MobileIron's (MOBL) CEO Barry Mainz on Q1 2016 Results - Earnings Call Transcript

| About: MobileIron, Inc. (MOBL)

MobileIron, Inc. (NASDAQ:MOBL)

Q1 2016 Earnings Conference Call

April 28, 2016 4:30 PM ET

Executives

Samuel Wilson - Head, Investor Relations

Barry Mainz - President and Chief Executive Officer

Simon Biddiscombe - Chief Financial Officer

Ojas Rege - Vice President of Strategy

Analysts

Raimo Lenschow - Barclays Capital

Michael Turits - Raymond James

Robert Breza - Wunderlich Securities

Yuuji Anderson - Morgan Stanley

Michael Kim - Imperial Capital, LLC

Heather Bellini - Goldman Sachs

Operator

Thank you for standing by. This is the conference operator. Welcome to the MobileIron First Quarter 2016 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Mr. Sam Wilson, Head of Investor Relations. Please go ahead.

Samuel Wilson

Thank you, Thomas. Good afternoon. And welcome to MobileIron’s first quarter 2016 financial results conference call. Joining us from the company are Barry Mainz, CEO; Simon Biddiscombe, CFO; and Ojas Rege, VP of Strategy.

The format of the call will be an introduction by Barry then Simon will provide details on the financials. We will then have time for questions. If you have not received a copy of today’s release, please call MobileIron Investor Relations or go to MobileIron’s Investor Relations website at investors.mobileiron.com.

Before we begin the formal remarks, the company advises that today’s conference call contains forward-looking statements that involve risks and uncertainties including, but not limited to, statements regarding MobileIron’s revenue, operating expenses, cost structure, GAAP and non-GAAP financial measures, projected financial results and trends in MobileIron’s business.

There are a significant number of factors that could cause actual results to differ materially from statements made on this call including, but not limited to, our limited operating history, quarterly fluctuations in our operating results, our need to develop new solutions, product defects, customer adoption, competitive pressures, mix shifts, our ability to scale, our ability to recruit and retain employees, and the quality of our support services.

Forward-looking statements are subject to a number of significant risks, uncertainties and assumptions as to future events that may not prove to be accurate. MobileIron’s actual results may differ materially. For discussion of potential factors that could affect our future results and business, please refer to our reports on Forms 10-K, 10-Q and 8-K and our other filings we make with the Securities and Exchange Commission from time to time.

All statements made during this call are being made as of today. If this call is replayed or reviewed after today, the information presented in the call may not contain current or accurate information. MobileIron does not assume any obligation to update any forward-looking statements to reflect events that occur or circumstances that exist after such statements are made today.

In addition, several non-GAAP financial measures will be mentioned on this call. Information regarding the corresponding GAAP measures as well as a reconciliation of the non-GAAP and GAAP measures can be found in our press release on the Investor Relations website or on the 8-K filing with the SEC.

We believe these non-GAAP financial measures are helpful in understanding MobileIron’s past financial performance, its future results, but are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with MobileIron’s consolidated financial statements prepared in accordance with Generally Accepted Accounting Principles.

As a reminder, in the past we’ve reported non-GAAP revenues to account for Vendor-Specific Objective Evidence or VSOE and to provide more meaningful period-over-period comparisons. Starting this quarter, we are only reporting GAAP revenues, because VSOE adjustments are immaterial.

At this time, I’d like to turn the call over to Barry. Please go ahead, sir.

Barry Mainz

Thank you, Sam, and good afternoon. In my second earnings call as CEO of MobileIron, I want to take a few minutes to discuss the first quarter and what I see as the path forward.

Billings came in at $38.3 million, lower than our guidance of $40 million to $43 million. We saw reduced end-market demand for two reasons. First, a tougher overall IT spending environment and changes made by the previous sales leadership that contributed to poor execution.

Revenues were at the low-end of our guidance range, offsetting the revenue performance is continued tight operating expense management. This allowed us to achieve EPS roughly as expected. Simon will provide more details on the quarter’s result in his section.

