Q2 2020 Earnings Call
Greetings and welcome to the cycle quarterly earnings call I'd now like to turn the call over to Steve Weber. Please go ahead.
Thank you.
Good afternoon, everyone to thank you for joining Michael a second quarter earnings call I see Weber, Vice President of Investor Relations and I'm joined today by our CEO will Lansing and our CFO Mike Mcglaughlin.
Today, we issued a press release it describes financial results compared to the prior year.
On this call management will also discuss results in comparison to the prior quarter.
To facilitate understanding of the run rate of our business.
Certain statements made in this presentation may be characterized as forward looking under the private Securities Litigation Reform Act 1995.
Oh statements may involve many uncertainties that could cause actual results could differ materially.
Information concerning these uncertainties is contained in the company's filings with the FCC in particular, the risks and factors risk factors are forward looking statements portions of such filings.
Copies are available from the FCC and the FICA website or from our Investor Relations team.
This call will also include statements regarding certain non-GAAP financial measures.
Please refer to the company's earnings release and regulation G. schedule issue today for a reconciliation of each of these non-GAAP financial measures compared to the most comparable GAAP measure.
The earnings release and regulation G. schedule are available on the Investor Relations page of the company's website at FICA dot com or on the Fccs web site at FCC Dot Gov.
A replay of this webcast will be available through April 29, 2021, and now I'll turn the call over to will Lansing.
Thanks, Steven Thank you everyone for joining us for our second quarter earnings call.
First I hope you and your families are healthy and think say as we go through this and that.
As we all know these are unprecedented time no one can predict with any certainty is scale are linked the disruption from Cowen 19, or how severe the economic and health impact will be the many unknowns include the scope in effect of further public health responses as well as governmental regulatory fiscal and monetary policies.
And we usually do we posted some slides with our results on the Investor Relations section of our website I'll be referencing a few of those today during our presentation.
Today I'll go over the results for a second fiscal quarter in first half of the here and I'll talk about how we're feeling or business in light of the current situation.
And how we plan to execute on a plan to remain strong while preparing for the opportunities when this crisis him.
As we show on slide two we've been successful in moving to a work from home structure and have not skipped a beat how we treat the needs for our customers in fact, nearly all of our 4000 person global workforce.
Our currently working from home. We responded earlier closing our kind off this in February and we follow the lead of local state and National authorities, and 43 offices and 32 different.
I'd like to take this opportunity. Thank all of our employees, who responded to the quickly unfolding circumstances and have allowed us to adjust to ensure that internal and client projects deliverable remain on track.
We were well prepared to move to this model over the last year, we've increased our usage of video based communication.
Before the pandemic it was a valuable tool to drive collaboration on reduced travel it's now critical business practice.
Our technology team that already built through robust VPN infrastructure that permits remote access to secure networks and servers that infrastructure in our cloud based solutions and support.
Has meant that we are able to serve our customers without any significant loss a productivity.
And as always our cyber security team is focused on protecting customers environment sensitive data.
It hasn't been easy they are uncertain stressful times for everyone.
But I'm proud of the business continuity efforts, we've undertaken to prepare for potential issues whatever they maybe and how those efforts have paid extraordinary dividends as we were able to adapt to the challenges we face.
Finally, we've established an internal Cronto Iris response team.
These are all examples of a resilient culture of dedicated professionals are stepping up to the daily challenges we face.
So I'm pleased to report that we had a very strong second fiscal quarter. We reported revenues of 308 million an increase of 11% over same period last year.
We delivered 58 million of GAAP net income and GAAP earnings of $1.94 cents per share.
We delivered 64 million of non-GAAP net income and non-GAAP EPS in 2014 cents.
This fact that we began to experience covered related.
It's up.
Despite the fact that we've begun to experience I covered related disruption in late March.
We were able to generate 84 million in new bookings, which is impressive considering the most of our deals are close at the end of the quarter right, what businesses were clothing, and and everyone's transitioning to work from home.
We continue to have a strong pipeline and believe many of our solutions are exactly what our customers are looking for as they focus on risk management.
