Callidus Software's CEO Discusses Q2 2013 Results - Earnings Call Transcript

Aug. 1.13 | About: Callidus Software, (CALD)

Callidus Software, Inc. (NASDAQ:CALD)

Q2 2013 Earnings Call

August 1, 2013, 4:30 PM ET

Executives

Bob Corey - Chief Financial Officer

Leslie Stretch - President and Chief Executive Officer

Analysts

Nathan Schneiderman - ROTH Capital

Chad Bennett - Craig-Hallum

Koji Ikeda - Oppenheimer

Eric Martinuzzi - Lake Street

Kevin Liu - B. Riley

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2013 Callidus Software, Inc. earnings conference call. (Operator Instructions) Now, I'd like to turn the call over to Mr. Bob Corey, Chief Financial Officer. Please proceed, sir.

Bob Corey

Welcome to CallidusCloud's second quarter 2013 financial results conference call. A more complete disclosure of our results can be found in our Press Release issued about a half-an-hour ago, as well as in our related Form 8-K filings to the SEC earlier today. To access the Press Release and the financial details, please see the Investor Relation section of our website. With me on the call today is Leslie Stretch, our President and CEO of CallidusCloud.

The primary purpose of today's call is to discuss our second quarter 2013 financial results. However, some of information discussed during the call, including the financial outlook we provide may constitute forward-looking statements within of the meaning of the U.S. Federal Securities Laws.

These statements are subject risks, uncertainties and assumptions and are based on financial information available as of today. We disclaim any obligation to update any forward-looking statements or outlook. Forward-looking statements involve risk, uncertainties and assumptions. If any of the risk or uncertainties materialize or any of the assumptions proving correct, actual results can differ materially from those expressed or implied by the forward-looking statements we make today. These risk and additional risks are also described in the detail on our reports that we file from time-to-time with the Securities Exchange Commission, including on our most recent 10-K and 10-Q filings, which I encourage you to read.

With that said, I'll turn the call over to Leslie.

Leslie Stretch

Thank you very much, Bob. Good afternoon, everyone. Today, I'm going to talk about three key topics. Firstly, I'll review our performance in Q2 2013. Secondly, I want to update you on some exciting developments on our product roadmap. Thirdly, I will update you on our outlook for Q3 and talk about the business momentum in the sales execution management space.

Let's turn to Q2. Q2 was a strong quarter for CallidusCloud. We exceeded our goals in total revenue, subscription revenue, billings growth, recurring revenue gross margins, overall gross margins, services margins, cash generation and profitability. We added 183 new subscription customers in the quarter and we've had over 480 transactions in total.

Notable new logos in the Selling Cloud included Lithium for commissions; Panin Life in Indonesia for commission; ShoreTel for Configure, Price and Quote; Dell Europe for Configure, Price and Quote; Alere Health for Sales Performance Manager and Sales Selector.

Notable new logos in the Marketing Cloud included NETGEAR, World Mobile, the CMO Council, American Megatrends, Scribe Healthcare, Datahug, and Fiserv. In the Learning Cloud notable new logos included, YouTube, The Motley Fool, HootSuite, Box, and AT&T and existing commissions customer. In the Hiring Cloud notable new logos included Siemens, Moody's and Princeton University.

In Q2, our marketing efforts were in a full swing. CallidusCloud sponsored key industry events, including the Gartner 360 Summit in San Diego, The Gartner 360 Summit in London, Accord Loma in Las Vegas, The Sirius Decisions Summit in San Diego, NetSuite's SuiteWorld in San Jose and the mLearnCon Conference also in San Jose.

In May, we hosted our Annual User Conference C3 at the Aria and Las Vegas. The event was a sellout with 750 registered attendees, a 70% increase over the prior year. C3 generated a significant pipeline and I expect this event to tee up strong bookings momentum for the rest of this year and beyond.