In Q1, I spent five weeks on the road listening customers, partners and employees. And here is what I heard. Our customers and partners recognize the importance that our products play now and in the future. As the world move to a new mobile-first model, our mission to provide the security and apps backbone for modern computing becomes really critical. IT leaders wanted solutions that will ensure they have the ability to choose whatever technologies they want. They don’t want future IT decisions dictated by closed-desks [ph].

Our neutral security and management framework allows our customers to choose an operating system and pair it with an app that they want to use. Customers want to move away from proprietary solutions that lock them into a single vendor and force them to use [a set of products] [ph].

We have a huge demographic tailwind. Customers told me numerous times that the new employees want to use latest technology and that means devices running on modern operating systems.

One company told me that new recruits made employment decisions based on the technology choice that the company can offer them. Another company reported that recruiting workers is much harder when the work environment requires them to use a Windows-based PC versus having the choice of using a PC, Mac, and/or tablet. Choices what MobileIron solutions enable.

My time on the road was not all complements. Customers are also very clear about things we can and should be better. Based on this feedback, I have started making changes throughout the organization to better meet market and customer needs. One example was improving support. A new head of Customer Success will be joining us shortly and have hired an objective third-party to benchmark our support operation against peer group companies.

For now, I’ve taken a direct role in key customer escalations to show our team and our customers how serious we are about their success. During the quarter we published our first security reports based on anonymous customer data. Among the key highlights include: more than 50% of enterprises have at least one non-compliant device; 1 in 10 enterprises has at least one jailbroken or rooted device, which is basically opening a door to hackers; 22% have users who have removed the pin, eliminating the first line of defense.

These stark results show the need for enterprise investments in mobile security solutions such as MobileIron. This is also driving growth in our partnerships and integrations with a number of security companies such as FireEye, Intel Security, Okta, OneLogin and Ping.

In February, we launched the AppConfig community with IBM, JAMF and VMware along with more than 60 ISVs including Oracle, Salesforce, SAP and Workday. The goal of the community is to make it easy for developers to adopt standards and accelerate the adoption of business apps by the enterprise. MobileIron developed the first toolkit launched by this community. Apple was very supportive at this initiative.

And I want to make a note that Microsoft was not part of this initiative. Microsoft depends to force customers into proprietary solution that locks them into a closed architecture. Expect to hear a lot more about AppConfig in the future.

Turning to customer highlights from the quarter. We surpassed a 11,000 cumulative customers who have purchased our solutions in 2009. Daiichi Sankyo the largest pharmaceutical company in Japan was an existing customer. During the quarter they placed an expand order to become the first customer of our Windows 10 solution.

We continue our strong presence in governments around the world. We added a regional government of the Basque Country, an autonomous community in Northern Spain with population of 3 million people and 78,000 government employees.

We continue to invest in government vertical. In March, we announced that MobileIron is in the process for three critical U.S. government security certifications, FedRAMP, Common Criteria and NSA Commercial Solutions for Classified Programs. We expect these to be completed in the near future and our status allows us to already act at many, many more programs.

Mizuho Securities USA is the U.S. subsidiary of the Mizuho Financial Group, one of the largest financial institutions in the world with total assets of over $1.8 trillion. We’re very pleased that Mizuho Securities USA chose MobileIron to provide employees with secure access to internal resources across all mobile devices.

We also had a sizeable order from ING Bank in The Netherlands. ING has nearly 85,000 employees spread around the world. We hope this expansion order will be one of many and we thank them for it. In August 2016, the Australian Bureau of Statistics is conducting the national census and preparing to count close to 10 million dwellings and approximately 24 million people in Australia on census night. This was a competitive bake-off. All the competitors were invited and MobileIron won.

Turning to the future, it is clear to me that MobileIron is a business that has underperformed its potential. I believe over the next 12 months we can make many positive changes to accelerate the business and financial performance of the company.

First, the lifeblood of any technology company is innovation. We cannot rest on our past successes and we need to accelerate our product development. We recently launched MobileIron Access, a highly innovative product I will talk more about during our next earnings call.