Our software revenue was up a modest 3% this quarter.
Applications were down 1% as we had fewer upfront license sale unless services revenue than last year.
<unk> management software was up 20% with increases in both license sales and transactional revenue from field, we sign previous quarters.
And this course business, we had another great quarter do the special pricing that began to take effect.
Total revenues were up 24% versus the prior year and totaled 129 million.
On the beat it beside revenues were up 27% over the same period as last year.
BDC revenues were up 15% this quarter scores, particularly b to B is also an area of risk during volatile economic times at some of those revenues are tied to things like originations of new logs.
The strength of our business and our conservative financial practices have allowed us to build the healthy balance sheet and you can see on slide four we have ample liquidity and borrowing capacity.
Definitely look ahead, it's impossible to fully understand what the path will impact to our markets will be and to predict when the economy will improve.
Because of these uncertain see where we're tracking our full year guidance.
I'd like to directly to slide five remind everyone. What our original guidance was where we stand now halfway through the year and what we would need to do in the back half to achieve those original numbers.
And it for transparency. This slide provides more details of our guidance than what we previously disclosed including more granularity around revenue.
The red highlight areas of potential higher risk in the coming months would be to be scores as I said, it's difficult for us to accurately forecast what will happen a volumes in the near term.
Because its course or sold through bureaus Sportsbook weird, we don't have visibility to real time data intensive disruption. This is especially difficult until we can begin to see the trends in the data.
We anecdotally know the mortgage volumes have been strong and auto has been weak, but it's difficult to quantify what's happening today level on the next several months.
On the software side, we have a great deal of visibility into our transactional and maintenance revenue stream I believe those revenues to be very resilient.
It's more difficult to estimate how many deals will be able to close and what potential impact that would have on license and service revenue.
We know that we have a strong pipeline of deals and fully expect to close many of them, but there's clearly more uncertainty than there was a few months ago.
We also believe that will spend less than originally planned we will likely see savings and some revenue based expenses.
And we'll spend less on travel and marketing and other discretionary areas.
We're scrutiny, we're scrutinizing our expenses more than ever and we're committed to being as efficient as possible.
In short, we don't know the severity or duration of disruptions and credit markets, where technology purchases to clients. Its course volume was negative impact on our revenues. Despite the special pricing that we start see this quarter, but difficult to know print declines in auto sales now create a backlog of buyers in the fall well as part of a longer downturn.
And well sale cycles for our solutions will likely be longer we don't yet know how much is due to customers reassessing purchases versus the weather this logistical challenges uppermost selling.
That said, we remain confident in our business model that great start to the year with large amount of recurring revenue.
While we expect their software revenues in the second half the year to be lower than our guidance due to see 19. We also expect expenses declined due primarily to reduce sales marketing expenses to play travel.
These expense reductions will mitigate the impact on our bottom line and.
And we expect to have other operating expense savings due to general disruption, so even though topline volatility it's difficult to predict we could still meet our original bottom line guidance the number of factors play out.
These are exceptionally volatile time, we remain optimistic and are actively managing the business to bridge. The short term difficulties, while building long term value.
I'll share some summary thoughts later, but now I'd like to turn the call over to Mike or further financial details.
[noise], thanks, well and good afternoon, everyone as usual I'll start with some detail around the revenue for Q2 fiscal 20 like those revenue for the quarter was 308 billion an increase of 11% over the prior year. Our application segment revenues were 140 million down 1% versus the same period last year.
The decrease in revenue was driven primarily by lower license and professional services revenue.
More applications bookings for the quarter were 48 million down 24% from last year due in large part you called it related disruptions and sales effort at the end of March.
And our decision management software segment Q2 revenues were 39 million up 20% over the same period last year.
Chris is primarily due to license and SaaS subscription revenues from our decision management platform products decision management software bookings for 23 million Q2 down 17% from the previous year. Similarly, due to software sales disruptions have yet this quarter.
Finally, our score segment revenues for 129 million up 24% from the same period last year.
To be scores revenue was up 27% over the same period last year and B to C revenues were up 15% from the same period.
