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spk01: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the ServiceSource first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there may be a question and answer session. To ask a question during the session, you need to press star then 1 on your telephone keypad. As a reminder, this conference call is being recorded. If you require any further assistance, please press star then 0. At this time, I would like to turn the conference over to Ms. Elise Brassell, Head of Corporate Communications.
spk00: Thank you, Operator. We appreciate everyone joining us today, and welcome to Service Sources Earnings Call to discuss our results for the first quarter ended March 31, 2021. On the call today are Gary Moore, ServiceSource's Chairman and CEO, and Chad Lyons, our CFO. As a reminder, our SEC filings and the earnings release we issued yesterday after market close are available on our website at www.ir.servicesource.com. In addition, we have posted earnings slides to accompany our comments today. Shortly after this call, we will post an audio replay and a copy of our prepared remarks to our website. Before we begin, I would like to remind you that during the call, we will make projections or forward-looking statements that involve risks related to future events. All statements made during the call reflect our views as of today, April 29th, 2021, and are based upon the information currently available to us. All projections and forward-looking statements should be considered in conjunction with the cautionary statements in the earnings press release and the risk factors included in our SEC filings including our report on Form 10Q. These documents contain and identify important factors that could cause actual events and results to materially differ from those contained in our projections and forward-looking statements, and we disclaim any duty to revise or update any forward-looking statements. In addition, during the call, we will also be discussing certain non-GAAP financial measures, which we believe provide additional information to enhance the understanding of how management assesses the operating performance of the business. The reconciliation of the gap and non-gap measures can be found in the earnings release that accompanied this call. And with that, I'll turn the call over to Gary.
spk03: Thank you, Elise, and welcome everyone to our earnings conference call for the first quarter of 2021. I'm happy to join you today to discuss our first quarter results. In our last call, we shared our expectations that our path to growth and improved profitability would become more apparent later in the year based on anticipated improvement in our go-to-market and operational execution. Today, I'm pleased to share that we continue to make progress on our objectives and we are gaining greater confidence to reach the future we envision. While there are certainly still elevated levels of uncertainty globally, we are encouraged by early signs of strengthening in the markets we serve. Market research firm Gartner this month raised their global IT forecast for 2021 from 6.2% year-over-year growth to 8.4%. And we share this optimism that conditions will continue to recover as the year progresses. Perhaps part of this belief is due to technology's ability to connect all of us. It's worth noting that the events of the last year have reminded everyone of the value of personal connection and relationships. Social and business networks have gotten smaller and more focused on those that add value to our daily lives. Our clients, too, are focused on getting closer to their customers and fortifying the value of their existing relationships. As a company that enhances and preserves relationships, ServiceSource has seen underlying momentum from this alignment of market need with our business strategy. We have focused on solid execution across the business to start the year and also on our ability to successfully deliver the deeper, stronger connections that our clients need well beyond the pandemic. In our first quarter business highlights, you can see the evidence of our relentless focus on creating quality relationships between our clients and their customers. Overall, for Q1, we performed broadly in line with the cadence we shared with you in February, while we also had some areas of outperformance compared to our internal expectations. From a financial snapshot perspective, We adjusted quickly to be responsive to the revenue headwinds we told you we would face in the first half of the year. Our non-GAAP expense reductions offset about 98% of our year-over-year revenue contraction, and we accreted cash in the quarter. Chad will give you a closer look at these factors in the financial section of our call. Turning to our client-centric results, I'm pleased to see that the work we're doing to instill a clients-for-life mentality in everything we do is taking hold. While clients-for-life is not a new concept, it's an important one that we are bringing front and center in our culture. We often counsel our clients on the value of nurturing installed-based accounts, and we also practice this advice ourselves. Our top 10 clients have been with us approximately 11 years And over the trailing 12 months through Q1, we've grown revenue with half of them. In the quarter, we've secured new expansion wins with six of our top 10 and expect to take on more work for them throughout the year. In addition, we focused heavily on renewals in the quarter with more than $50 million of contract value up for renewal. I'm pleased to say that we renewed, or extended more