8x8, Inc. (EGHT) Earnings Call Transcript & Summary

I cover communications technology for Needham & Company, and I'll be hosting our next session, which is with the management of 8x8. We're very pleased to have 8x8's CFO, Steven Gatoff, here with us. And the format of the presentation today is actually going to be a fireside chat between Steven and myself. [Operator Instructions] And we'll take questions as time permits and as they come in. And with that, I'll kick things off. And Steven, thank you for joining us first, appreciate it. And you guys just reported a quarter, so I think maybe to sort of level set our audience, maybe you can just sort of bring us up to speed on what you reported on your recently reported quarter? What some of the puts and takes were and maybe what some investor misperceptions were as you discuss the results with the investment community?

Sure. Hey, Rich, good to see you and good to spend time with everyone. Yes. We reported quarterly results, as you noted. They came in ahead of guidance as we set up that expectation and that cadence to reset how we look at the business and how we grow and pivot the business, as we've talked about. It's a move really on 2 fronts for 8x8. One, we are continuing to migrate a small business-centric company to a mid-market and enterprise customer business, a; and then b, migrate from a legacy offering to a new X Series, fully cloud, single platform business. And those are the 2 key themes around the business model and around which we executed. You saw that in the composition of ARR. You saw that in the growth of mid-market and enterprise customers. I think it did really nicely, up in the 60s, 60-plus percent, mid-market and enterprise together; as well as progress in migrating customers to the new platform, our target is to have more than 80% of our customer base on the new platform by the end of this calendar year. And so we continue to move forward. For, well, as Vik has said and others say as well, our space is fortunate in this environment, but unfortunately for all the wrong reasons, to have a lot of demand right now. And so while on the one hand, there are reasons to be thoughtful and cautious on how the pandemic is impacting small businesses and working capital constraints that they're facing, we're also seeing a surge in demand and a tremendous amount of activity on the deal front with customers, small, medium and large enterprise alike. And so we're pleased with where things are. We wanted to provide visibility for folks coming into the quarter and into the year. This is our new fiscal year. April started fiscal '21, which ends in March of 2021. And so one of the things we wanted to talk about with folks that, to your question of what are some of the things that maybe did not go swimmingly well is, we spoke a little bit about our net dollar retention, some impact of churn that we've been experiencing. The good news is that it started to improve as we came out of our fiscal year ended March. The rub is that it's higher than we want it to be, and we're still working on that and have been pleased with the progress we're making. And we'll see what happens with the whole COVID impact. Let me pause there and see what directions you would like to go down on that path.

Yes, sure. So yes, I imagine that was one of the areas of investor focus, was the churn number you mentioned and your net retention dipping below 100, I guess, during the quarter, I think. And it's encouraging to hear you're seeing that improve. Can you talk about sort of the dynamics there? It sounds like that's being exacerbated by a push to transition the SMB base onto X Series. So wanted to know, one, have you -- have there been any recent initiatives to accelerate that push? I know you said during the call you were at about 43% of your total base on X Series today. You want to get to 80%. Have you initiated any programs to sort of accelerate that? Do you think that caused the churn? And what caused the churn? Do you think to maybe start easing as you move into this next quarter?

