Core AI Holdings Inc (SYTA) 2022 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Siyata Mobile Q3 conference call. (Operator Instructions) This call is being recorded on Friday, November 11, 2022.

I would now like to turn the conference over to Daniel Kim, Vice President of Corporate Development. Please go ahead.

Thank you for joining the Siyata Mobile third-quarter 2022 conference call. Today, I'm joined by our CEO, Marc Seelenfreund; and our VP of International Sales. Glenn Kennedy. We will all be available for questions at the end of the presentation.

During the course of this call, management may make, express, and imply forward-looking statements within the Private Securities Litigation Reform Act of 1995 and other US federal securities laws.

These forward-looking statements include, but are not limited to, those statements regarding future product offerings, the belief that we are on the path for strong organic growth, the goal to deliver strong year-over-year revenue growth and reach profitability in the coming quarters, the belief that the worst of the pandemic is behind us, and that we will continue to see strong sales in all of our product lines and across our various markets and the timing and sale of our rugged handsets in North American and international carriers.

Such forward-looking statements are based on the company's current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are not statements of historical fact and are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict.

The company's actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. The company cannot guarantee future results, levels of activity, performance, or achievements.

The forward-looking statements contained in this presentation are subject to other risks and uncertainties, including those discussed in the Risk Factors section and elsewhere in the company's annual report on Form 20-F for the year ended December 31, 2021, filed with the Securities and Exchange Commission.

Now I'd like to turn the call over to Marc.

Thank you, Daniel. Good morning and thank you for joining the call. We are very pleased to report strong year-over-year and sequential top-line growth and declining losses for the third quarter of 2022.

This improved fundamental performance was driven primarily by a number of customer trials of our SD7 rugged push-to-talk handset device, which began shipping in Q2 2022, many of which then converted into purchase orders with volumes in Q3 that increased over Q2. We hope to deliver continued sales growth from this current quarter, Q4, and onwards.

Now I will discuss our financial results for the third quarter ended September 30, 2022. Then I'll conclude my remarks with our outlook. Revenues for the three months ended September 30, 2022, were $2.6 million compared to $1.2 million for the three months ended September 30, 2021.

This positive variance of $1.3 million or 111% was due mainly to the new revenue source earned from the SD7 and its related accessories in the quarter of $1.4 million, an increase in revenues from legacy rugged devices offset by a decrease in sales of cellular boosters in the period.

Gross profit for the three months ended September 30, 2022, was $860,000 or 33% of sales compared to $440,000 or 35% of sales in the same period in 2021, a positive variance to gross profit of $430,000. This positive gross profit variance in the quarter was due to the additional sales in the period of SD7 and its related accessories, offset by the decreased sales of higher-margin boosters.

Adjusted EBITDA was negative $1.6 million versus negative $4.9 million in the same period in the prior year, a positive variance of $3.3 million. This positive variance was due to increased revenue, increased gross profit, and a decrease in operating expenses.

Turning over to significant business highlights, we are pleased to report that Siyata has delivered on its plan to build and extend potential customers for the SD7.

We have previously announced the SD7 is certified and approved for use with many North American carrier customers, including FirstNet and AT&T, Verizon Communications, UScellular; and international channel customers, including Logic Wireless Europe, a leading distributor of business-critical communications solutions across the United Kingdom, Australia, New Zealand, and the Pacific Islands; and TASSTA, a global mission-critical push-to-talk software provider; and ESChat, a leading US-based push-to-talk software provider.

This foundation of increased distribution is directly leading to many potential significant volume opportunities, of which we have begun shipping products in an increasing number of verticals beyond our primary focus on first responders, including government, schools, utilities, security companies, defense contractors, amusement parks, and hotel resorts to name but a few.

I'm pleased to report that the increase in number and size of our aforementioned customer base translated into our much-anticipated volume growth for our SD7, which was the primary growth driver of our rugged devices and related accessories, which increased 588% year over year to $1.9 million in the third quarter.

Having said that, let me be clear that this is a process. Interest is very strong, and demand is growing, but we believe that we are just hitting the tip of the iceberg in a multibillion-dollar industry, and larger volumes should follow as end customers grow to appreciate our unique offering of this new product category.

