Q3 2024 Upland Software Inc Earnings Call

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Operator: Thank you for standing by and welcome to the Upland Software 3rd Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and instructions for that will be given at that time.

Thank you for standing by and welcome to the Upland software second quarter 2024, adding cool.

At this time, all participants are in listen only mode.

Later, we will conduct a question and answer session and instructions for that will be given at that time.

Operator: The conference call will be recorded and simultaneously webcast at investor.uplandsoftware.com and a replay will be available there for 12 months. By now, everyone should have access to the third quarter 2024 earnings release, which was distributed today at 4 p.m. Eastern Time. If you've not received the release, it's available on Upland's website.

The conference call will be recorded and simultaneously webcast and invested to upland software dot com and a replay will be available for 12 months.

By now everyone should have access to the third quarter I just want to check your full earnings release, which was just too preachy today at four P. M. Eastern time, if you've not seized the release it's available on our website.

Jack McDonald: I'd now like to turn the call over to Jack McDonald, Chairman and CEO of Upland Software. Please go ahead, sir. All right, well, thank you.

I'd now like to turn the call FC Jack Mcdonald, Chairman and CEO of up in software. Please go ahead Sir.

Alright, well, thank you and welcome to our Q3 2024 earnings call I'm joined by Mike Hill, Our CFO today's call.

Jack McDonald: And welcome to our Q3 2024 earnings call. I'm joined by Mike Hill, our CFO on today's call.

Jack McDonald: I'll start with a Q3 review. And following that, Mike will provide some detail on the Q3 numbers and our guidance. After that, we'll open the call up for Q&A.

I'll start with our Q3 review and following that Mike will provide some detail on the Q3 numbers and our guidance after that we'll open the call up for Q&A, but before we get started Mike will read the safe Harbor statement.

Michael Hill: But before we get started, Mike will read the Safe Harvard Thank you, Jack. During today's call, we will include statements that are considered forward-looking within the meanings of the securities laws. A detailed discussion of the risks and uncertainties associated with such statements is contained in our periodic reports filed with the SEC. The forward-looking statements made today are based on our views and assumptions and on information currently available to Upland Management as of today. We do not intend or undertake any duty to release publicly any updates or revisions to any forward-looking statements.

Thank you Jack during today's call. We will include statements that are considered forward looking within the meaning of the securities laws, a detailed discussion of the risks and uncertainties associated with such statements is contained in our periodic reports filed with the SEC.

The forward looking statements made today are based on our views and assumptions and on.

Information currently available to upland management as of today, we do not intend or undertake any duty to release publicly any updates or revisions to any forward looking statements.

Michael Hill: On this call, Upland will refer to non-GAAP financial measures that, when used in combination with GAAP results, provide Upland management with additional analytical tools to understand its operations. Upland has provided reconciliations of non-GAAP measures to most comparable GAAP measures in our press release announcing our financial results, which are available on the Investor Relations section of our website.

On this call upland will refer to non-GAAP financial measures that when used in combination with GAAP results provide upland management with additional analytical tools to understand its operations upland has provided reconciliations of non-GAAP measures to the most comparable GAAP measures in our press release announcing our financial results, which are available on.

The Investor Relations section of our website. Please note that we're unable to reconcile any forward looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort with that I'll turn the call back over to Jack Alright. Thanks, Mike.

Michael Hill: Please note that we're unable to reconcile any forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

Jack McDonald: With that, I'll turn the call back over to Jack. All right. Thanks, Mike.

Jack McDonald: Here are the headlines. We beat our Q3 revenue guidance midpoint, and we met our adjusted EBITDA guidance midpoint. We welcomed 122 new customers to Upland in Q3, which includes 18 new major customers. And we expanded relationships with 312 existing customers, including 27 major expansions. These new and expanded customers have been across our portfolio and include a number of our new generative AI solutions.

