Textura's CEO Discusses F4Q 2013 Results - Earnings Call Transcript

| About: Textura Corp. (TXTR)

Textura Corp. (NYSE:TXTR)

F4Q 2013 Earnings Call

November 21, 2013 05:00 PM ET

Executives

Kevin Doherty - VP, IR; Solebury Communications

Pat Allin - CEO

Jillian Sheehan - EVP and CFO

Analysts

Michael Nemeroff - Credit Suisse

Bhavan Suri - William Blair

Pat Walravens - JMP Group

Brian Schwartz - Oppenheimer

Jeff Houston - Barrington Research

Operator

Good afternoon and welcome to Textura’s Corporation’s 2013 Fiscal Fourth Quarter and Full Year Earnings Conference Call. Today’s call is being recorded and we have allocated an hour for prepared remarks and question and answer. At this time all participants are in a listen-only mode. (Operator Instructions).

At this time I would like to turn the conference call over to Mr. Kevin Doherty, Vice President of Investor Relations at Solebury Communications. Thank you, sir. Please begin.

Kevin Doherty

Thank you, operator and good afternoon everyone. We have posted our earnings release, as well as a supplemental slide deck to the Investor Relations portion of our website at www.texturacorp.com. Today’s speakers are Pat Allin, Chairman and Chief Executive Officer and Jillian Sheehan, Executive Vice President and Chief Financial Officer.

Before we begin, I would like to remind you that some of the comments made on today’s call including but not limited to our financial guidance are forward-looking statements. These statements are subject to the risks and uncertainties described in the Risk Factors section of the Company’s prospectus filed on September 20, 2013 and other filings with the SEC. Actual results may differ materially from those described during the call.

In addition, all forward-looking statements are made as of today and the company does not undertake any responsibility to update any forward-looking statements based on these circumstances or revised expectations. Also non-GAAP financial measurers discussed during this call are reconciled to the most directly comparable GAAP measurers in the tables attached to our press release.

And with that, I would now like to turn the call over to Pat Allin.

Pat Allin

Thank you. I would like to welcome everyone to our fourth quarter conference call. I am joined on today's call by Jillian Sheehan, Textura's Chief Financial Officer. Today we are reporting on our fourth quarter and full year results for fiscal year 2013, which ended on September 30th. I will begin today's call with highlights from the quarter, provide background on Textura, discuss some important recent events and then I will turn the call over to Jillian to walk through the fourth quarter and full year financial results in more detail. Finally we'll open the call to take your questions.

Well, we just had a terrific fourth quarter with accelerating year-on-year revenue growth from 65% in the third quarter to 72% in the fourth quarter. We had accelerating organic growth from 38% in the third quarter to 45% in the fourth quarter. In total we generated revenue of $10.9 million for the fourth quarter.

Construction value added to Textura's applications was $23.7 billion for the quarter, which represents an eye popping 158% year-on-year growth rate and a 74% increase from the third quarter construction value added of $13.6 billion. And finally total active projects during the period increased by 32% year-over-year to more than 6,200 projects.

We have continued to deliver on our strategic and operating plans in a manner fully consistent with our communications to you during our IPO and follow on offering. For those of you that may be new to our company, Textura is the leading provider of on demand business collaboration solutions to the commercial construction industry. We are a software as a service company with a unique solutions based offering. We serve a large market with solutions that enhance productivity and reduce costs for our customers.

We believe that our existing solutions provide value for the commercial construction industry globally, creating a total addressable market greater than $24 billion in annual potential revenue. Our collaborations solutions were used on commercial construction projects valued at nearly $100 billion during the past quarter and we serve more than 3,000 general contractors and owners and 300,000 sub-contractors.

We started Textura and developed our first solution which we call Construction Payment Management or CPM to address the chronic inefficiencies resulting from the manual processing of invoices and payments in the commercial construction industry. CPM is an intuitive, feature rich and highly configurable software based solution that creates a standardized process and provides all participants with visibility into the same set of data on a construction project.

