Advent Software's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Feb. 6.12 | About: Advent Software, (ADVS)

Advent Software (NASDAQ:ADVS)

Q4 2011 Earnings Call

February 06, 2012 5:00 pm ET

Executives

Heidi Flaherty -

Stephanie G. DiMarco - Founder, Chief Executive Officer and Director

James S. Cox - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

David Peter F. Hess - President

Analysts

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

David M. Scharf - JMP Securities LLC, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Advent Software Earnings Conference Call. My name is Kathy, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I will now like to turn the conference over to your host for today's call to Ms. Heidi Flaherty, Vice President of FP&A and Investor Relations. Please proceed.

Heidi Flaherty

Thanks, Kathy. Good afternoon, everyone. Thanks for joining us today for Advent's Fourth Quarter 2011 Earnings Call. Hosting our call today are Stephanie DiMarco, Advent's Chief Executive Officer; Peter Hess, Advent’s President; and Jim Cox, Advent's Chief Financial Officer.

Most of you participating in this call are aware of the regulations regarding forward-looking statements. Accordingly, we would like to note that during the course of this conference call, we will make forward-looking statements regarding future events and the future performance of the company. We wish to caution you that such statements are just predictions that involve risks and uncertainties and that actual events or results could differ materially. We discuss a number of these risks in detail in the company’s SEC reports, including our quarterly reports on Form 10-Q and our annual report on Form 10-K, and any forward-looking statements must be considered in the context of such risks and uncertainties. The company disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

As a reminder, we include non-GAAP financial measures in our disclosures. These non-GAAP financial results are not meant to be considered in isolation or as a substitute for results prepared on a GAAP basis. Please refer to the tables entitled, "Reconciliation of Selected Continuing Operations: GAAP Measures to Non-GAAP Measures" in our earnings release, which is filed with the SEC on a Form 8-K and available on our website for a reconciliation of GAAP to non-GAAP financial measures.

I have one more thing to note today. Advent is hosting an Analyst and Investor Day on the morning of Friday, May 11, at the NASDAQ market site in midtown. We will send invitations within the next few weeks.

I'll now turn the call over to Stephanie.

Stephanie G. DiMarco

Thanks, Heidi, and welcome, everyone. Thank you for joining us this afternoon. Advent had a very strong fourth quarter, finishing 2011 with record quarterly bookings and record revenue. Revenues were $86 million, a 14% increase; bookings or annual contract value were $13.7 million, a 31% increase; and operating cash flow was $27.6 million, a 13% increase year-over-year.

Later in the call, I'll talk more about our accomplishments and highlights. But first, let me turn the call over to Jim, who will provide further details on the numbers.

James S. Cox

Thanks, Stephanie. Our fourth quarter results capped off another successful year for Advent, setting performance records in annual contract value, revenue, operating profit and operating margin. In our earnings calls throughout 2011, we said we would finish the year strong, so we are especially gratified to see our expectations for the second half of 2011 realized.

Now let's start with bookings. Annual contract value, or ACV, for new contracts signed during the fourth quarter was $13.7 million, a 31% increase over the fourth quarter of 2010. We are quite pleased with the depth and diversity of our bookings performance. No single deal in the fourth quarter exceeded 10% of total annual contract value booked.

For the full year, ACV was a record $33.9 million, which represents 6% growth over our strong 2010 results. In 2011, we signed 52 new Geneva contracts, 86 new locally installed APX contracts, Tamale signed 38 new contracts in 2011 and Black Diamond sold 81 new contacts since our acquisition on June 1, 2011.

Turning to renewals. Our initially reported renewal rate, which is based on cash collection and therefore reported 1 quarter in arrears, was 93% in the third quarter, 2 points higher than the same period last year. When all the cash is collected for our third quarter renewals, we expect the initially disclosed rate of 93% to increase by our typical 2 to 4 points when we update the number with further cash collections.

Our second quarter 2011 renewals increased from last quarter's initially reported 92% to an updated 96%, as we've received subsequent collections.

Turning to the financials. Net revenue for the fourth quarter was a record $86.3 million, up 14% over the fourth quarter of 2010. Recurring revenue was 90% of total revenue. For the full year, revenue was a record $326.2 million, representing 15% growth over 2010. International revenue, as a percentage of total revenue, was 18%, up significantly from 15% in 2010.

