Q4 2023 OneSpan Inc Earnings Call
Yeah.
Good day and thank you for standing by welcome to the one span fourth quarter 2023 earnings Conference call.
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I would now like to hand, the conference over to Joe Maxa, Vice President of Investor Relations. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining the <unk> fourth quarter and full year 2023 earnings Conference call. This call is being webcast and can be accessed on the Investor Relations section of one spans website at investors Dot one dot com.
Joining me on the call today is Victor La modulate, our interim Chief Executive Officer, and Jorge Martell, Our Chief Financial Officer.
This afternoon after market close once been issued a press release announcing results for our fourth quarter and full year 2023 to.
To access a copy of the press release and other Investor information. Please visit our web site.
Following our prepared comments today, we will open the call for questions. Please.
Please note that statements made during this conference call that relate to future plans events or performance, including the outlook for full year 2024, and other long term financial targets are forward looking statements.
These statements involve risks and uncertainties and are based on current assumptions.
Consequently, actual results could differ materially from the expectations expressed in these forward looking statements.
I direct your attention to today's press release, and the company's filings with the U S Securities and Exchange Commission for a discussion of such risks and uncertainties.
Also note that certain financial measures that may be discussed on this call are expressed on a non-GAAP basis and have been adjusted from a related GAAP financial measure we.
We have provided an explanation for and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the earnings press release.
In addition, please note that the date of this conference call is March six 2020 for any forward looking statements and related assumptions are made as of this date, except as required by law. We undertake no obligation to update these statements as a result of new information or future events or for any other reason.
I'll now turn the call over to Victor.
Thank you Jeff.
Good afternoon, everyone. Thank you for joining us I would like to begin today's call by sharing my perspective on what's there.
Joined the company two months ago I was already impressed with its strong customer relationships solution set and the difficult, but important decisions that hit me to right size its cost structure, a refocus on driving efficient revenue growth profitability and cash flow.
Today I'm, even more impressed we have great assets to build upon including more than 60% of the world's largest banks as customers industry.
Industry, leading authentication and transaction for any technologies and an enterprise class E signature solution.
And we have talented employees across the organization I have met many of them in my first two months and I've seen firsthand a strong work ethic and dedication to operational excellence.
In the short run we are focused on continuing our operational improvements, which began last year over the longer run we will work towards identifying those areas in which our offerings put us at a competitive advantage vis vis other providers I have been with one spend only a couple of months on our company.
With that we will be able to reorient our offerings over time towards areas more highly valued by our customers and prospects.
Turning to our fourth quarter results first I want to congratulate the team on a solid quarter their hard work across the board in 2023 resulted in a strong end to the year, including 11% year over year revenue growth to $63 million, 11% AOR growth to $155 million in it.
Adjusted EBITDA of $11 2 million or 18% of revenue, representing our highest quarterly adjusted EBITDA margin in several years.
During the quarter, we reduced head count by approximately 5% and executed on several vendor related savings as well, resulting in an annualized cost savings of more than $15 million for the year annualized cost savings from our cost reduction actions totaled more than $58 million.
He will provide more details or annualized cost savings during his financial review.
Turning to our business units during the quarter, both segments had double digit year over year revenue growth driven primarily by expansion in existing customers and a sequential increase in profitability, which benefited from increased revenue and lower operating expenses, partially attributed to restructuring activities.
Revenue in our security solutions business unit was primarily driven by financial services customers, who value our industry, leading software and hardware solutions to mitigate potential hacking attacks.
Growth in software was driven by expansion of mobile security and authentication licenses from existing customers. We also had a significant security software win in the health care vertical with an existing esignature customer this customer signed a three year upper six figure contract for our mobile security cloud offering.
<unk> and identity verification solutions for electronic prescribing of controlled substances use case.
We saw double digit growth in DIGIPASS hardware tokens in the fourth quarter, which benefited in part from a few hardware deals that were originally expected to close in the first quarter of 2024.
Looking at the rest of 2024, and similarly to last year at this time visibility into DIGIPASS orders as strong at our large banking customers, which account for the majority of our hardware revenue.
