Skillsoft Corp. (NYSE:SKIL) Q1 2024 Earnings Call Transcript June 6, 2023

Skillsoft Corp. misses on earnings expectations. Reported EPS is $-0.21 EPS, expectations were $-0.18.

Operator: Greetings and welcome to Skillsoft Corp. First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chad Lyne, Head of Investor Relations. Thank you. You may begin.

Chad Lyne: Thank you, operator. Good afternoon and thank you for joining us today for Skillsoft’s earning call to discuss our first quarter financial results for the quarter ended April 30, 2023. Participating on today’s call are Jeff Tarr, Skillsoft’s Chief Executive Officer; and Rich Walker, Skillsoft’s Chief Financial Officer. Today after market close, Skillsoft issued a press release announcing it’s financial results. As a reminder, today’s earnings release is available on Skillsoft’s Investor Relations website. Before I hand the call over to Jeff, I want to remind you that today’s call will contain forward-looking statements about the company’s business outlook and expectations, including statements concerning financial and business trends, our expected future business and financial performance, financial condition, and outlook.

These forward-looking statements and all statements that are not historical facts reflect management’s current beliefs and expectations as of today and therefore are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks described in the Safe Harbor discussion found in the company’s SEC filings. During the call, we will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. References on this call to pro-forma results referred to our results that have been prepared and presented to reflect historical periods as Codecademy had merged on February 1, 2022.

Unless noted otherwise, all comparisons on this call to prior year results are being made on a pro-forma constant-currency basis which represents first quarter 2024 local currency amounts translated at prior year foreign exchange rates for the comparable period. We also want to note that we have updated our naming convention for our two reportable segments. Our previous Skillsoft Content segment is now called Content & Platform to better reflect our differentiated model of owning and delivering content through our SaaS-based AI-driven learning experience platform. This segment includes Skillsoft Codecademy and our coaching offering. Our previous Global Knowledge segment is now called Instructor-led Training to better reflect our delivery of technical skills training to virtual and in-classroom training.

With this naming convention update there has been no change in our disaggregation of revenue or expenses compared to how we’ve reported segment financial performance in the past. A reconciliation of the non-GAAP financial measures included in today’s commentary to the most directly comparable GAAP financial measures, as well as how we define these metrics and other metrics is included in our earnings press release which has been furnished to the SEC and is also available on our website at www.skillsoft.com. After our prepared remarks, Jeff Tarr and Rich Walker will be available to take questions. With that, it’s my pleasure to turn the call over to Jeff.

Jeff Tarr: Thanks, Chad. Good afternoon, and thank you for joining us. We had a strong start to the year building on the momentum that we shared on our fiscal 2023 fourth quarter call. I’m pleased to report that in Q1, we delivered near double-digit bookings growth in our Content & Platform segment, generated record high dollar retention rates, and expanded pro-forma adjusted EBITDA margins while continuing to fund important growth investments in content, platform, and go-to-market. On today’s call, I’ll discuss a number of important market trends and strategic priorities intended to extend our lead in enterprise learning. I’ll also share a few operational highlights that are driving our improved performance before turning the call over to Rich to cover our financial results.

I’m excited and encouraged by what I believe are important long-term structural tailwinds. Historically low unemployment has been a constant and businesses remain focused on getting more from their existing employees. Further, the pace of technological change has been relentless exacerbating technical skills gaps. This in turn continues to elevate talent development as a C-suite issue with surveys highlighting reskilling as a top priority for CIOs and their senior teams. This is driving a shift away from a more price-sensitive check-the-box approach to online learning towards customers taking a more strategic enterprise-wide approach to skills development. Now more than ever organizations and leaders are championing skills development for their employees, embracing the strategic imperative of workforce transformation that can be unlocked through the enterprise learning solutions that Skillsoft offers.

Our entire business has been built to deliver transformative learning experiences through an end-to-end enterprise-grade solution that ensures reskilling objectives are measurable and outcomes based throughout the learner’s journey. We’ve been evolving our offerings to better serve this growing and more demanding customer segment for some time and we’re encouraged by both the recent wins and the longer-term opportunity we see in front of us. The other big market shift is, of course, the sudden rise of generative AI. While new technologies are often hyperbole, we believe generative AI will profoundly transform jobs and the workforce at an unprecedented pace and scale. Knowledge workers are worried that their jobs will be at-risk from generated AI or from the employee who knows how to use it more effectively.

