. And I probably shouldn’t say I was surprised but I will say I was – we have been very pleased, that’s a better way to say it – pleased with our professional services margins, they’ve come in strong and when we push on whether or not we are going to be able to maintain them, we feel pretty good about those margins beginning to continue to do well through the second half. And for the full year you should think about our managed services margins in the 40s and you should think about professional services in the 30s.

Jeffrey Osborne – Stifel, Nicolaus & Company

And then endpoints accelerating in both Q3 and Q4 sequentially from the 500 or so this quarter?

John Joyce

I prefer not to get into predicting that. We are going to --

Jeffrey Osborne – Stifel, Nicolaus & Company

I understand. Thanks much.

John Joyce

Okay. The reason is – as we talked what’s happening with our revenue, customers – many customers have asked to accelerate and then we had the new solutions and so it’s just a pretty tough one to predict.

Operator

And we will next go to the site of Mark McKechnie with Evercore.

Mark McKechnie – Evercore Partners

My first question is about the comment about Edison here – I am estimating I don’t know if you tried but there is about 4 million endpoints there. Trying to get a sense of how would you see that deployment progressing, is this going to take a couple years to get those deployed, the buildout infrastructure first, maybe the endpoints start kicking up a couple quarters later, maybe you could walk us through that, how that rollout is going to play out?

Scott Lang

Mark, the deployment is scheduled I believe to go through 2021 right now, so over several years but I think you may remember from Q1 we were doing some active distribution automation deployments that it started earlier now with the AMI support that they have received. There is more infrastructure equipment that’s being deployed but that was already being deployed anyway for the DA project we were doing. But there it’s starting to ramp up and then it will go through 2021 it’s what’s currently projected I believe.

Mark McKechnie – Evercore Partners

And then one big picture question, I think in your – some of your filings, you talked about – I think your backlog included about 25 million endpoints, can you comment on – I guess your backlog has grown but kind of give us any quantification to how many endpoints are in your backlog now?

Scott Lang

Like I said a minute ago, we will get into the backlog on the fourth quarter call. What I would say is our pilots – the number of pilots that we have and customers that we are working with, those have remained relatively constant. So we still – as we roll out one pilot and into a deployment we have been able to replace those without a pilot. So the pilot activity has remained relatively constant.

Mark McKechnie – Evercore Partners

One final one, I know there are lot of questions about the UK and we will get differed to the government timing on that one, but are there major [open hunch] we should be looking to or any pretty major projects – can you talk to it a little bit about where you are seeing the most activity geographically?

Scott Lang

I have got here in front of me our kind of overall pipeline that’s by region and by product and size and I would say the overall pipeline looks very healthy. And pretty strong in the various regions, as you know we have a perfect budget going on in South America, namely in Brazil right now with CPFL, that is going on. The Southeast Asia projects that we have announced are going well. The project at Singapore Power is starting to be deployed, the software is up and running, the project that we signed in Malaysia with Masters is going well. And they tend to be – in some of these newer markets, they do tend to be quite large. I mean because we see the infrastructure there is quite aged and they see the impact and the benefits that can be unlocked with modernizing the power grid.

And so they do tend to become pretty large, pretty quick. So there are a few of those larger deals in the certain markets within Asia, certain markets within South America. And then also what I like about this is also the number of bids and active bids we have on the upsell around DA and DSM is quite healthy. So hopefully that gives you a little bit of a color. I wouldn’t want to only have the big elephants because as we know they are lumpy, they can take a little longer, they can come in. So to have that kind of spread out with the number of these upsell projects, it’s very much part of our strategy of enlarging our network but also selling more and more solutions and services and expanding that because of the power of our network platform is very important part of our strategy. And if I look at the pipeline it kind of underpins that our strategy looks like it’s still accurate that will help us continue to expand the company.

Operator

And we will next go to the site of Ben Kallo with Robert W. Baird.

Ben Kallo – Robert W. Baird

Thanks guys, I have four questions. Scott, [what if about] that pipeline?

Scott Lang

I think it would dissolved –

Ben Kallo – Robert W. Baird

Number two, seeing you two quarters later, we talked a lot about the second half, looking ahead to 2014, can you give us a qualitatively – will get your pipeline but how you feel about 2014 compared to when you went public?

Scott Lang

I will tell you what, we are not going to comment yet on 2014. We are very focused as John said – John and I both have said that reconfirming we feel very good about 2013 here, to take the company public in our second earnings call and what this team has done in supporting our customers and now we just really got our focus on continuing that momentum as we come out of this year and we believe if we came out of the year strong it’s going to really teed up another solid 2014. But of any specifics, we’re not ready to comment on any specifics in 2014.

John Joyce

Yeah I mentioned 2014 earlier – like I said, some of the things that move into the second half will help 2014 and we have been able to replace that. So that’s what – everything that we have won, as Scott mentioned we have won, Singapore, Masters, CPS, ComEd, all of those help 2014.

