Q1 2020 Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to Apple. There's first quarter 2020 earnings conference call. At this time I'll participate <unk> only load up in the speakers presentations there'll be a question answer session ask questions. During the session. On me depressed are one on your telephone you see if I put today's conference is being recorded.

Any further assistance please press star zero.

I'd like to hear the conference over to your Speaker today, Greg Mcdowell Investor Relations. Thank you. Please go ahead Sir.

Good afternoon, and welcome to Apple areas first quarter 2020 earnings call.

You will be discussing the results announced in our Pressrelease issue after market close today.

With me or Apple or a CEO, Scott Macfarlane in C.F., though Ross Tenenbaum.

Today's call will contain forward looking statements, which are made pursuant to the safe Harbor provisions of the private Securities Litigation reform active 1995.

Forward looking statements include statements concerning financial on business trends.

Impacts of covert 19 on our business and global economic conditions.

Expected future business and financial performance financial condition.

Guidance for the second quarter and fiscal year.

Can be identified by work such as expect anticipate intend plan, but leave seek or will.

These statements reflect our views as is today only should not be relied upon us representing our views at any subsequent date and would you not undertake any duty update these statements.

Forward looking statements by their nature addressed matters that are subject to risks and uncertainties that could cause actual results if her materially from expectations.

Or discussion at the material risks and other important factors that could affect our actual results.

Please refer to the risk discussed in today's press release or annual report on form 10, K. file with the Securities and Exchange Commission on February 28, 2020 and.

And our other periodic filings with S.C.C.

Reign to call. We will also discussed Nongaap financial measures are not prepared in accordance with generally accepted accounting principles.

Reconciliation of the gap and non gap results is included in our earnings press release, which has been filed the S.P.C.

Also available on our website had investor Dot <unk> Dot com.

What's that I'd be turn the call over to Scott.

Based Greg welcome to everyone, joining our 212020 earnings call.

Two one was another good quarter for Avalere.

Revenue was 111.4 million, 31% year over year.

Subscription and returns revenue up 35% year over year.

Overall are execution was south.

Experience strong new sales in January and February that that are internal expectations.

In March our new sales were impacted by the Cobin 19 crisis.

Impact continued in April.

We believe we can emerge from this crisis, even stronger than before.

Not all fast businesses enjoy the structural advantages we have.

Benefit from having market tail was at our backs.

We help businesses become more efficient.

We have a strong and sticky customer base.

We believe we are well positioned to grow within our customers segments that are doing well it occurred environment and that we are relatively insulated from the rest represented by our customers segments that are struggling.

Businesses had been forced to pivot to remote Workforces now have tangible evidence of the advantage of moving to the clouds, which helps many staff providers, including us.

Many e. commerce businesses, along with marketplaces, an e. commerce platforms that enabled them are benefiting from the current environment and we see it in our data where around half of our transaction volume comes from E. Commerce, and our revenue from customers experiencing meaningful increase transaction by is currently on par.

With our revenue from customers experiencing decreases.

We believe this crisis will accelerate businesses moved to the clouds and E. commerce, and we won't be there alongside our partners to help businesses succeed in their journey.

We partner with leading marketplace and E. commerce platform providers swirl open for business with many continuing to thrive.

When the coping 19 crisis began we quickly increased our engagement with existing in perspective marketplace in E. commerce platform part.

Reinforcing the message that they're compliance obligation continue and reminding them, but our solution put them in a position of string to press forward in this time.

I'm happy to say that the intensity of our conversation with these important partners has increased as a result.

And we expect to announce exciting new and expanded relationships in 2020.

We also believe our customer base is relatively well insulated from the negative consequences of just crisis.

Well, our customer base and small businesses more than 80 per cent of our revenue comes from our core customers and we did not see a meaningful increase in gross revenue churn in March.

While the crisis is changed the landscape our vision in our plan remain the same.

We are here to accelerate the inevitable.

Moved to compliance automation and we are unwavering in our goal to alleviate the burden of government mandated compliance requirements.

Adler supports all types and sizes the businesses, regardless of the size for tight we believe all businesses will look for efficiencies as a prioritizing optimize spam.

The pain of manual tax compliance will not diminish in the months to come in fact, it may become more acute as everyday complexities are multiplied by a patchwork of new rules.

And the deadline relief authors and short term rate changes.

Every business will be compelled to navigate the new environment.

And we will be there for those who haven't yet automated.

No doubt.

We will feel the impacts from the crisis.

But I believe are compelling R.Y. story, and the resilience business model and they insulate avalere from some of the difficulties other companies are facing.

Even before coded.

As a compliance company, we've been building and testing a system that our customers can trust.

And today that is on display.

100% of our global employees are working from home and our employee productivity remains high.

Fast company and the global business.

I've been using cloud Bayes collaboration tools for video conferencing.

Object management and other functions for many years.

These technologies allow us to bridge geographic distance. So it's been a seamless shift rest to recalibrate for the current reality.

Many investors have asked us how we're selling and I just want to remind everybody that we have a high velocity inside sales force many of whom were remote employees before the crisis, because we don't have long sales cycles or high A.S.P.'s, our sales reps rarely have to get on a plane to visit.

Aspects.

The crisis has put some of our teams into overdrive.

As global tax authorities use rates and deadlines as mechanisms to provide business release are compliance support and marketing teams have generated numerous resources for businesses to help them understand or respond to the options available.

Resources includes updates on legislative changes worldwide.

Educational assets held businesses pivot effectively to new models, the ability of customers to defer payments to states based on new legislation and promotional pricing alongside our partners.

Capturing and simplifying changing tax rules has always been our specialty.

Because understanding tax compliance complexities can be overwhelming to companies navigating the crisis.

We have made that expertise more openly available on our website.

We believe this will strengthen our existing customer relationships and attract new businesses, who want an expert help navigate new realities going forward.

Many investors understandably have questions about the mechanics of our business and how it works.

Of all our business model is designed to be stable.

Well, we certainly enjoy positive business cycles, driven by external forces like Wayfair.

We haven't suffered as much as many other businesses during previous economic upheavals.

A simple framework.

Think about our business in two parts.

What is tied to calculations and the other is tied to complain.

Let's talk about both in more detail.

We recognize revenue from our calculation product avid tax and our pricing model provide some installation against economic downturn.

EBIDTAX price plans are based on the number of transactions over the subscription term.

Our customers pay for an annual subscription based on transaction volume.

