ServiceSource International's (SREV) CEO Christopher Carrington on Q4 2015 Results - Earnings Call Transcript

ServiceSource International, Inc. (NASDAQ:SREV)

Q4 2015 Earnings Conference Call

February 22, 2016 16:30 P.M. ET


Erik Bylin – IR

Christopher Carrington – CEO

Robert Pinkerton - CFO


Tim Klasell - Northland Securities

Patrick Walravens - JMP Securities

Edward Maguire - CLSA


Good day, everyone and welcome to the ServiceSource Fourth Quarter and Fiscal Year 2015 Earnings Results Conference Call. This call is being recorded. Erik Bylin from Investor Relations will be opening today’s call. Erik, please go ahead.

Erik Bylin

Thank you for joining us. Before we begin, I’d like to remind you that during the course of this webcast call we may make projections or forward-looking statements that reflect our views as of today and are based upon the information currently available to us. This information will likely change overtime.

By discussing our current perception of our market and the future performance of our company and our solutions with you today, we are not undertaking an obligation to provide future updates. We caution you that such statements are just projections and actual events and results may materially differ from what we discuss. Please refer to the documents we have filed with the SEC. These documents contain and identify important factors that could cause actual results to materially differ from those contained in our projections and forward-looking statements.

During the course of this call, we will also be discussing certain non-GAAP financial results and projections. Unless otherwise stated each income statement metric discussed will be non-GAAP. Please note that we reference non-GAAP revenue, which excludes the impact of the haircut to deferred revenue from our acquisition of Scout Analytics, as required by purchase accounting.

The remainder of our non-GAAP metrics do not include non-cash expenses. Related to stock-based compensation, the amortization of internally developed software, amortization of intangibles acquired from our acquisition of Scout Analytics, acquisition-related costs and non-cash interest expense related to the issuance of convertible notes. We direct your attention to a reconciliation between GAAP and non-GAAP measures, which can be found in today’s earnings press release posted on the Investor Relations portion of the ServiceSource website. And with that, I’ll turn the call over to Chris Carrington, ServiceSource’s CEO.

Christopher Carrington

Thank you, Erik. Good afternoon everyone and thank you for joining the ServiceSource Q4 and full year 2015 earnings call. I’m joined by Bob Pinkerton, our Chief Financial Officer.

Today, I’ll provide you a brief summary of our Q4 and full year 2015 financial results and accomplishments, delve into how ServiceSource solutions provide unique value to our clients, and share some insight as to how we see our business growing in 2016. I will then turn the call over to Bob, who will cover our financials in more detail. We will then open the call for Q&A.

Turning to our Q4 and full-year 2015 financial results, I am pleased to report stronger than expected Q4 2015 results in both top and bottom line performance. Revenues, gross margin, and EBITDA results exceeded the high end of guidance as a success of last year's key strategic initiatives significantly contributed to the financial success of the company.

For Q4 2015 revenues were $65 million, gross margin was 40.8%, and EBITDA was positive $2.3 million. In Q4 2015, we achieved the highest gross margin in eight quarters and this is the fourth quarter in a row in which we expanded gross margin year-over-year. Additionally our Q4 EBITDA performance contributed to full year 2015 positive EBITDA compared to a $19.2 million loss in full year 2014. Our progress on profitability was once again coupled with our strongest new sales quarter since Q2 2013.

In Q4, we sold 17 new transactions, including 16 expansions and one new logo. We have successfully increased our new ACV signs each quarter in 2015 and in Q4 alone added new sales each of our five target market segments of hardware, software, cloud, industrial systems, and healthcare life sciences. Our new sales also reflected the continued trend of our current clients expanding the use of our revenue life cycle management solutions. Over the last five years, our revenues have continued to shift towards the subscription based economy in the cloud and the activities required to gauge, expand, and extend the economics of a lifetime customer relationship.

