Qlik Technologies (QLIK) Lars Björk on Q1 2016 Results - Earnings Call Transcript

| About: Qlik Technologies (QLIK)

Qlik Technologies, Inc. (NASDAQ:QLIK) Q1 2016 Earnings Call April 28, 2016 5:00 PM ET

Executives

Brett Pollack - Vice President, Investor Relations

Lars Björk - Chief Executive Officer

Timothy J. MacCarrick - Chief Financial Officer

Analysts

Brent Thill - UBS Securities LLC

Jesse Hulsing - Goldman Sachs & Co.

Matthew Swanson - RBC Capital Markets LLC

John DiFucci - Jefferies LLC

Raimo Lenschow - Barclays Capital, Inc.

Sanjit K. Singh - Morgan Stanley & Co. LLC

Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker)

Walter H. Pritchard - Citigroup Global Markets, Inc. (Broker)

Jobin G. Mathew - Deutsche Bank Securities, Inc.

Bradley Sills - Bank of America Merrill Lynch

Tom Roderick - Stifel, Nicolaus & Co., Inc.

John Christopher Rizzuto - SunTrust Robinson Humphrey, Inc.

Albert Chi - JPMorgan Securities LLC

Srini S. Nandury - Summit Research

Abhey R. Lamba - Mizuho Securities USA, Inc.

Yun Kim - Brean Capital LLC

Ed Maguire - CLSA Americas LLC

Steve R. Koenig - Wedbush Securities, Inc.

Keith Frances Bachman - BMO Capital Markets (United States)

Operator

Good day, ladies and gentlemen, and welcome to the Qlik First Quarter 2016 Earnings Conference Call. At this time, all participant lines are in a listen-only mode to reduce background noise, but later we will be conducting a question-and-answer session, instructions will follow at that time. As a reminder, today's conference call is being recorded.

I would now like to introduce your first speaker for today, Brett Pollack, Vice President, Investor Relations. You have the floor, sir.

Brett Pollack - Vice President, Investor Relations

Thank you, operator. Good afternoon and thank you for joining us today to review Qlik's first quarter 2016 financial results. On the call today are Lars Björk, Chief Executive Officer; and Tim MacCarrick, Chief Financial Officer. After prepared remarks, we will open up the call to a question-and-answer session.

During this call, we may make statements related to our business including predictions, expectations, estimates or other information that will be considered forward-looking statements under Federal Securities Laws. These statements reflects our views only as of today and should not be relied upon as representing our views as of any subsequent date.

These statements reflecting our current views regarding the future are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. Any statements regarding our products are intended to outline our general product direction and should not be relied on in making a purchase decision as the development, release and timing of any features or functionality described for our products remains at our sole discretion.

For discussion of the material risk and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's EDGAR System and our website. We encourage all investors to read our SEC filings. Qlik expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements made herein, except as required by law.

Additionally, non-GAAP financial measures will be discussed on this conference call. A reconciliation to the most directly comparable GAAP financial measures, including a reconciliation of revenue on a constant currency basis to reported revenue can be found in our press release, which is available on our website, www.qlik.com, under the Investor Relations tab. Also, please note that our webcast of today's call will be available on our website in the Investor Relations section.

With that, I'd like to turn the call over to our Chief Executive Officer, Lars Björk. Lars?

Lars Björk - Chief Executive Officer

Thanks, Brett, and thank you all for joining us today. We are pleased with our first quarter results and are off to a solid start to the year. Our balanced business model and continued momentum with Qlik Sense enable us to deliver total revenue growth and non-GAAP operating results that exceeded the high-end of our Q1 guidance ranges.

Total revenue was $138 million, an increase of 18% on a constant currency basis and 15% on a reported basis. Our non-GAAP operating loss for the first quarter was $12.3 million and non-GAAP net loss was $0.09 per diluted common share.

Reviewing our performance in the quarter, it's clear that we are benefiting from our growing market opportunity and the rising awareness for analytics and self-service visualization across all the customer segments we serve. This combined with our increased investments in building awareness for Qlik and educating the market on the value of our platform is contributing to increased leads and we're encouraged by this demand at the top of our funnel.

We're also taking steps to further strengthen our partner relationships and will be actively engaged with them at our customer and partner conference, Qonnections, next week.

We continue to evolve our indirect business, including our recently announced strategic alliance with Arrow Electronics, a global provider of enterprise computing solutions. Under this agreement, Arrow will distribute Qlik's offerings to complement their existing big data (4:23). This partnership will add distribution capabilities to better serve our resellers and customers, and help us grow and scale our partner program.

Overall we think these enhancements to our partner programs will increase the effectiveness of our channel, as we manage to greater results and profitability for our indirect business. Additionally in February for the sixth consecutive year, Qlik was positioned in the Leaders Quadrant of Gartner's Business Intelligence and Analytics Platforms' Magic Quadrant report.

Following this report, we participated in Gartner's Annual BI Summit in March, where they held their BI Bake Off. The Bake Off was a side-by-side competition, where each vendor was given the same dataset and asked to build a scripted demo. We believe Qlik performed well among the other vendors selected to participate.

Combined with our increases in lead generation, customers and prospect are more frequently seeing the value and differentiation of our fully governed platform that meets all of their very analytical needs. This was evidenced in our Q1 result with strong demand across SMB, midmarket and large enterprise.

On the large deal front, we continue to see increased traction and during the quarter we closed five deals greater than $1 million versus three deals in the first quarter of 2015.

We are pleased with our ability to close large deals across all our regions. In Asia-Pacific, as we previously discussed large deals remain active, but timing is more difficult to predict given challenging macroeconomic conditions. This quarter, we landed a significant deal with a Public Health System of Queensland in Australia.

They selected QlikView over other next-generation data discovery vendors for centralized, predefined, and self-service reporting across key clinical, financial and operational metrics for the whole state.

During the quarter, Kesko, a leading Finnish retailing conglomerate, selected Qlik Sense because of the strength of our visualization capabilities, speed of development and ease of use. With Qlik Sense, Kesko envisions all employees gaining a better understanding of their customer's buying habits and preferences, which drives the major decisions in their retail strategies.

Here in the U.S. UW Health, the integrated health system in University of Wisconsin-Madison, that serves more than 600,000 patients each year through 1,400 physicians and 16,500 staff at six hospital and 80 outpatient sites significantly expanded their Qlik deployment. UW Health will integrate Qlik into their Epic electronic medical record system to bring analytics closer to the point of care and drive improved patient outcomes.