And a large majority of our customers pay up front.

Oh, you just transactions are not carried over to the next.

Subscription term.

Furthermore are transaction bands are generally quite why.

And would have to see a significant degradation in transaction volumes in order to downgrade to a different band.

Even if they chose to downgrade it renewal the impact of revenue on a percentage basis is meaningfully less than the percentage decline in transaction volume.

We also recognized revenues from a number of compliance product.

Sales tax returns that compliance returns exemption certificate management and others.

These products are not tied to transaction volumes or our customers revenue.

For example are utterance processing services are primarily charge I just subscription basis for in a lot and number of returns to process within a given time period.

<unk> stories around the world are offerings flexibility to impact with businesses.

For some tax returns must be filed on existing schedules with the option to defer payments and for others.

Both return and the payment maybe submitted at a later date.

Ultimately these returns and payments must be submitted and will provide these compliance services to our customers.

Adding value to our customers as we help them remain and compliance and understanding react to a rapidly evolving and complex environment.

We have not seen a meaningful impact and our churn rate in fact, our gross revenue churning Q1 remained meaningfully below 4%.

We believe it would be difficult costly and frankly crazy for our customers to rip out our solution and go back the manual processes, especially in this time when efficiency is so critical for so many businesses.

Of course, there's a risk that surely will increase if macro conditions further deteriorate.

But we believe churn would likely be concentrated among small businesses, which is the lower end of the market for avalere and therefore should have a lesser impact on or revenue churn rate.

I would like to now share where we've been impacted by the crisis.

I said earlier like many companies are new business activity has been impacted by cope with 19.

We don't have significant customer or industry concentration.

Where we have customers in more heavily impacted industries, specifically lodging in fuel I want to point out that these two industries each represent a low single digit percentage of our total revenue.

And they are heavily weighted to compliance products.

That are not tied to customers revenue or transaction volume.

Are cross border businesses also being impacted as a reminder, adler item classification makes it easier for customers to sell anywhere in the world.

<unk> offering that identifies and maps tariffs codes to customers products.

Because global be to see trade has been down meetings Lee.

That part of our business has suffered.

Professional services, which represents 5% of our told me revenue into one.

You're over your declined due to a very strong comparable into 119.

And lower engagement from the customers.

For our professional services as a result of covert 19.

Regarding the impact an opportunity generation the crisis has wiped out the trade show environment and it's unclear when that type of gathering will regain its flooded.

Historically Adler is use trade shows to market alongside our partners and reached their customers.

In 2020, we had planned to do more than 350 events with 100 of those already being canceled.

We are working closer than ever with our partners to find new and different models.

To reach their customers.

The summarize my thinking on the Cobin 19 crisis.

I believe Adler as well positioned to succeed in the long term.

Today, we are experiencing economic uncertainty as businesses moved quickly.

The new normal operations.

Regardless of the impact every business will be considering the efficiency and our ally of their investments and it's just makes sense.

The clouds first philosophy, when considering new tools technology and processes.

As cash flow is tight and teams are forced to slow headcount gross and further control costs <unk> cloud technology cost effectively automate mandatory compliance processes.

This return on investment.

For any business is appealing.

Especially in times of ambiguity.

This has been adlers value proposition for many years, and we sort of thousands and thousands of customers today, who rely enough to make their teens more efficient.

And processes more seamless.

Just like many other companies that are focused on driving internal efficiency, we remain vigilant about improvements in this area for ourselves.

In our last earnings call, we discussed efforts to drive efficiency within our business, including the application of machine learning to our tax and proud of content to enable new product in customer grow.

Today I went to touch on two additional programs that are driving new efficiencies for avalere teams and our customers.

Just as the migration of our returned service platforms.

Mostly our course sales and use tax returns team required to separate tools to processing file returns.

Now in a single sales and use platform are compliance team has a more streamlined platform that will enable us to process more returns per employee per month.

And we plan to integrate our other tax types like communications.

And exercise into this tool.

We have made meaningful progress in deflecting many types of support cases through better self service tools. This effort includes major projects like EBIDTAX calculation review.

Shows customers a detailed breakdown of exactly how a sales tax rate calculation was determined.

Very common inbound request.

As I introduce into for this quarter, we watch the beta of Abbott tax tax code mapping for customer Onboarding.

By deploying advanced technology in this process, we give new customers in implementation teams the ability to quickly and more accurately map product libraries to tax codes through a decision tree tool.

<unk> broader use this tool will get more accurate and further reduce this aspect of manual implementation work.

Are efficiency efforts are global our European team has moved much of the exchange of materials of documents for registration been filing services from email to a web based poured.

Enabling our compliance agents to handle more accounts.

Moving seamlessly among them and avoiding manual data transfer task.

These types of improvements reflect the relentless efforts by our product in engineering teams from which our employees customers and partners all stand to benefit.

Wrapping up we announced last month adjusting saved we had a managing director at work Pincus will be leaving the board of directors Windows Karatirm and in June 2020.

Justice contribution to Avalere since joining the board in 2014 has been invaluable.

I'm grateful for the positive impact is made on our business.

I would also like to welcome Brian's Sharples to the board, Brian is co founder and former C.E.O. formal way.

And and accomplish leader on other public company Board, such as Yelp go Daddy and Allied to natural.

Well now turn the call over to Ross.

Talk through our financial results.

Thank you Scott our first quarter results were highlighted by a continued increasing market demand with strong sales execution in January and February and it's got noted softness in March.

The first quarter total revenue was won 111.4 million up 31% 20 year over year basis.

Scripture now returns rubbing your 35%, you're the year 105.5 million, which represented in 95% of our total revenue.

Professional services revenue was 5.9 million down 12% year over year.

You are declining professional services revenue was attributable to the covert 19 crisis.

Difficult comparable as or 212019 professional services revenue blue, 92% year over year.

Our core customer count increased by 752 approximately 12710.

End up to 120 20 year over year increase with 31%.

Our net revenue retention rate with 109% up from 107% 212019, resulting in a 111% for quarter average, which is equal to before quarter average we recorded in q. for.

Our neufeld demand was meaningfully impacted in March and remained impacted in April.

However, we saw some improvement in our opportunity fun on April O.

Well with two are always to know this will sustain.

Despite the current macro environment, our customers must still calculate taxes in file returns in our business model and customer base. So far has shown resiliency we expect.