Reflecting on full year 2015 I am proud of our accomplishments including in less than one year I recruited an entirely new leadership team including CFO, Bob Pinkerton; CCO, Greg Hopkins; CTO, Joe Kovach; COO, Brian Delaney; and CHRO, Judy Morris. Additionally more than 60% of the next 50 leaders either through internal promotions or external hires changed through the course of the year such that as we head into 2016 we have completely reinvigorated the global leadership team.

We transformed the company from two separate operating business units into one technology enabled solutions company. Historically, we spoke to the revenues and gross margins of these two business units separately. But going forward we will combine our managed services capabilities with our cloud and business intelligence technologies creating the revenue as a service platform. We simplified the operating model of the company to better reflect the way our clients prefer to buy from us. This rebundeling of our services and technologies, powers solutions that meet or exceed client expectations, and in turn drives ServiceSource revenue, expands gross margins, and improves profitability.

As a single company our employees came together to improve productivity and efficiency, driving cost out of the business and most importantly retaining and growing revenues on behalf of our clients. In 2015, in addition to the billions of dollars processed by our clients through our proprietary platforms of Renew, Revenue Analytics, and Customer Success Management we priced, quoted, and sold more than $8.4 billion of revenue for our clients. Our success at driving high margin renewals in subscription based revenue is a direct contributor to our client’s top line revenue and earnings per share.

The revenue based on outcomes that we generate make ServiceSource an essential partner to our clients.

In 2015 we also expanded our global footprint by opening our new revenue delivery center in the Philippines. And just three weeks ago we announced our 11th office located in Sofia, Bulgaria. Both of these locations play strongly into our global solutions and will contribute to expanded offerings that will strengthen future growth and profitability for ServiceSource.

Now touching on the 2015 full year financial highlights, the team reduced our cost to serve by 12.4% year-over-year. Gross margins increased by 350 basis points from 31.9% to 35.4%. Operating expenses were reduced by 17.3% while improving our overall health of our client relationships. The company returned deposit of full year EBITDA representing a $20.7 million improvement in 2015 over 2014.

For the full year, our go to market sales organization sold 61 new transactions of which 57 were expansions with existing customers providing further evidence that our customers intricacy [ph] initiative is working. Additionally win rates increased and average number of days to close the deal declined from 284 days to 231 days.

Our average client relationship with many of the biggest brand names in the technology industry increased by more than 25%. Larger relationships represent stickier, more relevant, longer-term potential for ServiceSource and fully leverage all of the capabilities of our revenue at the service platform.

Returning to industry norms for the full year combined with a healthy new sales year, we grew ACB from $244.9 million at the beginning of 2015 to $246.4 million at the beginning of this year. While this increase seems small it represents a complete reversal of the ACB decline that occurred in 2014. And importantly gets us back on track to grow ACB and revenues in 2016. We also put in place our stock buyback program, invested in a number of initiatives, and still finished the year with $208.7 million of cash.

Now 2015 in our routine here, I would like to spend a few moments discussing how we’re approaching the opportunities to fund ServiceSource in 2016 and beyond. Our ability to grow within our current plans and win new logos is strengthened by our B2B revenue as a service platform which provides our clients a globally scalable multilingual technology driven solution paired with a unique pay for performance business model that is more economically efficient and drives better sales results and insights than can be delivered internally by the client. As we further enhance our solution around customer insights and analytics we believe that customer intimacy and product knowledge we can deliver on behalf of our clients increases recurring revenues, improves product or service on boarding and adoption, more rapidly identifies up-sell cross sell opportunities, and most importantly helps our clients extend the customer relationship resulting in greater customer lifetime economics.

More and more our platform will leverage the huge amounts of data we have collected to better identify end customer behaviors and create predictive sales plays to drive results that both expand and extend customer relationships. Our revenue as a service platform is a critical differentiator in delivering revenue lifecycle management results on behalf of our clients. We recently closed a new win that is perfect example of the unmatched capabilities we bring in with our platform. In Q4 we launched a revenue lifecycle management engagement with an information services company in Europe, and quickly began providing the unique capabilities with our revenue, analytics and customer success management app that are fully integrated into revenue as a service platform.