Every quarter, there is a common theme in our customer references, Qlik delivers better business results for customers. This is a driving force behind our innovation, our competitive differentiation, and why we win.

Let me spend a minute on innovation. In February, we announced the general availability of Qlik Sense 2.2. This offering delivered on our commitment to business users, as well as including new capabilities for developers and enterprises. For example, we enhanced our advanced self-service data preparation capabilities, improved enterprise management features, and unleashed more powerful developer APIs. And next week in Orlando at Qonnections, our combined customer and partner conference, we will highlight Qlik Sense Enterprise 3.0, which we expect to be generally available in June. Qlik Sense 3.0 will be our seventh full update to Qlik Sense since its introduction in September 2014.

This rapid release cadence highlights that our investments in R&D are delivering consistent innovation every three months to four months. We don't want to give too much away here and now, so stay tuned for product announcements next week.

In addition to this new release, we will be showcasing our continued investment in key areas like our developer community, DataMarket, and our commitment to provide our clients with direct access to many valuable data sources. Our continued expansion of our curated DataMarket offerings will be highlighted at Qonnections and centered around a release of premium financial and expanded macroeconomic offerings.

Additionally, in April, we acquired Industrial CodeBox, the company behind QVSource, which allows Qlik Sense and QlikView users to include data from cloud-based sources such as social media, SaaS applications, and other web-based APIs into their applications for deeper level of insight.

A small UK based Qlik partner since 2011, QVSource provides more than 40 out-of-the-box connectors to specific applications within popular web-based services such as Twitter, Facebook and Google, as well as cloud-based applications including Microsoft Dynamics CRM, MongoDB and SugarCRM. With this acquisition, Qlik enhances the time to value and ROI of the Qlik Visual Analytics Platform by enabling customers to quickly set up to include data from more cloud based sources to gain even greater insights.

Lastly, we will showcase our latest innovation in the cloud. Qlik Sense Cloud is an important piece of our growth strategy and continues to see rapid adoption with over 50,000 registered users across more than 100 countries in only its first year of operation. It's been a great seeding strategy for the company and helped us drive increased awareness as customers and prospects are able to easily see the power of Qlik Sense first hand. Additionally, the level of sharing on the platform has created a viral like effect driving even more registered users.

We are very excited to be hosting a record number of attendees for several days next week at our annual customer and partner event, Qonnections. We expect it to be an exciting and busy week focused on innovation and collaboration, which will help to build momentum for the year. We hope that you can join us for the General Session and Investor Presentations at Qonnections on Tuesday.

With that, let me hand the call to our CFO, Tim MacCarrick.

Timothy J. MacCarrick - Chief Financial Officer

Thanks, Lars. As I review our results for the first quarter and share our guidance for the second quarter and full year 2016, please keep in mind that our constant currency results are calculated by taking revenue from our entities reporting in foreign currencies and translating those amounts into U.S. dollars using the foreign currency exchange rates from the same period in the prior year.

For the first quarter, total revenue was $138 million representing an increase of 15% over the same period last year, and an increase of 18% on a constant currency basis. Our reported total revenue for the first quarter was positively impacted by approximately $1.1 million as a result of the relative weakening of the U.S. dollar since we last provided guidance in February.

License revenue for the first quarter was $59.8 million, increasing 9% over the first quarter of 2015 and 12% on a constant currency basis. Maintenance revenue was $63.6 million for the first quarter, increasing 21% over the same period last year and 24% on a constant currency basis.

Professional services revenue was $14.6 million for the first quarter, up 14% compared to the first quarter of 2015 and up 16% on a constant currency basis. Total revenue in the Americas increased 18% in the first quarter and 21% on a constant currency basis. We are pleased with our results in the Americas as we saw good sales and market dynamics across this region throughout the quarter.

European total revenue for the first quarter increased 8% compared to the same period in 2015 and increased 11% on a constant currency basis. Our business overall in Europe continues to perform well and we remain positive on the overall growth rate trends for the remainder of the year.

Rest of world revenue for the first quarter increased 32% over the same period in 2015 and increased 36% on a constant currency basis. During the first quarter, we had good run rate business in Asia-Pacific, and we also closed a greater than $1 million deal in Australia.

However, we do continue to see challenging macroeconomic conditions in this region that make the timing of large deal closure difficult to predict. During the first quarter, 63% of license and first-year maintenance billings was generated from our indirect partner channel and 37% from our direct channel, compared to 65% indirect and 35% direct in Q1 2015. 74% of our license and first-year maintenance billings in the quarter came from existing customers and 26% from new customers.

At the end of the first quarter of 2016, our customer count stood at approximately 39,000. We had very good large deal metrics in the quarter. On a reported basis, we completed 98 deals over $100,000, compared to 88 deals in the same period last year. We closed 30 deals over $250,000 compared to 17 deals in Q1 2015 and five deals greater than $1 million, compared to three deals in the first quarter of 2015. These large deal metrics reinforce the increasing commitments customers are making to us, as they see Qlik as a long-term partner for their analytics needs, and we believe Qlik has become the modern BI standard for large enterprises.

Our head count ending the first quarter of 2016 was 2,599, a 20% increase from the same time last year and a quarter-over-quarter increase of 88 people. This reflects a reduced year-over-year hiring profile compared to Q1 2015. Over the past several years, we have established a global commercial footprint and more recently through our operational excellence initiatives we have improved the scalability of our core processes and systems.

These investments enable us to continue our strong revenue growth, while driving margin leverage through a more moderated hiring profile. Through the balance of the year, our hiring priorities will primarily focus on positions that support revenue generation and enable our innovation agenda.

Now, let's focus on cost and margin performance and review our results on a GAAP basis, and where applicable on a non-GAAP basis. Please note that a GAAP to non-GAAP reconciliation can be found in the tables of our press release, which is available on our website.

Gross profit for the first quarter of 2016 was $115.3 million, representing a gross margin of 84% compared to 82% in the first quarter of 2015. Operating expenses totaled $140.1 million in the first quarter, compared to $123.2 million in the prior year period.

Non-GAAP operating loss was $12.3 million for the first quarter, compared to a non-GAAP operating loss of $13.5 million in the prior year period. Our non-GAAP operating margin was negative 8.9% compared to negative 11.3% in the first quarter of 2015. Our non-GAAP operating results were positively impacted by approximately $200,000, as a result of the relative weakening of the U.S. dollar, since we last provided guidance in February.

