Dropsuite Ltd

ASX:DSE

Earnings Call Transcript 2022-Q4

[Craig Sainsbury]

All right. Good morning, everybody, and welcome to Dropsuite Fourth Quarter Investor Presentation. I'm Craig Sainsbury, Investor Relations, and with me today, we have Charif El-Ansari, the CEO; and Bill Kyriacou, the CFO.

Before I hand over to Charif, just a little bit of housekeeping. [Operator Instructions]. So with that, Charif, I will hand across to you.

[Charif Elansari, executive]

Thank you, Craig, and thank you everyone joining us and taking time out of your busy day. I'm very thrilled to present our Q4 results to the attendees. Just a short introduction first. Dropsuite is a backup leader. We are a partner built company offering backup and recovery solutions in the cloud for businesses, big and small. We are operating as a mission-critical solution for many companies and our partners, of course, and you are seeing and continue to see meaningful macro tailwinds driving the growth from cybersecurity and ransomware to regulation, to the nonstop move to the cloud and to SaaS applications. I mean a typical small business is running not less than 20 SaaS applications, and many of those definitely require some added data protection and backup.

We continue to lead in offering premium, highly featured products and we've been voted #1 Microsoft 365 backup provider by software reviews. We also continue to grow. We're approaching 1 million users in more than 100 countries with specific focus on OECD countries like the U.S., Australia, Canada, et cetera. We continue reinvesting in the team. We have now north of 80 people. We've built a phenomenal culture in the company, and we continue adding bench strength as we've done in 2022. And in 2022, in October, we also introduced and onboarded a phenomenal sales and marketing executive by the name of Eric Roach, who's taking over Channel Sales and Marketing globally, and he's been doing an amazing job, even though he's been in the job for less than 3 months.

And then lastly and very importantly, we have built a truly recurring and scalable revenue business model that continues to really tick upwards in the right direction while we are achieving positive cash flow and profitability.

The advantage that we continue carving in the market really revolves around two sides of the same coin. So on the one side, you've got delivering a phenomenal partner integration where we are integrating our products into the workflows and into the systems and to the [ RPs ] of the partners. On the other side of the coin, we deliver an exceptional user experience in terms of the quality of the product, the features. The fact that we are extremely unique in our search capabilities and the fact that we combine backup and compliance features into one product. Everything is delivered in a cutting-edge cloud platform that's available in 14 different data centers globally and of course, delivered by a highly responsive and skill team that is working globally for Dropsuite and its stakeholders.

With that, I'm going to ask Bill to cover our strong Q4 results, and then I will move my second section after Bill delivers the financials. Thank you.

[Bill Kyriacou, executive]

Thank you, Charif and Craig, and thanks, everybody, for your time today. In the financial overview, I will present our Q4 metrics, cash flow, year-to-date metrics and operating leverage.

As we exit December, annual recurring revenue grew by 10% on prior quarter and 58% year-on-year on a constant currency basis. AUD ARR growth for December was slightly hindered by depreciation of the USD/AUD pairing. And therefore, the AUD growth was 9% quarter-on-quarter and 67% PCP. Our paid user seats at the end of 2022 stood at 935,000, which represents a 44% year-on-year growth. We added 63,000 gross paid users in the quarter, which was slightly offset by the deactivation of 11,000 seats from a low ARPU legacy hosting partners and users.

Our monthly ARPU grew 4% quarter-on-quarter and 9% year-on-year on a constant currency basis, with a continued mix shift to higher-priced, higher-featured products with some benefit coming from the deactivation of the said low ARPU 11,000 seats.

Our gross margin pleasingly improved 4 percentage points in the December quarter and up 8 percentage points from the March quarter. The engineering team made great progress in the quarter with a range of costs mitigation measures and cloud scaling initiatives. These included upgrading search for better performance and optimizing for lower storage cost tiers within AWS. We expect 2023 gross margin to operate in a similar range to the FY '22 gross margin excluding any FX impacts from USD currency movements.

Our Direct Transacting Partners have increased 4% on prior quarter to 491 Transaction Partners, and we now have over 3,000 indirect MSP partners. Our revenue churn remains consistently low at [ sub-3% ] on an annual partner revenue turn basis. This includes the loss of the low ARPU legacy hosting end users we touched on earlier.

We are pleased to report our third consecutive cash flow positive quarter in December with positive operating cash flow of just over 450,000 for the quarter, bringing the 2022 operating cash generated to 930,000 for the year, up 206% on 2021 at 260,000. We also note the 930,000 includes 273,000 of due diligence payments that we made in Q1 of 2022.