Got you. Good questions. So yes, let me talk through the nature of some of the churn, and it's fairly different by customer segment. The short answer is that the migration of customers is not what has yet caused any meaningful churn. Most of the folks that we have on the X Series platform, north of 40%, the vast majority of those are from new customers. And so to your other question, there has been an acceleration in the move of customers to the platform in the last 60 days or so. We've been able to architect that to be a much more automated technology, tools-based migration than a more manual process that it has been in the past. In the past, it's been fairly slow, and our engineering team, product team has done a really nice job automating that process, and that started accelerating probably in the last 2 months. And so we're adding thousands of customers per Sprint over, which gives us confidence to hit the number in a few short months. The nature of churn with small business customers is different than it is with mid-market enterprise customers. So if we think of those 2 buckets, the large and small, if you will, churn across the small business customer base is roughly 50-50 loss of a logo, revenue downgrade. Those are 2 elements of churn. So if someone churns means they literally leave the 8x8 family, and then the second element is that they renew for less money. The nature of larger mid-market, enterprise churn is the vast majority of it is revenue downgrades. Every now and then, every 3 or 4 months, you maybe lose one logo. You have several thousand mid-market, enterprise customers. And so if you lose 1 every 4 months, it's a little bit larger, so it does impact the churn rate. But for the most part, churn is more a revenue downgrade. And what I've seen in the last periods of churn in that space is that the revenue downgrade for larger customers is mostly driven based on a usage, users basis. Meaning a larger company signs up contracts for 450 seats, and they deploy and they're using it. And then at renewal, in 2 or 3 years, they say, hey, you know what, we're actually at 375, 390, not 450. And so some customers, when they do "churn," it's a revenue downgrade based on usage. In small business, however, the revenue downgrade tends to be more pricing-based, more competitive dynamics with small business customers, particularly micro customers. And so that tends to be more of a market factor than it is anything to do with usage, users or size of customer. The other dynamic that's really important on churn is that roughly 65% to 70% of the actual churn that takes place in a month is from small business. And so the preponderance of it is in the small business arena. And of that small business churn, roughly 2/3 of that is legacy customers. And so it's customers that have a plastic desk phone, that have a phone next to some point-of-sale cash register store, and/or have a phone on a pole in a stockroom, storeroom. And so those have historically been higher priced, fairly non-feature-rich, non-value-add types of customers that are more susceptible to churn for someone coming in and dive bombing and saying, "Oh, you're paying $26 a line? I can do it for $10." Well, some of them leave, but some of them also just say, "Well, I'll stay with you guys. It's easier, a better product, but I am not renewing at $26." And so they renew at $18.50. And so that would be the nature of a pricing-based revenue downgrade. What I said earlier is, we are doing a much better job now, in the last few months, than we did a year ago with respect to churn. And what I mean by that, there's probably 3 or 4 things that we're doing differently. Is this helpful? Keep going down the path?

Yes. No, I appreciate it.

Sure. So for starters, we historically did not have a terrific customer engagement command of the customer to know why people churn. And so what we refer to as reason code analysis, we didn't really have. You go through either of the 7 reasons why, and we can see statistically each month who left and what reason. And so we had started implementing that over the past few quarters. And that matters a lot. If you don't really understand why something happens, your ability to change it is going to be meaningfully hampered. That was one important thing that we started doing. The second thing we started doing that we see impacting is, we started using more tools and technology and analytics to understand leading indicators about churn to understand, well, what are the business correlations that are preceding indicators to churn, whether it's usage or number of users or deployment time or activity levels, to sit and correlate. And really almost kind of classic AI, if you will, in analytics on user activity that we really only started doing with rigor maybe 6 to 9 months ago. And so that is making an impact. The third thing, candidly, is we changed our compensation plans. About a year ago, there was no one who had specific quota for a renewal book of business. Typically, you see renewal teams that have dollars of quota assigned to renewing accounts. We have that now, didn't have that necessarily a year ago. And so that matters when you have economic incentives, with a sales force specifically carved out as a renewals team as opposed to having that sit in a customer success, MBO type of structure. Sometimes it gets done given a couple of tries, sometimes it doesn't. And so that's been changed. And those are the -- I think I went through 3 or 4 items. Those are the big changes insofar as how we've addressed churn that seem to be making a difference. The fly in the ointment is, for us, like everyone, is what happens with COVID, right? Does that drive just higher churn across the industry because small businesses have struggles or large businesses pause on how much business they do? Anyone's guess is as good as anyone else's to see what happens over the next 90, 120 days. We have forecasted in our numbers and our expectations that it gets worse. We have forecasted probably another 2 points of churn associated with COVID in our numbers going forward. And so in other words, the Q1 churn rate is probably, we add around 2 points to worsening of churn. So to the extent that does not come to fruition, then that would be positive for us. And if it does pan out that way, then we feel like we're amply dealing with it.

That's great color. And just one final one to put this topic to bed, you said you were seeing some encouraging signs, I think, post the end of the quarter. Can you talk about what you saw that was encouraging with respect to churn?

Sure. Just like all of those things have come to a standpoint of us, our team being in more command of what's going on. That's probably the fourth item, which is we created the role of Chief Customer Officer that did not exist. It's a direct report to CEO, Sam Wilson, who really created and drove the small business, the SMB business. So he has a very good command, and he is directly comped on churn and on this part of the sandbox. And so we're seeing better knowledge and better correlation, cause and effect, between what we do and what happens. And so we saw an improvement in the churn rate absent this COVID assumption and see what happens. And so that's just positive. That was the meaning of what's going well, is the churn rate improved.