We do expect disruptions to scores volumes, particularly on the B to B side as loan originations declined in some credit for it.
As well said scores volumes are reported to us monthly in arrears. So we did not have visibility at this course volumes real time [noise].
Turning to our global revenue mix in our second fiscal quarter, 78% of total revenues were derived from our Americas region.
Our EMEA region generate 14% and the remaining 8% was from.
Asia Pacific region.
Recurring revenues derived from transactional and maintenance sources represent 78% of total revenues in the quarter consulting and implementation revenues were 16% in license revenues were 6% of the toll.
Revenues derived from our cloud Levered software as a service or south products or 74 million for the quarter, which include 58 million in transactional revenue of 17 million in professional services revenue, that's an increase of 12% from the previous year for our SaaS business.
[noise] total bookings, including our score segments for the quarter totaled 84 million down 20% from last year, those bookings generated 12 man and current period revenues a 14% yield.
Last bookings were 31 million for the quarter, which was up 6% from the previous year.
Our operating expenses totaled 232 million in this quarter.
18 million from the prior quarter due primarily to decreases in travel marketing and other discretionary expenses and the 3 million in restructuring costs in Q1 that did not recur in Q2.
It was GAAP operating margin for the second quarter was 25% and our non-GAAP operating margin has shown in our Reg G schedule was 32%.
GAAP net income this quarter was 58 million up 75% from the prior year. Our non-GAAP net income was 64 million for the core up 36% from the same quarter last year.
Our effective tax rate this quarter was about 7%, which included about $12 million excess tax benefits, resulting from stock based compensation activities. We definitely expect our section effective tax rate to be around 10% to 12% for the full fiscal year.
Free cash flow for the quarter was 55 million compared to 44 million in the same period last year free cash flow for the trailing four quarters was $259 million.
Turning to balance sheet at the end of quarter, we had $109 billion cash. This is down 2 million from last quarter, primarily driven by share repurchases, partially offset by cash generated from operations.
Our total debt face value is $959 million with a weighted average interest rate of 4.44% at the end of the quarter. We had dropped 124 million on our 400 million dollar revolving line of credit we anticipate drawing on that facility to pay for the $85 million 85 million dollar maturity of senior notes coming up in July.
Our leverage ratio that's calculated for our revolving line of credit was 2.25 times.
As a reminder, our current Coventry Covenant is 3.0 times and that Covenant will expand to 3.25 when the notes mature in July.
Turning to return of capital we bought back 290000 shares in the second quarter for $96 million average price of $331 per share at the end of March we had about $64 million remaining on the board repurchase authorization.
Finally, as well said because of the uncertainty around until the 19 any impacts on the economic environment. We are withdrawing our previously issued.
With that I'll turn it back over the wealth for some final comments.
Wonderful.
Well either.
Hi, where reconnect.
We are Rick reconnected can you hear me.
And hearing that well.
Right.
Okay.
Work from home challenges.
I'd like to end our prepared remarks today with some positive news, we're conducting a series of light Webinars that we're calling building resiliency adapting to the challenges of today.
These webinars, which are almost a virtual FICO world began last week and continue through May 28 topics fall within six crap adaptability digital customer engagement risk management operational efficiency building trust and protecting customers I'd encourage you to check it out information is available on our website.
Right and there are number keynote sessions I think we'll be of interest to our investors, including one I'll be doing jointly with Equifax CEO Mark Figura may 14th.
Finally, I'd like to thank all of you for joining up today. These are challenging time, but I'm convinced we're up to the challenge we can't control the external factors, we face, but we can control how we respond and plan for the future. We're stewards of remarkable assets. We remain optimistic as we look to the future will breaches period of disruption as we have in the past and will emerge place for growth, albeit.
Transparent as possible as we work through this uncertainty will provide guidance since we have better understand economic personal environment.
I'll now turn it back to Steve for today.
Thanks will.
We're now ready to take your questions operator, please open the lines.
Thank you feel like the restaurant question. Please press the one followed by the four on your telephone you will see were three Tony prompt to acknowledge a request. If your question has been answered on you would like to withdraw your Registrational. Please press. The one followed by the three once again, that's one for tourists for question one brief moment for the first question.
