Michael Picariello Neil Robert Hammer - Chairman, Chief Executive Officer and President Brian Carolan - Chief Financial Officer and Vice President of Finance Alan G. Bunte - Chief Operating Officer, Executive Vice President and Director.

Joel P. Fishbein - BMO Capital Markets Canada Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division Jason Ader - William Blair & Company L.L.C., Research Division Eric Martinuzzi - Lake Street Capital Markets, LLC, Research Division Andrew J. Nowinski - Piper Jaffray Companies, Research Division Brent A.

Bracelin - Pacific Crest Securities, Inc., Research Division Aaron Schwartz - Jefferies LLC, Research Division Srini Nandury - Summit Research Partners, LLC Rajesh Ghai - Macquarie Research Michael Turits - Raymond James & Associates, Inc., Research Division Gregory Dunham - Goldman Sachs Group Inc., Research Division Glenn Hanus - Needham & Company, LLC, Research Division Abhey Lamba - Mizuho Securities USA Inc., Research Division.

Good morning, ladies and gentlemen, and welcome to the CommVault's Third Fiscal Quarter 2014 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. Following today's presentation, instructions will be given for the question-and-answer session.

At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Michael Picariello, Director of Investor Relations. Please go ahead, sir..

Good morning. Thanks for dialing in today for our fiscal third quarter 2014 earnings call. With me on the call are Bob Hammer, Chairman, President and Chief Executive Officer; Al Bunte, Chief Operating Officer; and Brian Carolan, Chief Financial Officer.

Before we begin, I'd like to remind everyone that statements made during this call, including in the question-and-answer session at the end of the call that relate to future results and projections, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on our current expectations.

Actual results may differ materially due to a number of risks and uncertainties, which are discussed in our SEC filings and in the cautionary statement contained in our press release and on our website. The company undertakes no responsibility to update the information in this conference call under any circumstance.

Our earnings press release was issued over the Wire services earlier today and has also been furnished to the SEC as an 8-K filing. The press release is also available on our Investor Relations website. On this conference call, we will provide non-GAAP financial results.

The reconciliation between the non-GAAP and GAAP measures can be found in Table 4 accompanying the press release and posted on our website. This conference call is also be recorded for replay and is being webcast. An archive of today's webcast will be available on our website following the call.

I will now turn the call over to our CEO and President, Bob Hammer..

Good morning, everyone, and thanks for joining our fiscal third quarter 2014 earnings call. Our results for the quarter continued our track record of delivering solid double-digit revenue and non-GAAP operating income growth. We had another strong quarter, setting records for revenues and earnings.

In addition, we have good visibility and funnels entering into our Q4. Let me briefly summarize our Q3 FY '14 financial results. For the quarter, total revenues were $153.3 million, up 20% year-over-year and up 8% sequentially. Software revenue was $79.2 million and grew 20% year-over-year and 12% sequentially.

Services revenue was $74 million and grew 19% year-over-year and 12% sequentially. We continued in the stated objectives in transitioning away from Dell to other distribution partners.

The 20% increase in Q3 '14 total revenue was achieved even though our Dell revenue decreased 28% year-on-year while, for example, our revenue from Arrow grew 31% year-on-year. It is also important to note that the majority of the Q3 Dell revenue was maintenance revenue for -- from our installed base.

We expect Dell revenue to continue to decline as a percent of sales. From an earnings perspective, operating income, or EBIT, was $42.5 million, up 42% year-over-year and 12% sequentially. EBIT margins were 27.7%, diluted earnings per share were $0.54.

We generated approximately $30.2 million of cash flow from operations during Q3, exiting the quarter with approximately $500.5 million of cash and short-term investments and no debt.

Our revenue growth, aided by the continued solid market reception of Simpana 10, increasing penetration in large enterprise accounts and outstanding sales execution in our international operations.

Simpana 10 continues to significantly enhance CommVault's leading value proposition in our core business and enables us to begin penetrating other data-related market segments. Let me spend a minute speaking about our business environment. For the first time in many years, we're experiencing improvements in all the major regions of the global economy.

The situation in the U.S. is improving, Europe has come out of recession and there's positive momentum in Asia Pacific. Leading firms like Gartner, IDC and Forrester are forecasting that IT spending for 2014 will modestly improve over 2013. We are assuming overall storage-related IT spend will gradually improve.

Globally, we are anticipating overall market demand for our software and services will improve in calendar 2014. I will now address our current outlook. We had a positive first 9 months of FY '14, in which total revenues and license revenues grew 20% year-on-year and non-GAAP EBIT increased 37% year-on-year.

Our consistent, above-industry average results are a validation of CommVault's unique ability to adjust the changing data and information management needs of large commercial and government enterprises, as well as providing best-in-class solutions for leading managed service and cloud providers. Our visibility going into Q4 has increased over Q3.

While we have strong consistent growth in revenue and earnings, our business fundamentals are strong, I would like to add the following words of caution regarding our future outlook. We have -- we continue to have quarterly revenue and earnings risk due to the timing of large million-dollar deals.

We have still not met our hiring objectives in sales or field technical teams. While major firms are forecasting improvements in IT spend for calendar 2014, one recent survey indicates a slower start to 2014.

And as I stated last quarter, there's execution risks tied to the implementation of our All Things Data strategy, which is a major corporate-wide endeavor. I will discuss this strategy in more detail later on in the call. With that said, we believe the current FY '14 Street consensus for growth rates and for total revenues are reasonable.

Brian will discuss our operating margin guidance later on in the call. For 2015, we believe we will be able to achieve solid double-digit revenue and EBIT growth.

We are forecasting that FY '15 growth will continue to be driven by strong market traction with Simpana 10, strong product roadmaps and continued success with large enterprise accounts, and we expect to see strong growth in the cloud market.

We're also forecasting revenue from our new business areas, including mobile, content and archive, health care and operations intelligence. In summary, the company had another very solid quarter and is in good position to successfully achieve our annual objectives for fiscal 2014. We have also established a solid foundation for growth in FY '15.

We are increasing our rate of spending in order to make the required investments to ensure we can continue to outpace the market in growth and profitability over the medium to long term.

We are well on track in establishing our product, distribution, services, support and marketing foundations to enable us to achieve our FY '15 objectives and over the next 3 years, to achieve our billion-dollar plan and maintain mid-20s operating margin objectives. I will now turn the call over to Brian..

