Manhattan Associates' (MANH) CEO Eddie Capel on Q1 2017 Results - Earnings Call Transcript

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Manhattan Associates, Inc. (NASDAQ:MANH) Q1 2017 Earnings Conference Call April 20, 2017 4:30 PM ET


Dennis Story - Executive Vice President and Chief Financial Officer

Eddie Capel - President and Chief Executive Officer


Mark Schappel - The Benchmark Company, Inc.

Matthew Pfau - William Blair & Company

Terry Tillman - Raymond James & Associates


Good afternoon. My name is Jessie and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Q1 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instruction]

As a reminder, ladies and gentlemen, this call is being recorded today, Thursday, April 20, 2017. I would now like to turn the call over and introduce Eddie Capel, CEO; and Dennis Story, CFO of Manhattan Associates. Mr. Story, you may begin your conference.

Dennis Story

Thank you, Jessie, and good afternoon, everyone. Welcome to Manhattan Associates 2017 first quarter earnings call. I will review our cautionary language and then turn the call over to Eddie Capel, our CEO.

During this call, including the question-and-answer session, we may make forward-looking statements regarding future events or future financial performance of Manhattan Associates. You are cautioned that these forward-looking statements involve risks and uncertainties, are not guarantees of future performance, and that actual results may differ materially from projections contained in our forward-looking statements.

I refer you to the reports Manhattan Associates files with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal 2016 and the risk factor discussion in that report. We are under no obligation to update these statements.

In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to the related GAAP measures in accordance with SEC rules. You will find reconciliation schedules in the Form 8-K we submitted to the SEC earlier today and on our website at

Now, I will turn the call over to Eddie.

Eddie Capel

Well, good afternoon, everyone. Our first quarter results reflect the balance between strong license performance and some macro retail challenges. Our license momentum continues, with Manhattan posting record Q1 license revenue of $22.8 million, that's up 11% against a strong prior year comp and with solid pipeline activity exiting the quarter in all of our three regions.

EMEA operations had a terrific quarter actually, delivering $9.4 million in license revenue. Nonetheless, our Q1 services business revenue was down 6% over prior year with some retailers continue to experience material headwinds, muting a solid financial performance across all of our other key metrics.

In summary, we delivered Q1 total revenue of $143 million, down 4% year-over-year, and $0.42 of adjusted EPS, flat versus Q1 2016. With retail business consolidating activity escalating, we expect retail market choppiness to persist through 2017 as many retailers address strategic challenges with enterprise transformation.

And while those transformations bring significant opportunities for Manhattan as more retailers increase investment in omni-channel operations, they can also elongate implementation timelines. So given our outlook, we've lowered our revenue expectations for the year, while maintaining our earnings per share guidance and Dennis will cover the Q1 financial results and guidance details in just a moment.

Given our Q1 license performance and strengthening global sales pipeline, we do expect our service revenue growth to return modestly in the second half of 2017. Our competitive position continues to remain strong and we're aggressively investing in innovation and market awareness to take market share and position Manhattan Associates for the next wave of retail multichannel selling.

Our sales teams are performing exceptionally well. Competitive win rates remained a healthy 75% plus for the quarter in head-to-head sales cycles against our major competitors and we're off to a positive start in Q2 as well.

Overall, for the quarter, about 60% of our license revenue came from net new customers and we added several large global brands to our customer portfolio, closing four $1 million plus license deals in the quarter, one of them was with an existing customer and three with net new customers. Two of the large deals were in the U.S. and two in EMEA.

One of the deals was led by an omni-channel transformation initiative. And in all four of the large deals, we were successful head-to-head against very strong competition.

Our large deal activity continues to be driven by a healthy mix of Warehouse Management Solutions, transportation management, and omni-channel initiatives both in the U.S. and our international markets.

But just as important, our large deal activity is spanning diverse industries including industrial, wholesale, manufacturing, food and beverage, specialty retail, department stores and third-party logistics. In Q1, two of our large deals were in retail, one in food and beverage, and the fourth was in manufacturing. All were driven by strategic supply-chain modernization programs.

Our Q1 license fee mix was split roughly 65% to 35% between warehouse management and other solutions respectively. The retail, consumer goods, food and beverage, and third-party logistics verticals were our strongest license fee contributors, making up more than half of our Q1 license revenue. And as permitted by our customers our earnings press release highlights some of our Q1 software license wins.

