Absolute Software Corporation
Q1 2022 Earnings Call Transcript

Published: 9 Nov 2021

[Operator:]

Good afternoon, everyone, and thank you for standing by. Welcome to Absolute Software's Fiscal 2022 First Quarter Financial Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Before beginning its formal remarks, Absolute Software would like to remind listeners that certain portions of today's discussion 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, and Absolute Software undertakes no obligation to update or revise publicly any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. For more information on the assumptions, risks and uncertainties relating to the forward-looking statements please refer to the appropriate section of the company's MD&A, which is now available on Absolute Software's website and will also be available on SEDAR and EDGAR. I'd also like to remind everyone that this conference call is being recorded today, Tuesday, November 9, at 5

[Christy Wyatt:]

Thank you, operator, and thank you, everyone, for joining us today for Absolute Software's Q1 Fiscal 2022 earnings call. As you know, this is our first quarter including the results of our acquisition of NetMotion, and we are delighted to report a strong start to the year. We achieved year-over-year ARR growth of 17% in the quarter, accompanied by year-over-year adjusted revenue growth of 15% and an adjusted EBITDA margin of 26%. I am also proud to announce that we achieved a Net Promoter Score of 62, well above the SaaS industry average of 31 and an all-time high for our company. Our strong start to the year gives us increased confidence in our full year outlook, which Steven will cover following my remarks. Turning to the business, while we have observed the effect of the ongoing chip shortages and supply chain issues which impacted some of our partners and customers, we continue to see steady growth in activations across our cloud-hosted products and reported approximately 13 million active endpoints this quarter. Our enterprise and government business posted one of its strongest quarters, with year-over-year ARR growth of 16.9%, reflecting strength across both the Absolute and NetMotion product lines. Notable wins include Under Armour and the international law firm, Slaughter and May. Our education business continues to see strong demand, with a notable win in Latin America. As additional U.S. federal funding makes its way through the regulatory system focused on helping schools, we are working with our partners to support customers through this transition. We have been working on additional education offerings, including the development of student-specific SKUs in managed services. As we look at our progress in Q1, I want to touch on two areas of particular importance

[Steven Gatoff:]

Thanks, Christy. Good afternoon, everyone. We appreciate you joining us. We're off to a strong start in Fiscal 2022, driven by solid ARR growth in total and across our enterprise and government customers and a record quarter for new logo bookings. I'll talk more about this in a few minutes. Overall, I'd like to cover two topics with you today

[Operator:]

Thank you. We will now begin the question-and-answer session. And the first question will come from Scott Berg from Needham. Please go ahead.

[Joshua Reilly:]

Hey, guys. This is Josh on for Scott. Thanks for taking our questions. So maybe just starting off, I think we're all familiar with the chip shortage in the PC industry is impacting a lot of players in the space. But how much of that is offset for you guys with strength in Chromebooks, Chromebook shipments over the last couple of years, as these units have really surged faster than the overall PC industry, particularly in the education market? Curious what your penetration is in that market at this point.

[Christy Wyatt:]

Hi Josh thanks. That's a great question. So I think we've – the supply chain effects that we've seen, I would say, while different between Chromebooks and PCs, we've definitely seen some on both sides, I would say Chromebook volume remained incredibly high this past quarter. And so what we tend to see is more of a timing delay as a result of this. So a customer placing a larger order may have an additional three-plus weeks of delay before they receive their hardware, and that could impact kind of the distribution of software licenses, as well. So I don't know that we've seen anything unique, I would say, broadly across the segments because we've seen – depending on the specific partner, we've seen the effects sort of be applied differently.

[Joshua Reilly:]

Okay. Great. And then just a question on the metrics. So new logo ARR was strong in the quarter. Curious now how much can that sway in a given quarter, going forward, following the NetMotion acquisition. And curious if there's any color you can give us on the size of their lands relative to the core Absolute business.

[Steven Gatoff:]

Hey, it's Steven. Good question. And the answer is that new logo acquisition is a very important part of our growth profile now and going forward. So we have a very nice model of land-and-expand, and the expansion part of the model that you see in the reasonably solid net dollar retention is driving a lot of value. But the new logo acquisition is important, and you saw that come in really nicely this quarter. It's on both sides of the business, and we expect it to be a focus and contributor, going forward, for sure.

[Christy Wyatt:]

I would – I think the second part of your question was about the average deal size on those initial lands, and I would say they're about the same between the two product portfolios. So those initial deals tend to be quite small. Regardless of how we attach to that customer, it's the upsell and expansion that happens after that that starts to vary.

