IntraLinks Holdings' CEO Discusses Q3 2012 Results - Earnings Call Transcript

| About: IntraLinks Holdings, (IL)

IntraLinks Holdings, Inc. (NYSE:IL)

Q3 2012 Earnings Call

November 7, 2012 5:00 pm ET


David Roy - IR

Ron Hovsepian - President, Chief Executive Officer and Director

Derek Irwin - Chief Financial Officer


Jennifer Lowe - Morgan Stanley

Tom Roderick - Stifel Nicolaus

Richard Baldry - Wunderlich Securities


Good afternoon and welcome to the IntraLinks Third Quarter 2012 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). Please note, this event is being recorded.

I would now like to turn the conference over to David Roy, Senior Vice President of Investor Relations. Please go ahead.

David Roy

Thank you, Operator. Good afternoon. Welcome to IntraLinks Holdings' quarterly financial results conference call for the company's third fiscal quarter ended September 30, 2012. With me today are Ron Hovsepian, IntraLinks' President, Chief Executive Officer and Derek Irwin, Chief Financial Officer.

All of our discussion today will contain forward-looking statements, which may included projected financial results, direction, our operating metrics, business strategies, anticipated future products and services, anticipated market demand or opportunities and other forward-looking topics.

These statements are subject to risks, uncertainties and assumptions. Accordingly, actually results could differ materially from these forward looking statements, where listing of the risks that could cause actual results to differ, please see our latest forms 10-K, 10-Q and other reports filed with the SEC as well as the factors identified in today's press release.

A reconciliation and rational for any non-GAAP metrics that maybe communicated on this earnings call may be found in press release and accompanying financial tables that we issued in connection with this earnings call.

Information contained in our quarterly earnings release and the comments and remarks of the representatives of IntraLinks Holdings Incorporated made during this conference call are integrally related and as such are intended to be disseminated and understood together.

IntraLinks undertakes no obligation to update or revise this information acceptance required by the federal securities laws. Today's call is available via telephone and webcast. A telephone replay will be available after the conclusion of this call through November 14th, and a webcast will be available on our Investor Relations website.

To access the press release, supplemental financial information for the webcast replay, please consult the Investor Relations section of our website. Following some prepared remarks, we'll take your questions.

With that, let me turn the call over to Ron.

Ron Hovsepian

Thank you, Dave, and thanks to everyone for joining us today to review IntraLinks Holdings third quarter 2012 performance. We generated revenues of $54.8 million in the third quarter. This was above our guidance and contributed to profitability that was similarly above our guidance.

Let me update you on the state of our business in terms of revenue and operations, update you on the progress against our strategy and then introduce you to our new CFO, Derek Irwin, who will add his comments on the quarter.

First, our business. Our M&A deal count was up again year-over-year though down slightly, sequentially. We have continued to gain share in M&A, even in a difficult overall deal market by leveraging our superior VDR platform and our ongoing program of product enhancements. We are leaders in the M&A space and believe our increased product and sales and marketing investments are paying off as evidenced by M&A revenue growth of 11%.

Second, our enterprise revenue is down slightly year-over-year due to the challenging economic environment. From a strategic perspective, we continue to see positive signs for our future enterprise direction as evidenced by two recent customer wins. An exciting new customer win in the quarter was Actelion Pharmaceuticals, Europe's largest biopharmaceutical company.

When Actelion needed to automate the exchange of sensitive clinical trial documentation between trial sponsors and participants, they ran a competitive evaluation process before selecting IntraLinks. Prior to IntraLinks, Actelion had relied on traditional courier services an expensive and manual process for handing their clinical trial documentation.

Now, they can quickly set up central clinical trial portals to facilitate secure, compliant and auditable exchange of site feasibility, study startup, study conduct and study closeout documentation. Significant differentiators for us in this win included our security, detailed reporting capability, workflow analytics and our knowledgeable professional support organization.