Thanks, Bob, and good morning, everyone. I'll now cover some key financial highlights for the third quarter of fiscal year 2014. Total revenues for the quarter were $153.3 million, representing an increase of 20% over the prior year period and 8% sequentially.

We reported software revenue of $79.2 million for the quarter, which was up 20% year-over-year and 12% sequentially. During Q3, our software growth continues to be driven by a strong demand for data protection for virtualized environments, source-side deduplication and snap-based modern data protection solutions.

We continue to see strong demand for our capacity-based licensing models, which has a direct correlation to the underlying volume of data under management. Capacity-based license sales represented 77% of our Q3 software revenue, which was slightly down from 80% in Q2 FY '14 and up from 72% in the prior year period.

We anticipate that capacity-based licenses will continue to account for the majority of our software revenue despite quarter-to-quarter fluctuations. Let me provide you an update on the new pricing models, which Bob touched on during last quarter's earnings call.

Please note, these models will be positioned as options to our current capacity-based pricing model. During Q3 FY '14, we began to opportunistically offer term-based pricing structures where customers can rent the software licenses for a period of time as opposed to owning a perpetual license.

In addition to term-based pricing options, we have started to also market test a value-layering pricing structure versus our current bundled capacity charge. The value-layering approach allows customers to more easily purchase the specific solution sets they require.

Both the term and value-layering pricing models are being well received in market testing. The rollout of these models is being done through a well thought out, deliberate process and we expect customer adoption to be modest in the near term.

For the quarter, software revenues derived from indirect distribution channels increased 19% over the prior year period and represented 85% of software revenue. Our direct revenue represented the balance and increased 31% over the prior year period.

Please remember, most sizable deals are driven by our direct sales force even though they are transacted through the channel. Let me now comment on enterprise deal mix. Software revenue from enterprise deals, which we define as deals over $100,000 in software revenue in a given quarter, increased by 24% over the prior year period and 18% sequentially.

Enterprise deals represented approximately 61% of software revenue. The number of enterprise deals increased 14% year-over-year and 22% sequentially. Our average enterprise deal size was approximately $284,000 during Q3 '14 compared to $260,000 in the prior year period and $295,000 in Q2 FY '14.

Software revenue from non-enterprise deals increased 14% over the prior year period and 4% sequentially. We continue to expand our SMB distribution channel. The revenue mix for Q3 FY '14 was 52% software and 48% services. And from a services revenue perspective, our maintenance attach rates and renewal rates remain strong.

Services revenue for Q3 was $74 million, an increase of 19% year-over-year and 4% sequentially. For the quarter, revenue from U.S. operations generated 55% of total revenues, resulting in a 13% year-over-year increase, while revenue from international operations generated the balance, resulting in a 29% year-over-year increase.

The growth in revenue in our international locations is primarily due to increases in Europe, Canada and Asia Pacific, as we expand our international operations. And for the 9 months ended December 31, 2013, revenue from U.S.

operations generated 58% of total revenues, resulting in a 17% year-over-year increase, while revenue from international operations generated the balance resulting in a 24% year-over-year increase. From a distribution perspective, many of our global resellers and strategic partners had strong growth. Arrow, our largest U.S.

distributor, continues to be a strong partner for CommVault. For the quarter, revenue transacted through Arrow was approximately 30% of total revenue, growing 31% year-over-year and 2% sequentially. We added approximately 400 new customers in the quarter, bringing our historical customer count to approximately 19,500 customers.

Sales through our Dell relationships accounted for approximately 11% of total revenues for the quarter. Total quarterly Dell revenues were down 28% year-over-year and 38% sequentially. As noted on prior earnings calls, we have taken proactive steps to broaden our distribution through non-Dell channels.

These actions will lead to the further decline of our percentage of total revenues transacted through Dell. We expect to see Dell revenue further decline below 10% of total revenues over the next few quarters, as we continued to disengage from Dell other than on an opportunistic basis.

When Dell-related revenue as a percentage of total revenue drops below 10%, we will stop disclosing Dell's specific information. Now moving onto gross margins, operating expenses and EBIT margin expansion. Gross margins were 88.2% for the quarter due to the mix of software and services revenue.

Total operating expenses were $91.2 million for the quarter, up approximately 13% year-over-year and 8% sequentially. Sales and marketing expenses as a percentage of total revenues decreased to 44% in the current quarter, which was down from 47% in the prior year period.

Non-GAAP operating margins were 27.7% for the quarter, resulting in operating income or EBIT of $42.5 million. On a year-over-year basis, Q3 EBIT increased by 42%. Q3 EBIT margins increased by 440 basis points year-over-year and increased 110 basis points sequentially.

Net income for the quarter was $26.9 million and EPS was $0.54 per share based on a diluted weighted average share count of approximately 49.9 million shares. On a year-over-year and sequential constant currency basis, foreign currency movements did not have a material impact on Q3 revenues.

FX movements positively impacted earnings per share by approximately $0.01, both year-over-year and sequentially. I would now like to spend a few minutes discussing our operating expense investments for the remainder of fiscal 2014.

We had better-than-anticipated operating margin improvement in Q3 due to lower-than-planned headcount additions, as well as below-targeted spending on several investment initiatives. We added 40 net employees in fiscal Q3 and ended the quarter with 1,936 employees.

This was below our internal hiring targets, and we will roll the Q3 headcount hiring shortfall into Q4's hiring plan. We expect to increase our rate of hiring in Q4 compared to Q3, with a heavy focus on the recruitment of sales and front-end technical support teams.

Our planned additions to sales, services and support headcount are critical in order for us to achieve our targeted FY '15 and FY '16 growth rates. Please keep in mind that a typical sales rep and sales engineer each take about a year to become fully productive.

So in the short term, as we continue to hire, they will have a negative impact on short-term margins. Our inability to add enough sales and technical field personnel has been an issue for us throughout FY '14. Fixing this issue will be the top priority for our new Chief Human Resources Officer, Jesper Helt.

Jesper joined CommVault earlier this month, and we're excited to have him on our management team. His bio can be found on our website. I would like to highlight one additional key spending increase in Q4. Historically, we see a large sequential increase in employer-paid FICA expense in Q4 because many of our employees in the U.S.

reach the FICA limit well before the end of the calendar year. This year, we expect our FICA expense in Q4 to be approximately $2 million higher than Q3. I will now address the current Street consensus revenue growth rates and our anticipated EBIT margin improvement for fiscal 2014 and 2015.

