Good day and welcome to the Progress Software Corporation Q4 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Mike Micciche, Senior Vice President of Investor Relations. Please go ahead, sir. Okay. Thank you, Sherry. It's nice to have you with us again. Good afternoon, everybody, and thanks for joining us for Progress Software's fourth fiscal quarter 2023 financial results conference call. On the line with me this afternoon are Yogesh Gupta, President and CEO; and Anthony Folger, our Chief Financial Officer. Before we get started, let's go over our Safe Harbor statement. During this call, we will discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives, and other information that might be considered forward-looking. Such forward-looking information represents Progress Software's outlook and guidance only as of today and is subject to risks and uncertainties. For a description of the risk factors that may affect our results, please refer to the risk factors in our filings with the Securities and Exchange Commission. Progress Software assumes no obligation to update the forward-looking statements included in this call. And additionally, please note that all the financial figures referenced on this call are non-GAAP measures unless otherwise indicated. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP figures in our financial results press release, which was issued after the market close today and is on our website. This document contains additional information related to our financial results for the fourth quarter of fiscal 2023 and I recommend that you reference it for specific details. We've also prepared a presentation that contains supplemental data for our fourth quarter 2023 results, providing highlights and additional financial metrics. As I mentioned, both the earnings release and the supplemental presentation are available on the Investor Relations section of our website at investors.progress.com. Also, today's conference call will be recorded in its entirety and will be available via replay on the Investor Relations section of our website. So with that out of the way, Yogesh, I will turn it over to you.