Please remember that CPM is an extremely complex piece of software with over 250,000 major ways to configure a project and with unique documents over 500 million ways to be configured. The CPM intellectual property is protected by 41 patents and we have an additional 50 patents pending. CPM is very sticky and fully integrated with our GCs ERP systems. The value proposition to all users is four to five times the Textura fees to use CPM.

But we certainly didn't stop with CPM and today we have a robust suite of end-to-end solutions that provides a compelling value proposition for a broad range of users across the commercial construction landscape from owners and architects, to general contractors and sub-contractors. We will continue to expand our solution set through strategic acquisitions in organic development.

In addition to CPM, our on-demand solutions now enable our customers to collect review and route project documents, identify, invite and track construction bidders, collect and review contractor risk assessment and qualification and manage the lead certification process for construction projects.

Last week we announced our agreement to acquire LATISTA, which will bring an entirely new set solutions with mobile capabilities. LATISTA offers a set of integrated modules for project management in the field on mobile devices run on Apple, Windows and soon to come Android phones and tablets. These modules handle mission critical construction workflows including quality management, punch list safety, electronic commissioning and document management.

In essence LATISTA provides Textura with an outstanding new product offering that will allow us to capture a larger wallet share of technology spending in the construction industry. We see tremendous potential to integrate to LATISTA’s solutions in to our offering and explore opportunities to introduce mobile capabilities into Textura’s existing solutions. LATISTA will add an additional $4 billion in market opportunity, bringing the total addressable market to $28 billion.

We have experienced rapid growth across our suite of solutions but we see significant opportunities ahead as we continue to integrate and cross sell our existing offerings, introduce new solutions, increase our penetration within our existing markets and expand our international presence.

We have built a culture at Textura that is focused on transforming an industry and with that in mind; we are actively identifying and pursuing growth opportunities. Four of our key growth strategies include; first, new solutions. We are investing in our existing solutions to enhance and integrate current functionality and continue to create value for our clients. We are also investing in new solutions to broaden the scope of our services across all processes on a commercial construction project from initial design through close out. On this front we intent to grow our suite of solutions, both organically and through acquisitions. We identified a unique opportunity with LATISTA and we intend to build upon the LATISTA platform to create a more robust project management solution.

Second, existing geographic market penetration. We are focused on developing strategic relationships with large general contractors and owner developers in North America and Australia. Our current client set represents approximately 10% penetration in the North American markets we are in today. We have a large opportunity for growth by continuing to add new clients.

Third implementation and cross selling solutions. We aim to drive full implementation on all projects on our CPM solutions for recently engaged clients. This is a key driver of our growth in the quarter and will continue to be a tailwind as new client progress through the normal ramp process and we capture an increasing proportion of project work and the revenue stream associated with those projects.

In addition we aim to further penetrate our existing client base by cross selling our suit of solutions. While we are experiencing strong growth within our individual solutions, the cross sell opportunity is still in the early stages and alone more than doubles our existing market opportunity.

And lastly fourth, global expansion. Today we generate the majority of our revenue in North America, yet the U.S. and Canada represent less than 15% of the global construction market. We believe that our suite of solutions is well suited to address the needs of the construction industry and developed countries in Asia-Pacific and Western Europe, which combined represent about 60% of the global construction market.

In fact during October we announced that CPM was being used in Ireland by one of our largest customers. Long term we see the opportunity to move in to adjacent industries that use contracting methods similar to the construction industry such as oil and gas exploration and mining.

Now I’d like to highlight some recent accomplishments. We returned to the capital markets with the successful execution of our follow on equity offering on September 19th, which provided us with additional capital to execute and accelerate our growth strategies. As I mentioned last week, we announced our agreement to acquire LATISTA, the leading provider of mobile enabled cloud based field management solutions in the industry.

We have had several important new customer wins in the quarter which added large volumes of new construction activity on our CPM solution, including GH Phipps Construction, Grunley Construction and Graycor Construction Company. And keep in mind that these are only the GCs where we have had their permission to publicly disclose. We added many more large clients and had an excellent sales quarter.

