Liquidity Services Inc Q4 FY2020 Earnings Call

Welcome to the Q4 and Fiscal Year 2020 Liquidity Services Earnings Conference Call. My name is John, and I'll be the operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Now I'll turn the call over to Julie Davis, Senior Director of Investor Relations.

Thank you, John. Hello, and welcome to our fourth quarter and fiscal year 2020 financial results conference call. Joining us today are Bill Angrick, our Chairman and Chief Executive Officer; and Jorge Celaya, our Executive Vice President and Chief Financial Officer. We will be available for questions after our prepared remarks. The following discussion or responses to your questions reflect management's views as of today, December 8, 2020, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and in our filings with the SEC, including our most recent annual report on Form 10-K. During this call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. During this call, we will discuss certain non-GAAP financial measures. In our press release and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. We also use certain supplemental operating data as a measure of certain components of operating performance, which we also believe is useful for management and investors. The supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results. At this time, I'd like to turn the presentation over to our CEO, Bill Angrick.

Thank you, and good morning. Welcome to our Q4 earnings call. I'll review our Q4 performance and provide an update on key strategic initiatives. Next, Jorge Celaya will provide more details on the quarter. Liquidity Services reported strong Q4 results due to increasing customer adoption of our safe and effective e-commerce solutions. Across all business segments, as businesses and governments seek proven digital solutions to stay competitive, driven by our multi-year transformational investments and marketplace economies of scale, we recorded significant year-over-year growth in both our top and bottom line financial results. We're very proud of our team's efforts during the quarter to maintain a safe work environment for our associates while helping our customers, many of whom are small businesses, efficiently conduct commerce globally in over 500 B2B product categories. Liquidity Services continues to play an essential role in how businesses and government agencies operate within the $100 billion-plus reverse supply chain market. Our marketplace platform, buyer base, software, and services are best-in-class and deliver a competitive advantage for our customers. Our continued growth and success reflect several macro trends, including the secular growth of online retail, which drives the need for comprehensive Returns Management solutions; the need for organizations of all sizes to embrace technology to drive overall supply chain efficiencies and to monetize assets; and finally, the increasing focus by business and government customers on sustainability. Our solutions uniquely address all of these customer needs, and the investments we have made over the past few years in our My Marketplace platform, marketing stack, and technology infrastructure have positioned Liquidity Services extremely well to meet customer needs, both today and in the future. These needs are not unique to the climate of the pandemic; Liquidity Services is a consistent cyclical business that helps clients create value both in periods of economic expansion as well as contraction. We are distinctly well positioned to benefit from anticipated growth in the reverse supply chain market. Overall, our strategy and recent platform investments have been rewarded with strong financial results during the second half of our fiscal year 2020, allowing us to finish the year as a stronger, more efficient business. Our e-commerce marketplace capabilities continue to drive strong recovery for our sellers and have enabled us to scale our services quickly as more customers seek efficient self-service solutions to manage surplus and return goods in the supply chain. In turn, our higher recovery rates have driven increasing adoption of our consignment pricing model, positively impacting gross profit margins. GMV in our GovDeals segment grew a record 35% year-over-year as more government agencies utilized our digital platform to transact higher volumes, and a growing buyer base and automated asset promotion tools drove higher realized values through our marketplace. This performance has sparked growing interest in our platform by sellers of higher-ticket items in the transportation and heavy equipment categories. GMV in our Retail Supply Chain Group segment grew 33% year-over-year, as more large and SMB retail sellers adopted our platform, and existing customers increased their transaction volumes on our marketplace. Of note, GMV for our self-service retail solutions more than doubled year-over-year as more customers embrace the flexibility and convenience of selling items directly on our platform. GMV in our Capital Assets Group segment declined 8% year-over-year due to the wind-down of the DoD scrap contract. Excluding the expired scrap contract, CAG segment GMV grew 3% year-over-year during the quarter. Our CAG heavy equipment category grew strongly during the quarter as sellers took advantage of our self-service solutions, and our marketplace continued to deliver strong results. The extensibility of our e-commerce platform to third-party sellers on a global scale is another important growth vector for Liquidity Services. For example, we launched our new all-surplus platform in South Africa recently and have quickly become a destination in that region for both consumer goods and heavy equipment, with over 1,000 online completed transactions to date. Lastly, our Machinio segment grew revenue by 5% during the quarter as equipment owners and dealers began to prepare for a broader reopening of the economy by embracing Machinio's digital marketing solutions to connect with buyers at lower costs compared to traditional marketing channels. We are excited to end fiscal year 2020 with strong non-GAAP adjusted EBITDA results and improved margins as we leverage our new marketplace platform and technology improvements to the benefit of our sellers, our buyers, and our shareholders. Looking forward, we are focused on becoming a $1 billion GMV annualized business. We are seeing the benefits of increasing scale, driven by strong tailwinds, which allows us to leverage our fixed cost and marketplace business model. Because of our strong and growing buyer base, coupled with intelligent machine-driven asset promotion tools, more clients are adopting our consignment pricing model to share in the upside created through stronger price realization in our marketplace. Thus, we believe growth in our GMV and gross profit, which is a proxy for net revenue, are the best measurements of our progress. Because GAAP revenue was impacted by the changing mix in our pricing models, the efficiency of our business is best measured by adjusted EBITDA margins as a percentage of gross profit, which have steadily improved. Together, these metrics provide shareholders with a good measurement of both the sustainability and efficiency of our business. In closing, we'd like to thank our employees for their dedication to our mission, and we believe we are well positioned to help our customers navigate the global impacts of the pandemic and beyond using the strength of our online platform and the ingenuity of our team. We're excited to continue our role as a global market leader to create value for our customers and shareholders in the years ahead. I'll now turn it over to Jorge for more details on the quarter.