As Bob indicated, we are comfortable with the current Street consensus revenue growth rates for fiscal 2014. Due to the overachievement of forecasted EBIT margin in the first 9 months of fiscal 2014 and lower-than-planned investment levels, we now believe we can improve operating margins for fiscal 2014 by approximately 225 to 250 basis points.

For fiscal 2015, we believe we can again deliver solid, double-digit revenue and EBIT growth. However, we expect fiscal 2015 operating margin improvement to be muted due to our fiscal 2014 overachievement, as well as our plan to increase the rate of our operating expense investments in the fourth quarter of FY '14 and fiscal 2015.

These investments include additional go-to-market resources and expenses to better position the company for our All Things Data strategy. We need to make these investments in order for us to achieve our targeted FY '15 and FY '16 growth rates. Such investments are expected to have a negative impact on short-term margins.

While we expect to accelerate our rate of investments in fiscal 2015, we still anticipate strong, above-industry EBIT growth in absolute numbers. We will provide more specifics on FY '15 during our Q4 FY '14 earnings call. In summary, we remain committed to our $1 billion plan while maintaining operating margins in the mid-20s over the next few years.

Let me now comment on tax rates and share count. We will continue to use a pro forma tax rate of 37% for the remainder of FY '14 and FY '15. Our GAAP tax rate for Q3 FY '14 was 37%, and we expect our full year FY '14 cash tax rate to be in the range of 16% to 20%.

Our cash tax rate will remain lower than the GAAP tax rate through fiscal 2014 and into fiscal 2015. For fiscal 2014, we anticipate that our diluted weighted average share count will be approximately 49.5 million to 50.5 million shares.

For fiscal 2015, we anticipate that our diluted weighted average share count will be approximately 51 million to 52 million shares. Please note that certain executive officers of CommVault hold approximately 400,000 outstanding stock options, with an exercise price of $6 that will reach the end of their 10-year term in the next 6 months.

We expect that all of these stock options will be exercised prior to their expiration. Now moving on to our balance sheet and cash flows. As of December 31, our cash and short-term investment balance was approximately $500.5 million, up 3% from the end of September. Cash flow from operations was $30.2 million.

Free cash flow, which we define as cash flow from operations, less capital expenditures not related to the new headquarters, was $28.8 million, which was up 10% year-over-year and 24% sequentially. The increases are a result of change in working capital on the balance sheet, as well as higher operating income and revenue.

During Q3 FY '14, we expended approximately $19.6 million on construction costs for our new campus headquarters. We expect to spend approximately $25 million in Q4 '14, but the timing of our cash expenditures is dependent on the progress of construction, which is currently on schedule.

By the end of FY '14, we will have expended approximately 60% of the total cost of the project. Our estimate of the total cost remains in the range of $130 million to $135 million. Please keep in mind that we'll fund these expenditures from our existing cash balance.

As of December 31, 2013, our deferred revenue balance was approximately $192.8 million, which is an increase of $31.2 million or 19% over the prior year period and up $1.6 million or 1% sequentially. Please remember, the vast majority of our deferred revenue is maintenance revenue, not software revenue.

As our fiscal Q4 is typically a significant quarter for us in terms of maintenance support renewals, we would expect sequential deferred revenue growth to accelerate operating cash flows in the fourth quarter.

Lastly, for the quarter, our day sales outstanding, or DSO, was 58 days, which is up from 53 days in Q2 '14 and up from 51 days in the prior year quarter. The change is due to linearity within the quarter. That concludes the financial highlights. I will now turn the call back over to Bob.

Bob?.

Thank you, Brian. I want to wrap up the call with a brief commentary about our underlying business growth drivers and an update on our All Things Data strategy that I spoke about last quarter, including an overview of our near-term product pipeline.

We just posted the strongest revenue and earnings quarter in CommVault history and have delivered compounded annual revenue growth of 22% and compounded annual EBIT growth of 31% over the past 7 years.

The compelling reason why we have been able to deliver consistently strong financial results is that we continually lead the industry in providing unrivaled, innovative solutions for our large enterprise customers. These enterprise customers include large commercial and government enterprises and managed service and cloud providers.

We provide solutions for the most critical data-related challenges, which include the need to resolve data, scale and cost issues; improve recovery SLAs and centralized data protection; improve operations by automating everything; deploy a comprehensive operational analytics and real-time historical reporting; deal effectively with issues related to the emergence of private and public clouds; the compliance regulations which mandate companies to keep their data for longer periods of time, which requires advanced archiving and data management capabilities; and lastly, enable mobile users to have secure anytime, anywhere, any device access to their data.

The devices need to be managed and the data needs to be automatically governed. Simpana, our singular data information management platform, is unique in the industry. It enables us to deliver solutions that have more functionality, that are more cost effective, more reliable and can be supported across a very broad range of enterprise customer needs.

In summary, our ability to consistently provide winning solutions for data-related challenges has enabled us to increase market share in the large enterprise and MSP and cloud-provider segments of the market. Our unique capabilities are especially important as enterprises move to the cloud-based solutions.

I want to spend a minute on why the cloud has been a major catalyst for our revenue growth and will continue to be a major factor in our future growth. CommVault has invested heavily in cloud-based product development. We invested early on in anticipation of a massive shift to the cloud, the cloud computing and launched our first products in 2008.

We pioneered developing innovative technology that enables large enterprises and MSP and cloud providers to effectively deploy cloud solutions. In doing so, we have established strong competitive position versus our larger legacy competitors, as well as new entrants to the market.

As a result, over the past 7 years, we were able to consistently outpace the market in revenue growth in those segments. Our growth in the MSP and cloud segment has been a key contributor to our revenue growth. We are a provider of data-related solutions to approximately 150 managed service and cloud providers around the globe.

These providers serve hundreds of thousands of customers worldwide. We estimate those providers manage more than 50 petabytes of data with the Simpana software platform.

Many of the global cloud providers have adopted CommVault Simpana as a foundation for their data management offering, including Rackspace, Atos Origin, British Telecom, EarthLink, Expedient, Hosting.com, IT-Lifeline, Layered Tech, Onyx Managed Services, Peak10, PCM, Roheir [ph] and Microsoft.

