Absolute Software Corporation (ABST) on Q1 2023 Results - Earnings Call Transcript
Operator: Good afternoon everyone and thank you for standing by. Welcome to the Absolute Software's Fiscal 2023 First Quarter Results Conference Call. All participants are in a listen-only mode. I would also like to remind everyone that this conference call is being recorded today, November 8, 2022. I would now like to turn the floor over to your host Joo-Hun Kim, Vice President of Investor Relations. Please go ahead.
Joo-Hun Kim: Good afternoon and thank you for joining us today. With me on today's call are Christy Wyatt, President and Chief Executive Officer of Absolute Software; and Ron Fior, Interim Chief Financial Officer. Before beginning our formal remarks, Absolute Software would like to remind listeners that certain portions of today's call may contain forward-looking statements that reflect current views with respect to future events and conditions. Any such statements are subject to assumptions, risks, and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Any forward-looking statements contained in today's conference call are made as of today's date, Tuesday, November 8, 2022. And Absolute Software undertakes no obligation to update or revise publicly any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities law. For more information on the assumptions, risks, and uncertainties relating to these forward-looking statements, please refer to the appropriate section for the company's most recent MD&A, which is now available on Absolute Software's website and will also be available on SEDAR and EDGAR. I would now like to turn the call over to Christy Wyatt. Please go ahead.
Christy Wyatt: Thank you, to everyone joining us today for Absolute Softwareâs Q1 fiscal 2023 earnings call. As a part of todayâs call, we will cover the results, as well as three important themes. The diversity of our customer base, investments we have made in the business, and how we're faring amidst macroeconomic concerns. First, our results. In Q1, we delivered consistent and steady year-on-year ARR growth of 15% and adjusted EBITDA margin of 21%. As we shared in our last call, this quarter, we made a one-time investment in our company kickoff, as well as sales headcount investments to support growth later in the year, which was partly responsible for the downtick in EBITDA margin. We fully expect to maintain our Rule of 40 operating model for the full fiscal year as we have previously discussed. Enterprise and government sector ARR growth continued to be strong and expanded as a percentage of our total revenue. The sector increased 18% year-on-year despite being a seasonally slow quarter for the enterprise. Demand was particularly healthy for secure endpoint solutions for both security and IT use cases as we continue to improve our customer focused go to market motion. Our solid execution was also reflected on our customer satisfaction results. We continue to see our NPS score strengthen, setting another record this quarter. We were also recognized as a leader for the eleventh consecutive quarter by G2.com in the fall 2022 endpoint management report and for the second consecutive quarter as a leader in the Zero Trust networking group report. We also saw some nice mentions from industry analysts, including a feature in Forresterâs âThe Future of Endpoint Managementâ report and both the vertical market diversity in our business, as well as the diversity of our go to market channels with just over 50% of our sales going through our OEM partners. One of the verticals that continues to grow nicely is healthcare. As an example this quarter, we helped a large medical device company to improve their visibility, reporting, and compliance capabilities across more than 40,000 devices in a highly regulated environment. Their focus was ensuring their critical tools for endpoint encryption and device management remain healthy and operational, as well as the ability to remediate in the event that they need to protect intellectual property and other sensitive data on the endpoints. Another strong vertical for us in the quarter was professional services where we saw yet another large global professional services organization with an extremely large hybrid workforce leverage, absolute resilience for four critical applications to improve productivity and decrease the risk profile of remote work. Very much like Genpact, the customer who spoke at our Investor Day, this customer is taking advantage of the full suite of our secure endpoint capabilities. Turning to education, consistent with our view that education will remain at a high-single-digit, low-double-digit market for us, we saw 7% year-on-year growth as the segment continues to decrease as an overall percentage of our total revenue. We did see some effect of ongoing supply chain issues with our OEM partners, resulting in some deals being pushed out or in some cases shifting the mix from PCs to Chromebooks as they were more readily available. Like many of our education customers, one