During the quarter, we had a foreign exchange gain of $343,000 which was included in other income and expense compared to a gain of $1.4 million in the same period last year. As you know, foreign exchange gains and losses can fluctuate, and our guidance does not consider any additional future potential impact to other income and expense associated with foreign exchange gains or losses, as we do not estimate movements in foreign currency rates.

On a non-GAAP basis, our net loss was $8.3 million for the first quarter of 2016 or $0.09 per diluted common share, compared to a non-GAAP net loss of $8.5 million or $0.09 per diluted common share for the first quarter of 2015. Cash and cash equivalents totaled $370 million as of March 31, 2016, compared to $320.1 million as of December 31, 2015. We generated strong cash flow from operations of $41.7 million during the quarter ending March 31, 2016, compared to $36 million during the quarter ending March 31, 2015.

Our free cash flow increased year-over-year to $39.4 million in Q1 2016 compared to $33 million in Q1 2015. Deferred revenue was $176.5 million, up 30% year-over-year and 28% in constant currency. Our second quarter and full-year 2016 guidance assumes that foreign currency exchange rates will approximate current exchange rates. Since we last issued guidance in February, the U.S. dollar has weakened relative to the foreign currencies in which we operate. Accordingly, we are raising our full-year total revenue guidance on a reported basis and reiterating our full-year total revenue guidance on a constant currency basis.

This business outlook is directional guidance only as foreign currency exchange rate fluctuations and changes in the mix of domestic and international revenue and expenses can impact our results. For the second quarter of 2016, we expect total revenue to be in the range of $164 million to $168 million, representing 12% to 15% growth and 13% to 16% growth on a constant currency basis. We expect non-GAAP operating income of $2 million to $5 million and non-GAAP net income per diluted common share of $0.01 to $0.03.

For the full-year 2016, total revenue guidance is $704 million to $714 million versus the prior range of $695 million to $705 million, representing 15% to 17% year-over-year growth on both the reported and constant currency basis. On a reported basis, total revenue is expected to be positively impacted by approximately $9 million of foreign exchange tailwind compared with our prior guidance due to the relative weakening of the U.S. dollar.

We are also reiterating our non-GAAP operating margin guidance of 8% to 8.5%, which reflects 200 basis points to 250 basis points of margin expansion. We expect non-GAAP operating profit in the range of $57 million to $61 million and non-GAAP net income per diluted common share of $0.42 to $0.45. On a reported basis, non-GAAP operating income is expected to be positively impacted by approximately $1 million of foreign exchange tailwind compared with our prior guidance due to the relative weakening of the U.S. dollar.

With that, operator, we're ready to begin the Q&A session. Thank you.

Question-and-Answer Session

Operator

Our first question comes from the line of Brent Thill from UBS. Your line is open.

Brent Thill - UBS Securities LLC

Good afternoon. Lars, you mentioned Sense is increasing leads at the top of the funnel, can you maybe just give a little more color about what you're seeing in some of the larger transactions which showed good year-over-year growth, what you're seeing as an uptake there? And I had a follow-up for Tim.

Lars Björk - Chief Executive Officer

Yeah. I think, we've seen a trend of Sense being really in the market now and instrumental in large deal, continue together with QlikView. We see the platform story resonating very well, and what I also talked about the Cloud announcement, which has primarily to-date been a driver for awareness and leads is really kicking in. I don't want to be more explicit, but it's very, very promising. I think, we have with Qlik Sense on its platform a phenomenal offering in the market.

Brent Thill - UBS Securities LLC

Okay. And Tim, just on the sales and marketing at 61% of revenue. I know, you brought a new executive VP in for sales last year. I'm just curious kind of when you look at that as a percent, it's obviously a high number. We get a lot of questions about how you can drive more efficiency through this channel. Can you just give us a sense of how that initiative is going with Mark? What areas you're seeing for improvement around the sales and marketing line?

Timothy J. MacCarrick - Chief Financial Officer

Yeah. I think, things are going great across the whole sales and commercial organization in general. I think that's represented in the Q1 results that we have here. I mean, certainly when you look at ratios of expenses to revenue it's good to look at that over a multi-quarter time period. Our revenue here in Q1 is usually on the lower side of our quarterly revenues through the year, but we're very focused on continuing to drive revenue growth and also becoming more productive within the sales organization and overall from an expense to revenue perspective. So, those are the trends, we're expecting through the balance of the year.

Brent Thill - UBS Securities LLC

Thanks.

Operator

Thank you. Our next question comes from the line of Jesse Hulsing from Goldman Sachs. Your line is open.

Jesse Hulsing - Goldman Sachs & Co.

Yeah. Thanks for taking my question. I have one for Lars and one for Tim. For Lars, I'm looking at the large transactions and you mentioned, I think, or maybe it was Tim that mentioned a trend towards standardization, and you've been talking about the platform. I'm wondering if the type of buying that you're seeing from enterprises is changing a little bit, it seems like this next-generation BI market is entering kind of a middle innings where you're seeing more top down buying. And I'm wondering if that's the case and if you're seeing that, and if you think that benefits you as that cycle starts to mature?

Lars Björk - Chief Executive Officer

Yeah. Whether it's top down or not, I think, it's broad within enterprises. And I think, we can stand up and say that we have the broadest sets of products in the modern BI suite. And that's why we can cover if not all, a lot of their needs. And with something like NPrinting, we can certainly also replace the last few pieces of generation one vendors that anyone would be using. So, therefore it becomes more of a comprehensive discussion with enterprises, and more frequently, I wouldn't say, it's top down, but the top is certainly involved in the discussion of those.

Jesse Hulsing - Goldman Sachs & Co.

Got it. And a quick follow-up for Tim. I'm looking at G&A and it's down as a percentage of revenue a few hundred basis points year-over-year. I'm wondering where you think you can take that over the next year? What your target is? And you've talked in the past about finding efficiencies within the organization and initiatives around that. I'm wondering how those are progressing? Thanks.

Timothy J. MacCarrick - Chief Financial Officer

Well, I think, we can take it lower for sure. We did see G&A improve as a percent of revenue in 2015 by about 140 basis points. We've seen a continued trend of that here in Q1. We've made investments over the last several quarters to drive a much more scalable infrastructure. We're driving more automation, we're improving processes, and all of those are going to accrue to improvements in G&A as a percent of revenue and, of course, that's a key component to us driving 200 basis points to 250 basis points of margin improvement on a full-year basis this year.

Jesse Hulsing - Goldman Sachs & Co.