Now turning to services, consulting revenue was down 2% sequentially from Q4 2016, and 11% prior year - over the prior year, with Americas down 12% and EMEA down 14%. In the midst of retail and market stress, our consulting organization continues to execute very well globally, remains focused on our customer's success.

We completed 334 systems go-lives over the past 12 months and consistently received high marks for customer satisfaction. And our total services gross margin including maintenance for the quarter was 55.3% and was down from 56.5% in Q1 2016, but this includes the impact of adding about 40 college hires to our global team in early Q1. And as always, we closely balance ongoing hiring requirements with demand outlook and expectations of our customers, and we'll continue to do so throughout the remainder of the year.

Now we are proud to be the leading innovator in supply-chain commerce technology. For the quarter, we invested $14 million in research and development, with nearly 700 people dedicated to R&D. But the core of our successes is our strategy to be serial investors in forward-thinking innovation that expands our adjustable market and delivers market-leading differentiated capabilities for our customers.

As mentioned in our Q4 call, our 2017 plans call for an increased R&D investment beyond our core supply-chain solutions, developing the industry's leading multi-channel retail store platform with point of sale and clienteling capabilities focused on the consumer.

We expect 2017 to be a landmark year for product innovation enhancements. We are looking forward to our annual user conference, Momentum, which is held at Caesars Palace. Las Vegas in Las Vegas from May 8 to May 11. And there, we will launch several new innovated solutions to our customers, partners, the press and analysts. Our clients are clearly under more pressure than ever before to deliver omni-channel and agile supply chain solutions to help them succeed in a digital first landscape that demands both process velocity and technological changes.

And our new innovations focus directly on delivering against that acute need in a meaningful and competitively differentiated manner.

Now turning to our global associates, we ended Q1 with about 3,020 employees around the globe, flat over Q1 2016 and yearend 2016. We finished the quarter with 65 people in sales and sales management with 59 quota-carrying reps that's up one from last quarter, and we'll continue to be opportunistic and look for about half-a-dozen additional talented sales professionals to add to the company over the course of 2017.

So that covers the business update. So, Dennis, why don't you go ahead and provide the financial update and guidance, and I'll close our prepared remarks with a brief summary.

Dennis Story

Thanks, Eddie. We posted Q1 total revenue of $143.5 million, a quarter-over-quarter decline of 4% or 3% excluding currency impact. On strong license revenue growth, EMEA grew 49% and APAC was up 31%, while Americas declined 12% on license and services revenue.

Adjusted earnings per share for the quarter were $0.42 flat compared to prior year, included in our $0.42 of EPS was a favorable $0.01 benefit for $1.6 million Georgia R&D payroll tax credit received in late Q1 versus Q2, when we have traditionally received the credit.

GAAP diluted earnings per share were $0.40, increasing 5% over prior year. For your reference, a detailed reconciliation of GAAP to non-GAAP adjustments is included in our earnings release today. So as Eddie mentioned, license revenue for the quarter totaled $22.8 million, growing 11%. From a regional perspective Americas posted license revenue of $12.1 million, EMEA $9.4 million, and APAC $1.3 million.

Large deal pipeline activity is solid in both U.S. and Europe with several large Europe headquarter deals and Q1 and Q2 having global reach and being jointly negotiated by our U.S. and Europe teams.

The license revenue is recognized by the region executing the contract with the customer, which in this case is EMEA. Services revenue associated with these deals will also be recognized by the region contracting with the customer. Overall, we continue to target a license growth goal of 5% to 6% for the full-year 2017. Included in our forecast is 2% of year-over-year FX headwinds.

And we are also factoring in a moderate 2 to 3 percentage point growth-headwind for on-premise software transition to cloud-based subscription revenue. While the metrics are not material at this stage, customer demand is increasing and expected to continue in this manner through the remainder of 2017.

Finally, our license performance depends heavily on the number and relative value of large deals we close in any quarter.

Shifting to services, Q1 services revenue totaled $108.8 million, declining 6% versus prior year. Our services revenue is comprised of two revenue streams, consulting and maintenance. Our 2017 estimate for total services revenue growth including maintenance is to be in the range of down approximately 1% to up 1% compared to our 2% to 4% growth estimate from our Q4 call.