Subsequent to the end of the third quarter, we announced that we successfully closed a registered direct offering with certain institutional investors to purchase approximately $4 million of our common shares or pre-funded warrants and move thereof, together with concurrent and private-placed warrants, to purchase our common shares.

The combined effect of purchase price for one common share or one pre-funded warrant in the privately placed warrants was $0.23. We also announced an exciting new product, the SD7+, which features a wide-angle camera coupled with 4G connectivity that will have traditional body camera functionality as well as real-time situational and digital tracking capabilities.

The SD7+ will be powered by Visual Labs' innovative body camera software. Visual Labs is a highly respected software company and developer of Android-based body cam and dash cams software. The company provides its software to public safety, private security, and other customers throughout the United States and internationally.

Its public safety customers include town marshals, city police departments, county sheriff's offices, wildlife, and state agencies and federal customers.

And finally, we recently announced the addition of telecom industry veteran Dan Leech to our sales team. Dan brings more than a decade of senior sales experience to his role at Siyata.

Most recently, Dan served as a Senior Account Manager for Motorola Solutions, the global leader of public safety and enterprise security solutions. Previously, Dan was in senior sales roles at FirstNet as well as the Kyocera Corporation and Sonim Technologies.

Now I would like to pass the line back to Daniel, who will discuss some of the industry trends and market dynamics that are benefiting our business.

Thank you, Marc. North American wireless carriers have recently delivered mixed results with some carriers beating on sales and earnings and raising profit forecast to other carriers with in-line or better-than-forecast postpaid net additions, while other carriers shifted to cost cutting to address rising corporate costs and rising interest rates.

Importantly, in October, FirstNet announced it supports more than 4 million connections to more than 23,000 public safety agencies, a gain of about 1,200 agencies from the 21,800 agencies cited in the second quarter. During the third quarter, FirstNet added 334,000 connections, which represented a significant portion of AT&T's 708,000 postpaid net wireless phone additions.

To put these numbers into perspective, AT&T gained more than 2.2 million postpaid phone net additions through the first nine months of 2022. And FirstNet appears to have played a significant role in this with about 1 million connections being added for the same time period, reaching, as we said, 4 million connections in the third quarter after topping 3 million at the end of 2021, 2 million in early 2021, and 1 million in 2019.

With that, I'd like to pass the line back to Glenn.

Thank you, Daniel. Looking at our sales funnel, we continue to see strong opportunities in each of our three product categories.

First, in our rugged handset product category, we have increased our shipments of the SD7 PTT handset that supports mission-critical push-to-talk or MCPTT to North American wireless carriers. And we displayed this handset at several trade shows during and after the quarter, including just three weeks ago at the International Association of Chiefs of Police or the IACP show in Dallas, Texas.

The initial sales, the quantity of new customer trials, the customer feedback at the trade shows, and direct engagement from senior personnel within the wireless carriers have all been very strong as these wireless carriers aim to capture new customers who have been using traditional LMR or two-way radios. We're also seeing strong customer interest in our VK7 vehicle kit that works with our SD7 PTT handset.

Today, we're active with AT&T, FirstNet, Verizon, and UScellular in North America. And our objective remains to extend our launch with additional North America and international carriers and with additional PTT application companies later this year. As a result of all SD7 market activity, we are confident that this will translate into multiple thousands of SD7 handsets sold throughout the balance of 2022.

Secondly, in our in-vehicle devices category, we continue to sell through our UV350 in-vehicle device with customers in North America and internationally. Just after the quarter, we have shipped UV350s into an existing large wireless carrier customer in the Middle East, which launched and ordered this device initially two years ago and has continued to order additional UV350 devices for its first responder customer vehicles.

And thirdly, in our cellular booster product category, we saw continued demand for cellular boosters. During Q3, we sold boosters through a federal contractor into the US Navy to support one of their bases in the US. We believe that more business with the US military in the future will come as a result of this deployment.

And I will now hand the line back to Marc for closing remarks.

Thanks, Glenn. I would like to take this opportunity to thank our employees for their commitment. They've worked tirelessly to build the company we have today. I would also like to acknowledge and thank our investors, who stood by our company despite the turbulent environment.

