Greetings and welcome to the Fair Isaac Corporation Quarterly Earnings Call. During the presentation, all participants will be in a listen-only mode, and afterwards we will conduct a question-and-answer session. The conference is being recorded Thursday, January 28, 2021. Now, I’d like to turn the conference over to Steve Weber. Please go ahead.

Thank you. Good afternoon. And thank you for joining FICO’s first quarter earnings call. I am Steve Weber, Vice President of Investor Relations, and I am joined today by our CEO, Will Lansing; and our CFO, Mike McLaughlin. Today, we issued a press release that describes financial results compared to the prior year. On this call, management will also discuss results in comparison to the prior quarter in order to facilitate understanding of the run rate of our business. Certain statements made in this presentation may be characterized as forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve many uncertainties, including the impact of COVID-19 on macroeconomic conditions and the company’s business, operations and personnel that could cause actual results to differ materially. Information concerning these uncertainties is contained in the company’s filings with the SEC, in particular in the risk factors and forward-looking statements portions of such filings. Copies are available from the SEC, from the FICO website or from our Investor Relations team. This call will also include statements regarding certain non-GAAP financial measures. Please refer to the company’s earnings release and Regulation G schedule issued today for a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure. The earnings release and Regulation G schedule are available on the Investor Relations page of the company’s website at fico.com or on the SEC’s website at sec.gov. A replay of this webcast will be available through January 28, 2022. And now, I will turn the call over to Will Lansing.

