Commvault Systems Inc (CVLT) 2021 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Commvault Q4 FY 2021 Earnings Conference Call.

(Operator Instructions)

Please be advised that today's conference is being recorded.

(Operator Instructions)

I would now like to hand the conference over to your speaker today, Mr. Michael Melnyk, Director of Investor Relations. Thank you, please go ahead, sir.

Good morning. And thanks for dialing in this morning to discuss our fourth quarter and fiscal year 2021 earnings results. Before we begin, I'd like to remind everyone that the statements made during this call, including in the question and answer session at the end of the call, may include forward looking statements, including statements regarding financial projections and future performance. All the statements that relate to our beliefs, plans, expectations, or intentions regarding the future are pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 and are based on our current expectations. Actual results may differ materially due to risks and uncertainties such as competitive factors, difficulties, and delays inherent with development, manufacturing, marketing, and sale of software products and related services and general economic conditions. For discussion of these and other risks and uncertainties affecting our business, please see the risk factors contained in our annual report on form 10-K and the most recent quarterly report on form 10-Q and other SEC filings, and the cautionary statement contained in our press release and on our website.

The company undertakes no responsibility to update the information in this conference call under any circumstance.

In addition, the development and timing of a product release, as well as features or functionality, remain at our sole discretion. A press release related to today's announcement was issued over the wire service early this morning, and has also been furnished to the SEC as an 8-K filing. The press release is also available on our investor relations website. On this conference call, we will refer to non-GAAP financial measures, a reconciliation between the non-GAAP and GAAP measures can be found on our website. This conference call is being recorded and a replay is available for the webcast. An archive of today's webcast will be available on our website following the call.

With me on the call this morning are Sanjay Mirchandani, President and Chief Executive Officer of Commvault, and Brian Carolan, Chief Financial Officer of Commvault. Sanjay and Brian will each show opening remarks and commentary before we open the call for Q&A.

Now I'll turn the call over to Sanjay. Sanjay?

Thank you, Mike. Good morning, everyone and thanks for joining us today. I'm pleased to report that Commvault finished Q4 and full year fiscal year '21 on a high note, with record quarterly sales and earnings results. We accomplished this in a year where the pandemic focused customers to adopt solutions that will remain a core part of their IP strategy as they accelerate their migration to the cloud. By nearly all accounts we've performed well. Our portfolio and roadmap are aligned with our customers' highest priorities, our vision is resonating in the marketplace, and our team is focused on our continued execution.

This was evident in our Q4 results. We have software revenue growth of 35% and total revenue growth of 16% year over year. We accelerated our recurring revenue transition as Q4 subscription revenue represented 59% of software revenue and recurring revenue represented 76% of total revenue. We increased our total annual recurring revenue, ARR, by 15% year over year. We saw continued adoption of our cloud offerings and Metallic doubled ARR quarter on quarter again. Our results were led by our largest regions with the Americas posting record software revenue and a better than expected growth drove strong operating leverage with a non-GAAP EBIT margin of 20.3% and record non-GAAP EPS of $0.59.

We outpaced the industry growth rate, gained market share, and solidified our place as a market leader all while weathering the unprecedented macro environment. We could not have accomplished this without our loyal customers and partners and the hard work and dedication of our employees worldwide. I'd like to extend my appreciation to each of them.

I've never been prouder of our achievements or more excited about the opportunities in front of us. Now let's discuss why. As we discussed at our investor event in January, we believe the markets are at a tipping point, no longer are data protection and data management nice to have, they're organizational imperatives. Faced with multi-generational data sprawl, CIOs, and IT professionals are grappling with massive data fragmentation, new security threats, unknown failure points and economic inefficiencies, which are only magnified by exponential data growth. This creates what we call the business integrity gap. Said simply, it is a gap between a company's needs to transform and their ability to actually do it. We saw this coming and built a robust and future proof platform to help our customers close the business integrity gap, accelerate the cloud journeys, and deliver on the digital transformation strategy.

In fact, we estimate that we've now helped customers move over 2 exabytes of data to the cloud, and we expect this acceleration to continue. We're also seeing existing Commvault customers rapidly modernize the data environments by expanding with our newer solutions, including our Metallic SaaS offerings. Long time customer Chart Industries, a leading independent global manufacturer of cryogenic equipment, recently added Metallic to support their growing Office 365 and salesforce.com workloads.