Cash receipts for Q4 grew 8% on the prior quarter. The lower cash receipts growth was off the back of the very strong -- very strong cash collections quarter in the prior quarter. There was some effect of the USD/AUD depreciating in the last 3 months of the quarter, on the USD receipts that we received. Our DSO KPIs remained steady against the year end average, and we don't see any concerns with delays or any risks of doubtful debts.

Our total cash payments to suppliers increased in the December quarter by 14%. In September, it increased by more than 20%. The December increase is largely around wages and salaries increases, incorporating new starters and staff training, and we also have historically high Q4 marketing spend for the quarter, along with IT tooling expenses.

Payments for cost of sales in the quarter grew by only 4% against prior quarter. September increased 14%. This is due to the benefits of our lower search and storage costs from our focus on gross margin improvements, leading to lower cash payments in Q4. We do have a natural cash hedge for USD cost of sales, U.S. salaries and supplier payments as the majority of our cash receipts are collected in USD.

December quarter was another positive operating cash flow quarter, our third consecutive positive quarter of the year. The actual operating cash flow for the full year of 2022 was 930,000 up from 260,000 in 2021. As we mentioned, this includes 272,000 of due diligence payments made earlier in the year.

We do reaffirm our outlook for positive operating cash flow for 2023, though we note Q1 has historically been a higher cash outflow quarter.

We continue to improve our operating leverage, whilst we continue to invest in adding FTE, bench strength and capabilities and improve our gross margins, we are increasing our cost base at a lower percentage than our ARR increases, which is improving our operating leverage and allows us to invest in new product innovation and improve our current processes. When we apply the Rule of 40, Dropsuite sits above 18 for the full year 2022, up from mid-60s in 2021. And we continue to outperform compared to our peers in the SaaS market.

Thank you, Charif. Back to you.

[Charif Elansari, executive]

Thank you, Bill. Just like the theme of 2022 was growth and reinvestment in growth while staying cash flow positive, we believe we have the right flywheel framework in terms of growth and investment and future proofing Dropsuite. So here, it's going to be the same type of strategy where we continue growing our ARR at a meaningful rate. And then we continue investing prudently while staying cash flow positive and profitable in growth.

Now the reason why we're doing this is pretty straightforward. We talked about significant macro tailwinds that we expect them to continue to happen in the foreseeable future. We continue leading with our products with our team. We continue growing our partner network and serving a large addressable market while building a phenomenal team and a phenomenal culture in the company.

Just as a case in point, we have north of 3,000 transacting partners, but that only represents barely 2% of the total addressable market of these MSPs transacting mostly in OECD countries. And with our model, we're able to deliver, as Bill mentioned, meaningful operational leverage where we can scale across sales, marketing and support through our partners who are delivering first line of support, billing, provisioning, et cetera while we focus and continue focusing on growing our partner, our products and also delivering a phenomenal partner and end user experience.

We also, as we mentioned, continued expanding our product portfolio. One is strengthening our existing product, but we're also introducing new products. Our latest product that has been introduced towards the end of 2022 is QuickBooks backup for a company called Intuit, which is basically a much larger version of [ Zero ], which I'm sure many of the attendees on the call are very familiar with. So QuickBooks Online is the #1 accounting software provider for small and medium businesses in the United States and Canada. We have launched the product in beta, and we expect to start monetizing the product in late March, early April.

Now the reason why we picked and chose this product early last year to start building it is because we are timing the launch of this product with Intuit's own foray into the managed service provider market. So we are really excited about the product. We're also excited also about the partners being happy and looking forward to adding more data protection and more revenue streams for their business. At the same time, we expect this to steadily grow over time. We don't expect a big bang impact on the ARR just to manage everybody's expectations on the call.

It's also important to note that the market here is not as big as Office 365. At the same time, it's really important that we choose products that resonate with the SMB Community as well as with our growing partner network because the cross-sell effort and cost is actually minimal given the growth of our partner network, especially in North America, Europe and, to a certain extent, Australia and New Zealand.

So the growth strategy remains the same. Our ambition to grow within 2x faster or 2x than the overall market of backup and recovery in the cloud. So the market is growing at about 20%, 25% per annum. We want to grow at about 2x that. The way we deliver this growth is by growing our existing organic business which continues to have a lot of headroom to grow. One very telling statistic, aside from what we mentioned in terms of the -- our penetration in the MSP community, which is barely 2%, when you look at the amount or the number of SMBs who are protected with Office 365 Backup, which is our core product, as well as Google Workspace Backup, it is not going to be more than 15%. So still a lot of room to grow from here.