And we need to do and launch more of these types of products to maintain our product leadership position. Our new Head of Engineering, Danny Fields, has hit the ground and running. And I am very pleased with what I am seeing so far. He’s identified numerous areas, where we can bring industry best practices to improve our innovation and differentiation velocity.

Second, we agree with the feedback. We are not seeing all of the deals we could. We are moving to aggressively address this issue, without compromising our financial goals. Example of what we are doing include adding Arrow for North America distribution, expanding our relationships with operators around the world, making personnel and process changes in our marketing a lead-generation function, and lastly working on building even deeper relationships with Google, Apple, Intel Security Solutions, AT&T, Verizon and others.

We don’t believe there is a single bullet - a single silver bullet. And we have many initiatives underway, which combined should move the needle in the positive direction.

MobileIron has a number challenges at this time. And I’m focused on taking action to achieve my top two business priorities. Speeding up innovation and getting into more opportunities, which will help the company grow. I would characterize 2016 as a rebuilding year.

I believe we will continue to face difficult headwinds and we have begun executing our plan to reinvigorate the fortunes of the company. Because of the actions I believe are required and the difficult market environment, I made the decision to pool our annual guidance, our billing guidance.

Right now, visibility in the back-half of the year is limited. We have a significant number of large deals in the pipeline. But specific deal timing is tough to negotiate. However, I’ve also decided that we are still targeting our number one financial objective that of cash flow breakeven in the fourth quarter of this year. I believe this is an important milestone we need to achieve for our shareholders, customers, partners and employees. I am taking necessary actions and I believe this is the right decision for the business.

With that said, I will turn the call over to Simon.

Simon Biddiscombe

Thanks, Barry, and good afternoon. Clearly, I am disappointed with the results for the first quarter of 2016. Billings and revenues were not a strong, as we had expected what we provided guidance for the quarter.

On a positive note, we maintained expense discipline that delivered operating expenses at the low-end of our range, and we achieved the consensus EPS for the quarter. As a remainder, our discussion today will focus on non-GAAP financial measures unless otherwise noted.

Our press release in website provides a reconciliation of GAAP to non-GAAP financial results. For the first quarter ended March 31, 2016 gross billings were $38.3 million, up 5% year-over-year. Our recurring billings in the first quarter were $26.8 million, up 13% year-over-year.

Revenues were $38 million, up 13% from the prior year. Breaking down revenues into the segments, revenues from perpetual license sales were $10.4 million, down 14% year-over-year. The customers continue to show a strong preference for subscription solutions.

Revenue from subscriptions consisting of both term subscriptions and monthly subscriptions or MRC was $14.6 million, up 43% year-over-year. MRC revenue which is part of subscription revenue was $6.5 million, up 52% from a year-ago. Term subscription revenue was $8.1 million, up 37% from a year-ago. Revenue from software support and services was $13 million, up 16% year-over-year.

Starting in the third quarter of 2015, we began to report revenue from recurring sources to go along with billings from recurring sources. The exact calculation is detailed in the press release. We believe that recurring revenue reflects combined performance data on seats, contract lengths, mix and renewal ASPs. The rate of growth of our recurring revenues has been very tightly correlated to the rate of growth of cumulative seats.

Revenue from recurring sources for the first quarter was $26.6 million, up 36% year-over-year. On both of billings and revenue basis, recurring portion of our business is over $100 million a year run rate business. Non-GAAP gross margin in the first quarter was 82.3%. Total non-GAAP operating expenses were $42.3 million, at the low-end of our $42 million to $44 million guidance range and down year-over-year, even as we grew billings and revenue. Operating margins were negative 29%, significantly better than negative 49% a year ago.

Turning to the bottom-line for the first quarter, we reported a GAAP net loss of $19.4 million and a non-GAAP net loss of $11 million. GAAP EPS was a loss of $0.23 and non-GAAP EPS was a loss of $0.13. These are based on a weighted average basic share count of 83 million shares.

