Enghouse Systems Ltd

TSX:ENGH

Earnings Call Transcript 2022-Q3

[Operator]

Good morning, ladies and gentlemen, and welcome to Enghouse Q3 2022 Conference Call. [Operator Instructions] Also note that this call is being recorded, Friday, September 9, 2022.

I now would like to turn the conference over to Mr. Stephen Sadler. Please go ahead, sir.

[Stephen Sadler, executive]

Good morning, everybody. I'm here today with Vince Mifsud, Global President; Rob Medved, VP Finance; Todd May, VP, Legal Counsel; and Sam Anidjar, VP Corporate Development.

Before we begin, I'll let Todd read our forward disclaimer.

[Todd May, executive]

Certain statements made may be forward-looking by their nature. Such statements are subject to various risks and uncertainties, including those in our continuous disclosure filings such as our AIF, which could cause the company's actual results and experience to differ materially from anticipated results or earlier expectations. Undue reliance should not be placed on such forward-looking information, and the company has no obligation to update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise.

[Stephen Sadler, executive]

Thanks, Todd. Rob will give an overview of the financial results.

[Rob Medved, executive]

Thank you, Steve, and good morning, everyone. I will be discussing the financial and operational highlights for the 3 and 9 months ended July 31, 2022, compared to the 3 and 9 months ended July 31, 2021, as follows. Revenue achieved was $102.1 million and $319.5 million, respectively, compared to revenue of $117.6 million and $354.1 million. Results from operating activities was $29.8 million and $96.5 million, respectively, compared to $38.5 million and $116.1 million.

Net income was $18.1 million and $57.5 million, respectively, compared to $21.2 million and $62.6 million. Adjusted EBITDA was $32.5 million and $104.8 million, respectively, compared to $41.7 million and $126.4 million. Cash flows from operating activities, excluding changes in working capital, was $34.1 million and $107.3 million, respectively, compared to $41.1 million and $125.4 million.

Revenue for the third quarter of 2022 was $102.1 million, with results from operating activities of $29.8 million and cash flows from operating activities, excluding changes in working capital, of $34.1 million. As a result, we closed the quarter with $229.5 million in cash, cash equivalents and short-term investments with no external debt. This was accomplished while completing 2 acquisitions for $6.1 million, paying quarterly dividends of $10.3 million and repurchasing $9 million of common stock from shareholders.

We remain focused on operating a profitable cash flow-positive business, generating the necessary capital to fund our acquisition strategy without the need for financing.

Revenue for the third quarter of 2022 was down from $117.6 million in the same period in the prior year and was negatively impacted by $3.6 million as a result of foreign exchange as European currencies continue to devalue as a result of the conflict in Ukraine. Our Interactive Management Group continues to experience a market shift from on-premise license -- perpetual licensing towards Software-as-a-Service cloud offerings. This has translated into a decrease in overall IMG revenue despite increased sales of our cloud products.

Revenue in our Asset Management Group on a constant currency basis remains consistent this fiscal year compared to prior year. Net income for the quarter was $18.1 million or $0.33 per diluted share compared to $21.2 million or $0.38 per diluted share last year. The decrease is a result of lower revenue, net of decreased operating expenses relative to the comparative period. Adjusted EBITDA was $32.5 million or $0.59 per diluted share, compared to $41.7 million or $0.75 per diluted share in the third quarter of 2021.

Enghouse completed 2 acquisitions late in the quarter, purchasing Competella on June 23 and NTW Software on July 6. Competella offers a complete contact center platform, focused on the Scandinavian and Swiss markets, with both a SaaS and on-premise solution. NTW Software provides an attendant console and contact center offering for organizations that have adopted the Cisco communications platform.

Both acquisitions augment our contact center offerings and broaden our cloud-hosted solutions portfolio. We believe that acquisition valuations are becoming more favorable in this environment as rising interest rates increase service debt -- debt servicing costs and reduces profitability for many companies in the technology segment.

Yesterday, the Board of Directors approved the company's eligible quarterly dividend of $0.185 per common share, payable on November 30, 2022 to shareholders of record at the close of business on November 16, 2022.

I will now hand the call back to Mr. Sadler.

[Stephen Sadler, executive]

Vince will now give some operational highlights of the quarter.