It is important to note that the competitive differentiators that have enabled us to strengthen our positions in large enterprises as they implement hybrid cloud solutions are very similar to the competitive differentiators that have enabled us to become a leader in providing solutions to the major MSP and cloud providers.

We deliver flexible, secure solutions that make it easy for large commercial and government customers to adopt hybrid clouds and enable them to move their managed data in public clouds.

We have recently added a new interface layer, which opens the Simpana platform for multi-tenant scale of data management services, allowing service organizations to create custom solutions.

For those cloud providers, we deliver flexible, secure solutions and services that make it easy for large cloud providers to manage and move data from their customers' environments into their clouds for compute, storage over several use cases. Unlike many legacy competitive products, Simpana's modular architecture is naturally suited for the cloud.

It separates us from our competitors by delivering massive scalability, best-in-class multi-tenancy, comprehensive data security and complete automation and operations management reporting capabilities.

This allows our service-driven customers to quickly adapt and deploy new service offerings, employing our automated workflows behind customer-branded portals.

Simpana software offers customers a seamless capability to index, encrypt, move, store, archive and access data for operations, analytics, compliance and mobile usage across all major cloud platforms.

Secure access tied to index data ensures that a customer retains a comprehensive, holistic view of the data, whether it is on-premise, on mobile devices, in the cloud or in multiple clouds. In this time of heightened security concerns, customers are demanding a new set of criteria for data management functions.

Fortunately, this is something we have great experience with. Simpana allows users to have secure access to the data from any place, any time and on any device, including our newest features which extend into data synchronization and file sharing options.

Simpana is also integrated with major cloud providers such as Microsoft Windows Azure, Amazon Web Services, NetApp Private Storage for AWS and Hitachi Content Platform. We also offer sophisticated data management solutions for SaaS-based applications including data protection, archiving and compliance.

We expect that the cloud-based MSPs, cloud providers, outsources and systems integration business will grow substantially and become a material part of our business over the next few years.

In April of last year, we strengthened our ability to increase our positions in these segments of the market with the formation of a focused global team, a cloud services group we call CSG. In summary, the move to the cloud is a major catalyst for CommVault's growth.

Our unrivaled, comprehensive Simpana software platform and specialized cloud services and support lead the industry in providing [indiscernible] today's needs. CommVault's All Things Data strategy, as I talked about last quarter, is our exciting path to sustain long-term growth and profitability.

It addresses the key new and emerging customer data protection and management needs and opens up many new market opportunities for growth in health care, compliance, mobile, business intelligence, analytics, operations management and data-related process automation.

CommVault's key strategic objectives are to strengthen our position in our core data management business and simultaneously expand into new high-growth data-related market segments. These strategic objectives are being reported by an accelerated pace of CommVault innovation. We have a very deep product pipeline based on Simpana 10.

In the next few quarters, we will launch additional new products on the Simpana 10 platform including leading-edge solutions for advanced replication and recovery features; health care; operations management, including infrastructure analytics; enhanced business analytics capability; advanced mobile file-sharing; leading-edge, next-generation products for SharePoint and exchange archiving; and solutions for database archiving.

Please note the development and timing of any release, as well as any of its features or functionality, remain at our sole discretion. To summarize, we are strengthening our position in our current core data protection and management business and moving to several new high-growth, high-profitability market segments.

We have developed the technology, services and support to address those segments. Our focus now is on execution. This includes building the marketing and distribution infrastructures and pricing models for our new market segments. In closing, we had a solid FY '14 Q3 in revenue and earnings growth.

We are consistently gaining market share because of our increasing product differentiation, improved sales effectiveness, distribution leverage and broader brand recognition. Our innovative All Things Data strategy solutions address critical customer needs in the high-growth, high-value segments of the market.

As stated last quarter, we will continue to make the necessary changes in investments across the company to ensure the successful execution of the strategy. We are excited about our prospects for Q4 '14 and for FY '15 and our future potential. We are confident in our ability to continue to grow the company at double-digit growth rates.

Our next financial milestone is our $1 billion plan of revenue and maintain our operating margins in the mid-20% range. We have defined plans in place that we believe will enable us to achieve that milestone over the next several years. Thank you. I will now turn the call back to Michael..

Before the operator opens up the line for questions, I would like to highlight that Al Bunte and Brian Carolan will be speaking at the Stifel Nicolaus 2014 Annual Technology Conference in San Francisco, California, on February 11 at 1:55 p.m. Eastern time.

In addition, Al and Brian will be speaking at the Goldman Sachs 2014 Annual Technology & Internet Conference, also in San Francisco, on February 12 at 12:40 p.m. Eastern time. Details on the live webcast are available on the IR section of our website.

Operator, can we please open up the line for questions?.

[Operator Instructions] And our first question comes from Joel Fishbein from BMO Capital Markets..

Brian, I have a couple -- or just a couple of clarifications. Number one, stock's down in the pre-market based on the perception around deferred revenue being weak.

Can you just -- I know it's a little bit redundant, can you just go through the deferred revenue and talk about the breakup between maintenance and product, and if there were any changes in the product deferred, any meaningful movement there and then just what the maintenance deferreds were?.

Sure, Joel. Thanks for the question. So just as noted on prior earnings calls and also just during this call, the vast majority of what's sitting in deferred revenue is maintenance revenue, not software revenue.

Typically, any software deals that would go into a deferred category is typically just a timing issue and just a small portion of perpetual deals. So in other words, it's a timing issue of when we receive cash or can bill it versus when it meets our revenue recognition criteria, again, for a small portion of deals.

That will fluctuate a bit quarter-to-quarter, but we feel that it's not a good indicator of our license revenue growth, which was up 20% year-over-year, as the majority of it never makes its way into a deferred software category. So as of December 31, our deferred revenue balance, over 99% of it is maintenance and professional services.

Whatever's sitting there at the end of September, there was a few deals remaining in there that we did recognize. So going forward, you will see some fluctuations in there again, but it's only a temporary pattern in terms of just larger perpetual deals and timing issues with respect to revenue recognition..

All right. And then just a follow-up. You mentioned a little bit about linearity.

Could you just comment about linearity versus previous quarters?.

Sure. There's a higher concentration of larger deals, for sure. I think I mentioned the stat of 61% of our license revenue were enterprise deals. We also had an all-time high of international million-dollar deals, which is a good thing for us. So linearity kind of kicked up the DSO a little bit to 58 days for the quarter..

And then final follow-up and I promise I'll turn it over.

