SWI (2020 - Q4)

Ladies and gentlemen, thank you for standing by and welcome to the SolarWinds Fourth Quarter 2020 Earnings Call. I would now like to hand the call over to your host, Howard Ma, Senior Director of Investor Relations. Please go ahead. Howard M

Thank you, operator. Good morning, everyone and welcome to SolarWinds’ fourth quarter 2020 earnings call. With me today are Sudhakar Ramakrishna, our President and CEO and Bart Kalsu, our EVP and Chief Financial Officer. Following prepared remarks, we will have a brief question-and-answer session. This call is being simultaneously webcast on our Investor Relations website at investors.solarwinds.com. On our Investor Relations website, you can also find our earnings press release and a summary slide deck, which is intended to supplement our prepared remarks during today’s call.

Thank you, Howard. Good morning and thank you for joining us today. I hope you are doing well and staying safe. As you know, I joined the company earlier this year on January 4 and this is my first earnings call with the company. I want to start by first thanking our employees, customers, partners and our shareholders for their ongoing commitment to and for their support of SolarWinds. I have long been a student of SolarWinds’ high velocity go-to-market model. Our broad portfolio of solutions, low customer concentration, strong revenue recurring base, strong balance sheet and the opportunity to apply my background to address an expanding market opportunity to support the needs of ITOps, DevOps and SecOps professionals made it easy for me to say, yes, when I got the opportunity to lead the company as President and CEO. In the 7 weeks that I have been with the company, I have had the opportunity to spend a lot of my time with customers and partners. The vast majority of the customers that I have spoken to understand that the cyber incident that affected us and others could have happened to any vendor and especially a broadly deployed vendor like SolarWinds. Equally, they are eager to see us address the issue and share our learnings, which we are doing. The other opportunity that keeps coming up in these discussions is our ability to provide guidance and input to protect the entire environment of our customers as opposed to just focusing on our products, making us a more strategic partner. The majority of our customers that downloaded a version of the affected code have upgraded to our latest version and continue to renew their contracts with us. While the first priority continues to be ensure the safety and security of our customers, our conversations with customers and partners have also given us the opportunity to discuss the strength of our entire portfolio and of our future plans. I have also spent a significant amount of time on the cyberattack on SolarWinds, both in managing the investigation as well as working closely with our employees, customers and partners. I’ll elaborate on our investigation, learnings and future plans, but first, I will touch on a few financial and operational highlights in Q4 and 2020.

Thanks, Sudhakar and thanks again to everyone joining us on today’s call. Our fourth quarter financial results reflect solid execution while demonstrating the resiliency of our model in the face of the cyberattack. We finished near the high end of the range of our outlook for the fourth quarter for non-GAAP total revenue, ending the quarter with $265.5 million in revenue, representing year-over-year growth of approximately 6%. Non-GAAP maintenance revenue was $124.3 million in the fourth quarter, up 8% versus the prior year, driven by consistent maintenance renewal bookings and reflecting sequential acceleration in maintenance revenue growth since the second quarter, which was impacted the most by the pandemic. This growth was driven by solid customer retention as evidenced by maintenance renewal rates of over 90% in the fourth quarter. For the fourth quarter, non-GAAP license revenue was $34.5 million, which represents a decline of approximately 23% as compared to the fourth quarter of 2019. The decline in license revenue resulted from the continuing impact of the global COVID pandemic, the impact of the cyberattack and our continued evolution to subscription sales for our on-premises products. We continue to see quarter-over-quarter sequential growth in sales of subscriptions for our on-premises products in the fourth quarter. On-premises subscription sales resulted in an approximately 3 percentage point headwind to our license revenue for the quarter. Total non-GAAP license and maintenance revenue was $158.8 million in the fourth quarter, down 1% versus the prior year.