[Vincent Mifsud, executive]

Thank you, Steve. Today, I'm going to point out some important trends that we are seeing and focus on how they are impacting our business. Let me start by highlighting our cash position, ending the quarter with approximately $230 million in cash with no debt, which was up $42 million from the same quarter a year ago.

We also essentially maintained our overall cash position compared to Q2 2022, while during this quarter, purchasing $9 million in [ NTL ] shares as part of our share buyback, issuing $10.3 million in dividends to our shareholders and spending $6.1 million on 2 acquisitions, which generated about $500,000 in revenue as they were completed late in the quarter.

We continue to run our business, generating positive operating income and cash flows, giving us the ability to do acquisitions, make continued investments in product and execute on other initiatives such as our share buyback without depleting our cash or incurring debt. Having no debt in an era with rising interest rates provides us the financial stability that is becoming increasingly more important to our customers.

Foreign exchange has continued to have a large negative impact on revenue, decreasing revenue by $3.6 million compared to Q3 2021 and $11.7 million on a year-to-date basis. This is caused mostly because of the declining euro, U.K. pound and Nordic currencies relative to the Canadian dollar.

Looking at this quarter's results, we are seeing a change in revenue mix. Compared to Q2 2022, we had a sequential revenue decline of $4 million. 2.2 of this decline was due to foreign exchange. And the rest of the decline was related to lower hardware, on-premise product licenses and professional services, which is expected to be a bit lower, given the vacations that occurred during the summer months.

However, on a constant currency basis, we had an increase in recurring revenue, generated from our SaaS and maintenance and support services. This shift in mix is moving towards more recurring revenue and less one-time revenue generated from hardware and perpetual software licenses, particularly in the customer experience and contact center market.

Product development and ongoing innovation continues to be at the core of what we do and our single biggest area of investment, and it's not an area of the business that we are scaling back to achieve short-term profits. The markets we are serving are expanding, particularly in the areas of customer experience and contact center, improving public safety, virtual healthcare, helping telecom companies expand and improve their networks and moving transit to cashless safe environments.

These are all examples of growing market segments that we are in and areas of continued product innovation and investments. Enabling our products to be optimized in the cloud represents a large phase of engineering investment, which we will continue but have gone beyond this, introducing a number of new products and enhancements and are expanding our rate of product innovation.

We are achieving this through improved engineering velocity through the redesign of our products with micro services cloud architecture, enabling us to build, integrate and adapt quickly to customer needs. Many of our innovations are aimed both at the cloud and the needs of micro verticals we serve, creating differentiation in these segments against the large horizontal players.

Recurring revenue improvements are occurring as a result of our continued product innovation and some new go-to-market initiatives. Building a compelling cloud contact center product offering has enabled us to launch a new cloud uplift program.

Over the last several quarters, after we completed standing up our own multi-tenanted Software-as-a-Service offering, which we call [ Enghouse ] CCaaS, short form for [ Enghouse ] Contact Center-as-a-Service, we commenced a proactive campaign to our existing base of on-premise customers, providing them with a migration path to move either to [ Enghouse's ] CCaaS or to a private cloud.

This program is aimed primarily at our large existing base of on-premise contact center customers and is starting to pick up momentum, driving improved customer retention, expansion of our SaaS offering and increasing recurring revenue on a constant currency basis.

The other program that's generating momentum is through our channel partners. In a market where SaaS demand is growing, channel partners generally have a smaller role to play as there is less hardware and services work required when compared to the on-prem solutions.

However, we are one of the few companies that have enabled our channel partners to remain relevant as the shift to SaaS is occurring by allowing them to either sell our SaaS solution or provide them an opportunity to [ stand ] up their own cloud, manage it and sell their own SaaS offering to the market, based on [ Enghouse ] technologies.

These deals are structured in a way where we share in the success with our channel partners. We had similar programs historically in the past with our telecom partners, but have now expanded this globally to our other channel partners.

In the customer experience market, the demand for on-prem perpetual license continues to decline, but demand for SaaS is increasing. For the Asset Management business, we are not experiencing the same trend, so the demand for on-prem perpetual license remains consistent.

We are pleased with the continued profitability and the progress we are making with our products and go-to-market initiatives, address the growing -- the growth happening in the overall cloud market while maintaining our company's financial stability.

Let me turn the call over to Mr. Steve Sadler.