Turning to expenses and profitability. Cost of revenue for the fourth quarter was $29.2 million, up $7 million or 31% over the same period last year, resulting in a decline in gross margin for the quarter of 4 points to 66%. The decrease in gross margin is driven by lower professional services billable utilization from investments in strategic accounts and strategic geographies, higher amortization of intangibles from our 2011 acquisitions and increased facility expenses.

Total fourth quarter operating expense was $47 million compared to $41.6 million in the same period last year, an increase of $5.4 million or 13%, primarily resulting from a $3 million increase in product development expense.

For the full year, product development expense decreased as a percentage of revenue by 0.5 point to 17.6 million -- I'm sorry, 17.6% of revenue.

GAAP operating income for the fourth quarter was $10.1 million or 11.7% of revenue. GAAP operating income for the full year was $42.6 million, up 17% over 2010 and representing 13% of revenue. The increase in intangible amortization caused GAAP operating income to grow more slowly than our non-GAAP operating income.

Income tax expense in the quarter increased by $800,000, as the effective tax rate for the fourth quarter was 32% compared to 20% last year when the R&D tax credit was renewed for the full year in the fourth quarter of 2010.

GAAP net income was $6.5 million for the quarter, down from $9.2 million in the same period last year. GAAP diluted earnings per share were $0.12 for the quarter, down from $0.17 last year.

Turning to non-GAAP results. Non-GAAP operating income for the fourth quarter was $18.5 million or 21.4% of revenue. For the full year, non-GAAP operating income was $72.2 million or 22.1% of revenue, which was up from 21.2% in 2010. This represents an incremental non-GAAP operating margin of 28%. When the margin impact of our current year acquisitions is removed, the incremental margin was 39%, demonstrating solid operating leverage for the business. Non-GAAP diluted earnings per share were $0.22 in the quarter, up from $0.21 in the same period last year.

Turning to the balance sheet and cash flow. As of December 31, we had $136 million in cash, cash equivalents and marketable securities, up from $77 million on September 30. $50 million of the increase was due to our issuance of debt. In November 2011, we entered into a debt agreement to provide us with additional liquidity of up to $150 million. We drew down $50 million in November and have an option to draw down another $50 million by November of 2012 and have a line of credit or $50 million that lasts until November of 2016.

Operating cash flow for the quarter was $27.6 million for the year. Operating cash flow was $83.2 million, up 9% over 2010. As in prior years, we paid minimal cash taxes in 2011. In 2012, we expect to pay federal cash taxes at somewhere near a 10% rate. And from 2013 to 2016, we expect to pay federal cash taxes somewhere near the 20% AMT tax rate. However, this current view may change based on changes in tax laws, future income, future tax deductions, et cetera.

Deferred revenue increased by $20.6 million year-over-year to $175 million, driven entirely by increases in deferred term revenue. In 2005, our deferred revenue balance represented less than 40% of our annual revenue. As a result of our transition to term license model, deferred revenue now represents 54% of our total revenue.

Turning to guidance. I'll be making forward-looking statements, so I'll remind you of the safe harbor statement in Heidi's opening remarks. In the first quarter, we expect revenue to be between $86 million and $88 million, up 14% to 17% over the first quarter of 2011. For the full year, we expect revenue to be between $361 million and $368 million, representing an increase of 11% to 13% over 2011.

For 2012, we are guiding full year GAAP operating margin to be in the range of 14% to 14.5% and non-GAAP operating margin to be in the range of 23% to 23.5%, 100 to 150 basis points better than our 2011 operating margins.

Full year cash flow guidance for 2012 is between $90 million and $96 million, representing an increase of 8% to 15% over 2011. Please note, the first quarter has historically produced lower cash flows due to lower collections in the fourth quarter, coupled with the payout of bonuses and commissions in the first quarter. With great fourth quarter bookings, we expect this pattern to repeat in the first quarter of 2012.

We anticipate capital expenditures to remain steady in the range of $13 million to $15 million in 2012. This includes our normal rate of capital expenditures, plus enhancements to our IT infrastructure including an upgrade to our enterprise software system, as well as implementation of a professional services automation solution and continued investments in our SaaS infrastructure.