Here are the headlines we beat our Q3 revenue guidance midpoint, and we met our adjusted EBITDA guidance midpoint, we welcomed 122, new customers to upland in Q3, which includes 18, new major customers and we expanded.

Hips with 312 existing customers, including 27 major expansions these new and expanded customers who've been across our portfolio and include a number of our new generative AI solutions, we continue to execute on our growth plan as I said.

Jack McDonald: We continue to execute on our growth plan, as I said on our Q2 call, our core organic growth in any given quarter this year is going to bounce around a bit based on year-over-year compares, but we are still forecasting to exit 2024 with positive core organic growth in the fourth quarter, setting us up for positive core organic growth in 2025. Q3 adjusted EBITDA was $14 million, which was up sequentially from $13.6 million in Q2. And as you can see from the midpoint of our Q4 guidance, we expect adjusted EBITDA to continue growing next quarter to $14.9 million, roughly a $60 million annualized run rate.

On our Q2 call our core organic growth in any given quarter. This year is going to bounce around a bit based on year over year compares but we are still forecasting to exit 2024 with positive core organic growth in the fourth quarter.

Setting us up for positive core organic growth in 2025.

Q3 adjusted EBITDA.

Was $14 million, which was up sequentially from $13 6 million in Q2, and as you can see from the midpoint of our Q4 guidance. We expect adjusted EBITDA to continue growing next quarter to 14.9 million roughly.

60 million dollar annualized run rate and of course, we continue to see a meaningful increase in EBITDA next year, and we're targeting adjusted EBITDA of the low to mid 60 millions.

Jack McDonald: And of course, we continue to see a meaningful increase in EBITDA next year. And we're targeting adjusted EBITDA of the low to mid $60 million next year.

Jack McDonald: So we are still setting up for 2025 with positive core organic growth and continued expansion of adjusted EBITDA.

Next year.

We are still setting up for 2025 with positive core organic growth and continued expansion of adjusted EBITDA.

Jack McDonald: On the product front in Q3, I'll note that we earned 72 badges in G2's fall 2024 market reports across our portfolio of products. That's up from 56 badges in the summer 2024 reports. Upland Right Answers, our AI knowledge management solution, garnered an impressive 17 badges, while Upland BA Insight, our enterprise search solution, secured several new recognitions. Also in the quarter, we announced the availability of Upland BA Insight for Microsoft Azure AI Search in the Microsoft Azure Marketplace and online store and exchange, providing applications and services for use on Azure. BA Insight customers can now take advantage of the productive and trusted Azure cloud platform with streamlined deployment and management.

On the product front in Q3 I'll note that we earned 72 batches in <unk> fall 2024 market reports across our portfolio of products.

Up from 56 batches in the summer 2024 reports up and right answers our AI knowledge management solution garnered an impressive 17 badges.

Upland VA inside our enterprise search solution secured several new recognitions.

Also in the quarter, we announced the availability of upland VA insight for Microsoft Azure, AI search and the Microsoft Azure marketplace, an online store and exchange, providing applications and services for use on Azure.

Inside customers can now take advantage of that productive and trusted Azure cloud platform with streamline deployment and management.

Jack McDonald: Built on Microsoft Azure AI Search, BA Insight for Azure AI Search combines the BA Insight user experience platform, which is called BA Insight Smart Hub, with over 90 connectors to enterprise systems. The solution securely brings user data into Azure AI Search and delivers intelligent, actionable content search experiences without bouncing between multiple systems. looking for the right information. And again, we're excited about BA Insight because those 90 plus enterprise connectors provide that needed last mile solution for enterprises looking to implement AI platforms within their environment.

Built on Microsoft Azure, AI search B, a insight for Azure AI search combines to be a insight user experience platform, which is called <unk> insight smart hub with over 90 connectors to enterprise systems solutions securely brings user data into Azure AI search.

And delivers intelligent actionable content search experiences without bouncing between multiple systems.

Looking for the right information and again, we're excited about VA insight because those 90 plus enterprise connectors.

