Q3 2022 Aware Inc Earnings Call
Okay.
Good afternoon, and welcome to West third quarter 2022 conference call joining us today is the company's CEO and President Robert Eckl, CFO , Dave Parslow Encierro Craig Hermine.
Following their remarks, we will open the call for questions if.
You'd like to submit a question you can do so anytime using the built in ask a question feature in the webcast player.
Before we begin todays call I'd like to remind everyone that the presentation. Today contains forward looking statements are based on the current expectations of <unk>.
Management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described.
Listeners should please take note of the Safe Harbor paragraph that is included at the end of today's press release.
This paragraph emphasizes the major uncertainties and risks inherent in forward looking statements that management will be making today.
Well wishes to caution you that there are factors that could cause actual results to differ materially from those indicated by such statements.
These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10-K quarter.
Quarterly reports on Form 10-Q.
Forward looking statements should be considered in light of these factors.
You are cautioned not to place undue reliance upon any forward looking statements, which speak only as of the date made.
Although it may voluntarily do so from time to time, where undertakes no commitment to update or revise the forward looking statements whether as a result of new information future events or otherwise, except as required by applicable securities laws.
Additionally, this call contains certain non-GAAP financial measures.
Sure as defined by the SEC regulation G. non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP.
Accordingly, we're has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today.
I would like to remind everyone that this presentation will be recorded and made available for replay.
A link available in the Investor Relations section of the company's website.
Now I would like to turn the call over to <unk>, CEO and President Bob <unk> Bob.
Thanks, Matt.
Good afternoon, everyone and thank you for joining us today.
After the market closed we issued a press release announcing our results for the third quarter ended September 32022, a copy of the press release is available in the Investor Relations section of our website.
We're pleased that you could join us for this quarterly update unaware.
On today's call I will first discuss our financial and operational performance for the third quarter then.
And then I will review the progress, we're making solidifying our organizational foundation to drive scale and sustainable growth.
Afterwards, our CFO , Dave Barcelona will provide further details on our third quarter and nine month financial performance.
Following Dave's remarks, our new CFO , Craig Harman will discuss his initial observations since joining aware in August as well as share his strategic initiatives that are advancing the company's go to market efforts.
Finally, I'll review, our business drivers and outlook before we open the call for questions.
In the third quarter, we delivered $3 million of revenue $2 6 million of net income and negative $2 5 million of adjusted EBITDA loss.
The strong net income we delivered in Q3 was benefited by the $5 $7 million gain we recorded in July of 2022 from the $8 9 million sale of our building located in Bedford mass.
From a top line perspective, our Q3 revenue results continued to be impacted by the challenging macroeconomic environment as we saw several customers elect to delay their purchases to Q4.
Transitioning to our new business model is rarely a simple or straightforward endeavor.
Over the last despite significant headwinds in our strategic realignment and our sales team. We are very encouraged by our ability to continually increase our recurring revenue, which has increased $23 million in comparison to the first nine months of last year to $7 1 million year to date.
And subsequent to the close of the quarter, we've seen a couple of government customers receive approved to operate status after extended pilot phases and in one case a sizeable delay.
As many of you know in early August we appointed Craig Harman to new role of Chief revenue officer to position aware for accelerated scale and to achieve sustainable and profitable growth.
Greg has significant industry experience in SaaS and enterprise sales that we are leveraging to bolster our recurring revenue base and further optimize our go to market strategy and execution.
As a proven sales later, Greg has a strong track record of success in accelerating sales cycles opening new markets building partnerships and strengthening customer success with Craig and the team. We're confident that we can accelerate adoption of our new SaaS offering aware I'd optum.
Optimize our focus on expanding recurring revenue out of our existing portfolio and complete our business model transformation.
To support these and other organic growth initiatives, we are fortunate to be backed by a strong balance sheet with $31 million in cash cash equivalents and marketable securities.
Having ample cash enables us to continue to withstand this current market volatility and allows us to evaluate high ROI opportunities.