than 95% of this total value. Within this effort, we brought home two important wins at different ends of the size spectrum that I want to highlight. First, one of the top three accounts in the software and cloud vertical who has been with us for about 12 years, we set a goal not only to renew the relationship, but to secure a multi-year renewal in Q1. our team completed a complex multi-quarter negotiation that successfully ended with a renewal of our book of business for a three-year term and expansion to support recent acquisitions and their ongoing push into the cloud. I'm really proud of the team for bringing this in, especially during a time when the technology industry is generally seeing shorter-term commitments. At the other end of the spectrum, a global medical device client that provides diagnostic imaging and other mission-critical medical equipment was also up for renewal. This client relationship has been in place since 2017, centered around high-margin service contract renewal and warranty conversion. Our team worked for several quarters with this client to ultimately secure renewal with new commercial terms that expands the scope of our work by more than 30%. There's a common driving force behind both of these client renewals, and that is we have proven ourselves to be a valuable asset to our clients in times of business growth and change. As our clients grow through acquisition or charted course to build market share in new sectors, they need partners that understand the go-to-market implications for their business and can ramp quickly to attack new opportunities. Our top clients have stayed with us as long as they have in part because of our proven ability to flex and scale to support new opportunities and be a true strategic partner on their transformation journey. By living this clients for life mentality, it creates a valuable feedback loop for our sales organization as well with our clients demonstrating an increased willingness to be advocates and positive references for prospects in our pipeline. Our new bookings had strong improvement compared to last year and it's clear that our performance and execution here continues to accelerate. On a trailing 12-month basis through Q1, Our bookings were up approximately 30% year over year. Our sales team also added a very attractive new logo to our client roster in the first quarter. This client, which is a high growth data and analytics market leader, fits into our cloud and software vertical and is a recently acquired business of a marquee client who was a strong reference for us throughout the sales cycle. We announced last week that we are now live and in production for this client with Renewals Management Services. The goals of the relationship fit well with our strengths. We'll be working to modernize the renewals process by moving the client's customers from perpetual license contracts to subscription-based models. The shift in IT from perpetual to subscription relationships requires a level of sales expertise and proactive engagement that many companies simply can't manage alone. We have the expertise and scale to execute this properly, which are the key reasons why we won the opportunity to help this client create a new path for success. I'm encouraged by our solid performance with our clients in the quarter and also by the perspective, new logos, we have in the late stage pipeline that we expect to close in Q2 and Q3. We will continue to tune and refine the dials of our go-to-market execution engine, but I'm pleased to see our enhanced focus and discipline bearing fruit. We invested in building a new account-based marketing strategy, fully staffed our marketing team, enhanced our MarTech stack, and brought greater rigor to our lead generation and qualification process. With these changes in investments, we are optimistic that our go-to-market foundation is in a solid position to help us grow. In addition to these market-facing investments, we have also devoted meaningful resources to enhance our capabilities and pioneer new innovations that we expect will continue to differentiate our business. From a digital transformation perspective, we've begun to see early success from deploying advanced efficiency technologies such as robotic process automation and click to renew. Both technologies replace manual and repetitive production tasks and empower our valuable selling resources to focus on higher leverage activities for our clients. In one client example, since August of 2020, we have processed more than 20,000 quotes through our RPA system. This is significant because quoting seems like a simple task, but in reality can involve thousands of SKUs and pricing and discount information scattered across dozens of client systems. We're starting to see success with our RPA efforts, reducing manual intervention by 30% for our pilot clients. While RPA enables a faster time to quote, Click to Renew offers a faster time to buy. For one of our early Click to Renew clients, hundreds of thousands of their customers are now receiving automated self-service online quotes each quarter, and we are growing this efficient, no-touch revenue stream for our clients by nearly 40% year over year. Through these automation strategies, we are quoting and closing long tail, lower dollar renewals faster and more efficiently than ever before, improving client service while increasing job satisfaction for our teams. It's the strength and resilience of our teams that enables us to build upon the position as a strategic partner to leading brands across the world. As I reflect on our accomplishments, I know that behind every