Thank you, Bart. In my various executive assignments, I have sought to let humility, ownership, transparency, focused action and a bias towards customer success be my guiding principles. We are committed to practicing these principles actively at SolarWinds and as we do, we will emerge stronger as a business. Over time, we see significant opportunities to increase our relevance to customers and to expand our market by leveraging our network, systems, application and database analysis and monitoring tools, along with our excellent IT service desk and tools portfolio. We intend to integrate our platforms and serve the evolving hybrid IT needs of our customers. We will enable it ops, DevOps and SecOps professionals to have integrated experiences across automation and configuration, monitoring, visibility, alerting and remediation. These moves will further accelerate our progress towards a greater mix of subscription and recurring revenues. As we look to the next several quarters and years, we believe that we have a growing market opportunity, and we intend to organize our activities and plans to achieve and, in some segments, exceed market growth rates over the long-term even as we deliver strong EBITDA margins, as a result of the operating leverage that we have created in our business. To achieve a balance between sustained growth and strong profitability, we expect to take the following key actions: expand our international go-to-market investments to capture additional growth and market opportunities; accelerate our evolution to our customer success model and further enhance our sales team’s ability to land new customers and expand. We believe this critical evolution will lead to a better customer satisfaction and, over time, increase the lifetime value of our customers, continue to nourish our high velocity go-to-market models, while also expanding with the enterprise and global system integrated motions, we started in 2020. We are embarking on additional portfolio integration and packaging efforts to support enterprise customers. Accelerate our offering strategy to comprehensively address the needs of hybrid IT deployments with flexible deployments that is cloud, SaaS and on-premises with an associated evolution to a greater subscription mix. Selectively expand via inorganic investments that both round out our portfolio as well as enhance our ability to capture market opportunity faster. I will conclude again by thanking our employees, partners and customers for their commitment to and support of SolarWinds. Over 20 plus years, we have earned the trust of our customers by delivering powerful and affordable solutions and I am confident that going forward, we will be known for delivering powerful, affordable and secure solutions. Bart and I will now be happy to address your questions.

Operator, we are ready for questions.

And your first question comes from the line of Sterling Auty with JPMorgan.

Yes, thanks. Hi, guys. You touched upon a number of the key elements, but I wanted to dive back in specifically around kind of the comments that you made about improvement through the year on kind of the demand picture in two ways. Number one, I want to make sure I understand how much are you kind of baking in, in terms of improvement in the small piece, which is the licensing, but more specifically, the subscription? Are you expecting that the demand for subscriptions will bottom in March and then start to show some improvement through the year?

Yes, Sterling, I mean, we talked about what we have done so far in the fourth quarter as it relates subscription sales being a 3% headwind to license revenue. That’s fairly consistent with what we saw in the other quarters in 2020, right. And so we are expecting that headwind to continue in 2021 and like we said, we are going to make subscription sales a priority. So if anything, that headwind is only going to be even a little bit stronger as we move through 2021.

Right. But I guess what I am asking is the demand impact from the breach. Are you expecting the demand for your subscriptions, not the mix, but just demand for subscriptions in general to kind of hit a bottom here near-term and then show improvement through the year?

Yes, absolutely. As we have been building out our forecast for 2021, Sterling, we expect the biggest impact to be in the first quarter and then as we move through the rest of the year, we expect demand to continue to improve.

And then just one follow-up on the maintenance, you gave us maintenance renewal rates, but I want to understand when you think about the seasonality of when those maintenance renewal contracts come up, what does that mix look like because I would imagine that, that would be more weighted towards Q4. So are you expecting that the biggest maintenance hit might actually not come until Q4?

Sterling, there is not really a lot of seasonality as it relates to our business. When I look at what our bookings are from a maintenance standpoint, they are consistent quarter in and quarter out. So although we have some of our customers that like to co-term to a fourth quarter maintenance renewal date, that’s just not a trend that we have seen historically.

Understood. Thank you.

Your next question comes from the line of Brad Zelnick with Credit Suisse.

Great. Thank you so much and good morning. Sudhakar, I think it’s pretty clear that SUNBURST is a wake-up call for the entire industry. This is not a SolarWinds issue, but an industry issue and it’s good to see SolarWinds taking a leadership position in addressing these types of attacks. I wanted to ask a question that I think may be difficult for you to comment on, but just on the future liability and potential litigation related to SUNBURST, how are you thinking about any of these liabilities and customer claims and the degree to which SolarWinds might be covered by its licensing agreements?

Thank you for the question. The point you made last is the most relevant one, which is much like most software companies, we have covered through our end-user licensing agreements. And as you mentioned, SUNBURST is not just a SolarWinds’ specific issue, but it’s a broader industry issue. And as you also know, most software vendors unfortunately have vulnerabilities that they disclose and correct on a go-forward basis and so we have similar practices at SolarWinds as well.

