Q3 2022 Absolute Software Corp Earnings Call
[music].
Good afternoon, everyone and thank you for standing by welcome to absolute Software's fiscal 2022 third quarter financial results Conference call.
Yes.
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After today's presentation, we will have a question and answer session.
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I would also like to remind everyone that this conference call is being recorded today Tuesday may 10 2022.
Yeah.
I would now like to turn the floor over to your host Julie Kim Vice President of Investor Relations.
Go ahead.
Good afternoon, and thank you for joining us today with me on today's call are Kristie, Wyatt President and Chief Executive Officer of absolute software and raunchy, our interim Chief financial Officer before beginning our formal remarks absolute software, we'd like to remind listeners that certain portions.
Today's call.
May contain forward looking statements that reflect current views with respect to future events and conditions any such statements are subject to assumptions risks and uncertainties that could cause actual results to differ materially from those projected in these forward looking statements any forward looking statements contained in today's conference call are made as of.
Today's date Tuesday May 10, 2022, and absolute software undertakes no obligation to update or revise publicly any of the included forward looking statements whether as a result of new information future events or otherwise, except as may be required by applicable securities laws for more information.
On the assumptions risks and uncertainties relating to these forward looking statements.
Refer to the appropriate section of the company's most recent MD&A, which is now available on absolute softwares website and will also be available on SEDAR and Edgar I would now like to turn the call over to Kristy Wyatt. Please go ahead.
Thank you Julian and thank you to everyone joining us today.
I am pleased to share our strong quarterly results fiscal year Q3.
This quarterly growth with your 100 million annual recurring revenue.
There are markets within directly to enterprise and government Eric.
We also saw a record operating cash flow and delivered our seventh consecutive quarter, our rule of 40 performance.
Total error was 16% driven by record any of our growth in enterprise and government segments across product lines at 18%.
Education area represented 22% of the total ear Iot grew by 7% year over year.
It is consistent with seasonal education purchasing and it's also a function of the normalizing demand peaks during the last March quarter.
We continue to see strong levels of engagement as we enter the seasonally strong summer months.
Adjusted revenue grew by 18% to $54 5 million and adjusted EBITDA margin remained strong at 25% strong operating cash flow margin of 31% cash from operations of 17 million.
International continued to contribute to our solid quarterly performance.
Following heavy investments in our global go to market over the past year.
Part of that expansion, we added movie cause our top distributor to assist us in reaching customers in the Benelux region and more recently Orca technology in Australia, and New Zealand.
The strength of our business as a result of two key industry trends.
First is the continued shift within enterprise customers away from legacy network and security solutions toward endpoint security and increasingly zero Trust model.
The second key trend is the permanent our ongoing support of hybrid and remote work is driving towards endpoint and cloud centric security strategies.
As a result, we exited the quarter with $13 6 million active endpoints connecting to our cloud services, an increase of 2 million devices year over year.
Before I move on I want to quickly touch on the tragic situation in the Ukraine.
Our core business was not directly as it did as we have no operations.
Ukraine or Russia.
We have been active in supporting customers, who may have employees in the region and we hope for an early end of the conflict.
These horrific events and the escalating cyber events that surround them. A reminder, that now more than ever enterprises need to be vigilant about their security posture and ensure that all critical security controls that are in place and effectively protecting the enterprise.
The value of self healing influenced security has never been clearer and more relevant.
And then since it has been about a year since the announcement of the Netmotion acquisition I thought I would provide an update on our critical development work happening across the two key product segments within our business.
Absolute your endpoint, which is how we know reference our absolute visibility control and resilient products.
Absolute secure access our VPN and <unk> solutions previously known as that motion.
Let me first start with absolute secure endpoint.
We've talked on previous calls about the investments we've been making in intelligence and data analytics based on our unique telemetry.
This quarter, we launched insights for endpoint offering 19 security teams the ability to Olympics their absolute data to assess devices applications and data inventory performance and security trends across their entire device population.
One of our customers a financial institution in Texas acquired insights to monitor and manage the health and compliance are critical security controls.
Including Sentinel won tenable and crowd strike.
The ability to analyze this data is enabling them to understand the context around these endpoints and to better understand their security posture.
You may recall last quarter I shared with you details about one of our customers who experienced a ransomware attack and how we were able to leverage our unique connection to the device even while it was in a compromised state remediate the risks and restore the device without requiring a rebuild of the system.