Nathaniel Hauenstein, Chart's Global Infrastructure Manager, said, "Commvault and Metallic together are a trusted partner and their bulletproof solutions mean that we will have the scale, flexibility, and reliability that are critical to our business."

Not only do the customers see the value of our intelligent data services, but the industry has taken notice. CRN recently named us as one of top 20 coolest cloud storage companies. Make no mistake, Commvault is built for the cloud and hybrid cloud environments. As you know, innovation has always been a hallmark of Commvault. Over the past two years, we built our core offering, pricing, and licensing to better align with customer priorities. Our intelligent data services platform it's still for today and for tomorrow. And we conveniently provide these services as software on premises, in the cloud, as a managed service to our partners, or as software as a service. We believe that this creates incredible opportunities for us in meeting customers where they are and taking them to where they want to go.

We're seeing a gradual shift to multi-product deployments and as customers embrace what they're calling "the power of and", which is essentially the ability to easily and simultaneously leverage our on-premise solutions, like HyperScale X or disaster recovery, for the cloud native solution like Metallic. HyperScale, X embodies all things Commvault, giving customers the ultimate in choice and flexibility. It can be deployed in a matter of hours and seamlessly integrates with Metallic cloud storage to provide future-proofed air gap ransomware protection and other cloud extensions.

In Q4, HyperScale X saw increased momentum and new customer wins. Additionally, our standalone Commvault distributed storage offering, formerly known as Hedvig, is also gaining traction in software defined storage and modern container-based environments. Suez Spain, a worldwide leader in driving environmental sustainability, recently chose HyperScale X to protect their company and their customers. As Daniel Pastrana, Suez Spain, noted, "I can't overstate the absolute criticality of data protection and management in our industry. When we assess our options, Commvault came out on top due to scale, simplicity, flexibility, security, and resiliency. We're protecting our customers and our company with Commvault's HyperScale X and are thrilled with our choice."

And last but certainly not least, Metallic, the gold standard in data management as a service, is now available in 24 countries and customers have noticed. We've doubled the number of new Metallic logos, more than half of which were new to Commvault. Partner sourced bookings for Metallic also doubled in the quarter. Enterprise customers now make up over one third of Metallic's base and the Metallic ARR more than doubled and was a significant component of our total company sequential ARR growth. By all accounts, fiscal year '21 was a tremendous inaugural year for Metallic. Our pace of innovation in Metallic across SaaS and hybrid multi cloud, is helping our customers accelerate their cloud transformation. Metallic emerged as a key driver of our land and expand motion. Reps that sell Metallic also sell more Commvault core and customers that buy Metallic, spend more and have a higher retention rate on average.

Looking forward, we plan to accelerate development cycles and add capabilities to this exciting platform. What makes us unique is "the power of and", the ability to leverage on-premise and SaaS with a single user interface.

Changing gears. Throughout this past year, we've seen significant progress in our go to market execution. Our regions are hitting that stride and finding success across industry verticals with customers of all sizes. Our record quarter was fueled by large deal momentum and significant productivity increases. And we also posted strong growth in our velocity business across all three regions. Complementing our sales force is a world-class customer success team that's critical to our retention and expansion efforts. By any measure, the first year of our renewal cycle was a success. We finished the quarter and the full year with a net dollar retention firmly over 110%. Across our install base, we're increasingly selling a suite of intelligent data services that ultimately should drive higher lifetime value. Commvault had a good year. We will continue to work diligently to deliver similar results of fiscal year '22 and beyond. Now, I'd like to turn it over to Brian to discuss the numbers.

Thanks, Sanjay. And good morning, everyone. Hopefully, you had a chance to review our fourth quarter, and full-year results were released early this morning. We once again set numerous records this past quarter and fiscal year 2021 represented a breakout year for Commvault. We're entering FY '22 with wind at our backs, but before I discuss our Q1 '22 outlook, I'll review the results for the quarter and the full year. Fourth quarter total revenue was a record $191 million up 16% year over year. For the full year, total revenue increased 8% to $723 million. Fourth quarter software and products revenue increased 35% year over year to $89.4 million, another quarterly record. For the full year, software and products revenue rose 19% to approximately $327 million. Large deals represented 69% of software revenue in the quarter, compared to 67% a year ago. Revenue from software transactions over $100,000 increased 39% year over year to a quarterly record $62 million. The volume of these transactions increased 30% year over year, and the average deal size was approximately $313,000. We closed multiple seven-figure deals in the quarter led by the Americas.