success, small or large, are dedicated sourcers. From a leadership perspective, we are doing our part to care for our team in the workplace and in their lives. From a workplace standpoint, our teams are working virtually worldwide. As the pandemic clears, we will continue to be a virtual-first company. In our annual employee survey, nearly 80% of our team members so that they enjoy the work-from-home model. In 2021, if we are able to safely open our office locations, we will do so, but we will keep our home offices as our primary work locations. Our intent is to transform and reconfigure our office spaces as collaboration and innovation hubs for our teams and clients. As a general rule, day-to-day production work and individual activities will be delivered remotely while we use our site for specific activities such as employee and client onboarding, executive briefings, and business reviews, team building, and collaboration. This combination of virtual offices and in-person collaboration spaces offers a hybrid model that we see many of our clients moving toward. To make sure the virtual first model continues to work for our employees, we are taking steps to enhance and build our culture. In February, we held our annual service source cares week, dedicated to showing gratitude towards each other and supporting the communities where we live and work. During the week, sources worldwide gave their time and resources to support many important causes and nonprofits throughout the world. Additionally, we launched a Be Well initiative to support not only the physical health of our employees, but also holistically provide resources to care for the entire person, from mental health to finances and relationships. We undertake these initiatives because they speak to the heart of our culture of caring for each other and the communities around us, and also to cultivate a thriving virtual environment for our diverse and inclusive workforce. To wrap up, I'd like to say I'm as convinced as ever that our strategy, priorities, and team are on the right path to building a future that we'll all be proud of. We executed well in the quarter, saw areas of accelerating momentum in the business, and believe the market backdrop will continue to improve. I remain optimistic that the areas of stronger execution in recent quarters will begin to translate into enhanced financial results as we progress throughout the year. With that, I'll turn to Chad to cover the financials.
spk05: Thank you, Gary. It's good to be back with everyone today, and thank you for joining us. I will echo Gary's comments that we executed well in the quarter and in many areas paced ahead of our internal expectations. There is still plenty of year in front of us, and heightened levels of uncertainty continue to persist globally. but we are increasingly encouraged by some of the early market indicators we are tracking and the green shoots of activity we are seeing in the business. Before I turn to Q1 numbers, let me touch on a few things so you understand where our attention, priorities, and investment are being directed. As a team, we continue to focus on the four pillars that underpin our multi-year transformation strategy, inspire success, impact scale, ignite sales, and innovate solutions. Throughout the company, we are pleased with the level of activity and urgency we are seeing on these pillars and the overall progress we are tracking on the respective internal KPIs. The holistic focus and investments we have made in the employee experience, encompassing compensation, benefits, training, culture, diversity and inclusion, career development, and tools and technologies, among other areas, are allowing us to recognize tangible benefits from a more loyal, tenured and productive team. In Q1, our employee tenure reached the highest level on record and is up approximately 85% from where it was two years ago. That's incredibly important as we primarily support complex B2B sales motions for very technical products and solutions. While there are multiple components to our value proposition, the quality of our talent, coupled with process and technology, is a key differentiator in competitive situations and to partner versus build scenarios. Having a more highly skilled, technically proficient, and on the job experienced workforce is allowing us to deliver improved productivity and higher and more consistent outcomes for our clients. Through these enhanced outcomes, we start to benefit from a flywheel of sorts. Happier clients are more inclined to renew their contracts and expand their level of investment with us. They are more willing to take calls from our prospects and share their success stories. which helps accelerate our sales cycle. And when those executives move on to their next opportunity, they are more willing to bring us in to their new companies, which helps improve our new logo win rates. We are seeing early signs of these types of second-order effects. Client performance metrics are moving higher, our contract renewal rates are improving, our bookings activity is up, our pipeline is expanding, and churn is coming down, giving us increased confidence that we are making progress and on the right path. With that context, let's jump to the Q1 results. As I shared with you on our February call, we anticipated the first half of the year would have a more challenging year-over-year comparison due to typical installed-based seasonality, the ongoing impact of the pandemic on our clients' mid-market and SMB customer tiers, and the overhang caused by the one larger client who insourced various scopes of work last year. These factors