Ransomware attacks continue to rise with some sources reporting, but there will be a ransomware attack every two seconds in the next decade.
This quarter, we launched a new offering called brand somewhere response anchored by our patented self healing technology that can communicate with and control the endpoint to restore health and assisting recovery.
We've seen strong customer interest, including one new customer who was previously hit by an attack, which they were unable to quickly recover and they are now looking to absolute to monitor and maintain the health of the critical endpoint security solutions and to respond when a second half of the curves.
A critical part of the solution is the application persistence capability within our absolutely absolutely earnings products to restore critical security controls.
We continue to invest in the rapid expansion of our application for assistance catalog, which today with 81% more precision titles and this time last year and in parallel we are enabling new application persistence doesn't serve as partners with the ability to integrate their applications independently with the application precision platform.
Which leads me to my second update on absolute secure access products.
In our secure access portfolio, we have completed our integration with the application persistence platform, making it the industry's first and only bias enabled self healing resiliency DNA solution.
My resiliency G&A, we mean that it is not only integrated with <unk>, but also that it has a resilient deployment architecture and extended network and V G&A policy intelligence.
And the first few weeks of availability, we had more than 50 customers activate the self healing feature and early feedback has been very compelling.
One large construction firm that specializes in standing up major infrastructure projects.
Bridging our resilient zero trust capabilities to ensure access permissions are being validated as employers move between networks and as a result, they are eligible for cyber security insurance discounts.
We also have a sovereign government customer who's requirement, it's just split tunnel traffic and only enable access to highly confidential information is the user can successfully re authenticate it.
And finally, our customers are sharing their appreciation and it would be used with that.
With one international military training organization thing, it's like having another person.
Our secure access portfolio also achieved two critical security certification spark to common criteria El four plus.
By achieving these certifications we are conveying to our customers even more confidence that these capabilities have gone through rigorous standards based testing in Louisiana.
We're very pleased with the progress of this integration as well as the momentum we're seeing across the industry.
In Q3, we were recognized in Gardner's market Guide for Zero Trust network access.
Absolutely also recognized for the ninth consecutive quarter as a leader by <unk> Dot Com and the spring 2022 and put management report.
And finally, we were honored to be recognized in <unk> 2022, Best Software Awards for the best Security products list in the endpoint security category.
With that I would like to welcome Ron fewer our interim CFO .
Many of you may be familiar with Ron as he was an adviser for absolute a couple of years ago and he was instrumental in the success of our NASDAQ listing.
<unk>.
<unk> CFO of both public and private software and technology companies for more than 30 years and brings a wealth of experience and stability to absolutely.
He will be leading all aspects of finance tax and accounting, while we complete the search for a permanent CFO .
I will now turn the call over to him to review the financial details.
Thanks, Christy good afternoon, everyone and thank you for joining us.
On the call today I want to cover two important topics first I will go over our Q3 fiscal 2022 financial results then I'll provide some color on our current period and update guidance for the fiscal year.
Now onto the Q3 results.
As a reminder, we are reporting revenue on an adjusted basis that excludes any ifr RF purchase accounting impact on deferred revenue.
In addition, our year over year comparisons are based on an as if combined basis that includes the net motion results as the year ago period in fiscal 2021, but it does not factor in any U S. GAAP to Ifr S adjustments.
You can find the pro forma combined fiscal 2021 financial results and the business acquisition report that we filed in September of 2021 available in the Investor Relations section of our website on SEDAR and Edgar.
We believe this adjusted revenue metric provides a more meaningful and transparent view of the combined business and helps evaluate the progress that we're making over time.
Adjusted revenue was $54 5 million for Q3 fiscal 2022 up 18% from the prior year on an as if combined basis from Q3 fiscal 2021.
Our strong revenue performance was driven by continued growth in our totally our RV and some customer migrations from on premise perpetual licenses on Prem subscription agreement.
At the end of Q3, approximately 70% of the secure access portfolio was on subscription arrangements up from about 66% at the end of Q2.
Total <unk> came in at $202 9 million as of March 31, 2021, 16% year over year growth on an as if combined basis.
Recall that unlike revenue. They are it is not impacted by the Ifr S revenue accounting requirements and is free from the complexity and periodic distortions found in revenue.