Moving to the balance sheet, we ended the first quarter of 2016 with $95.1 million in cash, short-term and long-term investments; a decrease of $3.8 million from the prior quarter. This is the smallest net cash usage since going public in June 2014.

Deferred revenue was $70.2 million at the end of March versus $57.1 million in the prior year. DSOs for the first quarter of 2016, was 74 days, down five days from last quarter. In general, our DSOs are in the 70 to 80 day range and typically moved up or down based on inter-quarter linearity and some seasonal factors.

As Barry stated, we’re in the midst of a rebuilding year, so I wanted to spend a moment with you in our balance sheet. We reviewed - we currently have $95.1 million in cash, short-term and long-term investments. Those short and long-term investments are in highly weighted fixed-income securities. The long-term securities are ones with maturities in the one to two year range and should go lawful to the next year.

Further, the company has no debt. Therefore, our balance sheet is solid and supports the business initiatives of the company. Turning now to guidance, the timing and billing type of large transactions may cause the billings and revenues to vary in any given quarter. For the second quarter of 2016, we expect billings to be in the range of $38 million to $40 million, flat over last year. We are projecting a revenue range between $37 million to $39 million, up 6% to 12% year-over-year.

We expect non-GAAP gross margins to be approximately 80% to 82%. We expect non-GAAP operating expenses will be in the range of $43 million to $45 million. The sequential increase is mainly driven by our user conference which is held in May. We remain focused on the efficiency of our spending with particular emphasis on measuring and improving the ROI of each dollar spent.

And importantly, we remain committed to our goals for the fourth quarter. Cash flow breakeven and expect at that time operating margins will be in the range of a negative 8% to negative 12%.

Operator, we are ready for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] First question comes from Raimo Lenschow of Barclays. Please go ahead.

Raimo Lenschow

Hey, thanks for taking my question. Hey, can you talk a little bit about - you had strengthened some product areas like MRC, like with very healthy growth. And then, obviously, our stuff wasn’t kind of that great. Can you talk a little bit about how you’re setting up your sales-force and how you’re kind of compensating them, because it’s kind of - like it seems like the wrong stuff is growing in terms of where I wanted to see growth coming through? That’s my first question.

Barry Mainz

Well, thanks for the question. We maintain a sales-force and a compensation plan that really is in line with how customers want to buy. And so, we’re not doing anything that’s out of the ordinary to make sure that there is one sort of business model that’s preferred. We really get driven a lot by how customers want to pay. I mean, that’s really in line with what you see in the results.

Raimo Lenschow

Yes, okay, perfect. And can you talk a little about - on the macro-side we saw this quarter like quite a few guys like more on the bigger-side like SAP, Microsoft, et cetera having problems, while the smaller guys actually pulled through, okay. Like how would you characterize the environment for you? Was that kind of an Easter effect that you saw or like how do you think about it?

Barry Mainz

Yes, so first of all, I’ll kind of take a step back here, I mean, I chat a lot with a lot of customers all around the world. So mobility is still really important. We didn’t see a spending environment softening in particular in EMEA and APJ. So North America, we didn’t see that drastic of a change. We did see it, if there is in EMEA and APJ.

Raimo Lenschow

Yeah. Okay, perfect. And then, last question for me is like, if you look - how would you compare your win rates and performance against some of the peers like we saw the Citrix numbers obviously and VMware numbers. Like if you have competitive discussions like how are you referring in terms of your win rates that you have there. Thank you. Last question for me.

Barry Mainz

Thank you. So when we’re in we have a really, really high win rate. In particular, if it’s in our sweet-spot, which are large enterprises with really complicated and forward thinking on mobile-first strategy.

Raimo Lenschow

Okay. Perfect. Thank you.

Barry Mainz

You’re welcome.

Operator

[Operator Instructions] The next question comes from Michael Turits of Raymond James. Please go ahead.