Ben Kallo – Robert W. Baird

Second question, the layered products of software is accelerating faster than you guys would have thought, it is for me as I look at your numbers here and some of your wins. But compared to when you went public, is this where you thought you would be here?

John Joyce

It’s a little bit faster and the gross profit margins are expanding a little bit faster.

Ben Kallo – Robert W. Baird

My final question, we have heard a lot of your competitors out there, you talked about compressed margins as they go international and could be for business, we don’t – I am not hearing that from you guys, are you walking away from business, how are you picking your clients and should we expect the same as we go forward?

Scott Lang

I have not seen it. But then again we are a little unique. We come to the table with a very proven and tested value proposition focused on technology. And so I think what we're doing in our new markets is probably a little different than going in and accepting orders and go building product and determine around specification that a customer defines, our point of view going in as we take the customer, hears our experience, we have more experience of helping them connect homes of businesses than any other company, and really helping them understand of how you take this technology and unlock value, deliver a value proposition, unlock a business case. And so I think that might be a little – quite a bit different than what maybe some of the other alternatives that are out there that are focused on it, that’s a little unique to how we’re trying to go after these new markets. And also I think something I talked about in the first quarter is when we go into a new market, we tend to start with the market leaders that understand that. That they’ve already delivered a lot of operating benefits for their consumers. And so it has to be a technically driven unlocking a lot of business case for it to make sense. So but we haven’t seen, I don’t know if John you want to add anything to that, but I have not seen that compression yet.

John Joyce

No.

Scott Lang

Okay. What was your – did you have another question?

Ben Kallo – Robert W. Baird

No, that’s it. Thanks guys.

Scott Lang

Okay, good. Thank you very much.

Operator

And we’ll now go to the site of John Quealy with Canaccord Genuity. Your line is now open.

John Quealy – Canaccord Genuity

Hey good afternoon folks. So couple of questions. First on the UK, I know we can’t talk about much but looking through the public documents it looks like the UK is inclined to open up a bit of a 900 megahertz band to be unlicensed. When you compete with Vodafone, does it matter the spectrum that you’re talking about, so can you just talk to that for a minute? Does it really matter what those folks in the CSPs are looking at?

Scott Lang

Hello John. I’d really rather not get into any of the specifics. I would tell you, we are always able to find the right spectrum and the right solution. We focus on building world class network, and part of that is we understand how to leverage superior spectrums that are available and there is pretty much spectrum available anywhere in the world. And I think that’s what’s really created a powerful opportunity here with Vodafone in that market.

John Quealy – Canaccord Genuity

Okay that’s fine. And then secondly, more broadly, can you talk a little bit about customer IQ. It’s great to see the uptake in some of the other applications from utilities. The consumer facing one is interesting to me. You’ve got a lot of private companies trying to attack that space, some with good results, some with not so good results. It seems like Silver Spring, that’s a great area to launch into. Can you talk about your relative appetite for applications that face the consumer versus these utility facing applications?

Scott Lang

Yeah, there is a lot of activity. I think one of the things was I go around and talk to a lot of utility executives, CEOs, teams focused on this. That relationship they have with their consumer is front and center across the board. And we are making big investments there, we are listening carefully to our customers, we’re at the table with our customers and helping them identify ways of how they can embrace more information. The fact that we’ve distributed intelligence as close to the very endpoint as possibly is a real value proposition for us. And customers are now talking to us about what can I do with that network to turn that into a very core platform as part of my analytics service I offer to customers. I think what creates a lot of the analytics noise out there and talk out there is the replication of data after it gets into the back office.

And the way we’re coming at this and the way we are working with clients to go after this is how do you leverage the network and the power of the kind of network that we’ve created our fourth generation now to unlock more value for their customers. We’ve done at Oklahoma Gas & Electric, they have some very – they have a lot of award winning awards that they’ve won with their customer engagement, their customer satisfaction, the portal that we have here, kind of voltage reduction that we can do for their customers. So it is an important part of our story and how to leverage this network in order to help them unlock more value for their customer base. But you’re going to hear more about this later this year from us of what we are doing in this space and the kind of customers we are talking to and how we’re going to unlock something that’s pretty special I believe for the industry in that area.

John Quealy – Canaccord Genuity

Nice job guys. Good luck.

Scott Lang

Thanks. Thanks a lot John.

John Joyce

Thanks.

Operator

(Operator Instructions)

Scott Lang

Okay, well listen, I think we appreciate everybody’s time today. I just wanted to take an opportunity to thank all our employees for all the hard work and especially our customers to getting us to this milestone, to deliver the results that we delivered in the quarter. And we know we’ve got a lot of work to do but we’ve got a great group of customers and partners and employees to make this happen and thank you all of the investors who have dialed in today and being part of this story and part of this journey with us. And until the next quarter, we’ll keep you informed as we go along. Bye, bye.

Operator

This does conclude today’s program. You may disconnect at any time.

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