One of top global private equity firm with over 10,000 investors and more than 60 billion in assets under management was looking for an investor reporting and fund raising solution, they turned to IntraLinks. They previously were using an outdated technology approach and struggled to scale across multiple business units and funds. Primary competitors for this business were SunGard Financial Systems and Investment Café. This customer was attracted to the IntraLinks' platform because of our configurability, enhanced dashboard capability and the ability to integrate with their existing implementation.

Additional differentiation came from the superior level of client support services that we can provide and a product roadmap that meets their future needs for beyond the firewall sharing and collaboration.

Regarding our debt capital markets business, as I have mentioned in prior calls, the loan syndication market has evolved and we continue to take steps to better position our DCM solution to address the changing needs of our customers. Here we are integrating Misys' loan accounting capability with our loan syndication and reporting functionality as well as integrating our front end book building solution into our DCM offering.

Once complete, our offering will address the full loan syndication lifecycle, meaningfully improving our overall competitive position in this market. In the near-term, we'll still feel the impact the of older customer defections on our DCM revenue line, but we are optimistic these new product enhancements will improve our long-term performance in this business.

Last quarter, I outlined the strategy review process we went through as a company. That process included substantial external assessment and validation of our market opportunities and our company's future direction. Our focus was on qualifying the growth outlook for our core strategic transactions business, defining and assessing a range of options in adjacent enterprise markets and identifying and sizing our target market within enterprise and defining execution requirements for success.

We identified three major initiatives for our core strategic transactions business, a $600 million market opportunity as we size it. First, we want to improve our mid market advisory relationships in order to capture more of that opportunity. I am pleased to say that we made progress here and we have added new mid-market bank logo advisors.

Second, we want to continue to pursue promising geographies, where we are underrepresented today. We have already reallocated corporate resources to M&A, domestic and international to improve our sales coverage and we believe we will be well positioned when global economy improves. And third, we continue to enhance our offering with new capabilities to help manage the entire deal making process. We just rolled out release 3.2 of our IntraLinks platform and with it a couple of meaningful enhancements that improve our competitive offering. We added improved question-and-answer functionality and a new more intuitive user interface to improve productivity and provide a better user experience. We previewed our new release with about 35 customers and initial customer reaction was very positive.

We see our biggest near-term revenue opportunity in M&A. This is a business where we are best aligned for immediate success today. We are performing well in M&A and continue to win share in the $600 million market. We are realizing solid market momentum and are investing additional product and people resources to build upon the success.

Over the longer term, we've identified significant opportunity in the enterprise market that we believe will be a major driver of growth. We are targeting a $2 billion market opportunity for beyond the firewall collaboration in which we currently see no clear leaders or entrenched competitors.

We continue to invest resources in building out our solutions, optimizing our marketing message and enhancing our sales processes. We believe we can successfully leverage our heritage in expertise here just as we did in our core strategic transactions market to be successful in our target enterprise market.

As I mentioned last quarter, we are executing against our product roadmap to address this enterprise opportunity. Based on broad functionality our service platform delivers today, we believe we already have product leadership position in this new enterprise market. Our research indicates that our current platforms already delivers about 70% of the identified unmet needs of this market and future product releases will deliver the remaining 30%, the first of these releases is planned for Q1 2013.

Our go-to-market model for the enterprise is being constructed now. We continue to refine our brand positioning and demand generation process and we are making very good progress on all fronts. Our high velocity low cost sales model is in place and we are evolving our enterprise sales organization for better alignment with our product roadmap.

To summarize, we are stabilizing the business. We have a strong position in core strategic transactions business and we'll continue to aggressively pursue growth in that market. In enterprise, we continue to make progress executing against our strategic plan for beyond the firewall collaboration and are confident we are well positioned to attack this $2 billion market opportunity.

Lastly, I am very pleased to be able to introduce Derek Irwin, our new Chief Financial Officer. Derek has extensive experience as a senior financial executive at a variety of companies including CFO at HIT Entertainment and The Nielsen Company with a proven record of developing financial and operational controls to improve financial performance.

Derek's background also including a business transformation at Nielsen as well as past experience in financing's and M&A activities, I and the rest of the IntraLinks management team look forward to working with him.