By that needed last mile solution for enterprises looking to implement.

The AI.

Platforms within their.

Their environments.

Jack McDonald: For the second year in a row, Upland Right Answers has been named to the 2024 KM World AI 100, recognizing the top knowledge management companies leveraging the power of AI and other innovative software. This achievement supports Upland's and recognizes really Upland's extensive efforts in AI, integrating the technology and the products across the portfolio. And of course, we continue to release AI-powered innovations in customer service.

For the second year in a row up and right answers has been named to the 2024 K M World AI 100, recognizing the top knowledge management companies leveraging the power of AI and other innovative software. This achievement supports uplands and recognize it's really up in extensive efforts in AI integrating their technology and our products.

Across the portfolio.

Mike: Course, we continue to release AI powered innovations and customer solutions with that I'm going to turn the call over to Mike.

Michael Hill: With that, I'm going to turn the call over to All right, thank you, Jack. I'll cover the financial results for the third quarter 2024 and our outlook for the fourth quarter and full year 24. These results and our outlook for 2024 reflect our continued incremental sales, marketing and product investments pursuant to our growth plan, as well as the previously announced runoff of Sunset Asset Revenue.

Mike: Alright, Thank you Jack I'll cover the financial results for the third quarter 2024, and our outlook for the fourth quarter and full year 2004.

Mike: These results.

Mike: And our outlook for 2024 reflect our continued incremental sales marketing and product investments pursuant to our growth plan as well as the previously announced runoff of Sunset asset revenue.

Michael Hill: on the income statement. Total revenue for the third quarter was $66.7 million, representing a decrease of 10% year-over-year. Recurring revenue from subscription support declined 9% year-over-year to $63.8 million. Perpetual license revenue declined to $1.1 million in the third quarter, down from $1.5 million in the third quarter of 2023. Professional services revenue was $1.8 million for the quarter, a 32% year-over-year decline. These revenue declines are consistent with the planned runoff of Sunset Asset Revenue. Overall gross margin was 70% during the third quarter and our product gross margin was 72% or 75% when adding back depreciation and amortization, which we refer to as cash gross margin.

Mike: On the income statement total revenue for the third quarter was $66 7 million, representing a decrease of 10% year over year recurring revenue from subscription and support declined 9% year over year to $63 8 million perpetual license revenue declined to $1 1 million in the third quarter down from $1 5 million in the third.

Mike: <unk> 2023 professional services revenue was $1 8 million for the quarter of 32% year over year decline.

Mike: These revenue declines are consistent with the planned run off of Sunset asset revenue.

Mike: Overall gross margin was 70% during the third quarter and our product gross margin was 72% or 75% when adding back depreciation and amortization, which we refer to as cash gross margins.

Michael Hill: Operating expenses for the third quarter of 2024, excluding depreciation, amortization, and stock-based compensation, were $35.6 million for the quarter, worth 53% of total revenue. This is in line with our expectations and reflects the sales, marketing, and product investments we've been making as part of our growth plan. Our third quarter 2024 adjusted EBITDA was $14 million or 21% of total revenue down from $16.2 million or 22% of total revenue for the third quarter of 2023. This adjusted EBITDA year-over-year decline is as expected considering our growth investments and our decisions regarding sunset assets. However, you can see our adjusted EBITDA growing sequentially each quarter this year from $13.1 million in Q1 to $13.6 million in Q2 to $14 million in Q3 here and to a projected $14.9 million in Q4 based on the midpoint of our guidance.

Mike: Operating expenses for the third quarter of 2024, excluding depreciation amortization and stock based compensation were $35 6 million for the quarter were 53% of total revenue. This is in line with our expectations and reflects the sales marketing and product investments, we've been making as part of our growth plan.

Mike: Our third quarter 2024, adjusted EBITDA was $14 million or 21% of total revenue down from $16 2 million or 22% of total revenue for the third quarter of 2023.