The -- is there any change to the renewals that -- are more of renewals getting pushed into 4Q as people are adopting Simpana 10? Is that one of the issues that's may be happening?.

No, I'd say it's pretty typical for us. Q4 is typically a strong renewals quarter for us, which has always been the case kind of going back in time. So no unusual pattern there..

And our next question comes from Aaron Rakers from Stifel..

Just as a follow-up to the deferred revenue discussion. I know that you had mentioned, obviously, a sharp falloff in the Dell relationship. And you also alluded to that being majority being driven by the maintenance stream of that relationship.

Has that or should we expect that to continue or will that weigh on the deferred revenue balance as we go forward? Or rather, are you able to replenish that maintenance stream into that deferred revenue line?.

Yes. So -- no, it won't have an impact. I mean, any kind of falloff in Dell revenue, especially Dell maintenance-driven revenue, would just be replaced through alternative distribution channels. So we do not expect a significant falloff in deferred maintenance as a result of a drop in Dell revenue..

Okay. And as a follow-up, I know you kind of gave a little bit more clarity on what you're doing from a pricing perspective with the new -- 2 new programs to kind of modestly roll out here over the coming quarters.

If we look at that and kind of the change in pricing on a like-for-like basis, so customer deciding to go with either of these 2 new programs relative to capacity-based licensing, how do we think about that from a revenue perspective, I know albeit moderate in terms of this impact over the near term?.

It's Bob. Today, when we priced the capacity model, all our solutions are priced into that model, whether a customer deploys those solutions or not. By enabling a value-based pricing model, we enable customers to pick and choose those solution sets that have the impact tied to their goals, their data-related goals.

So basically, we're giving away a lot of value, which customers just do not use. So if you use that as a theory, we would expect that we would price to the customer's needs and net-net, the value to CommVault would go up and the customer would get exactly the value that he's paying for.

So I'll let Al take a crack at that, but that's basically what the expectation is..

I think that's clear, Aaron, and as well as the other initiative on some of the term-based pricing scenarios that we're testing and using opportunistically out there. I think the point you need to understand is, this is not a one-to-one replacement for all of our pricing methodology today. It's simply perceived as an option for the customer.

We find a different capital budget on the models, different P&L models out there, people want to buy software differently. So again, it's just an option..

So whether you're -- whether you're talking about operations analytics or health care or advanced mobile solutions, those will all be priced to value, so that's a good return for the customer..

And our next question comes from Jason Ader from William Blair..

Bob, just on the software revenue for the March quarter. You've had a couple of quarters now where you've been able to take some things off the balance sheet, which has allowed you to grow very nicely....

That is not true. Let's be really clear. In Q3, that revenue did not come off the balance sheet. The revenue was due to -- on software revenue, was due to license, pure license revenue growth. So that is the misconception out there. Total revenue, yes.

It impacts total revenue, but it does not impact or did not impact in Q3 our software revenue significantly..

Okay. So I mean, I guess I'm looking at Brian's comments on....

I'll let Brian take this from here. But to be really clear, we had extremely strong license revenue growth based on million dollar deals. They were at a record and it drove our results. That's what you got to focus on.

You guys are all twisted up on deferred, but I think you got -- you're just overstating the impact of deferred to what's driving the growth of this company..

Jason, just to give you a metric. So on the software, deferred software, quarter-on-quarter change in deferred software was $4.1 million. We recognized $79.2 million. So you can kind of look at those stats and make your own informed judgment..

So $4.1 million was the change from Q2 to Q3?.

That is correct..

Okay. All right. So my point, Bob, was really just about March quarter and I know that the people are twisted up about this, and what I wanted to try to get a sense from you on is, obviously, it can't help you at all in March, because it's basically 1% or less now of the total deferred, the software side.

So on the March quarter software revenue, I know you don't specifically give guidance between software and services, but would you expect kind of a similar growth rate in this -- and we've had about 20% growth for the first 3 quarters of the year in software year-over-year.

I mean, is that a reasonable assumption for the March quarter because I think clearly, that would put to bed any concerns on the deferred, helping things out this year on the software side?.

I always say, we expect a good solid quarter and this quarter is dependent on achieving our license revenue growth targets..

And our next question comes from Eric Martinuzzi from Lake Street..

The guidance for Q4, I know you kind of addressed it from a fiscal year perspective, but if I could just take it back to where the Street is for Q4, that's $158.5 million of revenue and $0.46 and the implication here is that you're comfortable with that.

Is that an accurate statement?.

That is correct, Eric..

All right. And then just a question on the new feature adoption for Simpana 10.

I know you said when people buy Simpana 10, they're getting access to everything, but I want to take it sort of a layer deeper, is Simpana 10 selling so well because of these additional features? How are you measuring that and how are you doing versus your own internal expectations? Are they buying it for the legacy capability or is it being bought for that plus these additional capabilities?.

I'll take it at the top and let Al expand on it. It's really both. I think clearly, we have validated in the market these advanced features in our core data protection business and I'll let Al to expand on it. And secondly, we clearly have validation on our mobile and operations analytics and some of these other new market segment targeted products.

So we're really confident about that. Our issue right now is on the execution side and putting the product management and the go-to-market capabilities to drive it in there, but from a market reception, customer reaction, position against competitors, we're feeling really good about it. Al why don't you....

Yes. I agree, Eric. And a couple of other comments. For instance, on the data protection use cases and solution set out there, you know our story there is that we've modernized that over the last few years, focused on virtualized environments, Bob went through what that means in the cloud environment.

Those things are extremely popular, those methods, using replication techniques, snapshot techniques, et cetera. And again, we've seen strong growth there.

The other side of that equation, and again talking data protection in those environments is all the automation we've done on the operational side, including adding automated workflows, is extremely popular and almost the bigger you are, the more dynamic you are, the more the popularity.

So those kind of feature sets and of course are all new with v10 have been really popular. And then as Bob added, now as you move beyond the data protection use cases, the mobile, the operational analytics, our new reporting capabilities and even early on our intelligent archiving is starting to gain a lot of traction.

So we feel good about those sides of the equation..

And our next question comes from Andrew Nowinski from Piper Jaffray..

Now just as a follow-up to your pricing commentary, Bob, I guess it appears evident that you continue to add more functionality to your platform. But your installed base gets the new functionality essentially for free, as long as they queue up their maintenance agreements.