Thanks, guys.

Operator

Thank you. Our next question comes from the line of Matt Hedberg from RBC Capital Markets. Your line is open.

Matthew Swanson - RBC Capital Markets LLC

Thank you. This is actually Matt Swanson on for Matt. Congratulations on the quarter.

Lars Björk - Chief Executive Officer

Thank you.

Matthew Swanson - RBC Capital Markets LLC

You mentioned a little bit about your new partnership with Arrow, and they're obviously a very large distributor. Are there any specific geographies or verticals you feel like this gives you more visibility too?

Lars Björk - Chief Executive Officer

No. I think, it's much more about coverage and we see this as a great opportunity to get more into the white space, but no specific vertical.

Matthew Swanson - RBC Capital Markets LLC

All right. And then obviously this has been a really good year for Qlik Sense and with that rapid release cadence, so you can really evolve the product to customer demands. Where do you really see the product going over the next year, I guess, with what are customers asking for and what are some features we could look for?

Lars Björk - Chief Executive Officer

Well, I don't think features is the key thing that customers are asking for or viewing in general what I think the opportunity brings. We can be squarely on into that self-service market that a lot of others are. We can use that as a starting point. We can go much, much further into the customized application markets with all the APIs that the product offers, and we can go into the embedded market with just the platform itself. So, I think, we have clearly shown that we created a much, much larger opportunity to go after and also, I think, we are the only one of the modern BI vendors that have that ability with our product suite as we stand today.

Matthew Swanson - RBC Capital Markets LLC

All right. Thanks for the time, guys.

Lars Björk - Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of John DiFucci from Jefferies. Your line is open.

John DiFucci - Jefferies LLC

Thank you. There was potential this quarter for a lot of disruption in closing deals, and getting what I'll call external factors surrounding Qlik, and you certainly put up respectable numbers and even more surprisingly the guidance implies decent second quarter numbers. Can you talk a little bit about, you know what you're doing and how you're managing everything around you and still keeping sales, but even more importantly, your customers focus on the value you bring over the risk that perhaps you are part of some other entity at some point in the future, it's got to be something that at least the enterprise customers think about?

Lars Björk - Chief Executive Officer

So, we are squarely focused on the great opportunity we have in front of us, the whole sales team is very excited, customers are engaging in larger discussions with us which the numbers show. And we have not seen anything that deviates from that trend and that's where our focus lies.

John DiFucci - Jefferies LLC

Okay, well, when – sort of a follow-up to this, you saw a big uptick in the amount of business from existing customers. So, I guess, what are they buying – I mean, are these customers that bought into – bought QlikView previously and now they're sort of buying into the platform, they've been buying Sense and other modules, or – and what does this mean or does this mean something about competition, I mean, for new customers, has that gotten, I don't know, I guess, more competitive?

Timothy J. MacCarrick - Chief Financial Officer

John, it's Tim. We're continuing to see strong adoption of the product platform, right, multiple products and multiple offerings with both existing and new customers. Within the existing customer base, it's of course a great up-sell opportunity to sell the platform to extend Qlik Sense into existing customers for new use cases and new projects, but at the same time, we're selling more QlikView to existing customers as well as they extend their existing deployments. The ratios that we have quoted relative to existing versus new are really based on the dollar amounts of sales and our big deal performance certainly greater than $1 million this quarter was in fact a bit skewed to the existing customers, but if you look at it on the basis of the number of deals that we've done, those ratios actually improve or moderate quite a bit. So, we're pretty pleased that we're landing as well with maybe some smaller deals, at least in this quarter, with new customers. So, I think, we're on track across the board.

John DiFucci - Jefferies LLC

Okay. Great. Thanks. That's clear. Thank you very much, guys.

Lars Björk - Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Raimo Lenschow from Barclays. Your line is open.

Raimo Lenschow - Barclays Capital, Inc.

Hey. Thanks for taking my question. I get new names all the time. Hey. Lars, can you talk a little bit about what you're seeing in Europe, I mean, the macro was obviously one thing that has everyone worried, and the European growth rate, it was good at 11%, but it decelerated from what we saw last year. Can you talk a little bit to what you're seeing out there in the regions, because everyone is nervous about what's going on out in the field?

And then one for Tim is like you mentioned your head count grew at 20%, but your revenue only grew at 18%, but you said for the rest of the year, you can moderate it. Do I assume that the head count additions for the rest of the year, if I think about the whole year will be lower than the revenue run rate or is it about the same? Thank you.

Lars Björk - Chief Executive Officer

Okay. So, on Europe, we continue to see strong demand in Europe across the board. I don't think we read too much into the first quarter of this year as we look over several years now, it's been in the high teens to low 20%s in Europe, percentage wise. So, there is no view from our side shifting here or anything, it's the same things that resonates with customer everywhere else, Qlik Sense, the platform is broadening our opportunity across the board, including Europe.

Raimo Lenschow - Barclays Capital, Inc.

Thank you.

Timothy J. MacCarrick - Chief Financial Officer

And Raimo, in terms of head count, so in the first quarter of 2015, we had 120 more people in that quarter, this quarter here, first quarter 2016 it's 88. As I mentioned in my prepared comments, we're starting to get the benefit of the investments that we've made to enable us to scale this business. And, yes, I would expect that to continue and certainly the relationship between the growth in hiring and the growth in revenue will have an improving relationship going forward, no question about that.

Raimo Lenschow - Barclays Capital, Inc.

Perfect. Good to hear. Thank you. Well done.

Operator

Thank you. Our next question comes from the line of Keith Weiss from Morgan Stanley. Your line is open.

Sanjit K. Singh - Morgan Stanley & Co. LLC

Hi, this is Sanjit Singh for Keith Weiss. Thank you for taking the question. Wanted to get back to your profitability outlook, and if I look at your EPS guidance, it comes up just a tad by $0.01, whereas you had some nice performance relative to the consensus expectations in Q1 and Q2 also looks – was pretty positive. So, in terms of the underlying profitability, you talked about head count, but I wanted to see if there was any sort of impact in terms of the mix, in terms of global SIs, you guys called that out last quarter, in terms of higher referral fees. But maybe you can give us some detail on around the underlying mix of direct versus indirect and the impact on profitability?

Timothy J. MacCarrick - Chief Financial Officer

Well, I think, the profitability is going improve this year consistent with our guidance. We saw some gross margin improvement here in Q1 as well, so managing it at that level also, and it's really about driving fundamental leverage within the model based on the examples that I mentioned earlier. So, we expect to continue to see ratios improve, on an expense to revenue basis and expect that we're going to generate 200 basis points to 250 basis points of margin leverage going forward.