We still expect 2017 to be the inverse of 2016, with services revenue down 3% to 4% in the first half, and up 2% to 6% in the second half. We are estimating Q2 services revenue to be down 1% to 2%. Our maintenance growth included in these growth estimates for quarterly and full-year remains at about 6%.

In summary, with our strong second half 2016 license growth and solid start to 2017, we certainly expect services revenue growth to improve modestly in the second half. Consulting revenue for the quarter totaled $75.5 million, down 11% compared to Q1 2016, and was down sequentially 2% from Q4 2016.

Our growth headwinds are in the Americas and Europe, and can largely be attributed to three factors: one, select customers extending implementations and upgrades; two, the completion of some large multi-year implementations going live; and three, FX headwinds.

As Eddie mentioned regarding headcount, we continue to carefully balance our hiring needs to align resource capacity with customer demand, and satisfaction across our global services businesses. Maintenance revenue for the quarter totaled $33.4 million, increasing 5% over last year. Strong cash collections, license revenue growth and retention rates of 90% plus contributed to year-over-year growth.

As a reminder, we recognized maintenance renewal revenue on a cash basis. So timing of cash collections can cause inter-period lumpiness from quarter-to-quarter. And Q1's growth was positively impacted by cash collection timing. It's also worth noting that we have not experienced any meaningful customer attrition despite the challenging macro environment.

Consolidated services margins for the quarter were pretty solid 55.3%, above our expectations benefitting from solid productivity capacity management and expense discipline. We expect Q2 2017 services margin will likely be in the range of 57.4% to 58.3%, and our full-year 2017 services margins to normalize into the 58.4% to 58.6% range, up slightly from our Q4 call outlook.

We expect Q2 and Q3 services margins to increase as billability and utilization ramp, then drop off again in Q4 due to regular holiday seasonality.

Turning to operating income and margins, Q1 adjusted operating income totaled $46.3 million with operating margin of 32.3%, up from 32% in Q1 2016. Our operating leverage has been driven by strong license revenue performance, workforce productivity and expense discipline.

With revenue guidance, we are lowering our full-year operating income estimate range to $207 million to $211 million, while increasing our operating margin objective to 34% to 34.1% versus the previous goal of 33.7% to 33.9%. This includes the $9 million in incremental strategic investment we discussed in Q4, representing about 150 basis points of margin and $0.08 of earnings per share, earmarked for innovation and competitive differentiation. Most of this investment is weighted to the second half of 2017, and is largely tied to incremental R&D resources and investment in cloud operations.

We expect a Q2 operating margin range of 33.5% to 34.5%, with second half operating margin in the range of 34.6% to 35.3%. The second half quarterly splits should be adjusted for quarterly license seasonality and lower Q4 services revenue due to the traditional retail holiday season.

That covers the operating results. Regarding taxes, our adjusted effective income tax rate was 36.5% for Q1 compared to 37% in Q1 last year. We continue to project a full year effective tax rate of 36.5% for adjusted earnings per share. For GAAP under new accounting rules related to taxes associated with vesting restricted stock, will lower our 2017 estimated GAAP effective tax rate to 35.6%.

Diluted shares for the quarter totaled 70.2 million shares, down 1.3% from Q4 2016. We repurchased 1.004 million shares of common stock in the quarter, totaling $50 million. We estimate Q2 through Q4 2017 and full-year diluted shares to be about 69.9 million. This estimate does not assume additional common stock repurchases. Lastly on shares, last week our Board approved raising our share purchase authority limit to a total of $50 million.

That covers the P&L results, now turning to cash flow. Cash flow from operations was a record $61.3 million, up 50% from Q1 2016's $40.4 million performance on strong global cash collections, and lower cash taxes paid based on timing over the prior year. Apples to apples, operating cash flow grew 35% as tax impacts for stock based compensation are now recognized in operating versus financing activities under new U.S. GAAP accounting rules for stock based compensation effective January 1, 2017.

Our DSOs improved to 53 days versus 63 days in Q4 2016. Our capital expenditures were about $800,000 in the quarter. And we estimate full-year 2017 CapEx to be about $9 million to $10 million. For Q2, we do expect operating cash flow to decline compared to Q1, primarily driven by $34 million in cash taxes being paid in the quarter, as I mentioned the timing a few minutes ago, and typical Q2 collection seasonality.

