Earnings Call: Q3 2015

Nov 5, 2015

Good day, ladies and gentlemen. Welcome to the Shutterstock 2015 third quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will follow at that time. If anyone should require operator's assistance during today's conference, please press star then zero on your touch-tone telephone. As a reminder, today's conference is being recorded. I would like to introduce your host for today's conference, Mr. Craig Felenstein, Senior VP, Investor Relations. Sir, please go ahead. Thank you, operator. Good morning, everyone. Thank you for joining us for Shutterstock's third quarter 2015 earnings call. Joining me today is Jon Oringer, our Founder, Chief Executive Officer, and Chairman, and Steven Berns, our Chief Financial Officer. During this call, management may make forward-looking statements that are subject to risk and uncertainty, including predictions, expectations, estimates, and other information. These include statements relating to the expansion of our addressable market, the success of new product offerings, including products we recently acquired, revenue growth and predictability of our revenue, adjusted EBITDA, equity-based compensation, taxes, and capital expenditures. Our actual results may differ materially from the results predicted. Reported results should not be considered as an indication of future performance. Please refer to today's press release and the reports and documents we file from time to time with the U.S. Securities and Exchange Commission, including the section entitled Risk Factors in the company's Form 10-K filed on February 27, 2015, and any risk factors included in our subsequent quarterly reports on Form 10-Q for discussions of important risk factors that could cause actual results to differ materially from those discussed in any forward-looking statements we may make on this call. On this call, we will refer to adjusted EBITDA, non-GAAP net income, and free cash flow, which are non-GAAP financial measures. You can find its release, which is posted on the investor relations section of our website. We believe that the use of these measures provides important additional insights for investors. However, these non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. With that, let me turn the call over to Jon. Thanks, Craig. Thank you everyone for joining us this morning. Shutterstock's sustained financial momentum continued during the third quarter as our focus on delivering an unparalleled user experience continues to attract an increasing number of customers and contributors to our platform. The backbone of that user experience is ensuring we have both the highest quality and the most diverse selection of content to meet the creative needs of our clients. Product matters. I mentioned this last quarter, and it's what we hear from our customers every single day. They come to Shutterstock because they're confident they will be able to efficiently find that ideal piece of content to help them create a high-quality project for themselves and their clients. Delivering on that expectation by offering the freshest and most robust content library is a primary focus of our entire team. During the third quarter, we added more content than ever before, growing our library by nearly 6.6 million images. That's 67% more than we added in Q3 of 2014. Shutterstock's library now includes over 65 million photos, vectors, and illustrations, along with over 3.3 million video clips. While the scale of our library is certainly attractive to our users, equally important is the quality of the content we provide and our state-of-the-art processing operation that vets every single piece of content that's submitted to ensure only the most suitable content is included. We continually hear from our engaged customer base that Shutterstock's library, along with our cutting-edge search technology, is a true differentiator, and they begin their creative process by coming to us for their content needs. Our focus on providing the best overall experience has resulted in sustained customer growth, with over 1.4 million customers licensing content in the past year alone. Our existing customers continue to return regularly, with revenue retention once again over 100%. As we deliver sustained operating performance, we have also continually invested in new tools and capabilities to better meet the needs of existing and potential customers. Evolution has been a key tenet of our success over the past 13 years, and we have transformed from a single subscription e-commerce image business into a company with a diversified portfolio of content offerings, servicing the needs of businesses of all types and sizes globally. In the past nine months alone, we have updated the way our subscription customers download content, introduced a smaller subscription offering, implemented new search functionality, expanded into new geographies, acquired new content types that complement our existing businesses, and continue to invest in additional products and functionality that will deliver long-term growth, all while delivering organic revenue growth of 28% and adjusted EBITDA growth of 32%. These financial results are largely driven by investments we began making several years ago, and which we have nurtured over time. Starting in 2011, we made a concerted effort to better serve the needs of larger organizations by building a dedicated sales force, investing in user management functionality, curating content, and providing greater legal protection to customers, and the result has been remarkable. In only four years, the enterprise business has grown to well over 20% of our overall revenues. We now have more than 22,000 enterprise users, up over 50% versus the third quarter last year. With