Okay. And maybe just a follow-up for Bart, I want to make sure I heard something that you called out and I heard it correctly, which is $20 million to $25 million in security-related initiatives. Can you maybe put a finer point to the timeframe and the cost of remediation related to the incident versus ongoing changes to your business process related to SUNBURST?

So yes, the $20 million to $25 million, Brad is the cost that we expect to incur throughout all of 2021 and that’s a combination of both security initiatives that Sudhakar talked about as well as just some general increases in some of our expenses such as we expect our insurance cost to go up in 2021. And then there is other charges, some of our professional fees will go up as a result of the cyberattack as well, so really just the $20 million to $25 million number was to give you some context of what we expected the increase in our expenses to be not just for ‘21, but as we move forward as well.

And Bart, I would also like to clarify that these are not necessarily related to remediation as much as we are looking at these as extensions and investments for us going forward. And as I mentioned in my remarks, that our aspiration is to support the broader needs of IT, Dev and SecOps professionals.

Very good. Thank you so much for taking the questions, guys.

Your next question comes from the line of Matt Hedberg with RBC Capital Markets.

Hey, thanks guys for the questions and welcome Sudhakar and thank you for the transparency on the cyberattack. I know it’s a fluid situation, but I think we all appreciate the details here. Maybe the first question, can you talk – I mean, we are effectively 2 months into the Q1 quarter here. I am wondering if you could talk about the pace of new business kind of the linearity through 2 months versus sort of what you would expect in a normal Q1? And then secondarily, on the maintenance side of it, you talked about mid – I believe low to mid-80s renewals this year. Is there a difference between your public and private sector maintenance renewal rates?

Matt, first of all, the renewal rates that we gave you, the low to mid-80s, that takes into account both our federal as well as our commercial customers. So that’s not a renewal rate that we’ve historically broken out between those two pieces of our business. So the low to mid-80s range that we gave you reflects both of those as well. So – and then as far as the pace of our business, the pace of our business in the first quarter, obviously, it’s been impacted by the attack but we’re seeing positive trends. And like I said, we expect the first quarter of 2021 to be the one that’s the most heavily impacted as it relates to new license sales.

And just to add on to Bart’s comments, I have been spending a lot of my time with our customers, both in the public and in the private sector and especially with the federal government customers, spending time at the CIOs, CISOs, highlighting, as you put it transparently, the findings from SUNBURST as well as the remediation steps. A lot of our customers, as I mentioned in my remarks, their reaction has been one of understanding. And many of our customers, including in the public sector have already upgraded to our remediated code.

That’s great. And then on Enable, the MSP business, when I think of growth there, I think both expanding the number of MSPs but also expanding what you can sell to them. I guess, on that second part, as we progress through this year and beyond, how do you think about adding more services to that business?

I’ll take that, Bart. So the Enable business, as we’re going to be branding it going forward, we’ll continue to expand its portfolio, we recently made some strategic announcements as it relates to our partnership with Sentinel as an example. So for a business that was largely focused on remote monitoring in the past, it has already evolved and continues to evolve into data protection, into security. And in the future, I’m sure we’ll explore additional avenues like analytics and insights as well.

Thanks, guys. Actually, maybe, Bart, just a quick – just last one here. Can you remind us again about your exposure to the federal segment? Roughly, what percentage of total revenue is that side federal, state, local kind of the...

Yes. I mean, that’s not a number that we’ve historically broken out, Matt. It’s – our federal business is – it obviously is a big piece of our revenue, but it’s not a number that we’ve – that’s been big enough that we’ve had to disclose separately.

Got it. Thanks a lot, guys.

Operator, we are ready for next question.

Your next question comes from the line of Sanjit Singh with Morgan Stanley.

Thank you for taking the questions, and congrats on the role Sudhakar and even bigger kudos for accepting the role, just given the headlines in December. But it does seem like the business – but it does seem like the business is proving resilient. And I just wanted to dive into a couple of topics. One, on sort of the comment around – this could have happened to anyone. I think most of us would certainly agree. But is there any sort of – when we sort of look at SolarWinds, was there any sort of things from an operations perspective that made the company more or less vulnerable relative to your peers, whether it comes from the – having distributed product engineering teams or anything that, like, the company is going to do better to shore up any potential vulnerabilities from the operations side? That’s my first question.

Sanjit, thanks for the welcome. As it relates to why we believe it could have happened to anyone, as we deconstructed what the threat actors did, we found malware that essentially can be injected into any supply chain. That’s the reason why we publicly disclosed it so that other companies can look at their own supply chains and potentially protect themselves from both current and future attacks. As it relates to, was there anything specific to the SolarWinds’ environment, we could not find anything that was idiosyncratic to the SolarWinds’ environment. And if anything, both our security hygiene, security posture, security tools consistent with what is practiced in the industry.

Got it. And then as you sort of manage through the solar storm compromise and work with your customers. I guess the larger question is, what is your vision for SolarWinds as the company sort of comes out of this? And as you look at what the company has been focused on, the strategy, how they sort of balance growth versus margins, should we see your tenure sort of extending that line of thinking or are you looking to change things fundamentally from a strategic perspective? What’s sort of your initial thoughts on how the business will be run and managed going forward relative to the past?

Definitely. My focus will be to essentially extend the strategy in the following way. I personally believe we have the broadest portfolio, if I may use that term, in network, systems, application and database monitoring, combined with our IT service desk as well as our tools portfolio. Going forward, what we intend doing is integrating them into a way that we can support the hybrid needs of our customers so that they can deploy on-premises or in the cloud, and we will be able to provide them consistent capabilities with one integrated platform. Additionally, we feel there is a significant opportunity for us to expand from monitoring to first into the automation and configuration aspects of things, then onto alerting and remediation with our IT service desk as an integrated portfolio such that we are able to support the entire life cycle of our customers. That is what we see as a market opportunity for growth going forward. And as we do that, we will continue to balance between growth and profitability and continue to demonstrate the operating leverage that we have created in our business.

Understood. That’s a great overview. If I could sneak one in for Bart, my question is this, why is there sort of lingering hesitation on guiding for the full year. If I look at some of your cohorts that sell into similar segments they have sort of gotten back to annual guidance cadence. ARR accelerated this quarter. Your Q1 guidance is more or less in line with consensus. So, the question is sort of what is the fear around providing guidance, given that the business looks relative to the impact, but it doesn’t seem like they is tons of volatility in the numbers, at least so far?

Yes. Sanjit, thanks for the question. We like to talk about the fact that recurring revenue is 85% or 86% of our total revenue. But we do still have a license piece, a license component as it relates to our revenue. And they is just enough variability in the full year of 2021 and enough – there is enough uncertainty around what our new license sales are going to be, that we just weren’t confident to give – enough to give a full guide. We like to be pretty precise when it comes to guidance. And there is just enough – there is a broad enough range of outcomes that we just weren’t confident to give a full year guide at this point.

Understood. Thanks you for taking the questions.

Your next question comes from the line of Erik Suppiger with JMP Securities.

Yes. Thank for taking the question, and welcome, Sudhakar. One, can you provide some context around the churn in the federal sector versus the – your nonfederal sector? Clearly, this attack was primarily targeted to the federal customers, and it would be helpful for us to understand what impact this is having on the nonfederal sector in particular?

Sure. I would say at this point, it’s too early to quantify churn as it’s been about little over 2 months since this whole event occurred. The way I would describe our activities are one of engagement and one of helping customers remediate and look forward. So through our conversations – and as I mentioned, I personally have had many conversations with both private and public sector customers. I would say some customers have taken a wait and see attitude, but not necessarily a focus on churn or replacement at this point in time. Additionally, as I mentioned, the vast majority of the customers that I have spoken to and we continue to engage with have not only upgraded, but many of them also have renewed their contracts. So those are the indicators I can present to you at this point in time, not so much a specific churn indicator.

And Erik, the expected renewal rates that we – that I have provided you, the low to mid-80s for the full year. That includes both our commercial as well as our federal customers. So yes, we are seeing a lot of questions, when customers are up for renewal. But like Sudhakar said, right now, they are taking more of a wait and see approach. It’s not that they have – that they are immediately turning us off or not renewing their maintenance contracts.

And I also believe that is because of two important factors. One is customers that we speak to and customers who have used multiple software vendors recognize and understand that vulnerabilities and software issues can happen to any vendor. That’s number one. Number two that it is a reflection of their confidence in the breadth of our portfolio and our ability to deliver their customers their success.

Okay. Then real quick on the Enable spin out, can you tell us what the growth was in fiscal ‘19? And how that can – obviously, it was 15% in fiscal ‘20. So just curious what the trajectory is there?

So yes, the MSP business, Erik, just like a lot of other businesses, was impacted by the COVID pandemic in 2020. So 2019 growth would have been slightly higher than that 15% that we saw in 2020 but any of the impact as it relates to growth from 2019 to 2020 was really due to the pandemic and a little bit of the slowdown that we saw in the second quarter, and we saw really positive trends in our MSP business in Q3 and Q4.

So can we assume that, that’s a high-teens type growth on a normalized basis?

Yes. Yes, that’s the goal.

Thank you.

Your next question comes from the line of Brent Thill with Jefferies.

Hi. This is Luv Sodha on for Brent Thill, and welcome Sudhakar to SolarWinds. I wanted to ask one quick one on – there has been a bit of focus on the renewals, and are you sort of offering any concessions to the customers that are renewing or are these normal conversations that you would otherwise have?

Our conversations on the renewal front have been normal other than the fact that, in some cases, we have had to explain to customers what we are doing, where we are headed, why they should feel secure, etcetera. If your question is related to pricing or promotion, I would say, our behavior has been per what it always has been.

Got it. And maybe one quick follow-up, if I may, on the – you mentioned some of the investments you’re making this year on the product side. I wanted to ask, are some of these investments, be it on the product or the go-to-market side, are they more longer term in nature or – I am trying to assess longer term margins – impact on longer term margins? Thank you.

Yes, Luv. What we talked about on the – what we’ve talked about primarily was expenses that related to the security incident. So Sudhakar talked a lot about our secure by design initiatives. And there are going to be some costs associated with that. But like I said, we expect those costs to be in the $20 million range in 2021. So when you’re thinking about what margins are going to be long-term, what I would tell you is that we think that margins are going to be at their lowest level in Q1, and margins will improve as we move throughout the year. And then as we look at 2022 and beyond, we’re always going to – we’re going to always weigh investment decisions and try to decide between both growth and profitability.

And to your question about whether some of these investments will yield returns this year versus longer term, some of the investments that I outlined are expected to yield returns this year, most likely in the back half of this year and on into 2022.

Great. Thank you again.

Your next question comes from the line of Kingsley Crane.

Hi, and welcome Sudhakar and completely agree with you, I think the more we learn about the nature of this highly manual attack, the better we can appreciate. This could have happened to anyone. So it’s encouraging that customers are agreeing. Researchers also found that adopting zero trust is one of the more effective ways for customers and vendors to protect themselves from these types of attacks. So given your experience with zero trust while at Pulse Secure, do you see opportunities to leverage that experience in SolarWinds today?

Absolutely. So as part of our secure by design initiative that I outlined, as I mentioned, I don’t look at this as a remediation effort as much as an ability to set the stage for a leadership effort over several quarters and years. So one of the key aspects of secure by design or a couple of key aspects, I would say, is that it is premised on zero trust principles and when I say that, that applies both to our infrastructure as well as how we plan to build products going forward. So some of the conversations that I’ve been having with customers, for instance, is how do we establish least privileged access models within both our products as well as other vendors’ products that enable the safety and security of our customers. So this is the point I was making, as I was describing, that one opportunity that comes up in our conversations with customers is not only how we protect them through our products, but also provide guidance to them across their environments that is rooted on least privileged access or zero trust principles and other related constructs.

Great. That makes perfect sense. That’s very helpful. So one more just on the MSP side, I was encouraged to see the productivity of the name change to Enable in December. I would just love to hear a little bit more color on decision to adopt what’s been a strong brand name for some time and how receptive customers have been so far?

Thus far the reception, but from our partner community has been very strong in terms of the Enable brand. And as you know, the MSPs business’ primary objective is to enable partners to, in turn, enable our small, medium enterprise customers. So the partners find that this is a nod to the model and are redoubling and recommitted to expanding the business.

Okay, thanks. That’s it for me.

Your next question comes from the line of Rob Oliver with Baird.

Great. Thank you. Good morning, guys and hope you are doing okay down there in Austin. It’s a tough couple of weeks down there. Sudhakar, one for you, and then Bart, I had a follow-up for you as well. Just Sudhakar, on the subscription products, it does sound like demand is kind of coalescing nicely around the old Samanage product, ITSM and around database with VividCortex. Is that right? And are there other products in that portfolio of SaaS subscription products that you are optimistic about or perhaps you could take the opportunity to talk a little bit about how you view expanding that portfolio?