We have less visibility in the mid market banking sector, particularly due to macroeconomic conditions in that segment over the past 12 months.
In 2023, we saw a shift in hardware demand towards our more sophisticated croteau devices and through a combination of mobile and hardware endpoint authentication solutions. We expect this trend to continue in 2024.
This year, we plan to continue focusing our customer expansion opportunities and in driving new logo growth. We're also rebuilding our channel network to help grow our topline and plan to introduce new products, such as DIGIPASS FX, one buyer, which was announced last quarter and targets the workforce application market.
Turning to our digital agreements business unit.
In the fourth quarter, we saw the expansion of several six and seven figure renewal contracts from enterprise customers willing to spend on important projects with stronger ROI.
For example, our three year customer contract up for renewal in the financial services industry more than doubled in size to high single digit millions over the term of the subscription.
This customer is using our E signatures in more than 100 use cases across its organization and comment on the outstanding level of support from a professional services and support teams the ease of integration and great ROI.
New logo attainment and increased sales and marketing productivity remain core to our long term digital agreements growth strategy. We expect improved performance from our sales team. This year have a goal of continuous improvement and we will strive to deliver more value to our customers every month.
Next I'll summarize our goals and objectives before turning the call over to Jorge to review our financials.
We are committed to achieving the rule of 40 in.
In recent quarters, we made several changes to accelerate this path, including the accretion of two business units to help drive operational excellence significant right sizing to better align our cost with our growth profile and increased focus on operational rigor across the company and the sunsetting of solution offerings with lower ROI.
To name a few.
We are driving towards our goal of attaining a level of 30% under the rule of 40 framework by the time, we exit this year.
I am working with the team to better leverage our competitive advantages and improve our growth profile as we mature our sales and marketing organizations focus on streamlining our cost structure and enhance our operational efficiency.
As you can see from our Q4 results, we are making progress and I believe we are positioned to achieve our 2024 targets.
However, we still have work to do and we will continue to closely monitor our go to market metrics to help ensure we achieve our profitability commitments.
Regarding capital allocation, we used more than $29 million in cash to repurchase common stock in 2023.
Including the $25 million modified Dutch auction tender offer we completed in December.
We expect to consider returning additional capital to shareholders in future quarters, as we balanced revenue growth profitability and cash generation.
I believe our decisions to focus on driving efficient revenue growth with increased profitability and cash generation are the right strategic and operational decisions for one space and will help us to achieve our commitment to create and return value to our shareholders.
With that I will turn the call over to Jorge.
Okay.
Thank you Victor and good afternoon, everybody before reviewing our fourth quarter and full year 2023 of results I will provide an update on the restructuring actions, we have taken to rebalance our cost structure to help drive profitability.
As Victor mentioned, we've reduced head count by about 5% in the fourth quarter net head count reduction from the time, we started taking action. During Q2 2023 through December 31, 2023 was about 24%.
We achieved annualized cost savings in excess of $15 million in the fourth quarter.
And in excess of $58 million for the full year.
We expect additional annualized savings approximating $5 million by the end of Q1 2024, most of which has already been executed on <unk>.
Lastly, completing our restructuring activities.
We expect to have some additional cost savings later in 2024, and now anticipate reaching 64% to $65 million in annualized cost savings by the end of 2024 up from 60% to $65 million by the end of 2025 that we projected previously.
Turning to our financial results.
11% year over year in 2000 $23 million to $155 million.
Specific to subscription contracts grew 18% to $125 million and accounted for approximately 81% of total AR.
Net retention rate or <unk> was 110%.
We've seen modest improvements in these metrics in recent quarters, primarily driven by expansion at existing customers.
Fourth quarter 2023 revenue grew 11% to $62 9 million as compared to the same period last year, driven by 17% growth in digital agreements and 10% growth in security solutions for the full year 2023 revenue increased 7% to 200.
$35 1 million.