less than 2% of our existing customer base converted to enterprise accounts, we still have plenty of opportunity to upgrade existing e-commerce clients over time. We are also seeing higher engagement from enterprise customers, with total downloads, including both comp and paid, nearly doubling versus the same period one year ago. Another area we invested in several years ago, which is delivering significant growth today, is our video business. We recognized early on that media consumption was evolving and customers were looking for moving images to include as part of their advertising campaigns, website designs, and corporate presentations. By investing in diverse asset types from SD video to HD video to 4K video, we can satisfy the video needs of a wide array of users. In this quarter, we further enhanced our video collection through a partnership with Red Bull Media House, where Shutterstock will serve as the exclusive distributor of their unique video collection beginning in 2016. This agreement demonstrates our commitment to provide the best content to our customers and is evidence of the appeal of our platform to content creators. Investments in enterprise and video over the last several years are delivering substantial growth today. While we maximize the opportunities in these businesses, we are also investing in new products such as editorial and music, where our customers are looking for additional selection to satisfy their diverse content needs. We are confident that success in these content genres will reinforce growth in all areas of the business and broaden overall exposure to the Shutterstock brand. We're also investing in workflow. Our acquisition last year of WebDAM, a cloud-based digital asset management service, has further integrated us into the workflow of marketing and creative professionals, and we see additional opportunities to expand the tools we offer to our users. I'm really excited about some of the new features and functionality we're working on, and with the recent addition of our new CTO, Anshu Aggarwal, we expect to deliver significant progress on this front over the coming months. Overall, we are still very much in the early days of maximizing the opportunities we see across the creative landscape. With our traditional e-commerce business continuing to expand and with the investments we have made over the last several years driving significant growth, we expect to continue delivering strong financial results while also investing to build long-term value for our customers, our contributors, and our shareholders. Our capital priority remains investing in the business. However, we firmly believe our share price should not reflect the financial growth we are delivering, the overall value we are creating, and the opportunity ahead as we execute our business plan. As a result, our board has authorized a $100 million share repurchase program, which Steven will expand upon in his comments. Having a repurchase plan in place will allow us to return capital to shareholders while continuing to maximize the long-term potential of our business. Before I finish up, let me welcome Steven, our new Chief Financial Officer. I'm excited to have him on board as we look to further drive our business and exploit the growth opportunities that remain ahead for Shutterstock. I will now turn the call over to Steven to walk you through our financial results. Thanks, John, and thank you everyone for joining us this morning. Having served on the board of Shutterstock for the last two years, I have seen firsthand the unique opportunities ahead for the company, and I am extremely excited to be joining John and the entire Shutterstock team to grow this powerful platform. Before I discuss this quarter, please note that we have posted a presentation on our website which contains supporting materials for today's call and other items we will discuss. As John mentioned, Shutterstock's industry-leading marketplace continues to attract more customers as well as more contributors, and this momentum once again translated into strong financial results in the third quarter, with revenue increasing 28% versus the third quarter a year ago. Excluding the impact of currency as well as contributions from PremiumBeat and the Rex acquisitions, both of which closed earlier this year, in January of this year. Excluding those, our third quarter revenue growth was approximately 25%. This was driven by significantly increased contributions from our expanding video and enterprise offerings, as well as growth from our traditional e-commerce business. We continue to see positive trends across all key metrics as we attract new customers across multiple content types and build increased customer lifetime value. This past quarter, our user base expanded to more than 1.4 million customers, including a more than 50% increase in our enterprise customer base during the same period. We also saw a 22% increase year-on-year in paid downloads, primarily from a higher level of activity across our subscriber base in conjunction with the new monthly download limits and the 350-image subscription plan we introduced last quarter. This increased engagement is expected to deliver greater lifetime customer value from longer retention as customers further integrate our products into their daily workflow. We also continue to see growth in revenue per download, up 4% year-on-year in the third quarter, reflecting the impact of higher enterprise sales as well as increased consumption across our video, editorial, and music products, which carry higher effective prices. The increased usage across our subscriber base and lower price point for the new 350 subscription plan partially offset the impact that these new businesses had on