New product innovation, and a prime example of this is QuickBooks Online backup which we launched, and as I said monetization will start in calendar Q2, early calendar Q2, we continue shifting the market for high conviction accretive acquisitions. We're having several of those that we are in discussions with. At the same time, we continue looking for high conviction, and we want to have full conviction actually before we deliver any acquisitions. And the simple reason is our organic growth is so healthy. The team culture and the engagement is really phenomenal in the company. We're introducing new products through our existing team with QuickBooks Online. So we're really being picky before we end up deciding on which company we want to acquire in the foreseeable future.

To conclude this presentation, as usual, we continue having very sunny outlook in 2023. We continue seeing the tailwinds, continue having a leading position in terms of the quality of the products that are being sold at a premium versus competition and also growing faster than the competition, continue growing the bench strength of the team, continue advancing high conviction accretive acquisitions, continue growing at about 2x of the market in terms of annualized recurring revenue. And I want to reconfirm our guidance in terms of profitability and cash flow for 2023 saying that it's going to be positive, and it's going to be within the range of 2022, given the amount of opportunities we see in terms of reinvestment to continue driving this very healthy growth and really going way above the Rule of 40 that Bill mentioned earlier.

With this, we conclude our presentation, and we'd be delighted to answer any of your questions. Thank you, and over to you, Craig.

[Craig Sainsbury]

Thanks, Charif. Thanks, Bill. [Operator Instructions]. A few questions coming in on margins, Charif and Bill. First one was, it seems that the gross margin was helped by optimizing storage costs, and there's 2 questions around that. Is that optimization complete, and is there more to go? And the second part of the question is how does Dropsuite weigh up the cost reduction versus the reduced access and flexibility for clients?

[Charif Elansari, executive]

You want to answer the first question, Bill, I'll answer the second question.

[Bill Kyriacou, executive]

Yes. Thanks, Charif. With regards to the first question in regards to optimizing, we believe that we've optimized a significant amount in 2022. There won't be any material changes to the optimization going forward. We've completed the search optimization. We're still looking at storage tiers and the like. So we don't envisage any material uplift in gross margin, and we reaffirm that it will be within that 2022 range.

[Charif Elansari, executive]

So to answer the second question, we mentioned earlier how our positioning of the product is premium. Our pricing is premium. So anything we do when it comes to cost optimizations, rule #1 is to never impact the user experience. And that will be continuing our focus because we cannot, on the one hand, say, we are a premium product, at the same time, we stop cutting corners and impacting negatively the user experience. Anything we do in the future, and we still have some ideas and some plans on continuous optimization, it's going to be about keeping the user experience intact. And in fact, if you look at the search optimization that we did in Q4, which was a major driver for the gross margin improvement, it actually improved the user experience because it made our search even faster than it used to be.

[Craig Sainsbury]

Thank you. Next question on margins was, strong improvement in margins over 2022, started around the low 60s ended up around 70%. Is there any seasonality through the various quarters that we should be aware of in terms of margins?

[Charif Elansari, executive]

That's a good question. There are -- there is no seasonality for the most part. It's more about optimization and about scaling the cloud.

[Craig Sainsbury]

Thank you. Next one, again, just came back on terms of clarifying why you expect gross margins to fall from the Q4 levels of 70%. You set that range, but why would you expect the margins to fall?

[Charif Elansari, executive]

Yes, remember that we have 14 data centers and this might grow in the future as well? So we have to continue adding capacity for our new users and for storage. So on the one hand, we continue adding storage and capacity across 14 different data centers. And even within each individual data center, we have to continue adding what we call clusters, which is a combination of servers and databases to continue adding the growth. So that's what will push the gross margin downwards. On the other side, as we scale the cloud, as we introduce new compression capabilities, as we introduce maybe different storage tiers as we introduce probably better price as we have better pricing from Amazon, as we look at further ways to optimize the cloud, we also expect to see gross margin improvement. So it's a bit of a yin and yang here.

And as you probably know, most of the people on the call know that we tend to be conservative on getting our numbers and want to make sure that we manage expectations. Hence, our conservative view is to say it's going to be roughly along the same lines of 2022.