Our partner ecosystem continues to flourish with 10 new resellers and consulting partners added in the quarter, including PWC as a global consulting partner. Our relationships with SalesForce.com is strong and we have now signed over 50 deals since joining the ISV for its program three quarters ago. In addition, we have committed this year to platinum sponsorship for the Greenforce Conference in San Francisco in the fall.

Turning to our Learning Cloud programs and roadmap. Litmus, our mobile learning platform is on fire. Bookings and revenue in the first half of 2013 are lot more than 100% versus last year. We have created a multi million dollar mobile learning business in less than 18 months.

Let me remind you that when we acquire these businesses they were the smallest of our acquisitions, representing only a few hundred thousand dollars of annual contract value at the time. Customers rave about Litmus functionality, as you can see from our latest website customer news.

We've now combined the rapid intake collaborative offering solutions with Litmus, launching Litmus also to vertically integrate solutions that learning management systems customers traditionally have to go to separate specialist vendors for. We're also adding content to the mix to provide a complete solution for customers looking for high quality rapid learning experiences on any device, anytime, anywhere at the best price point in the market.

I believe the traditional web-based learning management systems vendors do not do mobile well, and this continues to be a segment where we can meet many companies' needs, even if they have traditional LMS solutions already in place.

Let me update you on the Configure, Price and Quote and sales execution roadmap. It's clear that the opportunity for the best-in-class multi-tenant SaaS CPG solution is substantial. The link between CPQ and Incentive Compensation is powerful, and it is noteworthy, that our traditional commissions-only competitors have allied with a variety of CPG-only vendors in order to fill this gap in their offering.

When customers by these two solutions, commissions and CPQ separately, they pay daily for that choice. They get a do-it-yourself integration project and even more critically they miss the whole benefit of integrated sales execution management.

I believe CallidusCloud can deliver a better customer experience and much more functionality than the flagship legacy competitor offerings. We intend to have the richest roadmap for sales execution management. Our roadmap includes our own build-out for contract management and pricing optimization. Two key steps in the value chain of sales execution management.

Let me update you on our new Territory and Quota product. This quarter we released the new Territory and Quota solution, which we intend to be the most powerful in the industry, coupled with our market-leading incentive solution. And we already have four lighthouse customers assigned to Territory and Quota.

Let me tell you about our big sales data strategy. Our Lead to Money solution is underpinned by data that we consider to be the most potent, any enterprise can access. Our big sales data strategy is to spotlight this information through a new data visualization capability that we will release in Q4 of 2013. This is an extremely important area in which we've invested considerable time and talent.

I believe our big sales data strategy will be another critical differentiator for us, and will provide an exciting opportunity for all of our customers. The ability to provide powerful visual insight into sales performance management by product, region, salesperson, quotation and all through the sales execution lifecycle is key to ours and our customers' future. Similarly, these techniques will be applied to our marketing cloud to provide new and powerful insights into lead quality, lead management for the enterprise through intelligent data visualization.

Now, let me turn to the Q3 and full year outlook. Already in Q3, I see significant continued momentum in our cloud business. And I expect, we will continue to add new customers with the current pace. In particular, in our core commissions business, we've done very well in July with several head to headwinds for major new logos in the retail and travel industries.

Significantly, we've already signed in Q3, a commissions cloud transaction worth over $10 million spread over a five-year period. The contract is non-cancelable and annually built. Due to other significant opportunities in the selling, marketing and learning clouds, we have prudently added sales capacity in North America and EMEA at the beginning of Q3, in both the enterprise sales and volume sales segments of our business.

Finally from me, I know I say this in every public report, but once again I could not be more excited by the opportunity in front of us. I look forward to another strong quarter in Q3 and a busy second half of 2013.

Now, let me handover to Bob for more color on the quarter and the year so far.

Bob Corey

Great. Thanks, Leslie, and good afternoon again to everyone. This is an exciting time to be joining CallidusCloud. And as I start my first quarterly earnings call, I want to thank each and every employee for their hard work that has contributed to our success in Q2.

We'd like to remind everyone that I will be referring to both GAAP and non-GAAP financial measures. The reconciliation of our GAAP to non-GAAP financial information is provided in our press release, which is available on our website.