Finally, I'd like to take a moment to reiterate Heidi's invitation to all of you to our Analyst Day on the morning of Friday, May 11, in New York City. We welcome the opportunity to update you on Advent's strategy. We're planning an exciting program with the entire management team, including one-on-one tracks, following the formal presentation.

Now let me turn the call back to Stephanie.

Stephanie G. DiMarco

Thanks, Jim. As you heard, we had another year of record revenue and record bookings, a year in which we continue to execute well against our strategy, deliver strong results and increase our market share. The fourth quarter was outstanding, with many key client wins and the expansion of existing client relationships across market segments and geographies. Sales of Geneva were very strong in the fourth quarter, with new clients representing a broad cross-section of the alternative investment industry from emerging managers like Axonic Capital to large hedge funds like Pershing Square Capital Management, as well as asset managers, family offices and fund administrators. We are very proud to add BNY Mellon Alternative Investment Services to the list of Geneva clients in the fourth quarter. BNY is one of the world’s largest fund administrators with over $400 billion in assets under administration.

We closed new Syncova business in the U.S., Europe and Asia in the fourth quarter, and we're very pleased with the way this product is being embraced by the market. Managing risk is a key demand driver for Syncova. Prime brokers are better able to manage their risk at a more granular level while providing more transparency to their clients. And hedge funds can better attribute their costs to specific trading strategies or to a specific trading desk, which ultimately gives them a more accurate and comprehensive P&L. New regulations like Form PF, which requires that firms better measure their counter party exposure, are also driving demand for Syncova, and the team added support for Canadian regulatory margin and SPAN Margin requirements in the fourth quarter.

Tamale too had a very strong finish to the year. Increasingly, managers and managers are carefully examining a firm's research process as part of their due diligence, which is making Tamale a must-have solution for institutional investment managers and hedge funds.

We're selling larger contracts to bigger firms and significantly expanding our presence with existing clients as they bring more investment teams onto the system. In fact, almost half of Tamale's clients added new teams or new seats in 2011. Fourth quarter wins included Marsico Capital Management, the Oregon State Treasury, the University of Pittsburgh Medical Center endowment and a 100-seat license to one of the world's largest investment banks.

In addition to expanding our footprint in the markets we serve, another key strategy for Advent in 2011 was market specialization. With the acquisition of Black Diamond, we added a powerful platform to our arsenal that is purpose-built to meet the needs of the fast-growing advisory market. Both our Black Diamond and asset management businesses signed new clients in the fourth quarter while providing 2 great migration options for Axys clients. Black Diamond had its best year ever and finished 2011 with 340 clients on its platform. Homrich Berg was one of the big wins in the fourth quarter, a $2 billion advisory firm and a long-time Axys client who saw in Black Diamond a platform for their future growth. Another exciting win was RMB Capital, also a firm with $2 billion in assets under management. RMB has both a wealth management advisory practice and an institutional asset management practice.

Over the course of a very collaborative sales process, it became clear that the workflows of each group were sufficiently specialized, and the firm decided to go with both Black Diamond and APX to service the respective sides of their businesses.

The opportunities for APX and the rest of the asset management suite have continued to expand globally. Some of our new international clients for APX are ZAO Raiffeisenbank in Russia; Bluebox Wealth Management, a Swiss multifamily office. And we continue to expand relationships with existing clients such as Mora Wealth Management in Switzerland, Grieg Investor in Norway, Gareth Morgan in New Zealand, Banque Bonhôte in Switzerland and Formuesforvaltning in Sweden.

Our clients choose Advent because they know they can count on us to deliver solutions to their toughest problems. And our ability to do that comes with from our commitment to innovation. In our fourth quarter, we released APX 4, which marked another major step forward for this powerful platform. The enhancements in the recent release give users customizable dashboards, expanded reporting and easier access to critical business intelligence, making APX even more compelling as the heart of an end-to-end solution for global asset management.

Our sales team use this new release to tip many of the deals in their pipeline, and the result was a terrific quarter for APX, including a record number of migrations from Axys to APX.