[Craig Sainsbury]

Thank you. Moving away from margins to users now, several questions coming at around the same theme, which was users increased by 49,000 over the quarter, which is one of the softest quarters of new additions that Dropsuite has had in a while. Can you please just talk through that in particular with respect to the 63,000 new users that came on with some of the churn that were sitting there.

[Charif Elansari, executive]

Bill, over to you.

[Bill Kyriacou, executive]

Thanks, Charif. So with the 63,000 new adds and paid seats, this is in line with our expectations. We've grown more than 300,000 users in the 2022 year itself. The churn of the 11,000 we mentioned was from a one low ARPU legacy hosting partner in that sense. And then there was some smaller churn outside of that major partner there. But when we look at the actual ARR, impact is very immaterial on both of those being low ARPU paid seats that have been deactivated.

[Craig Sainsbury]

Thank you. And a follow-up question on that one was, are there any macro headwinds at the moment or through the quarter that you saw that just delivered, I guess, a slower level of users that you delivered in the third quarter?

[Charif Elansari, executive]

Yes. We haven't seen any recession impacting us. And actually, it's one of the things that we continue asking our MSP partners since they are the ones who are spending most of the time with the SMBs, the small and medium business clients. We continue to see a very resilient channel. I even went back all the way to talk to people who were in the industry in 2008 with the global financial crisis that hit us, which is way stronger than what we're seeing today in terms of headwinds. But even in that dark times, especially for many of the people attending on this call on the financial side, even on those very tough times, the MSP industry simply slowed down the growth, and there was no impact -- really impact in terms of deterioration or negative growth in that industry.

We feel very fortunate to be operating in this industry that is growing at a much faster rate than the rate of the overall growth in technology costs. So it's growing at about 12%, 13% per annum. And that's something that gives me a lot of peace of mind.

Now and that said, because we are doing reinvestments and there are certain areas where we can pull back if we need to, we continue watching these trends, and we will pull back on any of the investments if we see any slowdown that causes us to reconsider. At the moment, we don't see any of those happening in our business.

[Craig Sainsbury]

Thanks. Next question is -- there's two on acquisitions, first one is, where are you seeing the acquisition opportunities in terms of geography, and will they expand your correct offering? And the second question on acquisition is, can you provide any update on timing?

[Charif Elansari, executive]

Yes. To answer the first question, in our [indiscernible] commentary that we launched last week, we said that we converted a certain amount of Australian dollars into U.S. dollars. And so that should give a good hint in terms of what is the #1 geography of focus. We tend to see, and I would say, unsurprisingly, the United States tends to be the most rich in terms of SaaS companies that are enticing and interesting for us to pursue in terms of acquisitions.

In terms of types of acquisitions, I want to reiterate that we are not looking to acquire companies who are offering QuickBooks Online backup or Office 365 Backup, basically buying users. We're not looking for that. We are looking for solutions that will be complementary to what we're offering. And this could be in areas of archiving and compliance, in data governance, and how to manage the different -- the 20 and more SaaS applications per small and medium business. These are the areas that we are looking for. And the reason why we are looking at this complementary solution is because we talked about the fact that we have north of 3,000 transacting partners. So the idea here is to cross-sell and increase the share of wallet with the growing base of partners, especially in OECD countries.

To answer your second question, the timing is still up in the air. And I would say that we always avoid to put ourselves in a corner and put a date together, because the minute you start doing this, you start becoming irrational and you start most likely making mistakes in capital allocation and capital decisions. So we're going to continue taking our time in identifying and then pursuing and then doing due diligence on companies in the foreseeable future without giving timelines.

[Craig Sainsbury]

Thank you. Next question is big build-out of the senior management team in 2022 with some really good hires. Can you please provide some perspective on headcount plans for 2023?

[Charif Elansari, executive]

Yes. I mean the first thing is that we are almost finishing rounding up the executive team. There's one more executive hired who's joining us tomorrow in the United States. And with that, we would have concluded the executive hiring at least in terms of the CEO, direct reports at the C-level.

In terms of headcount, we expect to grow overall our operating expenditures in a way that continues to deliver profitability and cash flow. In terms of the exact number, I don't have the number in front of me. But in terms of reinvestment in headcount and in capabilities, there's a couple of things that are worth highlighting. One is we need to continue growing our sales headcount and increase our coverage in select OECD countries like Australia, Singapore, North America and Europe. We need to continue enhancing our engineering and product team and increase the level of specialization in the team in terms of -- for example, we are -- we just finished building a data team that is focused on providing additional insights and reporting to our partners and end clients. This requires a different level of competencies and skills that will be in part getting from inside the company, but also in other part hiring externally. So as the company grows, there's going to be a continued focus on specialization to be able to deliver solutions at scale to north of 1 million users in the foreseeable future.