Let me turn the call over to Derek now to provide you with some detail on our financial results. Derek?

Derek Irwin

Thanks, Ron. Let me start by saying that I am very excited to be part of IntraLinks. In deciding to join the company, one very important influence with the fact that I have used IntraLinks' platform a number of times in my prior lives and I have been very familiar with the IntraLinks' offering, brand and reputation. It's a great product with a large and growing market opportunity. I am happy to be here for my first earnings call with the company. I look forward to many such calls in the future and to meeting with you in person.

Now, let's talk about the quarter. Throughout, I will refer primarily to non-GAAP numbers. A definition of these numbers as well as a reconciliation to the corresponding GAAP results is available as an attachment to our earnings release and on the Investor Relations section of our corporate website.

Revenue for the third quarter of 2012 was $54.8 million above the high end of our $49 million to $52 million guidance and flat with our Q3 2011 performance. Our profitability measures for the third quarter were also ahead of our expectations driven by our revenue performance. As expected, our margins declined year-over-year due to the investments that we have made in the business to properly position this company for accelerating future growth.

[Spending] for the quarter was in line with expectations. Third quarter margins were as follows. Adjusted gross margin of 76% compares to 80% for the same quarter a year ago. Adjusted operating income of $5.8 million, an 11% margin compares to $12.8 million, a 23% margin in the same quarter a year ago. Adjusted EBITDA of $10.6 million, a 19% margin compares to $18 million, a 33% margin in the same quarter a year ago, and adjusted net income of $3.2 million or $0.06 per share compares to $6 million, or $0.11 per share for the same quarter last year.

Looking at our third quarter revenue performance by business line, enterprise revenue was $23.8 million, down 3% compared to $24.5 million in Q3 of last year. We are sharpening our product and market focus to better pursue the $2 million enterprise market opportunity. For Q3, enterprise comprised 44% of our total revenues.

M&A revenue of $23.9 million increased 11% compared to $21.5 million in Q3 of last year. This growth was driven by increased deal count and market share gains, but it's been impacted by lower average revenue per deal year-over-year, a function of smaller of deal sizes rising pricing differences.

For Q3, M&A also comprised 44% of our total revenue, the increased contribution from M&A is in line with our strategy of investing to maximize this business in the near-term as we implement necessary business model changes to ramp up our long-term enterprise revenue growth rate.

Lastly, DCM revenue was down 15% to $7 million from $8.3 million in Q3 of 2011, due to the cumulate impact of prior cancellations and down sales as it's been discussed on previous calls. For Q3, DCM was 12% of our total revenue.

Regarding cash flow, we generated $2.5 million from operations for the quarter, compared to $13.6 million for the same quarter last year. We have been investing in a number of strategic growth initiatives and in our infrastructure. This investment was reflected in an expected increase in our second quarter accounts payable balance. Making those payments this quarter normalize our accounts payable level at quarter end, but negatively impacted cash flow from operations.

Free cash flow for the quarter was negative $2.8 million, compared to $6.7 million for Q3 2011. Cash and short-term investments declined slightly to $66 million at the end of the quarter, compared to $68 million a year ago and $70 million, sequentially.

Let me preface Q4 guidance with some additional revenue observations. First, international revenues comprised 39% of our total Q3 revenues, compared with 40% in Q3 '11, the lower percentage reflecting weaker EMEA performance partially offset by growth in Asia-Pacific.

Secondly, our 12-month revenue backlog billed and unbilled at the end of Q3 was down 2% from last year. This was due to a decline in DCM bookings partially offset by higher M&A bookings. As you would expect with shorter contract terms M&A bookings convert to revenue faster.

Regarding the fourth quarter of 2012, we are providing the following guidance. We expecting revenue in the range of $50 million to $53 million, we are expecting operating income to be in the range of $3 million to $5 million, we anticipate adjusted EBITDA in a range of $7.5 million to $9.5 million, and earnings per share is expected to be in the range of $0.02 to $0.04.

