Earnings Call Transcript - OSPN Q3 2022

Operator, Operator

Hello everyone and welcome to the Q3 2022 OneSpan Earnings Conference call. My name is Nadia, and I will be coordinating the call today. I would now hand over to your host, Joe Maxa, Vice President of Investor Relations to begin. Joe, please go ahead.

Joe Maxa, Vice President of Investor Relations

Thank you, operator. Hello everyone, and thank you for joining the OneSpan third quarter 2022 earnings conference call. This call is being webcast and can be accessed on the Investor Relations section of OneSpan's website at investors.OneSpan.com. Joining me on the call today is Matt Moynahan, OneSpan's Chief Executive Officer, and Jorge Martell, who joins as our new Chief Financial Officer in early September. This afternoon after market close, OneSpan issued a press release announcing results for our third quarter 2022. To access a copy of the press release and other investor information, please visit our website. Following our prepared comments today, we will open the call for questions. Please note that statements made during this conference call that relate to future plans, events or performance including the outlook for full year 2022 are forward-looking statements. These statements use words such as believes, anticipates, plans, expects, projects and similar words, and these statements involve risks and uncertainties and are based on current assumptions. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements. I direct your attention to today's press release and the company's Form 10-K and Form 10-Q filings with the U.S. Securities and Exchange Commission for a discussion of such risks and uncertainties. Also note that certain financial measures that may be discussed on this call are expressed on a non-GAAP basis and have been adjusted from a related GAAP financial measure. We have provided an explanation for and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the earnings press release. In addition, please note that the date of this conference call is November 1st, 2022. Any forward-looking statements and related assumptions are made as of this date. Except as required by law, we undertake no obligation to update these statements as a result of new information or future events or for any other reason. I will now turn the call over to Matt.