Thank you, Mike. Good afternoon, everyone, and thank you for joining our Q4 2023 financial results conference call. Fiscal 2023 was another great year for Progress. I'm extremely proud of everything we accomplished and how all our teams performed. I'll quickly take you through some highlights from the past year and then provide a look at the year to come. The fourth quarter was another strong one, marked by ongoing stable demand for many of our products, especially OpenEdge, DataDirect, and Sitefinity. Top line revenues of $178 million remained robust. ARR grew 17% year-over-year. Our net retention rate was a solid 100% and operating margins were well above our expectations. For the year, we generated over $175 million of adjusted free cash flow on revenue of $698 million and finished the full year with operating margins of 39%. As you recall, we began 2023 with the announcement in January of the MarkLogic acquisition. At that time, we said that the MarkLogic acquisition would add over $100 million in annual revenue and would take about a year to fully integrate. I am delighted to share that virtually every milestone for the MarkLogic integration was completed before the end of fiscal 2023. This faster integration was a direct result of the continuous improvements we have made in our integration processes. As always, we gained new learnings from the MarkLogic acquisition that will help us further improve for the future. For instance, we had to maintain a separate entity to accommodate the unique requirements of the various US federal agencies who are our customers. Now that we have this entity, we see it as a vehicle not only to serve these existing customers, but to expand our relationships by addressing a wider set of their needs through our broader product portfolio. In addition to our M&A efforts in FY 2023, we also executed well on the other two pillars of our total growth strategy, which are sustained innovation and an unrelenting focus on customer success. So turning to product innovation in FY 2023, we added AI capabilities to our products, improved the time to value for our customers, and made our products even easier to adopt. For example, we incorporated generative AI into our Sitefinity product to enable content creators to rapidly scale content production and to improve targeted marketing by personalizing content to suit the needs of various personas. We delivered AI-powered contextual threat event analysis in the latest release of our Flowmon product, which provides our customers with faster, meaningful insights into possible malicious network activity. We launched Chef SaaS, which enables DevOps and SecOps to rapidly realize value, and we've received very positive reactions from our early customers. We launched Loadmaster 360, which provides administrators the ability to manage the performance and availability of their entire environment from a single-user interface. And we released new and updated versions of our DevTools products with a whole host of new capabilities. These include new components for rapidly building embedded, data-driven applications and support for new accessibility standards, among other features. The Sema4 and NoSQL database products we acquired with MarkLogic are leading products for semantic metadata analysis and are making sense of structured and unstructured data. As organizations embrace all kinds of AI, exponentially expanding the sources and scale of data necessary, Progress is now better positioned to help them develop and deploy their mission-critical applications and experiences, as well as effectively manage their data platforms, cloud, and IT infrastructure. In addition to M&A and innovation, the third pillar of our total growth strategy is an unrelenting focus on customer success. In FY 2023, after a couple of years of a slowdown in in-person activities, we hosted numerous live in-person customer events. These included more than 20 local in-region events across the globe for our OpenEdge customers called the OpenEdge World Tour. Over 3,000 attendees joined us to hear what was new in our portfolio and how the OpenEdge platform and the broader product portfolio is continuing to deliver increasing value to help propel the business forward. We also held well-attended conferences for our DevTools and Chef customers, where the Progress end-user community shared innovative ideas and best practices in rapidly developing engaging digital experiences and efficiently scaling DevOps and SecOps efforts across on-prem, hybrid, and multi-cloud environments. In 2023, we also dealt with the sophisticated multi-stage attack on our customers' MOVEit environment by a cybercriminal group. We issued a patch within 48 hours of discovering the zero-day vulnerability in MOVEit and proactively engaged with our customers to help them harden their MOVEit environment. We continue to cooperate with regulatory authorities who are investigating the attack, and we'll provide updates regarding the impact of the MOVEit incident on our business and operations in our upcoming Form 10-K. I want to thank the teams across our business for the amazing way they have come together to help our customers and to continue to move our business forward. Because of our employees' hard work and dedication, our customers have remained incredibly loyal and continue to work closely with us. Our employees are at the center of everything we do. They build our products, sell, service, and support our customers, and run our operations. In 2023, we continued to sustain a thriving employee culture, evidenced by our employee net promoter score, or ENPS, which is in the mid-30s. By the way, this is in the same league as Microsoft and Google. Once again, employee turnover at Progress was at industry lows, hitting mid-single digits in the second half of the year. Our employees are energized by our mission, vision, and values and they continue to share that with the world, helping us win numerous awards for being the best place to work. For example, The Boston Globe again selected Progress as one of the top places to work in Massachusetts, this time for the third year in a row. We ranked number six for 2023, moving up five spots from 2022 and now the highest-ranking software company on the list. I am delighted that we accomplished all this, continued to improve our internal processes and systems to become even more efficient, integrated our largest acquisition to date, and delivered outstanding results for 2023. Now looking forward towards FY 2024, I'm incredibly excited about what lies ahead. We foresee sustainable demand for our products in FY 2024 and it will be the first full fiscal year of revenue contribution from MarkLogic. As Anthony will explain in his guidance, we expect it to propel us to over $725 million in revenue and to also help expand our operating margin. We remain focused on our proven total growth strategy to create shareholder value, the same way we have for the last several years. Our capital allocation policy continues to prioritize M&A because we see it as the best way to generate sustained shareholder return for our investors. We are therefore extremely active in the M&A market. And as we've previously noted, market factors continue to shift in our favor. Competitively and financially, we are as well positioned for M&A as we have ever been and our reputation as an acquirer of choice among the sellers continues to grow. I also want to reiterate that we are unwavering in our strict discipline when it comes to M&A. First, we will continue to pursue companies that are a good fit in terms of technology, size, and culture. We're looking for companies with great products and customers, high recurring revenues, and retention rates. As I like to say, we're not looking for unicorns, we're looking to buy great workforces. Second, we will be extremely disciplined about what we pay for these businesses and how we finance it to ensure that we create meaningful shareholder value. And lastly, as we have repeatedly demonstrated, we will rapidly integrate acquired companies using the knowledge, experience, and best practices we have accumulated and drive higher margins. During the year, we expect to use excess cash flow to repay debt whenever possible and we will continue to repurchase shares to offset dilution from our equity programs under our existing share repurchase authorization. In addition to our efforts around M&A, we will also continue to execute on the other two pillars of our total growth strategy, innovation and customer success. Through investment in innovation and customer success, we will continue to drive strong operating margins, higher ARR, and high retention rates. To conclude, I am extremely pleased with our FY 2023 performance and I'm even more excited about what is to come in FY 2024. With that, I'll turn it over to Anthony to provide additional details around our results and guidance.