I am very excited to be at IntraLinks with a very good M&A business and we are executing through some macroeconomic headwinds. We are addressing DCM product issues and have taken steps to stabilize that business and we have positioned ourselves to aggressively pursue a great, largely untapped enterprise opportunity. We are in the middle of preparing 2013 budgets. After we have completed that process, I look forward to sharing our outlook for 2013 and our long-term operating model with you.

With that, we will be happy to take any questions you might have. Operator?

Question-and-Answer Session


Thank you. We will now begin the question-and-answer session. (Operator Instructions). Our first question comes from Tom Ernst with Deutsche Bank. Please go ahead.

Unidentified Analyst

(Inaudible) Tom Ernst. Thanks for taking my question. You just talk about how you're improving the [entire] [ph] portfolio to target [the enterprise] [ph] market, but you also have companies in the consumer space like Box and Dropbox that are getting adoption in the enterprise space. What kind competitive impact do you feel from the adoption of those kind of companies in the enterprise space towards your strategy?

Ron Hovsepian

A couple of things. One, we hear the awareness that those two companies can bring both Drop and Box (sic). It generates a very interesting discussion with the client that talks about control and other aspects of their business from an IT perspective.

The good news is we've seen situations where certain customers have actually shut their URLs off to block those vendors, because they are concerned about sharing confidential information and from a security exposure perspective. So, we do have a lot of conversations. So, from my perspective they generate good interest in terms of building brand awareness that we see out in the market.

In term of our strategy and where we have focused our strategy, we really focused our strategy above file sharing. File sharing to us is really, in the long-term, is really just a feature of the platform and we allow customers to see files at different levels.

What the client really wants is a series of other things that we have identified. I am not going to go into detail on that we think really differentiate the market, but I would highlight them with things like control and other dimensions of how content gets moved between enterprises, or shared with other organizations, not just files at the lower level, so it's building good awareness. It creates some definitional things we need to as we work through that with customers, but in general when we do run into them, we do see them and it does add to a rich conversation as to where and what the customer should be thinking about.

Unidentified Analyst

Got it. Thanks. Have you seen any change in your win loss rate against those companies in the recent past? Has it gone in your favor or have you…

Ron Hovsepian

We are early into this market as you can imagine. It's a very, very early into this game. I mean, I know they quote a lot big numbers and that's great. Let's understand what's adopted versus just premium out there in the market. We don't use the premium-type model out there in the market. So, I think that's one thing to take into account.

And then secondly overall I think as you look out into the market and into this very young market, I think there will be a lot of evolution as to where and how this market turns and we are placing our bet on where we think the market is going to go and architecting and taking advantage of what we already have that’s built from that area.

Unidentified Analyst

Okay. Thanks. Just one more follow-up, you signed a deal with Misys for the DCM product. How has that impacted the adoption of the product? Have you seen any kind of traction after that agreement and have you any positive feedback from the customer?

Ron Hovsepian

Yes. That's a great question around the Misys relationship. As you may remember Misys is a big firm that offers the accounting package as part of the debt capital's market loan syndication. And, in particular our strategy there was to partner with them and we have set up that exclusive relationship.

While I don't have any statistical facts to share with you, because we are just early into the relationship, I can share anecdotally what I have heard from few of the customers and one renewal that just came in that was forwarded to me by one of the reps and the rep highlighted several things. One, they felt that the Misys relationship was very helpful, the like the direction we are going. Two, they appreciated the new features we were bringing out in the product like the amendment voting. And three, they love the direction we were going with the book building on the front end and having that full lifecycle integrated.

So, that was a note that was just forwarded to me after the management change and it was great to see. Now, we've got to go through and climb through every single customer and make sure we touch every single one of them so that they know that same story and we'll be able to better get a feel for what that impact will ultimately be, but the early tea leaves on it feels good. You're doing the right thing, go faster, work hard all the normal things and deliver.

Unidentified Analyst

Got it. Thanks. Just one last question and then I'll let the others ask. You highlighted a big opportunity in the enterprise market and you said that your research show that you can meet 70% of the needs of the market of that space today and the remaining 30% you'll meet down the line when you add more features to the product. What are the features that are missing today and who in the market does offers those features today?