And this is where you're going to have to pull out your crystal ball for this one, I guess. But if you were to look down the road, say, a year, when you've got most of your base transitioned to X Series, how would you think about your dollar-based net retention in that sort of scenario? Where do you think it should be?

Good question. I mean it sure as hell should be above 100% in total, right, so at the risk of stating the obvious on that one. The nature of our NDR, I believe like many companies, is that it's much higher in the larger mid-market and enterprise customers. And then in the small business, it's really a question of managing churn. And so today, our expansion rates in enterprise customers is pretty strong, like it's a nice number. Churn is a little bit higher than it ought to be, orders of magnitude, 4, 5 points higher, not 20 points higher in enterprise. Whereas with small business customers, it really is -- churn is a much bigger number than it should be. And as we talked about a moment ago, it's really because of the legacy. Majority of it is the legacy platform customers in small business. We are looking to drive greater expansion rates in the mid-market. Our mid-market practice really is our channel practice. And so that's a really important dynamic for us. And as the channel continues to get traction and improve and grow, that's something that we look to develop the NDR within mid-market even more. And so if it's around 110% for the MM, Ent space, our target would be, we want to get that up to 120%.

Right. That makes sense. So I wanted to switch gears here towards kind of business, the business development side of things and really go back to a conversation we had about a year ago at the real-world version of this conference a year ago, where you'd talked about how the pipeline coverage had grown pretty dramatically versus historical levels based on your business development initiatives. And subsequent to that, if you look at the quarters you reported, your core bookings, I think, were 35%; I think, 30%; and then 26% this most recent quarter, really very good numbers, certainly on average. Obviously, that includes SMB, so really healthy bookings numbers. So wanted to maybe just drill down on the state of the business today on that front. Is your coverage still at the elevated levels it's been for the last few quarters? And how do you feel about that kind of rough bogey we've been at of around 30% core bookings? Understanding COVID is a factor in there, but how do we think about that relative to where we've been the last few quarters?

Sure, good question and topic. And the short answer is, yes, we continue to have good visibility for the next 6 months, 2 quarters: the current quarter, next quarter. And yes, the pipeline coverage ratios and activities, to my comment earlier, is still pretty strong. And that is the proof in the pudding, if you will, about the demand and appeal of the platform. And that's why we started reporting that metric. When we acquired Wavecell and we started growing our CPaaS business, we realized that people needed and it would be in everyone's interest to have some more visibility to the core business. And so we started reporting bookings. And the bookings number, as a recollection, is only UCaaS and CCaaS. There's no CPaaS aspect to that, for everyone else's benefit. And so what you stated, Rich, is spot on, which is our target really is to grow bookings something with a 3 handle, whether it's 30% or 35%. If we're growing bookings to 30% for the next 8 quarters, great, then revenue should start to pick up and converge on that line over time. We realize it's a journey, right, because your bookings number is a relatively small number on a $400 million base of business. And so it will take some time for that to happen, but it is an important target to continue to grow bookings at that level. We said sometimes it will fluctuate. Like this quarter with the COVID impact closing out March, some things pushed, so we closed at 26% rather than 33%. But on average, that is something that we still target and still look to be an important metric.

Got it. And then sort of following up on that, channel has been a big focus for you as you push towards the MME side of the market. You've had good success there. You've had good growth rates. You've had channel comprising the majority of your bookings on a quarterly basis. So can you just sort of give us your thoughts on where you are relative to where you want to be with your channel exposure? And then maybe weave in where you are with the ScanSource, which provides sort of another channel venue for you, which really hasn't spooled up to a meaningful degree, I think. But just bring us up-to-date on where ScanSource is and where you are relative to where you want to be with the overall channel.