Overall, we are very pleased with the growing acceptance by our customers of our truly unique, disruptive push-to-talk solutions. And we expect, based on what we are seeing today, growth in our various product categories with especially strong growth coming from our rugged handset product category.

We are just beginning to see the rapid adoption of our disruptive solutions, and as a displacement of land mobile radio by push-to-talk over cellular continues to progress, this should drive meaningful growth for our innovative products.

We stand by our previously stated goals of new customer wins, new and existing carrier launches, a continuous upgrade our product portfolio, and ultimately, strong organic growth with the goal to profitability.

We will file our third-quarter financial results with the SEC on a Form 6-K and urge all listeners to access them from the SEC's website, search for Siyata Mobile. That concludes our formal remarks. With that, operator, kindly open the call to questions. Thank you.

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Jack Vander Aarde, Maxim Group.

Okay, great. Thank you. Good morning, guys. I appreciate the update, and congrats on the solid growth acceleration. Really great to see things ramping up. Okay, so thank you my questions as well. So Marc, I'll just jump in on that question with the SD7 and the revenue opportunity.

So -- and then I also know separately, there's the SD7+ now as well with the body cam, which is -- which sounds like a pretty innovative and another great addition to the product line. So as we look at this quarter, and then we look at the fourth quarter coming up, can you just describe again and walk us through the tangible evidence you're seeing with the SD7?

You mentioned a lot of the volume upticks in the potential with some of the large carrier partners. Can you just help us understand just what were the unit sales are just roughly in this third quarter? Where are they headed for the fourth quarter? And then, as you look at next year, do you see a hockey stick inflection point? Thank you.

Thank you very much, Jack. So we see a lot of very, very large-scale opportunities. And when I say large-scale opportunities, that's thousands of units, it's not it's not hundreds of units. The ASP for the SD7 is around $300. That's about what we are selling it for. So every 1,000 units is $300,000. And we get all kinds of orders. We're getting orders now literally on a daily basis for many different types of customers.

And as we had mentioned on the conference call, it's coming from first responders and hospitality and casinos and hospitals and a defense contractor. Literally, this device is not limited to any specific entity. It can go to both the first responders and other enterprise customers. And through the carriers that we're working with, we're seeing very, very -- a lot of interest and very promising numbers that came in in this past quarter.

And if you ask, I want to say that we sold between 4,000 to 5,000 units in this past quarter. I don't know the exact number, but it's around that number. And I think that we can continue to sell thousands of units and move up to 10,000 units or more per quarter. That is our goal. It's to get to at least 10,000 units per quarter so that we're selling, on an annual basis, tens of thousands of units. That's the goal of the company.

And the market is not limited. In other words, it's not that there is a glass ceiling that you can only sell 50,000 units [in that kit], absolutely not. We could sell 200,000 units a year, and we would just be scratching the surface because this is a potential of millions of units that can be sold.

There are millions of land mobile radios that are out there. And we're working with the cellular carriers to displace those land mobile radios with these devices. And therefore, we think that the opportunity is tremendous, and the upside is tremendous, and we're pushing very hard.

That's also the reason that we recently hired Dan Leech. He comes from Motorola. They're the global land mobile radio provider. They sell more radio than any other company. It's a $40 billion company, and we think that it will be a very good addition to our sales team.

Again, we're leveraging the cell operators to be able to get to the end customers. If we were to try to go to a hospital and sell direct, the hospital would not buy from us because we're a small company. They've never heard of us. But when FirstNet comes to them or Verizon comes to them or UScellular comes to them, then they know that they're going to be working with the cellular provider that they that they trust.

It's being put on their bill. In any event, it's partially subsidized sometimes by the carrier. So in that sense, it makes much more sense. It's a much easier sale for us to get out to all these various customers.

One more thing I just want to I just want to add, I think that one of the largest verticals for us is going to be the schools, the education market. And we recently put out a press release about a company that we're working with, CrisisGo. And CrisisGo makes very, very innovative SOS functionality for this type of a device, for the SD7.

And as there are millions of teachers in the United States, there's over 100,000 schools in the United States, we think that that's going to be a great market for us. We are already selling to multiple schools already. In this quarter, [we sold to schools], and in the coming quarter, we expect to sell to schools, and we think that that's going to be a great opportunity for us.