Thanks, Steve, and thank you, everyone, for joining our first quarter earnings call. As we continue to deal with the effects of the pandemic, we remain focused on the health and safety of our employees. We are still primarily working from home and most of our offices remain closed. I am grateful to our dedicated employees who every day show their commitment to FICO and to our customers. On the Investor Relations section of our website, we have posted some slides that offer financial highlights of our first quarter. I am pleased to say we started 2021 well, as we continue to make progress on our strategic initiatives. We have reported revenues of $312 million, an increase of 5% over the same period last year. We are pleased with that result because we knew we would have headwinds on the software side as we transition toward more ratable recognition of our subscription software license revenues and our first fiscal quarter is typically our slowest software new business quarter. We delivered $86 million of GAAP net income and GAAP earnings of $2.90 per share, up 57% and 59%, respectively. On a non-GAAP basis, net income was $82 million, up 51% and earnings per share of $2.74 was up 52% from last year, as we reap the benefits of the cost reductions we put in place last year. As we discussed last quarter, some of those savings will be reinvested as we identify opportunities and hire additional individuals in key strategic areas. We continue to deliver free cash flow growth as well. Q1 free cash flow was $75 million, up 39% from last year. I am encouraged by the progress we are making across the business. The decisioning market continues to grow and we are well-positioned to serve it. In fact, in December, Forrester issued a Digital Decisioning Platform report and named FICO as a leader in the space. The FICO Decision Management Platform was recognized for providing all the tools necessary to manage and deploy digital decisions, which will stand up to the highest standard of regulatory rigor. We have been helping financial institutions make lending decisions for decades. We now bring that same level of automated analytical decisioning to the broader market to help businesses respond quickly to customers’ needs and anticipate their future demands. As we migrate more of our business toward a subscription-based model including SaaS software subscriptions and term license subscriptions for on-prem software, we will see less upfront license revenue than we would have in the past as the revenue is spread over the term of the deal. Last quarter we talked about how we would recognize less revenue upfront for on-premise licenses, and that change pushed about $9 million of revenue this quarter out to future quarters. This doesn’t affect cash flows or total revenues recognized but it does delay the timing of revenues and over time will smooth the lumpiness we have historically seen. This change is in line with industry standards and we believe it will provide a more representative, transparent view of the growth trajectory of our business. In our Application segment, we delivered $135 million in revenue, down 11% from last year. This was due to a decline in upfront license revenues and, to a lesser extent, professional services revenues. The license revenue was negatively affected by a smaller amount of term licenses upfront through renewal in the quarter and the revenue recognition change I mentioned earlier. In our Decision Management segment, we delivered $32 million of revenue, up 4%, despite many of the same issues we described in our Application segment. Our license revenue declined versus the previous year, but transactional revenues in DMS were up 36%, providing the steady predictable recurring revenue stream that we believe will continue to grow. We have had a lot of interest in our decisioning platform, and we sold a number of large deals in the past few quarters. We are working hard to install and get those customers live, so you can begin seeing the impacts from those recurring revenues. As I have often said, we are committed to becoming the preeminent platform player in decisioning analytics. This is the strategic focus of our software business. And like I said last quarter, that may mean exiting non-strategic products or services, we are not signing or renewing low-margin services-led project work. Last fall, we sold our Enterprise Security Score business because we believe in its effectiveness and value, but it is off strategy and we need to remain incredibly focused to maximize the opportunity that’s in front of us. In December, we entered into a joint venture with a longstanding partner in China that distributes FICO Scores. The joint venture will now distribute all software solutions for the China market. Moving forward, this will allow us to serve that market with less infrastructure and therefore better margins. So this and the ESS deal will have a small near-term negative impact on top-line revenues, but will help our overall margins and again allow us to focus on our overarching strategy. We expect more adjustments to be made to our software business as we make the necessary decisions to pursue our strategic initiatives. On the Scores side, the business continues to perform very well. Scores were up 26% in the quarter versus the prior year. On the B2B side, revenues were up 20%. There was continued strength in mortgage origination volumes, although normal seasonality wasn’t quite as strong as our fourth quarter. Auto originations were relatively flat versus the previous year. We are starting to see signs of cards and other unsecured loans beginning to bounce back, as both prescreen and origination activities picked up in that space. As we discussed last quarter, we did institute some price increases across various verticals. Those price increases start to feather in during our second quarter, and we can talk more about those impacts when we release the results of our March quarter. On the consumer side, we continue to drive growth. Our B2C revenues were up 40% versus the same quarter last year. The growth at myFICO.com is even more impressive, up 69% this quarter versus last year. The recent results of our myFICO business, as well as our partners’ experience, demonstrate that savvy consumers want the FICO Score, the Scores that lenders use. Finally, as you know, we haven’t provided guidance since the middle of our last fiscal year. We are still operating in a marketplace in the economy with a great deal of uncertainty and volatility. While our business has been remarkably resilient over the past year, it’s still difficult to quantify what macro trends will impact our volumes. So while we are confident in our prospects this year, we still believe that there’s a wide range of possible outcomes depending on the timing of vaccine rollout and the opening back up of the global economy. As we move through the year, we will provide more color than we believe is prudent. I will give final comments in a few minutes, but first let me turn the call over to Mike for further financial details.