<unk> recurring revenue growth, whether those opportunities or organic or inorganic.
Part of that strong balance sheet is the income from the sale of our Bedford building earlier this year.
Few weeks ago, we officially located our corporate headquarters to Burlington, Massachusetts.
Moving to a smaller but more modern facility that is better suited to our current business needs allows us to be more collaborative for customers maximize value for shareholders and increase employee satisfaction.
Lastly, the closeout my financial and operational summary, I'm delighted to share that earlier. This week at money 2020, Fintech show in Las Vegas, we unveiled our highly anticipated SaaS platform aware I D.
We are thrilled to bring this offering to the market and I would like to commend the entire where team have been working tirelessly to achieve this milestone.
From what we see where it is the most comprehensive platform in the market offering lightning fast identity verification multifactor authentication and biometrics on a single low code platform.
We pre configured it for the most common use cases and position it at an affordable price point. So we can tackle onboarding and authentication in a manner that helps organizations of all sizes improve their security posture and compliance needs, while enhancing the end user experience.
To summarize we recognize the continued challenging macroeconomic environment has resulted in customers deferring their purchases for longer than originally anticipated.
Nevertheless, we have a robust pipeline of business and continue to increase our recurring revenue generation.
We developed our disruptive aware I'd platform to expand accessibility of best in class security without sacrificing the user experience.
In fact in many cases are aware it enhances the user experience, we have high expectations for its market adoption.
We've realigned our revenue team around an updated strategy focus on customer success and led by SaaS industry veteran CRO Gregg Carman.
Despite the macro headwinds we are confident that our growth roadmap is on track for even greater success in the years ahead.
Now before discussing our near term business drivers and outlook.
Turn it over the call to Dave bar slow to walk us through our financial results for the third quarter Dave.
Dave over to you.
Thank you Bob and.
Good afternoon to everyone on the call.
Turning to our financial results for the third quarter ended September 32022.
Total revenue was <unk> 3 million compared to $4 2 million for both the second quarter of 2022, and the same year ago period.
For the nine months ended September 30, our total revenue was $11 9 million compared to $12 9 million in the same year ago period.
As Bob mentioned, the sequential and year over year decrease in our third quarter revenue was primarily the result of unfavorable macroeconomic conditions that lead to customers deferring their purchases of our solutions.
Now looking at our operating expenses.
Our third quarter of 2022 operating expenses decreased to 0.6 million from $5 8 million in Q3 of last year.
As a result of the one time $5 $7 million gain from the sale of our Bedford building, which was partially offset by higher sales and marketing spend as we revamped our revenue team and launch where I D.
Coupled with additional general and administrative costs related to our relocation and an increased bad debt reserve.
Operating expenses for the nine months ended September 32022, which includes the impact of the one time $5 $7 million gain from the sale of our bed for building were $12 1 million compared to $17 4 million in the prior year period.
Operating income for the third quarter of 2022 was $2 4 million.
Which includes the impact of the one time $5 7 million gain from the sale of our Bedford building compared to an operating loss of negative $1 6 million in the same year ago period.
Operating loss for the nine months ended September 32022 was negative <unk> 2 million compared to an operating loss of negative $4 6 million in the prior year period.
For the third quarter 2020 to GAAP net income totaled $2 6 million or 12 cents per diluted share compared to GAAP net loss of negative $1 6 million or negative seven cents per diluted share in the same year ago period.
As Bob mentioned GAAP net income for Q3 2022 included a $5.7 million one time gain related to the sale of our bed for building.
GAAP net income for the nine months ended September 32022 totaled $31000 or zero cents per diluted share compared to GAAP net loss of negative $4 6 million or negative <unk> 21 per diluted share in the same year ago period.
Our adjusted EBITDA loss for the quarter, which can be reconciled to GAAP net loss in our earnings release totaled $2 $5 million, which compares to adjusted EBIT loss of $1 million in the same year ago period.
