Ok, I went back and tried to break this out. Increases in commission expense as a percentage of increase in ANRR isnâ€™t consistent quarter to quarter.

We keep saying that up-front commission expenses are hiding the value of the company, so I wanted to know how those commission expenses are actually impacting quarterly income. Here is what I came up with for the 6 quarters since their IPO, trying to add back those commission expenses as if they didnâ€™t exist:

```
2015 Q2:
Commission: ANRR up $5M, commission up $1.2M = 24%
$6M adjusted net income, $16.5M ANRR, 42% tax rate: $2.3M extra net income = $8.3M
58,369,083 weighted diluted shares outstanding = **$0.14 EPS**, $0.56 TTM
2015 Q1:
Commission: ANRR up $7.6M, commission up $2.6M = 34%
$6.7M adjusted net income, $20.2M ANRR, 42% tax rate: $4M extra net income = $10.7M
56,562,661 weighted diluted shares outstanding = **$0.19 EPS**, $0.50 TTM
2014 Q4:
Commission: ANRR up $6.3M, canâ€™t find commission change. Assuming 30%.
$2.5M adjusted net income, $20.6M ANRR, 42% tax rate: $3.6M extra net income = $6.1M
51,857,309 weighted diluted shares outstanding = **$0.12 EPS**, $0.45 TTM
2014 Q3:
Commission: ANRR up $5.1M, commission up $1.6M = 31%
$2.7M adjusted net income, $14.9M ANRR, 39% tax rate: $2.8M extra net income = $5.6M
52,978,051 weighted diluted shares outstanding = **$0.11 EPS**
2014 Q2:
Commission: ANRR up $3.2M, commission up $0.9M = 28%
$2.1M adjusted net income, $11.5M ANRR, 43% tax rate: $1.8M extra net income = $3.9M
50,284,362 weighted diluted shares outstanding = **$0.08 EPS**
2014 Q1:
Commission: ANRR up $3M, commission up $1.2M = 40%
$1.6M adjusted net income, $12.6M ANRR, 42% tax rate: $5M extra net income = $6.6M
48,371,169 weighted diluted shares outstanding = **$0.14 EPS**
```

So if the company paid zero commissions, they would have reported something like $0.56 Adjusted TTM EPS for this latest quarter, which would give an Adjusted P/E of just over 60 at todayâ€™s price of $33.90 (and note that the company has since done a secondary, so shares outstanding will be quite higher next quarter). There arenâ€™t enough quarters available for me to calculate YoY TTM EPS growth, but I donâ€™t know how reliable itâ€™d be anyway coming off small numbers (the normal adjusted TTM EPS growth comes out to a crazy 1550% because of that very issue). But total revenue growth is running at about 46% and ANRR YoY growth in total over the past 4 quarters ran at 33%. So I think 40% growth seems like a reasonable figure going forward.

If we go with 40% growth, we get a 1YPEG of 1.5 today after backing out commissions given the 60 P/E. Now obviously 1YPEG is backward looking, and Iâ€™m assuming 40% growth going forward, so itâ€™s not really a fair calculation. But letâ€™s look 1 year from now to figure out where we might stand: $0.56 x 1.4 = $0.78 TTM EPS, which at todayâ€™s price would give a P/E of 43, which would give a 1YPEG of 1.08. So it will take a whole additional year just to get to â€śfairly valuedâ€ť on a 1YPEG basis, and thatâ€™s if the company paid zero commissions at all, which obviously isnâ€™t realistic.

So while itâ€™s true that upfront commissions do make the usual metrics look worse than they really are, the stock still looks quite expensive on a 1YPEG basis. Of course, thatâ€™s only one data point, and given the quality of the recurring cash flows one would expect to pay a little more. The question is how much more.

Am I looking at this right? Is my math right? Iâ€™d love to hear how others are thinking about this.

Neil