revenue per download growth. As I mentioned, we do anticipate that they will increase the overall lifetime value of our customer base. As Shutterstock generates strong revenue growth across a diverse set of asset types, we are also benefiting from the geographic diversity of our customer base. Currently, 39% of our revenues are from customers in North America, 33% from European customers, and 28% from the rest of the world. Each of these regions is growing at double-digit growth rates, and we continue to see strong momentum in nearly every country and region, including, most notably, Korea, Germany, and the United Kingdom. While 70% of our revenue is generated from customers outside the U.S., only approximately 30% of that revenue is exposed to currency fluctuations, primarily the EUR and the GBP. Given that we record revenue at the exchange rates at the time a product is sold, as opposed to when the actual download occurs, the impact of currency movements on our financial results tends to lag the variability of market currency rates. Assuming current exchange rates are sustained, we expect to still see a meaningful negative impact from currency movements in the fourth quarter of this year versus a year ago. However, the impact is expected to be less than that that occurred in the third quarter of this year. Shifting to the cost side of the business, we continue to align our spending with the revenue opportunity we see across our platforms. Operating expenses increased 33% versus the third quarter a year ago, with the primary driver being the higher contributor royalties associated with our growing revenue. Contributor royalties were approximately 29% of our revenue in the third quarter, which is consistent with the rate from the prior quarter. Overall, our contributor royalty payout percentage may increase slightly over time as we generate additional revenue from businesses that traditionally have higher royalty rates, such as editorial. However, the contribution dollars from these products will be greater due to their higher price points. Given the overall relative consistency in our contributor payout ratio, our gross margin remains steady at approximately 60% this past quarter, which number excludes the impact of both currency and acquisitions done in 2015. Sales and marketing expense increased 30% versus the third quarter a year ago and was approximately 24% of revenue excluding stock-based comp. We are seeing higher keyword costs due to increased competition. It is important to note that our total marketing spending as a percentage of revenue is essentially unchanged versus the prior year quarter. The return on our marketing spend remains strong as we continue to drive new customers to our platform while keeping retention and repurchase rates high across both subscription and on-demand products. G&A expenses increased 70% in the third quarter, excluding stock-based comp, slightly higher than expected, driven primarily by increased personnel costs, including severance associated with certain executives. Product and development costs increased 13%, excluding stock-based comp, due primarily to increased headcount to support our new business initiatives. Overall, our revenue growth, along with a controlled cost base, is translating into solid adjusted EBITDA growth. On a reported basis this quarter, adjusted EBITDA increased 11%. Excluding the impact of currency, contributions from acquisitions, and one-time severance costs, our adjusted EBITDA growth was approximately 27% and adjusted EBITDA margin improved over 30 basis points as we benefited from additional operating leverage this quarter. It is important to note that while we are delivering this operating leverage, we continue to invest in personnel, product development, and technology so we can further strengthen top-line growth and continue to innovate. GAAP net income in the quarter was $4.1 million, or $0.11 per share, as compared to $5.3 million or $0.15 per share in the third quarter of 2014. The decrease primarily reflects the improved operating performance, which was more than offset by increases in stock-based compensation, amortization of acquisition-related intangibles, and changes in the fair value of contingent consideration related to acquisitions. Non-GAAP net income, which is defined as primarily excluding the after-tax impact of non-cash equity-based compensation expense, as well as amortization of acquisition-related intangibles and the changes in the fair value of contingent consideration. That non-GAAP net income number increased 5% in the third quarter to $10.1 million, or $0.28 per share, as compared to $9.6 million or $0.27 per share in the third quarter of last year. Dollar share repurchase program. Our first priority for capital allocation remains unchanged, and that is investing in our business and external growth opportunities in excess of what is needed for such opportunities. We will use such capital to repurchase shares under this program. The pace of our repurchasing activity will be determined by, among other things, the scope of our strategic initiatives and the opportunities presented by the market price of our shares. Looking at the rest of the year, we remain very encouraged by the operating momentum across the entire business. Despite the recent shutdown of our e-learning Skillfeed platform, the continued negative currency impact on our business, and higher severance costs than originally anticipated, we remain confident in our full-year guidance. For the full year, our 2015 guidance remains unchanged at revenue of $425 million to $430 million and adjusted EBITDA of $82 million to $85 million. Given the few items I just mentioned, that is the impact of foreign currency rates, the shutdown of