For the nine months ended September 32022, adjusted EBITDA loss totaled $3 9 million compared to an adjusted EBITDA loss of $3 million in the prior year period.
Looking at our balance sheet with $31 million in cash cash equivalents in marketable securities at the end of the quarter compared to $25 million at the end of the prior quarter.
Increase in cash cash equivalents and marketable securities was due to proceeds from the building sale and partially offset by cash used in operating activities. Additionally, during the quarter, we repurchased 75000 shares of stock at a cost of $155000 as part of our previously announced share buyback program.
As Bob mentioned in this challenging macro environment, we consider our strong cash position to be a valuable asset.
During the quarter, we shifted some of our cash to marketable securities to take advantage of higher interest rates, while also maintaining our financial flexibility.
We strive to maintain a robust cash position that provides us with the flexibility to judiciously allocate capital to opportunities with high ROI potential that align with our long term growth plan and product roadmap.
We continue to actively evaluate strategic opportunities that would enable us to drive scale as an organization and to maximize shareholder value.
This completes my financial summary, now I'd like to turn the call over to Craig to discuss our enterprise sales strategy.
Greg.
Thanks, Steve Hello, everyone I'm happy to be here with you on today's call before I jump into my focus areas as CFO I wanted to touch on what drew me to the biometrics industry in the first place.
And specifically to aware my prior experience at exact target I saw People's initial hesitation to have there.
Our personal information on the Internet once people became more familiar and comfortable with the concept in particular, how they could benefit from a personalized experience. There was much less customer hesitation I believe the biometrics industry is at an inflection point similar to the inflection point marketing technology had 20 years ago.
Not a matter of if biometric will become mainstream it is a matter of how and when.
Which brings me to aware as an industry leader I was excited for the CRO opportunity with aware because the company has an outstanding track record of innovating in this space sizable and recognizable reference accounts and a strong growth strategy that in my view had the right focus while still having areas, where we can improve our execution and I can provide value.
Make an impact.
So one of the largest financial institutions and government entities around the world work with aware and use the company's leading biometric solutions to protect their users customers quickly recognize the added value and increase security that comes with biometric once they deploy aware is top of the line technology in the two months since I've.
Going to wear my excitement has only increased as they've been getting to see firsthand the customers, we work with and what's happening in the identity space and just this week the launch of a where I D, which solidifies our transition into a SaaS based platform company.
Where does extremely well.
<unk>.
Where is extremely well positioned for sustainable growth and I am highly confident in the company's ability to outperform the broader biometric industry growth rates. For example, let me describe to you aware is so successful in Latin America, our financial institution customers are under significant pressure.
The fraud as the region's digital economy thrives.
Whereas Gnome platform is a key component of their customer onboarding strategy to detect and reject fraudulent applications and transactions using novel applications of biometric to thwart a barrage of threats, including deep fakes video replays and hacking attacks with device emulators the team's success in this.
Region has led to strong referrals and a robust pipeline, which will be part of my focus over the upcoming months my efforts as CRO center around continuing aware its track record of success by building up our recurring revenue base and pipeline, while also maximizing our impact.
And the transformation to a subscription based business model.
In order to achieve higher levels of recurring revenue and subscription revenue in particular, we are focusing our efforts on three key initiatives.
First is it expediting customer adoption, whereas technology is leading the way and adaptive authentication and theres a tremendous market for us to capitalize on <unk>.
Making it critical that we accelerate the onboarding process and provide enhanced customer services.
Through the further development of a team dedicated to customer success. We're applying intention will focus on two critical areas. One helping first time users are those using authentication technologies in a new way deploy faster and drive adoption sooner and to cultivating value based relationships with existing customers to ensure their continued some.
SaaS and to drive expansion revenue. Additionally, by having a team focused on these two items. It frees up the bandwidth of our sales team to focus on acquiring new customers and driving new revenue.
Our second initiative is to evolve and strengthen our partner program. Our current program focuses almost exclusively on integrated resellers, which makes sense as a way to expand the reach of the sales team a refined program. We will continue this approach and we will add to it with.