large U.S. school district this quarter were seeing missing device rates in the . They turned to our resilience for Chromebooks offering across their 75,000 new student Chromebooks to help them identify lost or stolen devices, and they are leveraging our professional services team to manage their growing device fleet and assist with recovering those devices at the end of the school year. While Secure Access experienced some summer seasonality, especially in Europe, We are happy with the growing set of opportunities, especially in Transportation and Logistics, where we saw several key design wins with major airlines, as well as continued strength in the state and local government segment. One of the key wins this quarter in our Secure Access portfolio included a large multi-county police force in the UK where we replaced our underperforming legacy VPN product with our persistent self-healing Secure Access solution, ensuring first responders are able to access mission critical applications in rural remote areas known for having poor cellular coverage, and assuring officers can securely communicate with one another in pursuit of their safety and of those they are serving in the community. Staying on Secure Access for a moment, we are seeing accelerated demand for our cloud-hosted Secure Access offering. With its near instant time to deployment, ability to scale with business demands and lower cost of ownership versus an on-premise solution, our cloud SA offering gives enterprises the ability to scale remote and hybrid work initiatives, as well as quickly implement a ZTNA solution across the company with our best-in-class user experience. While it was a small part of the overall SA business when we acquired NetMotion, cloud deployments are growing quickly and we expect Cloud to be a material driver of new Secure Access ARR this fiscal year, as well as an efficient delivery vehicle as our OEM partners are bringing SA online. In addition to growing OEM support for our SA portfolio, we also added British Telecom and Ingram Micro US to the growing carrier and reseller partner community. The second theme I want to discuss today is around the investments we continue to make in our team. In our last call, we discussed investing early in the new fiscal year to set us up for growth in the second half. We accomplished that by filling quota carrying in key R&D positions at the end of Q4 and early in Q1, ensuring that teams were staffed and ready to execute against our first half plan. We also wanted to ensure that most of our employees could be on board in-time to attend our company kickoff. Our company kickoff was a powerful start to our year, enabling the entire Absolute Team to train, spend time on the Absolute story and with one another. These costs are all now fully baked into Q1 results and will produce continued revenue impact in the remainder of the fiscal year. As we continue to focus on driving awareness and demand for Absolute, we welcomed Alice Hansen as our new Chief Marketing Officer this quarter. Filling up the final pieces for our executive team this year, we also announced industry veteran Samir Sherif to Chief Information Security Officer, and we promoted Mark Grace to Chief Revenue Officer, as Matthew Schoenfeld exited the business to pursue a new opportunity. Mark has unparalleled knowledge and roots in Absolute's business and is known for his outstanding leadership and for building high performance go to market teams. And finally, last week, we announced that Jim Lejeal will be joining us as our new CFO. Jim is a seven time CFO with a proven track record in financial leader at SaaS companies and a passion for helping software businesses scale. I look forward to you meeting Jim after he starts with us on December 5. While we are seeing steady demand for our solutions, we continue to monitor external market conditions closely and we remain confident in the financial outlook we provided last quarter based on our growing enterprise business and the diversity within that business. In New York, we talked about our customers and prospects need to adopt resilient first strategies, given the growing threat landscape, and sophistication of cyberattacks. With the investments we've made, we're seeing the strategic impact that Absoluteâs self-healing intelligent security solutions are contributing to our 18,000 customers around the world and the massive opportunity in front of us with our unbreakable connection embedded in more than 600 million devices. Our focus continues to be consistent, steady execution, balancing profitability, cash generation and growth to deliver value for our shareholders. Before I hand it over to Ron, I want to express my gratitude and sincere thanks to him. As you all know, Ron stepped in as Interim CFO earlier this year and has played a critical role in helping to drive our business. He's had a tremendous impact and we have appreciated his support as we've conducted our CFO search. With that, I would like to hand it over to Ron for more details on the financials.