Sure. Sure. Awesome. And I think you laid it out, at the risk of sounding gratuitously flattering, you laid it out in a precisely right way, which is we are in the master agent channel model now adding migrating to the VAR channel. I'll get into that as you and I have talked about this in the past, which is, if you give it some context and some perspective, we as a company, we relate to the channel and look at other companies who have done a nice job in the channel, were early, were very aggressive, and we were late. And then, oh, by the way, when we got into the channel, we kind of were not that good at it. And so about 15 months ago, last January, we exited our head of channel, restructured the team, restructured our materials, restructured compensation and really relaunched our channel presence. And the good news is that it's kind of working. And so that's nice. But to your point, we're seeing large-channel bookings growth. And the good part of that, in my opinion, is that channel, there's no competitive barrier. No one has a competitive advantage over another participant in the channel. You really need, in my view, 3 things to be successful. You need a good product, you need to show up, and you need to pay market rates of compensation. And so historically we've always had a good product, but the product's gotten much better with our integration of video over the past year. Our contact center capabilities have improved meaningfully over the last year. Our voice has always been -- voice quality is a strong suit. And so now you really have a much stronger platform. Our commissions and spiffs, we adjusted to market. So we don't really pay anything crazy. It's just basically paying what the market pays, which is new for us this past year. And as a result, you've seen bookings grow really nicely. And you've seen channel growth 80, 80-plus percent for a few quarters, which is obviously not terrifically sustainable to keep growing 86% every quarter. And so at some point, that starts to come down and revert to the mean when you anniversary those 80%, 90% channel growth quarters, and then we'll see that probably coming up. But interestingly the channels work, but it's expensive, right? You're paying a spiff and you're paying a residual. And so for us, just like everybody else, it's high-quality deals, right? Because if someone comes in, a channel partner with business, the close rate on a channel-sourced deal is much higher than a direct cold-sourced transaction, right? If someone's coming to a channel partner, they want to get something done. Usually it's s shorter time frame and higher close rate, but you pay for it, okay? Well, it's been helpful in helping us grow. The other thing that's really resonated with us is the whole dynamic of how to get a better, a more robust volume of transactions of new deals, of lead gen, how to get more seats at the table, more at-bats for this embedded base, right? Because if you look at the base of 250 million, 300 million seats that are out there and you look at RingCentral has 2 million and we have 1 million, right? And so there's just tens of millions of embedded legacy on-prem users out there that are just starting to come to cloud. And so our view of how we get an at-bat is really by enabling the VAR channel, the VAR community to have a cloud offering to sell into their base. Because most of that legacy base is not owned by the equipment providers. It's not owned by Avaya, ShoreTel or Cisco. It's owned by the VAR. It's a VAR customer relationship. And the VARs sell not just telecom equipment, but laptops and servers and professional services, deployment services and help desk and support to their customers. And so up until recently, none of these VARs have had a cloud offering to sell into their on-prem equipment customers. And so we made the big bet that we would enable the VAR channel to do this. And we did that first with ScanSource, Avaya's largest distributor. And it's working out really well. You made the right observation that this is not a June or September massive increase to revenue. It's more of a -- it will start to ramp in the second half of the year insofar as revenue. But the traction we're getting with the space is pretty nice, where we're having more and more folks sign up, particularly as the platform and all the spend and the investments that we made in Q3 and Q4 now have a really strong partner portal up and running, where customers come in and provision electronically. Their customers get quotes. The billing is going live, and that's a really important aspect of it. And so we see the VAR channel development with ScanSource as being terrific. We just signed and announced recently, I think it was last week, we announced Virgin Media in the U.K., which is a terrific VAR-like channel route to market that we think is going to be awesome in the U.K. And so we're pretty excited about what the VAR channel does for bringing us more at-bats, right? You and I have talked in the past. What we, 8x8, have found is that when we're in a deal, we win 2 out of 3 of those deals that we're in. We have good product, good win rate. And our problem has been historically that we need more at-bats. And so the VAR channel is that bet to more at-bats.

That's great. So I want to pivot to some audience questions now. One of them actually dovetails off a comment you just made, which is when do you anticipate the Virgin Media relationship kicking in, so to speak, contributions from them?

Yes. That's, I would say, at least a 6-month type of ramp to seeing anything meaningful. It takes them a little while to go train their folks, go to market, get customers over. But their reach is so significant and their business customer base, so not even like small [ business ], but like their customer base is huge. And they have such a commanding presence that once they start the machine, we are really bullish on what that means. And so I would not look for anything remotely meaningful in revenue for at least 6 months. I would say traction, though, with their go to market, though, that's important.

Another question, how much uplift to LTV do you get from a customer on X Series versus the legacy platform?