Good morning. As Bill mentioned, we finished our fourth quarter of fiscal year 2020 with a strong showing in GMV, GAAP net income, GAAP EPS, and adjusted EBITDA. These results during an unprecedented global pandemic reflect the value of our services for sellers and buyers and the benefits of our multi-year transformation and platform investments, combined with the realignment, rationalization, and streamlining of our operating expenses. We are pleased with the positive reception and increasing customer adoption of our services. A key purpose of transforming our technology and business offerings has been to enable us to leverage our platform in order to scale our business that combines with a mix of services for better margins and more profitable results. Our fourth quarter of fiscal year 2020 results demonstrate how this can come to fruition. Comparing to the fourth quarter of 2019, we generated positive results that include GMV of $196.9 million, up 25%; GAAP net income of $5.4 million, up $10.7 million; GAAP earnings per share of $0.16, up $0.32; and adjusted EBITDA of $9 million, up $9.7 million. Fourth quarter revenue of $55.9 million was down $2.9 million, reflecting a stronger mix of full-service and self-service consignment model transactions compared to the fourth quarter of 2019, where the mix of our purchase model transactions last year were a greater proportion of total GMV. These fourth quarter results reflected, one, increasing activity in our GovDeals segment with government agencies able to utilize our digital platform. Our growing buyer base in GovDeals and use of automated asset promotion tools helped with higher recovery values within our marketplace, especially in the vehicles category, where, in combination with overall market trends, our recovery rates increased year-over-year. Two, solid growth in our Retail Supply Chain Group as more large than SMB retailers adopted our platform and support services, with existing customers increasing their transaction volumes. Three, growth in our Machinio segment as equipment owners and dealers leveraged our digital marketing solution to connect buyers at a lower cost than traditional methods. Four, solid growth related to our new focus on the heavy equipment vertical in our CAG segment, which offset the wind-down of the DoD scrap contract. CAG continues experiencing a more episodic nature in its activities and international COVID travel constraints. And five, improved gross profit margins, driven by increasing mix and adoption of our consignment model over our purchase model in certain segments and an increase in recovery rates across several verticals. More specifically, comparing the fourth quarter results to the same quarter last year, our GovDeals segment was up 35% on GMV and 32% on revenue. Our retail RSCG segment was up 33% on GMV and up 7% on revenue. And our CAG segment GMV was down 8% and down 50% on revenue, yet excluding the surplus contract, the CAG segment GMV was up 3% and revenue down 34%. Machinio's revenue was up 5%. We have a debt-free balance sheet and ended the quarter with $76 million in cash, up $9.5 million compared to the fourth quarter ending September 30, 2019, and up sequentially from this past quarter, which also included $4 million in stock repurchases. Turning to our full fiscal year 2020 results, a year marked by the economics and behavioral shifts from the global pandemic, our RSCG segment GMV was up 16.3%, and revenue increased 7.2%. Our GovDeals segment was down about 0.5 percentage point for both revenue and GMV. And our CAG segment GMV declined 27.9% and revenue declined 51.1%, inclusive of the transition out of the DoD scrap contract. Our Machinio segment revenue increased 28.8%. Looking ahead to fiscal year 2021, we will continue to focus on growing and expanding our self-service offerings and our all-surplus aggregated marketplace. We remain focused on executing our RISE strategy, which we believe will continue to better position us through flexible seller service offerings and an enhanced buyer experience. We are closely monitoring the impact of the COVID-19 pandemic on our economy, our sellers, our buyers, and on our own operations, while we continue to deliver our services reliably to existing and new customers. At this time, as we report our year-end results, we are comfortable providing guidance for Q1 of fiscal year 2021, despite the continued uncertainty created by the global pandemic and its impact on the global economy. We will evaluate providing guidance on a quarter-by-quarter basis during fiscal year 2021.