Ron Fior: Thanks, Christy. Good afternoon, everyone, and thank you for joining us. On the call today, I will first go over our Q1 fiscal 2023 financial results, spend some time reviewing the impact the NetMotion Secure Access product currently has on our business model, and then discuss our outlook. Now, on to the Q1 results. As a reminder, we are reporting revenue and year-over-year comparisons on an adjusted basis that excludes any IFRS purchase accounting impact on deferred revenue. We believe this adjusted revenue metric provides a more meaningful and transparent view of the combined business. Adjusted revenue was 54.2 million for Q1 fiscal 2023, up 10.6% from the prior year and relatively flat sequentially over Q4 fiscal 2022. The increase from the prior year is a result of the continued growth in our ARR base. We faced a tough comp as compared to the previous year's Q1 where we had a large multi-year international Secure Access Deal, a slowing in the conversion of perpetual licenses to term and a higher seasonal mix of secure endpoint versus Secure Access. We did see some macro pressures on contract length, which had a small negative impact on revenue, but didn't impact ARR. At the end of Q1, approximately 77% of Secure Access ARR portfolio was on subscription arrangements, up slightly from the 73% in the prior quarter and 59% at the end of Q1 fiscal 2022. In contrast with the ratability of our secure endpoint sales, IFRS 15 accounting treatment requires Absolute to recognize 50% of the value of Secure Access on-premise term contracts in the quarter signed with the balance amortized over the term of the agreement. As we have seen over the past year, this has resulted in some significant variability in the timing of revenue recognition. For example, if all of our Absolute contracts had been amortized as a traditional SaaS product, the growth rate in Q1 would have been 15% versus the 11% that we experienced. Over time, we expect Secure Access Cloud to grow faster than the on-premises term version of Secure Access, and help us return to the same smoothness and predictability of the Secure Endpoint SaaS model we had before the acquisition. Total ARR was 215.7 million as of September 30, 2022, 15% growth versus the prior year, and up 6.2 million from the prior quarter. Unlike revenue, ARR is not impacted by IFRS revenue accounting complexities, related to term licenses, and we believe it is the best indicator of Absoluteâs progress and growth. ARR growth was driven primarily by continued strength in enterprise and government, which grew 18% in Q1 versus 17% in the prior year, and 17% in the prior quarter. Education grew ARR by 7% versus 18% in the prior year and 12% in Q4. The strength in Enterprise ARR came from strong new logo acquisition and continued improvements in net dollar retention. New customer signings were a strong $4 million, up from the prior quarter's $2.8 million and down modestly from last year's $4.7 million, which included a very large deal in Secure Access and a large new education customer. Secure Endpoint in particular saw strong new customer acquisitions as the go to market strategy of a focused used cases continues to mature. We did well in professional and financial verticals and we are seeing strong activity in other large verticals such as logistics and transportation. Net dollar retention of 108% was slightly down from last year's Q1 of 109% and was flat sequentially from the prior quarter. We saw enterprise net dollar retention continue to improve sequentially, despite the small drag of a legacy customer non-renewal of an end of life product. Education ARR of 47 million was up 7% year-on-year, but relatively flat sequentially in what is typically a strong education quarter. We saw some education deals pushed out due to their inability to receive delivery of laptop purchases, due to the supply chain delays. We do expect to sign some of these deals in Q2. However, we are also seeing school boards adapt to this challenging environment by shifting their device mix to include more Chromebooks, which have been easier to acquire than laptops. The number of Chromebooks we are now attached to has increased significantly, but our lower ARR per endpoint from Chromebooks is creating a new near-term headwind in education. That said, we continue to believe our growing education endpoint population means it can still be a meaningful, but slower contributor to ARR growth going forward. Moving on to cost and profitability for the quarter. Adjusted EBITDA for Q1 was 11.5 million or a margin of 21%. The decrease in the adjusted EBITDA margin from prior quarter and prior year is a result of increased headcount from hires made throughout Q4 that are now fully loaded into the Q1 numbers, along with approximately $1 million in extra costs, approximately 200 basis points of margin associated with the company kick-off, which is in the sales and marketing line. Looking forward, given the number of new people we have already brought onboard