[Joshua Reilly:]

Got it. That’s super helpful. I’ll move back into the queue. Thanks, guys.

[Christy Wyatt:]

Thanks, Josh.

[Operator:]

The next question will be from Adam Tindle from Raymond James. Please go ahead.

[Adam Tindle:]

Okay. Thanks. Good afternoon. Christy, I wanted to start on the sales integration. I think we’re positively surprised that that’s already done at this point between the two businesses. So a couple of questions around that. Maybe you could just touch on what enabled you to go faster in the first place on this. And maybe more importantly, double-click on what changes in compensation or incentives that Matthew is driving for that team and how we could think about the opportunity for synergies now that the two entities are combined.

[Christy Wyatt:]

Sure. So just maybe one quick clarification. I think that we said that we were accelerating the integration of sales and marketing and had pulled kind of the people integration into the end of Q1. I definitely don’t want to set the expectation that full integration is completely done. We have still been running the two teams almost in parallel in Q1, and that had been our intention until the end of December. I think we believed that we could start to move the functional integration ahead more quickly. But I would say from a selling motion perspective, the teams are still somewhat distinct, and you’ll start to see those come together in a more integrated way as we end the calendar year. We do first and second-half comp plans. So we do six-month plans, not annual plans. And so I think we’ll have more to say about how we’ve reflected the integrated selling strategy as we go into the second half of the calendar year. Their comp plans remain unchanged. A couple of things that we did do as we came into this year as we increased our investment in the separation of renewals versus expansion. I know we’ve talked a lot about that in past quarters. We had formerly or previously sort of outsourced a part of that. I think, increasingly, we’ve been building our own in-house renewals team and taking that on directly, and we’re seeing some nice improvement as a result of that as we sort of get stronger. And I think the comp plans continue to evolve to make that distinction as well in terms of rewarding growth as well as really focusing on that net retention metrics. So I think those are sort of some of the two new distinctions we came into this year, but you’ll see the more complete picture as we go into the second half comp planning.

[Adam Tindle:]

Got it. Okay. That’s helpful. And maybe just as a follow-up, NetMotion is going through a couple of different transitions that Steven highlighted, and I just had two questions. On the mix of perpetual moving to subscription, Steven, could you just maybe let us know at this point how much is left to move, what is the time to move over and the ultimate impact to financials if we move all of that to subscription revenue?

[Steven Gatoff:]

Sure. So the background is the three different revenue models, if you will, is

[Adam Tindle:]

Okay. And just to follow-up, what kind of customer behavior have you observed as they’ve made this transition? What do churn rates look like? How do you ensure that you’re retaining customers through this process?

[Christy Wyatt:]

I can take that one initially. I think that we’re very pleased that the customer retention numbers remain high. And so I don’t think we expect a lot of churn throughout that process. I think if a customer is wanting to stay in one model or another, it has more to do with the leveraging of CapEx versus OpEx or sort of how they’re running that within the organization. I know we’ve said this in the past, but we don’t offer perpetual licenses to new customers. So the only perpetual licenses actually being sold currently today are sort of expansion licenses to existing customers.

[Adam Tindle:]

Got it. That’s helpful. Thank you very much.

[Steven Gatoff:]

Sure.

[Operator:]

And the next question will be from Doug Taylor from Canaccord Genuity. Please go ahead.

[Doug Taylor:]

Yes. Thank you. Good evening. I’m going to start with a bigger-picture question. You noted some of the education funding that’s going through the system right now. I also noted that the recent infrastructure bill has a pretty sizable amount set aside for kind of state and local governments for cybersecurity-type initiatives; talking over $1 billion. I wonder if you’ve had any – you’ve got a significant installed base in state and local. Do you have – believe you’re going to benefit from those funds getting deployed? Have you had any conversations or discussions on your pipeline related to that those funds?

[Christy Wyatt:]

Hey Doug, so it’s a great question. We do continue to track the federal funding as it moves, the ECF funding as it’s moving through the system for education customers. There are similar funding vehicles coming through for state and local. I would say we are tracking them. I don’t know that we’ve seen them play a direct significant role in the business year-to-date. But I think as I said, we’re tracking them and understanding how best to help customers that are sort of sitting in that space right now.

[Doug Taylor:]

Okay. You touched on the announcement this morning, kind of the next evolution of this Application Persistence as a platform, a couple of new partners. Can you maybe refresh us on the milestones, the road map for that initiative as you broaden it out and add partners and surface additional value for your existing and prospective customers? What should we be looking for over the coming years?