While business leaders are concerned about how their companies will remain relevant and competitive. This is creating a new imperative for reskilling and workforce transformation that is touching nearly every organization and knowledge worker. Given this profound shift, we believe there is a tremendous opportunity for Skillsoft. As we shared on our last earnings call, we have a deep legacy in AI and there have been a pioneer for many years in leveraging its power within our AI-driven Skillsoft Percipio platform. More recently on the content side, our Codecademy team launched an eight-module introduction to ChatGPT. That was our most successful course launch ever. We’ve also seen a more than six-fold increase in completions for our artificial intelligence and machine learning courses.

We have a rapidly expanding suite of offerings to help individuals, teams, and leaders develop critical skills for leveraging generative AI across the enterprise. Our training solutions span tech and dev, leadership, and business skills, and compliance with a recognition that generative AI has got more than just the technology that’s contributing to Skillsoft’s unique competitive advantage and interesting enterprise-wide generative AI learning needs. We are also using generative AI to create new ways to work such as our powerful AI coaching simulator which is generating a lot of excitement. It is currently an alpha with more than two dozen large enterprise customers and we’ll move into beta later this month. We are also using generative AI to accelerate the localization of our content and we are uncovering new ways to improve productivity across our organization.

Ultimately, we are confident in our opportunity to use generative AI to deliver on our purpose of helping organizations and their people grow together through transformative learning experiences. In summary, we believe powerful market forces are creating new demand for our offerings. Going forward, expect us to continue to focus on three important inter-related growth drivers one, leading and workforce transformation; two, leading in tech and dev skilling; and three, leading and preparing organizations and their people to succeed in a world of generative AI. Turning now to our operational highlights. Since our return to public markets, we’ve assembled the breadth of assets that we believe is unparalleled in the industry. Our go-to-market investments in people, processes and systems are enabling us to better position this comprehensive portfolio into a holistic and integrated solution for large and complex enterprise workforce transformations.

The changes in our go-to-market strategy and execution are reflected in our Q1 results. We grew our Content & Platform segment bookings 9% and 3% on an LTM basis. We demonstrate the value of our solutions with existing customers and were more effective at expanding our relationships at renewal. Our team’s ability to articulate and demonstrate the value across our solution suite drove cross-sell and upsell activity that contributed to record high dollar retention rates of 108% and 101% on an LTM basis. Beyond the headline metrics for Content & Platform’s Bookings growth and retention, we also executed well on the customer acquisition front. We earned business with more than 150 new customers in the quarter, including larger six-figure deals with a leading European aerospace and defense contractor, one of the largest U.S.-based last-mile logistics and distribution real estate companies, and a leading provider of retirement and investment products and services.

A highlight for the quarter was signing a four-year agreement with Kyndryl, the world’s largest IT infrastructure services provider with nearly 90,000 employees serving thousands of customers in more than 60 countries. Kyndryl has built a purpose-driven organization and a value-centric culture focused on putting the skills and careers of its people at the heart of its business. As the company works to advance its distinct culture and support the professional growth of Kyndryl’s globally, it sought an enterprise partner that could deliver measurable outcomes with an end-to-end learning solution. Skillsoft provides all Kyndryls with the opportunity to continuously develop and grow their skill sets. Skillsoft was able to demonstrate a compelling value proposition for Kyndryl that leveraged all of our capabilities, including our best-of-breed Skillsoft Percipio learning experience platform, our extensive and immersive content portfolio spanning thousands of topics and learning paths, and our full continuum of learning modalities, all supported with extensive program management and learning administration services.

It’s a tremendous win for our teams and a testament to our strategy. In summary, I’m pleased with our progress and the results our team generated. Our year is off to a good start. And while we expect there to be areas of variability quarter-to-quarter, we believe we are positioned for what will add up to a solid year. With that, I’ll now turn the call over to our CFO, Rich Walker, to cover our financial results. Rich?