The significant enhancements delivered in Geneva 8.5 and Tamale 6.0 earlier last fall have also been well received, as the ACV numbers demonstrate. Speaking of development, Advent's long-time CTO, Lily Chang, recently retired as we announced last month. We're very grateful to Lily for her years of incredibly productive service and her many contributions. One of Lily's hallmarks was her ability to attract great talent, and she's done a fantastic job hiring and training the next generation of product development leaders. The teams are all working at full steam, and we have major new releases across the product portfolio planned for 2012.

Looking ahead, I continue to have great confidence that we have the right strategies, the people and the processes in place to continue to deliver exceptional services and technology to our clients around the world. This is why I felt this was the right time to announce Advent's CEO succession plan.

In order to be truly successful in the long term, our company needs to evolve, and importantly, it needs to be able to transition leadership. We're very lucky to have such a strong and capable CEO candidate in Pete Hess. Not only does he know this business and our markets, he also has the personal qualities that are important for the next leader of Advent.

Pete cares deeply about this company and our customers, and I know he'll work tirelessly to ensure that we continue to lead this market. This is also the right time for change, as Advent embarks on yet another phase of growth and evolution, embracing the technology trends that will drive applications and business decision-making in the next 5 to 10 years. We see many opportunities ahead, and the new leadership team is highly focused on enabling us to realize these opportunities.

We have the vision and the leadership to continue to grow in the years ahead. Advent will always be the company that can be trusted to solve the investment management industry's most complex operational challenges.

As we think about the future, the vision for the next era of Advent's leadership is about not just how to make our solutions more functionally rich and well-targeted but also how to make them more easy-to-implement, adopt and own; a vision where our service is increasingly proactive, our solutions more responsive and adaptable to our clients' specific need and where we are increasingly open, which will enable our clients even greater choice in the selection of other key relationships.

In other words, our vision is to make it as easy as possible for our clients to succeed. We have the resources and the commitment to realize this vision. And personally, I couldn't be more excited about where we are headed.

Thank you for joining us. And now, I'd like to open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Sterling Auty of JPMorgan.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Stephanie, you mentioned a number of areas that were strong in the quarter. I just wondered if there was any one area that either stood out in terms of the strength in demand or perhaps maybe an area that had popped up and surged ahead in terms of the strength that you saw in the quarter?

Stephanie G. DiMarco

Well, I think one of the things we were really pleased with was we saw strength across the board. So really, all the units had very strong performance. And as you know, we were behind. And so, we were coming from behind and were able to bring in a lot of business in Q4.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And then, Europe and international has been an area that you've been working on. We see the evidence in the increase in percentage of revenue. Can you just highlight maybe a little bit more detail, how the plan is developed, maybe some of the investments going forward and where that percentage can get to?

Stephanie G. DiMarco

Pete, do you want to...

David Peter F. Hess

Sterling, it's Pete. I mean, ultimately, I think we'd be happy to pick up 100 basis points or so of European or international allocation each year in terms of total revenue. And the way to get there is a combination of expand geographically and then go deeper where we've already landed. And I think the focus right now is a bit more on going deeper where we've already landed since we opened offices in Singapore and Hong Kong back in 2010, and we've been in the Middle East now for 4 years, physically present in the Middle East. And so, our focus right now is really just going deeper from those hubs that we've already established. That means more sales people, more services personnel to service the clients that we're on-boarding in those regions.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And last question is more housekeeping. Can you give us what the organic growth was in the quarter? And within the forecast, how you're thinking about organic growth for 2012?

James S. Cox

Yes, I don't think we're breaking out organic growth from total growth, and here's why, Sterling. As we think about engaging with our clients and our prospects, it's most important for them to get the right product for them. And so, we don't really -- we’re thinking about everything from a total booking and total revenue growth perspective.

Operator

[Operator Instructions] The next question comes from the line of Chris Donat of Sandler O'Neill.

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

Just to follow up on the last question. I'm trying to understand, you have tremendous breadth in terms of where your sales came from and where you had success this year in terms of products and geographies. And now you were just asked a question to identify what was particularly successful. I guess I'm looking for what -- maybe the techniques or the timelines, as Pete talked about going deeper in some markets. Do you feel like that's -- I guess, as you have all these priorities or opportunities of geography, depth, product, is it possible to prioritize among them? Or do you feel like you're hitting on so many cylinders, you're going to keep on doing what you're doing?