The solid overall they are our growth was driven primarily by continued strength in enterprise and government, which grew a record 18% year over year on an as if combined basis.
This was partially offset by lower growth in education that came in at 7% year over year in Q3.
We are seeing strength in enterprise and government as we continue to execute to execute on our integrated strategy in terms of product development and the increasing effectiveness and breath of our go to market we.
We see this being reflected in improving enterprise new logo AOR growth and net dollar retention, which I'll talk about in more detail shortly.
I will also note the strong here our growth came from both secure access and secure endpoint portfolios.
Now turning to education.
If you recall Q3 of 2021, Mark the high point in Covid related surge spending and so education grew 35, 3% that period.
Needless to say that is a tough call.
That said as Christie discussed earlier deal activity in education remains at or above pre pandemic levels and there is still significant funding available for our K 12 education.
As we enter the two seasonally strong education quarters and see normalized comparison, we expect to continue to see stable AOR growth in education.
New logo, a or was a solid $3 2 million up 5% on an as if combined basis from a year ago and net dollar retention was 107%.
New logo AOR growth was driven by strong enterprise and government growth tempered by relative softness in the education over so.
Net dollar retention was relatively flat sequentially and down from the 110% in the prior year.
Again, the year over year decline is largely a function of the tough compare in education.
Enterprise and growth enterprise and government business now almost 80% of our a R has net dollar retention that is well above the corporate average.
Moving on to costs and profitability for the quarter adjusted.
EBITDA for Q3 was $13 8 million a margin of 25% of adjusted revenue.
Better than anticipated result was driven by a combination of discipline in operating expenses slower than anticipated hiring and head count growth and a benefit in the topline from secure access customer migrations that we mentioned earlier.
We had record operating cash flow from operations of $17 million driven by strong adjusted EBITDA and strong cash collection that led to an operating cash margin of 31%.
As a reminder, cash collections generally lag at all of our growth by a quarter.
We expect operating cash margins to continue trending above adjusted EBITDA, though there will be seasonal fluctuations between the quarters.
Taking a look at the balance sheet. We ended the March quarter was $69 million in cash up $8 million from the prior quarter based on our strong cash flow from operations, including debt service and dividend payments.
Turning to guidance, we are raising both our adjusted revenue and adjusted EBITDA.
For the full year fiscal 2022, ending June 30th as follows.
We are raising adjusted revenue guidance from a previous range of $206 million to $208 million to a new range of $209 5 million to $210 $5 million.
This implies adjusted revenue growth of $14 nine to 15, 4% versus 13 to 14, 1% previously.
Adjusted EBITDA margin guidance for full year fiscal 2022 is being increased from our previous range of 22% to 24% to $24 five to 25, 5%.
With respect to operating expenses, we continue to increase our investment in product development and our go to market capabilities to take advantage of the growing opportunities to work from anywhere in the <unk>.
Absolute plans to remain aggressive in hiring through the balance of this quarter before things naturally slow down in the summer.
In addition, as we get back to a more normalized work posture, we are budgeting for higher travel and trade show related expenses as well as higher office and facilities related costs.
The strong growth in our <unk> base continues to drive sequential growth in our total revenue. However, as we have discussed in previous calls adjusted revenues in the first three quarters of fiscal 2022 has benefited from the accounting treatment of maintenance to subscription migration.
The revenue ramp apps.
Absent. These migrations adjusted revenue guidance calls for continued sequential increases to revenue in line with the growth in our base.
Please recall that our adjusted revenue growth rate guidance for fiscal 2022, and our other year over year growth metrics are presented on an as if combined basis and are calculated based on the combined company fiscal 2021 financials and do not include any adjustments for purchase accounting or GAAP to <unk>.
Conversions.
As of March 32021, the remaining value of deferred revenue write down that we will be taking going forward over future periods as approximately $4 $6 million.
We anticipate the quarterly difference between our RF Rs reported an adjusted revenue numbers will continue to decline as we move forward.
<unk> revenue write down was $5 3 million in Q1 fiscal 2020 to $3 9 million in Q2, and $2 5 million this quarter and we will drop significantly as we enter fiscal 2023.
With that we appreciate your time and support and we're glad to open the call for any questions operator.
Ladies and gentlemen at this time, we'll begin the question and answer session.