Thanks, Will, and good afternoon, everyone. Today, I will walk you through our first quarter results in more detail and briefly discuss the impact we are seeing from the restructuring and impairment charges we took in the fall, as well as the revenue recognition assumptions we talked about last quarter. Revenue for the quarter was $312 million, an increase of 5% over the prior year. Our applications revenues were $135 million, down 11% versus the same period last year. This quarterly decrease in revenue was primarily driven by decreased term license revenues. In our Decision Management Software segment, Q1 revenues were $32 million, up 4% over the same period last year. The revenue increase was due to increased SaaS subscription revenue, partially offset by lower license revenues. As Will mentioned, our license revenues are down as we transition to a more ratable subscription revenue model. Last quarter we explained how we would be recognizing less of our on-premise software deals upfront license revenue and recognizing more revenue ratably over the term of the deal. In addition to this change, we are also selling more SaaS deals, which further reduces the upfront revenues. Finally, we are also deemphasizing a low margin of non-strategic professional services engagement, which will likely have a negative near-term impact on professional services bookings and revenues. This is driven by our core strategic goal of selling more high-value recurring revenue software. Turning to our Score segment, revenues were $145 million, up 26% from the same period last year. B2B revenues were up 20% over the same period last year, driven by high volumes in mortgage originations, as well as some unit price increases across our Score categories. B2C revenues were up 40% from the same period last year. Both myFICO.com and B2C partner revenues grew significantly. Score’s revenue was down 5% sequentially from Q4, but as a reminder, last quarter we had a material one-time royalty true-up that increased reported revenue. This quarter, 80% of total revenues were derived from our Americas region, our EMEA region generated 14%, and then the remaining 6% was from Asia-Pacific. Recurring revenues derived from transactional and maintenance sources for the quarter represented 81% of total revenues. Consulting and implementation services revenues were 13% of total revenues and license revenues were 6% of total revenue. SaaS software revenues, not including related professional services revenues, were $60 million for the quarter, up 4% from the previous year. Q1 bookings totaled $68 million, down 39% from the previous year. Those bookings generated $9 million of current period revenues, a 13% deal. SaaS bookings were $20 million for the quarter, down 45% from the previous year. Professional services bookings of $16 million were down 61% from last year. Our fiscal first quarter bookings are generally lower each year, particularly after a strong quarter like we delivered last quarter, and our quarterly bookings can be quite volatile from quarter to quarter. We feel good about the bookings outlook for the rest of the fiscal year, despite the relatively light bookings in Q1. However, it is important to note that we do expect bookings to trend lower overall as a result of our deemphasis on professional services sales and the somewhat shorter-term lack of typical SaaS contracts. As we discussed last quarter, we have shifted the sales of our on-premise software away from the sale of separate license and maintenance components to subscriptions that include both the rights to use the software and ongoing maintenance. This quarter, we adjusted our revenue recognition to be consistent with this change and industry standards for software subscription sales. This change results in less upfront revenue recognized in the quarter we signed a subscription contract and more revenue from that contract recognized ratably during the term of the subscription. This quarter, the impact of this change was an in-quarter reduction of revenue of approximately $9 million. Those are revenues that would have been claimed this quarter under the old sales model and will now be recognized over the term of the contract. As a reminder, this will not have an impact on our quarterly cash flows or the total revenue recognized from software license sales over the term of each subscription contract. Our operating expenses totaled $218 million this quarter, compared to $289 million in the prior quarter. The current quarter included a $7 million gain on sale of product line assets, and the prior quarter included $42 million of restructuring and impairment charges. Excluding those one-time charges, expenses were down $22 million due to decreased commission expenses associated with lower revenue, reduced incentive expenses, and cost savings resulting from the restructuring actions we took last September. Compared to Q1 2020, operating expenses before one-time events were down $14 million due to decreased marketing expenses resulting from a large customer event held in Q1 2020, lower travel and entertainment expenses, and cost savings resulting from our Q4 2020 restructuring. We do expect expenses to step up somewhat in the coming quarters as we gradually redeploy the restructuring savings to add strategic headcount, primarily related to the development of our Decision Management Platform Software. Our non-GAAP operating margin, as shown on our Reg G schedule, was 36% for the quarter and reflects an expansion of 900 basis points from the same period last year. GAAP net income this quarter was $86 million, up 57% from the prior year quarter, and included a gain of about $7 million from the sale of our EFS types technology and our JV agreement in China. Our non-GAAP net income was $82 million for the quarter, up 51% from the same quarter last year. The effective tax rate for the quarter was 2%, including $19 million of reduced tax expense from excess tax benefits. We expect our FY 2021 recurrent tax rate to be approximately 26% to 27% and we expect the net effective tax rate for the year to be about 19%. Free cash flow for the quarter was $75 million, compared to $54 million in the same period last year, an increase of 39%. For the trailing four quarters, free cash flow was $364 million. Turning to the balance sheet, at the end of the quarter we had $145 million in cash, down $13 million from last quarter. Our total debt now stands at $881 million, with a weighted average interest rate of 4.2%. And finally, in terms of return of capital, we bought back 101,000 shares in the fourth quarter at an average price of $494 per share. At the end of December, we had about $175 million remaining on the Board repurchase authorization and continue to do share repurchases as an attractive use of cash. With that, I will turn it back over to Will for his closing thoughts.