Integrated partners not to be confused with integrated resellers integrated partners are those partners, who don't resell our offerings, but who work with us to integrate <unk> technology with their own offering and then team with us to collectively expand our reach for.
For example, an integrated resellers intercede a partner of ours, who is integrated it whereas technology directly into their technical offering and therefore resells it when they sell their product. An example of an integrated partner could be working with an ERP provider to streamline the connection between aware tech and their product thus increasing the <unk>.
<unk> ability of <unk> to the partners' customer base. This expanded partner program will help us scale sales more rapidly domestically and abroad.
Finally, the third key initiative, we are focused on is realigning and scaling the revenue organization to ultimately meet and exceed our growth objectives.
We have expanded the team by introducing several new roles throughout sales and customer success, we're refining sales processes upgrading our sales technology and re energizing the team to better position for success, and we are optimizing and increasing our marketing efforts.
Confident this initiative will help us close more contracts increase our share of wallet and drive revenue faster.
Ultimately my efforts are aimed at helping aware grow its topline and Brian its base with.
With dedicated customer success and expanded partner program and a refined revenue organization in place I'm very confident about <unk> ability to drive growth and profitability.
Now I'd like to turn the call back to Bob for additional insights into our business drivers Bob.
Thanks, Greg.
This month, we entered the final phase of our business model transition for all book and ship company to a platform company with a strong base of recurring revenue.
We are thrilled to have unveiled aware I D and are optimistic about the offerings prospects to expand recurring revenue.
That said, while adoption of where it ramps up we remain focused on accelerating our growth and expanding recurring revenue of our existing portfolio.
To drive scale in top line revenue will focus on a couple of key areas first optimizing our go to market strategy.
As Craig highlighted we need to capitalize on the tremendous opportunity within our current customer base and afforded by an expanded partner program.
Transitioning to our revenue organization led by a chief revenue Officer was a key part in this optimization process.
Greg is leveraging his deep expertise to spearhead aware sustainable revenue generating efforts and has already made a noticeable impact in the short time he has been with us so far.
Second as we discussed on prior calls for many customers leveraging biometrics is a real cultural shift that requires close attention and guidance.
From a people and process perspective, we've realigned our teams and expanded the customer success function to reflect this shift in mindset.
From a technology perspective, we intentionally made aware I D functional from the start and easy to consume so we can increase accessibility of our technology and expand our total addressable market.
All in all we are confident that despite the current macroeconomic headwinds and short term volatility we are poised for significant long term growth as we navigate the final phase of our business model transformation in 2023 and beyond.
<unk> made aware I. Appreciate your continued support and we look forward to what is ahead for our company and industry with that we're ready to open the call to questions.
Matt Please provide the appropriate instructions.
Thank you Bob as a reminder, you can submit a question using the built in ask a question feature in our webcast player. Please hold while we populated the question.
First question is for you. Dave Q2, you said you received $8 $6 million in net cash proceeds.
The press release, you referenced the one time gain of $5 7 million why the difference.
Thanks, Matt as you know from our filings we sold the building for about $8 9 million.
After commissions and fees.
$8 $6 million in cash proceeds.
But on our books, we carried depreciated depreciated cost basis of $2 9 million roughly so we needed a onetime gain of about $5 7 million on the income statement.
Okay.
Thanks, David.
Question here for Craig Craig from your perspective, what does success ultimately look like more aware.
Sure. Thanks, Matt.
Success for aware.
We've taken a form as the biometrics industry leader with strong consistent recurring revenue.
Robust client pipeline driving expansion into new markets.
And geography geographic areas.
With the changes we're implementing in the traction we're having with our enhanced strategy, we are well on our way to achieving this success.
Thanks, Greg.
Question is for Bob Bob You've mentioned, a healthy pipeline can you provide some color or any con contracted pipeline wins.