Additionally, in conjunction with the release of earnings report, we posted on our website at calliduscloud.com, under the Investor Relation's tab, additional charts that tend identified performance metrics that we believe will lay an understanding in evaluating our performance over time.

Additional reconciliations of our GAAP to non-GAAP financial information are included on the website. All the non-revenue financial figures I will discuss are non-GAAP. Revenues are of course GAAP numbers.

During our second quarter, I am very pleased to report that we continue to build on the momentum established over the last few quarters. Despite the headwind we faced from the large customer loss that we previously disclosed that took full effect in our quarter just completed, that's Q2.

We are able to report SaaS billings growth of 31% for the quarter and SaaS revenues increased by 12% year-over-year. Total revenue increased to a smidge, under $26 million, an increase of 9% year-over-year. Additionally, SaaS deferred revenue on the balance sheet increased 45% from the prior year.

We signed over a 180 net new subscription customers, a record for Q2 and increased from 147 new customers in the second quarter of last year. Day sales outstanding improved to 85 days from 87 days in Q1.

Let's move on to some specific results for Q2. And again, unless I mentioned otherwise, the percentage increases or decreases are as compared to the same period of the prior year.

Now, looking at the recurring business. Total recurring revenues for the quarter were $19.6 million, a 9% increase resulting from growth in our SaaS revenues, which totaled $15.8 million compared to $14 million for the same period last year. This was the first quarter for the full impact from a large customer loss that we've previously disclosed.

Adjusting for this lost revenue, our recurring revenue growth rate would have been about 20%. The SaaS revenue growth rate when adjusted for the lost revenue would have been an excess of 25% year-over-year. The actual dollar loss of revenue Q2, from this customer loss was about $1.7 million.

I already mentioned these adjusted rates to clarify the momentum we're seeing in our business. As expected the growth in our current revenues was tempered somewhat by maintenance revenue. Maintenance revenue of $3.9 million was higher than expected and only decreased 3% from the prior year, primarily due to the conversion of licensed customers to on-demand.

Recurring revenue has represented 76% of our total revenues in the second quarter. There were no unusually large deals in the quarter. During the quarter the mix of contracts with annual versus quarterly payment terms, remain consistent at about 50%. Lastly, regarding recurring revenue, our customer retention rate continued to be 90% plus.

Non-GAAP recurring gross margin during the quarter was 68%. This was up seven percentage points from the 61% reported in Q2 of last year and improved from 66% reported in Q1. We continue to target recurring revenue gross margins in excess of 70%, as we exit the year.

Let's turn into our services and other business. Services and other revenue including licenses for the quarter were $6.3 million, an increase of $560,000 from the prior year, and a $ 396,000 increase from Q1. Non-GAAP services and other gross margins were 29%, increased slightly from 26% in the prior and significantly improved by 10 percentage points from the 19% reported in Q1. The increase in service and other revenue gross margin is primarily attributable to higher billable utilization in our professional services organization.

Shifting to overall gross margin. Our overall non-GAAP gross margin for Q2 was 59% and we expect our overall non-GAAP gross margin will continue to improve, during the year reflecting the target improvements in our recurring revenue gross margins.

Going down to P&L to operating expense. Our non-GAAP operating expense was $14.8 million, an increase of 11% from the prior year quarter. This exceeded the high side of our guidance of $13.4 million to $14.4 million for the quarter, primarily due to higher than planned, C3 User Conference cost of about $300,000 associated with our record attendants at the conference and the cost associated with replacing the CFO position of about $190,000.

Sales and marketing expenses were $7.1 million or 27% of revenue in Q2, increased to $153,000 from Q2 last year, when the percentage of revenue was 29%. The increase from the last year primarily reflects the additional cost associated with the record attendants at our C3 Conference held in May, and the increased commissions.