So I guess do you expect your larger customers within your installed base to adopt the new pricing models?.

Well, we've been testing those models with our distribution partners and our customers in terms of their acceptance of that approach versus our current capacity based approach. And by the way, as Al mentioned, this is an adder. It's not an either/or. It's what makes the most sense for the customer.

Now for example, if you're not deploying something, they won't have to pay for it, if they don't want to go to that model.

As it turns out in a lot of cases the customer is saying, well we prefer to stick with a higher-priced bundle approach, because we may use these features and we want the flexibility and that -- you've seen that in the term pricing as well.

You have to go a year, but 3 years from now we don't -- with the hardware guys we have to do a complete refresh and we don't like that. So we're happy that you've given us the alternative, but we'd rather stay with your -- our current perpetual model.

So these alternatives give the customer a lot more options and flexibility on how they purchase from us. So we've tested it and we don't see it -- because we're offering as an option, we don't see it as an issue. We see it as a major benefit..

Yes. I mean that makes sense, I guess, certainly it's a benefit for the customers, but I guess how does CommVault capture a bigger share of the wallet given the fact that you continue to add more and more features to the platform..

Let's just take 2 examples. One is operations, automation and analytics. So I have a vendor out there and they're paying that vendor, pick a number, $1 million. They add on value to that customer and we have competitive -- over the next few quarters we'll have a complete set of competitive solution sets in that area.

The incremental add for a customer to buy those is relatively small versus what they're paying for a plant level solution out there. That goes same case for mobile or healthcare.

So we're actually offering added functionality, better cost savings and better support, higher scalability, and a lot of other things at a lower cost of acquisitions to these customers. So they benefit and we benefit..

Okay. Makes sense..

Because as we open this up to these advanced functions that are going to be new -- we're not going to -- they won't be part -- the normal capacity based model will be there, but as we add these very, very advanced functions, the customers will have to pick and choose their purchasing models..

Okay, that makes sense..

If they want them, they got to pay for them, but if they pay for them, they're going to know exactly what they pay for and we'll give them an ROI and they'll know what their return on that investment is, or what the benefit is..

Okay. Just a clarification with you. In Q2, you defied the [indiscernible] pickup in demand in the Fed.

I guess can you just give us an update on what you saw in that sector in Q3 and what you're expecting going forward now that the sequestration issues have been resolved?.

We had a very strong third quarter, but it was due to some large deals. I said the underlying Fed business was not strong, but as a result of our ability to garner some -- it's been the large deals and said we had a good solid quarter. And you could expect that to continue.

I said the underlying Fed business will improve, but it'll be in our case we offset that with some larger deals, which ends up positively in terms of our Fed business growth..

And our next question comes from Brent Bracelin from Pacific Crest..

One question for Brian and a follow-up for Bob. Brian, I wanted to you talk a little bit about kind of the quarterly trends you saw. Clearly, strong quarter, but could have been stronger, the U.S. region was growing faster. It looks like for the U.S. region you're growing in the low teens.

Could you talk a little bit about the headwinds and tailwinds you're seeing in the U.S.

right now, and then perhaps some of the levers that could improve growth and then I got a follow-up for Bob?.

Sure, Brent. Yes, on a relative basis, international had a stronger quarter than the U.S. A lot of that was driven by some large multimillion dollar deals and international, as I mentioned. So it's a little bit lumpier than we typically have seen. I think if you look at the year-to-date increases, it kind of smooths out a little bit. The U.S.

is up 17%, international is up 24%. We're seeing -- we're optimistic about the momentum going into Q4, basically across U.S. and international..

Okay, fair enough. And then, Bob, 1 follow-up for you.

Obviously, you talked about Q4 visibility improving versus your visibility last quarter, but if I look at some of the external metrics that we have visibility into DSOs have increased for now 3 straight quarters, obviously deferred revenue didn't increase as much as it seasonally has in the past this quarter.

So help us connect the dots why your visibility -- you feel better about visibility going into this quarter than last quarter versus some of the metrics that we see that are a bit contrary to that?.

I'm just -- to Brian's point and Jason's point, the impact to our software revenue growth from deferred is small and getting smaller. So the changes in deferred are primarily going to be maintenance related going forward here. The visibility that I talk about, I talk about visibility and I talk about funnel.

What visibility is, are deals that we've shipped software, or we have orders for, or we can see that they're going to ship early in the quarter, but we haven't gotten paid or they just don't need our revenue recognition guidelines. So it just says that we have strength, the visibility is going up.

On a relative basis, we have strength for early in the quarter revenue that has an extremely high probability of closing early in the quarter. But it doesn't show up in deferred and internally we separate that from -- it's the high potential probability part of our funnel. And then funnel is your total opportunities for the quarter.

So right now in Q4, when you have higher visibility than we had going into Q3, and our funnel in Q4 is higher than we had in Q3, so the combination of the 2 says that we have a reasonably good outlook looking into Q4..

And our next question comes from Aaron Schwartz from Jefferies..

I just had another question on some of the program changes that you're contemplating on making on the product side.

I guess, for lack of a better term, the way maybe we think about Simpana and the capacity based licenses, some customers may have been forced fed, I guess, modules that they're not using and so you're looking to better monetize, I guess customers in some of the modules to get better uptake for products going forward.

Presumably, that may require some different sales specialization around some of the areas you're talking about expanding in.

And I guess the question I have for you is, how do you manage or how do you see any potential air pocket around that if the sales hiring has been a little bit below your plan, and it seems like you're putting a lot more onus on your sales force to make sure that customers are adopting and taking up product to where you can get adequately paid for that?.

That is a really good question. So let's frame it. If you're going to -- let's take operational analytics as an example. If you're going to frame that value to the customer in a team that really understands the impact of these analytic techniques and the outcomes to the customer.

So that means that your product management go-to-market overlay teams have to be in place to articulate that, because trying to educate a worldwide sales force on all the specifics in a discipline like that is difficult.

So the challenge is, and we're really clear on this, is to make sure those capabilities are in place in parallel with our implementing these new pricing models in the field, that's why we're going slow.

We want to make sure that those capabilities are there, so that when we -- and in the near-term, we're just doing this to our, let's say, from a corporate standpoint and they are not on our price book. And we won't put them in our price book until those capabilities are out there. But the question is -- it's a really good question.

And it ties to making sure you have crisp execution on strategy like that..