Illustrate I liked to provide you with more details on both our logo and rubbing your <unk> as well as share some additional details on our customer composition.

Hmm Q1, the number of logos that turned out of our business was actually down year over year, the percentage of our new obese.

<unk> no meaningful Upticking March.

Howard gross revenue churn, which in the past few of status in lower than 4% remained meetings, we blow four per cent into 120 20 and was on par with the rate. We song Q1 19.

We define gross revenue trying to the annual revenue contribution associated with billing accounts they cancelled.

All over their agreements with box in the last four quarters.

Divided by the total annual revenue recognize during last books.

As a reminder, our gross revenue turned design clue downgrade.

The value of which was not a significant per cent of total revenue on Q1.

While our customer base does comprised small businesses more than 80% of our revenue comes from our 12710 court customers, but hey, that's more than $3000 into traveling 12 months.

Are 2019 average core customer revenue with approximately $30000.

By taking our 2019 total core customer revenue.

Hiding by 10515 average 2009, some core customs.

As a reminder.

Include larger marketplace in commerce pop when customers that are aggregators of many of their own income.

Finally, Scott discuss a number of hours and commerce customers, along with the marketplaces in commas plop ones that enabled them.

Benefiting from the current environment.

Providing us with the opportunity to increase our penetration and that's important channel.

When discussing the remainder of the income statements. Please note that unless otherwise stated all references to our expenses.

Operating results and loss per share.

In a non got basis and our reconciled to our gap results in the earnings press release that was his food just before this call.

Gross profit was 79.6 million for Q1, 20, representing a 71% gross margin.

This compares with gross profit of 61.6 million and it's 72% gross margin in the same period last year.

Sales and marketing expense was 46.2 million come to one or 41% of total revenue.

And improvement of over 150 basis points year over year.

Meaningful investments and coupon 19 to increase our marketing and sales capacity to address stay healthy demand environment.

Continue those investments in January and February.

But slowed investments in March and April as we began to say slow down and customer demand for our product.

Hold up call the 19th.

Do you want to research and development expense with 23.5 million or 21% of revenue.

Up from 17% of revenue Q1 19.

Increase was consistent with our expectations as we continue to invest in our global file platform, including a new products content and features to drive sales growth in cost efficient.

You, one general and administrative expense was 18.1 million or 16% of revenue versus 15% of revenue in Q1 19.

R. Q1, 20 G.N.A. expense include I'm clan charges told us a 1.6 million.

Primarily related to increasing legal reserves.

Increasing our estimate how far nine income tax a cruel and higher bad debt expense.

You want non gap operating loss with 8.1 million, which was better than our previous guidance.

Nongaap operating loss reflects revenue upside in higher margin subscription and returns revenue.

Lower than expected employee costs in the quarter.

Offset by lower than expected professional services revenue in gross margins.

Nongaap moth per share was five cents in the quarter based on 77.9 million shares outstanding.

According to our Balanchine Cashflow statements are cashing cash equivalence were 450.5 million.

The end up to 128 decreases 16.5 million from 467 million at the end of Q. for 2009.

Total deferred revenue as with Q1 20 was 165.4 million.

3% from 161.2 million at the end of coupons 19.

As a reminder, our fourth quarter typically our strongest in terms of and customer demand that building.

And therefore, we would expect our first quarter deferred revenue to be flat decline as compared to our fourth quarter.

Calculated belongs in nine got metric that takes into consideration revenue into changing deferred revenue as well as the changing contract liability.

Calculated belongs where 116.7 million into 122.

21% for 96.4 million in the same period last year.

Calculated belongs with impacted in Q1 by right down to total deferred revenue.

Approximately $1 million.

Early as a result of the increasing our allowance for Dallas Fort counterbalance.

Amid the uncertainty of cold in 19.

Additionally, since our calculated belongs not trick includes total revenue.

Calculated buildings grocery was also impacted by lower than expected professional services revenue as previously discussed.

Although we normally don't discuss buildings linear already in the quarter I would like to share a little more color with respect to the month to month fluctuation.

In January and February or where you're over your calculated buildings broke with similar to our queue for 19 year over year billings growth rate.

However in March are calculated buildings decelerated meaningfully due to the crisis.

We saw an impact more in our new customer acquisition banana and to a lesser extent on up selling costs l. deal to our existing customers.

Free cash flow consumption with 25.99.

Compared to consumption of 12.5 million the same quarter last year.

Increase cash consumption and level of spending Q1 was expected and was largely driven by the payment over annual corporate bonuses colon $20.4 million.

Large insurance renewal for $3.5 million and the renewal of various software licenses for $5 million.

Free cash flow was also impacted by whiter than expected accounts receivable collections in the core.

We have stated on behalf calls.

Our free cash flow will fluctuate from quarter to quarter caused by many factors, including the timing of working capital.

Seasonality and levels of our buildings and expensive as well as our overall level <unk>.

I went now conclude the call by providing guidance on revenue and non gap operating loss for cute too and for the for Europe 2020.

Expanded the range of our guidance due to the uncertainty surrounding the cold in 19 pandemic.

Guidance is also based on the assumption that the most significant headwinds woke her on the second quarter for the modest improving the third quarter, you're a further assuming that economic conditions well more broadly open up by the end of the year.

Really.

Picking variation from these assumption could cause us to modify our guidance higher or lower.

Q2, 2020, we expect total revenue to be in the range of $109 million to $111 million.

Although not a standard practice for us to break out expected growth rate between subscription and return and professional services.

<unk> this quarter only we would like to share that we expect year over year subscription and returns revenue growth in the low to mid 20 per cent area. Why we expect professional services revenue to modestly decline your every year.

Management is focused on delivering efficient grown and it's such we are being responsible about how we manage our expenditures and cash flow.

In early March we thoroughly reviewed on 2020 hiring plan and decided to slow hiring and pasta business.

Visually we have been curtailing or delaying novice central operating expenses.

Expect are cute to non gap operating loss to be in the range of $8 million to $9 million.

Where the full year 2020, we are lowering our total revenue guidance from a range of 470 474 million.

A range of $455 million to $465 million.

Expect some mixture based on our assumption that 2020 professional services rubbing your growth will be fly this year over year.

Continued to expect our four year non gap operating loss there'd be in a range of $18 million to $22 million.

Turning to our views on cash for for the year, we have implemented responsible solutions to manage cash flow.

As a our collections began to slow as a result with the crisis.