And our first question is from enough Putnam with Barclays. Please go ahead.
Yes. Thank you good evening gentlemen, Oh.
I would just curious if you could talk just about.
Volume trends that you saw in the quarter Indeed.
And then you can see with popping beyond that but maybe what that growth was in the quality and maybe how it looks like you know in mind, you will see probably two months.
Okay, well BDC Minot.
No between.
The.
Mike I don't know if you have that detail on yeah. So.
The big three buckets volumes in that part of our business as you know our mortgage business. The auto business and then credit cards personal loans, what we call the other segment.
Mortgages were option.
As you would expect together.
So the refi dynamics that have been in place for.
Number of months.
And in the auto and other segments the.
Volume changes were on a year over year basis, where in the single digit percentages. So.
So not.
Really I think right held all of out.
There with respect to the ended the quarter the impact was close enough to the end of March which is the last reports we have from our partners at the barrels. So you know we did not see anything.
Informative from those volumes at the end of March.
Frankly, what you heard from the bureaus in there.
Quarterly reports over the last.
Week or number of days.
More real time information that we have on that front.
Got it and maybe just on the BDC business as well I mean, Youre go make a big that there has change over the you know do you anticipate that he'd be you know.
Great all how should we think about that.
You know so so far it's holding up nicely and.
You know with with respect to my FICO for example, it.
It's a it's not surprising consumer is very focused on their credit this kind of the time.
Okay, and then just last one if you can't speak to them. You know you talked about in a strong visibility on your transactional Nuneaton implied itself right. So I was just curious if you can just given then.
There on what you're seeing from your customers I mean has that decelerated is that being just push that much needed like any thoughts there.
Yes, it is being pushed out so remember we have a very long sales cycle 250 days sales cycle. So we.
We had a lot of stuff that was in process that that those closer to the end then to the beginning of the process and so that's up some of that push the next quarter. So they've got close.
The.
But they haven't been hit in the way they were back in 2000 17008. It says this is a different kind of a situation as you know and and so we haven't seen them.
Pulling back on their investment plans at least not so far now it would it probably would be naive to believe that everything will be business as usual and I'm sure on the margin there'll be some business that we were hoping for that won't happen, but but we haven't seen tremendous changes in behavior other than.
The timeline for getting transactions done slowing down a little bit.
Got it alright, thank you guys.
Oh, we have question from Bill Warmington with Wells Fargo. Please go ahead.
Good evening everyone.
So I wanted to ask.
If you could talk little bit about what the revenue exposure is.
[noise] cadence school in scores for those three buckets credit card mortgage and auto that would be for the I'm assuming for the b to B side.
You know.
So I think as Mike mentioned, a minute ago I think you know broadly we in mortgage it looks like it's going to be up auto looks like it's on the way down.
I'd cards, and personal loans down, but I think you probably do better reading into into the numbers that you see from the bureaus, then asking us to speculate because we don't have it yet.
No no how does it I I appreciate that in terms of the volumes book, but once we once we get a sense of the volumes than we have to map it to the FICO b to b.
Revenue and I was just asking for some help in terms of how big is credit card as a percentage of revenue. These days, how big is mortgage how big is auto how does that break down across the the scores b to B universe.
Mike you have those percentages I know you haven't handy.
Yes, we feel we haven't shared those in the past and I don't think this is the form to change that disclose your practice.
But I guess I can't say that it hasn't changed materially at least through the end of March to what we've had in the past [laughter] fear hits your assumption in the past what sorry, I would continue to use.
Okay, well I don't know, they're working or not but they're they're out there alright, well then when when you guys are talking about.
You made some references to margins in how there is.
Natural reduction in expenses going along with revenue and T. any.
Reduction was retired and so on.
It is thought to try to preserve the margin that was implied in the original guidance, which looks like it was around the 30% to 33% EBITDA you know that's adjusted EBITDA level around 30% operating margin is that that the thought that due to try to.