Ron Hovsepian

Yeah. We've identified through that market research as you may recall from the last conversation we did survey work with over 652 business and IT leaders and then we did a good 70 or so phone interviews and some face-to-face interviews. What we learned inside of there was six different categories of unmet needs. We've taken those unmet needs and put them into our product plan and measured against that.

We haven't gone into detail publicly what those are, because we think that's part of our competitive advantage lies, so we are not walking through all those details. We are going to roll them out in our in our releases. And, as I said in the call, you'll get the first rev of that in the first quarter this year. It will carry a bunch of the particular features we highlighted, but it was a good analysis, because it gave us - we knew we had the right baseline to operate from, which really takes advantage of those high themes like control, [auto mobility] [ph], high security, the ability to do work through that environment and the granular permissioning, not just low level file sharing.

Unidentified Analyst

Got it. Thank you very much.


Our next question comes from Jennifer Lowe who is in for Adam Holt of Morgan Stanley. Please go ahead.

Jennifer Lowe - Morgan Stanley

Thank you. Maybe just to follow-up on the last question, with the release that you have coming in Q1 2013, if you think about the delta between 70% and obviously in objective of 100% over time, does that take you from 70% to 80% in Q1 or that could be faster than that, slower than that? How should we think about that trajectory towards the aspiration of having all six categories fully met within the product portfolio?

Ron Hovsepian

Yes. Good news is we've targeted the 100% on the ones we’ve defined today. And as you know the beauty of our industry and our customers is that they keep moving that line on us. But that being said, in Q1 what I would say is that we will have a good viable product that it will take a big step towards addressing the market needs and having a good viable product out there to accomplish what we need to building off of the current platform today; I won’t break it into percentages, but I feel good it will give us the ability to get out and test in the market and then we'll only get stronger with the second release.

Jennifer Lowe - Morgan Stanley

And maybe in the last quarter on the call it was discussed that Tony Kender had just left the company and I think Ron you were taking ownership of the sales force for the time being while you were looking for another replacement? What’s sort of the update currently in terms of leadership and sales? Are you still looking for a new sales head or has that been filled and is there any time line that you have in place in terms of expecting to have somebody in that position.

Ron Hovsepian

Yes. Jennifer. That is correct. I stepped into the role and I said that I'd be serving in from definite perspective right now. Part of what I wanted to do was make sure that I understood where we were as an organization. How mature we were, where we needed to improve. And, while we were going through the strategy cycle, I want to make sure that I understood the linkage between what we need to get into strategy all we need to get down in the overall go-to-market and make sure that we get the right type of skills here.

So, now into the foreseeable future, I will be leading that particular role at the right point in time once we get things we want to get it to and is it appropriate role to have fulfill that is where I left things on the last call and that still holds true right now. I have been active out in the field with the team that are very good things and I am pleased with where we are progressing to. Work to be done, but we are getting there.

Jennifer Lowe - Morgan Stanley

Great. And then just one last one for me looking at the guidance, it seems like you are seeing very strong momentum in the M&A business, the enterprise business seems to have stabilized and that's the business that should theoretically grow quarter-over-quarter given a subscription model, and it seems like the DCM business, you are working through some of these lost customers, but we know we're probably seeing the worst of that.

Now, looking at the guidance which implies a pretty steep sequential decline quarter-over-quarter, and I know you don't guided a business lower perspective but even just at a high level, how should we think about, put that in the context of sort of the strength that you are seeing in M&A, the stabilization you are seeing in enterprise and DCM being a relatively small number overall. What would the factors be that could cause revenue to be down quarter-over-quarter?

Derek Irwin

Sure. So, when we prepared our revenue guidance, it reflects our judgment that we based on the current backlog, the pipeline opportunities, our competitive positions and the current market uncertainties and DCM continues to have softness, M&A is doing well. We are gaining share, but the overall market is down and enterprise is not yet where we want it to be.

Ron Hovsepian

Yes. I think on the DCM thing, the only amendment I would make to that is, we said those earlier defections will take some time work through the revenue impact of that and that's included in the guidance that Derek just referenced just now and that's part of what feeds that softness, so I want to give a little more color below what you were saying on that particular piece as we've learned that business.