Thanks, Mike. As I said in my opening remarks, we remain focused on building out our platform and taking it to an ever-expanding marketplace. We will continue to invest at levels we think are appropriate to make the most of our incredible opportunity, and of course, we will continue to innovate and make the most of our incredible Scores asset. I am now turning the call over to Steve for Q&A.

Thanks, Will. This concludes our prepared remarks and we are now ready to take your questions. Operator, please open the lines.

Thank you. Our first question is from Surinder Thind from Jefferies. Please go ahead. Your line is open.

Good afternoon. My first question is about the Scores business. If my calculations are correct, the B2C revenues were roughly flat from one quarter to the next. Can you provide some insight on that? Historically, we’ve seen a significant increase in revenues each quarter, and I understood this was a subscription-based business. Could you help me understand the apparent slowdown in new signings or if there are new signings being offset by some individuals canceling their subscriptions?

I am not sure I follow the question.

For your B2B revenues, they were unchanged quarter-over-quarter. Can you provide some insight? In previous quarters, there was significant acceleration each quarter on a sequential basis, but that didn't seem to happen this quarter.

That’s right. It didn’t appear this quarter. Mike, go ahead.

Yeah. I can jump in with some specifics. So B2C revenues were up quarter-over-quarter, but not a lot, call it, $1 million. If you look back to Q4 to Q1, a year ago, it was kind of the same factor. So there is some seasonality Q4 to Q1, and the year-over-year compare continues to be very strong. But you are right, the quarter-over-quarter additions just were not as large as they were in the last two quarters particularly.

And it’s worth adding that there was a settlement in the prior quarter.

Understood. Regarding the B2B aspect of the Score, I have a follow-up question about the software side of the business. It appears there may be a shift in strategy to prioritize the sales of SaaS products over on-premise options. Is this a departure from our earlier conversations? I had thought that the margins in both areas were relatively similar and that it would take considerable time for a transition in your business to happen. Are you planning to accelerate this change?

From a strategy perspective, we do not prioritize one business over the other. We aim to do what is best for the customer. While we appreciate the benefits of the SaaS model, we are also willing to engage in on-prem license agreements when it makes sense, and we do not prefer one approach over the other.

Okay. Thank you.

We have a question from Manav Patnaik with Barclays. Please go ahead. Your line is open.

Yeah. Good afternoon. Good evening, I guess. So just on the software piece, so firstly the fraud licenses I guess the decline there. It sounds like most of that is because you are not renewing lower margin services. I was just hoping to get an example of what that is because I would imagine anything enforced is probably valuable and worth sticking with. So maybe you can just help us how that decision works.

Mike, do you have a view on that?

Sure. If you look at the license, we are down about $15 million year-over-year from license sales. About $9 million of that was purely related to revenue recognition. This quarter, we also had fewer license renewals available. License renewals can be quite variable. Last year, Q3 was another low quarter, while Q2 was high. It fluctuates, and we can only renew what is up for renewal, so it was a low renewal quarter. It's not that we missed renewals; they just weren't due. The rest is just normal volatility, and Q1 tends to be particularly volatile because it's usually our smallest quarter and can have high variance. Services generally don’t impact the fraud license line or the total fraud business. For example, we might de-emphasize certain managed services we provide for customers, where we help them run applications regularly. While we do this service well, it’s not strategic for us, so we are not focusing on it. Additionally, we are designing our products to require less intensive professional services during installation, which reduces the overall costs for customers. These are two examples of why we expect professional services to trend downward over time.

Got it. Will, your comments around early signs of card, marketing, prospecting, etc., picking up. I was hoping you could elaborate a little bit there on which particular areas perhaps and how we should, I guess, that probably just ties to the reopening, just curious to what you think there?

Well, I think it is just that. What we are seeing is that the decline from a year earlier is not as significant as it was. While we still have a long way to go to recover former volumes, the trend is moving in the right direction. We are observing early signs of improvement.