We also saw continued improvement in deals under $100,000. Revenue from these transactions grew 26% year over year with increases across all three regions. Fiscal fourth quarter services revenue increased approximately 4% year over year to $102 million. Growth was driven primarily by improvements in professional services and Metallic. For the full year, services revenue was flat at approximately $397 million. This is the result of our efforts to strategically transition certain perpetual maintenance customers to subscription licensing arrangements. We believe these conversions benefit us over the longterm because of the associated opportunity to drive higher lifetime value with an active customer. Let me now discuss our accelerated transition to a recurring revenue based model. As a reminder, FY '21 was the first significant year of our subscription renewal cycle, which represented a positive inflection point in our transition. We expect subscription renewals will continue to be a revenue tailwind for the next several years. Fourth quarter subscription software revenue more than doubled year over year and represented 59% of total software revenue. We added over 200 subscription customers in the quarter.

For the full year, subscription revenue increased 70% year over year, and also represented 59% of total software revenue. The subscription net dollar retention rate exceeded 110% for both the quarter and the full year. Total Q4 recurring revenue, which includes subscription software, maintenance support services and SaaS increased approximately 24% year over year to $146 million and represented 76% of total revenue in the quarter. For the full year, recurring revenue grew 17% to $556 million and represented 77% of total revenue. Annual recurring revenue, or ARR, increased 15% year over year to approximately $518 million. During the quarter, Metallic ARR more than doubled sequentially and meaningfully contributed to the sequential increase in consolidated ARR. Now I'll discuss expenses and profitability. In Q4, we reported gross margins of 85%. For the full year, gross margins improved approximately 240 basis points to 85.3%. I'm happy to report, we sold through our remaining hardware inventory in Q4 '21, and we enter FY '22 as a software and services only model. Q4 FY '21 total expenses, including both costs of sales and operating expenses increased 4% year over year to $150 million.

For the full year, total expenses increased 1% to $577 million. Fourth quarter EBIT more than doubled year over year to approximately $39 million representing a margin of 20.3%. For the full year, EBIT grew 57% to $137 million. Full year EBIT margins was 19% representing a 600 basis points year over year improvement. Now I'll discuss cash flows and the balance sheet. For the quarter, we generated approximately $63 million of free cash flow. Q4 free cash flow is favorably impacted by our record Q3 performance, the timing of our bi-weekly US payroll in late December and the receipt of IRS tax refunds associated with the CARES Act. We ended the quarter with $397 million in cash and cash equivalents, and continue to have no debt on the balance sheet. As we mentioned during our January investor event, through FY '22, we're committed to repurchasing stock equal to $200 million plus 75% of annual free cash flow. From our investor event through the end of the quarter, we repurchased approximately 943,000 shares for $62 million.

Now I'll discuss our financial outlook for Q1 FY '22. For the first quarter of FY '22, we expect software and products revenue of approximately $81 million and total revenue of approximately $181 million. As a reminder, in Q1 of fiscal 2021, Commvault closed its largest single deal in company history. Now, let's shift to expenses. We expect Q1 '22 total expenses to be up approximately 7% year over year resulting in EBIT margins of approximately 18% to 19%. Please remember that Q1 FY '21 benefited from numerous one-time temporary expense reductions during the depths of the lockdown, including temporary salary reductions, lower T&E and lower healthcare costs. This creates a more challenging year over year comparison on the expense side. Our projected share count for Q1 is approximately 48 million shares. Given our record Q4 '21 results and our current Q1 '22 outlook, we remain confident that we're on track to deliver against the near term targets that we outlined during the January investor event. Our belief is underpinned by the following. First, we're landing new subscription customers and taking share in the market.