(Operator Instructions). Our next question comes from Tom Roderick of Stifel Nicolaus. Please go ahead.

Tom Roderick - Stifel Nicolaus

Hi, guys. Good afternoon. I actually wanted to get a little bit more granular on the enterprise business. I know historically the pharmaceutical life sciences business was one that has been pretty fruitful for you. You announced a pharma deal this quarter that sound like a pretty important one, can you give a little bit of backdrop on some of the strengths of the pharma business, what's driving that and maybe just perhaps a little bit of an overview as to what the size of that vertical looks like for you within enterprise today and what particular strengths of the product are relative to the competition.

Derek Irwin

Yes. In terms of that market segment we do see a lot of good activity there as you can imagine those are larger companies with the good size sales cycles associated with them, but I do think there is building the community with that is building and we are in that process of building out that particular community.

When you look at it from a differentiation perspective, I think there's a couple of things, we do have some things that are prepackaged around study startups and other pieces there where we didn't get a median impact for the clients allow them to our return from us literally within days things that would take them weeks or months to do before. So, things like our study startup is simple example of clinical research trials that we do with them. Those are areas, where we differentiate (Inaudible) inside of their environments.

Also, the other big thing that I hear from the clients as well as because we are doing that beyond the firewall sharing, there's a whole service dimension here that sometimes goes unnoticed. It's very, very important with those clients and the amount of controls that are required and regulatory compliances pieces that are now out in the market that we have to make sure we comply on their behalf and those are things that we do really good job from my perspective.

And, what I can see inside of their longer term is having the foot holes inside of those companies passing those regulatory compliant pieces the way we do. I also see it then opening up the door for us to do more things we are with those clients, so that's exciting from my perspective. I think those are the good things from my point of view.

Tom Roderick - Stifel Nicolaus

That's very helpful. Thank you. Maybe just kind of turn it to the cost side of the equation, so if I look at the numbers this quarter on a non-GAAP basis OpEx here and about the $35 million, call $36 million ballpark. Can you give us the trend line as to sort of how we should expect to trend over the next few quarters. Do you have a target level for OpEx on the non-GAAP basis that you would like to get the model to?

Derek Irwin

No. We are not there yet. We are currently in our 2013 planning process, and after we complete that, we'll be able to provide you with 2013 outlook and as well as our long-term outlook.

Tom Roderick - Stifel Nicolaus

Okay. One last question just on the top line again. You know, subscription certainly seems to drive the majority of the enterprise business, but across enterprise and even across M&A, DCM, can you just give us a feel for what overages might be generating as a percentage of revenue right now or are those pretty minimal at this point?

Ron Hovsepian

We don't usually breakout the overages at that level, so those pieces are embedded in the number, but obviously DCM performed lower, therefore I would say that you could extrapolate that some of that loss will show up in DCM overages that we would hopefully would have enjoyed and that's why I said that earlier comment I was just trying to put some color what Derek had shared with you on the DCM front that we need to understand some of these defections of these older customers. We'll take a full year to work their way through the body.


(Operator Instructions). Our next question comes from Richard Baldry with Wunderlich Securities. Please go ahead.

Richard Baldry - Wunderlich Securities

Thanks. You talked about the M&A volumes being pretty solidly the unit volumes in the quarter and ASPs down a little. Can you talk about how much of that's a function of deal size in either verticals or geographies that are new that you are expanding into versus what are some of that pricing being used competitive with accounts per share in markets that you've traditionally competed in? Thanks.

Derek Irwin

Yes. So, pricing is holding firm, and it's a function of more deals being done by the mid-market size firms, but pricing is holding steady.

Ron Hovsepian

So, as you know when you get into the mid-market as Derek is highlighting, when you get into mid-market, the deals are just physically smaller then load as much data and therefore you end up with a lower average deal size, so as he said we are not seeing that pricing piece of it. What we are seeing more is just the amount of content that gets loaded is less.