ServiceSource is able to monitor their customers’ usage and contact those customers with customer success plays that drive unique and targeted on-boarding, adoption, training, up-sell or cross-sell opportunities. By automatically scrubbing and loading client data, our platform triggers predictive workflow that identifies cross-sell, up-sell opportunities when usage is up and save place when usage is down. These actions drive more recurring revenue and lower churn rates for our client.

In a subscription-based economy, these activities become increasingly important to deliver high subscription renewal rates that now happen every 12 months instead of every four years. This is just one example of how ServiceSource is delivering revenue-based outcomes on behalf of our clients, and how we continue to evolve to support the changing needs of the technology industry in the subscription economy.

As we did last year, our intent in the near term is to provide next quarter’s guidance, which Bob will walk you through in a minute. I would like to provide some visibility into our business for the coming year. For full year 2016 we expect to grow revenue in the low single-digits and even as we make significant investments in technology and infrastructure, we expect gross margins to expand, operating expenses to remain relatively flat, and EBITDA to improve. Most importantly we expect double-digit ACV growth in 2016, which sets the foundation for accelerating growth coming out of the year. And with that I will turn it over to Bob for our detailed financial performance results. Bob.

Robert Pinkerton

Thank you, Chris. Today I’ll share our Q4 and full year 2015 financial results, give some color on the drivers of our business, provide guidance for the first quarter, and share some detail on our outlook for the full year 2016. As a reminder we have posted a presentation on the company website with the details of our guidance along with the GAAP to non-GAAP reconciliation of that guidance. During my comments today any income state results or projections I refer to will be non-GAAP.

In summary we delivered Q4 results that exceeded expectation across all key metrics including revenue, gross margin, operating expense, EBITDA, and cash flow. The strong quarterly performance was a result of the continued focus on client success as well as improved operational efficiency and ROI discipline related to investments and operating expenses. Of particular note, we achieved gross margin of over 40% for the quarter, a milestone we have not achieved since Q4 of 2013.

Now turning to Q4 results, our revenue for the quarter was $65 million, a decrease of 13.2% from the prior year primarily due to ACV losses incurred in the back half of 2014. Gross margin was 40.8%, up 300 basis points year-over-year and well above guidance.

I’ll now turn to our business segment review starting with managed services. Q4 revenue for managed services was $60.1 million above guidance due to better than expected production, but down 10% year-over-year. Gross margins for managed services was 40.5%, up 390 basis points from the year ago. This continued strong performance at the gross margin level, particularly as we managed through lower revenues that resulted from client losses in late 2014, is directly attributable to the operational acumen and leadership of our managed services business, the adoption of new tools, technology and processes, and our employees’ commitment to success for our clients and for ServiceSource.

For cloud business and intelligence, Q4 revenue was $4.9 million, down $3.2 million from last year and within our guidance range. Gross margin for cloud and business intelligence was 45.1%, down 210 basis points from a year ago as a result lower revenue, but offset by lower support and operational costs.

Moving on to operating expense and profitability. Our operating expenses came in at $25.9 million, up from prior quarter due to normal seasonal Q4 spend, slightly below guidance for the quarter and effectively flat to last year. Adjusted EBITDA for the fourth quarter was positive $2.3 million, down from $4.4 million in the prior year but better than our guidance of a loss of $1 million to $4 million. Our net profit in the fourth quarter was $300,000.

Now turning to a brief review of the balance sheet and cash flow metrics. DSOs in Q4 were 78 days, down from 85 days in the third quarter of 2015 due principally to the increase in revenue and our ability to manage collections. Cash flow from operations was $2.5 million, CAPEX was $3.3 million, which included $1.7 million in capitalized development, resulting in negative free cash flow of $2 million after adjusting for foreign exchange.

With respect to our stock buyback program, in Q4 we repurchased 136,000 shares for a total spend of $555,000, not including commissions, equating to an average price of $4.07 per share. We subsequently ended the quarter with $208.7 million of cash, equivalents, and investments, down $1.9 million from Q3 2015.