Our balance sheet continues to support stability and long-term investment flexibility was zero debt, and cash and investments totaling $101 million at March 31, 2017 compared to $96 million at the end of Q4 2016. The increase was driven primarily by strong operating cash flow offset by our share buyback program.

Now I'll update our 2017 guidance, and then I'll hand it off to Eddie for closing remarks. Given that we expect some continued slowness in the retail sector, we are lowering total revenue guidance while maintaining our earnings per share guidance. For revenue, we are lowering our guidance for full-year total revenue to $606 million to $620 million, representing about flat to 3% growth over 2016, down from our previous guidance of $622 million to $632 million.

Our total revenue guidance factors in about 1 to 2 percentage point decline from FX headwinds. As I mentioned earlier, we are expecting a moderate transition from traditional on-premise license revenue to continue cloud-based subscription revenue. We expect our full-year total revenue percentage split to be about 49% first half, 51% second half. With the Q4 holiday season as in prior years, we are modeling a sequential decline in services revenue of about 3% to 4% from Q3 2017 to Q4 2017.

From a revenue mix perspective, we believe 2017 hardware and billed travel will grow about 6% over 2016, representing about 9% of total revenue. For adjusted diluted earnings per share, we're maintaining our guidance range of $1.89 to $1.93 representing 1% to 3% growth over 2016 and adjusted EPS of $1.87.

We expect our full-year EPS split to be 47% first half, 53% second. This guidance includes $0.02 of negative FX impact. In addition, this includes $0.08 of planned strategic investments, most of which will incur in the second half of 2017. We expect Q2 2017 EPS to improve sequentially from Q1 by about 12% to 17%, in the range of $0.47 to $0.49 per share.

For GAAP diluted earnings per share, we expect to deliver $1.77 to $1.81, representing 3% to 5% growth over 2016 EPS of $1.72. The GAAP earnings per share range improved from previous guidance of $1.74 to $1.78, on lower projected cost for performance based equity incentive compensation. The difference between GAAP and non-GAAP adjusted EPS represents the impact of stock-based compensation for Manhattan Associates.

That covers the financial results and 2017 guidance. Now, I'll turn the call back to Eddie for final remarks.

Eddie Capel

Thanks, Dennis. Well, I'll close our prepared remarks with a very brief summary. Our success is driven by the focus we apply to delivering innovation in a rapid and ever-changing market. Focusing on our customer success and leveraging our deep domain expertise. And while the global retail macroeconomic condition certainly gives us reason to be cautious, we are bullish on the market opportunity ahead of us.

And we are investing significant energy and capital into innovation and advancing the world's leading suite of supply-chain commerce solutions so as to extend that market leadership in 2017 and beyond.

Omni-channel retail commerce and supply chain complexity in our target markets continue to increase driven by digitalization and e-commerce, which will continue fueling multi-year investment cycles for customers and for us at Manhattan Associates.

Our competitive position continues to be strong and we continue to invest in innovation to extend our addressable market, market leadership and differentiation. With the world's most talented supply chain employees, the best software solutions and market dynamics that require customers to adapt and invest in supply chain innovation, we believe we are well positioned for 2017 and beyond.

Jessie, we'd be happy to take any questions that you might have now.

Question-and-Answer Session


[Operator Instructions] Your first question comes from Mark Schappel from Benchmark. Your line is open.

Mark Schappel

Hi, good evening. A couple of questions here, starting with license revenue, it was particularly strong in the quarter. And I was wondering if that had anything to do with formerly, meaning subscription customers that decide to a move license - a professional license?

Eddie Capel

No, it didn't, Mark. It was in fact none of that activity in the quarter. And as we noted, actually pretty strong quarter from net new customer license revenue, about 60% of the license revenue in the quarter is from net new customers. And again, none of that was anybody switching from a subscription to perpetual license.

Dennis Story

Yes, three of the $4-million-plus deals were net new customers, nice global brands, Mark.

Mark Schappel

Okay, great. Thank you. And then, Eddie, help me out with the disconnection here between your solid license performance and the slowdown you're seeing in professional services business? I mean, usually one follows the other, and that just doesn't seem to be the case here?