Matt Moynahan, CEO

Thank you, Joe. Hello everyone. Welcome to our third quarter earnings call. I'm pleased to begin today's call by welcoming Jorge Martell to the OneSpan team as our new Chief Financial Officer. Jorge is a well-rounded and operationally focused CFO with strong experience in global finance. He joined us from Extreme Reach, a global leader in creative logistics with an end-to-end cloud-based technology platform, where he was instrumental in the execution of the company's organic and inorganic global growth strategy. Jorge is another great addition to our transformational leadership team, as we focus our strategic plan to drive increased growth and profitability over the coming years. Now, turning to our third quarter financial highlights. We had a strong quarter overall, including record bookings and digital agreements, driven by several customers committing to longer-term contracts, given the enterprise-class quality of our solution. As a result, total company bookings were at the highest level in eight years. Protecting high-value, high-assurance, B2B, and B2C transactions remains a high priority for our customers, even in a challenging macroeconomic environment. Booking strength was broad-based across North America and most of Europe. Though we did see some pockets in Europe and Asia where sales cycles lengthened. Total revenue in the quarter grew 9% year-over-year to $57 million, notwithstanding approximately $4.5 million of foreign currency headwinds. Adjusted for constant currency, revenue grew 18%. Annual recurring revenue grew 14%. Excluding the FX impact of approximately $3 million, ARR grew 17%, in line with our full year 2022 guidance range. In addition to FX, ARR was impacted by timing of contract renewals and certain customers adjusting their purchase volumes to reflect post-pandemic normalized levels. We were profitable on an adjusted EBITDA basis, which benefited from operating efficiencies and ongoing cost-saving initiatives as compared to prior quarters. Next, I want to briefly discuss two important seven-figure ARR eSignature contract wins during the quarter. Both were competitive enterprise expansion deals with existing digital agreement customers, which resulted in significant increases in ACV, TCV, and contract duration. The first one was with a leader in cloud banking software; this customer increased its contract length with us from one to three years, and its TCV by nearly four times. The second one was with a large insurance and wealth management firm that increased its contract length from three years to five years, and its TCV by nearly three times. Both of these large contracts highlight the strength and reliability of our enterprise-grade eSignature solution and demonstrate the land and expand paradigm we are emphasizing internally. In our security solutions segment, demand for mobile security and server solutions continue to be strong, driven by an ongoing escalation in mobile fraud attacks. Digipass bookings were also strong at their highest level in three years, as customers placed orders earlier than typical to compensate for increased lead times related to electronic component shortages. We are also pleased that our mobile security suite won the 2022 SC Award for Best Mobile Security Solution during the quarter. Now, I'll spend a few minutes on the progress we are making on our strategic transformation plan. As we've mentioned before, a key part of our transformation has been the continual strengthening of our executive leadership team to bring scale experience to the company. I am pleased to tell you that with the recent additions of Jorge, CFO, and Stuti Bhargava as our first Chief Customer Experience Officer, this important milestone is largely complete. I continue to hold the dual role of CEO and Chief Revenue Officer as we transform the company, training and enabling our sales team to sell all of our solutions and add to our talent base. We anticipate filling the Chief Revenue Officer role by the end of the year. Since our Investor Day in mid-May, we increased our direct sales force by approximately 20% and believe we are on track to double the team by the end of 2023. Although the labor market remains challenging, we have found success in highly experienced and highly qualified individuals, many of whom come from cybersecurity and digital agreements companies. I've been meeting with, evaluating, and personally approving every sales candidate we hire, and I can tell you our message is resonating as candidates are universally excited about our market positioning and growth strategy. Not only have we been hard at work ramping our sales and marketing efforts, during Q3, we made solid progress unifying our go-to-market strategy to enable the sales team to sell our entire solution portfolio across our five product pillars: verify, authenticate, interact, transact, and store. Additionally, the realignment and go-to-market focus around our OneSpan 1000 Program, which prioritizes growth at our largest 1,000 enterprise and target accounts, is nearly complete and we launched multiple orchestrated account-based sales and marketing campaigns for both our digital agreements and security solutions segments. As I mentioned in past quarters, new logo acquisition and demand generation continue to be key priorities for the company. We continue to make investments in our sales and marketing engine to increase the pace of new customer acquisition. We also recently launched Virtual Room as part of our plan to provide new innovative solutions to customers, and we'll be launching our next-generation cloud-connected Digipass device in the near future. As a reminder, Virtual Room is a white-labeled solution that enables companies to engage with their customers to provide high-touch digital customer systems, as well as execute agreements and transactions in a secure face-to-face virtual environment. Virtual Room is gaining interest from our target customers to enable secure use cases, like wealth management, private banking, and capital markets. Our go-forward strategy is resonating with customers and employees around the globe. We're adding new enterprise-class solutions to our portfolio, and we're increasing our sales force and expanding our go-to-market capabilities to take advantage of the opportunities we see ahead. Our vision is that the world of digital agreement processes will evolve to require security throughout the entire transaction lifecycle, not just at the point of authentication. This is the basis for our OneSpan transaction cloud platform strategy. We will continue to update you as we introduce new solutions and make progress on our strategic plan. I will now turn the call over to Jorge to take you through our third quarter financials.