over the past two quarters, we expect modest additional hiring. While we expect operating expenses to be up in Q2 as we fully absorb the new hires. Over the second half of the year, we expect operating expenses to be relatively flat. That said, the new hires are having the desired effect and we are excited about the increasing coverage in our pipelines and the number of more strategic conversations we're having with large Fortune 500 customers. And we believe we can continue to fund this growth by more fully utilizing and reallocating resources internally where necessary. Adjusted gross margin of 88% remains at historical levels in Q1. We have begun moving our service to the public cloud and are now incurring higher costs. As previously mentioned, over time, we may see a gross margin contraction of 100 basis points to 200 basis points. Operating cash flow from operations was 15.2 million and our cash and short-term investment balance grew to 67.6 million from 64 million last quarter after servicing the debt and paying our dividend. Concerning our debt, our coupon increased by 125 basis points since the last call, resulting in approximately 900,000 in additional interest expense for Q1 versus Q4. Given our strong cash flow from operations and our expectation of continued profitable growth, we are confident in our ability to service the debt while continuing to pay the dividend and organically de-lever the balance sheet as we continue to build our cash balance. To that end, on Friday, we made a payment against the debt and we will continue to opportunistically pay down the debt as cash balances . Turning to guidance. The macro environment of inflation, PC shortages, layoffs, etcetera are impacting many businesses, and we are not immune as noted in our discussion about the education market and Chromebooks. However, given our recent growth in the enterprise space, and the increasing activity in the Secure Access product line with a higher mix of Secure Access in the coming quarters, we are leaving both of our adjusted revenue and adjusted EBITDA outlook for the full fiscal year ending June 30, 2023, unchanged. And we'll be keeping a tight hand in the hiring and other operating expenses. The growth in our ARR base continues to drive sequential growth in our total revenue. However, as we saw in Q1 this fiscal quarter, we expect intra-quarter fluctuations to be greater this fiscal year than last year, driven by seasonality and the impact of multi-year term licenses and Secure Access. Looking at linearity, we are seeing the back half of the year be a slightly higher percentage of the year than 2022. As of September 2022, the remaining value of the deferred revenue write-down we will take going forward over future periods is approximately $2.5 million. The deferred revenue accounting write-down was 0.6 million in Q1, down from in Q1 of fiscal 2022, and 1.5 million in Q4 of fiscal 2022. We anticipate the quarterly difference between our IFRS reported and adjusted revenue numbers will continue to decline as we move forward, and be immaterial by the end of the fiscal year. Before I turn it back over to the operator, I wanted to say congratulations. I have been impressed by the remarkable progress the company has made in all facets of the business and especially in its people and products. I have no doubt that the company is on the right track to find even greater success in the coming years. With that, we appreciate your time and support and we're glad to open the call for any questions. Operator?
Operator: Thank you. And the first question will be from Doug Taylor with Canaccord Genuity. Please go ahead.
Doug Taylor: Yes, thank you and good evening. Last call and during your Investor Day in New York, you spoke about the expectation that you'd exit the year closer to 20% revenue growth. Q1 as you noted, started a little below the guidance pace of 15% to 17%, so my question is whether that 20% exit run rate is still a relevant target in this market and what gives you â specifically gives you confidence in that acceleration from these Q1 levels over the course of the year?
Ron Fior: Yes, okay. So, I think there's a number of things that we think about. Number one is that we've been having very strong ARR growth in the enterprise side and you saw that with 18% year-on-year growth and that was up from last quarter 17%. We also are actually looking at a growing Secure Access pipeline that we're seeing right now. And I would also remind you of the area that I talked about the IFRS impacts. And Q3 and Q4 are actually very large renewal quarters. So, there's big linearity towards that back-end of the year. And that makes a big difference. The other thing that's happening is, as you are aware, we've hired a lot of new people in the sales group in Q4 and into Q1 and those people are coming on board and they're scaling up very quickly and we expect improving productivity with those. So, yes, at this stage, we still see it as a meaningful answer to get to the 20%.