Yes, there is lower revenue to try to preserve that margin percentage or you thought is to try to actually raise that margin percentage to to offset the decline and deliver the same level of vps I think still you expect that will take every step of the within our power to manage our.
Since is to maximize the margin so while we don't have complete control over the top line, we obviously have a little more control over the bottom line and.
And so I I, you know I would hope that we could do better than preserving the rate.
Got it.
But again Dan.
If you.
Look at the slide in our debt, we basically laid out what would have to be true you know for us to press to hit the prior guide.
Right Okay.
And then I guess what in the in the current textiles expenses I wanted to ask about your plans for continued investment in the software business and how that's going to does.
You had you had mentioned.
When you gave you would know guidance you talked about some opportunities for increased efficiency within software business I want to see how that's all.
Hi, your weighing all that now.
Well, you know as being an impact as well that has been on our company. We were we were engaged in and continuously engaged in.
A really sensitive review of every activity that we have going on in the company.
And and our goal is to really focus on.
On things that are truly strategic and to deemphasize things that are less strategic and that that initiative that work proceeds to pay that Ed has not been slowed in the least like Cove. It.
I think you know if anything were more committed than ever to getting as much of our capability onto the platform as quickly as possible. So we can start to see the returns to scale that we're all looking for.
So I would say that are our investment plans.
On a strategic and platform stuff completely unchanged. There you know there if anything we're looking for ways to free up resources put even more against it but then things that are off platform off strategy.
We're scrutinizing those very carefully.
Okay last one from me I wanted to ask about a dozen Psycho resilience index you know it sounds like an interesting projects. It looks like you're you're maybe talk a little bit about what the with the plan is for that one in terms of the rollout it looks like Equifax is the only one right now doing.
Hi test with it but how soon you think that's going to before that actually start to generate some revenue how big could it be.
We think it's going to be very big it's not going to generate any revenue in the near term because our plan is to provide it for free along with FICO scores. So if you buy a FICO score you can also get the FIFO resiliency index along with it.
There, we think that there's tremendous demand maybe worth spending just a minute on what it is this is some really smart stuff that our guys came up with.
That helps us to differentiate amongst consumer consumers and evaluate their credit within within any particular FICO score there that's at a point in time and appointed the economic cycle and there are individuals who are more resilient and their individuals who are less resilient.
And the you know the traditional way of dealing with downturns and we see it today is that lenders raise their lending threshold. They you know they raise that cut off.
And well, obviously that the prudent thing to do.
We love for that to be a little more sophisticated surgical and be able to evaluate.
Some of the individual blows cut off.
And with more precision and that's really what the FICO resiliency index does.
It will be bundled with the FICO score it it will be widely available to anyone is buying FICO scores. It is currently in test as you said with Equifax and about Experian, we'll have it out too.
You should follow.
And yeah, we have we have high expectations, because it's been very well received to date.
Excellent well I will thank you very much.
Of question from just Mueller with Baird. Please go ahead.
Yes. Thank you just within the software businesses.
I understand that bookings are going to be impacted which can impact revenue license revenue professional services, but in terms of client usage I think there was a mention of collections and recovery I'm guessing that's because of some collection.
Hey, this is but seeing some negative impacts there, but just what are you seeing across the different software businesses on a kind of positives or negatives by the different products to call out.
No. We are we're seeing more in Cts and customer communication, that's up a bit because the lenders are engaged in a lot more back and forth with their consumer customers than than they have been in the past. So that's up a little.
The the the others you know not not tremendously different impact I mean, we're not seeing huge before well shift for anything.
[noise], Okay, and then within a need to be scores how much of it is tied to.
I guess origination on marketing type volumes and how much of it is stickier account management are open access program type scores in terms of B to B as revenue mix. You know, we don't we don't break it out we don't break it out.
I think I think it's fair to assume that there'll be a little less origination activity I mean, that's not unreasonable.
Okay and then.
There was two comments.
As you were talking about the special pricing one was began to take a factor then started to see just any sense of roughly how much oh. The special pricing was the benefit it was felt this quarter versus yet to be feathered in.