Yes, meaningfully better. The economics of a customer on X Series is a multiple of the legacy platform. And there are several reasons to that. One, the nature of the offering is just a higher value prop: analytics, softphone, all of the interactions of what you can actually buy and do on the X Series, there's just more. And so those services, that value prop just has higher margin as you would expect. Usually like larger, higher-margin -- sorry, higher-value services have generally higher gross margins associated with them. And so the lifetime value tends to be higher on the new platform, a. That's good. B, what the new platform does is that it removes a lot of friction in the selling, upsell, cross-sell process, where the old platform was just, it was a platform. That's probably been a little bit flattering. We've always been cloud delivery, but we sign Rich Valera. We deploy you, we configure you, and you're cloud-delivered. Great. And then we sign another company and customer, and we configure them and deploy them and it's cloud-delivered. But it's almost as if there's 2 different virtual instances on the old platform. And so migrating those all is a pain in the ass, and the team has now figured out how to do that on a tools-based way, which is very efficient. But also when you wanted to make changes and add more users or buy other services, it usually involved a human being, that you would need to speak with someone at 8x8. And on the new platform, there's a much more significant capability, e-commerce capability to add users and add services without talking to people. And so the value of customer relationship grows as people can add more users and expand and add other services, a, more rapidly; and b, with less friction.

Got it. I'm going to now paraphrase another question that's come in online. And it's around your targeted margin expansion, I guess, to exit the fiscal year. And I believe it's non-GAAP pretax breakeven. To get there from where you're at, sort of a double digit sort of non-GAAP op margin loss today, can you bridge between those 2, COGS versus OpEx, and what are the sort of major drivers of that leverage?

Yes, good question. It will come from a combination of 2 things: from growing revenue dollars and expenses growing at a decreasing rate. So it will come from a divergence of those 2 curves, is the short answer. Okay, so revenue will grow and continue to add revenue, good, that's always a good thing. And on the expense-side to the heart of that question, it's likely more of an OpEx cost-management exercise than it is a COGS cost management. There are certain elements of COGS that will be more efficient. For example, our professional services, that will be run and is being run a lot more efficient. And so that's helpful. But orders of magnitude, that's $5 million or $7 million a quarter. That's not a tremendous part, but it's helpful. We have a lot more control over our OpEx, over our OpEx spend. And so we're looking to manage that very, very closely. We have a new CMO on the marketing side. And so we expect to see improvement in our marketing spend, both insofar as the dollars being spent as well as the impact. We're seeing the impact in efficiency already. Our marketing engine used to be meaningfully focused on paid search and lead gen, lead aggregation and lead scrubbing. That was good to get business, but not very efficient on an ER basis, enhanced revenue basis. And so we're seeing an improvement in that this quarter, and we expect to continue to see that in sales and marketing through the year. G&A as well, expect to see some improvement there as well.

And how about the front-loaded expenses in the ScanSource deal? How should they trend from, I think it was, $6 million to $7 million in 2 quarters to get that up and running. How would that trend sort of over the next couple of quarters?

Yes. We had a little bit of a nod upfront to go spend and make investment. And that's what we did in Q3 and in Q4 that we just reported. And our ongoing spend, if you will, is all factored into our cost structure. And so the punch line is what we just said, which is we expect to manage OpEx very closely so that there's a very small growth in OpEx as we move through the year. So that will deliver a lot of leverage insofar as how we get to essentially breakeven exiting the year. And what we mean by that and people will say, what do you mean, Gatoff, essentially? I mean Q4 won't be 0.0. I don't know how you manage exactly to that. And so if we came in Q4 with a $1.9 million loss, $2.3 million loss in Q4, but the more important point is the next quarter Q1 is profitable. So that's what we've said for a year now, exiting the year at breakeven because the next quarter Q1 shall be profitable. And that's the important, in our view, the more important thing.

Right. That makes sense. How about pivoting to video meetings? Obviously, you guys, you launched the platform and you saw some pretty accelerated adoption of it, which near term, it's a nice thing, but it's kind of an expense. And so talk about how you plan to sort of monetize that and use it perhaps for lead gen.