Doug Taylor: Okay. Thanks for that. I mean you talked about the hiring for the company overall, but on the management level, you've expanded your executive team. I was very much on display at that Investor Day. Are there any other roles that you're looking to fill at the â on the C-suite or at the executive management level following the recent hires?
Christy Wyatt: Hi, Doug. I would say, none immediately. I think that the addition of Samir, I think we spoke a little bit last year about some transitions between IT and security, and so I think Samir is definitely a welcome addition to the team. We had talked about kind of our new CMO and then of course Jim will be joining us in December. So, I said before, I never say never. A team is always sort of a work in progress. I think we feel great about the team we've put together and how they've really come together coming into this year.
Doug Taylor: Okay. Well, on that note, I'll thank Ron for stewardship over the financials and look forward to meeting Jim. Thank you.
Ron Fior: Thank you.
Doug Taylor: And then, Ron, you said you're maintaining guidance, you're acknowledging that there's macro impacts that you're seeing, but you're expecting a higher mix of Secure Access, which under into this. And I imagine Christy could probably add to this as well, but the question would be, that's a newer business for you guys. Obviously, you've had it for a little while now, but certainly not as much visibility in modeling as you have in your core. Maybe just help us with the visibility that you have in making that assumption that Secure Access is going to accelerate? Wondering if there's anything contractual with new channel partners or something that you can give us to help our level of confidence to get it as higher as yours?
Christy Wyatt: Sure. I can start and then Ron can certainly jump in. I think Ron already touched on a couple of the big ones, which is first and probably most importantly is the visibility we have on that business, given that it is recurring and we have talked about the IFRS 15 impact and how we see that sort of trending through the year. And so, given that these are seasonally large renewal quarters and we start to see some of the impact of that IFRS 15 sort of lightning in the second half of the year. So, that's the first piece. The second piece is, we've talked about pipeline coverage coming into the quarter. We've talked about, kind of the number of large deals we see moving through and the kinds of design wins we're seeing in the pipeline. But I think that continues to look really strong. We've made some changes over the past couple of weeks as a result of the transition in the selling organization to really drive the focus behind the SA business across both North America and international. And so, I think we feel very good about not just the new capacity that we brought on board over the past two quarters, but also the pipeline that's kind of building behind it.
Doug Taylor: Got it. Okay. And then I guess maybe as a follow-up to that, could you maybe just talk about Plan B, if like enterprise spending, we've seen push outs at end of quarters or big enterprise technology companies, whether it's a ServiceNow or sales force etcetera? So, if that were to ultimately haven't forbid impact this business, maybe I'm sure you've kind of thought through a Plan B wondering if you could talk to what you would do if you ultimately did see some growth deceleration? Thank you.
Christy Wyatt: Sure. And I think we talked a little bit about this in New York. We keep a very close eye on the pipeline, the coverage, what's going on, sort of in the market around us. I think one thing that's quite unique about us because we've been operating under this, sort of balanced profitability model for quite a while now is that if we start to see things shift on the top line, we certainly make the right set of decisions, kind of on the hiring front. So, we did make some investments coming into Q1 to set us up for growth in the second half. That said, we have really â we really have that slowed hiring as we came, sort of through Q1 and coming into Q2 as we kind of keep an eye on the market around us. And so, I think operationally, as you would expect us to, we're sort of tracking both of those very, very closely. We're very committed to hitting that Rule 40 target on the fiscal year and sort of know what we need to do to get there.
Doug Taylor: Got it. Yeah. Makes sense to me and you got plenty margin to work within that. So, look forward to following it. Thank you for the questions.
Christy Wyatt: Thank you.
Operator: And the next question is from Thanos Moschopoulos from BMO Capital Markets. Please go ahead.
Thanos Moschopoulos: Hi, good afternoon. Christy, maybe just to close it up on the macro, I mean, so you called out the Chromebook mix shift. You called out maybe a bit of shortening in contract lengths. Anything else you're seeing or not at this stage? I mean as far as sales cycles, level of sign up required for deals, any change in that regard or not yet?