[Christy Wyatt:]

Sure. So just as a refresher or for folks who are less familiar with the program, our capabilities are embedded in over 0.5 billion devices. And clearly, we use them for our enterprise software to ensure that applications remain undeletable and can heal themselves when something goes wrong. And so for other ISVs that are not absolute, there are two ways that they can also benefit from that footprint within the BIOS. The first is that catalog of applications. So if somebody purchases our Endpoint Resilience product, we have an ever-increasing and growing catalog of third-party applications that customers can monitor and heal and automatically repair using Endpoint Resilience. The second is what we announced this morning, which is Application Persistence as a Service. And so it’s essentially us embedding our capability that can talk to kind of our anchor in the BIOS and use it for self-monitoring and self-healing of their own application, whether or not that device is already registered with some other piece of Absolute Software. This is a program we started talking about as what I kept referring to as a Horizon 2 event; so this is a longer-term strategy. It comes from the perspective that we believe that there’s way too many security controls and application – on these devices and that they are increasingly fragile because of the complexity. And so we can open up that set of capabilities to help the rest of the broader security ecosystem to build more resilient solutions. And of course there’s, over time, an increased line of revenue potentially available for us. What I would say, you should expect to see is that we will continue to work with new partners, but you should continue to see us take a very metered approach. And the reason for that is clearly because this is a critical set of capabilities. It’s not something you would want to go wrong. And so we are being quite selective as we’re scaling and ramping that part of the system. So you should continue to expect us to talk about more partners as we continue to grow it, but I wouldn’t expect it to see any sort of material short-term impact in the business.

[Doug Taylor:]

That’s fantastic color. Perhaps one last question, for Steve. You went through the single large NetMotion deal very quickly. I mean, first of all, maybe I’ll ask you just to repeat the contributions to this quarter to the ARR. And is that in the new logo ARR? Just clarify that. And then also just, I mean, maybe describe this transaction a little bit more qualitatively and whether there are other customers and potential transactions like this in the pipeline and the sales funnel.

[Steven Gatoff:]

Sure. Happy to. And thank you for clarifying, because there is definitely a difference on the ARR impact than revenue. And so we had a transaction, Christy will go into it in a moment, we’ll tag-team on it, with a large customer in Asia-Pac. And it was a three-year deal, and it was just under $3 million of TCV. And so it was an on-prem subscription. And so the rev rec for that is that roughly half of the transaction value is taken upfront as revenue in quarter. And so that’s where the incremental revenue comes from, versus ratable, that contributed to the quarter. The impact on ARR, though, is the annualized effect. And so it’s much less pronounced. The accounting acceleration of revenue recognition is not impacted on the ARR front. And so in that regard, it has a much less significant impact on ARR and the point of view of ARR being a better arbiter for what the recurring economic nature is of that business.

[Christy Wyatt:]

Maybe just to add a few more points of color on that. You had asked – it was not a net new logo. It was an existing customer. It’s a customer who is actually running the service as almost a managed service. In fact, it is a managed service provider in Asia-Pacific. And so this is a service that they’re offering to a broad number of customers. And so this was them increasing their position as their activations are growing.

[Doug Taylor:]

Okay. So if not a new logo ARR, then positively contributed to your net dollar retention then in the quarter, which was also strong?

[Christy Wyatt:]

Absolutely. Yes.

[Doug Taylor:]

Okay. Thanks for the clarification and congrats again on a good results.

[Christy Wyatt:]

Thank you.

[Steven Gatoff:]

Thanks.

[Operator:]

Thank you. And the next question will come from Kevin Krishnaratne from Desjardins. Please go ahead.

[Kevin Krishnaratne:]

Hey, there team. Good afternoon. Good quarter. A question for you on the active endpoints added. When I look sequentially, it looks like there were about 1 million, 12.5 million versus 11.6 million in Q4. Is that apples-to-apples, just to clarify? And where are you seeing the strength from? It was a little lower of an addition in Q4. I’m just curious on your thoughts there.