Second, subscription renewals are a tailwind. We estimate the FY '22 software subscription renewal opportunity to be approximately $80 million. This compares to approximately $50 million in FY '21. The opportunity is weighted about 60% towards the back half of the year with Q1 representing approximately $17 million. Third, our retention and expansion motion works. Our subscription net dollar retention rate currently exceeds 110%, and we're seeing existing customers adopt more of our intelligent data services at a faster pace. Finally, the Metallic effect has arrived. It's called "the power of and". On-premise and SaaS is resonating with customers. We expect Metallic to be a meaningful contributor to incremental ARR growth each quarter. While we are pleased with where we are today, we want to remind you that there may be quarterly variability in our results as we progress towards these targets. And while we have made significant progress, we are still in a period of transformation, and there remains work to be done during a period of global uncertainty. Now I'll turn the call back over to Sanjay for some closing remarks. Sanjay?

Thanks, Brian. Fiscal year '21 was a record year, but as Brian noted, we have more to do. At our fiscal year '22 Virtual Company Kickoff a few weeks ago, I updated our employees on how we're approaching the year ahead. I'll briefly share the key themes that we discussed for the year ahead. We will relentlessly innovate, especially around hyper cloud and SaaS data services. We will vigorously build on our leadership position to take share and widen the gap with the rest of the market. We'll continue to improve our end-to-end customer experience, working as one organization with our partners. We will maintain a laser focus on execution excellence, as we look to build on the performance we achieved this past year, and all of this lines up to deliver against the near-term targets that we outlined at the investor event in January. With that, I'd like to thank you for your time today, and we'll now open it up for questions.

(Operator Instructions)

Your first question comes from Jason Ader with William Blair.

Yeah. Thank you. Brian, just quick question on services. I know that you had outlined for the near term kind of a 6% to 7% total revenue growth and software 9% to 10%. That implies pretty low services growth. And just given where you are in Q4 and the momentum you have in Metallic. Is that still reasonable to assume a low single digit growth for services in 2022?

I think it is, Jason. First of all, Good morning. Great to have you here. I think a reasonable services growth rate for FY '22 of low single digits is probably appropriate. Again, we're going through a period of transformation and we've been strategically converting many of our older perpetual maintenance customers to more modern workloads. That could be in the SaaS, it could be converting them to new subscription offerings, and that has a bit of a headwind on services growth in general, but longer term we feel very confident about our near term targets we laid out during the investor event. Metallic is going to be a key part of that growth.

And just to be clear, the term -- the support elements of a term license goes into the services line, correct?

Correct.

Okay. All right. And then for Sanjay, I guess my question is on the data protection market and it does seem like more customers are starting to look at data protection through a data security lens, which is not totally new, but seems like it's ticked up a lot just with the kind of ransomware scourge out there. Can you just talk to that? I don't know if you have any anecdotes, but I'd be interested in hearing about what you're hearing from your sales folks, from customers around data protection being viewed through a somewhat new lens.

Fair question. Just the way we look at it is that protecting against bad actors is part of the construct of how we think about data protection and data management. A while back you would say that's a security plain and this is a data protection plain. Now it's sort of, it morphs a little bit more, it's morphing. And what we do is make sure that we're giving our customers newer tools, newer ways, newer angles by which to stay protected.

So for example, if I've got someone to using HyperScale X, they get automatic, and I call it the easy button, they get an automatic extension into MCSS, Metallic Cloud Storage Service, for an air gaped copy of their data, should they want it. They don't need to be cloud experts. They don't need to have a cloud account. We just take care of it and give them that additional layer of protection. Are you 100% protected always? No. But did we give you -- are we constantly innovating and putting more into the technology so that it's sort of seamless? Yes.

Your next question comes from Aaron Rakers with Wells Fargo.

Yeah. Thanks for taking the question and congratulations on another quarter of really strong results and for the full year. I guess I wanted to ask first on Metallic, you threw out several metrics that were quite impressive, ARR up 2x year -- quarter over quarter. I don't know if I missed it, but did you say how much Metallic is of ARR or how we should think about, be it Metallic, kind of penetrating the existing install base of the Commvault customers, new customers, et cetera. Any kind of additional kind of just color on just the momentum and what you deemed as kind of the era of Metallic now?

Sure, sure. So we're really excited about the progress we're making on Metallic. And in fact this was a product that really came to market at the start of the pandemic about a year ago. And if you recall, we were giving it away to customers and non-customers to try our end point because everyone was working remotely.