Mike: This adjusted EBITDA year over year decline is an expected is as expected considering our growth investments and our decisions regarding sunset assets. However, you can see our adjusted EBITDA growing sequentially each quarter. This year from $13 1 million in Q1 to $13 6 million in Q2 to $14 million in Q3 here.

Mike: <unk> and to a projected $2014 9 million in Q4 based on the midpoint of our guidance.

Michael Hill: This has us exiting 2024 at almost 60 million of annual run rate adjusted EBITDA, and we're targeting adjusted EBITDA to be in the low to mid 60 millions next year, which we will confirm and more specifically quantify with our 2024 guidance as part of our Q4 and Q5. Also, I will note that in Q3, we recognized $9 million of deferred gain from the sale of half of our interest rate swaps a year ago. This recognition of this previously deferred gain was triggered by the $177 million paydown of debt during the quarter. The gain was recognized on our income statement in the interest expense net line item as a one-time benefit in Q3.

Mike: This has us exiting 2024 at almost $60 million of annual run rate adjusted EBITDA and we're targeting adjusted EBITDA to be in the low to mid $60 million next year, which we will confirm and more specifically quantify with our 2020 for our guidance as part of our Q4 earnings report.

Mike: Also I will note that in Q3, we recognized $9 million of deferred gain from the sale of half of our interest rate swaps a year ago. This recognition.

Mike: Of this previously deferred gain was triggered by the $177 million paydown of debt during the quarter.

Mike: The gain was recognized on our income statement in the interest expense net line item as a onetime benefit in Q3, we anticipate continuing to steadily pay down our outstanding term loans with our cash flow generation on a monthly basis, resulting in relatively insignificant amount of the remaining swap sale deferred gains to be recognized in future.

Michael Hill: We anticipate continuing to steadily pay down our outstanding term loans with our cash flow generation on a monthly basis, resulting in relatively insignificant amounts of the remaining swap sale deferred gains to be recognized in future quarters. After this pay down of $177 million of our debt during the quarter, at the end of Q3, we had outstanding net debt of approximately $241 million, factoring in the approximately $60 million of cash on balance. At the end of Q3, our growth debt was approximately $301 million. We still have in place our variable fixed interest rate swaps, which effectively fixed the interest rate at 5.4% on approximately $257 million of our outstanding debt as of September 30th, 2024.

Mike: Quarters.

Mike: After this pay down of $177 million of our debt during the quarter at the end of Q3, we had outstanding net debt of approximately $241 million factoring in the approximately $60 million of cash on balance sheet.

Mike: At the end of Q3, our gross debt was approximately $301 million.

Mike: We still have in place are variable fixed interest rate swaps, which effectively fixed the interest rate at five 4% on approximately $257 million of our outstanding debt as of September 32020 for the remaining $45 million of our outstanding debt floats at an interest rate of sofa, plus 385 basis points.

Michael Hill: The remaining $45 million of our outstanding debt floats at an interest rate of SOFR plus 385 basis points, which was 9.1% as of September 30th, 2024.

Mike: Which was nine 1% as of September 32024.

Michael Hill: Our revolver matured in August of 24 with no amounts drawn or outstanding at the time of maturity.

Mike: Our revolver matured in August 24, with no amounts drawn or outstanding at the time of maturity.

Jeffrey Rhee: Unknown Attendee, Jeffrey Rhee, Upland Software Inc I will note that our ongoing free cash flow generation is in addition to the approximate $60 million of cash on our balance sheet as of September 30, 2025. Now the guidance for the quarter ended December 31st, 2024, we expect reported total revenue to be between 65.9 and 71.9 million, including subscription support revenue between 60.2 and 65.2 million for a decline in total revenue of 5% of the midpoint from the quarter ended December 31st, 2023. Fourth quarter 2024 Adjusted EBITDA is expected to be between 13.4 and 16.4 million for an Adjusted EBITDA margin of 22% at the midpoint.