In September we launched BidOrganizer, which is a new solution designed to help contractors with the central online location to prioritize, track and schedule all bid invitations. We also launched CPM Business, which is designed to serve our middle market clients in the CPM space. We expect the contribution from CPM business and BidOrganizer to become meaningful over time.

In the quarter we also announced a price increase for CPM subcontractor usage fees, which will become effective on all new projects brought on system after February 1st. It will take several years to realize the full revenue impact of the price increase. Therefore we are expecting a modest impact in 2014. Ultimately the price increase will add 2 to 3 basis points of revenue on subcontracted contract value.

On December 4, the 180 day IPO lock up will expire, and approximately 5.5 million shares will become eligible for sale. On January 6, 2014 the lock up for those who participated in the follow on offering will expire. However most of those who participated were insiders and will be in a quiet period until we announce our December quarter results in February. The number of shares that become eligible for sale to the public in January will therefore be approximately 1.5 million shares.

With that, I would like to turn the call over Jillian to provide more details on our results.

Jillian Sheehan

Thank you, Pat, and good afternoon everyone. During the quarter, we delivered year-on-year growth of 72% and revenue of $10.9 million, resulting from strong growth in both activity driven revenue and organization driven revenue. Our organic revenue growth accelerated from 38% in the third fiscal quarter to 45% in the fourth quarter.

We report our revenue in two categories; activity driven revenue which consisted revenues generated from our CPM, Submittal Exchange and Greengrade Solutions; and organization driven revenue, which consist of our GradeBeam, PlanSwift and Prequalification Management solutions, and now BidOrganizer. LATISTA will be reported within the activity driven category after that transaction closes later this quarter.

Activity driven revenue, which accounted for 77% of our total revenue, increased by nearly 50% year-over-year to $8.4 million and accelerated from the 41% growth we reported for the third quarter. The key driver here was a 32% year-over-year increase in the number of active construction projects during the period, with over 1500 new projects added during the quarter.

As Pat mentioned, $23.7 billion in construction value was added to our solutions in the fourth quarter, representing accelerating growth, both year-over-year and sequentially. The average project size increased, which will on an average result in a larger revenue stream from these projects being recognized over a longer duration.

Organization driven revenue, which accounted for the remaining 23% of total revenue increased by 238% year-over-year to $2.5 million and was slightly ahead of the third quarter growth of 235%. The driver here with 94% year-over-year growth in the number of organizations to more than 10,100, accounting for 4200 of these organizations and contributing $1.7 million in revenue.

Total operating expenses increased by 84% year-over-year to $18.9 million, as we continue to support the accelerating growth of the company and position Textura for the significant growth opportunities we see ahead.

Our cost of services grew by 97%, due to increased personnel related expenses from expanding headcount and higher stock based compensation, as well as a change in estimates for certain taxes, higher referral fees, and the impact from the PlanSwift acquisition.

Sales and marketing grew by 73% year-over-year resulting, from the PlanSwift acquisition as well as from increased headcounts for our solutions that are sold by our direct sales force. General and administrative expenses increased by 119% to support the strategic initiatives of our organization and the ongoing requirements of being a public company. We have leveraged our technology and development and depreciation and amortization expenses, which increased 65% and 28 %, respectively, both below the rate of our revenue growth.

Adjusted EBITDA loss increased from $2 million, a 31.8% margin in the fourth quarter of fiscal 2012 to $4.5 million or 41% margin this past quarter due to primarily a higher level of operating expenses to support our growth and strategic initiatives. We define adjusted EBITDA as our loss before interest, taxes, depreciation and amortization, share based compensation expense and acquisition related and other non-recurring expenses. We have provided a reconciliation table at the end of the press release.

Turning to the balance sheet, cash and cash equivalents were $127.7 million as of September 30, 2013, which provides us with the liquidity to continue to invest in our business both through organic initiatives and acquisitions. In the fourth quarter of fiscal 2013, our cash used in operation was $638,000.

While we anticipate that this may fluctuate quarter to quarter until we reach cash flow positive, this was an improvement from the $7 million cash used in operation during the quarter ended June 30, 2013. We anticipate a cash on hand balance of approximately $81 million following our acquisition of LATISTA.