[Stephen Sadler, executive]

Thanks, Vince. With respect to acquisitions, the actionable pipeline is significant. Valuations continue to decline in this challenging environment of increasing global interest rates. We completed 2 tuck-in acquisitions late in Q3, and only about 1 month of revenue is included in the quarter. These businesses had slightly negative EBITDA after special charges in the quarter, but should add to EBITDA in the fourth quarter.

At the end of Q3, our cash on hand remained at approximately the same as the end of Q2, at $230 million after purchasing over 330 shares of Enghouse stock for approximately $9 million, paying for the 2 acquisitions and paying the regular quarterly dividend. This is a result of our strong positive cash flow. We completed the acquisition of [ VoicePort ] earlier this week and expect it will be EBITDA positive for the 2 months that are part of the Q4 quarter.

I would now like to open the call to questions.

[Operator]

[Operator Instructions] And your first question will be from Daniel Chan at TD Securities.

[Daniel Chan, analyst]

Just had some questions about the IMG decline. Just wondering whether that is largely a result of the migration of your customers from on-prem perpetual license models to the SaaS model. Looks like hosted maintenance was relatively flat year-over-year. So maybe just can you comment on your logo retention rates, whether that has been stabilizing and whether that's still flat? Or is it -- or are you still on a net basis, still losing those?

[Vincent Mifsud, executive]

Yes. So a few questions. I'll start, Daniel. So there's two factors, right? Foreign exchange, we talked about, is causing a decline. But yes, there is a shift happening in the mix. There's less perpetual. We have existing customers that are moving to either a cloud or multi-tenant cloud or a private cloud. So we are seeing -- after we've stood up our own cloud and are pushing this in the market, we are seeing a reduction in any customer churn and better retention of our existing customers.

[Stephen Sadler, executive]

Dan, just to give some color on our churn, as you look at it from the premise side without that movement, it is about 8% to 10%, which is pretty much what it has been over the years.

[Daniel Chan, analyst]

Is that on a gross basis? Or is that on a net basis?

[Stephen Sadler, executive]

I keep them the same. So I don't distinguish that much between the two. We didn't do much price increases last year, although we're doing more now with the inflation picking up.

[Daniel Chan, analyst]

Okay. And then, Steve, while you're there, your share buybacks, that's -- I don't think that's something you've typically done in the past. Just can you give some color on how you think about share backs versus dividends and M&A.? It sounds like the M&A pipeline still is pretty strong right now, so just your thoughts on capital allocation.

[Stephen Sadler, executive]

Yes. Our pipeline is strong on M&A. But we always look at our stock and when it gets to a price that we believe is below fair value, we take some action. We've always had the buyback program in place, didn't use it when the markets were pretty frothy with high multiples. But now the markets have come down and we've come down, in our opinion, too much. So we used some of our funds, our cash flow to buy some of the stock back. We still have lots of cash to do acquisitions, to pay our dividends, our growing dividends, and to buy some stock back.

So we're using -- doing capital allocation of added buybacks, which have always been in the plan, but we've never implemented until the market came down to a level we believed was too low. So we decided that we should use some of the funds there, and we have plenty of funds for all the other activities.

You can see that in the fact that our cash, really after doing all that, hasn't gone down this quarter from last quarter, in spite of the acquisitions, in spite of the regular dividend and in spite of the buyback that we did.

[Operator]

Next question will be from Stephanie Price at CIBC.

[Stephanie Price, analyst]

It sounds like the M&A environment is getting a bit more attractive here for you. Just curious around the acquisition strategy and whether you're shifting more of an M&A focus towards cloud applications?

[Stephen Sadler, executive]

Our acquisition strategy is stable, always has been. We got to have a payback, 5 to 6 years cash flow. It is shifting a bit to the cloud because all the cloud guys are [Technical Difficulty], most don't make money and their values are dropping. And unless investors give them more money, some of them are hitting some trouble.

So it's shifting, but not our strategy is shifting, it's just that the opportunities are shifting a bit more to the cloud. But otherwise, our program is the same as it always has been. When the multiples were high last year, we didn't do many acquisitions because their discipline said too high. Now it's coming down to a part where there's a lot more opportunities that meet our criteria. But it hasn't really changed, Stephanie.

[Stephanie Price, analyst]

Okay. And your answer to that question leads into my next one. I was just curious around the competitive environment, and the MD&A noted some cloud contact center competitors reducing prices in an effort to retain revenue growth. Just curious on the economics of a cloud contact center sale versus on-premise. And how do you think about the competitive environment here?