Thanks, Yogesh, and good afternoon, everyone. Thanks for joining our call. As Yogesh mentioned, our fourth quarter results were strong across almost every metric, and we're very pleased to deliver such a strong close to fiscal 2023. Diving right into the numbers, I'd like to start with ARR, which we believe provides the best view into our underlying performance. We closed Q4 with ARR of $574 million, which represents approximately 17% growth on a year-over-year basis and 1% pro forma growth on a year-over-year basis. To be clear, the pro forma results include MarkLogic in both periods. The growth in ARR was driven by multiple products including OpenEdge, MarkLogic, Sitefinity, our DevTools products, and MOVEit. And ARR was again bolstered by strong net retention rates of 100%. In addition to the strength in ARR, revenue for the quarter of $178 million was just above the high end of the Q4 guidance range we provided back in September and represents approximately 12% growth on a year-over-year basis. Our strong revenue performance in the quarter was driven by multiple products, led by OpenEdge, which continues to outperform our expectations. For the full year, revenue of $698 million grew by $88 million and represents 14% growth over the prior year. This growth was driven by MarkLogic's topline contribution, combined with growth across multiple other products, most notably OpenEdge, Loadmaster, Sitefinity, MOVEit, and our DevTools products. With customer retention rates remaining strong throughout 2023 and a strong demand environment fueling growth for a number of our products, we're thrilled with our top line results for the year. Turning now to expenses, our total costs and operating expenses were $115 million for the quarter, up 18% over the year-ago quarter and $428 million for the full year, up 16% compared to fiscal 2022. The year-over-year increase in expenses for both the quarter and the full year was driven almost entirely by the addition of MarkLogic to our business. Operating income for the quarter was $63 million for an operating margin of 35%, handily exceeding our internal expectations. The better-than-expected operating performance was the result of over-performing on the top line while managing our expenses to plan. On the bottom line, our earnings per share of $1.02 for the quarter were $0.09 ahead of the high end of our guidance range. This over-performance relative to expectations was again driven by strong top line performance coupled with solid cost management across the business. With virtually all planned synergies achieved on the integration of MarkLogic during fiscal 2023, our Q4 results position us very well for the upcoming year. Moving on to a few balance sheet and cash flow metrics, we ended the quarter with cash, cash equivalents, and short-term investments of $127 million and debt of $731 million for a net debt position of $604 million. This represents net leverage of approximately 2.2 times on a trailing 12-month EBITDA basis. I'd also like to highlight that during the fourth quarter, we again paid down $30 million against the revolving line of credit that we used to partially fund the acquisition of MarkLogic, bringing the outstanding balance on that revolving line of credit to $110 million at the end of the fiscal year. DSO for the quarter was 62 days or flat compared to the year-ago quarter; however, it was well above the 49 days we reported in Q3 of 2023. The reason for this sequential increase in DSO is the timing of our bookings and billings in the quarter with a significant portion coming later in the quarter and pushing the related cash collection into early 2024. Deferred revenue was $295 million at the end of the fourth quarter, up by approximately $15 million on a sequential basis, reflecting our strong top line performance in the fourth quarter. Adjusted free cash flow was $33 million for the quarter, which was slightly less than we expected, but was entirely driven by the timing of billings as I mentioned in my discussion on DSO. During the fourth quarter, we repurchased $4 million of Progress stock, bringing our annual total to $34 million and ending our fiscal year with $194 million remaining under our current share repurchase authorization. Okay. Now, I will turn to the outlook. And when considering our outlook for 2024, it's important to keep in mind the following. First, 2023 was a year of top line growth across many of our product lines. In 2024, we expect the demand environment for our products to remain stable. Next, MarkLogic contributed to our 2023 results for approximately 10 months. However, due to the seasonality in the MarkLogic business, that 10-month contribution represented roughly 70% of MarkLogic's annual topline. In 2024, we expect the incremental contribution from MarkLogic, that 30% we didn't see in 2023 to occur in our first fiscal quarter and to a lesser extent in our second fiscal quarter. Also, MarkLogic's revenue model is comprised mostly of term-based licenses. When combined with some of our other products which employ a similar revenue model, most notably Chef and DataDirect, it's fair to say that approximately one-third of our product revenue will be recognized under an on-prem term-based license model. As a result, the timing of contract renewals, especially multi-year contracts will have a more significant impact on our revenue in any given quarter and could skew results higher or lower. We will therefore continue to focus on ARR as a way to cut through the noise in 2024 and we expect ARR will continue to grow at a level that's generally consistent with 2023. The final point I'd like to highlight is that, absent any acquisitions, we anticipate we'll continue to aggressively repay the revolving line of credit that was used to partially finance the MarkLogic acquisition. And by the end of fiscal 2024, we expect that we will fully repay that revolving line of credit, driving our net leverage ratio down to approximately 1.5 times. With all that said, for the first quarter of 2024, we expect revenue between $180 million and $184 million and earnings per share of between $1.12 and $1.16. For the full year, we expect revenue of between $722 million and $732 million, representing between 3% and 5% growth over 2023. We anticipate an operating margin for the year of 39% to 40%. We are projecting adjusted free cash flow of between $202 million and $212 million and we expect earnings per share to be between $4.58 and $4.68. Our guidance for the full year EPS assumes a tax rate of 20%, the repurchase of $45 million in Progress shares and approximately 45 million shares outstanding. Our share buyback activity in 2024 is meant to address potential dilution from our equity plans. And while we believe that share buybacks and dividends can provide shareholders with a good return, our M&A track record over the past three years has delivered superior returns for our shareholders. And for that reason, disciplined accretive M&A will continue to be the top capital allocation priority of our total growth strategy. In closing, we're excited to deliver strong financial results across the board in the fourth quarter, a continuation of the trend we saw for all of 2023. We're thrilled with the integration of MarkLogic and how it positions us for the future, and we believe we're on track to deliver a great 2024 and beyond. With that, I'd like to open the call for questions.