Our deferred revenue balance increased by 55% year over year to $21.9 million. Deferred revenues consist of amounts that have been invoiced but that have not yet been recognized as revenue as of the end of our reporting period and as generally recognized ratably over the estimated duration of a project or contractual service period.

I will turn now to some highlights for our fiscal year 2013. Our revenue for the year was $35.5 million, which represents 64% year-over-year growth. Activity driven revenue grew by 48%, resulting from 5200 construction projects added to our solutions during the year, totaling $55.7 billion in construction value added, a 65% year over year increase. Organization driven revenue grew by 183% year-over-year partially driven by the contribution of $4.2 million from our PlanSwift acquisition.

Adjusted EBITDA loss increased to $13.2 million, a 37% margin compared to $9.1 million, a 42% margin in 2012. The increased loss was driven by higher personnel related and professional services expenses to support the process of becoming a public company and support our strategic initiative. However adjusted EBITDA loss margins improved from 42% in 2012 to 37% in 2013 as we leverage our cost structure and grew certain operating expenses at a slower rate than revenue growth.

I will turn now to our financial outlook for the fiscal year 2014. Our construction value on system is ahead of forecast. Because of this construction value on system and clients in the various stages of implementation, we had very high visibility into our revenue stream for fiscal 2014. We are expecting a continuation of our recent revenue growth trajectory during fiscal 2014.

For fiscal 2014, we are raising our previously provided guidance, excluding LATISTA. We're adding an incremental contribution from LATISTA and providing an outlook for the first quarter. For fiscal 2014 we anticipate revenue growth, excluding LATISTA in the range of 58% to 65%, previously reported 55% to 63%, resulting in revenue of $56 million to $58.5 million. Previously we reported $55 million to $58 million.

We anticipate the contribution from LATISTA in fiscal 2014 to be in the range of $1.5 million to $2 million after normal acquisition related subscription revenue write down, bringing our total fiscal year guidance to $57.5 million to $60.5 million and growth rates of 60% to 70%.

As you may recall, approximately 95% of our activity driven revenue in a quarter comes from projects added prior to the quarter start. For the fiscal, for the first fiscal quarter ended December 31, 2013 we anticipate a revenue growth range of 72% to 75%, resulting in revenue of $11.7 million to $11.9 million. This includes a modest contribution from LATISTA of $75,000 to $100,000 as a result of anticipated timing of the transaction closing and the normal acquisition related subscription revenue write down. Therefore we are expecting accelerating revenue growth in the first quarter of fiscal 2014, compared to the fourth quarter of fiscal 2013 reported on today. In fiscal 2014 we expect to see significant leverage in our cost structure and we expect operating expenses will grow at a slower rate than revenue. In summary, business is strong and we are executing well.

With that I'd like to turn it back to Pat for some summary remarks.

Pat Allin

Thanks Jillian. The commercial construction market is strong ant Textura continues to deliver strong financial and operating results. We are excited about our current growth prospects and the opportunities for our organization in the coming months and years as we continue to expand our industry leading portfolio of value added solutions.

With that I would like to turn the call back to the operator and open up the lines to take any questions.

Question-And-Answer Session

Operator

Thank you. We will now be conducting a question and answer session. (Operator Instructions). Our first question is from Michael Nemeroff of Credit Suisse. Please go ahead.

Michael Nemeroff - Credit Suisse

Pat a couple for you quickly. Could you just give us a general sense or your view of the health of the commercial construction industry? I know it's a big driver of your business. Can you tell us maybe anecdotally what you are hearing from the largest customers about their confidence going forward on starting projects?

Pat Allin

I think Michael; the construction value added in the fourth quarter is a really good indicator that the commercial construction market is healthy. We saw improvement in all sizes of projects, from the small to the jumbo. In addition we saw substantially more volume in what we would call the mid-sized projects, which I think is where you sort of look to determine the health of the commercial construction market. We hear from our clients that their robust business volume or projects coming on system, they are expecting 2014 to be a very good year and 2015 to maybe perhaps even be a better year.