In terms of your question more specifically, the SIs and referral fees, nothing really to report about that in Q1, pretty standard levels of engagement in that regard, they're an important part of our channel, but relative to our expectations in the quarter, it was consistent.

Sanjit K. Singh - Morgan Stanley & Co. LLC

And then, one follow-up. I know, Qlik Sense is getting a lot of attention, it's clearly getting some traction in the market, but wanted to get some detail around QlikView. I know that's going to be an existing customer play for the next several years. But, in terms of dollar growth in 2016, should we be assuming that QlikView contributes to dollar growth from a license revenue standpoint in 2016 and beyond?

Timothy J. MacCarrick - Chief Financial Officer

I think, the right way to think about this is across the platform of offerings that we have, and as I mentioned earlier, we're penetrating even further into existing customers and seeing lots of new customer growth as well. As we up-sell and continue to expand in existing customers, we're really focused on getting a bigger share of their analytics wallet and helping them with more and more aspects of their business, whether that's QlikView or Qlik Sense, we think that's net accretive to us and to them. So we're really focused on selling across the platform based on however the customer wants to either deploy more licenses to existing applications or start a new project, which would typically be with Qlik Sense.

Sanjit K. Singh - Morgan Stanley & Co. LLC

Got it. Thank you very much.

Operator

Thank you. Our next question comes from the line of Steve Ashley from Robert Baird. Your line is open.

Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker)

Great. I would just like to ask about the sales team, new sales management brought in here. Could you maybe walk us through some of the changes that might have occurred here in the first quarter to the sales organization?

Lars Björk - Chief Executive Officer

Yeah. So we mentioned, we have just simplified the structure in Europe. We've put a global head to go after the large opportunity in the OEM and developer market, and we have a new leader in the U.S. in addition then to having in August hired Mark, who runs the whole thing. That's primarily the changes we made, and I think, they've settled in very well. We can't attribute any kind of distraction to the business because of that.

Timothy J. MacCarrick - Chief Financial Officer

And Steve, keep in mind that our Head of Sales hasn't changed, Mark is the Head of Sales Support and Services.

Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker)

Yeah.

Timothy J. MacCarrick - Chief Financial Officer

Richard Timberlake remains our Head of Sales.

Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker)

Right. Okay. Terrific. And then I just wanted to go back to the rest of the world, in the Asia theatre, the big growth rate that we saw here you called out both a large deal in Australia, but also solid run-rate business. Has there been any change if we kind of take the large deal off the table, has there been any change to kind of the underlying run-rate tone of that business or to your outlook there?

Timothy J. MacCarrick - Chief Financial Officer

It's a data point for us that we're happy about here in the first quarter as is the team in Asia-Pac. I think we need to see more data points going forward, certainly as we look at the bigger deals, predictability on timing of closure remains a bit more difficult than it has been in the past. So, we think that we're taking a cautiously optimistic view and we're consistent and comfortable with how we've included that in our guide. And we're going to go try to knock down a great Q2 as well.

Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker)

Thanks.

Operator

Thank you. Our next question comes from the line of Walter Pritchard from Citi. Your line is open.

Walter H. Pritchard - Citigroup Global Markets, Inc. (Broker)

Thanks. Lars, I'm wondering if you could talk about just the various version upgrades you've had here at Qlik Sense, and how you think of the 2.2 release versus the impact that some of the other version upgrades have had or the dot upgrades have had in terms of getting customers comfortable with the new product as well as getting some of the features that are needed to drive that further into your base.

Lars Björk - Chief Executive Officer

Yeah. So, I don't think Qlik Sense has any element of getting customers more comfortable, I think, they are comfortable already. As we mentioned on the call, we have improved it for the actual end user, for the developer, but also improved the enterprise capabilities from a management of a large installation of it. I think, we are past the point of giving any comfort to people. They clearly see that, we are keeping this release cadence, it's getting richer and richer, and a lot of customers, while they might start out with self-service visualization type of projects. They pretty soon start dipping into wanting to do more of custom applications and/or embedded analytics in other environments. And I think we are there already. There will be some new very compelling cool things released next week, and I don't want to share that today and steal the thunder from our big conference, but I don't think there is any worry in the customer base of this not being a fully-fledged product.

Walter H. Pritchard - Citigroup Global Markets, Inc. (Broker)

And then, any – maybe for you, Tim. Any color you can give us in terms of size of the two – or relative contribution of the two different products, and at certain point in time, do you think, you might start breaking that out, in terms of View versus Sense?

Timothy J. MacCarrick - Chief Financial Officer

So we did mention, when we reported full-year results that Sense had contributed very strongly to our 2015 performance, 18% of license sales for the year and 25% or 24% for the fourth quarter. So that momentum, we're expecting to continue throughout this year. I think, we also indicated when we reported last that we would update you on an annual basis, but rest assured Qlik Sense continues to do very well in the market and even exceed our expectations.

Walter H. Pritchard - Citigroup Global Markets, Inc. (Broker)

Great. Thanks.

Operator

Thank you. Our next question comes from the line of Karl Keirstead from Deutsche Bank. Your line is open.

Jobin G. Mathew - Deutsche Bank Securities, Inc.

Hey, guys. This is actually Jobin Mathew, sitting in for Karl. Thanks for taking my question. First a question for Tim. Tim, so, when I'm looking at deferred revenue, it's usually up sequentially in the first quarter when I look at the last two years, but it was down slightly this quarter despite having FX tailwind based on what I gathered. Is there anything that, is it just from a strong 4Q or anything else that we should look at?

Timothy J. MacCarrick - Chief Financial Officer

No, I mean, certainly maintenance renewal rates were strong once again, well exceeding 90%. As we discussed last year during 2015, we definitely moved to a more consistent methodology around the globe whereby customers got a quote for their upcoming renewal 90 days prior (41:54) and very consistently invoicing them 30 days prior to the start of that new maintenance period.

So this did lead to some more timely renewals in 2015 and it was a driver of growth, both in renew and deferred revenue, and as a result, we were able to secure the vast majority of our January 2016 renewals in December, and therefore they were reflected in deferred revenue in the balance sheet at the end of last year, so that's really the driver of the small sequential decline.

Jobin G. Mathew - Deutsche Bank Securities, Inc.