Thank you. Our first question will come from Pinjalim Bora with JP Morgan. Your line is open.

Great. Hey guys, congrats on the quarter.

Thank you, Pinjalim.

I want to ask you on MarkLogic. Now that you have integrated MarkLogic, what are you hearing from the MarkLogic customer base in terms of innovation that they would like to see? And I know you don't focus on cross-sell as much, but is there any opportunity for cross-sell that you're seeing in that base? And one for Anthony, what is the dollar contribution for MarkLogic for the full year?

I'll start with the first part, and then Anthony can discuss the revenue contribution for FY 2023. Pinjalim, one key takeaway is that the MarkLogic product, along with Semaphore, is fundamentally an underlying database system that requires considerable effort to start realizing its full value. Consequently, the time to value is longer than we would prefer. To address this, we've been working throughout the past year to develop a fast-track option as an add-on to the product, aimed at facilitating the creation of data-driven applications instead of starting from scratch. We're genuinely excited about this innovation. Another area of innovation we've responded to is how customers can utilize MarkLogic and Semaphore to enhance their existing data while ensuring that generative AI outputs, derived from standard tools, are tailored to their specific business needs—without transferring data outside their environments. We've introduced additional offerings to simplify the use of internal data, enabling context-relevant, non-hallucinogenic ChatGPT-type responses. Regarding cross-sell opportunities, as you know, we do not factor that into our business models since our goal is to generate shareholder value independently of cross-sell. However, we do see potential cross-sell opportunities. Our digital experience products can significantly assist MarkLogic customers in better presenting information and developing data-driven applications more efficiently. In fact, our fast-track offering incorporates some of these capabilities. We also identify opportunities for complex, large-scale environments to benefit from DevOps and SecOps functionalities from products like Chef. Additionally, our decision engine, Corticon, can further enhance the business logic needed for MarkLogic data. While there are various possibilities, I want to emphasize that we are just beginning to explore this customer segment and offer these solutions. We've also started to demonstrate the benefits of MarkLogic and Semaphore to our other customers. I believe that 2024 will provide insights into whether these cross-sell opportunities develop into something significant to discuss on future calls. We are still in the early stages of this initiative.