Subscription revenue grew 15% to $27 3 million in the fourth quarter led by 17% growth in digital agreements in putting 28% growth in SaaS revenue consistent primarily of our esignature solution.
Q4 security solutions subscription revenue grew 13% driven by growth in mobile security and authentication of software products.
For the full year 2023, subsequent set of revenue grew 19% to $106 4 million.
Maintenance and support revenue declined <unk> 1 million year over year to $11 3 million in the fourth quarter of 2023.
For the full year 2023 maintenance and support revenue declined 4% as compared to six per side for the full year 2022.
Both in maintenance and support revenue from on premise subscription contracts in both Q4 and for the full year 2023.
Offset by the expected declines from legacy perpetual contracts, we expect this trend to continue in the coming quarters.
Legacy perpetual maintenance renewal contracts are converted to subscription contracts overtime.
Professional services and other revenue, which includes perpetual software licenses declined by zero point $2 million in Q4 to $1 7 million and by $1 7 million to $6 3 million for the full year 2023.
This was primarily due to our strategic decision to focus on selling only a new recurring revenue contracts a few years ago.
Perpetual software licenses were up approximately 1% of total revenue for the quarter and year.
DIGIPASS hardware token revenue grew 16% in the fourth quarter and 3% for the full year 2023 and included a few contracts that closed in the quarter that were originally expected to close in the first quarter of 2024.
These contracts added approximately $2 million to our Q4 projected revenue.
Fourth quarter gross margin was 69% compared to 67% in the prior year quarter.
Driven primarily by favorable product mix and a $1 4 million inventory write a reversal of an impairment charge taken in the second quarter of 2023, partially offset by depreciation of suffered capitalized costs, which we began depreciating in 2023.
For the full year 2023, gross margin was 67% versus 68% in the prior year product mix depreciation or suffer capitalization costs in 2023, and a credit from a cloud service provider that benefited our 2022 gross margin accounted for.
The majority of the year over year change.
Fourth quarter GAAP operating income was $1 8 million compared to an operating loss of $4 million in the fourth quarter of last year.
Increases in revenue and gross profit margin and a decrease in operating expenses, primarily from lower head count related costs for <unk>.
Partially offset by an increase in restructuring and related charges.
Full year 2023, GAAP operating loss was $28 9 million and included $17 3 million in restructuring and $3 million and other onetime costs. This compares to 2022 GAAP operating loss of $27 1 million, which included 13.
One 3 million in restructuring and $4 3 million in other one time costs.
GAAP net income per share was <unk> <unk> in the fourth quarter of 2023 compared to a GAAP net loss per share of <unk> in the same period last year.
GAAP net loss per share was <unk> 74, and 36 for the full year 2023, and 2022, respectively.
non-GAAP earnings per share, which excludes long term incentive compensation amortization restructuring charges other nonrecurring items and the impact of tax adjustments was <unk> 19 in the fourth quarter of 2023 and zero for the full year 2023.
This compares to non-GAAP earnings per share of <unk> <unk> in the fourth quarter of 2022, and non-GAAP loss per share of <unk> for the full year 2022.
Fourth quarter, adjusted EBITDA, and adjusted EBITDA margin was $11.2 million and 18% as compared to $3 2 million and 6% in the same period of last year, respectively.
Full year 2023, adjusted EBITDA, and adjusted EBIT margin was $12 million and 5% compared to $6 4 million and 3% for the prior year respectively.
I will now discuss our financial results for our security solutions business unit.
AOR grew 10% year over year in the fourth quarter to $101 million.
Subscription <unk> grew 19% to $75 million and was partially offset by an expected decline in perpetual maintenance.
We plan to continue transitioning existing perpetual base maintenance contracts to subscription contracts overtime.
Fourth quarter and full year, 2023 revenue increased 10% to $48 4 million and 8% to 184.2 million respectively.
Subscription revenue grew 13% to $14 1 million in the fourth quarter and 28% to $66 million for the full year, driven primarily by our on premise mobile security and authentication solutions. As a reminder, we had very strong renewals in the first quarter.
A 2023.