largely played through as we expected. Revenue of $45 million was down $5.1 million, or 10.2% year-over-year. The new logos we won last year are in production and are in various stages of ramping to our run rate expectations. Combined, they accounted for approximately 3% of our revenue in the quarter. However, this new logo revenue contribution was more than offset by legacy churn in the single-client headwind I referenced a second ago. Our first quarter non-gap cost of revenue was $32.1 million, a favorable reduction of $2.2 million, or 6.3% year-over-year, as we aligned our resources to our revenue. Non-GAAP gross profit was $12.9 million, or a margin of 28.7% of revenue, down $2.9 million, or approximately 300 basis points year-over-year. Although we are seeing some nice contribution from our virtual first operating model by way of lower facility and travel expenses, We expect our non-GAAP gross profit margins to be under pressure in the near term, particularly as we continue to carry meaningful fixed costs relative to our current scale, and also as we are investing in front of revenue for some larger program ramps that are underway. Non-GAAP operating expenses were $14.6 million in the quarter and represented 32.4% of revenue. Compared to Q1 of last year, we have lowered our operating expense base here by $2.8 million or a 16.2% favorable year-over-year reduction. You have heard me say this in the past, but I feel it's important to reiterate that these are net savings, as we have been intentional about capturing and realizing some savings while also redeploying some of the gains into areas that align to our strategic growth priorities and the furtherance of our four strategic pillars. Turning to the bottom line, first quarter adjusted EBITDA was negative $200,000, roughly in line with last year's Q1 of positive $100,000. I'm really pleased with the financial stewardship the team has demonstrated and the rigor and discipline that has underpinned our decision-making process to drive this result. Shifting to the balance sheet and cash flow highlights, we maintained a healthy cash and liquidity position that affords us the flexibility to continue to invest in our digital transformation initiatives. including the robotic process automation and click-to-renew capabilities that Gary highlighted. In the first quarter, we accreted approximately $100,000 of cash, cash equivalents, and restricted cash, primarily driven by our working capital. DSOs were 69 days, a very strong nine-day improvement year over year. Seasonal patterns and the mix of off-quarter clients usually cause a pronounced increase in DSOs sequentially from Q4 to Q1. so we are really pleased with how our client delivery, account management, and billing teams work together to hold DSO flat with the fourth quarter of 2020. Cash flow from operations was approximately $500,000 and included approximately $900,000 of restructuring expense to align with our virtual-first operating model and to improve our go-forward cost structure. CapEx, inclusive of capitalized internally developed software, was $1 million, down approximately $500,000 year over year. Free cash flow in the first quarter was negative $500,000 compared to negative $7.2 million in the prior year period. We ended Q1 with $36.5 million of cash, cash equivalents, and restricted cash. We maintained $15 million outstanding on a revolving line of credit with an effective interest rate of 2.11%. with an additional $14.7 million available for borrowing on the line. Total liquidity consisting of cash on hand and availability under our revolver was $48.9 million as of quarter end. From a capital allocation standpoint, we continue to target our investments at internal organic initiatives that support our ongoing transformation. Although these investments and expenses can be diluted to our near-term financial results, we undertake them believing they will further enhance our value proposition and accelerate our progression to our long-term target model objectives. We will continue to be disciplined about where and how we invest our resources, and we will also continue to be mindful of any potentially accretive acquisition opportunities or other uses of capital that could benefit our stockholders. Before I open the call for questions, allow me to summarize our year-to-date results. Although we had a tougher year-over-year comparison on the P&L, it was not unforeseen and in several respects paced ahead of our internal assumptions. We had a comparatively strong quarter from a new bookings and terms standpoint, and we are encouraged by the momentum we are seeing on these two fronts. We added our first new logo of the year and secured some great expansion wins across our installed base. We had impressive performance renewing and extending contracts that were expiring in the quarter, including the large multi-year that Gary shared with you. So all things considered, we are really pleased with how the team performed through the first three months of the year. We are increasingly encouraged by the tone and commentary we are hearing from our clients, as well as the more favorable market outlook more broadly. But we also recognize the road in front of us and the work we still have to do. We have not changed our expectation for the cadence through the year that we shared with you on our February recall. We remain focused on our objectives to return to growth later in the second half of the year while also keeping our sights set on our target model and the value we believe we can create for our stockholders over time. With that, operator, please open the call for any questions.