David Peter F. Hess

Well, we -- doing what we're doing involves prioritization. So expansion internationally, each new jurisdiction has a consequence to your product plan. And so, we're balancing our domestic clients with our international clients. And through that process, we prioritize a set of features and capabilities. A lot of our focus now is in those international requirements so that we can grow our business internationally. Every time we add a new geography, we add to that list of things that we need to do. And so, we're always balancing what's the right pace because we want to grow as quickly as we can responsibly, but we also want to make sure that we do a great job of delivering the capabilities to clients in a specific region need. And so, that's kind of the color behind why right now, while we always have our feelers out for new regions, we're really focused on just shoring up and delivering for the clients in the regions where we've already gone.

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

Okay. So if I think about -- well, looking at just headcount, I know there's some acquisitions that kind of skew it. But you had client service grow about 22% year-on-year, the headcount there, where sales and marketing only grew about 10%, so that's one way to think about it is that you’ve added more depth to the offering to help out more of the back end of it than the front end?

James S. Cox

Sure. Chris, so I think there's a couple drivers there. One is what Pete alluded to, which is we're building out the service and support organization internationally and building depth there. The second thing is a question of mix for some of the acquisitions that we've done. So these were smaller enterprises who were focused on serving their customers. And so as we acquire them, their general mix was more focused on those cost of providing those revenues. Part of our hypothesis about buying Syncova and Black Diamond is that we could put them into the Advent sales channel and be successful there. And so that's part of how you see that leverage of adding that product mix to our broad sales force.

Christopher R. Donat - Sandler O'Neill + Partners, L.P., Research Division

Okay. And then just one housekeeping one to make sure I got it. Your commentary about the cash taxe, Jim, you said around 10% in 2011, and then after that, I just didn't catch what you said.

James S. Cox

Yes, bumping up to closer to 20%. Okay. And that's in 2013 with the caveats that who knows what might happen from a legislative perspective?

James S. Cox

Yes. What's happening is we're working through our NOLs, and our other deductions are limited to reducing our cash tax rate down to 20%. So we see that being very stable through 2016.

Operator

Our next question comes from the line of David Scharf of JMP Securities.

David M. Scharf - JMP Securities LLC, Research Division

Just a few things. As I'm looking at my notes from last quarter, and I have written down that you said you were not hiring as quickly as you'd like to. I see the headcount stats on the trend and analysis that you put out. Did that change in Q4? I noticed the stock comp as a percent of revenue is pretty constant in the guidance, relative to 2011. But are you running into any bottlenecks in terms of staffing up, particularly on the product development side?

James S. Cox

I don't -- I think -- no. We'd always like to add people faster, David. Part of the reason why you have seen less headcount growth in the fourth quarter is because we had more turnover within the organization as well. If you think about it, we go through an annual planning process where we think about reallocation of resources. And part of that process is both adding heads in certain areas and taking them away in other areas.

David M. Scharf - JMP Securities LLC, Research Division

Okay. So we shouldn't think of the 2012 budget as any surprises in terms of maybe kind of catching up with headcount growth in the second half or anything to that extent? I was just reflecting on last quarter's comments, and it just seemed like maybe margins were potentially a little overstated temporarily because you couldn't hire as much as you wanted to, and I didn't know what...

James S. Cox

Well, I think if you look at kind of sequentially what our margin has done from Q3 to Q4, that's a little bit of that catch-up has occurred. And then, I think kind of as you think about next year, as we grow revenues throughout the year, you would expect that trend to reverse.

David M. Scharf - JMP Securities LLC, Research Division

Okay, that's helpful. In terms of capital deployment, was there much share repurchasing this quarter? I know Q3 was...

James S. Cox

We repurchased a lot of shares in Q3. We did not repurchase shares in the Q4.

David M. Scharf - JMP Securities LLC, Research Division

Okay. And should we read anything in terms of prioritization of capital given that you've drawn down on the new bank line? I mean, I know you're always looking at potential fits on the M&A side, but should we deem that to be an indicator that there's more than the usual amount of prospects out there?

James S. Cox

I think it's really -- it's a great time to borrow money, and it's a very cheap opportunity for us to get capital. And so I think flexibility is good, and so I think we just wanted to capitalize on that opportunity more than anything specifically in the market. Having said that, it does give us flexibility to do any number of things, deploy our capital in any of the ways that we've kind of traditionally done it.