Research and development expense was $3.9 million for the quarter, an increase of 10% over Q2 last year and represented 15% of Q2 revenue consistent with the prior year. This increase reflects the investments we have made and will continue to make in our product team as we endeavor to enhance our solution set.

G&A expenses were $3.8 million and 15% of revenue in the second quarter, an increase of about $960,000 from last year. The increase was primarily driven by the cost replace to CFO role, including CFO transitions, severance and associated hiring cost of $670,000 along with increased legal expenses of about $300,000 associated with protecting our intellectual properties.

Non-GAAP operating income for the quarter was a positive $389,000 compared to an operating loss of $784,000 last year, and operating loss of $677,000 in Q1. We continue to anticipate positive and improving non-GAAP operating income for the remainder of the year.

Adjusted EBITDA for the quarter was $1.2 million positive, representing substantial improvement from same period last year. Adjusted EBITDA for the prior year quarter was essentially breakeven presented on the same basis.

Our non-GAAP net loss for the quarter was $749,000 or $0.02 loss per share compared to the prior year quarter loss of $782,000 or $0.02 loss per share. This is lower than our expectations for the quarter of breakeven earnings per share, and resulted from a charge of the tax provision for withholding taxes related to sales into international markets. Non-GAAP loss per share is calculated based on $37.8 million and $35.2 million basic weighted average shares outstanding respectively.

Turning to the balance sheet. We had a record quarter for cash collections, which increased cash and investments to $27.2 million at quarter end. This is an increase of $4.3 million from the prior quarter, reflecting our continued improvements in DSOs and early billings in the quarter that we were able to collect.

Cash flow from operations for the quarter was $5.2 million positive. Day sales outstanding improved from 87 days in the prior quarter to 85 days in Q2. If you adjust DSO for the $3.1 million gross in our deferred revenue during the quarter, also refer to as net DSOs, our net DSO improved from 73 days to 71 days over the same period.

Total deferred revenues including both short and long-term increased by $3.1 million to a record $47.4 million. SaaS deferred revenue was $34.1 million, an increase of $3.6 million sequentially with the balance relating to maintenance and services reflecting momentum in our on-demand business and SaaS deferred revenue balance has increased by 45% year-on-year.

On the employee front, as a result of further cost cut actions in the quarter, we're down from 594 employees in Q1 to a total headcount in June 30, excluding contractors of 564 employees.

As Leslie commented on earlier, we are prudently adding sales capacity in North America and EMEA in both the enterprise sales and volumes sales segment of our business. We are targeting to add 15 additional quota-assigned sales heads, nine in the enterprise and six in the volume business. As we're successful in hiring all these positions, we will hire approximately, 34 enterprise and 31 volume business quota assigned sales reps as we enter Q4. As a result we anticipate our headcount to increase during the third quarter.

Turning to guidance. I'd like to move on to the forward-looking financial outlook and I want to remind you of the Safe Harbor language provided at the beginning of the call. Further it should be noted that we plan to update guidance only during our quarterly conference calls.

For Q3, we're anticipating total revenues to be between $26 million and $27 million representing an increase of 9% to 13% growth compared to the third quarter of 2012. Non-GAAP operating expenses for Q3 are expected to be between $13.6 million and $14.6 million. The non-GAAP expense is projected to include about $250,000 of cost associated with the transition of the CFO roles and recruiting and severance cost associated with the changes in the financial organization.

GAAP operating expenses are expected to be between $16.6 million and $17.6 million for the quarter. The reconciliation to non-GAAP operating expenses is in the press release. Lastly, we are projecting the cash flow for the upcoming quarter, remain slightly positive.

Turning the guidance for the full year. We are narrowing our earlier total revenue guidance and projecting our full year revenues to be between $106 million to $109 million. This represents double-digit revenue growth for the total year. Our prior guidance for non-GAAP operating income was between $4.0 million to $5.0 million for the year.

In light of the cost associated with the transition of the CFO role, recruiting and severance cost associated with the changes in the financial organization, together with the investments and targeted increases in sales heads and our elevated sponsorship to platinum sponsorship, to the Dreamforce Conference hosted by Salesforce, we're lowering our non-GAAP operating income range to $3.5 million to $4.5 million for the year.