spk01: Ladies and gentlemen, if you have a question or comment at this time, please press star then 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press the pound key. Again, if you have a question or comment at this time, please press star then 1. on your telephone keypad. Our first question or comment comes from the line of Josh Vogel from Sidoti and Company. Your line is open.
spk02: Thank you. Good morning, Gary and Chad. I hope you guys are doing well. There are a couple of questions here. Thank you. A couple of questions. Last quarter, you had a – and I may have missed any of your prepared remarks, but you mentioned that – you know, how much revenue per employee was up. And I think it was around 7%. And that was with full year headcount down about 13% from a year prior. So I'm just curious, how much additional capacity or productivity gains can you drive from the existing base before you start to reinvest in headcount additions? Or maybe another way to ask is, what do you necessarily need to see in the marketplace to get comfortable bringing additional heads on board?
spk03: Yeah, thanks, Josh. And Chad, you're welcome to jump in here if I missed something. But clearly, quarter to quarter, the headcount was about flat, so not a lot of change there. And given the ramp of the new business, the efficiency was about the same in terms of revenue per head. So from that point of view, we didn't have any material change that we thought we should call out, and that's why it wasn't part of our remarks. That said, as we look at all of the things we're investing in, we talk about collect and renew, we talk about the RPA and the value of that, and it's early days for that stuff. We've been pushing on those things for quite some time and we're seeing good progress. I think also the efficiency of the team in terms of the teamwork, the communications that we have, the tools that we're using now. There's just a number of things that we're automating, and so there is additional leverage. I don't think I could or should put a number on it, but we do expect to continue to expand on our productivity.
spk02: I appreciate those insights. Shifting gears a little bit, a really good contract renewal rate. a nice tick up from around, I think it was 81% in Q4. Is this back to pre-pandemic levels or perhaps even a little higher than your historical rate?
spk03: It's higher than our historical rate. As a matter of fact, you have to go back several years to get this kind of rate. Q1 of last year, and was also around 95%. The difference is a large portion of this year's renewals was in Q1, so it's more weighted. So we feel really good about what we were able to get done in Q1. We're really focused on it as we closed out last year and really pleased with it. My hope would be that we can continue to drive a very high renewal rate, and we're seeing that in the way we're delivering for our clients in terms of the performance targets that we mutually agree to, as well as how quickly we're ramping to the changing environment. So I think, you know, churn's never going to go away or go all the way to zero, but I think our plans for 21, and we set this plan last year, have us closer to the middle of that lower part, so the 5 to 15% target that I've talked about over time. And our global account management and the structure that Mike Maltin's put in place for the global service deliveries team, we have a number of client-alike initiatives, and they're paying dividends. It's not just talk. It's real people and technology investments that are delivering and executing to the metrics we agreed to with our clients. So, Josh, we're really pleased with Q1 and have high hopes and execution to continue that.