Eddie Capel

Yes. So the services revenue on the new business is still kind of following the traditional model, Mark. But what we are seeing is, as Dennis mentioned, a number of our existing programs are slowing and pausing a little bit, number one, whilst largely I think the retail community and the retail - our retail customers sort of reconstitute their landscape in their portfolio.

So as I think you know, we've seen more store closures in 2017 already than we saw in calendar year 2016. Certainly - fortunately, we haven't been affected by this. But we've seen more retailers file for Chapter 11, Chapter 7 this year than in all of 2016. So there's a lot of reconstitution of retail portfolios. And that is causing pause around some of the network re-architecting and therefore supply-chain software implementations.

Mark Schappel

Okay, great. Thanks. And then, Eddie, with respect to the turndown in your professional services business, are you planning to pullback your hiring plans in that group? If I recall correctly, you're looking to hire about 80 people for the…?

Eddie Capel

Yes. So we'll continue to monitor that, Mark. And obviously, we'll be balancing supply with demand and keeping our eye on that as the year goes on. I think we mentioned that we did bring on 40 campus recruits in early January of this year, and we'll continue to keep our eye on the supply/demand balance.

Mark Schappel

And then one final question. On the revenue guide down is that solely on the professional services line?

Dennis Story

Yes, solely. If you look at every other line in the P&L, the company executed very strong.

Mark Schappel

Thank you.

Eddie Capel

Yes. Thank you, Mark.


Your next question comes from Matt Pfau with William Blair. Your line is open.

Matthew Pfau

Hey, guys. Thanks for taking my question. Just wanted to dig into the impact of the record store closures that you mentioned earlier, Eddie. What does that do? Or how should we think about that relative to your market opportunity as retailers rationalize some of their assets and maybe in the future now are going to be working off a smaller store base?

Eddie Capel

Yes. It's a great question. I think it's - to be honest with you, Matt, I think it's a reasonably long answer, I'll do my best to keep it short. So in the near term, clearly, it's having an impact on the services business. The rollout of some of our software as retailers - again, reconstitute kind of the portfolio in the landscape. I do not think it has a long-term effect on our business.

Certainly, it will be a good question to ask retailers yourself, but what we've got here I think really is a - well, we really got too much retail square footage, not necessarily too many retail stores. But too much retail square footage, and that's driven by this 25, 30 year big box kind of legacy that we have here.

25 to 30 years ago the strategy for growth often times was build bigger stores and more of them. And I think we're suffering from that legacy a little bit. You look at the per capita square footage here in the U.S. compared with other parts of the world. And it's five, six times what you see elsewhere.

It's not so much - again, so not so much the store count, but the size of the stores. But it's a complicated formula to get that balance right. And that's why we're seeing some guys sort of pause and rebalance that whole digital channel with the bricks-and-mortar channel to create the appropriate balance in the portfolio. And I believe that's where the pause is.

But over the long term, I don't think it has a negative impact on Manhattan Associates. In fact, I believe it has, creates really positive opportunity as the balance, again, between digital and bricks-and-mortar gets balanced out.

Matthew Pfau

Got it. And then maybe if I can touch on some of the delayed services engagements again. Just trying to get a better understanding from the clients' perspective what exactly is driving that, because I think if they were to look at or evaluate their strategy against stemming off some of the bleeding from e-commerce guys like Amazon, I think Manhattan would be a key cog in improving their fulfillment and their distribution operations.

But maybe it's just the fact that as they go through these store closures they don't have the resources on their end to dedicate towards these implementations or is it maybe that they don't know exactly what their distribution network is going to look like six months from now as they through some of these rationalizations?

Eddie Capel

Yes, I think it's largely in the latter, Matt. There are some rationalizations going on throughout the network again as the volume sort of rebalances between digital and bricks-and-mortar. And then inside the bricks-and-mortar portfolio, how that balances out as it relates to distribution centers, transportation networks and, of course, the order management strategy.

Matthew Pfau

Got it. And last one for me, maybe just an update from you guys on the point of sale system for Love's [ph] or progress that you made on that front?

Eddie Capel

Yes, going pretty much as expected, Matt. So we're right in the throes of getting ready to turn some of those early adopter customers on, pretty much right on plan as we had talked about for Q2 of 2017, so pretty much right where we expect it to be and where we want to be.

Matthew Pfau

Got it. Thanks for taking my questions, guys.

Eddie Capel

Thanks, Matt.