Michael Turits

Hey, guys. I’m trying to find out what happened, I mean, obviously it’s tougher macro, but generally things haven’t been falling off a cliff. And you guys are on a really strong recovery rate off of 1Q last - 1Q of last year. And things seemed to change and some of my checks were fairly positive even towards pretty closely end of the quarter. And then particular, I guess, the second-add on to that general question is just that, what’s going on in terms of seat growth? If you’re commenting that seat growth, it sounds like it’s still up there in the 30s. And if so, are ASPs falling off or what’s happening, because obviously with the billings decline it doesn’t seem to be truing up? Billing slowing, it doesn’t seem to be truing up with - it had been very healthy 30%-plus seat growth and I thought stable ASPs.

Barry Mainz

Okay. So I’ll answer the first question and I’ll have Simon answer the seat growth question. So first is, as I mentioned before, spending environment particularly in APJ and EMEA softened, we have a very, very robust big deal pipeline, more robust than we had in the past. And it’s a little bit harder with regard to timing and negotiating that. And then, third would be there are some business process changes made by prior sales leadership, which we are actually in the process and have made all of the changes.

Michael Turits

Before Simon is on that, if you had a big deal pipeline you’re saying that, is that pipeline still there and that it’s just very lumpy? But typically you guys can’t count on that, or is that you’re less confident in the pipeline? So again, I don’t quite understand how that flows through here.

Barry Mainz

Yes. So it’s yes and yes. So, yes, we actually have big pipeline and, yes, you got lumpiness.

Michael Turits

Okay. But again…

Simon Biddiscombe

Michael, I’ll take…

Michael Turits

Yes, sort of hard to see why that - if that was a - why that would act as a big impact on the outlook, what’s the change there on the big deal pipeline?

Barry Mainz

Yes, I mean, I think you also have - if you look at the mix we got quite a few deals with state local government which we had before and those are little bit more difficult to predict and they are large. So in terms of negotiating those types of deals we’re taking the stance that we are now.

Simon Biddiscombe

So, Michael, let me take the second part of the question.

Michael Turits

Thanks, Simon.

Simon Biddiscombe

It’s relatively straightforward to ascertain. Number one, if I compare the actual performance in the quarter to my expectations at the time I gave guidance, seat numbers were very consistent with my expectation mix was slightly different and you see that show up in terms of the subscription growth versus the perpetual performance on a year over year basis and versus the guidance, okay.

So we have couple of deals that came in subscription instead of perpetual that we thought might be the other way. But we always have to deal with that. We recognize that.

ASPs were flat sequentially, okay. So seats as I expected, ASPs as I expected, mix slightly different than I had expected in terms of new seats. And then review slightly below my expectation, because of the process change that Barry referred to in his commentary, okay. So we’re mixing process changes. We’re in the process of fixing those changes at this point in time.

Those changes actually resulted in the renewal rate being a little lower than we would expect it to be not that the customers have necessarily gone away just that we didn’t renew the business the way we would normally renew the business from a process perspective, okay. So that’s what happened relative to the guidance that I provided you.

Michael Turits

So they renewed at lower dollar rates, and then what were those process changes?

Barry Mainz

So I am not going to get into the dirty granularity of it, Michael, I think we will say that for another conversation later.

Michael Turits

Okay, thanks.

Operator

The next question comes from Robert Breza of Wunderlich Securities. Please go ahead.

Robert Breza

Hi, thanks for taking my questions. Maybe just follow-up to Michael’s question. As you comment, Simon, the mix was slightly different. Wondering, how you are thinking about that mix differently. And then, Barry, for you, what are you doing with either sales force compensation or in terms of process changes that making to the sales organization to get the mix that you want and I’ll leave it there. Thanks.

Simon Biddiscombe

So as I said last year, right, so throughout the course of last year, we essentially had a very consistent revenue mix, okay. So let’s go to the revenues instead of billings for the purpose of this calculation, because we don’t give you all the granularity unique to the billings calculation, okay. So last year we sold roughly a third, a third, a third revenue between perpetual, subscription and then support and services on a quarterly basis, okay.

In the most recent quarter, you saw about perpetual number was less than a third, okay. And frankly we are the two, with pretty close to a third, okay, but slightly higher than the third, obviously to get to the math. But my expectation moving forward is that, what we experience was kind of one quarter normally, when I look at the new seat mix moving forward, my expectation is that goes back to roughly that a third, a third, a third that we previously seen.