spk05: Josh, the other thing I'd add on to that, Josh, is the other point of pride that we have with respect to the Q1 performance in comparing to last year or previous years. is the amount of multi-year renewal that we did have as well. Gary touched on the one large one with one of our top three clients being a three-year renewal. So, again, I think it really just does point to the level of comfort, confidence that our clients have in us and our ability to execute and to structure something over the longer term that aligns with their business priorities and strategies. So, pleased with that, and obviously that, you know, does ease the burden. We have to execute every day, but that does ease the burden in terms of having these renewals come back in every 12 months to have some of those multi-years and continued performance there.
spk02: Yeah, that actually leads into my next question when we think about, let's just take Q1 as a snapshot. Of that 95%, how much of that was renewed at multi-year versus 12 months? You may not have that at your fingertips, but I'm just curious.
spk05: Yeah, a little more than two-thirds of that, Josh, was renewed out for more than a year.
spk02: Oh, great. What about the pricing on these renewals? Yeah, sorry.
spk03: No, I was just going to add, you know, Chad made a great point there. I think if you think about also not just the multi-year, but our ability to upsell renewals and extend some of the renewals to a higher revenue number. Basically, you know, we retained 100% of the revenue in general there. So I feel really good about the performance and the execution of the team.
spk02: Great. And just thinking about the pricing on renewals, is it stable, better, or have you been giving any concessions?
spk03: Yeah. You know, there's always pressure, but if you're able to demonstrate a higher level of value and extend a contract, you know, we feel better about a multi-year and giving up some price on that because we know we can get it back over time. So it depends on the deal, but yeah, we've seen some pressure, but you have to also remember that For the last two years, we've been renegotiating a lot of contracts to improve the financials, and we've been able to do that, not just with price, but the way that we perform the work and where we perform the work.
spk02: Understood. I got a couple more here, so I just want to shift gears a little bit. Thinking about the new capabilities you're providing for clients today, you've highlighted RPA, Click to Renew. I'm curious, what The average ramp time on that type of work versus your historical programs, does it take longer? Is it shorter? Can you just give some insights on that?
spk03: Yeah, well, it depends, which is not a very good answer, but it does depend on the complexity of it. As I mentioned, the click to renew is no touch, and you've got a number of different data points clients you've got a number of different SKUs and that kind of thing so I think I mentioned that the pilot that I referenced in in my comments we've been delivering on that from August of last year so it ramped slower than what I think we will be able to ramp things in the future Because we're learning, right? And so it's hard to give you an answer, but that's certainly something we're going to track and something that we'll continue to make improvements on so that we can ramp much more quickly.
spk02: I got you. And to use your words, Gary, you mentioned pioneering new innovation. Does that mean you plan to build out the platform and capabilities internally, or would M&A potentially be on the table?
spk03: Everything's on the table, Josh. I mean, there's a lot of great technology. I mean, we're using UiPath for our RPA stuff, and we've been an early user of their technology. We have an internal team that is really, really skilled in this area. We have clients that are working jointly with us and, in some cases, funding the work. So I feel really good that we will have a combination of both. I've said for the last two years, my preference is the partner. Make sure that we can prove things out, and then if coming together in a more formal way makes sense, then we'll do that.
spk02: I got you. And just last one, and I understand it's a fluid situation, and this is not necessarily an easy answer here, but what kind of cost savings, because When you want to think about the long-term cost structure of the business and the leverage in the model, what kind of cost savings do you think you can see long-term by moving to this permanent hybrid model with home offices being the primary location for many of your employees and thus less reliance on a real estate footprint?
spk03: Yeah, I'm going to let Chad hit that one. we have seen some pretty positive impact there, and we think we've got a fair amount more to go. Chad?