Yes, Thanks, Matt I think as we've previously mentioned we've added language at the most of our new customers contracts.
Allow us to announce some customer wins.
As Greg mentioned, we've got a robust pipeline and are getting to where we want to be but it does take a while to get to the next step.
Customers signed on 18 months ago are now moving to full launch.
We're also seeing those customers increasing their spend with us.
Of our longstanding customers has almost doubled their spend with us.
And we expect people will come online more quickly with you where I'd SaaS.
Functionally functionality right out of the box and its logo.
We're seeing good traction with the immigration customers. In addition to the large financial institutions.
Thanks, Bob.
Feedback that you receive at money 2020, after launching aware I'd.
Greg you want to take this one sure thanks Bob.
We spend three days on the on the floor at money 2020, you're talking with multiple fintech.
Fund advisors banks of all sizes, both credit unions mid market online banks as well as some of the largest banks in the world.
Others in the financial services space and the feedback on <unk>, specifically a low cost.
<unk> implemented solution for authentication.
The feedback was ecstatic.
We are we are even more excited coming out of this with a number of.
Great leads to follow up on.
That this product is really something different different in the market.
The market is already responding.
Thanks, Greg next question when do you anticipate your business model transformation to be complete.
Is there a metric or milestone youre tracking internally to indicate the completion of the transformation.
Yes, Matt.
Transformation is an ongoing process as you know.
We've achieved significant milestones you heard Greg a minute ago. This week's launch of <unk> and.
In our recent SEC.
Hiring of Craig.
Really expanded our customer success initiatives.
They are all critical things that were put in place for our SaaS business model.
So we've grown recurring revenue as a percentage of total revenue.
And as that percentage increases will be able to speak to <unk> as opposed to quarterly revenue.
At this time, the best metric to track as our transformation would be cash flow breakeven as it reflects our company's profitability.
Okay.
Thanks, Bob Our next question is it likely you get back to the Q2 level of revenue in the fourth quarter.
Thanks, Matt.
Directionally, we expect Q4 to be better than Q3, as we're seeing some headwinds described earlier begin to subside.
Annually, given the headwinds we discussed the full year won't be at the 15% rate we previously anticipated.
But we anticipate more growth in 2023, as we work towards that target.
Next question what are the company's plans for deploying its cash.
Yeah, Matt I'll take that so that's a good good question.
We're very fortunate to be back with a very healthy LNG, we've got roughly $31 million in cash right now and.
I will now.
<unk> in the filing that this quarter, we put about $20 million of our cash or at least the cash is there.
Highly liquid marketable securities.
Treasuries AAA bonds and such.
We're looking to take advantage of.
The interest rate in the market today.
If you want any more on that you can take out the Q filing.
Overall, our large cash balance.
But the patient and smart.
We can evaluate and act on high ROI opportunities organically and Inorganically.
Where I do.
We've got things in the pipeline and we're looking to drive scale as an organization to maximize the shareholder value.
So at any given time as the mix of capital allocation initiatives and review.
As we make these decisions and communicate them there'll be pushed into our filings with the SEC.
The next question is for Bob when do you anticipate aware I E contributing to top line revenue.
That's a good question.
As we launch it we anticipated where I'd to nominally contribute to Q4 revenue.
As you know we're ideas appear SaaS pay as you go model.
SaaS becomes a more material contributor to our top line revenue, we'll look at providing additional metrics like bookings and backlogs in our quarterly updates.
Bob are you still expecting to be cash breakeven on an operating basis by the end of next year.
Yes, we continue to anticipate crossing over to adjusted EBITDA profitability by the end of 2023.
Given the current impact of the macro economic headwinds the exact timing is still unknown at this point.
But nevertheless, we are comfortable with our current cost structure and do not anticipating adding significant opex in the near future.
Okay.
Thanks, Bob.
How should investors think about your breakeven revenue run rate quarterly or annual.
Yes, I think that.
<unk>.
We think our current cost structure will remain relatively stable.