We we have felt it yes, it's come in.
Okay.
Thank you.
A question from Brett Huff with Stephens. Please go ahead.
Good afternoon, guys and glad everybody is healthy and well.
Question to follow up on the when I thought was an interesting comment you made on bank Hell. Then we'll I think you phrased. It you know the bank one hit on it yet it's harder hit as hard as maybe the great recession, just given this isn't bank led.
A lot of our constant level, so kind of how banks are reacting. So can you just flush out that a little bit more I think you mentioned that you haven't seen any major changes in investment, but what is their attitude and you talk with them about your game plan is and how you can help them.
I think I think that they're much better prepared a than the last time their balance sheets are stronger they have more capital on hand. They you know they learn the last time around and I also think that the government and the fed as jumped in and away they very quickly and away that they didn't the last time around to longer.
So so I think it's those tend to thing and it you can see from their public statements. If you. Let if you look at the public statements from the Big thing CEO.
There, they're obviously planning to whether that's much better than the last time around.
That's helpful in any particular products that.
Peak more interest in the last six weeks I'm, assuming maybe collections or something like that but anything that has it's kinda Spartan spiked up given the changes in the and the outlook.
Just as I mentioned earlier, there's there's more usage of our of our customer communication services, which is the last mile customer consumer customer contact.
That those volumes are up remember long sales cycle, and so you wouldn't see things King.
Quickly you know that things that are in place, we're seeing more volume in place as you'd expect like that like they see tcf.
But otherwise we're not and then we're expecting you know with with all the with all the.
Transaction volumes down credit card transaction volume down it may have an impact on calkin.
Volumes, but.
Most of our Calvin business is priced by account and so I'm sorry.
Not sure how much impact it would really have.
Okay no not quite thank you for that last question for me in here one of the thing that a lot of pumps have been asking us is kind of the value proposition that the FICO score continues to provide.
And even at higher prices were maintaining that it's still one of the best deals going and risk management and portfolio management.
Any conversations.
Yeah, I don't know how much you can talk with banks about about because what did the you know any added views on how does that value play out on certain situations like this for banks.
Do they perceive it differently are they.
Looking to buy a differently by more that trust for that risk management, and then situation like this.
So the answer is yes, we strongly believe that its a tremendous tool if I go sort of tremendous tool for value in credit worthiness and worn needed more necessary worn demand than ever in times like these.
You know the the resiliency and they said I mentioned earlier is tied up in that and so the way. We think about is we're constantly innovating and trying to find ways to bring ever more sophistication to that evaluation to that decision and and its you know that's worked out pretty well.
Will they be pulling account management support more frequently in these times you know to me determined we'll see we'll see it wouldn't be a shop.
Okay, Great that's funny appreciate it.
Once again, if you like the rest of for questions. Please press one for on your telephone and we have the question from surrender stunned with Jefferies. Please go ahead.
Good afternoon.
Well I'd like to start with a question on the scores business.
Can you talk a little bit about the strength in the BDC segment Q2 was a little bit of a color on earlier, but ill double digit growth at this point seems really strong in yet.
How should we think about the consumer in this environment and then maybe even from a competitive perspective in the sense that there are perhaps other competing services out there.
That are also trying to at least mimic providing.
Consumers in sports like information for free.
Yeah, I mean, that's been going on for years. There. There are players out there and provide non FICO scores to consumers to help them.
Hello takes to give them a sense for what their credit worthiness, but since since lenders predominantly used FICO scores, there's a mismatch there.
Consumers are sometimes confusing but.
The you know we were work we've been working for a long time and trying to clear up that confusion and make sure that consumers understand that a credit score is not a FICO score unless it's a FICO score and that the the what they're trying to put the consumer trying to understand is what's the.
Lender thinks of them what the lenders evaluation of their credit worthiness is that in the FICO scores the way to do it. We you know we have we have enrichment with experian, our partner where were experienced provides FICO scores to the consumers and their consumer offerings. We offer obviously FICO scores in our own consumer offering advice.
FICO, we think that there's more appetite and interest in that than ever.