Looking back on the full year, our 2015 revenue came in at $252.6 million, a decrease of 7.7% from 2014 due to the 21% decline in ACV ServiceSource expense in 2014. Against that headwind the team at ServiceSource did a tremendous job of controlling expense throughout the year and that showed up in full year gross margin of 35.4%, a year-over-year increase of 350 basis points, an EBITDA of positive $1.4 million, an improvement of more than $20 million from the prior year. I think it is important to point out that the team achieved these financial results in the face of a $20 million revenue decline from the prior year.

At the same time we are addressing the cost structure of the business, the team was able to stabilize and then improve customer relationships throughout the year and return churn to industry norms. Our ACV at the beginning of 2016 is $246.4 million, up $1.5 million from the prior year, a solid rebound from the $66 million ACV loss in 2014.

The team at ServiceSource endured a truly challenging 2014 and in 2015 substantially improved the operations and culture of our company. This was reflected in the dramatic improvement in our P&L during the year but equally importantly our relationships with our clients, our employees, and our shareholders. We are approaching 2016 with that same focus and commitment to success. And with I’d like to discuss guidance for the first quarter and our outlook for fiscal 2016.

We expect consolidated revenue for Q1 in the range of $56 million to $59 million, which represents a normal Q4 to Q1 seasonal decline. As a reminder ServiceSource experienced considerable ACV losses in the back half of 2014 that continued to generate revenue in the first half of 2015. As a result of this, is a roughly 13% year-over-year decline in Q1 2016 as compared to Q1 2015. We expect consolidated gross margins in the range of 30% to 33% in the first quarter compared to 34.1% in the year ago quarter. This slight decrease in gross margin is due principally to lower revenue combined with startup cost related to the Philippines and Bulgaria and other investments we are making in the business.

We are forecasting operating expenses in Q1 of between $23 million and $24 million. As a result, in Q1 we expect an adjusted EBITDA loss in the range of $1.5 million to $4.5 million and a net loss in the range of $2 million to $4 million or a loss of $0.02 to $0.04 per share. We assume a basic share count of 86 million shares and a normalized tax rate of 40%. We were expecting free cash flow to come in at negative $6 million to negative $9 million for Q1.

Prior to sharing our expectations for 2016 I would like to comment on a change in how we will report on the business. We see tremendous opportunity for growth and expanding profitability for ServiceSource in the coming years as a technology enabled solutions company that expands and extends our clients revenue relationships. Due to this we have made a decision to discontinue segment reporting, so we will not be providing guidance for or a breakout of managed services in cloud and business intelligence results moving forward. We are running ServiceSource as one business to maximize the opportunity for growth and profitability and believe reporting it as such best reflects this decision.

As Chris stated we are expanding what we share by our expectations for the full year so I will take a few moments to address our outlook for 2016. With trend returning to industry norms, our sales engine gaining momentum, we believe we will return to growth in 2016 and expect revenue to grow between 1% and 3% over 2015. During the year, we expect to return to a normal seasonal revenue pattern where we grow slightly sequentially in the second and third quarters and experience our normal seasonal boost in Q4. This will translate into a year-over-year revenue decline in the first half of 2016 due to the impact of the aforementioned ACV losses from the second half of 2014 that continued to generate revenue for the first half of 2015.

However in the second half of 2016 as we move beyond this effect, we expect to see high to mid single-digit percent revenue growth compared to second half of 2015, which we believe is more reflective of the underlying execution of the business. Additionally we expect ACV to grow 10% during 2016, a meaningful improvement over 2015. As a result we should exit 2016 with strong new ACV and revenue growth as we head into 2017.

We expect gross margins through 2016 to reflect the revenue pattern mentioned previously as well as our continued investment in new locations and technologies. These investments are balanced against the operational efficiencies we expect to continue to drive into the business. As a result, for 2016 full year we expect only a modest improvement in gross margin EBITDA when compared to 2015. And with that I will hand it back to Chris.