We anticipate to continue generating positive cash from operations and positive cash flows for the full year. During the quarter, we will be presenting at the Oppenheimer conference in Boston on August 13 and we hope to see you there.

I would now like to open the session up to Q&A. Operator, would you please prompt for questions.

Question-and-Answer Session

Operator

(Operator Instructions) And that question comes through from the line of Nathan Schneiderman of ROTH Capital.

Nathan Schneiderman - ROTH Capital

I was hoping, Leslie, we could start off, last quarter you shared with us the ACV bookings growth as well as the core commissions bookings growth. And I was wondering if you had that data this quarter?

Leslie Stretch

I don't have that at hand, Nathan. Let's come back to you later on the sequence of the calls perhaps with that.

Nathan Schneiderman - ROTH Capital

Maybe I'll shift at another question. Cloud billings this quarter grew 31%. And last quarter, it grew 51%, the comp was clearly a little bit tougher, you were up against a 40% last year versus a 25% in the prior quarter. But maybe if you could share with us just on a billings basis, were the total cloud billings actually up sequentially or was Q1 a better quarter for billings?

Leslie Stretch

Well, the difference accounting for, if I remember, the large customer was because that $1.7 million of revenue we didn't have in Q2. So that's the primary difference. If you bill that in, I think that would probably take you up to the same type of level. So that's a primary difference. But actually the billings growth was ahead of expectations for significant.

Bob Corey

The billings growth did come in at 31% year-over-year. And as I said in the comments, this is the first quarter of that the loss of our significant customer. So we weren't able to benefit from the $1.7 million of recurring billings that would have come from the loss of this larger customer. So we think the hurdle was a little stiffer. And I think if you adjust the billings rate for the loss of the customer, you'll see that the overall gross billings, is much stronger.

Nathan Schneiderman - ROTH Capital

And then, I was wondering if you could share details with us on this very significant $10 million deal that you signed. Just curious what the competitive dynamics were on that deal and just anything you can share with us to help give us insight there? And then Bob, how do you recommend that remodel taxes for the balance of the year?

Leslie Stretch

So on the large deal as a financial services customer, that's all we're able to say at this time, it was typically competitive with the usual commissions, self guidance, but the scale involved and the debt is really right and for the core commissions business and it was a great campaign and it was a great outcome for us.

Bob Corey

On a modeling the tax provisions, so Q2 it fits really by on unplanned charges to the tax provision resulting from the holding taxes on sales with the international markets. So we had three deals that were collected in conjunction with record tax collection this quarter. And three deals had over $700,000 alone of withholdings, tax withholdings that we had to net out against the P&L.

Going forward to try and manage the bumps and grinds in the tax provision, we're going to be amortizing, be withholding taxes over the service period of the related revenue transaction, very similar to what we do for commission expense as well. So having said that, our normal tax provision includes, only taxes on as date basis for international, because as you know here in the U.S. we have a net operating loss carry-forward. So I'm going to say, between $100,000 to $200,000 a quarter maybe a safe number going forward for the tax provision.

Operator

We have another question for you. This one is from Chad Bennett of Craig-Hallum.

Chad Bennett - Craig-Hallum

I actually think the billings number was pretty outstanding, so I won't ask about that one. So I guess, to nitpick a little bit on the guide for next quarter, if you look at where you ended up in SaaS revenue for this quarter, you're basically flat sequentially going into $1.7 million headwind. So bookings appeared to be good, billings look good. Is there anything holding back the sequential improvement in SaaS revenue next quarter? That from a billing standpoint or anything that's different there that, any reason why you wouldn't grow, say, $1.5 million to $2 million in SaaS revenue next quarter?