Once again to ask a question you May press Star and then one.
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Once again that is star and then wanted to join the question queue.
We will pause momentarily to assemble the roster.
And our first question comes from Adam Tindle from Raymond James. Please go ahead with your question.
Okay. Thanks, good afternoon, and kristie congrats on the $200 million a milestone you talked about the shift to zero trust as a <unk>.
Number one driver of the business here and I wanted to ask a question around that you could maybe first just speak to how this is changing the nature of conversations at the customer level I imagine you're gathering to things like funded projects around that so the nature of the conversations at the customer level, what youre doing to aid the sales force I know you made some changes there.
To capitalize on that and then ultimately how that's going to translate translate to financial metrics as you become more strategic.
Hi, Adam Thank you.
So the combination of the two products is actually helping us in both directions.
And we've talked a lot about the increased spending around zero trust.
<unk> assessed as accelerated shifting a lot of focus on endpoint security as a whole and so what we're finding is that the opportunity to go in and talk to customers about funded their trust projects things that we know are in their roadmap in the next 18 to 24 months.
It means that we get the opportunity to fit into an already funded project, but also demonstrate the power of resilience and I think thats why.
These are such.
As such a nice sort of complementary nature to these two pieces and using self healing resiliency DNA. They also see the ability of self healing security and then start to think about the application of resilience onto other products and then vice versa in customer areas, where we're actively already engaged with them on healing there.
<unk> solutions, we can show them a better path. So so I think it does give us a significantly more strategic.
<unk> position in the conversation with our customers and as we all know.
That is a rapidly growing market I think Gartner says, it's going to go from $820 million and spend this year to something like $1 6 billion in the coming years.
And what we've done to enable the sales force. We're doing we continue to do a lot of training around Forest management, we've continued to build out.
Both the demand generation function as well as kind of putting together the integrated customer story. This is as we kind of go into Q4, it's a nice moment for us because we have all of the pieces connecting to the platform and we start to be able to tell that bigger picture story about <unk>.
Hal resilience and resiliency G&A can all work together.
And then we as always have a number of strategic initiatives going on with our OEM partners.
As many of them have zero trust in their strategic initiatives in the coming year coming 12 to 18 months as well and we have the opportunity to tuck into those.
So we've seen some nice lift I think in both the pipeline as well as in some of the results. It's still very early days I mean, I think if we take a look at the opportunity ahead of US we see so much more.
As we move into the closer into FY 'twenty three.
Very helpful and maybe just as a quick follow up for Ron obviously nice to see cash flow in the quarter raising.
Raising revenue and EBITDA guidance, just curious I think you had some comments about cash flow I may have missed but how to think about cash flow for rest of the year and bigger picture on capital structure, just how youre thinking about options that you're considering in servicing the debt I understand that you are in the interim CFO position, but it's a question that we often get from investors in terms of.
Type of capital structure and servicing the debt any comments would be helpful. Thank you.
Sure. Thank you Ed.
Well in general obviously, we feel pretty good about our ability to generate cash I mean, you've seen it very consistently over this last year or so.
Before that we generate a lot of cash on a regular basis.
<unk> as the company continues to grow we expect that amounts to in fact increase we feel we've been doing a lot of analysis on this and we've been we feel pretty comfortable in our ability to service the debt I mean, our coverage ratio is declining pretty significantly just on a naturally just a natural function of our.
Growing EBITDA and our growing cash flows so at this stage.
We're obviously going to keep an eye on it we're going to be very careful.
With interest rates rising and everything else like that but.
That's really where we are right now today.
Yes, if I wanted to add a moment to that I think we.
We started out the beginning of this year talking about the flexibility that we wanted but also saying that we were very comfortable with our ability to service the debt and continue to generate cash and invest in growth and I think as we've gone through the year, we've demonstrated our ability to be able to execute across all three of those and so.
Maybe longer term when we're in a less volatile environment, we could look at other more creative ways, but right now we feel very good about our trajectory, where we're sort of ahead of plan and we feel like right. Now is the time to focus on executing and managing leverage within the business.
And for Q4 real quick I know, it's typically a seasonally strong cash flow quarter, but is there anything that would be different this year.
Yes.
No.
We are aware of it.
Yeah.
Got it thank you very much.
Thank you.