We increase our efforts to extend accounts payable terms with vendors and take advantage of other programs that would delay cash outflow, including the difference of employer payroll tax payment.

Under the recently passed hairs that.

We continued to expect they modify both cache burning 2020.

Consistent with what we shared on our February 2020 earnings call.

However, our cash bird and maybe slightly higher due to the potential impact two buildings and increasing details outstanding.

In closing I would like to emphasize a few points to Scott touched on it was prepared remarks.

While our business is not immune from the cold in 19 crisis.

We believe we are well positioned to grow with in our customers segments that are doing well in the current environment.

And that we are relatively insulated from their risk represented by our customers segments that are struggling.

And we enjoy some business model advantages that are appealing in these trying times.

Including.

First the vast majority of our sales team is inside sales <unk>.

We expect ourselves teams can be as productive at home as in the office.

Second hour S.P.'s are modest compared to many software sales and we typically don't have lumpy implementation project or the need for people to be on site.

So we can continue to take customers live on our products.

Finally, we were on the compliance industry businesses they'll have to calculate taxes bio tax returns ever met payment.

So we believe this function is still very important relative to other software purchases business with maybe make it.

On June 23rd we will be hosting a virtual animals day for the investment committed.

Web cast of the event will be accessible on our I, our website and we will share additional details shortly.

At this point, we would like to open up the call for your question.

Thank you as a reminder to ask a question. Please press star followed by the number one on your telephone keypad.

The first question comes from Chris Merlin from Goldman Sachs.

Yeah.

Okay. Thanks, so much for for taking my question I just wanted to ask about trigger events I know, there's there's many of them you know that costs customers to become aware about <unk> in in the past year piece, then one of the bigger ones I know pointed sale replacements can can is it at least has been a big one as well, but obviously, we're dealing with much depth.

The environment now so I'm wondering if you're saying new trigger events, causing customers to come through just what what what that has look like more recently thank you.

Hey, Chris This Scott.

So as you pointed out you know, there's probably eight or nine that we call eight or nine trigger events that we call out on the regular basis, you know anywhere from P.R.P. you know the audit to change of C.F., all to moving into a different product arena.

Geography, but I would actually have to say that you know over the years you know that the E.R.P. has been you know our strongest one when somebody says hey, I'm going to go change my or P. at that time to go solve a problem that everybody knows that they have right if you're out there talking to you know country.

Holders and and C.F.O.s. They all know that they probably you know got some work to do and the sales tax arena and they take that opportunity of of any of a of an E.R.P. change or financial application change P.O.S. change whatever it is a business application change in in in order to in order to do that now.

Having said that mean, having gone through the the you know 2008 and 2009, you know so downturn that <unk> that we had we learn but probably the best trigger of them all is.

Uncertainty you know our biggest competitor is is status quo and you know when they when they are forced with having to look at our ally decisions efficiency decisions is this is what brings them to the four so I could actually make the case that the cove it environment right.

We are in right now where people are having to look at all of the they're they're inefficiency or looking efficiency measures in <unk> in order to help the business. You know this is one of the strongest triggers that are out there.

Great. Thanks, very much maybe just if I could ask one more in apologies if I missed it I'm prepared remarks, but I'm just wondering if you'd call that what percent of customers are actually trading down to a lower tier because if you know <unk> significant pressure on Rabin I know gross revenue churn it sounded like was very strong and south of 4%, but just.

If it's you'd called out the impact of that thanks.

You know, we did I I didn't call it out specifically, although that we would that we're not seeing a meaningful change and anybody you know that downgrading at <unk> at this moment in time.

<unk>.

<unk> when we look at our our transaction environment you know we see it. It's the base is very stable always the volume that are obviously bombs that are down but.

I didn't say was when you look at those that are more meaningful versus those that are much more me if way down on a dollar basis, the they're they're offsetting each other so a dollar basis the ones that are off our our our about equal to to go ones that are declining.

Great so much.

Your next question comes home style Audi from taking marking.

<unk>.

Mm.

Yeah. Thanks high guys apologized bouncing between calls so if you did cover this but I I'm curious as in terms of when we look at some of the exposure to some of the smaller you know company. So through the with the the big Commerce et cetera, what do you experiencing with that ended.

A spectrum and instead of meaningful amount of revenue. So if you see variability is it really gonna move the needle much anyway.

Well I'll give you an overview and then Ross can fill in some of it some of the detailed sterling, but so that that segment has not been a big you know sort of revenue area for us it's been a big strategic area for us.

If you you know recall you know we sort of did are you know land and expand in a in the mid market and then have been opportunistic upmarket, but downmarket, we wanted to protect ourselves through the big Aggregators and so we've done big volume deals in those areas with those you know with with with those customers and then we'll be you know.

Working overtime to monetize those relationships even more than we are today, but overall perspective, you know it it does not have a a meaningful impact on the you know on the on the business. If that were if that were to go to go South Interestingly, though you know we're seeing a lot of businesses.

I mean small businesses actually you know what our services and are thinking about doing it because it. It's so <unk> of the efficiency <unk> the efficiency aspect of it. So you know there's a good and bad tale to that to that into the market.

Yeah, <unk> throwing and then.

I would just I was that one thing because I think there's got to two questions and I want one is on the commerce side I think it's a great opportunity for us and lives as <unk>.

Causes more of an acceleration to commerce, where we stand to benefit from that so that's a positive I think the other part of your question would just small business exposure.

Yeah. There's a few few ways, we think about I mean, the court and we sat on the card 2019 average court customer revenue, which is 80% to 85% of our our total revenue. The average is $30000. So it's give it a little high from commerce the marketplace customers that are bigger, but it's still even when you're not that out that average.

Revenue for court customers pretty sizeable number that doesn't look like something that comes from a small business and then and then the other thing I would say is when you think about just start gross turn which which we said as meaningful way below.

Gross dollar turns meaningfully below 4%.

When you just think about that I didn't think about well.

Software companies that only serve small businesses have monthly churn that looks a lot like our annual churn them to say well why is that why is an hour's higher and I think that suggests that either we have fewer those classic small businesses, where the dollar pretty in significant more respect to our dollar term. So that's a little more color on on on the <unk>.

That makes sense take very much cat.

Thanks. During your next next question comes from Brad sounds from think of American Security, Yeah mine or something.

These guys I wanted to ask a quite a ride in the migration to the new platform for compliance it sounds like that could be a catalyst for communications and excise tax new cat.