I guess the question is, it seems like maybe the products, I don't know if you agree or disagree with this statement. It seems like the product in the phase roll out of Simpana 10 for certain modules may be a little bit ahead of what you need to do on the sales capacity side to make sure you monetize that properly and so, is there... ..

Let's put it this way. Innovation is ahead of our go-to-market and field execution capability. So we would agree with that..

And so is there sort of any near-term risk in growth because as you stated it takes 9 to 12 months to see productivity there?.

Well, let's separate sales capacity from the ability to execute and sell into a new segment of the market. I mean, you need the sales capacity if you're going to grow. As I mentioned, we've been growing 22% over the past 7 years compounded. And over that period, we generally improved sales productivity.

So round numbers, to hit those objectives, you're hiring 20% new sales teams every year. If you hire below that, it's going to be more difficult to hit your target revenue, our license revenue objectives. So that's 1 part of the model.

The other part of the model is that you need a whole infrastructure to go and penetrate these new markets, product management, field overlay, technical expertise, who -- technical people who understand the technology and can articulate it.

So you need both, you need sales capacity and you need the, I'll call it the go-to-market infrastructure, in order to penetrate these new market segments. So technically, we're actually ahead of where we thought we'd be in innovation.

And as Brian mentioned, 1 of the major tasks of Jesper Helt who just joined us is to accelerate our hiring both in the field and in our, let's call it our go-to-market capabilities, in order to penetrate these new market segments..

And our next question comes from Srini Nandury from Summit Research..

I have a question on the competitive dynamics out there. Can you talk about the competitive dynamics particularly the pricing trends vis-a-vis some of your largest competitors.

Which competitors are you gaining share or displaying the most and how much of your new pricing models are really driven by customers versus competitors?.

So that's a good question. So traditionally, in our core market, our major competitors are Symantec, EMC and IBM. And we've consistently taken share from all 3 of those competitors in our core data protection and management business.

I said on prior earnings call, there's a lot of price competition in those markets, particularly as hardware solutions, I'll call it are tied at a spindle. So as the price of this goes down, the price solution sets go down. We've been able to counteract that. So our -- we do see pricing pressure, we've mitigated it by selling on value.

But there's no question, it's there. And as this prices start hitting down to 0, that pricing pressure is going to increase. So part of what we're doing in our pricing models is tied to being -- giving us more flexibility in dealing with, I'll call it traditional competition, making it easier for our channels and salespeople to deal with that.

Secondly, as Al was talking about earlier, we want a price to value, we created a lot of innovation and we just don't want to give that away. So we want to give our customers a high return on that investment, but separate that from, let's say, our core data protection and management solution sets..

And our next question comes from Rajesh Ghai from Macquarie..

I just wanted to follow up on some of the questions asked on Simpana 10. Considering that you've expanded your TAM quite significantly and levered yourself to some of the mega trends out there, whether it's hybrid cloud or mobile or Big Data.

I think one of the questions that keeps coming up is, can CommVault provide metrics in terms of what the traction is in these new markets, as well as trend essentially you can give us an idea of whether the strategy of expanding the TAM and going after new market succeeding? Also, could you share data about what the mobile functionality that you have, mobile data management, if that's going to sort of actually helping you getting new deals or expanding your TAM? Thanks..

So firstly, regarding the cloud, as I said earlier on the call, the cloud in enterprise and in MSPs cloud providers is a major, major factor of our growth. I could say it's not 100% of these million dollar deals we do are cloud related, but almost 100% have a major cloud component to it. And I defined that quite clearly on the call.

And I'd go through that transcript, because that is driving our business. Million dollar deals drive our business and the cloud is a major component of those million dollar deals. So more than anything else, that is overriding our growth today. Regarding the content related, whether it's archiving, analytics and there's a component of mobile in there.

So you've got a core component model of your data protection is what we call our core in it, file access, file sharing, you heard us content related. The content related part of our business is now becoming a key component of our growth.

We can see it, we can measure it now, and as we look forward, I can say we don't hit our billion dollar numbers and our $2 billion numbers without extremely high growth in those segments. Growth rates that are, for the sake of argument, several times higher than our core.

So to answer your question, those segments are important, they are growing today. Mobile is one of them. We have a lot of large mobile deployments, archiving, as Al mentioned, advanced archiving is another significant area for growth for us.

So mobile, we'll continue to expand, archiving we'll continue to expand and that component of archiving, by the way, is compliance.

And as we start moving into operations and operations analytics where we really have some compelling technologies, we start rolling that out sometime in the first half of fiscal '15 as we start moving out aggressively into the healthcare market and where we have a foundation, by the way.

Those other new market areas will become drivers and we're not overly confident, but we're confident in our ability to execute those strategies..

And our next question comes from Michael Turits from Raymond James..

Bob, you talked about competition, price competition with the large guys that continues to supply pressure. Anything new on -- versus smaller competitors, [indiscernible] in any of them are there. And also Brian, just wanted a clarification, I think it's obvious, but I just want to make sure I was right.

You said that the software deferred revenues were down -- were changed $4.1 million, I assume you mean software deferred was down $4.1 million sequentially, correct?.

That is correct, Michael, yes, quarter-on-quarter change is $4.1 million down. Let me clarify something. That is correct. That's what the math is. But when I say visibility is up, you do not see it but we're just -- I'm just telling you, our license revenue and growth, when you take all into consideration, is strong. We just got to keep it that way.

So don't get overly focused on deferred, because you're going to get twisted up in your underwear..

Yes, I hate that.

So, visibility, I think, you defined that such as off-balance-sheet backlog, is one way of looking at that, right?.

Correct. You could look at it that way. It's not revenue, because it's just not revenue, right, it doesn't meet our criteria and we're very strict on how we -- and as soon as it is revenue, it becomes revenue. We have a very rigorous, consistent revenue record and checklist here. That's where it comes from.

So I'm just saying on balance, if you look at Q3, we have -- when you net all the figures out we had a really good solid license revenue growth in the quarter..

And I was just asking, Bob, about the smaller competitors, any change in the landscape there.

People have been brought up to you before like [indiscernible] and anybody on the small side that's either more or less visible?.

Well, from our revenue, we see activity out there. It isn't impacting our revenue significantly, but I would view it more as opportunity. We started to -- as we extracted from Dell, we did 2 things. We successfully, and everybody felt we couldn't, in a few quarters now we got our way out of Dell.