For our first-quarter fiscal year 2021, our outlook reflects continued year-over-year growth in our GovDeals and RSCG segments, as our e-commerce solution provides safe and efficient ways to transact, with potentially slightly higher results in our CAG segment even as the pandemic continues to impact the global economy and benefits of our cost-control and cost-reduction measures. We also anticipate our service mix between consignment and purchase models will vary quarter to quarter, and that we will continue to launch incremental functionality across our marketplaces to enhance the seller and buyer experiences, which may increase our sequential marketing and IT spend. Management's guidance for the next fiscal quarter is as follows: We expect GMV for fiscal Q1 of 2021 to range from $175 million to $195 million; GAAP net income is expected for fiscal year first quarter of 2021 in the range of $2 million to $3 million; with a corresponding GAAP earnings per share for Q1 of 2021 ranging from $0.06 to $0.09 per share. We estimate non-GAAP adjusted EBITDA for Q1 of 2021 to range from $5 million to $6.5 million. Non-GAAP adjusted earnings per share is estimated for Q1 of 2021 in the range of $0.08 to $0.12 per share. This guidance assumes that we have diluted weighted average shares outstanding for the quarter of approximately 34.6 million shares. We will now take your questions.

Thank you. We now begin the question-and-answer session. And our first question is from Gary Prestopino from Barrington.

Hey, good morning, all. A couple of questions here. First of all, Bill, given that we're seeing more and more online shopping, are the online retailers at this point starting to see a greater percentage of returns coming back to them that's coming back to you? At one time, I think, something like the retail returns on e-commerce were about 10%. Is that about right of all shopping? And has that really increased at all?

Gary, number one, we've witnessed an earlier sharper increase in the proportion of retail moving online. The volume of online sales growing as it has will increase the volume of returned goods into our channel. The return rates are higher than 10% in many categories. I don't think any of these online or omnichannel players want to risk losing any sales. They're encouraging clients, customers to spend freely. There are some promotional elements to that. They encourage multiple SKUs of different sizes, if needed, to get to the right product. So we know that return rates are well above 10% in many categories, as high as 30% in some categories. You have a lot of higher value consumer electronics items, where you see sometimes either technical glitches or buyer's remorse and those items going back. Apparel is a huge category of returns. Housewares, even housewares, is a big area of returns. And now we have lots of bulk items being sold digitally, appliances, furniture, and we are uniquely positioned to help in those areas, too, because we have a natural distribution center footprint, which helps these online retailers reduce costs by allowing those consumers to return to our facilities. So without question, we're seeing just this massive secular growth in online retail. Probably various analysts have said, we've gone from roughly mid-teens penetration of total retail online to about 30% penetration of total retail online now in a matter of about nine months.

Yes. That's going to benefit you, certainly. And then can you just talk a little bit about some of these automated asset promotion tools that you're using that help to drive growth in GMV and GovDeals? What does that entail?