[Craig Sainsbury]

Thanks, Charif. Next question is a bit of a -- one on outlook. The exit '22 rate was an impressive 67% up year-on-year. First part of the question, what are you seeing in terms of your forward pipeline for '23? And second part of that question is when you're talking with your existing partners, are they giving you any feedback from what their pipeline is looking like?

[Charif Elansari, executive]

Yes. I mean the first thing to note is that I really encourage everyone to ignore the 67% and really focus on constant currency or U.S. dollar growth, which is closer to 60%. Now the reason why I say that is because we don't know how the Australian dollar is going to behave in the foreseeable future, right? It fluctuates like crazy. So we always look at constant currency. This is just a side feedback to everybody on the call to look at the constant currency growth.

In terms of our funnel and our outlook, we have an optimistic view on our annualized recurring revenue growth in 2023. While we don't give exact guidance, we have mentioned repeatedly that we expect to grow, and I have expectations of the team and the Board has expectations of me to grow at about 2x that of the market, which is growing at about 24% per annum.

[Craig Sainsbury]

A couple of questions now around QuickBooks Online. You've announced a positive beta trials, and it looks like you're targeting some critical application data here. Can you comment on the market opportunity that you see with QuickBooks Online, and then why you think Dropsuite Partners will be successful adding the QuickBooks Online back up to their portfolio of products?

[Charif Elansari, executive]

Yes. In terms of the addressable market, QuickBooks sells its solution to about 8 million small and medium business. Now many of those don't have only one license, so they might have 2 or 3 licenses as well, right? So in terms of the market, you're talking about, let's say, about 20 million licenses that are sold every -- that are the installed base of QuickBooks Online/Intuit. So that's the overall market.

Now the reason why we have launched QuickBooks Online backup is because, one, Intuit itself is entering the MSP market, and it's calling it one of their 5 big bets for 2023. That's public information. You can see it on Intuit's shareholder communication. The second reason is the MSPs themselves are very experienced with QuickBooks themselves because I can assure you, in the U.S. and Canada, 80% of MSPs are themselves using QuickBooks Online. The third reason is revolving around the importance of protecting critical data, including accounting and financial information. That will also add layers of annualized recurring revenue, not only for us, but also for the MSP partner who would be able to add another service to their stack of services that they're offering to the small and medium business.

A couple of notes on the product. From our perspective, it will be gross margin enhancing, it will also be ARPU enhancing, subject to the amount of mix that we expect to get towards the end of 2023 and beyond.

[Craig Sainsbury]

Next question around that is, where do you expect the ARPU to be for QuickBooks Online? And if you can't give an exact figure, do you think it will be sort of enhancing for your ARPU or slightly lower than the existing group ARPU level?

[Charif Elansari, executive]

I would say from a unit perspective, right, when you look at the one license or one SKU of QuickBooks Online backup, it would be materially higher than our current ARPU. However, the name of the game is mixed because the higher the mix, the more positive impact we're going to have on the ARPU and vice versa. And right now, I believe it's still too early days to give an outlook on how much impact we're going to see on gross margin and ARPU with the launch of QuickBooks Online backup.

[Craig Sainsbury]

Just one for Bill here on the seasonality of cash flow, can you just talk about the seasonality of cash flow through the 4 quarters of the year? And then if Dropsuite is cash flow positive, will that mean that you can switch to lodge 4Cs going forward?

[Bill Kyriacou, executive]

Yes, thanks for the questions. I'll take the first one being what the expectations are of the upcoming Q1, cash outflow and the seasonality there. Historically, Q1 has been a higher cash outflow due to annual payments that we're putting out. So these include insurances, annual insurances in Australia and Singapore. They also include potential annual staff bonuses, and then software -- annual software subscriptions that are paid out in Q1 of each year. We also have in Q1 2023 payment of our Indonesia rent for the office in Indonesia as well, which is -- in Indonesia, that would be a 2-year upfront payment. So I've got that coming in Q1 as well. So for those factors, that's why we stay to the market. We will again have a historically high cash outflow, where -- from that sense.