[Stephen Sadler, executive]

I think the overall way we look at it is what customers want, we can provide. We can provide it on-prem, we can provide it in the cloud. The in-cloud competitors, if you look at, most lose money. And that's okay if they have money, but it's going to be a little more difficult, potentially, to get money in the next couple of years, a lot more than it has in the last couple, especially with interest rates going up. .

For us, it's just a matter of the numbers. So we're fine doing both. We have product to do both. Many of them do not. And we're continuing on with our normal plan in that regard. Whatever the customers want, we will offer to them. Margins are lower certainly in the cloud, and we compete in that market, but we won't lose money to play in the cloud.

[Vincent Mifsud, executive]

Yes. Just to follow up on that, Stephanie. We look at every deal kind of on a deal-by-deal profitability basis. We don't take deals that are losses or low-margin deals, we don't do that as a way we run the business. So if a competitor is dropping their prices to a point where there's no money, no profit in the deal, we won't take it.

[Stephanie Price, analyst]

That makes sense. And then, Vince, you'd mentioned partnerships in the cloud strategy. Just curious if you could expand on that a little bit. I think that's a bit of a shift from what we've heard in the past. Just curious, how the uptake has been, and how you're thinking about that?

[Vincent Mifsud, executive]

Yes. So we have generally been going a bit more direct on the Interactive side of our business. The Asset Management has always been a direct sale. But we have a good channel program at Enghouse, generally. We drive a good amount of revenue through channels.

But when the market was on-prem, channel was quite useful because they implemented hardware. There was a lot for them to do. And in the cloud, there's a little -- there's less hardware business. There's less kind of field work to do, right?

So what we did is we created some new initiatives for them, allowing them to sell our SaaS offering, which, by the way, our understanding of our competitors, they don't let them sell SaaS. They basically have a referral program, where they have to refer deals to the SaaS provider. We are different in that regard. We let them sell our SaaS offering.

And then secondly, we're seeing that some of them want to stand up a cloud offering for their customers and move their on-prem customers to the cloud, and we've enabled them to do that. So we've trained them. We've -- we let them stand up a cloud on any cloud platform they want: Azure, Google, AWS, whoever, IBM, because we're agnostic to the cloud providers. Our solution works on any cloud platform.

So we've given them a spot to market and sell in the SaaS world, which I think is different. So that's a new initiative that we've done in the last 6 months, and it's gaining some traction.

[Operator]

Next question will be from Deepak Kaushal at BMO Capital Markets.

[Deepak Kaushal, analyst]

It's good to be back on these calls. I just wanted to dig in -- can you guys hear me okay?

[Stephen Sadler, executive]

Yes, yes. Good.

[Deepak Kaushal, analyst]

Fantastic. I just want to dig in more on the M&A pipeline, Steve. Can you give us kind of a sense qualitatively, if not quantitatively, the mix between smaller versus larger opportunities? And it seems like the first couple, to start, have been tuck-ins. Is that just the nature of how this -- you expect the profile to happen, the smaller ones first and the larger ones later? And maybe some color on that, if you can.

[Stephen Sadler, executive]

Yes. I think you hit it right. Some of the smaller ones, if you're going to pay a little bit more, you're only paying a little bit more because they're smaller. But we have large opportunities, medium and small right now. There's a lot of companies trying to sell their businesses, either they're worried about a recession that may or may not be coming or we may or may not already be in it, but they're sort of taking advantage of that, especially if they have debt with rising interest rates.

[Deepak Kaushal, analyst]

Got it. And from a buyer's perspective, you're obviously buying and you're seeing more. But in a falling -- as rates continue to rise and valuations continue to fall, like are you ready to pull the trigger on these things now? Or do you kind of wait a quarter or 2? How do you kind of think about pacing yourself through this trend and -- when the flood gates open?

[Stephen Sadler, executive]

Just like last year, when they meet our disciplined financial return, it catches our interest, and we look at them. When they're too high, we don't, and it seems a lot of others, some were bought last year, but most didn't get done. So there's a bit of demand out there right now. And we still have the financial discipline we've always had.

And it's done well. We're in a very good position now. We've got good cash. We got good cash flow, and opportunities are coming up, and many of our competitors do not have that. Everyone talks the SaaS model, very few of them make money. They all need investors to keep pouring money and to make their model work. We don't have that problem, and we're starting to see even with the Competella, smaller SaaS companies selling and meeting our model.