Richard Baldry - Wunderlich Securities

There have been a lot of transitions in the sales group and you've now been heading in for a while. Can you talk a little bit about how you are feeling about the group qualitatively, the tenure you've got, you had talked before about allowing some natural attrition to take the capacity to a level you thought was better match to the company's goals overall? Maybe just some qualitative discussion about where are you think at that and your satisfaction with it.

Derek Irwin

When I look at it, if I could use muscle memory kind of an analogy and talk about things, I feel that we've got good muscle development in our M&A business. However I am not sure every (Inaudible) is properly performing for us, so I think we could do better in certain geographies is what I mean by that, but in general I feel good about the institutional capabilities of our M&A pieces and you are seeing that in some of the numbers.

From a enterprise perspective, that was a more complex situation. So, as you can imagine without having the strategy being as tightly focused as it's become now, we synchronize all the pieces together when we executed inside the company and narrowing with a better focus in the market, the targeted focus is really what I was looking for by us on where we want to go I think will give us a chance to build that are muscle memory.

Now, as we look at that market as was spoken about a little bit earlier, as we look at that market and the way the consumers are buying, I mean the enterprise consumer, the way that enterprises are buying now, they tend to be buying in a different manner. They will download a piece of software and play with it they then may migrate to a pilot. They then may migrate to a departmental rollout and then they might ultimately get to the enterprise rollout. This is fundamentally the same situation we have to then align the sales processes to.

The good news is, we've put this high velocity, low cost sales engine in place now. We are getting up and running, I feel good with the early returns on that and they are working with the current product offering out there and where I am seeing that muscle memory in that Americas right now strictly get built up very quickly and we've hired excellent people there, so I feel good about that part. That will address the front end of that sales process. Meaning, they download the pilot, the departmental pieces of it, right up through the wholesale, but in some cases we'll then need to deploy that enterprise rep to make sure that they go bring the bigger deal the $0.5 million deal or the $1 million deal across the line for us.

So, I think we are heading in the right direction there. I like where we are going, we are doing our modeling and planning for 2013, but those will be things that will be much tighter, we can give you more color on those, Rich, as we get into next year.

Richard Baldry - Wunderlich Securities

Then just maybe a little brief commentary on, you've got some significant operations in Manhattan and obviously the strong Hudson disruptive impact there, any concerns or any overriding worries about whether that has an impact on the quarter you really haven't highlighted anything, so it seems like it probably it's something you've [got no].

Derek Irwin

No. I would, A, make sure that I wish everybody in New York the best, because I know there is a lot of stress going on there. We do see, because some of our employees and obviously it's a difficult situation for a lot of people still down in that area, so our prayers are with them.

The performance of the company was very good through that process, the storm impact was non-existent from a customer-facing perspective, which is the way we plan those things, but it's always nice to see the plan come out right. I won't challenge the nature gods here to take me out, because they always can't. In the end, they'll always win, but in general things went very well from my perspective.

The only little fly in the ointment was we had just done a new release and we were switching between the data centers and there has been a minor hiccup here or there with that, but nothing of magnitude to report. I feel very good about that and we are all over with what that issue is.

Richard Baldry - Wunderlich Securities

Thanks. Congrats on other good quarter.

Derek Irwin

Thank you. Team is working hard.


(Operator Instructions). Showing no further questions, this concludes our question-and-answer session. I would now like to turn the conference back over to Mr. David Roy for any closing remarks.

David Roy

Thank you, operator. Let me turn it over to Ron for his final remarks before we conclude the call.

Ron Hovsepian

So, just a quick summary our strategic transactions business performed well in the third quarter as we continue to gain some share. We've begun executing against our future growth opportunities in our core strategic transaction business as well as in the emerging enterprise business.

I am really pleased to have Derek here as part of the team. You can hear he is right into a lot of the details now. Our third quarter results and our guidance for Q4 reflect our program for this current transition period in which we will strengthen our positioning and execution capabilities towards the goal of driving that long-term sustainable growth.

Thank you very much for joining us today on this call and have a good evening. Thank you.


The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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