Growth in Q4 on premise subscription revenue that was partially offset by a modest decline in SaaS revenue, primarily attributed to the sunsetting of our legacy deal flow solution.
Maintenance and support revenue, which consists primarily of revenue from on premise perpetual and subscription contracts declined $1 million year over year in Q4, 2023 to $10 3 million.
As mentioned previously <unk> revenue from subscription contracts, mostly offset the expected decline in perpetual contracts.
It should pass hardwood token revenue increased 16% in the quarter and 3% for the full year.
Q4, 2023 gross profit margin was 6% to 7% as compared to 64% in the same period last year. The increase in margin is primarily attributable to favorable product mix and then Christian subscription revenue and the reversal of the $1 4 million of inventory.
Write off discussed earlier.
As a reminder, hardware gross margin can fluctuate in any given quarter based on product and customer mix.
Operating income was $20 4 million and operating margin was 42% compared to $10 7 million and 24% in last year's fourth quarter.
An increase in revenue and gross profit margin lower operating expenses and the reallocation of certain expenses to digital agreements in 2023 accounted for the improved performance.
Now turning to digital agreements.
<unk> grew 15% year over year to $54 million.
Subscription <unk> grew 18% to $49 million.
Fourth quarter and full year, 2023 revenue grew 17% and 5% to $14 5 million and $59 million, respectively as compared to the same periods in 2022.
Subsequent server revenue grew 17% in Q4, 2023, and 9% for the year to $13 2 million and $45 million respectively.
Digital agreements SaaS revenue accounts for the majority of the subscription revenue and grew 28% in the fourth quarter to $13 million and included <unk> $5 million of overage fees that we do not expect to repeat in future quarters for.
For the year SaaS revenue grew 22% to $45 5 million.
As discussed in prior quarters, we are sunsetting. The on premise version of our <unk> solution and expect minimal subscription revenue from this solution going forward.
For comparison purposes on premise subscription revenue contributed <unk> 4 million and $4 8 million for the full year 2023, and 2022, respectively.
0.2 million and $1 1 million in the fourth quarter of 2023 and 2022, respectively.
Is there a point 2 million recognized in Q4 2023 watts from certain customers migrate into our cloud platform that needed more time to complete that transition.
Maintenance and support revenue, which consists primarily of revenue from existing on premise E seem to subscription contracts was flat year over year at $1 million in the fourth quarter.
We expect this revenue line to trend lower in the coming quarters as customers complete their migration to the cloud.
Fourth quarter gross profit margin was 75% as compared to 79% in the prior year quarter the.
The declining gross margin is primarily attributed to the appreciation of suffer capitalization costs in 2023, and a credit from a cloud service provider in 2022 that did not repeat in 2023.
These items were partially offset by the average fees, we received in the fourth quarter of 2023.
Putting these items Q4 2023 gross profit margin would have been approximately 270 basis points higher than the prior year.
Operating loss was zero point $7 million as compared to an operating profit up to $1 5 million in Q4 of last year and an operating loss of $4 7 million last quarter.
As a reminder, in Q1 2023, we'll reallocate expenses from our security solutions reporting segment to digital agreements, which accounted for the majority of the year over year change in profitability in the fourth quarter, along with the items just discussed.
Our restructuring efforts and a focus on efficient growth contributed to the Q4 2023 sequential improvement.
Turning to our balance sheet, we ended the fourth quarter of 2023 with $40 to $1 5 million in cash cash equivalents and short term investments compared to $98 5 million at the end of 2022.
Can use of cash in 2023 include approximately $29 million to repurchase common stock.
Putting 25 million via the modified Dutch tender offer we completed in December of 2023.
$12 5 million in capital expenditures, primarily capitalized software costs $12 million and restructuring payments and $2 million of acquisition related costs.
We have no long term debt.
Consistent with the changes we made in our operating model last year, we expect to generate positive cash flows from operations in 2024.
Geographically our revenue mix by region in the fourth quarter of 2023 was 49% for EMEA.