Yes. And to take the second question, Pinjalim, when we acquired MarkLogic, we had mentioned that it was roughly a $100 million business, maybe a little bit more. And we thought they would do probably $70 million for the year in 2023. And the business came in just slightly ahead of that, so just north of $70 million in fiscal 2023 was the number.

Got it. Thank you very much.

Thank you. One moment for our next question. And that will come from the line of Ittai Kidron with Oppenheimer. Your line is open.

Thanks, guys. Maybe I'll start with you, Yogesh. Last earnings call, you sounded very upbeat on the potential for M&A. Sounds like that valuations are finally starting to come in the direction you want them to come. And we're now literally a year since MarkLogic. Maybe you can give us an update on what you see out there and how would you rate the odds of another acquisition in 2024?

Ittai, you're completely correct. We have been very proactive in the M&A area. We are evaluating companies and competing for them. Interestingly, we have turned down many opportunities because we felt they did not meet our standards for solid businesses that we would want to acquire at any cost. Given our current position and observations, I am genuinely confident that we will make an acquisition in FY 2024. It's important to understand that it requires cooperation from both sides, so the sellers need to align with us as well. However, we are optimistic about our pipeline, the level of activity, and the discussions we've had in the latter half of FY 2023, which have been significant and engaging. Therefore, I am assured that we will proceed with something in FY 2024.

On the financial side, you provided an interesting overview of the enhancements made to the portfolio. However, linking this to Anthony's comments about the year, it appears that you are expecting no core growth in the business apart from the added contribution from MarkLogic that was not included in 2023. This suggests that you anticipate zero growth in the core. I'm curious why, despite all the changes in the portfolio, there aren't better opportunities for monetization. Regarding the generative AI enhancements, are none of them expected to generate revenue, or are they solely focused on enhancing user experience? Is there any way to extract more value from these developments?

Yes, Ittai, it's Anthony, and that's a great question. This largely relates to the timing of contract renewals in our business for 2024. We have a significant number of term-based subscription contracts, and the timing of their renewals will affect our revenue on a quarterly basis. I also mentioned that we experienced solid annual recurring revenue growth last year, driven by multiple products. We anticipate a stable demand environment. While there may be some variation from quarter to quarter, over the year, I expect annual recurring revenue growth to remain consistent with what we saw in 2023.

Very good. Thank you. Good luck.

Thank you, Ittai.

Thank you. One moment for our next question. And that will come from the line of Fatima Boolani with Citi. Your line is open.

Good evening, gentlemen. Thank you for taking my questions. Either for Anthony or Yogesh, it was interesting to hear that MOVEit had a strong performance in the quarter. It was enough for you to call it out in your prepared remarks. And appreciating that it was an incident for the business, I'm very curious as to how customers have responded. I mean, it seems almost counterintuitive that it was a contributing factor to some of the strength you saw. So I just wanted to unpack that a little bit because it seems counterintuitive. And then I have a follow-up, please.