Jorge Martell, CFO

Thank you, Matt, and good afternoon, everybody. I'm really excited to be a part of OneSpan and the new management team and look forward to helping drive growth as we implement our strategic plan. I hope to meet all of you face-to-face in the near future. I'm pleased that we reported a strong quarter from our top and bottom-line, largely driven by improved operational discipline and execution in the business. ARR grew 14% year-over-year to $136 million. ARR specifically to subscription contracts grew by 25% to $101 million and accounted for approximately 75% of total ARR. Dollar-based net expansion or DBNE, which we define as a year-over-year growth in ARR from existing customers, was 109%. DBNE was impacted by FX, longer sales cycles in certain international regions, timing related to contract renewals, and some customers right-sizing their volumes to reflect post-pandemic levels. Revenue grew 9% to $57.1 million, led by 25% growth in subscription revenue to $22.3 million and 11% growth in Digipass tokens to $19.8 million. We also experienced a 1% growth in maintenance revenue. These revenue increases were partially offset as a result of our security software license transition from perpetual to term, which is included in professional services and other revenue. Gross margin was 67% compared to the prior quarter and compared to 70% in the third quarter of last year. GAAP operating loss in the third quarter was $5.6 million. GAAP operating expenses included a $3.8 million impairment charge related to our decision to sunset non-core solutions and $2.7 million of non-recurring items related to our restructuring plan. Operating expenses benefited from our cost reduction plans, increased R&D software capitalization costs, and approximately $3 million from changes in FX as compared to last year. Regarding our cost reduction plan, last quarter we mentioned that Phase 1 was substantially complete, with annualized savings of $11.8 million, near the high end of the $10 million to $12 million called for in the plan. We made progress on Phase 2 of the plan during the third quarter. Restructuring charges were approximately $2.7 million and annualized savings increased by $3 million to approximately $9 million in total. As a reminder, Phase 2 of the plan calls for total cash charges related to severance and benefit costs associated with headcount reductions of approximately $10 million to $17 million during the period covering the last three quarters of 2022 for the year ending 2025. It is also expected to result in approximately $20 million to $25 million in annualized cost savings. Q3 adjusted EBITDA was $4.5 million or $2.8 million higher than in the same period last year. Adjusted EBITDA margin was 8% compared to 3% last year. The year-over-year increase in adjusted EBITDA was largely driven by higher revenue, cost reduction initiatives, capitalized software costs, and lower than anticipated headcount additions due to a challenging labor market. GAAP net loss per share was $0.18 in the third quarter of 2022 compared to $0.02 in the third quarter of 2021. Non-GAAP earnings per share in the third quarter of 2022, which excludes long-term incentive compensation, amortization, non-recurring items including the impairment of intangible assets, restructuring charges, and the impact of tax adjustments, was $0.03, consistent with the third quarter of last year. I'll discuss our digital agreements segment quarterly results. Digital agreements ARR grew 20% to $46 million led by 24% growth in subscription ARR to $41 million. Q3 revenue grew 20% to $12.2 million, including 25% growth in subscription revenue to $10.3 million. Similar to last quarter, the vast majority of subscription revenue recognized in the quarter was ratable with the sequential increase influenced by the timing of contract start dates. Gross margin was 80% compared to 72% last year. The higher gross margin was largely a result of increased scale and efficiencies, combined with a one-time credit from a cloud service provider, resulting in approximately a six-point benefit. Operating income in Q3 was $2.2 million compared to $2.1 million last year. The increased revenue and gross margin were the primary drivers of the improved performance. As a reminder, our transformation plan is still in its early stages and we plan to invest for growth in this segment, including the hiring of additional talent to drive topline growth, to increase sales and product development. Turning to our security solution segment quarterly results. ARR grew 11% to $90 million led by 26% growth in subscription ARR to $61 million. Subscription revenue grew 25% to $11.9 million, driven primarily by expansion contracts from existing customers for on-premise, mobile security, and service solutions. Total revenue for this segment grew 7% to $44.9 million, with growth in mobile security, service solutions, and Digipass tokens, partially offset by expected decreases in legacy deal flow and perpetual software-based licenses. We continue to focus on driving subscription revenue growth. We also continue to see a healthy demand for Digipass tokens. Last quarter, we noted that supply chain challenges could impact quarterly Digipass revenue by up to $2 million in the second half of this year. While we continue to manage these challenges, we expect electronic component shortages to delay shipments of certain Digipass SKUs from Q4 to the first half of 2023 in the amount of $4 million to $4.5 million. Security solutions gross margin was 64% compared to 69% in the same period last year. Factors impacting gross margin include an increase in electronic component prices, product mix, and an increase in shipping expenses. Operating income for the segment was $5.7 million and operating margin was 13% compared to $10.7 million and 25% last year. The primary differences from last year can be attributed to lower gross margin and the $3.8 million impairment charge discussed earlier. Turning to our balance sheet, we ended the third quarter of 2022 with $94 million in cash, cash equivalents, and short-term investments compared to $98 million at the end of 2021 and at the end of last quarter. We used $2.4 million of cash in operations during the quarter, primarily related to changes in net working capital and we have no long-term debt. Geographically, our revenue mix by region in the third quarter of 2022 was very consistent with the prior quarter: 45% came from EMEA, 36% from the Americas, and 19% from Asia-Pacific. This compares to 42%, 34%, and 24% from the same regions in the third quarter of last year, respectively. And with that, I'll turn it back to you, Matt.