Mike: For cash flow for the third quarter of 2024, GAAP operating cash flow was $4 3 million and free cash flow was $4 2 million, which was in line with our expectations. As a reminder, our GAAP operating cash flow and free cash flow last year. In Q3, 2023 was benefited by the $25 million onetime.

Mike: Cash gain from the sale of half of our interest rate swaps.

Mike: I will note that our ongoing free cash flow generation is in addition to the approximate $60 million of cash on our balance sheet as of September 32024.

Mike: The guidance for the quarter ended December 31, 2024, we expect reported total revenue to be between 65, 9% and $71 9 million, including subscription and support revenue between 60 to $65 2 million for a decline in total revenue of 5% at the midpoint from the quarter ended December 31 2020.

Mike: Three.

Mike: Fourth quarter 2024, adjusted EBITDA is expected to be between $13, four and $16 4 million for an adjusted EBITDA margin of 22% at the midpoint. This adjusted EBITDA guidance at the midpoint is an increase of 6% from the quarter ended December 31, 2023, representing the first year over year quarterly increase in adjusted EBITDA.

Jeffrey Rhee: This Adjusted EBITDA guidance at the midpoint is an increase of 6% from the quarter ended December 31, 2023, representing the first year-over-year quarterly increase in Adjusted EBITDA since Q2 of 2022. For the full year ending December 31st, 2024, we expect reported total revenue to be between 272.6 and 278.6 million, including subscription and support revenue between 256.6 and 261.6 million for a decline in total revenue of 7% of the midpoint from the year ended December 31st, 2023. Full Year 2024 Adjusted EBITDA is expected to be between $54.1 and $57.1 million for an adjusted EBITDA margin of 20% at the midpoint.

Mike: Since Q2 of 2022.

Mike: For the full year ending December 31, 2024, we expect reported total revenue to be between $272, six and $278 6 million, including subscription and support revenue between $256 six and $261 6 million for a decline in total revenue of 7% at the midpoint from the year ended December.

Mike: Remember 31 2023.

Mike: Full year 2024, adjusted EBITDA is expected to be between $54. One at $57 1 million for an adjusted EBITDA margin of 20% at the midpoint. This adjusted EBITDA guide at the midpoint is a decrease of 14% from the year ended December 31 2023.

Jeffrey Rhee: This adjusted EBITDA guide at the midpoint is a decrease of 14% from the year ended December 31, 2023. So again, I'll point out that Adjusted EBITDA has been growing sequentially every quarter this year, and we expect to exit this year in Q4 at $14.9 million at the guidance midpoint, which is almost $60 million of annualized run rate.

Mike: So again I'll point out that adjusted EBITDA has been growing sequentially every quarter. This year and we expect to exit this year in Q4 at $14 9 million at the guidance midpoint, which is almost $60 million of annualized run rate.

Jack McDonald: And so with that, I'll turn the call back over to Jack. All right. Thanks, Mike.

Speaker Change: And so with that I'll turn the call back over to Jack Alright. Thanks, Mike We are ready to open the call up for Q&A.

Operator: We are ready to open the call up for Q&A. If you wish to ask a question, please press star followed by 1 on your telephone and wait for your name to be announced. That is star 1 if you wish to ask a question.

Speaker Change: If you wish to ask a question. Please press star followed by one on your telephone and wait for your name to be announced that is star. One if you wish to ask a question.

Unknown Attendee: And your first question comes to line is Jeff Van Ree from Crayton Capital Group, your line is open. Hey, this is Daniel. I'm for Jeff. Just wanted to open up. Congrats on the quarter. Just wanted to ask in terms of some of the cost cuts that have been going through in OPEX. It's been trending real nicely. Just any color on sort of what some of the changes are that have been made there, if those are finished, and then just how you think about those. Is this a good run rate to look at for 25? Just how to annualize those and think about them forward.

Speaker Change: Thank you first question comes from the line of Jeff Van <unk> from Craig Hallum Capital Group.

Speaker Change: Your line is open.