[Christy Wyatt:]

Hi, Kevin. So it’s not – sorry, excuse me. It’s a little early in the process for me to already be losing my voice. So it’s not completely apples-to-apples only in – sorry, meaning versus previous year. Because with the addition of NetMotion, we are actually counting if there are NetMotion activated cloud endpoints, as well. This is in the 13 million, nearly 13 million active endpoints. That said, what I would say is that the number of cloud-hosted active endpoints in the NetMotion side was not a huge contributor into the growth of that number. So it was still overwhelmingly the majority of VCR active endpoints. And in terms of the quarter-on-quarter shifting, I wouldn’t read too much into that. We know that there’s a lot of seasonality built in by different industry that would kind of represent the change between when a customer would purchase licenses and when they would activate licenses. So an example would be not a lot of work is happening in some areas within education during certain months versus enterprise. So IT projects tend to have a different seasonality versus on the market. So I wouldn’t read too much into the linearity. I think what we’re happy about is that we continue to see steady growth and heavy usage.

[Kevin Krishnaratne:]

Got you. Thanks for that. Just maybe a second question, on ARR, $187.4 million. Can you remind us was the ARR run rate for the combined business in Q4 $175 million? I’m just trying to think about how to compare it sequentially. And then going forward, how do we think about – I know you haven’t given specific ARR guidance, but how do we think about ARR guidance relative to the adjusted revenue guidance you’ve given, just to parse that out again?

[Steven Gatoff:]

I think the last part, first, is we see ARR as a bit of a leading indicator that reflects the overall economics. And so when we talk about how we are marching towards our 20% sustainable growth target, we look to ARR as the arbiter of the road there. So would frame that out versus revenue, particularly in light of the conversation we just had with some of the other guys on the nature of revenue. We went through it with Adam and Doug on the notion that there is acceleration of revenue on some of the deals that may benefit revenue in one quarter and then have it be a little bit softer the next quarter. But over the long term of that contract, the ARR will speak to that. So that’s one dynamic from our standpoint of how ARR is a good growth vector. We did provide, as you mentioned, the 17% growth is on an apples-to-apples as-if-combined basis year-over-year. And then we have not published, though, I apologize, what the organic product-level ARR is on each piece for the previous quarter sequentially. Having said that, the dynamic is that we had good growth in both parts of the business.

[Kevin Krishnaratne:]

Okay. Fair enough. I went through the BAR to look at the adjustments to the deferred rev, and it looks like last year it was a little bit over $13.5 million, and it was – this is more an accounting question. I think in this current quarter it was $5.3 million. I mean, how do we just think about that level of adjustment over the next few quarters?

[Steven Gatoff:]

Yes. Good question for you and me and probably no one else on the call. So the write-down in deferred revenue was roughly 50%, 5-0 percent, of the balance. And most of the deferred revenue, if you dive into the BAR, you’ll see was short-term in nature. So roughly $20 million in change was near-term first year. And so that’s how you get that $5 million on a quarterly basis. So if you were to ballpark it, you’d say, okay, $20 million of deferred would have come in roughly $5 million a quarter in year one and so that’s how you kind of back into that.

[Kevin Krishnaratne:]

Okay. Got you. Perfect. One last one, bigger picture. I saw the press release not too long ago on the combined product for NetMotion and Absolute. And I know, going forward, you’ve got a product road map where you’ll be looking at different products that use both technologies. And I know this is a relatively new-ish and still early industry. You’ve got a very unique offering. I’m just wondering, as you look across your client base, how do you think about who you might be identifying as the early adopters, sort of thinking about logical customers, whether that’s based off of industry scale or revenue size of company? I’m just wondering, just as a broad question, who do you see as being the ones that might be first to adopt and natural good first audience to go to market with.

[Christy Wyatt:]

Sure. So I would say the first – the early candidates kind of come in two areas. The first would be existing customers. So we’ve identified customers who were customers of both Absolute and NetMotion and have been kind of in conversations and gathering feedback and looking for sort of those opportunities to work with those customers as we start to connect the products together. And then I would say, more broadly, we continue to see a nice inflow of opportunities that come from what I would call more competitive situations, where customers are moving off of other secure access or connectivity solutions and opting for NetMotion’s, what I’d say, curated experience, the nice user experience that they offer as a part of that. It’s still too early for us to be – outside of the Persistence announcement that you referenced that we just put out a couple of weeks ago, I think it’s still too early to be sitting with customers and going through some of the next steps two and three and four in the product road map. But we are pulling together that list of customers who have a set of shared interests and leveraging that as a feedback area for us as we define those plans.

[Kevin Krishnaratne:]

Great, thanks a lot. I'll hop back in the queue.

[Operator:]

Thank you. And the next question will come from Thanos Moschopoulos from BMO Capital Markets. Please go ahead.