Christopher Carrington

Thank you, Bob. I would like to thank our employees for a very successful year, our clients for teaming with us in successful partnerships, and our shareholders who believe in the same long-term investment opportunity as we do. While setbacks are always possible, we remain confident that our multi-year strategy will lead us back to a sustained revenue growth and expanding profitability. Sharon, with that I would open the line for questions.

Question-and-Answer Session


Thank you. [Operator Instructions]. Our first question comes from the line of Tim Klasell from Northland Securities. Your line is open.

Tim Klasell

Yes hi, good afternoon everybody. So -– hey, congratulations on the quarter. I'm sort of staring at the 2016 guidance and just wanted to get, as I'm trying to back into the numbers, it looks like 1% to 3% rev up 2016 but obviously a much half, much stronger second half. So how should we think about Q1 and Q2, and I missed that sequential guidance that you guys gave, but how should we think about Q1 and Q2 as far as revenue for 2016?

Robert Pinkerton

Sure. Yes, Tim, this is Bob, and thanks for the comments. Clearly as we look at 2016, the -– if you think about kind of how our revenue is growing in 2016, you need to kind of look back what has been going on from 2014, 2015 and 2016. So if you remember in 2014, we had churned dramatically our pace new sales, taking ACV from $311 million to $245 million. In 2015 we have balanced it, so the churn and new ACV sales pretty much balance each other out and you can see we slightly grew ACV.

As we looked at 2016, the critical point here is that we're getting back to ACV growth and as you think about that curve that we're going through in terms of getting to a point of net -– adding net ACV, it’s going to take us a quarter or two for us to get to a point where that’s reflected in revenue in 2016. So that’s kind of how the curve is happening as it relates to Q1 and Q2 or H1, let’s say. You also then need to think about some of the revenue that was in the first half of 2015 that was related to clients that we lost in 2014. We've talked about that one big customer in the past that impacted our Q1, Q2 revenues in 2015 and that's kind of what is driving that kind of different first half and the different second half.

Tim Klasell

Okay, great. And then, I know you guys have been making a lot of changes in your go-to-market strategy obviously over the last several quarters, but maybe you can sort of talk to us about – you're realigning, I'm sure your sales force and your strategy for 2016, you're making your tweaks and stuff like that. Maybe you can talk to us of where you're going to be focusing on, what's a little bit different right now than maybe where we were six, nine month, a year ago?

Christopher Carrington

Yes, Tim this is Chris. Thanks for the question. And looking forward, we're excited about the opportunity that lies in front of us, and what we've really seen is an evolution of our relationships with our customers through the back half of 2015, where more and more we actually saw our customers looking for us to rebundle our solutions and truly buy from us and approach revenue as a service. So really a platform-based approach where we combined the capabilities of our managed services and our cloud business and intelligence technology together to really create the solution that drives revenues on behalf of our clients.

So that is different than what we were doing in the first half of 2015 and in fact in the first half of 2015 we had really two go-to-market sales teams underneath Greg Hopkins. We had two marketing organizations underneath Greg. And really to the course of the back half of 2015, we consolidated those in the one and created one go-to-market sales organization because instead of selling software separately and services separately we really combined them together to sell solutions as revenue as a service platform. So really different approach for 2016 as a whole and Greg continues to now add and build around that joint sales and marketing team.

Tim Klasell

Okay, great and very helpful. Thank you.

Christopher Carrington

Thanks Tim.


Thank you and our next question comes from the line of Patrick Walravens from JMP Securities.

Patrick Walravens

Great, thank you. So congratulations on the quarter. I guess my first question Chris would just be -- I love to hear your thoughts in terms of what you’re seeing from sort of a macroeconomic point of view in the different geographies you’re operating in and how that might play into your value proposition?