34% from the Americas, and 17% from Asia Pacific.
This compares to 46%, 35% and 19% from the same regions in the fourth quarter of last year, respectively.
For the full year 2023, the revenue mix by region was 47% from EMEA.
34% from the Americas, and 18% from Asia Pacific compared to 46%, 35% and 19% for the same readjusting 2022, respectively.
I will now provide an update to our financial outlook.
The adjustments, we made to our operating model in 2023 to rebalance our cost structure with our expected growth profile combined with our focus on operational rigor and driving efficient growth the salt that in our expectation of a substantial improvement in our 2020 for cash generation and profitability.
For the full year 2024, we expect.
Revenue to be in the range of $238 million to $246 million consistent with our previously communicated target range of low to mid single digit growth.
<unk> to be in the range of $160 million to $168 million and adjusted EBITDA to be in the range of $47 million to $52 million.
System with a low to mid range of our previously communicated target of 20% to 23% margin for the year.
We also expect to generate cash from operations in 2024 in the range of $39 million to $43 million.
Which includes approximately $5 million in restructuring related payments and for capex to be in the range of 10% to $11 million, primarily consistent with capitalized software costs.
Consistent with our focus on operational efficiency and best practices, we have made changes to improve the long term financial position of our company.
As discussed in prior calls we made a decision to sunset our deal flow on premise esignature and Standalone risk analytic solutions and that many customers of these products are transitioning to our cloud based <unk> seen it for and other offerings.
We estimate there will be a net impact to both revenue and <unk> of less than one $5 million from sunset products by the end of 2024.
Beginning January one 2024, we transitioned our identity verification solutions from our security business unit to a digital agreements business unit to reflect this greater alignment with our <unk> product portfolio.
We expect the sunsetting of products to result in a modest sequential decline in first quarter 2024.
And in our are primarily related to the timing of contract explorations.
By business unit and considering the relocation of identity verification to digital agreements, we expect a modest first quarter sequential increase in digital agreements.
Offset by a sequential decrease in security solutions.
We relocated as certain costs in digital agreements, mainly related to customer support and professional services from sales and marketing expenses to cost of revenues.
This change combined with the unexpected increase in depreciation of suffer capitalization costs, which we started depreciating in 2023 is expected to reduce <unk> gross margin by approximately 700 basis points in 2024.
Excluding these items, we estimate digital agreements gross profit margin will increase by about 200 basis points in 2024 as compared to 2023.
That concludes my remarks, Victor and I will now be happy to take your questions.
As a reminder, if you'd like to ask a question at this time. Please press star one one on your Touchtone telephone.
Please standby, while we compile the Q&A roster.
Again that is star one one to ask a question.
Our first question will come from the line of Rudy Kessinger with D. A Davidson.
Great Hey, guys. Thanks for taking my questions.
We're moving pieces on this model that I'm sure anybody on this call can count Jorge could you just.
I mean number of comments I guess gross margins I'll keep it simple 67% this year we should.
Should they be next year.
Hey, everybody how are you doing.
Answer the question. So I would expect for next year, there's a few dynamics that I want to walk through before I tell you a number.
So first one is next year.
You heard about the increased amortization or depreciation of cop silver so thats going to continue to impact <unk>.
Higher than he did this this year right.
Second component is on the security hardware is the mix of.
MBS versus APAC.
Clients and the product mix as well with drives that.
Gross margin for that particular business and so we could we continue to see we ended this year with better than expected APAC versus EMEA, we expect in.
In 2020 for things to normalize the best and we'll see that more consistency EMEA versus APAC markets. So that we will see Oliver to drop.
So net net I think you would expect the key 2020 for gross margin to be consistent with 2023.
Puts and takes for consistent is kind of the high level of asthma.
That's helpful.
And then just to read it back.
To make sure I can.
Got it all correctly.
We should be expecting maintenance and support in both digital agreements and security solutions to continue to decline and then on hardware.
It was actually a pretty strong quarter were there any pull forward then and do you expect hardware to be flat or up slightly again next year down.
So you are correct.