Got it. Okay. And a follow-up for Lars, if I may, so you mentioned – you mentioned enterprise standardization across Qlik, is that across Qlik Sense where you may be replacing other tools out there or is it also across some of the legacy BI tools out there, maybe I'm just taking some names, like maybe Business Objects or Cognos, can you kind of elaborate on that enterprise standardization that you're seeing across Qlik's portfolio? Thanks.

Lars Björk - Chief Executive Officer

The short answer would be yes and yes, and NPrinting has given us that ability to replace generation one, because what they are and have been are static tools and for their need of printing reports, we do that very well with NPrinting, and the great thing is, when you incorporate it into our platform, it doesn't limit you to just that use case. You can then go into your dynamic analysis in the application, and take it on from there.

Jobin G. Mathew - Deutsche Bank Securities, Inc.

Okay. Thanks.

Operator

Thank you. Our next question comes from the line of Brad Sills from Bank of America Merrill Lynch. Your line is open.

Bradley Sills - Bank of America Merrill Lynch

Hey, guys, thanks for taking my question. Just one on the strengths you are seeing from your existing customer base. Can you comment on, whether that is existing QlikView customers for the most part adding Sense, so kind of backing your thesis that there is a need for two separate tools, one for guided analytics versus self-service or is it existing QlikView, adding more QlikView now knowing that Sense is developing even further visualization?

Timothy J. MacCarrick - Chief Financial Officer

Brad, it's Tim. It's really both, we're seeing terrific adoption of the platform in both existing and new customers. We're seeing existing customers lean-in and make larger purchases with us, in some cases extending their deployments of QlikView and purchasing Qlik Sense for new projects, as I mentioned. And with new customers, we're seeing great array across the big deal metrics that we've of people leaning in, recognizing the openness and extensibility of the platform, the mobile capabilities and purchasing Qlik Sense for their projects as well. So it's – I would say success in all cases there.

Bradley Sills - Bank of America Merrill Lynch

Got you. Thanks. And then, last one just on the competitive environment with Microsoft making a bigger push with Power BI, are you seeing them more often in deal cycles for Qlik Sense?

Lars Björk - Chief Executive Officer

Not really, we've seen them for a longtime. We have win rates over 90%. With them being a visualization tool, I think, they are squarely much more of a competitive threat to the other visualization tools; and we are much, much more of a broad platform. So, we do see them, but it's much, much more for the rudimentary use case than most of the use cases that we go after.

Bradley Sills - Bank of America Merrill Lynch

Got it. Thanks, guys.

Operator

Thank you. Our next question comes from the line of – pardon me, if I miss pronounce – Tom Roderick from Stifel. Your line is open.

Tom Roderick - Stifel, Nicolaus & Co., Inc.

Yeah. Hey, guys. Good afternoon. You've got a new version of Qlik Sense coming out here and you released a major – a major update to QlikView last December. How do – how should we and how should your customers think about the way these roadmaps ultimately kind of continue down the path, do they ultimately converge, do you think about them running in parallel for a long-time, how are you receiving feedback from customers and partners on the dual product dual license strategy?

Lars Björk - Chief Executive Officer

So, you can take – Tom, Lars here, you could take the standpoint of how many have requested to move over, very, very few. That I think is the strongest signal that they see it as something that they are very pleased and happy to run in parallel. Over time, as we've said and we are working on this now, migration will get easier and easier, but I think, the forcing function is not going to be our product, it's going to be when somebody is rebuilding their application because the underlying business process is being redefined, then you might reevaluate, should we make the move as well over to Qlik Sense. In addition to that, a QlikView customer is going to expand very likely more and more on to Sense platform.

Tom Roderick - Stifel, Nicolaus & Co., Inc.

Great. One quick follow-up on the product itself, it seems like we've been hearing more about IT standardization requests are on governance and security and things that are similar (47:01) architecturally or IT related, curious to how you think that positions you guys in the marketplace with respect to how you sell and how you position the product?

Lars Björk - Chief Executive Officer

Yeah. I think, it positioned us very well, but I wouldn't sort of harp too much on the heavy part of that. I would just say that if you don't have a governance and security and scalability and manageability story, I think, very, very, very hard to have any kind of control over large population of users and apps across many territories. It will be sort of chaotic and you will create the Excel type of environment, which doesn't benefit any enterprise. And of the modern players, I think, we're the only one that are equipped to handle this at this moment.

Tom Roderick - Stifel, Nicolaus & Co., Inc.

Got it. That's helpful. Thank you, guys.

Operator

Thank you. Our next question comes from the line of John Rizzuto from SunTrust. Your line is open.

John Christopher Rizzuto - SunTrust Robinson Humphrey, Inc.

Hi. Good morning. Lars, I want to hit on something that you were talking about before and about – it's about perception and about what you're seeing in the market, and of course, like the industry analyst firm Gartner now split up the business intelligence market into what they are calling self-contained architecture versus the traditional BI platform. And it is this mix perception that Qlik is a desktop tool, a visualization only tool as opposed to being that enterprise platform. Clearly, there are a lot of people using it very broadly as an enterprise platform. Is there any difference in how that perception is changing over time or – and what are you doing to differentiate yourself or are there for the market to get the perception that you're more than just a desktop tool?

Lars Björk - Chief Executive Officer

So, John, I don't know if you've mixed us up with somebody else because Qlik Sense is built solely for the cloud, for mobility, for touch first with an HTML5 interface and you have developer capability on to server. You might have mixed us up with Tableau, which is a desktop tool. And we are clearly a platform and have been for a long time, we do have a desktop product, that's how you – if you don't want to use our cloud offering, can download and get started with it, but we don't sell any desktop product on Sense. It is purely a lightweight client or an HTML5 interface against the server. You don't need to make any installation if you don't want to, you can go on to Qlik Cloud and start building something directly against that server. And I'm not sure I would agree with you. I have said the word platform probably on every question tonight. So, I don't know what more we can do. I think, it's actually beginning to really resonate in the market that we are differentiating from the other visualization-only tools.

John Christopher Rizzuto - SunTrust Robinson Humphrey, Inc.

Okay. Fair enough. Yeah. I'm pretty familiar with some of the banks that use you as a pretty standard enterprise standard platform. When you're looking at – so as you're looking at being this platform and going out into the client base and you're taking QlikView and you're doing the upgrade models as they go, you haven't given us a roadmap for QlikView upgrade cycles, but you've given us a very extended roadmap for Qlik Sense upgrade cycle. Are you going to update the Qlik Sense – QlikView upgrade roadmap anytime soon?