Christy Wyatt: Not yet. And as I said before, I think we feel very comfortable with the coverage we came into this quarter and kind of what's building for the second half. So, I don't think we've seen the effect of that. I think on the education side, it really has been driven by availability. So, I think that they're â where they have the opportunity to take a certain number of devices they can get their hands on is Chromebooks, we see them take more Chromebooks than PCs if those are not available, but thatâs sort of the â the number of seat growth and the amount of seat growth we see happening within these accounts continues to maintain and sort of stay steady. So, nothing that we've seen yet, but as I said before, we're keeping a close eye on it as we go into the end of the year.
Thanos Moschopoulos: Okay. And then thereâs obviously been some currency moves, so how do we think about it in terms of the recent decline of the Canadian dollar? Just how much of a tailwind is that as we think about OpEx and margins?
Ron Fior: So, our exposures are obviously Canada and then into the U.K. We did in fact hedge some of that earlier in the year, which is actually very favorable, compared to our plan, but not nearly as favorable as it could have been now, right. And unfortunately, our goal is not to speculate on these things. Right now, we're in pretty good shape. Obviously, it's a positive impact. We sell our product primarily in U.S. dollars, but it could have a negative impact at some point in time if the currency becomes U.S. dollar becomes too strong against everybody else. So, â but otherwise, we're in pretty good shape.
Christy Wyatt: Yes. The other thing I would remind folks, I guess, just on top of that is that, weâve talked a lot about our growth strategy and one of the key parts of our growth strategy being international growth. One of the reasons why that's such interesting area for us is because so much of our market and our sales is still actually happening within North America. And so, I think that that balances out a little bit, I think some of the currency swing we see across customer accounts.
Thanos Moschopoulos : Okay, great. And then last one for me is, just remind us in terms of the FedRAMP certification, any update there for the timings on that?
Christy Wyatt: We're still awaiting, some more detailed a comeback from the FedRAMP office. So, I don't have anything new to announce on that yet today.
Thanos Moschopoulos : Okay. Iâll pass the line. Thanks.
Operator: Thank you. And the next question is from Scott Berg from Needham. Please go ahead.
Scott Berg: Hi, everyone. Congrats on the quarter and thanks for taking my questions. I have two, first as a follow-up to comment Ron made, you are having more conversations with Fortune 500 companies today, I assume that's partially driven by the sales force, but as you look at those conversations, which side of the business are they really more focused on? Is it more on the resilient side or the Secure Access functionality or potentially both?
Christy Wyatt: Hi, Scott. That's a great question and I'm sort of trying to think it through. I guess, on the Secure Access side, I think we see organizations continue to manage the risk of remote workforce. So, we talked on the call about some of the interesting design wins we've had and they typically tend to be large multinational organizations who are, sort of de-risking their hybrid and remote workforce strategy. And so, that remains a really important part of the conversation. I think on the IT side with Secure Endpoint, that really is, kind of I think hooking into as connected to the work from anywhere conversation, but even more broadly, as all of their budgets are coming under pressure, they're wanting to make sure that they get the most amount of coverage and protection that they already have. And in many cases, it is about, sort of shoring up the protection that they have because many of them are not in a position to, sort of spin up and ramp up, sort of new security projects going on across the organization. And so, if you look at some of the quotes that we've given in the past, where they say it's like having another IT manager, it helps them, sort of offset additional headcount costs on the IT side because we can automate some of the self-healing and the resiliency of those products. So, I think it sort of fits within their do more with less strategy as a result of kind of the pressure that they're within their own organizations.
Scott Berg : That is helpful. And then from a follow-up perspective, Christy, you talked about the new CF or CRO, excuse me, that starting with Matthewâs departure, you've had some change in your sales leadership over the last couple of years, I call it more evolution than revolution, but how should we look at this change? Is any of the playbook, does it change differently with the internal promotion or is this an opportunity maybe inject even more change in the sales organization?