Rich Walker: Thanks, Jeff. Welcome, everyone, and thanks for joining today. As Jeff discussed, we delivered a solid first quarter that generally outperformed our objectives. We grew bookings and revenue in our Content & Platform segment, performed in line with our expectations in our ILT segment, expanded adjusted EBITDA on a dollars and margin basis, and generated strong positive free cash flow. In the past several quarters, we have worked to flatten the organization, simplify spans and layers, and promote a culture of ownership and accountability, and we continue to execute with a high degree of focus and urgency. Moving now to our financial results. Unless otherwise noted, the results I discuss will be on a pro forma basis, as if Codecademy had merged on February 1, 2022, and excludes the divested sum total business for all periods.

In addition, I will just discuss growth comparisons on a year-over-year constant currency basis unless otherwise noted, which we believe represents a more appropriate comparison of our underlying operating and financial performance. Let’s turn first to bookings. In our Content & Platform segment, bookings were $65 million, reflecting growth of 9% for the quarter and 3% on an LTM basis. The higher performance in this segment was primarily due to stronger upsell and cross-sell activity across our offerings, which was captured in our dollar retention rate of 108% for the in-quarter period and 101% for the LTM period. As a reminder, given the quarterly seasonality in our renewal base, Content & Platform Bookings and DRR are metrics that should be primarily viewed and assessed on an LTM basis.

In our ILT segment, bookings were $44 million, down 18%, which we had largely anticipated due to changes in fiscal 2023 in two large partners training subsidy programs. Importantly, we expect to largely lap the impact of these changes in the second half of this year. Given the mix of bookings between our two segments with Q1 typically being the seasonally smallest quarter of our Content & Platform segment, total bookings of $108 million were down 4% due entirely to the ILT segment. Moving to the P&L. Content & Platform revenue was $99 million and up 2%, with growth across all lines of business including sustained double-digit growth from Codecademy. ILT revenue was $37 million and down 14%, contributing to total revenue of $136 million being down 3%.

From a mix standpoint, approximately 73% of our total revenue was in our Content & Platform segment. This is up from approximately 66% two years ago, and we expect to continue to increase the mix over time from this segment given its more predictable and recurring subscription revenue basis. Shifting to profitability. Across the organization our teams executed well and demonstrated effective stewardship of our capital and resources. Identifying areas to drive ongoing operating leverage through greater productivity, efficiency and effectiveness. We prudently rationalize spend in some areas to redirect investment capacity towards strategic growth priorities for the business. I believe we struck an appropriate balance between reinvesting savings into the business while also accruing more to the bottom line.

Non-GAAP OpEx of $114 million or 84% of revenue, was favorably down 6%. Non-GAAP cost of revenue of $38 million, or 28% of revenue, was up approximately 1%. Non-GAAP content and software development expense of $14 million, or 11% of revenue, was favorably down 21% due primarily to the timing of content development spend and capturing of synergies from the Codecademy acquisition. Non-GAAP sales and marketing expense of $44 million, or 32% of revenue, was up 7% due to investments in our go-to-market transformation to accelerate bookings growth on our Content & Platform segment. Non-GAAP general and administrative expenses of $18 million, or 13% of revenue, was favorably down 26% due primarily to the capturing of synergies from the Codecademy acquisition and other expense reductions.

Adjusted EBITDA was $22 million, up 13%. Adjusted EBITDA margin was approximately 16% of revenue, a gain of more than 200 basis points compared to our pro forma results in the first quarter of fiscal 2023. Our GAAP net loss was $44 million in the quarter and adjusted net loss was $30 million. Moving to cash flow and balance sheet highlights. Cash flow from operations was $21 million in the quarter, led by working capital favorability as we had strong cash collections against the seasonally high fourth quarter accounts receivable balance. We invested $4 million in capital expenditures and capitalized internally developed software, resulting in positive free cash flow of $17 million. We ended the first quarter with $178 million of cash and cash equivalents, an increase of approximately $8 million from our fiscal year end in January.

During the quarter, we repurchased 4.4 million shares under our $30 million share repurchase program. The outstanding balance on our term loan facility was $601 million and we had $45 million drawn on our $75 million accounts receivable facility. As a reminder, we prepaid $31 million on the term loan last fall following the sale of the sum total business, and we have annual amortization payments of approximately $6 million. From a capital allocation standpoint, we will continue to prioritize organic investments that we believe will accelerate our long-term growth profile and align for our priorities of leading in workforce transformation, leading in tech & dev skilling, and leading in generative AI. We will also continue to evaluate opportunities to further reduce our obligations under the term loan in advance of its maturity in July of 2028, while also assessing further share repurchases under our existing share repurchase authorization.