Lars Björk - Chief Executive Officer

Well, we did it at the end of the last year, with QlikView 12, and we have announced that it will be on an annual cadence, differing from Qlik Sense, which will be three times a year, February, June and September.

John Christopher Rizzuto - SunTrust Robinson Humphrey, Inc.

So, you're going to get another QlikView release this year?

Lars Björk - Chief Executive Officer

Absolutely 12 months after the previous one or thereabout.

John Christopher Rizzuto - SunTrust Robinson Humphrey, Inc.

All right. Thank you.

Operator

Thank you. Our next question comes from the line of Mark Murphy from JPMorgan. Your line is open.

Albert Chi - JPMorgan Securities LLC

Hey, guys, this is actually Albert Chi on for Mark. Thanks for taking my question and congrats on the quarter Lars and Tim. I'll make it quick, but just want to ask about the competitive pricing, and I don't know if you agree that, the playing field is getting a little bit more crowded, but is – are you seeing anything out there, that's causing to be a little bit more opportunistic with pricing, such as with discounting or maybe you're finding that you're having a little bit more pricing power with the existing customers?

Lars Björk - Chief Executive Officer

I don't think you can draw any conclusion through any changes in pricing behavior. There are more noise in the market. But I think most of the traction which you can see from numbers is coming from two vendors in the modern space, us and Tableau.

Albert Chi - JPMorgan Securities LLC

Got it. Okay. And then to – and for the February GA Qlik Sense 2.0, I know, these are just upgrades. But what sort of uptick do we typically see in terms of license or new customers when there is a new release? And can we expect something similar for the 3.0 GA?

Lars Björk - Chief Executive Officer

I think, you take a lot of that type of behavior out of the equation by having a frequent release cadence, and that's the whole idea, meaning it isn't pending a date, it is a continuum.

Albert Chi - JPMorgan Securities LLC

Got it. Fair enough. Thank you very much.

Lars Björk - Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Srini Nandury from Summit Research. Your line is open.

Srini S. Nandury - Summit Research

All right. Thank you for taking my call. Congrats on a good quarter, Lars and Tim. This morning we spoke to an industry consultant, he reported that he is seeing evidence of some of your customers moving to Qlik Sense from View. He also said that he thinks Qlik Sense needs to improve in terms of functionality vis-à-vis the View product. In your opinion, if you had a – if you take the baseball analogy, what innings are you in, to make the two products comparable, at least similar? I have a follow-up please.

Lars Björk - Chief Executive Officer

Well, I wouldn't use that analogy because our intention is not to make it similar to QlikView. Why you would not have built a totally new platform. The whole idea is to build some of the functionality and capability into the product, that we think are key, but not everything, that's why it's such an open platform with so many APIs, that's why we have 8,000 people on Qlik Branch, our developer community.

If you can't find a functionality, you might even want to build it yourself, from a visual thing to some other capability or you might find it in that developer community. If you take that approach, we think you will eventually be able to provide to the market, the absolute broadest set of capabilities and functionality and capability, much broader than QlikView. But, it might not be out of the box and we think this is a strength, because if the only innovation on this platform comes out of us. We think this is somewhat constraining. Others are taking a very different approach to this. We have to wait for a release, you don't have to do that with Qlik Sense, you can actually build a lot yourself, if you don't find it from us.

Srini S. Nandury - Summit Research

All right. That's helpful. Okay. Asking a little differently, obviously Qlik Sense is going to be a next major product out of – that's a lot of focus on. If you look at your R&D dollars, can you provide some color, what percentage of your dollars are actually going into QlikView versus Qlik Sense?

Lars Björk - Chief Executive Officer

So first of all there is a portion that goes to both of them because they have the same back end and engine, but outside of that vast majority goes to Qlik Sense.

Srini S. Nandury - Summit Research

All right. Thank you so much.

Lars Björk - Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Abhey Lamba from Mizuho Securities. Your line is open.

Abhey R. Lamba - Mizuho Securities USA, Inc.

Yeah. Thank you. Lars, what drove the uptick in large deals any common thread amongst the large deals you signed in the quarter. And as part of that, can you comment on industry verticals where you saw some strength or any areas of weakness?

Lars Björk - Chief Executive Officer

Yeah. So I think the uptick in large deals, it just continues on – being a focus for us. And as I said before, we are more and more seeing that we are becoming an enterprise-like platform for larger corporations. And I don't think this will stop here, we've said it before and we continue to see that traction in the market.

Verticals that standout strong, well, I will highlight healthcare since we announced the two deals on this call in that vertical. I don't think we see any vertical that has any weaknesses per se. There is lots to do in healthcare, there is lots to do in a lot of verticals. So we think this traction of large deals is going to continue in a positive way.

Abhey R. Lamba - Mizuho Securities USA, Inc.

Got it. Thanks. And Tim, you have this non-GAAP adjustment of $382,000 for non-routine corporate governance and shareholder matters. Can you elaborate on that please?

Timothy J. MacCarrick - Chief Financial Officer

Sure. Yeah, these are non-routine cost related to our engagement in activist shareholder matters, it's principally legal fees.

Abhey R. Lamba - Mizuho Securities USA, Inc.

Thank you.

Operator

Thank you. Our next question comes from the line of Yun Kim from Brean Capital. Your line is open.

Yun Kim - Brean Capital LLC

Thank you. Hey, Lars can you talk about your OEM business in little more detail. Obviously it's becoming an increasing mix of your business as you continue to focus on the partner and open platform strategy. Is there a way to quantify how much of your revenue is driven by your OEM business? And do you actually expect this OEM business to show faster growth than the rest of the business? Yeah.

Lars Björk - Chief Executive Officer

Yeah. So, we've announced before, it's been around 8% to 9% of our business. I think, there is a great opportunity for this to take a larger portion of the business, or be accretive to the growth in general. It is very, very interesting and very compelling, because we have the product offerings. Hence, why we put a global lead behind all of this.

And I referenced it before, we have made some very interesting OEM deals. There's no one we highlighted this past quarter, but I think you will see more of those like assets. But, you might also see more where we become embedded in applications that might not be the first you come to think about at OEMs. I think, you should look at it as an OEM, developer, embedded type of opportunity.

Yun Kim - Brean Capital LLC

Is there a difference on how you will recognize those type of deals in terms of revenue, depending on whether it's OEM or embedded?