Christopher Carrington

Great Pat, happy to address that. I think from a macro perspective and economic view globally, clearly the world has seen a little bit of a slowdown that was reflected in the markets and that’s actually helped us here recently. We have seen our pipeline increase faster and more significantly because of that. Because I feel as an outsourced based partner, clients turn to us when they are looking for greater efficiency and when they have greater pressure on themselves to grow top line revenue. And so I think would become a partner of choice and a partner of opportunity when the world economics somewhat slowdown.

I think particularly within GOs, our greatest opportunity seems to really be showing itself in Europe and this is something we worked hard on in 2015 and I think has really start to pay dividends at the end of 2015 and look strong for 2016. Where more and more we’re seeing European based brands and logos step up and look to buy from us versus the historical norm which was really just extensions from U.S. based brands. So we’re very optimistic and excited about EMEA as a market.

I think Asia for us will stay so much status quo as far as a sales market. Obviously it’s a growing delivery market for us with the opening of the Philippines, so we feel good about that. And then I think the Americas, specifically North America continues to represent a good growth for us. One of the things we were really focused on last year as you know Pat is solidifying our customer relationships, the result of that adds 57 expansions with those current clients, and we really came to understand that we basically have high single-digit penetration with those clients as far as market share, the vast majority of the remainder of the market share being in-sourced. And so we think that’s a real opportunity for us in 2016 to really expand our share of wallet with North American clients.

Patrick Walravens

Great and two more sort of quicker ones, one is just as I think back I mean I hear you on the comment about the ACV fall off from 2014 but my sense is that the first half of 2016 is more challenging than you realized it would be after you guys reported Q3, so what's different?

Christopher Carrington

Pat, I’ll take the first stab and then Bob will want to jump in. I think one of the things that evolve for us through the course of the year is really the mechanics of the business of how the vast majority of our new sales for 2015 happened in the latter part of the year. In fact some 68% of our new sales for 2015 happened specifically in the second half of the year. And as you know it takes about six to nine months to ramp that revenue and so we were hoping more of that would fall in the first half and then show up in Q1 and Q2. But it really starts to show up in the latter part of Q2 and then heavy in Q3 and Q4. And so I think that’s just the mere mechanics of the business. Bob?

Robert Pinkerton

Yes, I would completely agree with Chris you on that and I’d say Pat, the fundamental here is that growing revenue requires growing ACV first. And ACV -- you land ACV now depending on whether it is an expansion or what type of expansion it is. Whether it is in logo, what type of a new logo business it is. But it is going to take a couple of quarters for that to turn into revenue and so we’re not going to -- the H1 that we have today is reflecting how ACV came out as Chris said in 2015, and the fact that we’ve kind of had a flat ACV during 2015 and it will grow when we get the kind of net ACV growing this year.

Patrick Walravens

Okay. And then last one, how do you think about, and this is obviously really difficult, given how volatile the stock market has been, but how do you think about whether you should buy your stock back more aggressively?

Robert Pinkerton

Sure, yes. I mean, Pat, we got – if you think about in a total for 2015 we repurchased 295,000 shares for a total of about $1.2 million in average price including commission fees and stuff of $4.11 this year. We’ve got an automatic plan in place, it’s a plan that we set in place in Q3 of last year and we balanced how much based upon that plan. We designed that plan so that there’s ROI for us and the shareholders at lower prices to drive more share purchases. So it’s set up that way and we're constantly evaluating our places to invest and what ROI is in terms of internal investments and things like buying our stock back. And I would say that as you think about where the price has been in that, it’s reasonable to assume that if we felt the ROI was strong, kind of to repurchase at $4.11 or so that it’s going to be -– that should give you a sense of kind of where we think the ROI is. So that’s kind of the plan that we have in place and we're evaluating whether we should revise it or buy back more on an everyday basis.

Patrick Walravens

Okay. Thank you.


Thank you. And our next question comes from the line of Ed Maguire from CLSA.

Edward Maguire

Hi, good afternoon, Chris and Bob. You made a comment that I was -– intrigued me that as you have a growing proportion of Renew that you're starting to get into a one-year cycle of renewals, rather than a four-year cycle. Could you expand on that, is it --- are you -– do you have contracts that have shorter durations that allow you to increase the customer touch?