Sure. I think that's a broader theme, Gary, certainly not limited to our business and our industry, but we know our marketplace business model benefits from scale, and we drove organically 25% more volume in our e-commerce platform. So that's always going to help a marketplace business model generate operating leverage. When you overlay additionally a more efficient business, driven by technology investment, that's what really becomes compelling. For example, with the investments we've made in our marketing technology stack, we're now understanding what every individual buyer reviews, bids on, and purchases. So we have artificial intelligence and machine-driven automation to present available assets to those buyers dynamically to increase the propensity of them bidding and buying in our marketplace. We know Gary Prestopino, he browsed and bid on pickup trucks, and that's an area that he likes. So the next time you log in, you're going to see a recommendation engine featuring those assets for you as opposed to other buyers. That learning and algorithm strengthen over time and allow us to make better matching available between the supply of assets and the buyers who come to our marketplace.

Do you have a mechanism to send emails to buyers when a specific piece of equipment or category comes up for sale?

Yes, absolutely.

Okay.

We have saved search agents that will automatically send the selected filter or desired assets to individual buyers. We'd also point out that over 50% of our bidding is occurring on mobile devices. And we've invested, over the last few years, in a much stronger mobile responsive design, which is allowing these buyers to have a better experience and encourage more robust activity, including bidding on mobile devices. So all of those things come together to help drive broadly a more efficient business model and higher buyer participation which, as you know, drives higher recovery rates, which allows us to satisfy sellers and do more business.

Okay, thanks. I’ll get back in the queue. Let somebody else go. Thank you.

Hi, good morning, guys. This is Dalton on for Colin. Congrats on the quarter. Just a couple here. First off, looking at guidance for next quarter, with the bulk of the holiday shopping season behind you and given a lot of the commentary we've heard, a lot of shopping, and you said a lot of the returns have really been pulled earlier into the quarter than typical. I guess, my question is, what are really the biggest unknowns as we look through the rest of December? And what really has to change dramatically for things to move one way or another versus where you're looking at them right now a week into December?

Dalton, you correctly noted that this call is happening later in the quarter than usual, which allows us to provide guidance. However, there are uncertainties related to policy decisions affecting the availability of facilities, particularly in our government business and Industrial Capital Assets Group segment. In these areas, full closures have negatively impacted our ability to conduct regular asset pickups after a sale, hindering our ability to book completed GMV and revenue. While these policies have improved significantly in the U.S. over the past six months, Europe still faces considerable closure policies and travel restrictions that are challenging for the Capital Assets Group business right now. In the U.S., some jurisdictions, like California, still have severe operational challenges, even in the government sector. Our guidance reflects the trends we are observing. However, if there were to be a sharp change, we could see disruptions in the government business. We avoid predicting government policies. We remain optimistic about the macro trends, which indicate that clients want more flexibility and efficient operations. In the government sector, counties and cities are experiencing revenue declines of 10% to 20%. They are aiming for greater productivity, looking to monetize unused equipment, and are committed to sustainability. Our business model stands out because it eliminates the need to transport assets to an auction site, allowing government and corporate entities, as well as equipment dealers, to sell items on-site. The asset stays in place while we connect with buyers who pick them up efficiently. This not only reduces the carbon footprint for our clients and buyers but is also increasingly gaining attention. Although we have been doing this for 20 years, we believe customers and institutional shareholders focused on ESG investing are paying more attention to it now. These are the macro trends we are monitoring.

If I could add, this is Jorge. In addition to what Bill has just said, we also, as you saw in my comments, CAG, Capital Assets Group, continues to have an episodic business where you have large deals that come and go from time to time with different customers, and they could be a consignment deal or a purchase deal depending on how the transaction evolves or it could get delayed by a month, which would put it in the next quarter. So we're comfortable with our guidance, but you have to have a range because you can't have things that slip, for example. And that would be another factor as to why this late in the quarter, we still have some, obviously, some range in our business in addition to what Bill has just said.

Great. That helps a lot. And then maybe turning to registered buyer growth. Trends have been looking pretty promising there. I'm pretty clear that you've been able to drive a bit of an increase in bringing more buyers to the platform. But to the extent that translates into growth in auction participants and transaction volume, just wondering is that kind of a mix shift impact there that's driving that delta? Or is that something that you're consciously trying to drive conversion of registered buyers to drive more participants in transaction growth? Or is that just something that's kind of a secondary function of all the other user and interface improvements that you've already been mentioning?