Lars Björk - Chief Executive Officer

We would recognize it depending on how it's charged. And in many cases, we sort of tag along on the partners business model, which could be that it's term-based and then we recognize it accordingly.

Yun Kim - Brean Capital LLC

Okay. Great. Hey, Tim. I think, I almost on every quarter, I ask this question, but on professional services gross margin, didn't see much of an improvement again. Is there an opportunity to show any improvement there or do you expect the margin to remain at that level for professional services gross margin or do you keep hiring more people to – as you see deployment size getting larger and more complex? And then, in that regard, how is the traction with the large system integrators and is there any opportunity to offload some of the implementation work?

Timothy J. MacCarrick - Chief Financial Officer

Yeah. So professional services performed very well in Q1, 16% growth on a constant currency basis. We did actually see some improvement in the margin of that business in the quarter and we are focused on that, as one of the key enablers for us over time as we scale the business and we're pretty comfortable with the roadmap that we have there around scaling in geographic coverage, and how we're managing margins there. But, yes, they will improve over time.

In terms of the engagement with the systems integrators, continues to be a strong point. One of our favorite go-to-market channels and we've got great partnership between SIs and our professional services teams.

Yun Kim - Brean Capital LLC

Okay. Great. Thank you so much.

Operator

Thank you. Our next question comes from the line of Ed Maguire from CLSA. Your line is open.

Ed Maguire - CLSA Americas LLC

Hi. Good afternoon. I was wondering if you could quantify at least any up-selling or conversion activity that you've been able to realize from the adoption. I guess, you mentioned 50,000 registered users on the cloud product?

Lars Björk - Chief Executive Officer

Yes. We've said before, the traction on Sense is compelling to us because we have closed large deals. We've closed large deals with existing customers. We've closed large deals with new customers. We've expanded large or Sense installation into the larger installations. But we also have a long tail of LANs (1:00:39) on Sense, which we know we can come back and do expand. So it's a mix of everything. And we have also mentioned that we haven't done that many of conversions. We've sold more additions to the QlikView installations that clients have.

Ed Maguire - CLSA Americas LLC

Great. And this is a question that probably hasn't been asked for a while, but I was wondering, how much use of your product for analyzing unstructured data, the kind of big – atypical big data uses you may be seeing these days?

Lars Björk - Chief Executive Officer

I would probably add to your question, I don't think you – there is anything called unstructured data, there is data that is to be structured, because if you want to analyze it, there has to be some kind of structure in it.

Ed Maguire - CLSA Americas LLC

Okay. Of course. All right. Thanks very much.

Lars Björk - Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Steve Koenig from Wedbush Securities. Your line is open.

Steve R. Koenig - Wedbush Securities, Inc.

Hi, gentlemen. Congrats on the quarter. Thanks for taking my questions. I wondered – you guys are not at the point yet where you're buying back stock, but I'm wondering if you have any view on whether or not investors are undervaluing Qlik, and if so, maybe what don't they appreciate?

Timothy J. MacCarrick - Chief Financial Officer

So, we're obviously focused on continuing to drive good operational performance, which in the case of your question includes cash generation. I think, you saw great results in that regard in 2015, and strong results here in the first quarter. So, we're focused on those fundamentals, and of course we always keep close to mind options that we have around capital deployment. So rest assured, we're keeping those things in mind, and are open to considerations as we go forward.

Steve R. Koenig - Wedbush Securities, Inc.

Great. Thanks. Thanks. And I guess for the follow-up, wondering if you have any thoughts on the large vendors here who seem to be struggling in self-service analytic and visualization, maybe with the exception of Microsoft, what's keeping them from catching up, and is this category of product just not strategic for them or isn't important for them, and if so, why aren't they catching up?

Lars Björk - Chief Executive Officer

I think, this is a question, you have to direct to them, otherwise, we would just be speculating.

Steve R. Koenig - Wedbush Securities, Inc.

Fair enough, Lars. Thanks, guys.

Lars Björk - Chief Executive Officer

Okay.

Operator

Thank you. Our next question comes from the line of Keith Bachman from BMO. Your line is open.

Keith Frances Bachman - BMO Capital Markets (United States)

Hi. I had two questions please. The first one is – I'm trying to understand, what the pipeline of interest in employees joining Qlik these days are, as you think about you hiring needs over the next 12 months. And the reason I ask is if Qlik is indeed putting itself up for sale or evaluating strategic alternatives. I would think that would make it more problematic in terms of at least interest level of joining the team. But I wanted to start the questions by – how does the pipeline look of folks interested in joining Qlik appear at his juncture?

Lars Björk - Chief Executive Officer

Well, we have a strong pipeline of interested applicants for the jobs that we have posted. That hasn't changed in years, I would say. It's great place to work, we're in a great space, with great product portfolio, and a great culture. So we certainly don't expect that to change.

Keith Frances Bachman - BMO Capital Markets (United States)

So, just to be clear, you haven't seen any change in the last 30 days to 45 days?

Lars Björk - Chief Executive Officer

No, nothing...

Keith Frances Bachman - BMO Capital Markets (United States)

Okay.

Lars Björk - Chief Executive Officer

...measurable, no.

Keith Frances Bachman - BMO Capital Markets (United States)

Okay. Then the second one is, you mentioned that you are incurring legal expenses associated with evaluating strategic alternatives, can you give investors a sense about how long you would anticipate, any frame of reference on a process, how long you would anticipate these strategic explorations to go. If you could comment, any amounts there, how long do you think this process might last?

Lars Björk - Chief Executive Officer

So let me be very, very clear. I did not say that the company was engaged in any activities related to strategic alternatives. What I've said, is that we have incurred some non-routine costs related to the company's engagement with activist shareholder matters. So, I just want to be clear about.

Keith Frances Bachman - BMO Capital Markets (United States)

Okay. Yeah. That's helpful. Would you anticipate that those legal fees will be ongoing for some period of time?

Lars Björk - Chief Executive Officer

Well, we're certainly not providing guidance on non-recurring costs, but – so, yeah, that's about all I have to say about that.

Keith Frances Bachman - BMO Capital Markets (United States)

Okay. That's it from me. Thank you.

Operator

Thank you. That's all the time that we have for questions for today. So I'd like to turn the call back over to management for closing remarks.

Lars Björk - Chief Executive Officer

So before we end the call, I'd like to thank everyone for joining us today. I would also like to thank our employees, customers and partners for their support in the first quarter of 2016.

Operator

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program. And you may all disconnect your telephone lines at this time. Everyone, have a great day.

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