The product made some good progress. We've gone from two countries a year, roughly a year ago, to 24 countries. We've gone from three offerings to real multi-cloud hybrid cloud offerings, including Office 365, database, VMs, Kubernetes, containerized apps, on-premise, edge. And we've also tied it back to HyperScale X so that customers don't have to choose. They get both, they get "the power of and" like I was saying, so we've been focused really on making sure that the product capabilities are seamless and are with the workloads customers want.

Now the outcomes of that, and we did not put out the numbers and believe me, we'd love to, but we need a little more time. We've doubled the number of customers. ARR has doubled every quarter since inception. Okay. 50% of our customers, Metallic customers, also have another software solution because they see "the power of and" coming to play. And we've scaled as about a third of our customer plus/minus are in the enterprise. So we're really excited about both the breadth of the appeal on the product and the depth of the capabilities that we've built. And we're not going slow down.

So standby, we will share more over time, but right now we're very please, yes.

Fair enough, Brian, this is a quick other question here is that when I look at their reported results, one of the numbers that really stands out is that your free cash flow, I think it's like 70% higher than the prior peak. I know that deferred revenue's grown quite well over the last two quarters. Is there anything that kind of structurally we think about changing in the free cash flow, or the trajectory of the free cash flow, for the company, because it is quite impressive this last quarter.

Aaron, thanks for the question. I think longer term, you'll see a normalization of that. I think we had a very strong Q4 free cash flow, and it was driven by, as I said, a record Q3 performance. And we did have some one-time items that showed up in there in the form of timing of a payroll and also some IRS tax refund. So we can't count on those repeating every quarter. So longer term I would just say keep mimicking basically our free cash flow follows our EBIT, non-GAAP EBIT performance, and there's a correlation there over time.

Your next question comes from James Fish with Piper Sandler.

Hey Guys. Good morning. Congrats on the quarter. A lot of good things are really going on. I just was curious if you could maybe rank, order, or give us a little bit more color as to how to think about the demand for data management overall versus the federated product portfolio, being able to address any workload in any form factor against kind of the change in the go-to market efforts over the last year that really led to the upside and really the momentum in the businesses. Is there any rank order that you could give there?

James, hi, it's Sanjay. It's you know, so I guess -- I'm going to parse your question out and hopefully I'll cover what you need me to. The first thing is if you look at where we were a year ago to where we are today, data management, data protection are imperatives. Customers are now looking at this as part of a core IT strategy as they transform. So it's not just about moving stuff into the cloud. It's about saying, okay we're helping a customer move the data to the cloud and then help them digitally transform with that. Okay, so that's job one.

The second is, as much as everyone wants to transform, there is what we're addressing as the business integrity gap, which is essentially the chasm between your desire to operate at a certain transform level digitally and your ability. And it's not a lack of trying; it's about being able to get it done. And that's where we come in and we're helping customers with giving them a unified data platform through our intelligent data services, consumed either through SaaS or on-prem or both. And that's sort of a differentiator.

That is what is allowing us to really get out there and do some mission critical work for customers as they move to the cloud. So the scope of work has increased. Now we have also curated our product offerings so that it's easier for customers to consume it and let's say they want DR as a service, if you would. We've seen DR as a capability being consumed by customers. In the last quarter, for example, we saw a good uptick in that. There were, in the case of specialized workloads, like Office 365 or Salesforce, we do that off of our Metallic suite. So that it's all managed through one pane of glass. So I'm not sure if that answered your question directly, but that is the approach we're taking to help our customers through their tough sort of data issues. I'm happy to take a second question if you have it, if I didn't cover everything.

Yeah. We can talk about it offline, but just to follow up on Aaron's question on Metallic, Sanjay, you had mentioned that Metallic, you were kind of giving away to customers during the pandemic to try giving, just being a good vendor and good support overall. Just curious, maybe it's for Brian, I guess. How should we think about the monetization strategy of that over the next year as you shift from free to paid offering?

I'll take that question. So the free offering was for end points. Okay. As customers started working remotely, we gave them the end point capability for a period of time. I think through September. And from that point on, customers can do the basic trial program, but it's our paid service and I think the end point piece was for awhile that gave us great feedback. Customers appreciated it, some converted and we moved forward.

Your next question comes from Jack Andrews with Needham.

Morning. Thanks for taking the question and congratulations on the results. Sanjay and Brian, I was wondering if you could maybe drill down a bit more on what's been driving your very strong large deal performance. Is this happening just organically with customers? Is there a sort of subconscious sales motion changes that you've undertaken to really drive this? Any additional thought, or does this get back to some of the pricing and packaging changes that you've made to make Commvault easier to consume? Any thoughts or more details about what's driving that large deal strength?