Recently for the most part and we will continue to remain that way going forward.
And with that trajectory you can see that.
We need about $5 5 million of quarterly revenue.
They hit that breakeven mark.
That scene.
Attainable with.
The growth that Bob was just talking about.
Checking that later on.
And we will continue that way.
Our cost of goods remain nominal and that will stay that way as long as aware I'd SaaS platform remained nominal part is that that contribute more significantly to the top line. It will increase our cost of goods a bit.
Adjusted target, but otherwise.
Growth in topline revenue will help us achieve cash breakeven.
Thanks, David another one for you can you.
42% decline in subscription revenue year over year.
Hey, Matt.
Tricky subscription revenue.
Yes, it would be very very flat.
As described in the past.
Due to the on Prem nature and other attribute our revenue recognition around this.
Based off of the committed.
So in Q3 2022, we had about 400000 of revenue compared to $1 1 million last year, but overall for the nine months were flat at $2 2 million in both the 2022 and 2021.
The Big difference is that in Q3 of 2021, we booked a significant amount of revenue from existing customers that renewed for multiple years that was.
The difference then.
It is now so.
As a result, instead of our typical annual revenue spike from those renewals.
In 2022, because these customers on the good news side they are locked into 2023.
But.
We saw an unusual one or increase for revenue recognition in 2021.
Otherwise our practices. Since then has been to sign and renew contracts or one year basis.
We.
Ignite that committed value at the time of signing or the time of.
Renewal, which causes the typical annual slate.
Be clear.
There was no lost revenues in any event, we just recognize more in 2021.
In 2022.
Thanks, David.
What were the number of Gnome transactions in Q3.
Yeah, Matt as we've mentioned before we believe recurring revenue is a bit more reflective indicator of the continued adoption of nuomi because our company's transitioning.
<unk> based platform and.
The mix of transaction and user based contract.
As we mentioned Brian .
89% of our Q3 revenue was recurring very good indicators there.
And in the past, we disclosed transaction numbers, because there was an early indicator of newly adoption and our transition to a recurring revenue model.
Now we are seeing customers renewing at higher volume.
Very heartening.
We just recently signed a customer that last year or this current.
Current year that just ended had about 600 700000 transactions.
As their committed minimum they went over it.
So we renewed them for next year 2 million transactions.
Almost a three times increase for them.
Thanks, David Bob and what ways as Craig made a noticeable impact on the organization.
Yes, great question Matt.
We're excited to have Greg on the team and the few months that he's been here Craig's got right to work and I'll give you a couple of quick examples in some quick wins, so he's identified personnel and skills gaps things working with HR to quickly fill those positions as well as providing training.
Refining the sales process to close the gaps and prevent any leakage in the in the closure.
Proactively engaging with partners to accelerate the expansion.
Demonstrating leadership through <unk>.
Inspiring demeanor challenging the sales team for improve personal accountability.
He is also identifying gaps in the sales Tech staff.
The source of the necessary tools to better enable the team for success.
And these are just a couple of ways I mean, we look forward to.
Tackling the initiatives the outline.
Now these immediate impacts lead to an impact on revenue.
Mentioned earlier he is out at money 2020.
Yes.
Firsthand.
<unk> from our customers.
Thanks, Bob Our next question, how many customers are trialling aware I E.
As I've previously mentioned there are about a dozen customers that we're in a beta program prior to this weeks where I'd launch.
We're looking to convert those customers to the latest release and expect to add more customers this quarter.
No.
And I believe we closed one wondering were out there right Greg.
Yes.
Got it our next question of warehouses $1 42 per share in net cash versus stock price of $1 86.
The market is giving little to no credit for where its operating business. Why do you think this is and what is the market missing what is your plan to correct.
Yes. Thanks.
Yes, that's a tough one I wish I knew exactly what our.
They are pulling the market, where we're thinking certainly.
Management team.
We feel that.
The company is operating well our fundamentals are very strong we talked about our cash balance our ability to grow.