So think the recovery from 2008 is still in progress. We estimate that there is another 25% or 30% more growth to come just from returning to a more healthy commercial construction market. And I think that's reflected in the results we're seeing in our business, not only from our fully implemented clients, whose revenue, the number of projects continue to grow and our revenue continues to grow and also the clients that we're implementing.

Michael Nemeroff - Credit Suisse

That's great. In your prepared remarks Pat, you had mentioned that you had an excellent new quarter of customer signings. Is there any way that you could give us any metrics or any anecdotes about the number or the sizes of the new customers that you are signing that will lead to revenue over the next six to 10 quarters?

Pat Allin

We went public June 7th, and starting in July we started to see some very different things taking place in the marketplace. So we have had more extremely large general contractors call us to initiate discussions around our solution set than time in our previous history. And I think going public has helped to establish us as kind of the premier provider with access to capital and a strategy to really put forth a full platform of solutions to the industry.

So we are not in conversation with all of the top 20 GCs, but by far the majority. And one of them has become a new client and is almost fully implemented. We expect that over the next six months that several others will also become fully implemented and there are others where it looked to me like they will start bringing up some test projects and if we're successful with that, that will benefit future years.

Michael Nemeroff - Credit Suisse

That's great. And if I may for Jillian one question, actually two. Just on the activity driven versus ODR split, I think this is the second quarter where I think we have been off on our split of activity driven and ODR, even though the total revenue has been above expectation. Any way that you could give us maybe a little bit of help on how we should think about the split of ADR/ODR in Q1 and maybe for the year end '14?

Jillian Sheehan

Yes, so I think that will continue. The percentage split, now that we have had PlanSwift in for a couple of quarters, it's been contributing a bit more than originally anticipated and so that's really what's driving that difference than what was originally forecasted, and you can anticipate for the next quarter, it continued to be a similar split.

Michael Nemeroff - Credit Suisse

Okay, great. And then the last one from me and I’ll pass along. You mentioned in your prepared remarks that you expect some leverage to just come through in 2014. Would you expect that operating expenses would grow at less than half the rate of revenue growth in fiscal '14?

Jillian Sheehan

Yes, I think we would say probably around 60%, maybe not half but 60% in terms of the percentage to revenue growth.

Operator

The next question is from Bhavan Suri of William Blair. Please go ahead.

Bhavan Suri - William Blair

I guess pad and drilling, as you think about that you think about the guide for next year, which was a nice bump up even organically, it’s still seems that if I think about that flowing through, it looks a little conservative. And has duration changed at all or are you guys just sort of being sort of pragmatic here?

Pat Allin

Well, I think it’s probably a combination of the two things. We’re only six or seven weeks into 2014 and we want to see some of the current trends continue before being a bit more aggressive. But the average size of the projects has increased and therefore the duration as well. In some sense that’s really good news because it does give us a longer tail to the base of revenue that we can count on.

Bhavan Suri - William Blair

And then as you look at your -- one of your GCs has taken you into Europe. Have you seen any move with the Australian based folks to do any work in Asia yet or is that still sort of early here?

Pat Allin

It is a little bit early but one of the largest general contractors in the world we are -- we've implemented in North America. We are talking to them about test projects and they’ve a commitment to bringing up test projects in Australia and they’ve made an introduction to their Chief Financial Officer in the UK. So it’s playing, it’s still very early days but we’re pretty encouraged by what we’re hearing and the reaction from some of the Australian contractors.

Bhavan Suri - William Blair

That’s great, and then you talked about North America penetration and sort of the GCs you have sort of count for about 10% penetration. If you were to look at those GCs and maybe give us a little color of sort of what the penetration in the projects for those GCs looks like, some of the ones that have been maybe longer, maybe Gilbane or others are little more penetrated? Any sort of sense of on average within those guys, what the penetration in terms of number of projects could be?

Pat Allin

We would still say it’s in the sort of the 50%-55% range.

Bhavan Suri - William Blair

Okay. So within your existing GCs the opportunity to double still remains and then that fully accounted will be 10% of the North American market. Is that the right way to think about it?