A little color on on where you are in those two and and how this.

Yeah.

Hey, Brad Scott <unk>. It <unk> I'm very excited about about that about that move I mean, you know and I'm really proud of the team I mean, we've been working on this for a couple of years and we'd been you know we had our new customers all going on the new platform, but to get everybody over to it you know we had to make.

You have to make sure all of the features that everything is is is working.

Properly and so over the last you know nine months you know we've been migrating thousands of customers you know over to this new platform and it's allowing us to deprecate you know one of the platforms that we've habits for for awhile. So the efficiency of just going to you know one single platform that.

Allows you to you know better service your customers you know to help them on board to help our our our agents you know and work with them easier I mean, it's just a great benefit for everybody and then as you suggest there are areas that we can use you know to drive.

Better through a single you know more sophisticated platform. So we're really excited about that and it and it's something that you don't really proud of the team for for for getting done you know under the circumstances, because you know they they did the final you know migration of some of the biggest and and and talk test and many of the.

Customers during the cold that crisis.

Thanks, God and then then I wanted to ask about the comments made earlier on funnel improvement towards the latter part of April are used to live with that is the case is that reflected in your guidance that that sustains or are you assuming more kind of the environment that you saw you know prior.

Well yeah right.

<unk>.

No.

Huh.

I was going to say you know March we had some comments are around you know March was impacted overhead coded and April looks a lot like March there. There was there was some improvements on on the booking site on some of the subcategories of.

Opportunity fun, all we saw a nice improvement in April and in the first week I may we we we continue to see that hanging in there. So I would say, we're being very cautious we're not ready to call.

That a trend they're just some observations we want to share that that we're seeing some improvements and so as I mentioned on the prepared remarks, you know you're too and we see as being the most <unk>, we kind of mottled several scenario that we're looking at something I'm more like a your shape. So do you too.

Most most impaired some improvement in two or three and then more broadly opening up in in in Q. for.

<unk>.

Appreciate it.

Going quickly Brad honored real quickly to this that that.

When when we saw the the the Kobe crisis, then through 2008 nine personal.

I I got together with the team and we.

And our why efficiency.

Message and and the team responded really really well to develop you know lots of digital.

Assets lots of things that we can do to to drive that month of March you know the switches.

And June will prove out that that they've you know that they've done a pretty good job of of of <unk>.

No the number of people, we have come into our webinars or at at at at all time record as you might you know you might expect.

Huh.

But it it really is you know dry then do message really is driving you know a new opportunities. So we're very very hopeful that that will continue you know throughout the year.

Oh, that's great. Thanks, so much guys.

Your next question comes from pot, well, even some J.M.P. securities.

Yeah.

Right and you so much versus Joey I'm for Pat I'm, sorry, if you could talk about the opportunity she with marketplaces, and then how're you guys thinking about M. and Nancy I'm.

Thank you.

Well I'll I'll get I'll start out and Ross can jumping on the market places and then we'll.

But look I mean <unk>. This is you know we we we really believe you know in the marketplace in E.E. Commerce, and and I guess I want to remind everybody you know when we think about this this space I think of it a lot like how we got involved in the P.R.P. as in the beginning you know you got.

You get into the E.R.P.G.'s you you wind up your windows that that business use you secure those partners as as loyal partners to yourselves and then you worked with them to develop and and monetize those relationships. So for the last you know you know a couple of years, we've been really focused on.

How we are <unk>, you know working with the big Aggregators in E. Commerce, and and marketplaces like you know Shopify Big Commerce wax and and that's exactly what we've been doing and you know.

Coming along I mean, who you know just being Cove. It I mean, what is what you mean, you know nobody you know saw that you saw that happening and just the the man that is being generated in that area right now and the number of transactions in the increases that people are having is really it's really quite amazing.

And and we've been working with them you know the solidify our relationships you know to help them take advantage you know Oh, you know have they have the opportunity now, but it really is one of those kinds of things where you are just strategically getting them <unk> getting them in place, making sure that it's all working and working with them.

So you become a trusted partner and this will mine a ties itself over time, but no doubt marketplaces are up you know a strong you know a strong driver in the in in the market today.

<unk>, yeah jumping on that one.

Yeah, I think it's great I mean, I mean, the it's a great opportunity we spent.

A couple of years really developing these relationships with the important calmer spot forms marketplaces, we've expanded the team in 2009.

And it's a really great long term opportunity and you know it's time to what we think will be an acceleration of adoption of ecommerce given coven. So we're excited about the opportunities I'd say the intensity of conversations in Q1 and then.

In April or were very very encouraging you know to wait conversations on where we can be helpful. But what I'd say this is a long term game you know, there's a long term opportunity for us to have a play out we're not a G.M.B. motto, we like to say were lower beta. So you know a in tough times the base holds in and and the good stuff we'll play out.

Over the years, but we're not a G.M.D. model, where the revenue shows up immediately or goes away amelie. So as we have successive and grow up all the segment. It it'll come over time, but it's not you know don't don't look forward and cute too.

Yeah, what what I have what I have been really impressed with is that the number of strategic conversations that we're having mean you know <unk> you'd be thinking could go either way right, but for us. It really has been a big time, when we are talking to lots of different players.

Now lots of marketplaces lots of E. Commerce, you know you know businesses.

Tend to my premiere prepared remarks, I think that you know we'll start denouncing some of those things in the in the <unk> in the months in quarters to come so it's.

Good good area for us and now for Mark for M. in a <unk> <unk>.

We're in Acquisitive company and we've had you know ER areas that we've wanted to look at you know, we're always evaluating things on a building by process built by partner.

But we've got our you know we've we've we've we have you know identified some targets we would like to you know look deeper ask you know in the coming months and quarters. So we're going to continue to lean in when it comes to you know acquisitions.

Great. Thank you so much.

Your next question comes from Scott burn from need.

<unk>.

Hey, guys Josh on for Scott. Thanks for taking my question.

On the partner site, just curious how impacted is E.R.P. change events versus somebody other partner groups out there in generating leads and you have you seen any improvements specifically with your p. in the last few weeks I know you touched on this a bit but just wanted it gets more color.

Yeah, <unk> <unk>, great question, and I think it goes to sort of the heart you know of Apple era, and our in our partner model <unk> interesting ways, you know I'm, what everybody talks about <unk> I mean, I think people is just a assume that it's new business right.