Matt Moynahan, CEO

Thank you, Jorge. We estimate revenue in the first nine months of 2022 would have been $9 million higher and our revenue growth rate would have been six points higher at 11% had currency exchange rates been constant compared to the year-ago period. Based on current exchange rates, we expect additional FX pressure in the fourth quarter. I also want to point out that we made several important portfolio management decisions recently, in line with our strategic plan to focus our efforts on our most relevant solutions as we enter the first year of our strategic plan beginning January 1st. The sun-setting of certain assets, including deal flow, will contribute to revenue and ARR headwinds over the coming quarters, but also enable us to reallocate resources and focus our efforts on our highest growth opportunities. For the full year 2022, we expect the following: total revenue to meet or exceed full year 2021 revenue despite FX headwinds; ARR to be in the range of 12% to 13%, which is near the bottom of our previous guidance range of 16% to 18%, when excluding an estimated FX impact of 3% to 4% and considering the downstream impact to our business from strategic portfolio changes in the macroeconomic environment; and adjusted EBITDA to be in the range of positive $1 million to $3 million as compared to our prior guidance of negative $5 million to $7 million. In closing, we believe we have momentum in our strategy and our teams as we head into fiscal year 2023. We have been hard at work over the past six months to put in place the foundation of our three-year plan. This plan includes increased revenue, predictability, and a more balanced contribution across product lines, business segments, and geographies over time. I'm proud of our team in the progress we've made today. We look forward to updating you again next quarter. With that, Jorge and I will be happy to take your questions.

Operator, Operator

Thank you. Our first question today goes to Gray Powell of BTIG. Gray, please go ahead, your line is open.

Gray Powell, Analyst

Okay, great. Yes, thanks for taking the questions. I just had a few here. Maybe starting off high level, how do you feel about your pipeline and the visibility you have on demand today versus six months ago?

Matt Moynahan, CEO

Jorge, I'll handle this one. I feel increasingly positive about everything. Can you hear me well?

Gray Powell, Analyst

I can hear you. Yes.

Matt Moynahan, CEO

Okay. All right, thank you. Sorry. I feel increasingly good with the visibility we have in the operational brig taking hold really in every part of our business without stop. Obviously, I had dual visibility as CEO and CRO, and I'm very pleased with the teams and the process behind our ability to gain visibility number one, and then two multi-coated visibility going forward. As you know, the key focus and priority for us has been demand generation, and we continue to focus on that. New logo acquisition is one of our top priorities, which in turn drives new pipeline. Our execution on existing customers has been improving, and you do see an increasing portion of our pipeline coming from installed base customers as our sales team is unified now and has the ability to sell the entire portfolio. That said, getting the flywheel spinning on the new logo acquisition obviously will take multiple quarters to get that right.

Gray Powell, Analyst

Okay, that's helpful. We're still working on some elements of the model. I hope this question is alright, but could you help me understand that while you had a significant revenue beat, it appears that ARR was somewhat underwhelming, and there's a guidance decrease even when considering constant currency. Can you clarify these aspects? Was there additional term license revenue or extended contract durations? How should we view the sustainability of the revenue increases you reported in Q3, considering that the overall numbers look quite good?

Matt Moynahan, CEO

Yes, I can provide a high-level overview. In terms of revenue, we have contributions from on-premise, subscription software, and revenue recognition related to those, as well as our perpetual hardware business. Despite facing supply chain challenges, we are experiencing strong demand for our hardware products, which helps buffer our revenue. However, revenue can vary widely due to the nature of our business. Annual Recurring Revenue (ARR) was affected by a couple of known lost contracts during Q3, leading to a slight decline. We also saw some customer churn in our SMB segment as we shift towards enterprise, which contributed to this dip. Additionally, there was a minor impact on our ability to cross-sell due to discontinued products, and the decisions we've made regarding our product portfolio over the last few quarters have also affected ARR, limiting our opportunities for cross-selling and upselling. These factors are the main reasons for the discrepancy in ARR performance.

Gray Powell, Analyst

Understood. Okay. Thank you very much.

Matt Moynahan, CEO

Thank you.

Operator, Operator

Thank you. And our next question goes to Anja Soderstrom of Sidoti. Anja, please go ahead, your line is open.

Anja Soderstrom, Analyst

Hi. Yes, thank you for taking my questions, and congratulations on the good progress you appear to be making. You're mentioning that sale cycles are getting a little bit longer in some regions. Can you just elaborate on that what you're seeing there? And sort of if you think that's going to be affecting other regions as well as we go forward?