Pat Allin

Yes, no, if they fully implement it, we’d be more in the 18% to 20% range.

Operator

The next question is from Pat Walravens of JMP Group. Please go ahead.

Pat Walravens - JMP Group

And if I missed this I’m sorry, but you didn’t give EPS guidance for next year, did you? Or I guess for this year?

Jillian Sheehan

We did not. Pat. We didn’t give EPS guidance we wanted to get a couple -- we said on those call last quarter and again this quarter, we want to get a couple of quarters under our belt with revenue guidance and then we’ll look to start guiding towards adjusted EBITDA and EPS.

Pat Walravens - JMP Group

Okay, I mean that’s fine. But I just wanted to make sure that I am in the right ballpark. I mean is it still realistic for me to expect you guys have a pretty reasonable level of profitability in let’s say a year from now?

Jillian Sheehan

Yes, so as we mentioned, we’re going to start seeing a continuous improvement over 2014 through the leverage in our model and as we work towards profitability. And so the expectations and the timeframes, I think as we work through 2014, you’ll start seeing that improvement there with the operating leverage.

Pat Allin

Nothing has changed Pat.

Pat Walravens - JMP Group

Thanks. And then what should we expect in terms of future acquisition plans from you guys.

Pat Allin

We constantly are looking at opportunities. There is probably four or five at any point in time that we’re looking at. It would appear that in the last six months or so, perhaps as a result of us going public, more of the software providers in the space seem to be hiring investment bankers and they’re going through a process. So yes, there is nothing eminent. We’ve been working on LATISTA for about six months. And I have to say we’re just absolutely thrilled. We had our fingers cross the whole way that we would end up being successful because we think it is such a strategic acquisition for us and there is just so much leverage with their clients.

Finding businesses like that, that are complementary have great skill-sets in areas where we need it, complementary clients and immediate leverage and the business is growing at 90% a year. I mean it’s just really hard to find. So you’ll expect us to possibly do another transaction in the next 12 months but we’re being very, very selective and very careful. LATISTA sort of hit all of our dials but a lot of the things we’re looking at really just doesn’t.

Pat Walravens - JMP Group

And then last question, and maybe the IPO plays into this, but from a competitive point of view, what are you seeing?

Pat Allin

The only thing that I have seen in the marketplace is, again some of the players are working with investment bankers, just from either a pricing or dramatic changes and go to market or being more aggressive. We are not seeing anything different at all.

Operator

Thank you. The next question is from Brian Schwartz of Oppenheimer. Please go ahead.

Brian Schwartz - Oppenheimer

Jillian, I wanted to tap into the differed revenue trend. It looks to me like the change in differed revenue nearly doubled here year-over-year and made up about 43% of the total year’s differed revenue mix. That’s up from 28% of that mix last year. I think you talked about the changes in the duration, the bigger deals. My question is the spike in the performance that we saw, was the strength mostly broad based, lots and lots of new deals, or did you have a couple of elephant deals in the quarter that really lifted that line item.

Jillian Sheehan

No. I would say that there are two things on that, Brian. First, we are, from our general contractor claims on CPM, we do have your six months subscriptions and the subscription cycles for a bulk of the clients that are on the same six months and so the subscription period is the September 1 start date and with the increased volume and activity, and given that our pricing is all based on project activity, part of that spike is just going to be due to that billing cycle.

And then I would also say that there is not one specific elephant deal that created that huge spike in differed revenue again, because it’s all driven by the project streams and there is no one project that’s going to have a material impact on revenue. It’s going to be driven more by the volume of projects, not necessarily did one large project.

Pat Allin

I think Brian, the success that we’ve had in the last 18 months, bringing on board much larger general contractors and some very large owners, really means that we are in a new world now and we will see much higher construction value as we move forward.

Brian Schwartz - Oppenheimer

Jillian, when we think of Textura here, we think of your business really as more than one product, more than CPM, and as the platform begins to broaden to other collaboration segments, like adding LATISTA, it’s certainly going to be important for investors to track the momentum of platform. Is it possible to estimate in the quarter what your non-CPM bookings mix was?