Well, those are two metrics that we've reported for a long time, Dalton. And let me just make sure that we have some clarity on the difference. Our business is always focused on increasing the number of unique participants for every item sold. We've had robust participation, very strong recovery rates, and the quality of the buyers that we're attracting, the quality of the buyers, is increasing. These are buyers who are buying larger ticket items. We're seeing a lot of participation in the transportation and vehicle categories, and the construction and heavy equipment categories. And so the average value per transaction is trending up. And I think that's just a function of the things we talked about. When you look at being an efficient seller and capturing more value for the items sold, you want to remove a lot of these make-ready costs and transportation costs and really get to the highest net recovery possible. And so we've been focused on bringing the right buyers to bear for those higher ticket items. The other thing I would point out is that we've added functionality to benefit the seller so that the sellers can do hybrid sales of items, which include the traditional competitive online auction where the highest bidder wins coupled with a make-offer alternative. So the buyer comes in and wants to preempt the auction and hit the bid and buy it now, they can do that. And so when you have a buy-it-now transaction, there's only one bidder in theory, one bidder for that item recorded in the auction participant number, so that's why that number might be lower than traditionally has been the case.

Right. That makes sense. And then just one more quick one, and then I'll hop back in the queue if I have anything else. But you mentioned the goal of driving $1 billion in GMV. Obviously, that's a long-term plan here. But just kind of wondering, as you look at the opportunity ahead of you, how much of that do you think lies within your existing footprint and existing verticals and is just driven by increased buyer growth and penetration there? Or do you think you need to expand into new marketplaces, new verticals, and just expand the total TAM there in order to reach that sort of scale?

I believe there is a strong market for us in our current areas to reach the $1 billion annualized GMV target. Currently, we are achieving about $200 million in GMV per quarter from the September quarter. Our business experiences various ups and downs and follows seasonal patterns. However, the overall trend shows significant growth in online retail, around 30% to 50% year-over-year during Black Friday and Cyber Monday. We are well-positioned to take advantage of this trend in the retail supply chain, especially considering the changes happening there. We have an excellent distribution center network, a large buyer base, and established sales and merchandising channels to generate impressive results for e-commerce retailers, omnichannel retailers, and their suppliers. There is a clear trend towards digital transformation in supply chains, emphasizing the management and monetization of assets, and we are a recognized leader in this area. As the industrial supply chain adopts sustainability practices, seeking to reuse and redeploy high-value equipment globally, we are ideally positioned to lead this movement. In government, we see a $3 billion total addressable market in the U.S., where we are about 15% to 20% penetrated, benefiting from a strong network effect. We aim to be a best practice, data-driven solution provider for those governments striving for greater efficiency and environmental responsibility. There is significant opportunity in our current core business, and we have noticed that organizations are becoming more inclined to explore digital solutions earlier than expected, as they rethink their operations. The pandemic has highlighted the need for this shift, and when we showcase our digital marketplace and self-service options, customers are unlikely to revert to traditional methods. This represents a substantial opportunity for us.

And we have another question from Gary from Barrington.

Sure. Where do you think the contingent business, which makes up about 82% of your total business, is heading? Do you think that will continue to increase, Bill? Additionally, what influences the choice between going contingent versus purchasing, and self-service versus full-service on the sellers' side?

Sure. Well, we were born as a 100% consignment business 20 years ago. And we always suggested to our clients, it's in their interest to pay us on a revenue share basis because they share in the upside created as we drive higher participation and higher competition. And so we've always had that philosophy. However, we've always provided a menu of options. We don't want to dictate to our clients what they must use. We want to give them the flexibility to migrate between those as they see fit. So the pricing model, consignment versus purchase, has always been available to our clients. We've just noticed that as clients have experienced the marketplace, they have elected to use more of the consignment pricing model recently. We don’t necessarily predict or forecast in the future where that's going to be; we just think there's a broader trend as we have a transparent marketplace, and sellers can see the results they've elected to drive more to the consignment model. They get the upside created when we increase the pricing for these assets. We're still happy to do purchase model if the clients so choose, and we have people that participate in that market. There are reasons that they might do that related to inventory controls or SOX controls. But I think the broader opportunity is to create an incentive-structured model with our sellers to share the upside with them as our marketplace becomes more competitive and robust. In terms of self-service versus full service, again, there's a continuum. Clients that need assistance to catalog and manage sales, we will provide that assistance. Now there is a cost to do that, and that increases the overall fees that they would pay. We've developed outstanding tools to allow sellers to manage the transaction process on their own after an initial orientation, and many of them see the benefits of that. They like to have the control, the ability to set the terms of their sale, load their own equipment. With the data that we can provide through their client portal, they feel very comfortable doing that. And so we see, not just in our industry but across the landscape of B2B solutions, that many corporate and government clients very much like that self-service alternative. And we're providing it, and we think that's a trend that will strengthen over time.