Skillfeed, and the non-recurring severance amount, given those items, we do anticipate that revenue and adjusted EBITDA results will be at the lower end of this guidance range. For the full year of 2015, we also expect non-cash equity-based comp expense of approximately $31 million. An effective tax rate of approximately 44%, and capital expenditures of approximately $17 million. With regards to 2016, we expect another year of strong, profitable growth from the sustained momentum across our various businesses. We are currently finalizing our 2016 business plan, and we will provide prospective financial guidance on our year-end. Jon and I would be happy to answer any questions you may have. Operator, can you please prompt the participant lines for questions? Thank you. Ladies and gentlemen, if you have a question at this time, please press star, then the number 1 on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from the line of Youssef Squali with Cantor Fitzgerald. Your line is open. Please go ahead. Thank you very much. That's Youssef Squali at Cantor. Your growth is quite a bit lower than what you've done in prior quarters. I was wondering if you can maybe help us just carve out the impact of FX, impact of the accounting change that you've had, and maybe the impact of some of the pricing pressure you may have had from Adobe's On Demand offering. Jon, on that last point, you've been testing lower prices for your On Demand. I was wondering if you can share with us what you've learned so far, the importance of price as a part of the overall value proposition, and how that may move as we move forward. Per download number, that 4% increase goes to growth of 9%. Once again, ex FX, ex foreign currency movement, it's a 9% growth rate. In addition, the revenue per download metric and the paid download metric, which was up 22% this quarter, go hand in hand and are really good indicators of our subscription business. We feel positive about that. As it relates to the pricing- I can jump in and talk about pricing. We've been testing pricing for 13 years at Shutterstock. We also have our 1.4 million customers vary in job title and type of job. We have everyone from the independent graphic designer, all the way up to the biggest agencies in the world, and we have to price accordingly for all of these users to make sure that we serve all of them at once. That's why we've always tested price, and we've always tested packaging, and we'll continue to do that. The price testing that you see us do today is not due to any change in the competitive environment. We've made changes to our pricing and packaging since day one, and we'll continue to do that. Today, we'll continue to do that and interview the customers that we cater to. What was the growth trends if we just looked at the subscription side of the business, separate from the On Demand? Has the growth rate for both segments changed materially quarter to quarter? I would say that the subs are growing nicely, but a little bit slower than the On Demand. We don't break out those specific criteria as sometimes, as Jon indicated in his prepared remarks, go from an e-commerce customer to an enterprise customer. It's not as if there sometimes isn't movement among the landscape of customer types. Got it. Thanks. Nice quarter. Thank you. Our next question comes from the line of Lloyd Walmsley with Deutsche Bank. Your line is open. Please go ahead. Thanks, guys. A couple questions if I can. First, last quarter you mentioned broad weakness across Europe. Can you kind of give us an update on how trends look in Europe? Maybe some color on what might be going on there or may be no longer going on there. Then, you all mentioned external growth in your prepared remarks. Is there any interest in kind of any of the incumbents that might eventually be for sale, or is that not an area where you would be interested? Thanks. We start with the European question. It's still choppy in Europe, but we see good growth. It's growing nicely. We think certainly stabilization in the overall economy in Europe is a good thing for all businesses, including ours. We continue to have expansion opportunities across the continent, and that's a positive. As it relates to the M&A, I'll flip it to Jon in a second, we're focused on our business. We're focused on continuing the innovation that has driven Shutterstock to be a leader in this space, and we continue to expect to do so. Clearly the noise that's in the marketplace is, once again, just noise to us, we certainly are focused on the opportunity that we have with both existing and potential customers. Yeah, to further expand on M&A, we monitor several companies. We talk to several companies. We talk to everyone in our space. We started 13 years ago with a unique offering that delivers exactly what the customer wants, and we've innovated our product over the past 13 years to give our customers exactly that. We've done incredibly well. We're growing organically. We're going to continue to do that, but we do look around opportunistically for acquisitions. As you have seen over the past couple of years, we make them when they make sense. We will make them in a way where we continue to push the boundaries of the market and make sure that we're not going backwards, but going forward into what the customer wants in the future. Any deals we would look at, of course, are going to be financially accretive. When we talk about financially accretive, we're focused on cash returns. We're not looking at anything just because it happens or may be for sale. Okay. Just on a housekeeping basis, you said enterprise customers grew 50%. Can you give us an update on the revenue, or should we just assume it's more than 50%, given greater than 100% revenue