Christy Wyatt: I wouldn't say there's any sort of macro changes into or large changes into how we're thinking about go to market most broadly. Clearly, we were disappointed around the timing of Matthew's departure, but these things happen. I think Mark is a well-established leader within the organization. He has been with the company for a long-time. There's truly nobody within the building who understands the business, as well as he does or has fostered the close relationships with our OEM partners, but he's also held incredibly large roles in his past with and other companies with a direct-to-customer roles as well. So, I don't think you'll see any massive shifts from us. We were able to do the transition relatively quickly. I think within the week of announcing, we had already installed Mark in the position. He had already announced his next level down. We had done some consolidation of roles to, kind of as we brought people up within the organization and so all roles are filled, everybody's locked in their teams that happened within 7 to 10 days and now folks are focused on executing against the quarter.
Scott Berg : Great. Congrats again and thanks for taking my questions.
Christy Wyatt: Thanks, Scott.
Operator: And the next question is from David Kwan from TD Securities. Please go ahead.
David Kwan: Good afternoon. Wanted to talk a bit more about the FX, particularly I guess as it relates to the top line. I was curious to what extent the revenues were negatively impacted by the stronger U.S. dollar?
Ron Fior: Well, they're actually â they're not actually impacted because we sell in U.S. dollars. The biggest thing that we have is the expense we have â the exposure is actually on the expense side, primarily with our employees that we have in Canada, and in the U.K. and obviously some other countries too, but those two in particular are the largest pieces.
David Kwan: Yeah, but like how about when you're selling like into Europe, are you selling in U.S. dollars there?
Ron Fior: Yes.
David Kwan: Okay. So, the vast majority of your revenue is charged in U.S. dollars then?
Christy Wyatt: Correct.
Ron Fior: Correct.
David Kwan: Okay. And then I guess on a related note, the international ARR, that's been pretty strong kind of 45%, 50% growth, over the last year, but this quarter it dropped into the low 30s, any particular reason for that?
Ron Fior: I don't think there was anything. It's just timing of deals.
Christy Wyatt: Yes, I would say Europe, especially is typically a soft reporter in the summer quarter. And I think we talked a little bit about that with Secure Access. That has been historically a more direct sales for us. And so, those projects do have a tendency to slow down a little bit when you hit the summer months and folks aren't super excited about running in the month of August. But I don't think we're seeing anything more broadly, sort of internationally. We continue to get great traction with our OEM partners on ramping up and investing more in international reach. So, I think because we're coming from a â we've done quite well with international in the past couple of years, but we are still coming off of a relatively small base. So, I think you'll continue to see us do more there.
David Kwan: Thanks. And just my last question. As it relates to macro, how are you finding the North American environment versus Europe and other international areas and regions? Are you finding it more difficult in Europe in particular versus what you're seeing in North America?
Christy Wyatt: Well I think Ron talked on some of the, sort of, what I'd call things around the edges that we've been watching contract term is one that we said early on. I think we said, outside of kind of the direct selling SAPs that I touched on for the summer months, I don't know that I've seen a big difference between Europe and North America from a demand perspective, but they're very different markets for us, right. We're much more entrenched in with our partners and direct within our North American space and education as a bigger impact on, sort of quarter-over-quarter on our North American business. So, outside of that, I don't know that I have any headlines or big conclusions to pull out of that.
David Kwan: All right. Thanks.
Christy Wyatt: Thanks, David.
Operator: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Christy Wyatt for any closing remarks.
Christy Wyatt: Thank you. And I want to thank you all again for joining us today. This month marks the start of my fifth year leading Absolute. In that time, we've grown into a Security Software company with more than 200 million in recurring revenue, 18,000 customers, and more than 14 million end user devices that depend on us to keep delivering for them. Our path to success continues to be consistent steady execution, balancing profitability, cash generation and growth to deliver value for our shareholders. With our unique resilient self-healing intelligent security solutions, we are positioned well in a large and growing market and focused on serving our customers at this critical time in industry. Thank you all again for joining us.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