So, good to hear from you, Fatima. I'll answer part of it, maybe Anthony can add as well. From my perspective, right, we have actually done everything in our power to help our customers harden their environments, deal with the incident that they faced, and move forward, and we continue to do so. I am really proud of what the team has done, and we're really proud of being able to keep our customers, and the customers have been loyal to us. It's been a really wonderfully positive set of outcomes. Obviously, a huge challenge and still a lot of unresolved legal issues and regulatory issues. But from a customer perspective, we continue to be very positive about MOVEit. Anthony, do you want to add anything?

I agree. MOVEit performed well in the first half of 2023 and continued to do so in the second half. We are monitoring the pipeline to ensure we can keep closing deals. Retention rates have remained fairly strong, but we will evaluate that throughout the year. We want to observe how retention trends develop over time. While it was a very good year and we are pleased with the top line results, we remain cautious. We are focused on understanding our customers' situations, renewal trends, and ensuring we continue to build the pipeline. Overall, it has held up well.

Okay, that's helpful. And since you brought up retention rates, it's a good segue into my question around what you're thinking about net retention rates underneath the hood as you tell us and talk to us about consistent ARR growth trends consistent with this year? And the spirit of the question really is, we did see net retention rate this quarter dip about 100 basis points, so it's not dramatic. I think you've been operating in the 101, 102 zip code pretty consistently. So, maybe to ask the prior question, do we expect some of those innovations in the portfolio pull up the socks so to speak on net retention rate or any other commentary you might be able to share as you think about net retention rate trajectory in 2024?

Yes. Sure, Fatima. I can take that. I think in the back half of 2023, we do have churn from time to time. And I think Yogesh has mentioned this before. Sometimes it's factors that are outside of our control like M&A. And so, I think any slight dip we saw in the back half of the year was associated with a very small number of contracts and one in particular, where there was two global financial institutions merged and the party that was using our technology did not come out on top in the integration. And so sometimes those things happen. And we measure net retention rates on a trailing 12-month basis. So I think as we move through the first half of 2024, we would expect retention rates to be maintained and then start to normalize and improve in the back half of the year again. I think that would be a projection on where the estimate would be there. I don't want to guide to a specific number. We still are happy. 100% or better for us is great. I still think for the full year of 2024, there can be some improvement there.

Perfect, thank you so much.

Thank you. One moment for our next question. And that will come from the line of Brent Thill with Jefferies. Your line is open.

Thanks. Curious if you could just address the demand environment and how you would characterize how customers are feeling today versus six months ago, a year ago, what are you seeing in terms of their overall attitude to spend and how you're feeling about the pipeline?

Brent, we continue to observe stable and ongoing demand, as noted in our prepared remarks. Our product portfolio is increasingly relevant to businesses today compared to a year ago, and even more so than the year before that. As we introduce new products that target additional areas where we can assist, demand remains strong. We are not witnessing any significant shifts in demand, either upward or downward. It's important to clarify that we don't see a sudden change in behavior where people might think there won't be a recession and start spending recklessly. We're not observing that, nor do we expect it. Budgets are still being monitored, and spending remains cautious. However, our product offerings help organizations optimize expenses, enhance operational efficiency, and improve IT and development processes, all contributing positively to their circumstances. Therefore, we anticipate more of the same in 2024 as we did in 2023 at this point.

Regarding M&A, several of your competitors share similar views. I'm interested to know if there are one or two additional points you'd like to mention about what is driving this M&A environment to regain momentum. Is it more reasonable valuations? Or perhaps after such a prolonged stall, there's a natural pent-up demand? What do you believe is influencing the situation now?