spk05: Yeah, good question, Josh. I think if you look over the longer-term horizon, we have been very active in terms of rationalizing the physical footprint, if you will. So while we still have 11 offices in eight different countries around the globe, and that's a critical component of the value proposition for our clients to have that global coverage to be able to sell into 170-plus countries, the actual physical plant, if you will, is less necessary. And I think COVID has really shone a light on that and opened up people's eyes to understand that you can access great talent anywhere. And we've been able to prove out over the past year that we can actually keep them productive, drive greater productivity. And as you think about the entire human capital value chain from recruiting, sourcing, training, onboarding, putting them into production, being able to do that at a very high level of effectiveness. The model has shifted, and I think it's not just us. We're hearing this and seeing this from our clients and other tech leaders as well, that they will have more of a hybrid approach going forward. But in terms of your question about what does that unlock in terms of the cost structure, we've taken our physical square footage down about a third over the past couple of years. Probably have another room to run over another third in the coming years as well. So the number that I kind of soft-circled, Josh, is on the facility side itself. potentially five to seven million dollars of expense that we can get out over time. And then again, that last part over time is probably the critical one. Some of these are longer term leases. The corporate real estate market is soft in many of the areas that we're based. So we'll be smart about either subleasing those, renegotiating as we can, or as those come up for expiration, stepping away or downsizing. So a lot of work going on on that front. Pleased with the progress so far, but more to go here in the years to come. and obviously a key lever for the target model that we've put out there.
spk02: Well, great. Gary, Chad, thanks for taking my questions. I'm looking forward to watching the business progress this year.
spk03: Josh, thank you very much. Thank you, Josh.
spk01: Thank you. Our next question or comment comes from the line of Jim Kennedy from Marathon Capital. Your line is open.
spk04: Morning, guys. Hey, Jim, how are you? Good. Doing well, doing well. Listen, very quickly, first of all, congratulations on the continued progress. Chad, I guess this is a question for you. I just had a quick question on, could you remind us of what the outstanding NOLs are at this point?
spk05: Yeah, good question, Jim. On the federal side, it's north of $350 million. I don't have the pinpoint number on me, but I can follow up with you. North of $350 million in agri on the federal NOLs, and then a similar figure north of $300 million on the state and local NOLs as well. So a substantial figure, and that's to the question on M&A. That is one of the things that we look at as well is are there ways to unlock the value associated with those NOLs that are hanging on the balance sheet.
spk04: Great. Okay. Thanks, guys. Keep up the good work. Thanks, Jim.
spk01: Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star then 1 on your telephone keypad. I'm sure no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Moore for any closing comments.
spk03: Thank you very much, Howard. I'll be quick here, but I do want to re-emphasize a few things that Chad closed with in his comments. We continue to be encouraged by the tone and the commentary that we're seeing from our clients, as well as the outlook that we're seeing more broadly from Gartner and others about where the market's headed. I want to remind everyone we have a road in front of us. It's early in the year. And the key thing for myself and the team is we've not changed our expectation for the cadence that we'll see throughout the year that we talked about in February. But we remain very, very focused on returning to growth in the second half of the year as well as focusing in on the things that we can control and improve on. So I also want to thank our employees for delivering the way that they did in Q1. Their perseverance, drive, performance really allowed us to deliver on our brand promise and the commitments we had to our clients. I'm also incredibly proud of how the team has showed up relative to generating the results that we shared. Also want to extend my appreciation to our client partners and we continue to deepen those relationships and place a lot of emphasis on our ability to use our clients as references and have them help us grow this business. And then finally, certainly want to thank our stockholders who share the conviction that we have about the future of this company and what we're building towards. And I really appreciate it, as does the team. So with that, I'll let the call end, and thank you all very much.
spk05: And Gary, really quickly, actually, before we do that, just so I can clean up an answer that I gave there to Jim. Appreciate the question. I didn't have it at my fingertips, but want to make sure I get the right number out there for everybody. Our net operating losses on the federal side as of the end of FY20 were about $317 million, Jim. And then on the state side, we're just shy of $250 million. So I apologize for misstating that earlier, but did want to clean that up. And then as Gary said, thank you, everyone, for the support. Look forward to talking with many of you here in the days and weeks to come.
spk01: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.
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