Bob Corey

No. From my standpoint, I would say, we have momentum in the business. We did benefit in Q2 from a licensed deal coming in earlier than we thought. I think we noted a couple of quarters ago the AT&T license bill. We expected a go-live number and Q3 it actually came in at a smidge earlier in the Q2. So when you look at the trends from Q2 to Q3, we got to consider some of the timing of that deal. Probably we do have other license deals out there that could come in and help us post a stronger Q3 from a revenue standpoint.

Chad Bennett - Craig-Hallum

I am just talking kind of SaaS revenue sequentially? And I am just wondering is there anything holding that sequential back at all?

Bob Corey

No, because we have adequate capacity on the street for what we're doing and we're adding selectively like Leslie said and positioning to move into a stronger Q4 and I look forward into 2014.

Chad Bennett - Craig-Hallum

Nice job also not only on the billings, but on the recurring gross margins, are we still on track to exit the year at 70%?

Leslie Stretch

Yes. I hope to see that actually.

Bob Corey

Yes. We are better.

Chad Bennett - Craig-Hallum

Another question I have, Leslie, on the large $10 million financial services deals. How many sales people, does that cover? Can you talk about that?

Leslie Stretch

It's thousand of payees Chad, I can't be more granular than that on this particular transaction. That's pretty confidential.

Chad Bennett - Craig-Hallum

And it's purely a commission's deal, no other products?

Leslie Stretch

For the moment, it's just commissions to date.

Chad Bennett - Craig-Hallum

And Bob, that deal, so will it be build this quarter on an annual basis. And I assume roughly $2 million goes into deferred and the rest of the deal is obviously off balance sheet?

Bob Corey

That's correct. So it's a five year deal, non-cancelable, billed annually, right. So we'll get the billings benefit for one year in Q3 and everything else will stay off the balance sheet.

Chad Bennett - Craig-Hallum

And then, Leslie, can you speak to, you always give us good color on customers in each cloud that you get every quarter. Was there particularly strength in billings or bookings in one cloud versus the other this quarter? It seems like they are all pretty good across the board, but anything deploying out?

Leslie Stretch

Just the two things, Commissions was pretty strong and I have to say as a big piece of that billings benefit, billings growth very strong. Learning Cloud; really pleased with the Learning Cloud. I don't want to breakdown the logos every time and the number logos, but Marketing Cloud, we did nearly 60 new logos there. So those three areas are very, very exciting for us.

Chad Bennett - Craig-Hallum

And then one last one from me probably for, Leslie. Can you talk about average deal size and kind of how that's trending or what you expect that to trend throughout the year?

Leslie Stretch

I think arithmetically, the average deal size went up a little bit versus the prior year. And I think we are seeing in Marketing and Learning Clouds, what used to be very small deals trending upwards. And that's very good for us. Obviously, on the Commissions side, we have a reasonable number of large deals flowing through all the time. And I have to say looking into the pipeline they are there for the back half of the year as well. So a good trend for us.

Operator

And we have another question for you. And this was from the line of Brian Schwartz of Oppenheimer.

Koji Ikeda - Oppenheimer

This is Koji for Brian. I've got a question regarding the way your sales team is attacking new accounts. Is Commissions the big door opener and are your sales teams, kind of, using that and then pitching other products as the process goes along? Or are there any other of the platform products that are beginning to open their own doors right now?

Leslie Stretch

So I would say that CPQ is coming up fast. And we're definitely getting into head-to-head engagements for CPQ. It's opening the door and when the customers see our roadmap and see that they can get more cost-effective solutions for commissions and potentially marketing, it's very, very compelling, particularly, for commissions along side CPQ.

Marketing opens its own doors, to be honest with you. And I have to say the same is true with Mobile Learning. So it's more about showing customers the roadmap. And even though we might not do more, we now have 60 odd customers with more than one product. But even though we may not sell more than one product at a time, the influence of the roadmap is very powerful in the sales engagement and is really helping a lot.

Koji Ikeda - Oppenheimer

And then, just got a quick housekeeping question, I might have missed this. But do you happen to have the geographic breakdown?

Leslie Stretch

Just over 80% in North America.