Because just think about it, if there's a storm or some kind of an incident in the school, now the teacher can also push the SOS button and inform whoever she has to inform that there's a problem, and she can also speak to staff, to the principal, or to first responders, and they're all on one network.

So we think that this is an ideal solution together with CrisisGo. We think that it's a home run, and it's something that we're very focused on. And we think that that's going to be a very nice vertical for us. But again, that's just one of many verticals that we're going after. We just think that that's going to be a very large-scale vertical for us.

Great. Marc, a lot of fantastic color there. I appreciate that. And I'll follow up with one on the -- just for comparison and context, more so. How does the SD7+, which has yet to contribute to revenue, right, just to be clear. I think that's going to be on track for fourth quarter or first quarter of next year for -- in terms of revenue generation.

But how does the SD7+ compare to the SD7 in terms of ASP cost, the overall revenue opportunity? And then maybe just -- can you touch on the recurring revenue aspect or opportunity of your business? Thanks.

Okay, great question. We expect to fully commercialize on the SD7+ somewhere between Q1 and Q2, so it's still a little ways off. But the main difference between the devices is that it has a wide-angle camera, which is run by a separate chipset within the device. And that wide-angle camera allows you to do exactly what police security companies are doing with body cameras.

Just to give you an idea of the size, the body camera market, just in the United States, is around 500,000 units a year. It's controlled by two very large companies: one is Motorola, as we mentioned before; the other one is a company called Axon.

Axon are the guys that made the Taser device. You can see Axon is -- they're extremely profitable. They sell their package of a Taser device and a body camera together for $250 a month, okay, which is not cheap. But that's one of their best-selling packages.

And we think that we have a real shock to come into the market as a newcomer, again, together with the cellular carriers. We're not like Axon or like Motorola that sells to the end customer. We're going to be doing this together in partnership with cellular carriers selling our product. The ASP on that product is higher than the SD7 because there's more features to this device. It's about $150 more expensive than the SD7.

And what is very interesting about this is that we're partnering with companies like Visual Labs, who make body camera software, and we're going to be getting recurring revenue from that. So we're not going to be selling just hardware. We also expect to get recurring revenue from sales of the device with the software.

And in general, you should know, Jack, that we're now working with software companies like CrisisGo, like Visual Labs, and other companies that we're in discussions with that would like to be part of the offering of SD7.

And if they want that, then we have to also get part of the recurring revenue because we believe that that's very important for the growth of the company. And I would love to have recurring revenues that when we wake up in the morning, you know that we're getting recurring revenue that is not just a hardware sale because that's very important.

In the same way that Axon sells their body camera with the recurring revenue piece, the same way that Motorola sells the body camera with a recurring revenue piece, we're doing the same thing. And I think that that's going to be very good for the company going forward.

Excellent. I appreciate the color there. And then another category because it's higher margin for you guys. I wanted to just touch on the cellular boosters. What's really interesting that stands out to me is it seems like you got in -- you got a contract win with the federal government or with the US Navy at least. And I think that deployment was expected to lead to additional sales with the US military.

The US military could be a very -- it's great customer to have if you can get in. So can you just talk about how is your -- what is that opportunity like for, I guess, is it just boosters? What do you think, expectations wise, in terms of the revenue opportunity within the military or whatever you're able to provide? It just seems like that could be a big driver. And obviously, boosters are also a higher margin product for you.

Yes, so we love our booster products. But for these types of situations, they're long term. In other words, to get into the military, it took us a while. There was a tender that we filled out, and it took almost a year to get that original contract. Now that we are approved to be able to sell to the US military, we're going after additional contracts. And we think that that could be lucrative for the company.

I still can't say because you've only got one contract. I still can't say how long the next ones are going to take or if we will get them. But the fact that we have a reference and the fact that they appreciated the devices, that they understood that it works with all of their cellular equipment, right? So these boosters work, whether you're on AT&T, Verizon, T-Mobile.

It doesn't matter which carrier you're using. It works well with all of them. And they actually tested these products to make sure that it works well with all the carriers. So the fact that we have that stamp of approval, we're now trying to leverage that to get into additional military contracts.