Speaker Change: Hey, this is Daniel on for Jeff just wanted to open up.

Speaker Change: That's on the quarter just wanted to ask in terms of some of the cost cuts that have been going through in opex.

Speaker Change: It's been trending real nicely just any color on sort of what some of the changes are that have been made there. If those are finished.

Speaker Change: And then just how you think about those is this a good run rate to look at it for 25 years, how to annualize those things about them forward.

Jack McDonald: Yeah. So, Daniel, costs are going to continue to come down. As you can tell, we've messaged and targeted increased EBITDA next year. So, part of that increased EBITDA is going to be from continuing cost refinements. We've, of course, you know, had an infrastructure here at the company where we could handle four to five acquisitions per year. We're obviously not doing that now. So, we've got sort of some infrastructure costs and extra costs that we can take out of the business that do not relate to the growth investments that we've made. So, there are cost efficiencies that we'll continue to recognize.

Speaker Change: Yes, so Daniel costs are going to continue to come down as you can tell we messaged in targeted increased EBITDA next year. So part of that increased EBITDA is going to be from continuing.

Speaker Change: Cost refinements, we've of course had an infrastructure here at the company.

Speaker Change: We could handle four to five acquisitions per year, we're obviously not doing that now so we've got sort of some infrastructure costs and extra costs that we can take out of the business that do not relate to the growth investments that we've made so there are cost efficiencies that will continue to recognize them.

Unknown Attendee: The one thing to what Mike said is that within the growth investments now that we are , and Michael Hynes, John McDonald, Alexander Sklar, Scott Berg, Michael Hill, Johnathan McCary, Unknown Attendee, Jacob Roberge, Jeffrey Rhee, Upland Software Inc, Unknown Attendee, Jacob Roberge, Jeffrey Rhee, Unknown Attendee, Jacob Robert, Unknown Attendee, Michael Hill, Unknown Yeah, and then just a high level question, Jack, for you, just on, you know, a very broad range of go to market changes that have been made, maybe just highlight, you know, in a little bit more detail, some of the places where you've seen the most success in terms of the correlation between those changes being made and where those are driving change.

Speaker Change: The one thing.

Speaker Change: To what Mike said is that within the growth investments now that we are at.

Speaker Change: A year and a half plus.

Speaker Change: Into this cycle, we are seeing whats working.

Speaker Change: And what isn't working and we're able to kind of turn up the investment on those motions on which we're getting a good return and then we can adjust our spending in other areas. So overall that gives us some efficiency and supports expanded margins.

Jack: Yeah, and then just a high level question Jack for you just on a very broad range of go to market changes that have been made maybe just highlight.

Speaker Change: And a little bit more detail some of the places where you've seen the most success in terms of the correlation between those changes being made and where those are driving change.

Jack McDonald: I would say two in particular. One was putting in place a modern digital marketing function at the company. And if you look across the board in terms of what we're doing around organic SEO, what we're doing around product recognition on peer review sites, what we're doing in terms of the level and quality of our product marketing and how that's supporting sales enablement, all of those things are just a step function better than they were before. And as a result of that, we're seeing some significant increases in lead generation and conversion of that lead flow into pipeline.

Jack: I would say two in particular, one was putting in place a modern digital marketing.

Jack: <unk> at the company and if you look across the board in terms of what we're doing around organic SCO, what we're doing around product.

Jack: Ignition.

Jack: On tier.

Jack: Review sites.

Jack: We are doing in terms of the level and quality of our product marketing and how that supporting sales enablement.

Jack: All of those things.

Jack: Just a step function better.

Jack: They were before and as a result of that we're seeing some significant increases and.

Jack: Lead generation and conversion of that lead flow into pipeline.

Jack McDonald: Secondly, we've built out our sales capability and brought in new sales management. And again, the sort of rigor and hygiene around the sales teams is a step function better than it was a year or a year and a half ago. Now we are starting to see some of that flow through into bookings, and that is what's going to support that. It was the core organic growth target of low to mid single digits in 2025. The other area there where we've made investment is in customer and really in enabling our great CF teams with the tools that they need to engage with customers in a more strategic way and to drive more product utilization and value for our customers supporting higher renewal rates through time.