Greg mentioned on the call what he's doing to kind of transform the organization.
The best I can say right now is that.
The market is saying.
It proved.
Crude that we.
We have the sales potential.
Talking to.
We will start to see the growth that Bob was talking about.
And yes.
So we're feeling.
Quite recognize just how much.
The cash in assets, where it has.
On the on the books right now.
Thanks, Dave.
Next question what are you going to sell something revenues declining what is the problem.
Sure.
I'll take this.
Yes.
Think that we've had we've got some really strong indicators right. We are seeing expansion with our existing customers, which.
When transactions go up demand goes up we're just going to equate to people in other companies looking.
Force solutions, we have a really robust pipeline.
Some things pushed out we have seen delays on people wanting to spend cash and commit.
When.
Unless they are.
In almost need to move to something so deals are taking longer.
The third piece is.
We sell predominantly to the enterprise right now outside of aware idea and this is one of the reasons, we launched SaaS low cost solution. So that we can get much more of a repeatable.
The stream of customers coming on board the enterprise takes longer theres longer decision times Rfps things along those lines that can equate to a longer sales cycle, which delays it.
So for US our focus is being in multiple revenue streams with different types of customers and different types of products.
And we're very bullish on on what we'll see coming in in Q4 and Q1 into next year.
Thanks, Craig next question are there cost savings opportunities to be had over the next 12 months should negative macro conditions continue.
Hey, I've got this Matt.
Okay.
Yes.
The management team here to take a very disciplined approach looking at our growth opportunities, what we should be investing in.
Where we should be spending our money.
As we as we look over the next 12 months.
Nobody knows exactly what will happen, we do see growth and are ahead of us we see strong pipeline, we see good opportunities and everything we've talked about.
Should things upset that end.
The growth not happen, we have strong cash reserves that allow us to be flexible.
But we will also be wise with the cost basis of the company.
There is nothing right now that we feel like is.
Is excessive.
But we will have a very disciplined approach to where we invest and where we don't.
Thanks, David next one is for you were there any one time or severance related charges in the quarter that will not repeat.
Yes, that's a good question.
To call out here you may have noticed our EBITDA for Q3 was.
Markedly worse than it was last quarter and that is because there were a couple of unusual costs in there with the change in the sales organization we had some.
Severance and.
Recruiting type expenses that are unusual for the business.
In addition, you may notice on.
On our Q filing that.
We increased our bad debt reserve.
We're partnered with a startup company that in this environment. There. They are funding is.
Question will and so we thought it prudent to.
Some reserves.
Overall.
That could impact more of our of our customer base, but.
Most of our customers are good solid bank government customers. So we don't expect that to be any worse.
Next one is for Craig the new SaaS product do you anticipate that customers that currently pay for licenses will transition to SaaS and how does that change the overall revenue profile of the company.
Sure Yes.
As I talked a little bit about as we move to <unk>.
More of a SaaS.
Focus.
And products.
Description revenue is going to continue to increase I think where our focus is is delivering the solution that the customer needs. So if it's in the cloud or SaaS based platform something that has a low cost.
And easy to implement.
But with little customization versus something that needs to be on premise with heavy customization. We can go either way so for us our focus will be continue to be on the customer and providing a solution that they need.
While also moving more and more towards a subscription based revenue.
Yeah.
Thanks, Greg at this time. This concludes our question and answer session question wasn't answered please email me or the IR team at AWS.
Gateway IR Dot Com I would now like to turn the call back over to Bob for closing remarks.
Yes, Thanks, Matt.
I want to thank everyone for joining us on today's call.
Also want to thank our employees partners and shareholders for their continued support.
As a reminder, you may learn more about our strategy and the investor presentation available on our website.
And we look forward to updating you on <unk> progress on our next call Matt.
Thank you Bob I'd like to remind everyone that our reporting and todays call will be available for replay via a link in the investor section of the company's website.
Thank you for joining us today for <unk> third quarter 2022 conference call you may now disconnect.