Maintenance and support so you would expect that to continue to decrease again thats by the side on the da side of the house.
At the end of life of on premise to SaaS as those conversion. So you'll expect that lower on the security side again do you expect that lower because of the perpetual to turn a corner versions right. So I think that's by the science. So the answer is yes, they're on the hardware. We did have a very strong Q4 2023, because of the product mix and the client.
Because as I mentioned.
APAC generally comes with higher margins.
Some of the largest banks.
At EMEA at lower margins on average.
And so we expect that to normalize a little bit in 2020 for some of the deals that.
We're accelerating the wood from upside from Q1 to Q4 included higher margins. Okay. So that's why when you look at Q1.
Q1, 2020 forward you would expect not only seasonally lower revenue on harder, which is normally normal normal for a company our size, but also because we pulled some of the better margin deals into Q4, right. So you would expect that to impact as well in Q1.
Okay, and then Victor I guess, just more kind of a high level I haven't been here.
For a few months now just where do you see the opportunities to drive higher levels of growth on a sustainable basis. As we all know that business has struggled to really achieve that for a long time, now where where do you see room to improve the go to market.
Organization and drive higher levels of growth.
Yes, Thanks, Rudy I mean, there are a couple of things one I've been here just two months yesterday. It was actually a two month anniversary. So I don't want to get into too many details, but I think on the security side of the business. There are opportunities. We did mention a new product last quarter. We have other things planned for later in the year.
And there are some adjacent markets that we haven't really been in.
Like workforce authentication that might provide opportunities.
As well.
So.
Overall, we're going to be looking to.
Identify those and even within our existing businesses segment the <unk>.
Customer base, so that we can spend our time on the highest value areas. So theres some potential growth in that way as well.
Got it that's it for me I'll jump back in queue.
Thank you Rudy.
Yeah.
Our next question will come from the line of Gray Powell with BTG.
Hey, thanks.
I'm just wondering if that was for great talent My line cut out there.
Yes, we can hear you great.
Okay, great. Thank you very much.
A few questions on my side.
Maybe to start off Victor so.
Yes.
Been at the firm for 60 days.
What surprised you the most so far and then just kind of following up on <unk> questions. I mean in terms of potential changes I know you don't want to say too much but should we expect them to be more operational in nature, just getting more efficient or more strategic.
Thanks, Greg what surprised me I don't know if surprises exactly the right word, but one of the things that really struck me as I got evolved over the last 60 days is the strength of the customer relationships, we have 60 of the.
The top 100 banks is an incredible asset for the company. So that's the first thing and then the second thing is the team has been working really hard and you can see it in the execution in Q4 did very well through a lot of change Rudy Ed mentioned, the amount of moving pieces and there's certainly been a lot of change over the last six months of the teams executed very.
Very well as to your second question operational efficiency is absolutely an important.
Feature of our 2024 plants, it's the overriding feature I think.
But we are also going to explore areas for increased growth as we do that though we're going to be.
We're going to do it in an efficient way. So if we decide to move into an adjacent market you should not expect us to go hire 30 or 40 salespeople to go after it.
As we identify opportunities will test will iterate and we'll try to do it in a super efficient fashion.
Understood. Okay. That's good to hear and then I just had a question on sort of the.
The cost savings that you achieved last year. So you have some good charts.
Slide decks over the course of the year I, just want to make sure I understand it correctly so.
That cost savings totaled close to $59 million at the end of 2023 I guess my question is like what was the starting point on the accumulative number like we know that 15 five came out in Q4, we know that $24 million came out in.
In Q3.
Just wondering how much came out during the first half of the year, we tried to like sort of.
Just just just lineup parallel.
How things should have expanded.
Yes, so I can take that one Greg. So if you look at so Q2 cumulative it and you have to take a step back and think about we have the phase one and phase II phase one was completed.
The range for that it was 10 to 12, we ended up I think 11 point that you're so close to the high end and that was completed early in 2022.