With a good first quarter behind us, we believe we are positioned well for the year ahead. We are reaffirming the full year outlook we provided in April, which calls for total bookings of $610 million to $640 million, revenue of $555 million to $585 million, and adjusted EBITDA of $100 million to $105 million. We look forward to connecting with many of you in the coming days. We appreciate your support as we continue to execute our strategy and seek to drive profitable growth for Skillsoft and value creation for all of our stakeholders. Operator you may now open the call for questions.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Ken Wong with Oppenheimer. Please proceed with your question.

Ken Wong: Great. Thank you for taking my question. I want to just maybe ask quickly on the guidance. It looks like you guys did see a bit of an FX headwind this quarter and as we think about that full year guide, what’s baked into there, and should we view kind of on a constant currency growth basis, that kind of that reiteration is actually a bit of a modest increase?

Rich Walker: Yes, I think — Ken, it’s Rich. Our guidance isn’t changed because of the FX environment, so no modification there. And we think when we said guidance, it was reflective of our best outlook for the year.

Ken Wong: Okay, fantastic. And then maybe second really solid performance on the retention side. Can you maybe talk about where you saw that uplift from? I think you mentioned maybe a little bit of incremental cross-sell. And as we look ahead, is that a trend that you think is potentially sustainable?

Jeff Tarr: So, Ken, thanks. We’re pleased with the dollar retention rate. 108% demonstrates what the company is capable of and is reflective of what we’ve seen for some time in some pockets of the business, some geographies some segments of customers. With that said, it’s a small quarter. It’s our smallest quarter of the year. And so individual small numbers of wins and losses can move that dollar retention rate up or down quite significantly in the first three quarters of the year. So we prefer to look at the LTM growth rate, which also is moving in the right direction at 101% as the metric to watch more closely. Of course, we’re driving each quarter to drive the highest dollar retention rate we can to move that LTM metric up.

Ken Wong: Got it. Okay, perfect. Thanks a lot, Jeff. Really appreciate the color, guys.

Operator: Our next question comes from the line of Raj Sharma with B. Riley. Please proceed with your question.

Raj Sharma: Hi, thank you for taking my questions. I wanted to understand if you could probably please add some color on — more color on Codecademy. How’s that revenue contribution and also in terms of the profitability metric. You had set certain metrics when you acquired them. Do you please give an update on that?

Jeff Tarr: Sure. Raj, thanks very much. I’ll start, I’ll let Rich take it from there. But first of all, you need to understand how we’re operating business. We have the Codecademy B2C business, which we operate effectively as a business unit that’s reported inside of content platform. The B2B business has been increasingly integrated into our tech & dev product line, so it becomes increasingly difficult to break out. With that said, we’re pleased with how it’s performing top line. I’ll invite Rich to give best shot at how we see the metrics that require some allocations to do that. And we’re also tracking well on the profitability commitments that we made at the time of the transaction. Rich?

Rich Walker: So we did announce Raj when we acquired it, it was probably a $20 million drag on EBITDA at that time. We have now more fully integrated the business. We don’t have a separate reportable segment-level P&L view, but I’m very pleased with the progress we made. Part of the reason we saw 13% year-over-year growth in our consolidated was because of the efforts we made. We expanded margins on a like-for-like comparison about 200 basis points in the quarter. The full year outlook is reflective of Code and its contribution to our results. And the go-forward will be described much like on this call without a lot of detail. Now that we’re lapping the Codecademy and more importantly, integrating it into our operations and our results.

Jeff Tarr: Maybe on — is on the top line. The B2B business is growing in the double-digit — at a double-digit rate. The B2C business is growing at a mid to high single-digit rate. And that B2C business, I emphasize, is growing faster than we’re seeing peers growing in the B2C segment. So we believe we’re taking share.

Raj Sharma: Right. I know you commented on the synergies on the cost side, and some of those were from the Codecademy side. Is it fair to say that — what would you classify the $20 million drag on EBITDA when you acquired it? Has it been narrowed to half of it or all of it, or is it flat now, counting the synergies you have?