[Vincent Mifsud, executive]

Just add to that as well -- sorry, just to add to what Steve was saying, too. When it comes to post-acquisition integration, we've got that down to pretty efficient model, I would say. We put in a lot of money on systems, consistent systems, whether it's CRM or ERP or professional services, management systems, et cetera. So when it comes to absorbing acquisitions, we're in a pretty good spot there, too. We're ready, and we're quite efficient at it.

[Deepak Kaushal, analyst]

Makes sense. Appreciate that. And Vince, maybe just a follow-up with you on the perpetual to SaaS conversions in IMG. When you convert a perpetual license to SaaS, how long does it take to break even on the economics there? And are you seeing a pickup in add-on features when you convert to SaaS?

[Vincent Mifsud, executive]

So two questions. So like I said initially, like we won't take any deal unless they're profitable right away. So what generally happens is if they're an on-prem customer, they're paying us a support maintenance fee. When they move to SaaS, we have to increase that fee because we've got the cloud infrastructure and the DevOps team, we've got to manage.

So we get a lift in the recurring revenue when it moves from a support contract to a SaaS contract, in order to absorb the cost of running a SaaS platform. So that's how we think about it. And then the profitability is there immediately. There's a little bit of a professional services -- sorry.

[Deepak Kaushal, analyst]

Yes, got it. When you forego the perpetual renewal, how long does it take up to make that acquisition? You need like 2 years of SaaS or 1.5 years of SaaS?

[Vincent Mifsud, executive]

Yes, I see what you're saying. So if somebody came to us and they were going to buy a perpetual and rather pick SaaS, it's about at 3 year.

[Deepak Kaushal, analyst]

3 year. Okay. Okay.

[Vincent Mifsud, executive]

Yes.

[Deepak Kaushal, analyst]

Okay. And can you give us a sense then what percentage of IMG today is on perpetual versus SaaS? And when we might -- I guess, do you have any targets for an inflection point on when you might pass the halfway point on conversions?

[Stephen Sadler, executive]

It's hard to say. The majority is still on-prem. But remember, we have a large SaaS program through the telcos. People tend to ignore it because they do the SaaS, they host it. They bring the customers in. So some people don't look at that as a -- they look at it as a hybrid SaaS, and it's not under our name. But I still think most of it still is on-prem converting over as the industry is. The industry is still mostly on-prem, but is converting over to SaaS.

[Deepak Kaushal, analyst]

Okay. That's helpful. And since it's been so long that I've been on the call, if I may ask one more question. You guys are in lots of various international markets. Are there any notable areas of relative resilience or relative weakness internationally that might be worth understanding or flagging?

[Stephen Sadler, executive]

Well, the only thing I would say is that the foreign exchange sort of tells the story. Europe is weaker, high inflation in the U.K. So the pound is down from like $1.38 to $1.15. The euro is down from about $1.20, $1.22 to $1 or just under $1. Usually, if you watch the exchange, you can -- it answers that question for you.

[Deepak Kaushal, analyst]

Got it. What about Latin America? You had some new operations in Mexico, Brazil, any notable mentions there?

[Stephen Sadler, executive]

It's not very large, but they're all having the same problem, some higher or lower, depending on which country you're in and which [ week ] you're in. Some are okay and then they turn bad. Some are having trouble now but it will improve. So it just depends. But if you watch the exchange rate, you'll get a good flavor probably for what's happening in the country.

[Operator]

[Operator Instructions] And your next question will be from Paul Treiber at RBC.

[Paul Treiber, analyst]

Just a couple of follow-up questions. Just first on M&A and the ability to integrate acquisitions. I was just looking back in the past, and I think the most acquisitions you've done in a single year is about 6. How do you think about -- you've done these 3 smaller ones, and your ability to integrate acquisitions is higher than what it has been in the past.

Like does doing small ones ultimately preclude you from doing larger ones, if there's a flurry of them? Or is it -- are you now at the point where you see that you can do many more acquisitions in a time period versus previously?

[Stephen Sadler, executive]

We can do more today, not only integrate them, but we can do them because we have increased our acquisition team, doubled the size, added another analyst, added a couple of people doing outbound calls. We've been positioning over the last 6 months because we believe the next 2 to 3 years will be very good for acquisitions in our strategy. .