Sure. It's exactly what you said. And there's 2 parts of it. We had really improved the quality of our video offering massively in the last year with the acquisition of the Jitsi video platform from Atlassian. And so that was just a terrific add. And with that came the Jitsi open source community, the Jitsi open source platform and video offering. And so there's 2 parts to this. There's the commercial product, 8x8 Meetings, that has a free offering in it, and then there's the Jitsi free meetings product that's just out in the world and the community. And so we introduced the commercial product for free because we wanted to drive usage. And it wasn't a freemium model. It was a free out. We're out there. We're late with go to market. And we have now a video product that can compete really, really well. And so let's go build a user base and we'll monetize it later on. And we really looked at it as an 18- to 24-month investment to build a base of users. In other words, have it be free for 2 years, build users and then you can introduce pricing and monetize it. And because of the pandemic, we went from a few hundred thousand barely users for both the free offering and Jitsi combined, was only 200,000 users, shot up to 20 million. The vast majority of those was on the Jitsi service, but there is a nice, healthy chunk on our commercial free meetings, the 8x8 Meetings product as well. And so on the one hand, what you said is totally right. Like, okay, well, that costs something, right? You don't go from essentially 0 to 20 million with no impact on your cost structure, right? That's -- the good news is that for a platform offering, we have a very low marginal cost of service, but it's still a cost. And so the great thing that the guys on our operations team did was they worked with Oracle on this much more cost-effective platform for trafficking our video content and our video transactions. So the cost structure of that is way more affordable now even as a platform than it would have been otherwise. And so we're thankful for that partnership and relationship. And two, what it did was it accelerated our entry into the market with a paid offering, right? The comment I made earlier was like, give it 2 years, get some respectable level of users, then go monetize. Well, we looked at it in a matter of 6 weeks and said, holy s***, we have all these users. We should go now introduce a paid offering that has obviously much more robust features and reporting and analytics and storage and tighter integration and all the stuff you'd really get from an enterprise-grade video offering, and then go migrate customers, both from the 8x8 free meetings that are using that as well as the community of 18 million to 20 million users that are on Jitsi and having folks start bringing them over. So that's the focus now is go monetize this large base that should be a pretty attractive CAC. And our CMO, Marge, who's relatively new, came in at the beginning of this calendar year, has done a really nice job of seeing that as a terrific lead gen asset and looking at that as a nice way to improve CAC.

Great. That's a good summary of that. Another question from online, so free cash usage the last quarter, was there anything unusual in that, sort of onetime in nature? And how should we think about free cash flow usage as you progress through the year?

Yes. That's a good question. And I appreciate that someone asked that because it's important to talk about our cash burn, cash trough, what that looks like. The short answer is yes. There were larger cash outflows in the quarter, in Q4 March quarter, that we don't expect to have that magnitude going forward. And so if the Q4 quarter cash burn was something like $48 million, we expect that to start going down immediately in Q1. Probably, we'll still have a 4 handle on it, but it will be at the way lower end of that for Q1. And then we expect that to halve every quarter thereafter. There was some large capital expenditures. We had our new headquarters office that we moved into in Q4. And so that was the biggest chunk, roughly around $10 million of cost, that we don't see as recurring. And so that's one big item. And then we do see cash burn continuing to trend as an improvement as we move through fiscal '21. We talked about a P&L breakeven in Q4. The cash trough will probably follow roughly 2 quarters later, which is the nature of ASC 606, the SaaS model, where expenses like commissions are paid upfront typically and then amortized over the life of the customer. And revenue is taken upfront, but then as customers ramp, they pay later on. So the cash flow typically follows roughly 2 quarters or so behind the P&L.

Got it. That's helpful. And then another question online going back to the channel. And I suspect this is kind of a dynamic situation. But are you concerned that one of your competitors will get aggressive in terms of spiffs in the VAR channel? And if so, how will you react? I'm assuming you've seen this type of activity already, but feel free to comment on that one, Steven.

Sure. So that's a little bit of apples and oranges when someone says, hey, spiffs in the VAR channel. The way that economics work in the 2 channel models, you have the master agent model that is AVANT...

And, Steven, I'm sorry to interrupt, we have about a minute, and we're going to have to wrap it up. So we'll have to make this one tidy.

Yes. So the master agent model is a referral model where they get a spiff. And we are at market. Sometimes people do crazy things. It's far and few between. It's very economic. The VAR channel is a reseller. There's no spiff. So we sell to them at, say, 50%, and then they're marking up and selling their business. And so the economics of that business are, bottom line, are much more controllable and knowable. We're not seeing crazy spiff levels and we're not concerned about it.

That's great. Okay. With that, we're going to have to wrap it up. Steven, thank you very much, really appreciate it, a great conversation. Thank you.

Likewise. Thanks, Rich. Thanks, everyone.