Then phase II kicked off and so I would say Q1 and Q2 from phase two plus a little bit the new actions that we announced in Q2 that totaled about $19 $1 million right and so that was completed that that is the number you're looking for is $19 1 million in Q2 sort of like year to date and then in Q3, you add another 24.
<unk> million dollars that we that we discussed last quarter, plus the $15 5 million this quarter Thats your $58 five.
Understood.
Trend line was $19 $24 15, and a half.
Q2, Q3 Q4, you got it Okay, and then last one on my side.
Alright so.
I mean, I understand that the cost savings like phase in right.
In the quarter numbers.
But we're talking about.
Was there was there anything like.
One time in nature that created a headwind because we're talking about like huge cost saving numbers.
But EBITDA for the year it went from like $6 million to $12 million.
I'm just trying to reconcile like what appears to be very large cost saving numbers.
<unk> versus <unk>.
Yes.
The lower growth on EBITDA in 2023, yes, I think I think part of the.
Part of the equation that you need to factor in is that we started in Q1 and we exited Q4, but we started in Q1 and the first half of Q2.
Really investing heavily in cell phone market and the theme that's that's where their pizza you also have to factor in.
Just to give you an example.
Sellers, we hired I believe in the first four months of 2023.
About close to 38% 39 sellers right and so when you start taking that investment that we made earlier in the year than the offset with these cost savings do you have to take all into account to get to that number okay.
Okay. That's very helpful. Thank you.
As a reminder, that is star one to ask a question.
Our next question will come from the line of Alex Hoffmann with Sidoti.
Hi, Thanks This is Alan.
Alex Hockman on for Amit So as Sean.
My first question I would love to hear a little bit more context around the guidance. So I think you mentioned that you're on target.
The low to middle of guidance for revenue and EBITDA can you talk about some of the scenarios that bring you from the low to mid and maybe even <unk>.
And.
Yeah, Hey, Alex how are you doing thanks for the question. So I think part of that range, we still account for the Lumpiness that you see on the hardware business.
As you know is lumpy because of the timing of shipments so part part of that.
The guide there is to consider that lumpiness.
The component is <unk>.
Primarily on the term.
On the security software.
That is youll see theres, sometimes it pops or revenue right and that's because again is primarily recognized upfront from a license perspective term license perspective, and so some of these deal may or may not close in a particular quarter particular year youll have those pops.
You have a lot more.
Ah seasonality or expectation of trends is more on the us completely SaaS doesn't exist yet.
So.
That doesn't play that much of a factor, although obviously there is some.
New logo, new revenue potential there. So those are the three factors that I can comment comment to you regarding the range.
Thank you I appreciate that.
And I think you very briefly mentioned sales force, but.
Wondering if you could elaborate on average what level of productivity would you say the sales force has achieved and how much room for improvement do you think there is.
Yes, we don't we don't normally comment on those metrics Alex.
What are the things that a Vegas I'd love to get your you can chime in here as well, but what are the things that we're this has been tasked with obviously you said than to find efficiencies and that includes sales and marketing and that includes working with semi and semi or the gms to improve.
Our efficiency off ourselves a dollar spent as well as the productivity for our sellers. So I think I'll turn it over to you for additional comments.
Yes, thanks, Jorge so not just at <unk>, but in any company. It takes typically it takes a while for our salespeople to ramp up and become fully productive and one of the things I think you saw one spent over the last few years as there were a whole bunch of new salespeople just started going through a six month or longer ramp up period and.
The productivity wasn't high at this point we have.
Jorge you can probably provide the details, but a much more tenured team than we had a year ago.
People, who have at least hit a year or very close to the year Mark and so naturally we expect that productivity to increase as there had been in a position us longer and have been working the accounts longer.
Yes.
Great I appreciate the context, that's all for me. Thank you.
That concludes today's question and answer session I would like to turn the call back to Joe Maxa for closing remarks. Thank.
Thank you everyone for joining us today, we appreciate your time and look forward to sharing our progress with you next quarter. Thanks, again and have a nice day.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].
Yes.
Okay.
Okay.
Okay.