Okay. So if I read it right, you're saying that the self-service is becoming more prevalent overall versus full service. I mean can you kind of break down, if you'd make it public, the percentage of the consignment that is full versus self? Or is that something you don't give out?

Well, it's not a metric that we give out, but we would say it's the majority of our business. And it's one that has natural attraction for corporate and government clients because they're capturing more of the value created in the transaction because they pay a lower fee when it's self-service versus full service. Now again, certain clients are in extremis, that they don't have certain resources or they need certain assistance with logistics or valuation. But we're marshaling our data, we're marshaling our automated marketing tools to deliver that in a self-service package, where sellers can efficiently have a smarter and faster way to list and sell assets, getting great execution on the buyer side. We're there to help them with anything else that would arise during the course of that transaction.

Okay. Good. And then just a couple more, if I may. It looks like, because you didn't provide us with Q4 numbers broken out, but roughly estimated, your operating expenses were around $28 million compared to $33 million last year. In terms of what we're anticipating for this fiscal year, there will obviously be some increase. But is there any significant increase that we're expecting, or will it just move in proportion to what the top line and the GMV growth will be?

We've realized some operating efficiencies as we've finished our integration work. Therefore, we don't anticipate significant growth in areas like technology or ERP integration since that phase is behind us. Instead, we are investing more in our sales and marketing teams to leverage the opportunities available in fiscal '21. We continue to observe macro trends indicating a strong demand for reliable digital solutions for managing and selling equipment and inventory across various major industries, including biopharma and healthcare. This sector saw substantial growth last quarter, driven by a global increase in research and development efforts, partly due to initiatives like Operation Warp Speed aimed at developing vaccines and other treatments. The spending on test and measurement equipment signals a thriving research environment that positively influences our market. Additionally, there are ongoing opportunities in the energy supply chain and continuous technological advancements in automotive and transportation, which result in a significant volume of equipment needing to be sold. We believe that our investments in sales and marketing are justified as we have a tremendous opportunity for growth aligned with these macro trends.

Yes. What I mean is, I could rephrase my question. The Q4 numbers indicate people being brought back from furlough and similar situations. It seems that last year at this time, during your first two quarters, you spent nearly $20 million on sales and marketing. Given those figures, you are still expecting an increase in spending for fiscal '21. I'm just trying to understand how we should view these expenses moving forward.

Yes, I think there'll be some incremental growth in sales and marketing spend.

Can you tell us how the different businesses have evolved over the quarters? It used to be that Q1 was your second strongest quarter, Q2 was your strongest, followed by Q3 and Q4. Has that expectation changed significantly regarding your GMV generation for the year?

I will share some general observations, and Jorge can address any specific questions regarding the guidance. We are providing guidance this quarter because we have considerable information from the three months ending December 31. It's difficult to predict in 2021 whether past patterns will occur again due to numerous external factors. This includes people's willingness to receive a newly developed vaccine and whether policymakers will support that, allowing a return to normal economic activities, easing travel restrictions, and accessing manufacturing and government facilities. This is the main uncertainty we face. Typically, we see a strong recovery period after the holidays. January is usually slow, but activity tends to increase from January through July. Under normal circumstances, those months are strong, followed by a slight slowdown in August. Our aim is to maintain an effective sales and marketing strategy focused on gaining market share that can counteract seasonality in the business. That is our objective.

Okay. Okay. And then lastly, and then I'll jump off. When you talk about this $1 billion of GMV goal, is it reasonable to assume that you could get there in five years?

I would hope so. I would hope so. I think you look at the TAMs and you look at our penetration and the glide path that we're on to have relevant solutions, to be able to make a compelling case for those prospects to come to a digital solution, we feel very good about the value that we're creating for our customers and that being a very solid target for us.

Thank you, ladies and gentlemen, that concludes today's call. Thank you for participating, and you may now disconnect.