Dennis Story

My pleasure, Matt. Thank you.


[Operator Instructions] The next question comes from Terry Tillman with Raymond James. Your line is open.

Terry Tillman

Hey, good afternoon, gentlemen. Can you hear me okay?

Dennis Story

Can hear.

Eddie Capel

Terry, no bad.

Terry Tillman

Okay. There is a little bit of background noise on my end. Sorry about that. But I fell off at some point, had a bad connection. So if some of this has been touched on I apologize. But, Eddie, the one part of the business that I'm always been enamored with is the ability to really help the omni-channel and go with the order management software.

Can you talk about - I know you talked about WMS versus non-WMS, but you have a lot of skews, so how does that OMS business do in the quarter; given some of these retailer woes and/or do you see that as being a resilient part of your business serving retailers or CP companies?

Eddie Capel

Yes, well it's - as you know, Terry, it's become over the last few years a material part of our business. And certainly, it's been really helpful for our customers in creating differentiation for them. And in this particular quarter, it is mirrored. The last number of quarters continues to be a significant part of the business and a good part of the momentum. So we had in the quarter 65% of our new license revenue came from WMS and 35% other, which is a little more skewed towards WMS, as you know in this particular quarter.

But as we've talked about many times the quarter-over-quarter percentages there aren't necessarily indicative of the specific momentum around product category.

Terry Tillman

Okay. And on the retail selling platform that's going to be launched, could you maybe give us an update again on how you would see that affecting? I guess, it would be more of a bookings or subscription revenue conversation. But how you would see that kind of being borne out into the model in this 2018?

And with the retailer woes and the word you used, which is a good one, the reconstitution of their business, does it change kind of the pace on potential adoption or selling?

Eddie Capel

Yes, well, let's see, so great question and as we've talked about many times, the launch is in 2017. And we expect to begin to see positive revenue impact in 2018 and then in the out years.

With regard to the - if you want to call them the retailer woes it's certainly not - they're not widespread across all of retail and so forth. I'm not sure they're woes, but there is a reconstitution going on. The thing that we continue to see is that retail stores are moving from being a single function facility, into a multi-function facility. And this platform that we've developed and is about - and we're about to launch is focused squarely on being able to manage the retail store as an intimate personalized multifunction facility.

And that is the - we believe that is the revolution that is happening on the high street or down main street. So I don't believe that any of the things that we're seeing in the retail landscape has a negative impact on our strategy.

Terry Tillman

Okay, okay. And then, I guess, Dennis, just a couple of quick ones for you. The $9 million cost - in cost that I don't know if I'd call them one-time in nature, but they're kind of strategic opportunistic investments you're making. Do we really think about that all kind of being eliminated or not in the model into 2018, so it truly is kind of $9 million that is in 2017 and that doesn't replicate at all?

Dennis Story

Now, we'll continue to carry that forward and we expect to drive growth to cover the cost of adding the strategic investment. So it's really a time to market, bringing those resources in.

Terry Tillman

Okay. And, Dennis, just final question is on the - how do we think about the gross margins, the consolidated gross margin going forward? Could it radically change or could you just see a kind of a - be more modest in terms of puts and takes, given that more and more of your business will be cloud oriented in the future?

Dennis Story

Well, I'll give you more - I would certainly expect to see a change initially, but we'll give you more color when we start picking up a little more volume in the business. At this stage, it'd be early to - it'd be premature. I don't know see any significant change coming in 2017 and maybe modest change in 2018.

Terry Tillman

Okay. Well, clearly, there are some woes and some impact in the retail business. But it was good to see the software sales and the cash flow strength, so a solid job on that front and I'll leave it at that. Thank you.

Eddie Capel

Good. Thank you, Terry. I appreciate it.

Dennis Story

Yes, every - basically, every line with the exception of services the company executed very strong. And even the services team executed strong from a margin profile point of view. We just have a headwind challenge with the services revenue.

Terry Tillman

Yeah, understood.


There are no further questions. I turn the call back to the presenters.

Eddie Capel

Good, very good. Thank you, Jessie. And thank you, everybody, for joining us on this earnings call. We appreciate you taking the time to be with us. And we look forward to updating you on our Q2 performance later on in July. Thank you. Bye-bye.


This concludes today's conference call. You may now disconnect.

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