I mean, we're really they're really it really boils down into two segments, you have new business of which there is not just a lot of new D.R.P. you know in the United States that are being sold on you know on an annual basis and less so you know in a in a crisis like like like we're dealing with here, but the real yeah part of the market that we're dealing with our.

R.P. customers is is worked with them with the the those that have already what we call existing customers right existing customers in the microwave and the dynamics of world. The Sage World. The Epicor World. So we're working with those companies who are you know partner channel our our team of of you know.

I am strategic account managers, we work with them in order to come up with programs that are driving their customers implement a more efficient way to do sales tax or use tax. So yeah. So it really is a moment, where we can stop and focus on the.

Thing customer bases of the E.R.P.G.'s, which is really a target rich environment, and and and and drive that that efficiency message.

Okay, Great and then I just to follow up.

Given the shift in demand for some items are you finding any products, where you didn't have tax content dealt out.

Asleep, but our surging now it customers and you're redirecting the team to build dot.

<unk> you know [laughter]. That's that's a good question. That's a good question you know I I that encourage every go look it up logging on the on the on our on our website you know about some of the interesting things that we've seen you know around you know around the Cobra crisis.

You know survival goods around the rise right you know lots of things that you would expect but we did have all that content I I've not heard of an area, where where it's just you know you know really off the charts that we did not have it not content for but I'll have to go back and check on that one because I have there.

Heard that one.

Mmm.

Thanks.

Your next question comes from <unk> from can't acquired here on without them.

[noise] Hey, guys. This is luke on for a D.J.

So I was wondering are there are differences in the profiles with customers, you're adding today versus <unk> and that is you know as in our they concentrated in certain verticals or are you seeing differences and geography, and then also or are there discernible changes in.

The types of trigger events that are driving new bucking today and over the last couple of months that you've been able to identify.

You know I I I, we have not notice you know any discernible change in the kind of customers that we're getting you know we hear this all the time you know you know some really large deals that week that we deal with and they're like milk. You know this is a problem for US. We've got you know we've got to step up we've got to make.

You know we've got to get this done you know regardless of what school of of what's going on.

And and you know we don't see it you know our customers coming in and any different area or lack of an area whether it be New York or you know, Louisiana or Arkansas. Some of the things that you know places or that are that are hit harder. We have we haven't seen a meaningful change in the way customers are are you know our our our.

<unk> by me and buying the buying the product if anything we see somebody says Hey, you know I I can't make a decision this month I want to push it off to another month I mean, we see you know we see some of that but you know for the most part it's business. It really is business as usual, although you know the way, we're talking to them around efficiency and or.

R Y. is different.

That's helpful. Thanks.

My next question comes from Brian Peterson from Raymond James Caroline or something.

[noise] great. Thanks is Alex Garland from Brian Ross I know, you mentioned being more measured on hiring but are there any there been any other ships in terms of the bucket you plan to invest in this year, whether it be international or product development automation or or is it just business as usual outside of the the hiring.

It's largely because of years old I would say is in early March we went through all the head count I mean, we're fortunate as a high grow Tech company that we can we can slow are hiring to manage expenses and we went through all the head count across the whole company and we looked at areas, where we where we can slow slow hiring.

And your take some costs out a cute you and you know we're evaluating on a weekly basis as everything involved in a very fluid dynamics situation. You know, how we want to modulate hiring. So you know we got her fingers on the dials of of of of the hiring pays what I would say is that we still look at continuing our investments in product and then.

Sneering, we have a really attractive road map or delivery of some really exciting products. This year and we'll talk more about them on animals day in June but we got some exciting products that are you know for longterm growth in for efficiency drivers and so we really are doing right. There and we want to continue making those investments. So while we are slowing all areas.

It it doesn't from the hiring I think will be more normal in the r. and d. side.

Sales, marking the good news as as we can comment on prior cause we felt we were a little bit hot behind it ourselves marking capacity had reacted in 2009 teams don't you before we were wrapping our capacity.

And that continued in January so we've got a lot of that behind us and so we modulator that further you know as coded head and will continue to look at that and then you know on G.N.A. I think I think we did have some some unexpected expenses in q. on and and I think we can get them. We can get some leverage in there so so pretty much business as usual, but but.

Although additional color right there.

<unk>.

Yeah, Yeah, we probably won't be quite as aggressive to expand internationally. This year. You know, we'll we'll just you know <unk>, probably hunker down and focus on in the you know <unk> you know last Ham and yeah, a little bit of growth in in in in in India, but <unk>, we'll probably tone it down.

A little bit Internet Internet internationally.

Got it Oh, Scott one other question for you one of those things we heard consistently is that handling a paper based documentation been one of the biggest challenges during the work from home environment.

Up to can demand for some of your digitization products like sort of pepper.

You mean.

Not not not at not as of yet, but we do believe that that is a big tailwind for the you know for the business right. I mean, the realization of what you have to what you have to do at home and in something like this really is driving people to.

To you know to really trying to play you know how how can I go you know how can I go on line how can that how can we use you know a cloud based product we didn't see some you know one of our largest you know Sir capture deals you know we've ever had you know happened into one. So you know people are looking at it it. It. It is one of you know.

Top three product line, but I haven't seen a you know a huge switched to that you know in the last you know 45 days.

Oh, thank you.

Your next question comes from Frank <unk>, Yeah alignments open.

I think you couple of questions here from me you know stopped maybe we'll we'll start with you obviously, there's going to be some some new <unk> rules that go into effect here in January 2021, I know Europe is small international is small, but walk us through the opportunity.

She is those rules go into place or is that kind of a nice to have a war cannot be a change agent to accelerate growth in Europe, and then a couple more follow ups. Thanks.

Yeah I mean, it's it's really good question I mean look at all that's going on in in Europe is is in around the world for that matter is really dry I mean, playing into our strength and driving the business <unk> you know all of the different you know all the different you know that changes and the the bitter happened.

Thing I mean ours are certainly a tail wind for us there's no being there's no question about that.

And that's why we're sort of you know doubling down you're investing in that in that in that area and we're looking at other ways to be able to you know you know deal with the videos Asian and and the like you know enemies. So.

So I would say yeah.

It will but you know covert is put it dampening effect.

On on.

On on on international for for for you know because it's just been so why you know wide spread there you know hit really hard I mean hit really hard so I mean, nobody's really pushing a lot of the initiative that were driving things and we'll see how it all you know we will see how it all settles out.