So doing them, we've increased the staff to do them, and we have a lot more people that have done acquisitions in various geographies. So they will now have experience in integrating them. So we should be able to do better than that as well. I would say, currently, we have extra capacity to do acquisitions today.

[Vincent Mifsud, executive]

Paul, as I mentioned earlier, too, we made a lot of investments in systems so that the acquisitions get integrated quite smoothly. Like they come on to our CRM, they come on to our marketing automation systems like it's from a system perspective, in addition to the people side. Both things are in good shape to absorb acquisitions, small or medium or large.

[Stephen Sadler, executive]

And just to answer the question a little more directly, it doesn't matter to us really, small, medium or large. We are capable of doing small, medium or large, as long as they meet our financial discipline. As you get larger, sometimes you get more private equity players because they don't like small and medium. They tend to look only at large, and they can drive up prices, which don't always meet our criteria, and they do it with using debt, and we tend not to do that.

[Paul Treiber, analyst]

And just in regards to the large acquisitions, I mean, there's been talk over the years of possibly adding another market or segment. Is that an opportunity and desire for the company at the moment? Or are you just looking to continue building out the existing segments?

[Stephen Sadler, executive]

So I've heard that question a lot. And for 10 years I said we're a 3-legged stool, and we could go to a fourth leg because that's always what we're looking to actually do. But we're not targeting any particular vertical. It would be an opportunistic buy of a larger group that will be sort of the foundation for developing that new area. But we could do that, but I've said it for 10 years, and we haven't so far. We'll have to wait and see if we -- if that changes. But investors should know that we could do that.

[Vincent Mifsud, executive]

I'll just have to add some color on that. So like we just did this [ VoicePort ] acquisition, and it's focused on the micro vertical of media companies, right? So even within the customer experience market, there's micro verticals within that, that we're not in, even though it's the same kind of product suite and same use case, but it's in micro verticals that are new.

So within the contact center market, we have many verticals that we're in. So sometimes as we buy something in a new micro vertical within an existing segment, like [ VoicePort ], for example, that we just bought.

[Paul Treiber, analyst]

Okay. That's helpful. Just one last one on the M&A is with the other opportunities, are there any in your pipeline like the fourth leg of the stool? Are there any in your pipeline at the moment?

[Stephen Sadler, executive]

Yes.

[Paul Treiber, analyst]

Okay. We'll leave it at that. Just shifting gears, just on the organic side. In regards to IMG, the -- is video still a drag on year-over-year growth? Or has it started to stabilize at least on a sequential basis?

[Vincent Mifsud, executive]

On a sequential basis from Q2 to Q3, it was still down a little, like about $1 million. So we still had a drag from Q2 '22 to Q3 '22. And year-on-year, it was down quite a bit. But yes, we still had a little drag. We think it's hopefully bottomed out at this point, but it was still a marginal drag from last quarter.

[Paul Treiber, analyst]

And just one last one, just to clarify that...

[Stephen Sadler, executive]

The other thing I would say, Paul, the people -- the other thing that I would say that sometimes everyone does understand, that type of a market, it is, as Vince said, down a bit, but it's also an area where there are acquisition opportunities as a result. So it could actually build up more again through acquisitions.

[Paul Treiber, analyst]

That makes sense. Just putting some more granularity around the year-over-year, what proportion of the year-over-year decline in IMG relates to video?

[Vincent Mifsud, executive]

I mean we don't -- we didn't disclose it specifically, but it is significant. It's a big portion of it. That and foreign exchange is a lot of it, if I look at last year to this year. So video is still quite a drag, on a year-to-year basis. When I was talking about the $1 million, that's last quarter Q2 to this quarter.

[Stephen Sadler, executive]

But it gives you some idea of year-over-year because we're not looking at what we're down year-over-year, and we look what we're down over last quarter. When you take out exchange, it shows you that most of it is video from last year.

[Operator]

And at this time, gentlemen, we have no further questions. Please proceed with closing remarks.

[Stephen Sadler, executive]

Okay. Thank you, everyone, for listening to the call. We continue with our long-term capital allocation strategy and to invest in our operations to improve our internal growth. Thank you for your continued support, and we look forward to talking to you after we complete our October fiscal 2022 year-end.

[Operator]

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines. Have a good weekend.