Jillian Sheehan

I can tell you in terms of; we don’t put that out and disclose that. In terms of GAAP revenue CPM, for the fiscal year represents about 63% of total revenue and for the quarter it represents about 61% of total revenue.

Brian Schwartz - Oppenheimer

And then last question, Pat, kind of really along the same topic here. When you look at your pipeline of opportunities and you look at the fourth quarter results, in terms of those new customer wins that you are achieving, are you starting to see a trend here where the customers are buying more than one product on the initial sale or do they mostly start with one product and then it expands from there beyond.

Pat Allin

That’s a really good question. I think what we’re seeing is much more interest in having a dialogue around the platform and much more initial exploration of a number of our solutions. But implementation does tend to be one solution at a time. And in most cases it either starts sometimes with PQM, in most cases with CPM. We’re pretty optimistic that we are seeing -- our clients look at us differently. And the platform solution that we articulate to them is something that they are embracing and I would expect over the next 18 - 24 months we are going to see a dramatic improvement in the cross sell, the number of clients that have more than one solution implemented.

Operator

(Operator Instructions). And the next question is from Jeff Houston with Barrington Research. Please go ahead

Jeff Houston - Barrington Research

First question is that you mentioned in your prepared remarks that 2 to 3 basis points increase in pricing for the subs in CPM. Just curious if there's more room for increases on the horizon, or should we think about it more along the lines of perhaps annual increases in that base or over a different duration? Any color there would be great.

Pat Allin

Yes, in addition to that price change some of our other solutions we did some modest price increases in the last few months. We don’t have any additional plans in 2014 for any further price adjustments. There has been a little bit of conversation with our general contractor clients about whether they would prefer an increase every few years or whether they'd like something more on an annual basis and it's been pretty mixed. So we're likely to continue with the approach of doing a price increase every few years. I would tell you though that price increases are in no way automatic. It's all related to the value proposition and we expect through the various additions in functionality and integrations of our solutions that we'll be able to significantly enhance the value proposition and therefore the pricing along with it.

Jeff Houston - Barrington Research

That makes sense. And you mentioned in response to an earlier question that for next year you expect operating expense to grow at about 60% of the rate of revenue growth. Is most of that leverage coming from the CPM product and could you talk a bit about the levers that you have in your other products as well?

Jillian Sheehan

Sure. So you're right that most of the leverage does come from the CPM product. We've talked in the past about the percentage of our CPM revenue that comes from the sub-contractor base and the leverage that we have in terms of the sales cost, as well as the support costs in that model. The other solutions, we do, they're getting to the point where they're going to start covering their fixed costs and become more, turning that stage to profitability and so we'll just start seeing the leverage from those models as they get to that point of starting to cover their fixed cost.

Pat Allin

I think the other thing too is that in going public, there is a cost structure that the organization has to bear and Jillian has had to pretty significantly enhance the size and the skill set of her organization for example and God knows the DNO insurance premiums have skyrocketed et cetera, et cetera, audit fees go up, legal fees seem to go up, but they don’t scale with revenue. So there's going to be a lot of leverage just on the corporate side as well. And when we're growing at the rate that we're growing at, the leverage becomes pretty dramatic, pretty quickly.

Jeff Houston - Barrington Research

Okay and then last question from me; with the LATISTA acquisition, just a clarification. Did you say you expect that to close before the end of the calendar year?

Pat Allin

We're actively moving towards December 2nd and we don't see anything on the horizon that would cause it be delayed but that's what we're shooting for.

Operator

Thank you. We have no further questions in queue at this time. I would like to turn the floor back over to management for any closing remarks.

Pat Allin

Thank you. Well Jillian and I would like to thank everyone for participating in today's call and for your interest in Textura. We're really proud of the fact that we have fully delivered ahead of expectations since becoming a public company and this is due to the hard work and dedication of our employees. We are very excited about the growth prospects for our company and the incremental opportunity that the acquisition of LATISTA represents for Textura. We look forward to speaking with you next quarter. Thank you.

Operator

Thank you. Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.

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