For all practical purpose we're out and we've moved those accounts and that revenue to other distribution partners. Secondly, we started to build our own, I'll call it mid-market capability, and started to roll out product into that midmarket.

And going over the next few quarters, we will continue to expand our capability with, I call it leading products both from a technology and pricing standpoint to address the higher, not the lower end of the SMB, but the mid to higher end of the SMB, mid-market.

You will see us move into those sectors a lot more aggressively than we have in the past and we're confident we can succeed in those areas..

And our next question comes from Greg Dunham from Goldman Sachs..

Most of mine have been asked. I do appreciate kind of how you guys describe how the cloud is driving your business and how hybrid cloud is good for business.

But maybe drilling a little bit on that, what differentiates you in hybrid cloud versus some of your competitors specifically? And then a follow-up, historically, you have said that the backdrop from a volume perspective has gotten more complex.

Has that changed at all this quarter or it is getting any better as you've improved some of the messaging around hybrid cloud?.

No. I mean when you talk to customers, most of our large competitors, they're running into massive scale issues. They are running into significant compliance issues, because with our competitors we back up products and archive and compliance are 2 completely separate products. They don't scale very well. They're extremely costly.

Secondly, when you start talking about deploying a consistent, universal data protection compliance strategy across the globe in hundreds of locations with many, many petabytes, our competitors don't scale, they don't have the universal console, they have scalability problems, their backup products and archive products are separate.

The reporting isn't as complete. They don't have the automation that we do. They don't have the operation analytics capability we do. So when you start to put those things together, we're solving some really big fundamental problems.

I was in a -- without naming the company, I was in a very large customer in China a couple of months ago and, a well-known name in China, and he had some of our, I'd say, your typical traditional legacy competitors in there and it's the first time I met the CEO and he said, Bob, you're winning the technical evaluation.

I said, can I tell you a little bit more about CommVault? He said, no. He said, I know who you are. I know what's you're ranked, I know what your reputation is. And I know you can solve my problems better than my traditional vendors. I just need you to execute. So these are fundamental issues.

Big banks, big insurance companies, big governments as the governments, and one of the reasons we're doing so well in the federal government is the move to consolidated clouds, big governments, Canada is moving to consolidated clouds, state governments are doing the same and that's a sweet spot for us.

I spelled out a lot of issues in the call and I'll let Al walk down and explain this a little bit further, because it is a key driver of our growth..

I would just add, Greg, and Bob laid that out really well, the other element, he talked about it in the script, but if the dynamics and the flexibility of our capabilities, our architecture of our solution sets because what's going on out there is people's underlying infrastructure can change dramatically overnight.

They can add public file capabilities to their already private cloud capabilities, they can add multiple public cloud capabilities and you have to of course maintain the same management, the same compliance, the same access, the same visibility and of course the same security settings. And it's not so easy to do in practice.

So it's that dynamic, it's the flexibility as part of our solution sets that I would add to Bob's comments..

And we're the only ones, by the way, that in massive scale, index all the data. Everybody else fundamentally moves around 1's and 0's. By indexing, it means we know what application it came from, what version of the app it came from, whose data it is, who has access to it, if it's encrypted, who's got the key.

And it's offset, so you have a file and it's moving from on-premise to a hybrid cloud to a public cloud. The intelligence moves with the data. And it's captured at the console. So we always know where it is, who has access to it for past recovery, for DR, for whatever and it's unique out there. And those kind of capabilities are driving our business.

There's nobody who has built this kind of platform with this kind of functionality and scalability across all these different use cases that these big enterprises require..

And our next question comes from Glenn Hanus from Needham..

Last quarter you gave us a little bit of sense of sales of Simpana into your installed base on the 10.

Can you maybe give us an update this quarter on how that rollout is going?.

Yes, Glenn, this is Al Bunte. We continued to be pleased with it. Rolling along, I think compared to past releases, we've had greater uptick with our bigger customers this early in the release, they normally wait quite a while for obvious reasons. I believe we are at right around 3,000 sites that we've been deployed with v10.

We're running over 100 a week in terms of deployment, both upgrades and new deployments of it. So again, we're feeling quite good about it. We're getting good response from it, good satisfaction levels out there with our customer base..

Our next question comes from Abhey Lamba from Mizuho Securities..

Bob, Just one clarification and then I have a question. On visibility for Q4, thanks for explaining that in detail.

How does the visibility this year compare with normal Q4 over last year's Q4?.

I don't have a specific answer, because I know we had a very strong Q3 last year. So my guess is relative to a year ago, it's probably down a bit, but it's up quite a bit from last quarter..

Thanks. Go ahead, Bob..

I think that -- I mean I can be really clear about what happened between Q2 and Q3 and I'm pretty sure -- I mean, a year ago, Q3 and Q4, this year versus last year, I'm not as clear. But directionally I think I'm correct..

Got it. And as we look at specific growth drivers for our fiscal '15, now we've got capacity increases at existing customers, new customer signing in the core offering and adoption of market expansionary features of Simpana 10. It seems like migration from region based to capacity based may not be tailwind anymore.

So can you help us understand all these drivers and maybe stack rank them for the next year, any quantitative or qualitative color will be helpful?.

Yes. I mean, I can clearly, without question, big enterprises, big governments, MSP cloud providers, those big enterprises, cloud based deployments by far, are the drivers. Those are where the million-dollar deals are. In parallel with that, we clearly are confident now about where we are going in these new market segments.

We've got it built into our plan. We are basically where I said we would be 2 years ago. I said when we launched Simpana 10, I said we'll launch it, we'd establish credibility in our core and strengthen it. We're clearly there. And that we would validate where we are in our new market segment. We are clearly there.

And we'd start to build revenue in '15, which is our current fiscal year coming up. I'm confident we can get those objectives because we're tracking against those. And then those would become a more significant component of our growth in FY '16 and FY '17. That's exactly where we are.

The only color I will add to that is we're more confident about that because we have the products out, we're innovating faster than we had planned, and we've gotten a really good market reception. I mean, we're really clear on where the competitive positioning is.

The only thing we are behind on is getting our go-to-market engines, what I would call it, getting our field execution capabilities up where they need to be. That's our major focus. So again, biggest driver, large deals, big enterprises, on cloud base solutions..

And I'm showing no further questions at this time.

If you have any final remarks?.

No. Thanks very much..

Thank you. And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect..