Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Youssef Squali - Jefferies & Co.
Youssef Squali - Jefferies & Co.
In terms of your net ads for the quarter, can you speak to the trend you’re seeing there, in particular what are the top reasons customers are leaving? Is it only pricing when they do leave? Where are they going? Historically, I think you’ve talked about smaller customers accounting for only about 6% of total revenues. Where does that stand right now?
Secondarily, in terms of your guidance, what’s baked in there in terms of net ads for the year?
Magid Abraham
In terms of the small customer turn, it really comes from a variety of different places. Primarily companies that are in tough shape as far as monetization is concerned or having funding difficulties or in the mobile space.
There is really no change in the mix of competitive losses. We still rarely lose to competition and we think we still win a lot more than we lose.
I think a much tougher Q1 was a much tougher environment than Q4 in people are lot more cautious in re-upping subscriptions when they are in a total survival mode.
That said, as far as the guidance, we are anticipating that we will continue seeing this level of net customer ads, we’re seeing customers I would say probably until the end of the year where we will start seeing some pick-ups, because clearly some of the customers that we have that type of customer will have a fuller shake-down. Now the percentage of revenue that came from new customers stood at about 6%. We have actually not calculated it, but I doubt that it has changed a whole lot. Maybe it’s 4-5% and you should also keep in mind that we do continue to add smaller customers, so it’s not like we are losing all these smaller customers and the only customers that we are keeping are large customers.
Youssef Squali - Jefferies & Co.
If I may add one last question. On the margin, can you walk us how you get from the 18% EBITDA margin to the 20-23%. Maybe you can help us understand where that improvement is. Is it basically throughout the whole P&L? More clarity on that, if you would.
Magid Abraham
There are two reasons for it. Number one, from a cost standpoint, we had talked after our earnings call in Q4 that the payroll tax as a percent of salaries have dropped from 20% in Q1 to about 14% in Q4. Comes from a differential of roughly 3% of total cost that is really coming from payroll taxes.
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