Our next question comes from Mike Walkley from Canaccord Genuity. Please go ahead with your question.
Alright, My congratulations also on crossing that $200 million and the cash flow.
I guess.
Christy just curious.
Calling out the ransomware incident.
Have you how you helped some customers dealing with this.
Just talk about how this is driving.
You're persistent business pipeline or our change in discussions with potential customers.
Absolutely and thank you Mike good to hear from you.
So I think while we've talked a lot about self healing security and the capabilities of the platform ransomware. It was an interesting opportunity to really put it in context is something that customers are.
Struggling with each and every day and so.
I had mentioned a little bit earlier that today, we see a ransomware attack happened almost maybe once every 11 seconds, we predict that it's going to accelerate to something like once every two seconds.
And so it is happening across every organization across every industry and so while people think of us as sort of self healing security really helping them understand what having that unbelievable persistent connection to that device can mean, what it means is when that device is frozen and it's unresponsive to anything else, we can still kind of get in there.
Manipulating we can heal the other security controls.
Put them back online, we can remediate some of the risk and we can oftentimes get that device.
Back into a healthier state where it can start taking care of itself again without having to rebuild it from from iron, which is something that nobody really wants to do especially when users are remote and so it really has shown a bright light on the power of self healing the power of absolute reach in our script and capability and having that that lifelock.
Line to those devices, and so being able to package that up very neatly and being able to go in and have that conversation with customers.
<unk> small I think I think of ransomware responses are very horizontal product there isn't really a vertical market our customer sites, who isn't thinking about how theyre going to recover.
When they eventually get hit and so we do see it as a significant opportunity and we're working quite broadly across our partner base as well too to figure out how we can integrate it within their offerings as well.
Yeah.
Great. Thanks.
With the strong enterprise quarter, just wanted to clarify it was.
With I guess secure endpoint and secure access above expectations and then how is the sales force.
Progressing and maybe some some nice cross sell opportunities between the two.
Okay.
So we're still very early on and cross sell because as I said. This is the first quarter, we have the platform integrated with.
With persistence, although I think we feel very good as we sort of look at the pipeline as it is combining in front of us and the sales force is structurally nothing has changed we still have secure access operating as a specialist team within North America, it's more integrated internationally, but.
But we are seeing a lot of customer interest and I would say, we see that accelerating as we come through the second half of the year, where customers are really leaning in and wanting to understand from whichever side of the business. They started on the capabilities of the other side and again really being able to leverage the self healing ability within.
The previous Netmotion client secure access products is a really great way of showing the power on both sides and so I mentioned in my script, we've had over 50 customers already turned it on within the <unk> side that really sort of gets them thinking okay. So now what is the rest of my security applications could also be self healing.
What else what else could I do and so it really is a nice way to launch into a new chapter with those customers.
Okay. Thanks last question for me I'll jump into queue I know education.
Smaller part of the business now and it's lapping some tougher growth comparisons.
How should we think about maybe AOR growth for this business going forward.
Single digit high single digit grower or maybe 10% grower just how are you thinking about trends in that business to help us model longer term.
I mean, I think that's about in the right neighborhood I think in this particular.
And we've said that for a while right. We don't we don't see it we see education turning into a nice run rate business, we don't see it maintaining the really high spiky growth that we saw last year I think Q3 of fiscal year 'twenty, one with the peak of that activity. So this was a difficult comp year on year.
And so but I think we continue to see a lot of demand. We continue to see a lot of growth and that is somewhat unique to us as well with some of the new restrictions on the ECF funding.
Delineates, what you can what you can spend on hardware versus what you can spend on software and I think one of the benefits of absolute is we're actually in the hardware and so there there is some flexibility for customers who are looking to.
To take advantage of that funding and continue to use absolute and so we're not we're not all the way through it we are heading into the busier months within the education buying season.
But again I think we see it turning into a nice run rate healthy business. So we don't see it returning back to the pre pandemic state.
We definitely don't see it staying in the high double digit growth not where it was last year either.
Great. Thanks for taking my questions.
Our next question comes from Scott Berg from Needham. Please go ahead with your question.
Hi, everyone. This is Michael Rockers I'm on for Scott Berg. Thanks for taking my question just one quick one for me.
Could you maybe talk about you know I guess, the next steps with the integration of that motion.