But for right now we know it's a tail when we know it will be a driver you know <unk> will be a driver's a business what are the interesting things about that is that unlike sales tax which is state I mean that is is a federal tax and so they're using that as a way too you know scoffing the blows and.

Do something to the different things. So it's you know, it's it's a political hot potato and and I think it'll have to fall out you know in in the in the coming course, we'll see how the fall out yet.

Helpful color, there and then I guess shifting to to you rush here <unk> as you look at your customer base 12000.

<unk> customers, there's a mix of those customers that are kind of offline online multi channel were clearly see acceleration too kind of the online opportunities and I. Just wondering where are you at you know intevening. Your go to market efforts to target more the online.

Businesses and <unk>, how quickly can you kind of pivot to capture what looks like pretty pretty sharp acceleration here that we're seeing it did some of the other platforms out there I get your marketplace partners, but are there things you can do to drive more opportunities top the final specifically with some of the online.

Activities happening now.

<unk>, Yeah, I mean I to me that.

That hasn't really changed we've been at that game for Awhile now you know we sat on the call about 50 per cent of our transit actually buying comes from ecommerce. So this could be pure e. commerce or this can be the evolution of <unk> storefronts that have migrated into that mix models and so we see that across our base.

And I think it's got talked about you know, it's it's not just marketplaces, but but also you know the commerce platform partners or you know the businesses that are doing it on their own and and you just do a commerce on their own that's been a big growth area for our business in the past, it's something that is woven into the <unk>.

All of our go to market are go to market model and we have many many customers are pure commerce or or mix model and I think you know how did you talked about before we really laid the groundwork over the last couple of years of getting the partners I'm, putting ourselves in a position established herself as a leader I think when you look at our <unk>.

Already to have sales tax compliance cross border International exemptions W. that were coming this multi platform, okay product plop 'em company and so in working with these customers are inherently global commerce and they have varying needs. It costs. The tax compliance journey, yeah, I just get find that <unk>.

We're shining in our ability to deep in our partnerships and and try to our customers. So again I. It's a long term opportunity and I think won't won't won't be advantage by well I agree with what you said wishes acceleration of the journey to eat calmer spot by a potential customers out there.

We we saw one or the <unk> <unk> <unk> I'm sorry, we saw what are the most interesting things.

We had a customer you know come here just recently I mean, it's very very fast you know a a household name that we all you know that you all know would know mean, they've been selling almost exclusively you know <unk> retails in in the in involved in stores all over and in 150.

10 years, they've never sold any other way than that and and you know with our you know a one of our partners one of our new you know relatively new partners Tulip retail, that's who they had selective and they and they were using outlet, we got them up and going in selling in in in just you know like record you know record time, but it's.

Brand you know never had gone on line and we do see you know businesslike that driving our way.

Very encouraging.

<unk>.

There's really around the go to market or excuse me. The other pro services business, you talked about kind of buildings being pretty good in in January February and then obviously I stepped down all the she part of that stuff down and doing she talked about being tied to pro services. So what was the Lenny area Pro services are you pay.

Any more <unk> implementation just trying to understand.

ER driver's upper services, the Runrate kind of been working and what it implies for Q. too.

Yeah, because and you you know <unk> P.S. I I think one important thing about P.F. <unk> first of all we definitely so.

Impacts starting in February from some international P.S., and then meaningful way in March including in the U.S. and I will will be on business and so so go ahead and then we're we're looking at I think the P.S. grew 92% year over year and she went 19. So we're kind of basing that you're over here comparison, which was difficult, but I think the import.

Part that I wound up people understand is that we don't have U.P.S. a they good leading indicator for our our our our subscription business. What's most important in that business is that we continue to sell an add on products expanding our existing customers out on products are existing customers and we land, new new customers and take them line.

We look at our goal lives you know in in in in March or is down from January bad, but it was at or above many of the months in 2019 and then in April was above March and so we're still doing a good job of bringing in customers and taking them live unnatural to drive subscription and so on P.S. to give me a little more color.

You have P.S. is really comprise that things like nexis studies, and voluntary disclosure agreements and registrations and even like customs brokerage support services. So little of the P.S. revenue you know for the <unk> high velocity business comes from.

<unk>. So the services are all very valuable to our customers I think right now they're focused on their business and they just want to get there the the tax headache, which I think it's become more complex and it's going to continue to work for blacks. They just want to get you know the taxes calculated and returns filed in the payments made and the other things dealing with Backfiles Nvidia I think.

I can put that on pause and come back to that later and so you know that that's the majority of the P.S. services and that's I think where we see the impact and in the guide we've kind of given some color that we see it being flatish for the year. It's just it's just difficult. It's just difficult to see you know how when that comes back and and yeah. We had a strong you're on the first half of the year.

Last year, I think we did 52% growth over your future 19, as well, but I think the important point is is we don't look at as a as a weighting indicator of the subscription business.

Yeah, and I just wanted to point out to everybody you know on the call that that you know, it's we're very conflicted when it comes to up to you know professional services, because we do not want to be in competition with our partners. You know the people who are you know, bringing us business and doing the implementation. So we walk a very fine line you know in.

In in what we're doing with you know how much we grow that business and and how much we involve the partners and we always wanting to be partner first.

Yeah, <unk> women from top to one question.

The question. Thank you.

The next customer come from that Stotler from William Blair Carolina's out then.

I guess actually taking my questions you address most of them just a couple of quick ones for me first of all you talked about you know stable customer term positive sounds like downgrades are pretty benign at this point, but outside of the kind of structured downgrade that you're saying are you seeing any requests from customers for flexibility.

In billings terms or H.T.V. early for anything like that.

Yeah, we we we have seen customers asked for.

Extended payments are so you know can we pay net 90 of them or 45, we've seen some of that it's it's a we've seen a long vacation in our day sales outstanding but it's a few million dollars. It's nothing to concerning at this point.

And and we haven't on the on the price inside.

Really customers haven't been is focused on increasing discounts for new sales, but they've been more interested in cash really and so you know I think I think that that manifests itself and and maybe giving them you know and that 90 or something longer and also we have seen some customers request instead of paying and you want a bath.

Quarterly a monthly so we are getting some of those requests it's not a significant portion yeah, but yeah I expect we'll see more of them.

Right. Okay. That's awful and then the second one from a higher level. Obviously, you guys have over the past decade, or so <unk> you know massive library of content.