You just kind of given the situation people are concerned about their credit and so so you know we feel pretty good about that business.
Fair enough. They did he said that some of that business is tied to to.
Origination of credit cards and to the extent that theres decline there that'll that'll flow that though.
That's helpful and then in terms of any color on his experience. The primary source of the to the BDC revenues or Mike My cycle considerable percentage as well as experienced figure that my FICO its a well revenues.
In terms of revenues yet.
Our my packed with a good business too good sized business too I don't think we breakout the specifics of it but experience also very important to that business.
Understood and then in terms of just a big picture question for the scores business. Obviously, it is a very transaction driven.
Business.
Is there consideration to may be moving more towards licensing model just to reduce some of the volatility or is there an appetite from out some clients or is there any kind of discussions.
We see I think was last quarter I believe that there was a big licensing deal.
Any color thoughts you might be having with clients, especially maybe in the current environment. We're constantly like this.
Oh, most of our sports businesses price for four.
Understood, meaning that from your guys is perspective from a strategy perspective, yeah desire for you guys to go more towards licensing model.
Well, we're pretty happy with the model that we have I don't know that we're looking to modify it.
Understood.
And then moving towards the software business.
You talked a little bit about.
The applications business versus Dms, maybe the idea being that.
How should we need maybe think about the mix of sales on a go forward basis is is the salesforce being incentivized and maybe sell dms over applications or.
During the past times, you guys have talked about that you're agnostic, but obviously.
Dms is that the platform of the future.
Right, we we have historically.
Paid a little bit extra attention to for them from a sales force perspective to selling Dms based products, but at the end of the day, we sell to our customers what they need and the CMS based fantastic and if it's not then so be it will do it that way. So as you know, we and we compensate our salespeople regardless of what it is they sell.
I think your points well taken though and as we think into the future, we likely will favor Dms sales over 90 M.S. sales.
So that you know I think that is that's the piece the business to really watch that's the future.
That's helpful and then maybe turning to expenses.
We obviously given the strength your cash flows the balance sheet as a firm I mean do you really have to speak about playing defense in the current environment theme I got the since that you guys were obviously watching expenses carefully.
Obviously, if that's good to do at any point in time, but.
How should we just think about your overall expense allocation at this point or investment versus.
Maybe what it would be under normalize conditions, yeah, how much of a difference are you guys kind of seen obviously, there's a natural component to it meaning obviously, the the less travel less marketing type stuff.
Just any color there would be helpful as well.
You know if you're asking about coal that specific kind of implications that you just mentioned, though it's it's things like travel and it's the fact that when revenues lower you know we have less expense associated with with servicing that revenue so to that part is for sure do.
Yeah, I wouldn't say that we're in a place where suddenly because of coal that our backs or to the wall and we have to rethink our entire expense structure. I think we're doing the thing that management always does which is reviewing whether every dollar as well spent and you know we are engaged in that process and new engaged in that process, but I.
I wouldn't call it an emergency or response to coded and he says running the business.
Okay understood. It not that was actually my point that you guys really do have a strong cash flows balance sheet. So that you don't perhaps need to be asked defensive us maybe other organizations.
Absolutely.
And then I guess turning to.
I guess the question being.
Just a.
When I look at the personal expenses head count up over year over year.
But the personal costs are down is that mostly like variable comp. It does is that the delta there or how should we be thinking about that difference.
Like doing take though.
Hi, it's it's two things so.
As you May recall, we had a restructuring expense last quarter part of that was to reduce headcount.
And.
So there are some of that and then also we accrued throughout the year.
Todd.
Yearend incentive bonuses.
Both cash and stock based.
Based on a certain expected outcome and not outcome could we could exceeded or or underperformed a end up rate at which we accrue those year end does have an impact on the on the period to period labor cost the big picture, though is that a head count is.
Essentially flat I think it's up <unk> percent.
Versus where we were last quarter and there's nothing significant going on in terms of the mix of compensation fronts of rate of change of compensation per person.
Okay. That's it for me guys. Thank you so much very helpful.
There are no further questions at this time.
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