Hey Jack, it's Sanjay, how are you? So it's a couple of things. One is, as we shared over the course of last year, we've been very focused on our go-to-market activities, segmented the market in a way that we think we can really get into and help our customers. We've aligned the portfolio and the workloads to match that. And now with the compounding of HyperScale X and Metallic, this gives us the breadth that customers want.

Now, we are appealing to their digital transformation from a data point of view, but not just taking the data to the Cloud, but using the data with the Cloud. And that is appealing. So a lot of our bigger deals, if you would, are more strategic. It's both the journey to the Cloud, with the data and then optimizing and using it.

And our portfolio is completely aligned around it. Like we shared in Jan, when we did the Analyst Day, it's all about aligning our portfolio with the workloads that customers are having the hard data issues. And then I think, and not to geek out on you, but what's really appealing to customers, and if I was a CIO today, it would appeal to me very much, is that I get a single pane of glass for any workload. Whether it originated on-prem, on appliance, in the Cloud, managed service, you get a single pane of glass. So, that is very appealing when skills are a premium. Because especially in the world we live in today where people are working remotely and things have changed at the turn of a head, we are making things easier to do remotely with a single pane of glass, and optimizing on IT professionals that are in the organization becomes paramount. And we've really focused on that.

Appreciate the color around that. Just as a quick follow-up question, you've completed the first year of a subscription renewal cycle, which has been a new motion for Commvault. I was just wondering, when you think about entering, as Brian alluded to, a larger, renewal opportunity here in the new fiscal year, just what are the lessons learned from this? What do you think has gone well and where do you think you can still improve in terms of executing on the subscription renewal opportunity?

Good morning Jack, it's Brian here. So FY '21 was that kind of inaugural year for us in terms of a meaningful subscription cycle, but we got ahead of this. When Sanjay came in a couple of years ago, he saw that the need to build out a customer success function that's really dedicated to paying attention to this group of customers. And it was only going to compound from there and become more of a tailwind for us. And we're really pleased with the results that we had in our first year. This whole land, adopt, expand and renew formula that we have, I think is just starting for us. And we're really starting to hit our stride.

And what is nice to see is that we also have the portfolio that's well aligned for expansion capabilities. So when we go in and have that conversation with those customers, it's not just about the renewal, it's about what else can we do with them? How can we broaden our portfolio footprint and also help them on their journey, wherever that may be to the cloud or to SaaS or to a hybrid-type environment. And what's nice to see is that, as a reminder, what Sanjay mentioned is that it's "the power of and". I mean about 50% of our Metallic customers have another Commvault solution, and it really gives us something to hone in on and talk about during these conversations.

Your next question comes from Jacob Stevens with Lake Street Capital.

Hi, good morning. Thanks for taking my question. So large deal success has kind of been a focus or pretty prominent over the last two quarters. Was that more of a pipeline anomaly or is that the new status quo?

I would say that we're seeing success across the board, Jacob. So yes, we are seeing success in the large deal, execution and pipeline. I think that has to do with a restructured, go-to market infrastructure. We've got a sales force that's hitting it's stride. There's just executional excellence that's happening in that area. But we're also seeing in the sub-$100,000 category, which would be kind of the mid enterprise, we're also seeing success there across all three geographic regions. So that's a credit to our velocity sales, our channel relationships, and again, just better execution all around.

So we like this balanced formula where we can have those large enterprise transactions kind of drive probably 70% of the quarter for us, but we need the stability of also selling into enterprise and also complementing that with Metallic as well, which, spans across all categories.

Great. And so just moving forward into '22 here, where do you see your sales force trending? Do you think you're going to invest more in that, or do you think you might keep it at the level it's at currently? How do you think about that?

By and large, I think we've got what we want from a structural point of view, from a segmentation point of view. There are areas of the world or parts of the segments in some segments where people continue to invest. But by and large, I think we're in a good place. And we're focused on productivity like we saw last quarter and I think we've kicked off the year, we're on our way. So I think we're in a pretty good place, Jacob.

Great. Thank you. And congrats on the quarter.

Thank you.

I'm showing no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.