[Thanos Moschopoulos:]

Hi, good afternoon. Just going back to the supply chain impact, is there any way to just as a very rough ballpark quantify how much of an impact it’s having on the business? And then given that it seems like it’s probably gotten directionally worse over the last three months, does that imply you would have been in a position to raise guidance perhaps even more if not for maybe that holding you back?

[Christy Wyatt:]

I’ll take the first part of that, and then Steven can sort of speak to guidance. I’d say it’s tough to kind of quantify what didn’t happen. So maybe I’ll just kind of give you a few points of color around it. The first thing is that we don’t see an effect on demand as a result of what we’re seeing happening with systems. What we tend to see is more an effect on timing. So some folks not being able to get what they need in as – in the time period that they had originally thought they could have it. And in other cases, we do see an effect on the mix of devices, where they may take, and this would be sort of more particular to education, where they may take a higher number of either PCs or Chromebooks depending on which their hardware partner is and which one they have kind of more availability of, especially as folks were getting ready to get children back in classrooms. So the timing effect, we’re talking about weeks, not months. But if that’s happening near the end of a quarter, that could sort of push things back and forth depending on where you are. Sometimes we can decouple ourselves from that. If it’s a larger deal, we can – the software integration can happen more quickly. Other times, we’re sort of happening as the hardware unfolds. But the one thing I just kind of want to remind everyone is that it is a relatively small part of our overall sales that are actually still selling connected with hardware. We do sell through OEMs as we go back and focus on upsell and expansion. But in those moments, they really are more sort of strategic channel partners as opposed to it being a direct connect to a piece of hardware type of a sale. And so the effect is probably less than you might imagine, but it has an effect on new projects that involve new hardware.

[Steven Gatoff:]

And so to that point, and Thanos, it’s a good question, with Christy’s context and color, there’s some impact, obviously, on how we think about the road ahead and guidance, but it’s not a massive impact.

[Thanos Moschopoulos:]

And given the commentary on timing, does that imply that education might – the seasonality might be a bit different than what we’ve typically seen with usually the December and March quarters being weaker, with that ultra seasonal fanatical this year?

[Christy Wyatt:]

Without kind of leveraging the crystal ball, what I would say is that we are seeing customers plan earlier. So what we would internally refer to as sort of harvest. Folks getting ready for kind of the next cycle of school is happening a little bit earlier this year as schools are, a, because they have to be more thoughtful about sources of funding and there’s work that needs to be done in order to access that funding as well as there’s an expectation that it might take them longer for them to get what they need. So we see folks starting a little bit earlier. So yes, that seasonality does exist. And I think this year we are seeing folks at least do the work a little bit earlier, if that’s helpful.

[Thanos Moschopoulos:]

It is. Thanks. Finally, going back to the large NetMotion deal, you mentioned that the at least initial deal sizes kind of look similar to Absolute type of deal sizes. I mean, how common or not is it for them to sign seven-figure deals? Would the frequency of that be comparable to preexisting Absolute? Or in terms of that build size, what would that look like commonly?

[Steven Gatoff:]

The scale of the business, obviously, is smaller by half from us. So the volume and frequency is probably similar on a relative basis. And so they do sign historically, and we have signed, obviously, this quarter, seven-figure deals. So it is part of the calculus. When it is a subscription on-prem, the revenue impact is obviously pretty meaningful upfront.

[Thanos Moschopoulos:]

Okay. Great. Thanks guys. I pass the line.

[Steven Gatoff:]

Thanks.

[Operator:]

The next question will be from David Kwan from TD Securities. Please go ahead.

[David Kwan:]

Good afternoon. I was wondering just on the revenues, not having us been able to see the financials, but for like the subscription revenue, for example, from NetMotion or the perpetual licenses, I assume that’s going to be broken out outside of kind of the recurring revenues that accounted, I guess, for historically the vast majority of Absolute’s revenue?

[Steven Gatoff:]

So the really two main parts of the NetMotion, the company formerly known as NetMotion, their business is the software license revenue, which will continue to be broken out. You’ll see in the financials under software license. And then the recurring nature of revenue, like a subscription agreement, like maintenance, is included with our subscription agreements and recurring revenue. So that will all be included you’ll see on the P&L in one line item under cloud and subscription revenue, and then you’ll see license revenue underneath that.

[David Kwan:]

Okay. And I’m guessing you’re probably not going to be kind of breaking out NetMotion separately?