But I will tell you that deal types change fairly dramatically on a quarter-to-quarter basis, we said that previously, right. Customer can be well into a conversation associated with buying a perpetual deal from us and that deal will flick to a subscription deal at the end of the day.

As Barry said, what we are not trying to do is force the customer to buying a certain way. We want the customer to be able to buy and whatever billing model, they deemed to be most effective for them. We are not trying to force them to buying a different model, because that puts the business at risk essentially, okay.

And in many instances that customer has, if they’re expanding, already entered into a billing model with us in the land transaction itself. So that’s where it plays at.

Barry Mainz

And to answer the question, it’s not just sales process that we’re changing as yet. If you listen to the script I also mentioned we are doing things of marketing, engineering as well as support, and doing more of that overall operational uplift.

Samuel Wilson

Great. Rob, you have any follow-up?

Robert Breza

Just one follow-up, Barry, as you think about making the cash flow breakeven target, I know you’ve committed to making that reinforce that here in the call. What are you looking - is there further headcount reductions that need to be made or you feel you’ve made the necessary cost containments that you need to just from a - maybe process perspective.

Simon Biddiscombe

So Rob, I will take that, it’s Simon. I think we’ve done a good job managing operating expenses over the course of the last nine months or so. Again this quarter we were able to deliver operating expenses that were at the low end of our expectation, and on a year-over-year basis operating expenses were down, despite the growth in revenues and billings, okay. We are going to continue to make sure that we manage operating expenses in order to get to that cash flow breakeven line in the fourth quarter, and obviously it’s predicated on delivering our expectations on billings and revenues as we move through the remainder of the year. But there is no requirement to reduce the headcount in this business at this point in time.

Robert Breza

Great. Thank you very much.

Barry Mainz

You’re welcome.

Operator

The next question comes from James Faucette of Morgan Stanley. Please go ahead.

Yuuji Anderson

Hi, this is Yuuji Anderson on for James. Thanks for taking my question. On the OpEx guide for Q2, which seems like it’s coming a little bit heavier than what you have had originally thought. I know you’ve mentioned that user conference earlier, any other drivers to consider there, I’m just trying to kind of fit that within your trajectory towards your operating margin target exiting the year? Thanks.

Simon Biddiscombe

It’s Simon, no, nothing specific to call out as it relates to Q2 OpEx. Q1 was a little over that we would have expected to be in. As we said, it’s a low-end, part of that was obviously attributable to the commission number being a little lower even the billings or little lower right, so nothing specific to call out.

Yuuji Anderson

Thank you.

Barry Mainz

All right, next question please?

Operator

Next question comes from Michael Kim of Imperial Capital. Please go ahead.

Michael Kim

Hi, good afternoon guys. So again with regards to the cash flow breakeven target exiting the year and maintaining the headcount, is that target predicated on driving sales leverage through counter partners like Arrow, or what’s some of the assumptions around gaining leverage to the model?

Simon Biddiscombe

So, let me make sure, I say correctly, what I said when I was asked the question a couple of seconds ago. So what I was trying to say there is no need to do reduction in force, okay. Quite where it headcount comes out in the conversation remains to be same, but there is no need to do a reduction in force is what I was trying to answer - when I answered the question last time.

Barry Mainz

I think…

Ojas Rege

As I look at this point in time as I look at the billings expectations relative to the operating expense structure that we have moving forward. Barry has given you a view on having things about not having offer the full year guide and why that is the appropriate thing to do. Clearly we’ve constructed our view of the remainder of the year. We’re building operating expense structure demands that view of the remainder of the year, and still believe the cash flow to cash flow breakeven. And nothing more to add other than that.

Barry Mainz

Yeah. I would add one thing that. You’re right. There is a lot of leverage in the model and kind of the thought behind making sure we got Arrow and we continue to partner and utilize the leverage are very strong mobile operator network around the world. And we believe that will give us scale and we get that kind of force multiplier with our system headcount and leveraging the distribution model that we’ve laid out over the last several years.