Jack: Secondly, we built out our sales capability and brought a new sales management.

Jack: And again sort of rigor and hygiene around.

Jack: The sales teams is.

Jack: Stephane <unk> <unk> better than it was a year or year and a half ago.

Jack: Now.

Jack: We are starting to see some of that flow through.

Jack: Into bookings and that is what's going to support.

Jack: That.

Jack: Organic core organic growth target of low to mid single digits and.

Jack: <unk> 2025.

Jack: The other area.

Jack: There, where we've made investment is in customer success.

And really.

Jack: In enabling our great teams with the tools that they need to engage with customers in a more strategic way and.

To drive more product utilization and value for our customers supporting higher renewal rates through time.

Jack McDonald: And so we think we're on a nice positive trend of substantial reductions in EBITDA year over year if you look at 23, 24, and what we see going into. So that would be my comment. Thanks, Jack.

Jack: And so we think we're at a <unk>.

Speaker Change: Nice positive trend.

Speaker Change: Of substantial reductions in EBITDA year over year, if you look at.

Speaker Change: <unk>.

Speaker Change: 'twenty three 'twenty, four and what we see going into 'twenty five.

Speaker Change: So that would be my commentary there.

Michael Hill: And then just one for Mike, in terms of the strategic thinking on, you know, paying down the debt, you know, I assume that sort of setting up for refinancing, just any thoughts on why now on the on the payment of the debt, and then just how that sets you up for maybe the next few steps, how a process of refinancing looks like, what you'll be looking to achieve there. Thanks. Yeah, Daniel. So we paid down $177 million of debt in Q3. At the current interest rates, right, that's about a $7 million a year of interest savings annualized.

Speaker Change: Thanks, Jack and then just one for Mike in terms of the strategic thinking on paying.

Speaker Change: Paying down the debt I assume that's sort of setting up for refinancing just any thoughts on why now on the on the payment of the debt and then just how that sets you up for maybe the next few steps how the process of refinancing looks like.

Speaker Change: What youll be looking to achieve there.

Speaker Change: Yeah, Daniel so pay we paid down $177 million of debt in Q3.

At the current interest rates right, that's about a $7 million a year of interest savings annualized so big incentive for US just to go ahead and take some of that excess cash in our balance sheet pay down the debt and enjoy the lower cash interest as a result.

Michael Hill: So big incentive for us just to go ahead and take some of that excess cash on our balance sheet, pay down the debt, and enjoy the lower cash interest as a result. Timing for refi sometime next year, fiscal year 25. As you know, our debt matures August of 26. The longer that we delay the refi, then the more interest savings, because we've got a very attractive rate on our existing credit facility. So the longer that we hold in our existing credit facility, the better off we'll be just from an interest cost standpoint. So yeah, so that's the point.

Speaker Change: Timing for refi sometime next year fiscal year 'twenty five as you know our debt matures August 26.

Speaker Change: The longer that we delay the refi than the more interest savings because we've got very attractive rate on our existing credit facility. So the longer that we hold in our existing credit facility. The better off we'll be just from an interest cost standpoint. So.

Speaker Change: So, yes, so thats the plan.

Unknown Attendee: Understood. Thanks, Jack. Thanks, Mike.

Speaker Change: Understood. Thanks, Jack Thanks, Mike.

Speaker Change: Yeah.

Jack McDonald: I'd now like to hand the call back over to Jack McDonald. Okay, great. Thanks very much for your time today and we will see you on next quarter's earnings call.

Speaker Change: I'd now like to hand, the call back over to Jack Mcdonald.

Okay.

Jack McDonald: Okay, great. Thanks, very much for your time today, and we will see you on next quarter's earnings call.

Speaker Change: Uh huh.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

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