Rich Walker: Yes, it’s a tough measurement because you have to make some assumptions on allocations. But I think we’ve made the progress we expected and executed on the integrations. It’s primarily the entire B2B business is integrated into our tech & dev offering. The B2C business has a different autonomy as it operates. But all of those two are supported by a shared services model in HR and legal and finance and accounting, as well as some marketing support to the enterprise business. So I think the drag is not meaningful on the business, and we’re operating it more for the top line growth that Jeff alluded to and pleased with what we’re seeing on the top line.

Raj Sharma: Great. Okay, fair enough. I just want to move on to the ILT business, the global knowledge. Can you comment on the revenue cadence and sort of through the year, the expectation for that business as part of your guidance and how that business is doing?

Jeff Tarr: Well, first of all, I’ll say we’re tracking as we expected in the first quarter, and we believe that we’ve turned the corner on that business that we have operating it more effectively, that we’re close to lapping some of the issues that we saw in that post COVID environment and are feeling good about the year. Rich, what sort of color are you comfortable giving on the…?

Rich Walker: Yes. I think the — on a quarterly kind of the progression of the business, Q4 historically tends to be a seasonally high quarter for ILT bookings. You approach a use it or lose it. Q1 is always from a classroom and consumption where we recognize revenue, generally a smaller impact seasonally. When I widen the aperture and think about the business and how it’s executing and importantly, when we lap in the second half the tough compares to the prior year, there’ll be a more logical compare in the business, but the business is executing to the plan we put in place, and that’s something we’ve enjoyed for about three quarters now, which has been really important.

Raj Sharma: Got it. Thank you. And then just congratulations on the free cash flow sort of flowing through down to the bottom line. Yes, that’s all my questions. Thank you. I’ll take it offline.

Jeff Tarr: Thanks Raj.

Operator: Our next question comes from the line of Robert Simmons with D.A. Davidson. Please proceed with your question.

Robert Simmons: Hi. Thanks for taking my questions. I was wondering if you could give us some color on your sales force productivity. Principally looking at the ramp of the newer reps, but then also kind of like where you saw better strength in like maybe weaker than expected.

Jeff Tarr: No. We’re seeing good progress on productivity that salespeople who joined us last year. It takes about 12 months to get full productivity. We have assumed improved productivity in our guidance for this year, and we’re seeing that develop as we had expected. Going forward, a big focus on our – with regards to our sales force is to continue to help our sales people engage in a more consultative sales process and to engage at more senior levels in the organizations that we serve. That’s where skills development and workforce transformation is viewed as a strategic imperative. That’s where we’re winning, where we’re winning accounts like Kyndryl and others, and we feel really good about the progress the team is made.

Robert Simmons: Got it. And then I was wondering if you could talk about the pricing environment. How is that been going up for you so far this year?

Jeff Tarr: First of all, as we’ve talked about, we implemented a company-wide price increase, it takes a while for that to flow through because again, we have bookings, the bookings have returned to revenue. We’re heavily fourth quarter weighted. So every year, we implement price increase, we see there a little of it in the year. With regard to the pricing environment, we see it is quite bifurcated. I alluded to this in my remarks. We see a segment of customers that is highly price sensitive that sees online learning as sort of a check-the-box activity and we see a segment of customers that see online learning and what beyond that what we deliver are transformational learning experiences as highly strategic. The former category of customer, we see as shrinking, both for us and the market overall.

The latter category of customers, those that are more strategic, we see as growing, growing market and where we are taking share. So we believe the market is in a transformation of its own. We feel good about how we’re positioned, and we believe over time that’s going to be reflected in a stronger performance.

Robert Simmons: Got it. And then the final one from me is could you just talk about where you see in terms of sales cycles? Are those getting longer, getting shorter, kind of stable? And kind of how would you characterize your customer conversations versus three or six months ago?

Jeff Tarr: Yes, I think we’re probably building out some commentary on some other calls where others are citing lengthening of sales cycles. Keep in mind, we have most of our business is a renewal business in an upsell business, and we are not seeing a lengthening of cycles there. We are, like others, seeing a lengthening of cycles on new business, but we are less depending on that to hit our numbers and drive growth than others in the industry.

Robert Simmons: Got it. Thank you very much.

Operator: Our next question comes from the line of Raimo Lenschow with Barclays. Please proceed with your question.