Operator

We have another question for you. This one is from Eric Martinuzzi of Lake Street.

Eric Martinuzzi - Lake Street

I got a question on the operating expenses. I'm curious to know, but I'm not that familiar with the Dreamforce Conference. Wondering if you've been platinum in the past? What the decision was to be platinum this year? And where does that get you? And then I've got another question as well.

Leslie Stretch

Obviously, being part of ISV Force program, we'd look to that and believe this is the right time to invest. We haven't been platinum in the recent memory. We've been a smaller gold sponsor. We think that partnership is really important for us looking into the future. Obviously, there is an oracular state out there and a SAP state.

The word is there is all kinds of other things going on where we're working, that's why we working very seriously with them in partnership. But you can't ignore have a many, 100,000 that are going to come through this year. It was a 100,000-plus last year. It's the premium cloud conference in the world and we want to be there and put our market there and take advantage of that fruitful. It's a great partnership for us.

Bob Corey

Just to note that sponsorship will occur in Q4.

Eric Martinuzzi - Lake Street

Is there anything as far as keynote speaking or access positioning on the floor, access to customers kind of pipeline development that you just fell, anything you can quantify or maybe just subjectively.

Leslie Stretch

I think that's probably too early at this stage for us to comment on the detail of that. But we will come back to close to the time and let you know, but it's going to be a very rich schedule for us with the conference looking forward to.

Eric Martinuzzi - Lake Street

And then second question from me. Last year or years prior you've been very acquisitive, wondering if there is anything percolating. What the attitude is for corporate development effort?

Leslie Stretch

Right at this point in time for the rest of this year, in fact, we are focused on executing. We have more than enough to go to market with. We are focused on executing with the products that we have, so not at the moment.

Operator

We have another question for you. This was from Kevin Liu of B. Riley.

Kevin Liu - B. Riley

First question here, just in terms of the billings growth this quarter, maybe if you could if you could talk a little bit about how much of that was partner driven or partner led? And then as you make your way through the remainder of the year given the plan that additional 15 direct reps here, talk about the contribution you expect from direct versus indirect?

Leslie Stretch

So I think it was a pretty standard quarter from a resale perspective. There weren't any large resale transactions taking place in the quarter. But I'd say, most of the six figure transactions that we did, had some kind of influence as usual. I'll have to come back to you. We probably can't give you more granularity on the number of resale deals we did. If you don't mind I'll come back to you with that during the day.

Kevin Liu - B. Riley

And then just in terms of the 15 adds, I think I heard they would all be in place, hopefully by the end of Q4 here. Just curious as to how many guys, thus far in the quarter, what level you might to expect in Q3?

Leslie Stretch

We'll be ready with those in Q3.

Bob Corey

Kevin, you heard it right, it would be 15 and pretty well along the path we've got most of on board and the goal is to position and ramp them, clearly all on board before the end of Q3, position through Q4 and start looking forward to 2014.

Kevin Liu - B. Riley

And just in terms of the current pipeline coverage that you have with the folks in place. How are you feeling about that and what are you guys pretty much running at full productivity for your quota carrying reps today?

Leslie Stretch

The payment is good and especially when you keep in mind that we increase the quota, especially the high end of our sales force, we have a number of people who really increase the quota substantially from, say, 1 million to 2 million as much as 8 million. And we have people at that level already. And in terms of the pipeline it really is the best that we've seen, substantially the best that we've seen. So we've definitely got enough to go up.

Kevin Liu - B. Riley

And just one housekeeping one from me, I was wondering, Bob, if you could provide the license revenue number that's embedded within the services in Northern Light?

Bob Corey

I think it was $1,075,000 or $1.1 million.

Operator

There are no further questions at this time.

Leslie Stretch

Okay. So if there are no further questions, I'd like to thank you all for joining us on our call today and we look forward to speaking with you again next quarter.

Operator

Thank you. Ladies and gentlemen, that concludes your participation in today's conference. And you may now disconnect. Have a very good day.

Bob Corey

Thank you.

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