Matt Moynahan, CEO

Sure. At a high level, I would say that the lengthening sales cycles are more related to the digital agreements side than to the security software side. We are experiencing strong demand for tokens but are facing challenges in meeting that demand due to supply chain constraints. The security software products are performing well, as they are closely linked to online banking and the authentication and identity verification processes for users. This is a positive aspect for us. The digital agreement business encompasses both internal use cases, such as NDAs and internal documentation and business processes, as well as external use cases that involve customer engagements, like mortgage lending refinances. We also benefit from healthy integration into platforms through our private label capability. Occasionally, we observe lengthened sales cycles for internal projects, driven by CIOs prioritizing their focus in response to the macroeconomic environment. For external customer-facing use cases, we have noticed a decline in transaction volumes, which could affect larger upsells or purchases during renewals or midyear contract expansions. In summary, there is a contrast between internal projects, which are impacted by reduced corporate priorities amid economic challenges, and external use cases tied to transactions like mortgages and refinances. This has created some hesitation among our customers, particularly in areas related to mortgages and insurance.

Anja Soderstrom, Analyst

Okay, thank you. And then in terms of them expanding yourself to move in home pretty aggressively, can you talk to how fast do you think they're going to become productive? How long is that training cycle for new reps?

Matt Moynahan, CEO

Yes, that is a great question and something we're hard at work at, which is global enablement. We enabled North America in Q2. I was over in Europe personally for the European enablement session. And we'll do a pack in Q4. We have our sales kickoff with a high percentage of content and enablement in January. So, this is an ongoing process. We are tracking to plan a slightly behind hiring on the Salesforce, but we believe we're tracking to plan to double the salesforce by the end of next year. And so as we discussed when we rolled out the plan in May, the three significant variables for us to drive over performance in the plan are getting the sales team productive, time to rent, the quota attainment, the quota levels themselves, and deal size. I feel good with the enablement offers that have been taking place, though we have to go see those sellers in action as we enter into FY 2023. It's all very new right now, but I feel comfortable with the rate and pace of the enablement; and now we need our top sellers to go out there and do a great job for us.

Anja Soderstrom, Analyst

What is your churn rate and how has it changed in recent months?

Matt Moynahan, CEO

We encountered a couple of known contracts that resulted in churn this quarter. This was one factor that contributed to the reduction in ARR. We are relatively new to the small and medium-sized business space in terms of cloud infrastructure and did see some churn in that segment, which has historically focused more on enterprise. This contributed to another decrease in the SMB area. There were no long-term issues, but we did experience those two isolated situations in Q3. However, there is no significant trend or change in the overall trend line.

Anja Soderstrom, Analyst

Okay. And just one last question. What is driving the increase in the adjusted EBITDA guidance compared to the previous guidance?

Jorge Martell, CFO

I can take this one. Yes, I can tell you what, I got this. Can you hear me okay?

Anja Soderstrom, Analyst

Yes.

Matt Moynahan, CEO

Yes.

Jorge Martell, CFO

I think there are a couple of factors here. One is our financial discipline that we've been implementing over the past few months, which has clearly affected our cost structure, particularly in how we capitalize software expenses. The other factor is related to headcount, as the restructuring initiatives we've discussed are starting to show their benefits sequentially. Additionally, there's potential for growth with late hires in specific departments. Those are the three main points I can address.

Anja Soderstrom, Analyst

Okay, thank you. That was all for me.

Jorge Martell, CFO

Thank you.

Operator, Operator

Thank you. And the next question goes to Rudy Kessinger of D. A. Davidson. Rudy, please go ahead, your line is open.

Rudy Kessinger, Analyst

Hey, thanks for taking my questions. I want to go back to Gray's question first, just on the revenue upside in the quarter. Is there any finer point you can put on the term licensed mix in the quarter where either there's two large eSignature renewals that you caught out term license, it's just still a tough model to grasp with subscription and digital agreements up 18%, quarter-over-quarter in the maintenance and support was up sequentially too? So, how much of that was driven by license?

Matt Moynahan, CEO

Yes, we had a couple of significant contracts that closed at the end of Q2. And as Rudy, the way that subscription models flow, they didn't really have much of an impact in Q2. So that's another element where we had two contracts close at the end of Q2, that manifested themselves in Q3, from a top-line perspective, but there's no major departures other than the only comment I can really make is that we will experience lumpiness from time to time, given the product mix that we have at the moment, which still has a heavy on-premise component on the security software side. And on the digital agreement side, we still have that large deal phenomenon has given it to the enterprise where they have an over-weighted impact on any given quarter. And I don't anticipate that that changes over the next two to three quarters until we get the flywheel spinning on the new logo acquisition.