Got it. And just one last one for me, myFICO.com, I mean, I think, I understand why that’s doing so well because of the market macro out there. But are you guys doing anything really differently in that business to push them to grow to at least over 69% this quarter or…

I think I…

…will set up for a big fall basically somewhere down the road.

It's difficult to determine exactly. I believe it's a mix of us approaching things differently as we continually strive to improve our operations. We have a talented team that is always experimenting and innovating to enhance the business. Additionally, we benefit from a growing number of consumers who are more focused on their Scores and FICO credit scores, which directs them to myFICO as a natural choice. Although we don't promote it as much as partners like Experian, consumers still find us, and we do engage in some marketing ourselves. Thus, it's both factors at play: we are taking advantage of the current environment where consumers are increasingly aware, though it's uncertain how long this will continue. It could potentially last a while, but we can't predict that. Furthermore, we are also reaping the rewards of outstanding execution from our team.

All right. Thank you.

We have a question from Kyle Peterson from Needham. Please go ahead, your line is open.

Hey. Good afternoon, guys. Thanks for taking the question. So I just wanted to touch a little bit on the expense and margin trajectory. Appreciate some of the color you guys mentioned on kind of reinvesting some of that as we go here. I mean, is it fair to think that some of the labor costs and savings you guys had this quarter will eventually be redeployed and maybe some of the savings of the facilities are kind of more permanent or how should we think about the cadence and level of this reinvestment?

Maybe I will just take a quick stab at that, and Mike, you can give your view. Some of those labor savings will absolutely be redeployed into areas that are more strategic. So we have very healthy investment in our decision management platform, and so some of those savings will be redeployed there. I think that on the facilities and some of the travel reduction expenses that are COVID-related, some of that’s going to persist. I think some of that becomes permanent. Obviously travel, some amount of travel will resume, but I think we have all learned how to do business with less travel than we had before. And I mean, I am sure our experience is not unique. We have become a Zoom Video company. I mean, we had it before the COVID outbreak, but now it’s a way of doing business. And so I would think that even when everything comes back, we won’t see our travel expense at the same kind of level.

I would add that when things return to normal, we won't revert our real estate facilities expense to the previous model. We view the restructuring actions and footprint reductions as permanent. Regarding labor, we are reallocating some of the savings into engineering talent for our platform products. We are not providing specific guidance on how that will evolve. However, I maintain my outlook from last quarter, which suggests that for the full fiscal year, we expect our operating expenses to remain flat or increase slightly, perhaps in the low single-digit percentages, and I feel comfortable with that projection.

Got it. That’s helpful. And then I guess just a little bit of a follow up on the gross margins. It seems like you guys are kind of strategically exiting some lower margin businesses, especially in the services side. I mean should that lead to maybe a slight upward bias to gross margins over time? I realize that some of that will be kind of mix driven between Scores and software. But all else equal I just want to get any color that you guys could provide on the gross margin impact on deemphasizing services and some of these other businesses?

All else equal, if we deliver less professional services, it’s going to have a positive impact on gross margin, no question. The mix matters, for sure. But our professional services margins, gross margins are in line with what you would see at other well-run enterprise software companies that have in-house professional services and those margins are a lot lower than what typical software margins are.

Okay. That’s helpful. Thanks guys. Good quarter.

Our next question is from Ashish Sabadra with Deutsche Bank. Please go ahead. Your line is open.

Thanks for taking my question. I just wanted to ask a broader question about the platform strategy. Last quarter you talked about some good traction on that front. I was just wondering if you could provide any update on any other customer conversations and how should we think about the FICO Studio, how’s that coming along in the open API strategy? Thanks.

The FICO Studio strategy is progressing well, and we are on schedule. We have a quarterly release cycle where we implement improvements regularly. Our API strategy is firmly established, and we are focusing heavily on it. Currently, we are utilizing the APIs internally and are in the process of making them available outwardly and documenting them for external use. I believe the main challenge will be developing a partner ecosystem that can utilize these APIs. Therefore, we are not concerned about releasing the APIs; instead, building the ecosystem requires more effort.