Christopher Carrington

Well, we're really – and thanks for the question, good to hear from you. What we're really seeing is this change towards the subscription-based economy where many of our customers in the hardware and software world used to sell a relationship to a client where say 80% of their economics of that relationship were recognized the day of the initial sale. And then we would work on the recurring revenue or maintenance revenue associated with that sale over the coming years. More and more as -– especially in the software side as they moved to a subscription-based economy, deals aren’t as long, they don’t tend to be three, four, five-year software deals, and so many of these deals are one-year in length.

Our duration with our clients has remained the same, kind of that two and half to three years. But what clients are asking us to do now is back up in the sales cycle, back towards month three, help them insure that clients are properly on-boarded, that they’re adopting the use of the software, that we are providing some education plays around the software, and then months three through nine really looking for cross-sell, up-sell opportunities based upon the usage of their services online. And so we're actually getting involved in more of a sales cycle or ongoing relationship that our clients have with their customers and it’s actually creating new opportunity for us that we hadn’t had before.

Edward Maguire

Great. How is the delivery center in the Philippines, you had announced that a little while back, but I would be interested in the -– your take on progress there and also the new centre in Sofia, Bulgaria. I’d be interested to get your take on the benefits of moving into some of these new locales?

Christopher Carrington

Yes, sure, great question. On the Philippines, we announced that as you recall right around the end of Q3, Q4 and I'm pleased to say the Philippines is open. We actually have approximately about 80 employees in the center today. We're actually doing work on behalf of several clients. And we're utilizing the Philippines in that case for not only services provided to our clients, but we're actually doing some of our own back office work within the Philippines that is helpful for us from a lower cost-to-serve basis.

So the Philippines is up and running. We expect that to continue to grow throughout the year. Greg Hopkins and the sales and account management team are seeing a dramatic increase in our pipeline as opportunities in the Philippines are increasing for us. So we see that very positively. Now as I’d alluded to before the Philippines represents a global English based market force, so it provides us a secondary market to expand our services around revenue lifecycle management. Some of those services I just eluded to back around on boarding, education, adoption type place.

Bulgaria similarly for Europe represents a multilingual site for us to expand our capabilities there, as I alluded to earlier I think from the question from Pat, that we have seen increase in demands in EMEA and many of those demands have language requirements in Eastern Europe, provides a great opportunity for us to expand into the market and access talent around multilingual skills, and also lower our cost to serve. So Bulgaria will come up. We’re just starting to hire in the month of March and we’ll come live in May this year then we’ll start to support customers at that time.

Edward Maguire

Great and the last question is around the large customers. You’d made a comment about the importance of some of your larger customers particularly the expansions, and given the distribution of new clients or new contracts and expansions it would seem that that’s certainly the direction of least resistance. Could you comment on some of the progress that you’re making in identifying where the greatest opportunities are and do you expect actually to have fewer logo ads or a fewer deals but focus on larger sizes in 2016?

Christopher Carrington

Great insight and I don’t think we’ll see a lower number of transactions because we’re anticipating and have great optimism around a very big new sales year. But clearly our average win increased last year. We’re seeing our average pipeline deal being larger. I think as I mentioned earlier in my opening comments that our average relationship last year grew by 25%, at a combination of once again expansion and we’ve actually done some cleanup as it relates to relationships and we’re certain logos were too small for us really to leverage the capabilities of our company on a global basis. And so we’ve found a mutual exit point there. But I think what we really do see is that there is a big opportunity with current clients to expand our share of wallet and that is the path of least resistance to our growth curve in 2016 and beyond.

That said Greg and his go-to-market sales organization certainly is continuing to chase new logos and we do think there will be opportunity there as well. And we are looking forward to announcing some of those in 2016.

Edward Maguire

Great, thanks so much.


Thank you and that concludes our conference for today. We thank you for your participation and you may now log off and disconnect. Everyone have a good day.

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