retention? Yeah, we don't really disclose that level of detail, let us take the question, we'll come back to the broader group if we think that that's going to be helpful as we go forward. The enterprise is becoming a much bigger part of our overall business, still significant opportunities in the future to grow. Great. Thank you, guys. Sure. Thank you. Our next question comes from the line of Aaron Kessler with Raymond James. Your line is open. Please go ahead. Great. Thank you. If you could talk a little bit about maybe how Shutterstock, how you integrate with the enterprise customers. I think obviously one of the pitches of Adobe is maybe better or improved integration given the Adobe Cloud. If you could just talk about how your kind of integration compares versus them, and your feedback from customers, if that's even a factor that they consider. Thank you. We know that our customers come to us to find the best image for their product. We know that a lot of customers start with the image, and that's what we have been focused on, and that's why we sell four images every second to businesses around the world. We're also focused on workflow, and we'll continue to expand the business as necessary into different ways that make sense to help the customer. Great. Any update just on the music side of the business? Obviously, still early at this point, but any updates you would highlight there? It's still early. We're very happy with our acquisition of PremiumBeat. It's a great team, great product. They're experts in the area. They're still, in our opinion, the leader in product in stock music. We're going to continue to integrate that business where we see it fit and to help our customers find music for their footage projects. Great. Finally, is there anything you can quantify on Skillfeed revenues or expenses that were associated with that business? Thank you. A couple of million dollars for the year in revenue was what was expected. Great. Thanks a lot. Sure. Thank you. Our next question comes from the line of Blake Harper with Topeka Capital Markets. Your line is open. Please go ahead. Thanks. I wanted to ask you first about the API strategy then some of the partnerships you've had with Facebook and others. Facebook recently announced they had 2.5 million advertisers. You talked in the past about, I think, when you originally had the partnership with them, they had about 1 million advertisers, just wanted to see if there's an update there, Jon, about any traction that you've gotten with Facebook advertisers. Yeah, we see the API continue to be an important part of our business. We're looking to grow it across the board. We have lots of different partners. Facebook is one of them. Facebook is a great partner. It's helped us get a lot of other partners, we're going to continue to grow the API part of our business, we don't break out any details from there. Okay, thanks. Then just one more, Jon. I was just curious on your thoughts about contributors putting up content on other platforms such as Adobe, I know you've always been non-exclusive and open, but just wanted to see if you have noticed that trend at all with some of the content that you have on Shutterstock put up more on other platforms. What do you think about that? Yeah. We still have the best experience, we will continue to have the best experience for our contributors. They make more money with us. We know that. We can see them talk about it. We continue to grow our library at a very fast pace, as I said in my prepared remarks, with a few details and numbers. We're going to continue to focus on the product side of our marketplace for contributors, just like we do on the customer side that we've done ever since 2003. We've gotten to know this process very well. It's very efficient for us. We're able to take in a lot of content, we know exactly how to prioritize that content for our customers so that they get the best content that they need for their project as quickly as possible. Great. Thanks, Jon. Thank you. Our next question comes from the line of Rohit Kulkarni with RBC. Your line is open. Please go ahead. Great. Thank you. A couple questions. I guess just one philosophically on the 2016 guide. I know you are one of the ad companies that used to give an annual guide a year out. Just wanted to dig in a little bit deeper as to anything in particular you think has changed as to why you may not be prepared to give a 2016 guide today. Alternatively, can you provide any color about what you think are fundamental differences in perhaps mix shift in the business affecting gross margins, mix shift in media downloads affecting any particular contributor payout ratios, the way we need to think about year-on-year comps for 2015 and 2016? As it relates to 2016 guidance, I joined as the CFO at the tail end of September. We want to make sure that we complete our 2016 business plans before we give any external guidance, and therefore this is just a question of making sure that we do that and allocate our resources and investments and initiatives in a way that drives profitable long-term growth, and then we'll discuss this impact on 2016 in the first part of next year. I wouldn't read any more into it than exactly that. I think in terms of the fundamental differences and the opportunities and some of the key ratios that you talked about, we see customers growing nicely. We see contributors growing nicely. We see greater engagement that is happening both with our customers and with our contributors. As Jon talked about, we've made a lot of investments. We've invested about 300 to 400 basis points of margin in building out additional functionality and tools, and as these items go live, we expect to even increase that in terms of the level of engagement