Michael Kim

And is that partially depending on some of - at least some of the large deals closing before year-end and what do you think is the risk-based on your visibility yet, some of these large deals you’re moving to the following fiscal year?

Ojas Rege

Yes, I can’t really comment if they’ll fall into the next fiscal year. That’s a topic we get to nail on, but…

Simon Biddiscombe

We’re working on a quarter-by-quarter basis, right. And as Barry said visibility is - we also have a very large deal pipeline visibility is questionable is to when some of those close and you would possibly comment on what’s going to happen three quarters from that.

Michael Kim

Okay. Very good. Thank you very much.

Barry Mainz

Thanks. Next question, please?

Operator

[Operator Instructions] the next question comes from Heather Bellini of Goldman Sachs. Please go ahead.

Heather Bellini

Hi, thank you for taking the question. I guess I had a couple, but they all seem to be focused on some of the stuff people are asking, and I think Michael Turit as well. The question is, so you are talking about a pipeline that is bigger that sounds robust. It’s not closing the way you thought it was, so it seems unpredictable. Could you walk us through over the last year, how your close rates have changed, because I mean, technically a pipeline can go up, and up, and up, but if your close rates go down, the pipeline going up doesn’t really help us, right.

So I guess I’m trying to get a sense, because it does seem like the market is gotten a lot more competitive. People reference Citrix and VMware and Microsoft, and I guess I’m just wondering can you share with us, how you’ve seen close rates change whether it’s over the last six months, over the last 12 months and kind of what you are forecasting for those close rates to do or you’re expecting them to increase, decrease state the same? And then I had a follow-up. Thank you.

Operator

This is the conference operator. We have lost connection with the speakers, if you could just standby for one moment.

Barry Mainz

Yes. Can you hear, okay?

Operator

Yes. Speakers are connected. Please proceed.

Barry Mainz

Can you hear me?

Heather Bellini

Yes. We can hear you. Thank you.

Barry Mainz

Excellent. So I got three quarters to that question. So just bear with me if we kind of have to go back and forth, because there is no - how we that gotten to this, okay. Let me answer the last part, because it is the middle part that got missed there. So - well, when we have an opportunity to show up we win. I’ll make a comment, you need some kind of reference to Microsoft. And the good news is they created tremendous demand.

So they’ve gone out there and leverage their kind of machine to go talk about, hey, why EMM is important and why it’s really important to use certain kinds of technologies to manage Mobile First strategy. And we’re benefiting by that. We’re being brought into account, where we have never been before and partly because the solution that Microsoft has doesn’t provide the level of choice that customers want.

And I heard from a couple customers that said - and particularly said, hey, they will kind of look at MobileIron as more of an open system approach versus maybe more proprietary platform. So we’re getting brought in, okay. So that’s really good. We start to see some of that…

Heather Bellini

So let me ask you a question there then. So you are getting more at that today in the last quarter than you were a year ago?

Barry Mainz

I would say that - I would say it wasn’t a year year-ago, so I don’t have that kind of concept especially for large accounts. But what I can say is we’re getting brought into some very large deals that we haven’t had visibility into before.

Heather Bellini

Okay. Well, then that gets to the win-rate question. So if you can’t comment on the number of deals, you guys must keep track of win-rates. So how is win-rates been changing over the last 6 to 12 months? Because what I was saying is your pipelines - so you talk about the pipelines really big, but obviously closed rates are being impacted if pipeline is going up, and you’re taking down your expectations and pulling guidance.

So I’m trying to get a sense for how your close-rates have changed over the last 6 months or 12 months?

Barry Mainz

Yes, they’re a bit lumpy. I mean, I would say they’re probably trading…

Heather Bellini

Oh, just directionally on it, LPM basis, some sort of a trend to give us a sense?

Barry Mainz

Well, when we get out to apps, we win. And I would say that close-rates are trading in sideways.