One when do you expect it to be kind of fully in the integrated and then maybe a bit more color on the early success with the sales team selling both products.
Yeah.
Sure Hi, Mike.
So on the on the product integration initially.
I think we sort of laid out a path for us.
I've talked about where we see the first three touch points being the first of which is what we've already accomplished around the integration with the persistence platform.
The second we've talked about is really how the user experience starts to touch one another and you shouldn't really think of that as a single common console or sort of one.
We don't need to integrate the solutions top to bottom, but but being able to look at the data holistically. So we can think about risk holistically. We can think about the different pieces of telemetry to that coming from the various different parts of the platform.
From the biopsy operating system the applications on both sides and being able to sort of view.
We have a view of risk and then being able to take action against that risk and so that's really the third step which will be how do you envision action and set up rules that are enforceable across all of the different places, where we have the opportunity to influence the devices. The behavior. We can influence the network, we can influence specific applications or the device as a whole and so we.
A lot of flexibility in terms of how we match kind of that broad intelligence view that we've talked so much about.
With kind of the the what I'd call the enforcement piece right. The rules engine and those will be the next two pieces that you will see us working on the <unk>.
Data pieces are particularly exciting one to me we've talked a lot about the investments we've been making around insights and intelligence and the data insights product that we announced earlier this quarter and you'll you'll start to see more interesting milestones as we go through next year, along that sort of data strategy and roadmap that we've talked about for quite a while now.
<unk>.
On the on the selling team I think one of the interesting pieces is really being able to use the data to tell that story.
Talked a lot about how the sales teams are structured and organized.
We're spending a lot of time right.
Right now thinking about how we set up.
The structure for the coming year as we go into Q1 of next year.
But but I think they were.
We've had two years now down this this.
Intelligence path, where we've talked a lot about the telemetry, we collect collect and.
And the unique things, we see about the health and the security posture of that device.
And so being able to use that data and really visually demonstrate to the customer.
What is the status of the device or your security posture with absolute and without.
And if you do get a chance to sort of take a look at.
One of the I think it's in the company overview, that's on the website right now and it will be in our upcoming investor presentations and.
And we've been starting to actually demonstrate some of that data modeling real time, where you can really see the difference between the overall security and compliance with a device that is turned on versus not turned on.
And that's a very powerful tool for the selling organization both in demand Gen as well as in introducing some of these new use cases to our existing customers.
Alright, thank you.
Our next question comes from David Kwan from TD Securities. Please go ahead with your question.
Good afternoon.
I was.
Just curious Bob we've obviously seen a fairly significant bump up in he tested EBITDA margin guidance since the start of the year.
I think it was 18% to 20% initially and now we're in the mid twenties.
How much of that impact is due to the increased revenue guidance and just some of the operating leverage versus the tight labor markets impacting your turnover and higher activity versus anything else.
Well I mean, it's all part of it is a big part of it obviously is the improving revenues on the gross margin that's flowing down that makes a big difference obviously.
But we've also been hiring we've continued to hire throughout the year. It has been harder than than anybody anticipated. There is no doubt about that.
But then we've also we've been spending money to invest in and make sure. The companies are getting together properly. So.
Yes. We're also taking we're looking for efficiencies at the same thing we're going to look for more things like that in this last quarter. We will obviously as we've become more normal and theoretically norm more normal in the.
In our office posture and those kind of things that people are coming to the office, we're going to have to spend a little bit more on office issues and things like that and then also on <unk> as we are starting to make trips out to the east coast and back in.
Sales calls et cetera that seems like that's on an upward trend. So we're going to continue to be balanced, but we expect.
A good solid 20% plus.
The EBITDA margin.
No that's helpful. Thanks, Ron.
And then one last question on capital allocation.
A question on kind of a debt.
Also with the way it's going after I believe it does.
Variable rate as it did.
Do you guys have interest in trying to lock it in.
At a fixed rate and then as well just generally with what's going on.
Overall markets and also your share price is an NCI be also part of the consideration as you look at capital allocation.
So on the interest rate we do it.
It is adjusted every quarter.
Look at it on a quarterly basis, we have accordingly, and we can in fact look at locking it in over.
Shorter periods of time or six months, a year and do things to do that but right now it is a.
Variable rate.
So right now the interest rate is 7% and for this next quarter and so.