I believe it's a combination of factors. For instance, if we take VC-backed companies, their primary objective is often to exit through an IPO. However, looking at the enterprise software IPO exits in the past two years, there have been very few. If you're a VC and your business isn't performing exceptionally well, an IPO isn't likely in 2024. So, what options do you have? With the past two years being challenging for IPOs and 2024 also appearing unpromising, it's uncertain whether even modestly growing businesses will be able to go public. This is prompting both founders and VCs to rethink their strategies as they realize they may not want to fund another round for certain businesses. Those companies looking to raise funds may start seeking market opportunities. Additionally, businesses held by sponsors for a long time are also exploring ways to achieve liquidity. For investors, timing is critical—VCs are focusing on their successful investments without concern for the rest of their portfolio, while sponsors face pressure from limited partners regarding liquidity. These dynamics are influencing the types of businesses we are considering, which tend to be closer to our size—ideally within 15% to 25%—although we are open to slightly smaller or larger ones as well. In that range, there is considerable activity.

I just want to clarify something for Anthony. Your margins over the past four to five years have consistently been in the high 30s to low 40s. Is this still the range you're considering for managing the business? Are you aiming to maintain that high 30s to low 40s as the right framework for the next couple of years, rather than pushing for higher margins at the expense of growth?

Yes, we are looking at a margin range of 39 to 40 for this coming year. We do not anticipate a significant change in the margin profile of the business. We have consistently stated that we will maintain margins better than 35%. Operating in the high 30s is certainly manageable for us and aligns with our strategy.

Great, thank you.

Thank you. One moment for our next question. And that will come from the line of Ray McDonough with Guggenheim. Your line is open.

Great. Thanks for taking the question. Anthony, you mentioned billings timing was more back end loaded this quarter. Has that been a trend or was it driven by a few deals in the quarter? And how do you think about that in 2024 as your business becomes more term-license related and more dependent on renewal timing?

Yes, that's a good question, Ray. I believe it was due to a small number of deals. We often experience variability in deals within any given quarter, especially in Q4. The dynamics in Q4 regarding the timing of bookings and billings tend to differ from other quarters because we have sales incentives focused around that timeframe, and many customers are wrapping up their budgets and negotiations at year-end. Therefore, Q4 is usually more challenging when it comes to accurately forecasting the timing of incoming revenue. We exceeded our expectations on the top line, which we are excited about, although it came in a bit later in the quarter, causing that cash to push into the following year. I also agree that as we head into 2024, more parts of our business are shifting to term-based subscriptions. If more multi-year contracts are involved or if certain contracts’ timing shifts from quarter to quarter, it could affect our revenue. There may be variability from one quarter to the next, but I believe the impact on cash flow will be less significant. We could experience a situation like we had in Q4 with some timing issues, but I see it as primarily affecting revenue rather than cash flow, which will likely be a bit less impacted.

That makes sense. And then maybe another one for Anthony. And Yogesh, if you want to comment, that would be helpful as well. So, as we think about just kind of where interest rates have gone and where most I think are expecting them to go, which is down next year, you talked a little bit about absent an acquisition. You'll get your net leverage down to about 1.5 times. What do you view as an appropriate level of leverage if you do find the right business? And I know it might be deal dependent, but just kind of where are your guardrails in this interest rate environment around leverage?

I believe interest rates significantly influence our model. Our leverage levels act as a limit on our growth speed and scale. At 3.5 times net leverage, we might push slightly beyond that if necessary to finalize a deal. We would feel comfortable at 3.5 or even 4, but I doubt we'd exceed that much. If we were to increase leverage for the right opportunity, as we did with MarkLogic, we would likely start to reduce it quickly after the deal is completed. Reflecting on the MarkLogic transaction, we've managed to decrease our net leverage by more than half a turn this year. We initiated repayment in Q2, having closed the deal in Q1, and we expect to eliminate that revolver by the end of 2024. Should we take on additional debt for our next deal, I anticipate following a similar strategy—leveraging up to around 3.5 times net or slightly more, then aggressively reducing our leverage once the deal is closed and integration begins.

Makes sense. Thanks for taking the questions.

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Yogesh Gupta for any closing remarks.

Well, thank you, everyone, again for joining us. We look forward to talking to you again soon. Have a wonderful evening. Good night.

Thank you all for participating. This concludes today's program. You may now disconnect.