The second question around potentially seeking to lodge 4Cs if we are cash flow positive for that fourth consecutive quarter, this is still to be determined at Board level. But if we were -- if it was to be the case, we would cease providing a 4C, we would still provide a quarterly update with the [indiscernible] business update for the business.

[Charif Elansari, executive]

And I'm sure in the -- again, "the worst case scenario" that we don't lodge a 4C, even if we don't, we're still going to provide color on the cash flow. One thing that we want to continue doing not just on cash flow, is to continue providing our shareholders and investors the same set of metrics, good or bad, every single quarter to ensure everybody can track our business in the most transparent way possible. So that's not going to change whether we lodge a 4C or not.

[Craig Sainsbury]

Next question, are you seeing genuine increase in demand or inbound interest on the back of the increased level of cybersecurity issues that we've seen globally over the course of 2022. And if you have been, are you able to quantify how strong that increase in inbound activity...

[Charif Elansari, executive]

Keep in mind that I'm sure the person asking the question is based in Australia, because these cybersecurity trends and subsequent queries have been growing substantially since 2019. Now 2022 was a high profile in Australia with Optus and there was one more in health care which, forgive me, I can't remember the name. But this is one of the major tailwinds that have been taking us and pushing us forward in terms of growth. I would say since 2019. Since we see the -- we saw the flurry of ransomware activities that really started rearing its ugly face since 2019, and that trend hasn't stopped, and we don't expect it to stop in the foreseeable future.

It's akin to an arms race between the good guys and the bad guys. So we see improvements and strengthening of cybersecurity. On the other hand, we see the web criminals and cyber criminals improving their capabilities to hack because it's such a profitable business. And this is where I continue to be really optimistic about backup, the increasing importance of backup as a core component of any company's security posture. Because the most -- one of the most popular adages is that it's not about when it's about, if you're -- it's not about if, it's about when you're going to be hacked or have data protection issue. And with backup, you're able to protect yourself even if you have a data hack because you're taking your data, you're encrypting it, putting it in an entirely different cloud, and having it ready for recovery whenever something like this happens.

[Craig Sainsbury]

Two more questions that are left in the queue at the moment. Can you comment on the government market? Are you making any progress with federal government here in Australia and overseas? And is that a big target market for the organization?

[Charif Elansari, executive]

Yes. We are specifically focused on the U.S. government market. And let me be clear what I mean by market. We are a company that is focused on small and medium businesses. And over the last couple of years, we've made some meaningful inroads in the mid-enterprise market. And there are many definitions. In our case, we're defining mid-enterprise as top 5,000 users, so between 500 and 5,000 users.

So our focus on the government cloud business in the U.S. is not about getting a Department of Defense working with us. That's way too enterprise for us and requires a different set of capabilities. What we're focusing on is state and local government. What we're focused on, and this is a very big market, are the vendors who are selling to the U.S. government. If you are a vendor, you cannot -- service in the U.S. government, even if you're 5 employees or 500 or 5,000, you have to have that data in government-sanctioned data center that's typically in the Virginia, Washington D.C. area.

So what we've done in 2022, and we announced this earlier, is that we now have a fully functional government cloud offering for Office 365 backup. And we expect monetization also to happen in 2023, and that will be a key focus area for us in 2023 and beyond.

[Craig Sainsbury]

Last question, this is back on QuickBooks. There's over 5 million QuickBooks users worldwide. What sort of percentage of that are you hoping to the target?

[Charif Elansari, executive]

Yes. I mean I think the number is a bit higher. If you had the desktop, the QuickBooks desktop that's also moving to the cloud, so it becomes 8 million. I would say that is what I call the total addressable market. As Intuit enters the MSP market, we are looking to see traction from Intuit enhanced traction for QuickBooks Online backup. Now in terms of numbers, I think it's a bit too early to give an outlook or an aspirational attached to those. I think Q2 will be a very interesting quarter for us to look at the traction and try to make some conclusions around the aspiration attached and also the impact on ARR, ARPU and gross margin.

[Craig Sainsbury]

Well, Charif, Bill, that's the end of the questions for today. Charif, I'll just hand back to you for any closing remarks.

[Charif Elansari, executive]

Well, I want to thank everybody who joined us today, taking time out of your busy day to join the call. I just want to reaffirm our optimism for growth, for success. We are buoyed by strong market tailwinds. We continue building a phenomenal team with strong benchmark, and we expect 2023 to be another solid year for 2023.

With that, I thank everyone for joining us, and until the next time. Thank you.