That's very helpful information. I have a follow-up question regarding the fraud solution. With the shift to working from home, there is certainly a rise in the demand for fraud and digital identity solutions. We are noticing increased interest in the market. TransUnion and Equifax have also introduced certain products, and Equifax has announced the acquisition of Kount. Could you discuss the demand you are observing in the marketplace and the competitive landscape for Falcon? While Falcon is a leader in the financial sector, has there been any change in the competitive environment? Thank you.

We are not experiencing significant changes. Falcon remains the market leader, and we continue to sell it in all its variations. The demand for Falcon isn’t noticeably increasing or decreasing. In the fraud sector, we are exploring some less traditional opportunities and utilizing the decision management platform for these. We are also engaging with clients who may require lower-cost fraud solutions that are not as intensive as Falcon, and these will be integrated into the platform.

That’s very helpful. Thanks.

Our next question is from Jeff Meuler with Baird. Please go ahead. Your line is open.

Yeah. Thank you. Hello, everyone. Will, I know that you said you are going to give us more detail next quarter on how the calendar ‘21 special pricing and B2B Scores is feathering in. But just hoping you can confirm that four weeks in the execution of the special pricing implementation is going smoothly and as planned?

Everything is going as smoothly as expected and according to plan. We will discuss it in more detail later.

Fair enough. Regarding software, can you share any additional insights on license and maintenance? I understand the situation with transaction and maintenance, but for those applications, we saw a decline year-over-year. While this area typically doesn't experience significant growth, it did decrease. In DMS, there was modest growth by DMS standards, but it seems like the comparison isn't particularly challenging mathematically.

Yeah. There is not…

Mike, do you want to take that?

A lot of that category is driven more by usage than by fixed minimums. It's not entirely based on usage, though. We did notice some fluctuations in usage this quarter in certain products, some of which appear to be influenced by macroeconomic factors. For instance, we observed decreased usage of our origination solutions in a few areas, and there’s also normal variability in the usage of services like fraud detection. Again, some of this may be related to macroeconomic conditions and may not be tied to the speed of credit card transaction processing. There isn’t a significant issue here. The larger factor was the overall number of licenses, which was affected by the revenue recognition change and the usual challenges of the first quarter combined with a decline in renewal payments as well.

Got it. And then, Will, sorry to ask you to repeat yourself. But the mortgage comment in your prepared remarks, was it just that mortgage is seasonally a smaller percentage of the mix this quarter?

The mortgage…

I think. Yeah. Go ahead, Will.

Well, I’m just going to say that the mortgage is holding up fine actually, and for now it looks right.

Right. I guess Equifax reported a mortgage inquiry should actually accelerate a little bit this quarter and I thought you had a comment that something related to mortgage. It almost felt like it was a lesser benefit than I just didn’t know if that was just seasonal mix or what you were saying and maybe I just misheard you?

No, I don’t think we provide guidance on future mortgages. It’s better to refer to the bureaus and their forecasts because we tend to be a lagging indicator in that area. However, what we are currently observing is a strong mortgage market.

Yeah. Got you. Thank you.

We have a question from Brett Huff with Stephens, Inc. Please go ahead. Your line is open.

Good afternoon, Will, Mike, and Steve. I hope you are all safe. Thank you for taking the question. I have two broader questions. We have been monitoring DMS for a long time and still believe it’s a very significant long-term strategic product. Will, you have mentioned your commitment to this. Last quarter, we had a significant win with a major Brazilian bank regarding this product. Is there anything similar in the pipeline, or can you share any anecdotal information or indications that this momentum is starting to gain traction?

Yeah. I think it’s too early to talk about specifics, but we have a lot of DMS opportunities in the pipeline and various interests from large financial institutions. And so, without being able to get into specifics right now, I would say that it is consuming a lot of our sales activity.