Sheldon McMeans: Hi, this is Sheldon on for Raimo. Thanks for taking our questions. I want to start on Codecademy. And how are you seeing the reception of the recently announced enhancements to the suite with Codecademy Plus and the upgrade of Pro features. In terms of kind of the reaction here, is this leading to reduce friction for the enterprise sale? Is it leading to higher land sizes? Any color here?

Jeff Tarr: Well, I can’t tell you is – we believe Codecademy is taking share on both consumer and the B2B side. So we feel good about that, early days on the new launch. Where I can also tell you, we’re seeing traction is on our new generative AI offerings, and we expect to continue to invest in that area and believe we’ll continue to deliver results in that area.

Sheldon McMeans: Great. And wondering if there’s anything that you could call out in terms of demand across regions or verticals and that’s all from me? Thank you.

Jeff Tarr: Look, we see more growth in regions where we’re less penetrated. So growth is stronger, for example, in MDI and some of the Asia Pacific markets. But those are still small parts of our business and do less to drive the total company result. Overall, both our big markets, North America and EMEA, we’re both performing to expectations in the first quarter. You also asked about the verticals, sorry. So in terms of verticals, we see more growth opportunity in areas like – and where we’ve been seeing more results in professional services, in technology, in retail. Those have been some good financial services have been really good verticals for us, seeing good, healthy growth. But what really differentiates where we see growth versus where we see less growth is with customers to see workforce transformation reskilling as a strategic imperative. And where they’re investing in talent, that’s where we see the most opportunity.

Sheldon McMeans: Excellent, thank you.

Operator: Our next question comes from the line of Tom Singlehurst with Citi. Please proceed with your question.

Thomas Singlehurst: Yes. Good evening it’s Tom here from Citi. Forgive me if I missed the beginning of the call, so I apologize if we’re rehashing sort of stuff you’ve already covered, but I’m interested in the comments on generative AI. I mean you talk about some of the content you’ve already created that addresses sort of reskilling these in that area? But I’m just interested whether you could give more flesh on the bone on what your customers are saying about this topic and whether it’s really sort of starting conversations about sort of a broader push for reskilling and upskilling. And then more specifically, is there an opportunity on the cost side as well for you guys in, either course creation and/or sort of sort of learner support and personalization? Thank you very much.

Jeff Tarr: So love the question. We are seeing the impact of generative AI on what we teach, how we teach and how we work. And it is coming up in terms of what we teach and how we teach it comes up in almost every customer conversation. When it comes to what we teach, we’ve already announced the Codecademy suite of eight segments course on introduction to generative AI. We have added to our IoT portfolio, and we are launching a first of a series of learner journeys, comprehensive multi-mobile learning – learner journeys on generative AI. Generative AI cuts across all three of our major categories. It impacts leadership and business skills, it impacts tech and debt and it impacts compliance. And you should expect over time that every new course of hours, if it’s in an area where generative AI has an impact, that we’ll be integrating that into the content.

So that’s number one. What we teach, it’s changing, and it will continue to evolve given the imperative that generative AI to create workforce transformation and reskilling. Secondly, on how we teach, we are – we’ve long been using AI in our business. We’re seeing generative AI as a huge unlock. I mentioned on the call, we have an AI coach simulator that is an alpha tremendous response from customers that’s in beta with alpha rather with more than two dozen large enterprise customers. And we are within weeks of moving into data. We’re very excited and believe that we are leading the industry in this particular field. In terms of how we work, the third area, generative AI is already having an impact on cost structure. We’re seeing that there are areas in our business where it’s driving cost out, and we expect that to continue.

Now I’ll tell you that we’re not – we less focused on dropping that to the bottom line right now more focused on using the resources that generative AI frees up to invest in extending our lead and what we teach and how we teach. We see that as critically important to the future of the business. It is an enterprise-wide top three imperative for our company and expect us to do everything we can to sustain a lead in this area.

Thomas Singlehurst: That’s very clear. Thank you very much.

Operator: There are no further questions in the queue. I’d like to hand the call back to management for closing remarks.

Jeff Tarr: Thank you very much. We’re greatly appreciate you joining us for this call. We’re still early in the year. We feel very good about how the year has started, and we look forward to updating you after our second quarter.

Operator: Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.