A full percentage point of change would be the equivalent of about $2 $7 million on a full year and so half a percent is going to be roughly half of that 1314.
So we feel pretty comfortable that we can handle those things at this point in time, we will obviously look for opportunities too.
To see what makes sense.
Thanks, Ron.
On the share buyback is that something you guys would consider given where the shares are right now.
Yeah.
It's very tempting when you take a look at the share price, but I do think the market being as volatile as it is.
Don't know that we have any immediate plans right now I think.
Right now we're very much focused on driving the business forward and continuing to invest as we as we wrap up the year and go forward. So I would say nothing in our immediate future.
Thanks, that's it for me.
And our final question today comes from Dana <unk> from BMO capital markets. Please go ahead with your question.
Hi, it's Stephen Mikkelsen Entre span out so I just have a couple of quick questions first on the international AOR growth how much of that is coming from some of your initiatives to really grow your partner base.
It's a great question. So thank you Steven I think that it's coming from both our investment of direct sellers as well as our expansion with our partners.
We are we are continuing to invest and continuing to build up and youll see us do even more as we go into next year.
And building out the channels and the direct selling capability in all of our international theaters with a number of our strategic partners and also resellers and so I think we have a couple of the announcements we made on the earlier in the quarter with some new distribution partners and more traditional distribution, especially within EMEA.
And so we see all of those as opportunities and then the piece, we haven't talked too much about yet.
Some of the opportunities we see around carriers and there is some part of that that we talked about when we did the original.
Net motion acquisition and some of their distribution agreements with carriers.
And so we are starting to see some of the early rewards from those investments and I would like to believe youre going to continue to see more of that from us as we go into next year.
Okay. Good to hear are there any particular countries or verticals in the international that you want to call out for sort of driving this are driving the growth.
I don't think there is any new ones other than what we've spoken about before we're doing quite well in EMEA and we are quite active in UK or with one of our announcements earlier this or this quarter was about some new distribution in dock in Benelux.
We are also doing a little bit in a little bit more in APAC I am starting to invest in regions like Australia, we're doing quite well in Japan Latin America has always been strong for us and continues to be strong.
So I would say it is still very focused it sounds quite broad because we are.
We are in fact, a global organization, but we are quite focused on when we think about the theaters, we want to go into and which partners were going in with.
So I think youll continue to see asps quite powerful about that as we go into the next year.
Okay, no that sounds good and I guess the final question is now that you're a year into a trend that motion with all of the turbulence that's going on in the public equity markets like are there any M&A opportunities like maybe smaller tuck in ones that might look like.
Appealing right now or is that just off the table.
I never say never but but I don't think Thats really our focus right now we're always taking a look at the technology landscape and whether there is interesting partnerships for us or aqua hires or interesting tuck ins that would grow our technical capability.
So we're always looking but we do primarily look at the next year.
One of increasing investment into our roadmap. There is so many cool things going on within both the secure access and secure endpoint portfolios right now.
And so much we're doing to kind of bring those to our partner community that that.
But I think we have quite a lot on our plate right now so I never say never but that's not that's not in my immediate.
Vision right now.
No that sounds good. Thank you that's all for me.
Okay.
Okay.
And ladies and gentlemen, with that we will be concluding today's question and answer session I would like to turn the floor back over to Kristy white for any closing remarks.
Thank you and thank you all for participating in today's call.
A year ago, we shared with you the strategic rationale around our acquisition of net motion to leverage our unique persistence and intelligence platforms into a new large and growing market and in doing so we saw the opportunity to create more resilient endpoints that can always connect in a highly secure way.
And here, we are a year later and I'm very proud of the great progress. The team is making the core of what we do uniquely well is found in our self healing persistence platform that is embedded into the hardware of over half a billion devices and from that platform. We have a unique intelligence and data platform, which customers can now access through our insights products.
In this space, we've built a portfolio of self healing security solutions that started with our security endpoint, our secure endpoint offerings and now also includes secure access and in parallel we continue to build out the ecosystem through our application persistence as a service and our channel partners.
We're very pleased we just broke through the $200 million IRR margin delivered our seventh straight quarter of rule of 40 financial perfect performance. We believe we are delivering against our goals and we're very confident in our ability to continue to deliver thank you so much.
Okay.
Ladies and gentlemen, with that we'll end today's presentation. You may now disconnect your lines.