David M. Scharf - JMP Securities LLC, Research Division

Got you. Last question. So you've got 3 more months of Black Diamond under your belt. Has the interplay between APX and Black Diamond pretty much played out as you suspected? I mean, not just in terms of kind of the sales integration, but in terms of kind of -- I don't want to use the word cannibalization, but you know what I'm driving at.

James S. Cox

We'll let Pete answer that.

David Peter F. Hess

No, I think it's gone pretty much the way we thought it would. We expected to see a fair number of Axys clients and even Advent OnDemand clients move over to Black Diamond. And we have -- we also knew that Black Diamond would give us the ability to win business that we couldn't win, and it has. So I think that, that's all played out pretty well. And it's given us the ability to focus the APX product direction very squarely at that international market we talked about earlier, as well as more the traditional asset management profile firms, which has always been Advent's bread and butter, and part of why we bought Black Diamond was to enable us to not only win that advisory segment with Black Diamond, but also make sure that we were unconflicted in our focus on those asset managers with APX.

David M. Scharf - JMP Securities LLC, Research Division

Got you. And just lastly in terms of -- on the CapEx side, you highlighted a few things. I think you've mentioned kind of your SaaS infrastructure as well. I mean is that a significant component of your investing? Still trying to get a sense for how you view your end markets' demand at this point for more of a hosted environment. Because it doesn't seem like it's been kind of a real front burner issue from the demand side, but is this the kind of thing that could change on a dime and suddenly we're looking at high teens, $20 million of CapEx for a couple of years?

James S. Cox

I don't see that. The SaaS infrastructure is in 2 buckets, David. One is, I think, and you're alluding to this, the hardware. I think it remains important for us to give our customers choice. And so we'll continue to do that where that's right fit for them. The others improvements around our SaaS infrastructure is around the systems and processing and controls around all of those businesses. We have a large variety of those businesses now. And so it's not only on the hardware side but also what I would argue is infrastructure more on the application side.

Operator

Our next question comes from the line of Sterling Auty of JPMorgan.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Couple more housekeeping ones. Can you go through -- what was the FX impact, if any, on the quarter? And kind of what are your thoughts around FX impacts that you've embedded in guidance?

James S. Cox

Let's think here. So not meaningful would be the way I would describe it in the fourth quarter. And when we think about our guidance, we fix it back to kind of our plan for 2012. And although they move around a lot, those remain relatively consistent when we think about it for next year.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And when looking at the capitalization of software development costs, what was that in the quarter? Backing into it, it looked like it was actually at a very low level.

James S. Cox

It was, particularly in relation to the fourth quarter of last year. So I'm sorry, let me try and pull it off the trended disclosure here. So yes, it was only $100,000 in what is our FAS 86 and about $400,000 or $500,000 net in what we’d call capitalization of internal developed software costs, so $600,000.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

And was there -- because that obviously hurt EPS, not capitalizing as much as you did last year. Was there a change in assumptions or something else that impacted or it's just timing of release of products?

James S. Cox

It's really around timing of release of product. It's -- particularly around the FAS 86, that is just -- we just follow the guidance there. When we have to capitalize that, we do. When we don't, we do not. Around the internally developed software cost, that's some of the people and consulting costs associated with implementing some of those systems.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And last question is now that you've brought on a couple of additional products and areas, how should we think about the average time to implementation? So when we think about the over $13 million of ACV that you’ve signed, what should we be framing our mindset around in terms of when that actually gets into implementation and starts to flow through revenue?

James S. Cox

So I don't think that it changes -- I don't think it changes materially kind of how you should be thinking about how those flow through. Obviously, smaller deals come live sooner. Larger deals take longer. And we had a fair mix of all of those in the fourth quarter.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

So is there a framework that you would recommend that we use like, looking across that, it should be 1 quarter, 2 quarters? Or how should we think about it?

James S. Cox

Between 2 and 3 quarters.

Operator

[Operator Instructions]

Heidi Flaherty

Right. If there are no more questions, thanks, everyone, for joining us, and we'll talk to you next quarter. Thanks.

James S. Cox

Thanks.

Operator

Ladies and gentlemen, that concludes today's session. Please disconnect, and have a great day.

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