[Steven Gatoff:]

Well, you will correct on the face of the financials. We do, as part of our acquisition disclosure, disclose the NetMotion revenue on an IFRS basis in the footnote in the financial statements. So you'll see that in total.

[David Kwan:]

Okay. That's helpful. Okay. And I guess what I was trying to break out what kind of the growth rates between Absolute and NetMotion was this quarter, I guess, at least on – I remember seeing something about revenue. I think it was up – not the adjusted revenue, but the revenue was up 53% year-over-year. And I think 76% was due to NetMotion and 24% from Absolute. So I guess, doing the math, does that imply, I guess, roughly about 13% growth for Absolute's business in Q1?

[Steven Gatoff:]

I think if you back into the math the way you said that, that...

[David Kwan:]

Effectively, about 24% on the 53% is kind of what I did.

[Steven Gatoff:]

Yes. Orders of magnitude that would not be a bad assumption.

[David Kwan:]

Okay. Perfect. And then just on the education business, you had a nice bounce-back quarter in Q1 here. I guess, what do you attribute that to? We'd obviously seen some data points coming out of some of your OEM and channel partners that seemed to indicate that it might have been another tough quarter for the education market, but you guys seem to have bucked the trend there. So curious to see what you guys – what happened in your business?

[Christy Wyatt:]

Yes. It's a great question. I think that, first of all we have not seen – schools are definitely not through their digital transformation. And as much activity as we saw last fiscal year with people acquiring systems, the bar has been raised in terms of their needing to account for where those systems went and how they're being used. And so our data has become increasingly relevant and helpful for those schools, even if we weren't a part of the original purchase, for them to even retroactively go back and track, activate and then figure out kind of where all their stuff is. I think that in the first wave of stabilization dollars there was a lot of learning's by educational institutions. Many schools saw incredibly high breakage rates; breakage meaning how many systems they sent home but didn't get back. And so this concept of sort of fleet management as they scale becomes increasingly critical as well as all of the visibility attributes required to manage them. So a lot of the programs that we are helping some of our larger customers with are things like reclamation as a service. So how we help them track and retrieve those devices and get them ready for either the next school year or the next semester as well as making them through some of their other expansion programs for how they continue to deliver new devices out to students. And I'll also just reiterate something I said a moment ago, which is a very small percentage of our sales are actually connected to new hardware purchases in the aggregate, right? A lot of what we do is upsell and expansion. And so that would be independent of what was happening with some of our other channel partners.

[David Kwan:]

That's a good point. I was going to ask you about that, your comment on kind of not a lot of the activations are necessarily in conjunction with the hardware sales. Can you say roughly what the breakdown is?

[Christy Wyatt:]

We don't really break that out, but – yes, we don't really have an easy way of breaking that out here, but I would say it is – the majority of what we do is upsell and expansion, as opposed to – even if you take a look at our net new logo that would be an easy sort of indicator, right? Our net new logo has been trending up nicely, and that's usually a nice indicator of where we're seeing kind of new hardware attach and new partners coming in. But the growth is really happening in upsell and expansion.

[David Kwan:]

Okay. And just the last question. Do you guys still see looking out in the next few quarters and even maybe beyond that to the education business, you're going to be facing some tougher year-over-year comps, but do you still expect the education business to kind of grow in line with what we've seen from the enterprise and government sectors historically?

[Christy Wyatt:]

I don't think our view has changed in the last quarter on that, which is we think we're still in a period of accelerated activity in the education space, and I expect there to continue to be a lot of work and opportunity within education for the coming quarters. We do see the opportunity in enterprise and the demand starting to build up, as well. So we do believe while enterprise in terms of their level of – I don't like the word maturity, but I would say complexity in their security strategies and their ability to use kind of a broader percentage of our features is a little bit further ahead of education, we do think that they long-term kind of net out into the same place, they do converge over time. So I don't think our view has changed versus where we were when we started the year.

[David Kwan:]

Okay. Great. Thanks.

[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:]

All right. Well, first, I want to thank you all again for joining us today in our first full quarter following the acquisition of NetMotion. We were pleased with what we were able to accomplish. Not only did we continue to deliver balanced year-over-year growth of 17% in ARR, 15% in adjusted revenue and profitability with an adjusted EBITDA margin of 26%, but we did so while also accelerating the NetMotion integration. We have a clear view on what we need to do as a team, and with a strong start to the fiscal year we remain focused on making the investments required to realize this opportunity. Thank you all again for joining us today.

[Operator:]

And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.