But that's not the only place that we're working on. We're working on FirstNet and other cellular carriers that we want to launch these products with. So the military is definitely a large-scale opportunity. It's more long-term just in the sense of it takes a while to get the contracts.

And in the meantime, we are working very aggressively to get into carrier sales and into enterprise sales, which are shorter term and quicker turnarounds. But it's a good business. And like you said, the margins are great, and we'll be continuing to focus on that.

Excellent. And then maybe a question for Dan -- for Daniel Kim. You mentioned AT&T, FirstNet, and the strong subscriber add data points that you walked us through earlier. Can you maybe help us understand just how we should think about what the subscriber adds mean in terms of how -- are they correlated with Siyata's momentum or with Siyata's future sales?

Did it become -- is it a direct apples-to-apples kind of comparison for, hey, AT&T, FirstNet keeps growing. What does this mean? How do we view this for actual Siyata's revenue as it seems like the SD7 continues to ramp?

Yes, that's a good question, Jack. The real ramp-up now for us is with the SD7, as you saw in the quarter. So there is a correlation between what our ramp up with the SD7 to what we're seeing with FirstNet's continued growth.

One thing I'd note about FirstNet is the original total addressable market, when they first embarked on this, was estimated to be only 3 million users, and they upped that to roughly 10 million users over the course of time as they continued to include other verticals such as schools and other enterprises that require critical communications.

So we are seeing the same thing. So the opportunity set that we have continues to grow as FirstNet continues to expand its market. So there is -- obviously, as FirstNet continues to deploy, we would hope that we will continue to be able to participate in that growth.

If I can just add to that, Jack, we're now the lowest cost or one of the lowest-cost devices available on FirstNet, right? So AT&T is incentivized to get as many black SIMs or FirstNet SIMs into the hands of first responders because they actually have a quota that they have to meet every year with the FirstNet authority, and they have a certain amount of SIMs that actually have to get out.

So for them to be able to give out our device and partially subsidize the device and make sure that people are taking it, it's actually the lowest cost solution for them, which they're happy to get into the hands of the first responders because it's much less expensive than, for example, giving them a rugged Samsung device, which cost them $700, right?

So not every single first responder needs a smartphone, a powerful smartphone from Samsung for $700. It would be enough to give a security guard, yellow school bus driver, somebody working in a hospital, all they really need is a device like the SD7. So in cases like that, FirstNet are really looking to be able to put out our device and make sure that people are taking that because then they have to subsidize less. So in that sense, we think that it's a very large opportunity for us.

Okay, great. I appreciate the color from Dan and Marc, that's also helpful additions there. And maybe just one more thing. As it relates to the SD7+ in just your comments about AT&T and FirstNet and how they're incentivized, and they have quotas to meet to get the device into their customers. Is the SD7+ -- does that have a similar dynamic in terms of how AT&T and FirstNet would be incentivized to sell that device?

So again, they're incentivized because if they don't -- let's say that they have to sell 1 million SIM cards a year, black SIMs, because they got a grant from the American government. And in return, they actually have to put out a certain amount of SIMs every year and make sure that their network is growing and that it's becoming a network that the American government invested in, okay, for first responders.

So again, the fact that we have an effective low-cost or cost-effective device that does push-to-talk very well on the FirstNet network, that's their main incentive besides the fact the salespeople, of course, have an incentive to activate these SIMs, and they get their -- they need their quotas by activating new SIMs. So in that sense, it's good for AT&T as a corporate -- as a company, but it's also good for the salespeople.

One other thing, and we discussed this in the past, every single time an SD7 is given to -- is lit up, okay, basically what they're doing is they're taking out of the hands of that person a land mobile radio device, okay? It's very difficult for AT&T, for a sales guy, to take a customer away from Verizon and vice versa, right?

It's very difficult to take from one carrier to another carrier. But when you are going after a school or a hospital or a utility that are right now using radios, and you're AT&T and you're saying, listen, forget your radios. We can do the exact same thing over a cellular network, and you're not getting it from a small radio provider, you're getting it from AT&T and it's not going to cost you much. It's only going to cost you $20 a month.

That's a much easier sale than trying to go to the same customer and say, here, take this smartphone. It's nothing like your radio. It's nothing that you're used to. [It has a] screen and whatnot. Now you have to learn how to use it. It's a totally different sale.