That both organically anthrax positions just wondering now looking forward what kind of Ah priorities you have in terms of continue to expand content and then capabilities, whether that's geographically or in terms of different types of tax coverage thinking.

Yeah, I mean, Ross actually you know address this when we talked a little bit about you know, where where we were going to take our investments going forward and we really tried really hard to <unk> to protect you know in what we're doing around contents around development R. and D. So you know we can drive you know.

The new products that we you know where that we're bringing out the efficiency and content is just one of those and we've got you know a I think a very strong road map you know around the content that we want to deliver to fill in holes in you know into U.S. and and what we need to do you know internationally is as well as you.

Killer, you know a a me and and Brazil. So we're we're going to stay on that game plan and fill in the holes that we've had you know I've I've been saying all the way along the line. We don't have all the content that we need in the in the U.S. and we're gonna continue to you know be relentless in in in making that happened either through.

You know our own efforts through the you know the index acquisition as we can start you know point that you know that that a service to get that done and well as acquisitions when they when when they when they come up so maybe we're going to be relentless in in in driving that for.

God. Thank you for saving my questions.

But you.

Your next question comes from City planning Guy He from me do How's your mind is open.

They black not I'd like to hear you guys is doing well most of my question <unk> just a quick.

Question, you talked about you know revised sergeants lawyer I'm, just wondering where did you see the in fact more between your you know calculation business versus contents, yeah, 'cause talks about the business model, just wondering where they.

Do you expect more impact.

Yeah, I mean, I I think.

<unk> one when we think about sort of roughly half of the subscription businesses compliance and so that's not really tied to you know transaction volume or anything like that so we feel really low inflated and then we've talked about how the other half is calculation and we feel you know reasonably well inflated there because of how are our pricing model, where we price and why.

Bands and and so customers have to be meaningful way impaired and and they'd have to you know to they'd have to <unk> meaningfully imperative downgraded in the way the pricing models built yeah. The the they're pretty wide. So it's hard to get downgraded and then.

Impact a on revenue to US is is less than the impact the transaction volume. So so there's really good good reasons why we're inflated across the board and as we talked about our turn a downgrade.

It is looking good so far not sure how to play all going forward, but so far the base is really stable and and and the metrics matches look good we think about guidance for 2020, you know I'd say three I I'd say I'd say, we we spoke about three things right.

We model of your scenarios V. shape, you shave l. shape, we kind of zero in on the your shape.

As we might have those scenarios were able to get the boundary is high and low on you know what revenue can look like for the year wherever they get comfortable around the those boundaries and and a three hours. We looked that was just sorta that shape of the curve and how it'll affect new new bookings and so cute to be the hardest hit and then two or three improving from there and q. for.

Opening up more broadly and then the second part is is turn you know as as I commented is is just what do we think about turned in March was was good April was on par with March. So so far was really saying a stable and going base. It could object, we did motto and assume some optic we expect it would but so far it's it's been it's been holding a nicely.

And then the third one is we've got a bunch of new products coming out this year and some of them we had projections for revenue in the back after a year, we're still going to launch those products and we still are going to focus on getting revenue from those products, but yeah. I think in this environment that could dampen our expectations that has dampen our expectations for what we expect out of those products.

Kind of those three things and the scenario motto I talked about is how we got our arms around the gangs.

Yeah <unk>, thanks for taking my question.

<unk>.

Yeah last question, sometimes Danielle Chester from City Carolina's open.

Great. Thanks to everyone and thank you for squeezing the N. <unk> first on the the growth opportunities you talked about this a little bit earlier about being opportunistic going up market I guess, how old is that's rank in your gross priorities given that going up market might be a little bit of a higher touch sale, which could be a little more difficult than the current.

Environment. So it's the first question and then the second question is you know when state and local jurisdictions Changeup started the filing date.

You know for how does that impact you you know, especially for the customers that aren't on a subscription for for for tax returns that shift the revenue to add any incremental costs on your side you know any insight there would be great. Thank you.

So you know I'll I'll take the M- Ross you want to take the last question first and then we'll we'll we'll we'll we'll deal with the other one go ahead.

Yeah. So we've we were monitoring and cataloging the changes that it that jurisdictions, you're making allowing that our customers to delay file. Some cases, you can delay your payment, but you have to file. Some cases, you can lay filing as well, but what I would say is over the past few years, we really move.

If the compliance business too, mostly annual subscription paid up front and so the returns revenues recognize ratably. There still are some I call pay as your file so you're not we file we bill and recognize the revenue, but it's become wrote a significant majority and minority have a compliance and most of his annual recognize right.

And so you know we could see that small minority you know if if your file a little later it might shift some revenue, but but but we don't see that as a as a really meaningful impact in into into revenue.

<unk> can you repeat the first question.

Sure are just ongoing a up market yeah. It feels like in this environment it might be a little bit of a difficult high touch sale kind of where does that ranking your priorities right now.

You know I mean look at me, we're we're going to continue to be opportunistic and the enterprise space I mean, yeah, yeah, and <unk> and and when I say opportunistic the thing that I really mean about opportunistic is that we don't change our sales motion. We don't you know in the way. We go after the you know the upper end of the mid market is the same way we.

Oh, you know against you know me up market into the enterprise space. So for US there really is no change in sales motion and and and we're going to be as aggressive as doing those opportunistic change. It means opportunistic ideal as we as we possibly can we do quite a number of those you know every every quarter.

I wouldn't say is we're in the we're just in the process of you know having are are limited availability you know our custom rules you know and that's really the the biggest elements that I talked about in the past that we need to have as a feature in order to really go up market and we.

Then you know driving towards you know getting that release and bringing that out over the you know the coming quarters and so yeah. We have our sights set on on on continuing to be opportunistic and and and <unk> and moving off and hopefully it will coincide you know with the loosening of you know of all.

The you know the total that you know issues. So yeah activity really good timing for us.

Right, Thanks very much.

Thank you.

We have no further question I would like to <unk>.

Crown coupons and see how the closing remarks.

I want to close by saying thank you.

And congratulations on this first or any golf without with Apple era, and the all the employees for your adaptability.

Our customers and partners for your trust, we will navigate the coming months together and I'm confident that Avalere will emerge from this crisis stronger as a team.

It isn't valued technology to our customers and partners.

Thank you all for your interest in Avalere and we look forward to talking to you on next call. Thank you very much.

<unk> Conference call. Thank you for your participation you may not disconnect.

[noise].