Absolutely. The observations that you made on both the service desk and database are absolutely correct. In addition to that, I alluded to additional packaging and integration considerations that we are executing throughout this year. That applies broadly to our, call it, traditional products based on the Orion platform, including network and system management. So as a result of that, I expect the subscription mix of that business to continue to grow as well. Now if you take a perspective of a few quarters out, as we integrate our platforms into much more of a singular motion then increasingly, our primary motion will become subscription on that particular platform. So over time, the goal is to improve the mix and expand it from the current 86% to something higher going forward.

Okay, great. That’s helpful color. And I think that ties directly, Bart, into what my follow-up question with you is going to be, which is you guys traditionally have been agnostic as to how your customers bought. And so clearly, you change here on this call. And I guess your comment relative to prioritizing subscription would go hand-in-hand with what Sudhakar said. Are there incentives built in there for the sales force? And any other changes relative to the go-to-market? And I would assume you’re going to do this and keep consistent with sort of the kind of lean, like go-to-market model that SolarWinds has always pioneered? Thank you guys very much.

Yes, Rob, I mean, as it relates to our subscription offerings, like you said, we’ve been agnostic. At the end of the day, we want the end user to have the ability to purchase in either – under either in a subscription arrangement or under our traditional license maintenance agreements, right? And we’re not going to change that. However, from an investment standpoint, we are going to put more dollars behind some of our on-premises products, and we’re going to try to make that a priority as we move forward.

Appreciate it again.

Your next question comes from the line of Kirk Materne with Evercore ISI.

Hi, guys. How are you doing? This is actually Peter Burkly on for Kirk. Thanks for taking the time to answer a few questions here. My first one is, and apologies if I missed this in your prepared remarks, but just wondering if you guys have any update just on the timing of the spin-out of the MSP business?

So yes, we’re still expecting that spin out to happen sometime in the second quarter.

Okay, great. Awesome. And then just one quick follow-up, just wondering, I mean, it sounds like the cyberattack had more of an impact on the licensing piece of the business, which makes sense. But I was just wondering if it had any impact on the MSP business at all as well?

There was a slight impact in January, just as some of our MSP partners and some of our – some of their end customers assessed the potential impact. Once we were able to assure them that none of our MSP products were part of the cyberattack, we’ve started to see the MSP business get back to its form.

Okay, great. Awesome. That’s helpful. Alright. Thanks very much, guys.

Your next question comes from the line of Mohit Gogia with Barclays.

Hey, guys. Thanks for taking my question as well. I was wondering if you can – I mean when you initially discussed and announced the spin-off last year, you had a framework for the SolarWinds stand-alone post the spin-off and the MSP business, what the growth and profitability framework and profile will look like, right? And obviously, things have changed somewhat. I mean you’re discussing some incremental investments in security and also product-related investments, right? So just wondering, if you can sort of like maybe touch upon if any goalposts have moved. So I think SolarWinds stand-alone, you had discussed a low to mid-single-digit grower in the mid to long-term MSP business, I think you had discussed to high teens. But just curious, as to if you can update us how you’re thinking about the two separate businesses post the spin-off in terms of growth versus profitability? And then I have a follow-up question. Thank you.

Yes, Mohit. I mean one of the reasons why we didn’t provide full year guidance is because they is still a certain amount of uncertainty as it relates to the revenue side of our business. The goal is to continue – when we split the MSP business and the core IT business, to have two separate companies. They’ll have two somewhat different financial profiles. The core IT business, we talked about being a mid-to-high single-digit grower. That will obviously be impacted as it relates to the cyberattack in 2021. But we think that those impacts will be short-term in nature. And we think as we move into 2022, we will continue to look like the company we talked about when we announced the MSP spend last year.

Yes, operator, let’s take one more question.

Okay. You do have a follow-up with Sterling Auty with JPMorgan.

Yes. Thanks, guys. So just – actually on the spin, I’ve gotten a number of questions from investors around if they is any change or update in thinking in terms of how the two companies would be capitalized. In other words, where would the debt actually go? And would there be any need for any financing actions along through that process?

Sterling, we’re still looking at the potential capital structures of both of the businesses long-term and post spin. So when we move into the second quarter, we’ll have more discussion around that.

Perfect. Thank you.

Alright.

There are no other questions at this time.

Okay. Thank you again everyone for joining us and we will be in touch.

This concludes today’s conference call. You may now disconnect.