So in that sense, all they're doing is saying, give us your land mobile radio and take this device. It feels the same, it looks the same, and you'll be getting it from AT&T, or you would be getting it from Verizon. So in that sense, it's a pretty easy upsell and sale for the rep.

And they get they get compensated because they got that new SIM activation. AT&T gets the black SIM, which is lit up and everybody's happy. So in that sense, they're very incentivized to sell the product.

Okay, great. Well, I really appreciate the update, guys. So that's it for me. And I look forward to seeing how you guys execute.

Thank you very much.

Tom Kerr, Zacks Investment.

Good morning, guys. I think most of my questions were just answered. A couple of quick ones. You talked about the sale of rugged devices and accessories in the quarter were $1.9 million. And of that, the SD7 was $1.4 million. Can you clarify what else is in there or what's left in the legacy products? And will those continue into the fourth quarter of next year?

So -- hi, this is Marc. So some of those legacy products are still some of the devices that we're selling in the past. Some of them are UV350. Some of them are other rugged products that we sold in the past, the UR5 and UR7. So we do have other devices that we're still selling. And yes, to your question, we're still selling those products and we'll be selling them into 2022.

The UV350 is a product that we think is going to be around with us for at least in 2023 and beyond, maybe even into 2024, something that's not going away. We're still getting orders for it, and we think that we're going to get even larger-scale orders for it going forward.

The UR7 and the UR5 are products that we launched many years ago. So we still have inventory, and we're selling through it. But we'll be selling that this quarter and hopefully next quarter. So in general, those are the other products that we're still selling.

Okay, great. And on the financing, the $4 million offering, is that gross proceeds, or can you comment on net proceeds? And then maybe also comment, if you can, on pro forma cash positions currently and expected by the end of the year?

So the cash that we have, you can see what our financials are. As you know that we raised money. That was the gross proceeds, maybe take off 6% or 7%, something like that. That was various commissions and legal fees and fees that we had to pay for the capital raise.

We have a healthy balance sheet at this point. We have only a few hundred thousand dollars of debt left on our balance sheet, and we think that we're in a good position going into the new year, capital wise. So we feel very good.

Okay, great. And then, one on that I just -- one last one that I just missed. I think you answered it, but on the SD7+, the [come-to-market] timeframe for that?

It will be sometime between Q1 and Q2. It all depends on carrier certifications. The reason that we called it the SD7+ is because we want to allow ourselves not to have to do very long certification with the carriers. It's the same Qualcomm chipsets that we use in the SD7, and therefore, the certification should be much, much shorter.

If certifications took now anywhere between three to six months, we think that the certification that will take anywhere between one to three months, something in that timeframe. So we're working with the various carriers right now to work on the certification. So we believe that we'll be able to launch it commercially some time in between Q1 and Q2.

We displayed this product for the first time at the show that we had mentioned before, the International Chiefs of Police show about a month ago. And there were literally police chiefs that came and wanted to give us a credit card and buy five devices, 10 devices, like smaller police outfits that literally want the [environment decked] with the best perks, and that's what we want.

We want a lower-cost device that all it does is push-to-talk and a body camera solution. And it's all we want. We told them it's still not commercial, and we don't sell direct. We only sell through a carrier because we want the carriers to give them the data package and to give them the warranty and whatnot.

So we're happy to be working with the carriers to sell these products. And we think that it's going to be a very strong addition to our product portfolio.

Great. I appreciate it. That's all I have for today. Thank you.

Thank you.

(Operator Instructions) There are no further questions at this time. I would like to turn the conference back to Marc Seelenfreund for any closing remarks.

So again, I just want to thank our shareholders for staying with us during the turbulent times. If you're on this call, then obviously, you're still with, which is wonderful. I think that there is a very bright future for the company, and I think that we're now -- we've moved from $1 million quarters to growth. And I think that this growth is the beginning of additional growth going forward. And that's our goal.

And I think that the company has a lot of potential, and I appreciate that you're still with us. And I think that you will be happy going forward because we're working very hard to make that happen. If anybody has any questions, you can feel free to reach out to me at marc@siyata.net, and we appreciate you being on the call. Thank you.

Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank you all for participating and ask that you please disconnect your lines.