Heather Bellini

But then how does that foot with what you are telling us and what you are seeing in your business like it just - it just doesn’t…

Barry Mainz

The deal sizes are bigger. Our deals sizes are bigger than we had before.

Heather Bellini

But you are getting more that and you’re - it just - honestly, like it just doesn’t. I think a lot of people are having a hard time comprehending what you are saying, because it just doesn’t - it doesn’t foot.

Barry Mainz

Yes, so app-adds are relatively flat, right. So we have better [indiscernible] change materially. Our average, these larger deals that we’re being introduced to, that’s a good sign. So I get to see that, so it’s sort of trending near the end of the quarter. And that’s why it’s at sort of the visibility or the ability to kind of forecast those. And then the other piece is that, again, we’re engaged in these deals. We tend to win on the large deals.

Like as I said before, we got a chance of making sure that we are getting back to more deals.

Heather Bellini

Yeah. I guess, then that would then mean you could keep your annual guidance and pull your quarterly, because the odds of you closing them over the course of the next - this fiscal year are probably higher than trying to figure out where you’re going to be in the next three months. But that’s just one person’s opinion, trying to figure out what you are saying.

Barry Mainz

Okay.

Heather Bellini

Thank you.

Barry Mainz

Thanks.

Operator

The next question comes from Karl Keirstead of Deutsche Bank. Please go ahead. Karl, you are live.

Unidentified Analyst

Hey guys, sorry, I was in mute. This is Tavan [ph] for Karl. Thank you for taking my question. I had a clarification on the guide. Did you guys give the revised billings and revenue guide for the year?

Simon Biddiscombe

No, that was what we were just talking about. We elected not to provide full year guidance. And Barry on his - in his prepared remarks was very specific about why he had elected to do that. So now there is no full year guidance.

What we did say was we were maintaining the objectives associated with cash flow breakeven in the fourth quarter. And expecting an exit trajectory operating margin of somewhere between the negative 8% and negative 12%. So we’ve left that line in the fand [ph] associated with cash flow breakeven and profitability at the fourth quarter. But we took away the annual billings guidance based on the very specific commentary Barry provided that.

Unidentified Analyst

Okay. So the guide you gave in Q1 for billings and revenue does not stand anymore. You gave us like [$180 million to $20 million] [ph] for billings and I believe there was a revenue-guidance for the year, so that is not final anymore?

Simon Biddiscombe

That is correct. That’s what Barry said in his remarks.

Unidentified Analyst

Thank you. Second question, you spoke about the mix-shift away from perpetual towards what’s subscription. Aside from customer preference, anything else is driving that mix-shift? I mean, is there a difference in how you sell our channel mix away from direct to channel or towards telco partners?

What is happening in terms of your, I guess, sales-mix between different channels? Is that a factor in driving the mix away from perpetual towards subscription?

Simon Biddiscombe

As we said, if you look at the customer preference, a new customer preference that highly would wish to purchase at this point in time, that is definitely moving toward a subscription model. And on a revenue basis, as I said in an answer to an earlier question, last year it was roughly a third and third and third between each of the buckets of actual subscription, and then support and services.

So we want customers to buy whatever model customers want to buy. New customers tend to want to buy in a subscription model today.

Unidentified Analyst

But there is no change in, I guess, sales-mix by channel?

Simon Biddiscombe

So we don’t go into that level of granularity on a call.

Unidentified Analyst

But is that a factor in the mix-shift between perpetual subscription?

Simon Biddiscombe

No, that isn’t the key reason for the mix-shift. You have traditional seasonality associated with how customers purchase and the types of customers who purchase in each quarter and so on. So now you’re not - I understand the question. It’s not a key component of why we have what we have at this point in time.

Unidentified Analyst

Okay. That’s helpful. Thank you.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Sam Wilson for any closing remarks. Please go ahead.

Samuel Wilson

All right. Thank you, everyone, for joining us today. A replay will be available on the same - the link on the MobileIron investor relations website or by dialing 877-870-5176 and referencing the replay number of 117240 through May 28, 2016. Thank you very much.

Operator

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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