Rudy Kessinger, Analyst

Okay, and then on the dollar base, net expansion rate, 109%, down seven points from 116%. last quarter. Going by the definition of that figure, gross churn shouldn't be impacting that number. So, a seven-point decline, quarter over quarter again, is there just any finer points you could put on why such a pretty significant drop off in that metric?

Matt Moynahan, CEO

Do you want to take that, Jorge? Let me address one of the dampers I mentioned earlier, Rudy, which is related to some of the decisions made in portfolio management. We did discontinue deal flow, risk analytics, and the on-premise version of our digital agreements. All three of those products had associated pipeline, although minor in the larger context, amounting to single-digit to mid-single-digit millions. Naturally, when customers learn about such decisions, it can influence their purchasing choices, leading many conversations to shift towards other products. However, those alternative products are not as widely available for cross-selling into our installed base, which has a higher proportion of banking customers at this time. This was one of the key reasons for the decline in investment quarter over quarter.

Rudy Kessinger, Analyst

Okay. And then just lastly, for me, it looks like you didn't buy back any stock in the quarter after you spent $5.7 million buying back stock in Q2, just wondering the thought process behind that decision, especially if you consider where the stock was trading down in the $8 to $9 range in September, why not buy back in the stock in the quarter?

Matt Moynahan, CEO

Yes, at a high level, we continue to evaluate that. And obviously, we do believe the stock is at an attractive level. We took a pause as we put a fine point, obviously, as you know, we rolled out the new strategy to the investment community in May and had been very hard at work, building out a corporate development strategy to support that, including M&A. And we thought it was prudent to take a pause to make sure that we had all of our corporate allocation sources and uses aligned before going further on that. But until then we do believe the stock is a very attractive valuation. And there's always an opportunity for us to re-enter the market at current levels. That's a continuous discussion with the Board.

Rudy Kessinger, Analyst

Got it, that's it for me. Thanks for taking the questions.

Matt Moynahan, CEO

Thank you, Rudy.

Operator, Operator

Thank you. Our next question goes to Nick Mattiacci of Craig-Hallum. Nick, please go ahead, your line is open.

Nick Mattiacci, Analyst

Hi, this is Nick on for Chad Bennett. Thanks for taking our questions. So, as we think about the three-year CAGR targets given in May, I guess, given how much has changed in the macro and with FX and now the updated ARR guidance for this year, are you thinking about the linearity of that three-year targeted CAGR any differently?

Matt Moynahan, CEO

At the moment, we are not. The big factor here, given our size is really the ramping up the sales and marketing efforts in their front end engine. I do feel very good about the enterprise-class nature of our products and when we do land enterprise customers, they behave like enterprises would, both in terms of deal size and contract length. And so right now, no changes to our guidance; I feel very comfortable with where we're at. But obviously, the first half of next year is incredibly important for us to see the productivity of our selling community and the deal sizes as we reorder oriented company to the upper half of the pyramid. So, no change to guidance right now.

Nick Mattiacci, Analyst

Got it. And then maybe if you could expand more, on the upcoming launch of the cloud-connected Digipass, I guess more color you could give on that offering. And if that may change the revenue recognition of hardware sales or add a recurring component to that business?

Matt Moynahan, CEO

It will be launched with a ratable recognition model associated with it. When we launch the cloud-connected device, it will be purely recurring revenue. In the traditional sense, it's a service rather than a piece of hardware. I'm very eager to introduce this device to the market. Historically, hardware was sold through a separate sales team and motion to part of our installed base. With a unified go-to-market strategy, we intend to connect this cloud-connected device with everything. We firmly believe that high-assurance security for transactions requiring it, whether for documents or banking transactions, can leverage this capability. This includes the digital agreements process, the Virtual Room product we recently relaunched, and our traditional banking core. We plan to make an announcement soon regarding this product, and considering the supply chain aspects and the uptake, it will be a multi-quarter journey as we engage our sellers with this new business model, which has received a favorable response from our installed base customers. However, we haven't discussed it in much more detail, and we don’t provide product line guidance on this. I'm happy to discuss some dynamics offline, but you can expect more information coming soon.

Nick Mattiacci, Analyst

Thanks for taking the questions.

Matt Moynahan, CEO

Thank you.

Operator, Operator

I'd like to thank everyone for joining for this call. We appreciate you going along on this journey with us and we look forward to updating you again in one quarter's time. Thank you for your time today. Thank you. This concludes today's call. Thank you all for joining. You may now disconnect your lines.