Okay. That’s helpful. And then the second question is on margins, I know that we have been working through sort of enhancing our tech kind of infrastructure and then spending a lot of money on DMS and some of the SaaS application if you will, the platform solution. I know that we have talked about the potential margin benefit from that. But I know we are kind of running into a little bit to the rev rec change and some other things maybe exiting some businesses. Can you sort of give us a sense this year and next year, not numbers but just how we should think about margin benefits and headwinds as we look to see the business start expanding margins maybe a little more rapidly? Thanks.

The margins are being influenced in two ways. They are improving because we are managing our expenses better, and our product mix is shifting with less emphasis on PS. We are evaluating our products to identify those that are not strategically significant or beneficial, such as in China and ESS. On the other hand, we see a major opportunity with the Decision Management Platform. Each year, we assess how much we can invest in it, and this is not a small undertaking. Given the market potential, we do not intend to underinvest. Therefore, some of the margin improvement might be offset by this additional investment. As for the direction of margins, we are not ready to provide a clear answer. They could be improving, declining, or remaining flat, and flat might be a reasonable expectation. However, it's important not to rely too heavily on that since circumstances could change. Internally, we are continuously striving to enhance margins through operational improvements and cost reduction while also being committed to seizing the opportunity within the platform.

That’s really helpful. Thank you, guys.

And we have a follow-up question from Surinder Thind with Jefferies. Please go ahead. Your line is open.

Thank you for the follow-up question. A quick question on kind of the M&A front, you talked a little bit earlier about kind of fine-tuning some of the businesses that you are in and being a little bit more focused. Is there an opportunity for M&A within that or has anything potentially changed there that we can think about or any needs that you might have?

I don’t think much has changed. Our position on mergers and acquisitions is that we are always open and looking, but we rarely find anything significant that makes sense for us. The challenge, especially considering our platform strategy, is that bringing in other businesses with different code bases complicates the integration into our platform. So while we are always on the lookout, it makes more sense for us to focus on organic investment and growth at this time. However, we do pursue small acquisitions, usually for talent or minor technology solutions that fill specific gaps. Regarding large acquisitions, I wouldn't expect anything soon, but it's always possible; it’s just not something that's imminent.

That’s very helpful. And then one other quick question. There were a lot of questions in kind of the bookings numbers and you guys provided some color on the seasonality component and how the first fiscal quarter is generally the weakest. Is there anything else, I mean, when I look back that number was actually the lowest that I have on record for you guys in the past three plus years. And so is there anything there to read into other than just the lumpiness in the sense that maybe clients are hesitating a little bit? Is there maybe a little bit of uncertainty? What are those client dialogues or is it just clients are waiting for more of the DMS platform and maybe if you can talk about the roadmap for the DMS platform over the next year?

I will provide my perspective and Mike can add his thoughts. Regarding the bookings, we are experiencing some changes. For instance, the term lengths have decreased slightly, which is intentional. We prefer to have renewals occur sooner rather than later because we believe there are opportunities for improvement in the future. This shift is also apparent in our sales compensation structure. Our sales team is now incentivized based on annual recurring revenue instead of the total bookings value, which has a natural impact internally. That’s one aspect to consider. Additionally, while we have long promoted this as a key metric, we recognize that we need to concentrate on our business on an annual recurring basis moving forward. Mike, would you like to add anything?

I believe there isn't any noticeable hesitancy from customers, whether due to COVID or other systemic issues. It's hard to determine with absolute certainty, but the outlook remains positive. We are optimistic about our new business performance for the year, especially following our record-breaking booking quarter in Q4, which leads into this typically slower quarter. While time will reveal more, the current indicators suggest that our pipeline is still strong for the year.

That’s very helpful. And then one kind of final question here, just the roadmap for the DMS platform over the next year?

Yeah. I am not sure what we are prepared to disclose about the roadmap. We continue to make progress on Studio and we continue to work hard against getting the APIs turned outward, and I would say, those are the big points.

Okay. Thank you so much, guys. Thanks a lot.

And there are no further questions at this time.

Thank you. This includes today’s call. Thank you all for joining and we look forward to speaking with you again soon. Thank you and have a good day.

That concludes today’s call. Participants, please disconnect your lines.