that we see from both our customers and contributors and making the platform as relevant as it can be to the workflow of each party. Okay. If I could just ask on the Q3 trends, as far as the gross margin is concerned, I know you called out a couple of things, and I believe in your 10-Q, we would be able to see what the breakdown in the gross margin is. Ahead of that, any particular thing you would be able to highlight as to what led to year-on-year decline in gross margin? Yeah. The big impact was currency. Other than the currency impact and the impact of acquisitions that we mentioned in our prior comments, there wasn't any material change. Once again, I think it's 60% was what I talked about. I think when you see the Q, which will be filed tomorrow, certainly if there's any follow-up question, I'd be happy to take it. Okay. Thank you, Steven. Nice quarter. Thank you. Thank you. Our next question comes from the line of Brian Fitzgerald with Jefferies. Your line is open. Please go ahead. Hey, guys. Any update around the Penske agreement? How has that ramp been going? Any comments on the potential you see for that in 2016 and beyond? Maybe also, could you talk a bit about the relationship you mentioned with Red Bull? I believe it's kind of video-centric. I'd love to hear your thoughts on that. Thanks. Yeah, sure. I'll jump in. This is Jon. The Penske deal is super important for us. Penske, along with our Rex acquisition, cemented our entry into editorial and gives us a pretty good head start. We continue to build that business out, and Rex is doing well, and we're talking to a lot of our enterprise customers that need this content. The other great thing about Penske is that it's exclusive to us. It used to be with one of the other companies in the space, which you know about. They trust us today to grow with them, to sell their content, and to build an editorial offering that is differentiated and customer-centric, which is not what it was before. We look forward to building out editorial, and we look forward to it being a good part of our business. For the Red Bull deal, same thing. Content is coming towards us in different ways, in better ways, we're finding that the most amazing content out there, their owners are realizing that Shutterstock is the place where we know the future of the customer, we'll be able to sell it the best. Again, Red Bull is an exclusive deal with us. These are important deals for us. Great. Thanks, Jon. Thanks. We have time for one last question, operator. Our last question will be from. Okay. I'm sorry? We have time for two more questions. Sorry. Our next question will be from the line of Ralph Schackart with William Blair. Please go ahead. Good morning. Two questions, please. First, maybe Jon, video sort of trends broadly. It's a pretty strong theme. Seems like you're seeing some early traction on that. Maybe give your perspective on how you see the video content product playing out for you, maybe over the next couple of years. The next question, just on the LTV sort of calculation. On one hand, you called out increasing ad pricing, but on the other hand, you're having the mix shift to subscription, which would make your customers stay around longer. Can you sort of give us an update in terms of if there's been any material change in the overall LTV equation? Thank you. Yeah. I'll jump in on the video part and then hand it over to Steven Berns. The video world is still evolving. We were the first in this space to build a crowdsourced marketplace for video. We've learned a lot. We continue to learn. It grows well, and we continue to see more and more still image buyers move over to video as the tools become easier to use. Not only do they move over and start using some video, but they continue to integrate it in with products. Audio is important to video, and that's why we made that PremiumBeat acquisition. That's why we continue to focus on audio also because video needs audio. It's a great product for us. On the LTV, we see this as really fairly steady. The higher price points on enterprise, the higher price points on video, the higher price points on our Offset collection are all significant, and they are offset, if you would, by some higher marketing spending. However, as I mentioned before, gross margin dollars, contribution margin dollars are higher. We're still seeing four to five times the lifetime value of a customer versus the cost of acquiring that customer. We feel a positive trend, and certainly one that we need to be mindful of and treat with the same fragility as anybody would treat any customer as we go forward and make sure that we're continuing to press hard on maintaining that ratio, if not improving it. Okay, thank you. Now we have time for one last question, please. Thank you. Our last question comes from the line of Dean Pressman with Morgan Stanley. Your line is open. Please go ahead. Thanks for taking the question. Just one. For your $199 subscription plan, can you provide some color on the % of subscribers that use more than 350 images in a month? Yeah, we do not detail that usage. Once again, it's also an evolving landscape where you have customers who are either shifting among subscriptions. We are seeing a nice uptake of the 350 product from on-demand customers. Once again, we continue to, as Jon said, as we've done for the past 13 years, we continue to make sure we have an appropriate offering for customers based on their usage and need patterns over time. Great. Thanks. Thank you very much. Thank you very much, everybody, for joining us today. We appreciate your time. If you have any follow-up questions, please let us know. We're here to answer anything you might need. Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect.