Optiva Inc

TSX:OPT

Earnings Call Transcript 2018-Q4

[Operator]

Good morning, ladies and gentlemen. Welcome to the Optiva Reports Fourth Quarter 2018 Financial Results Conference Call. This call is being recorded. I would now like to turn the meeting over to Mr. Ken Taylor. Please go ahead.

[Kenneth James Taylor, CFO & Company Secretary]

Before beginning our formal remarks, Optiva would like to remind listeners that today's discussion may contain forward-looking statements that reflect the current view of the company's outlook, objectives and strategy. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those presented in these forward-looking statements. Optiva does not undertake to update any forward-looking statements, except as required. More details with respect to the cautionary nature of forward-looking information can be found in the company's fiscal 2018 MD&A dated December 12, 2018, and the company's annual information form. All disclosure documents are available on the company's website, optiva.com, and on sedar.com. I'll now pass the call over to Danielle Royston.

[Danielle Rios Royston, Chief Executive Officer]

Thank you. Good morning, and welcome to our 2018 Q4 and fiscal year-end earnings call. I'm Danielle Royston, CEO of Optiva, and I'm joined today by our CFO, Ken Taylor. I've the following 4 main points I'd like to communicate today on our call. We had finished our fiscal year, and our revenue continues to decline year-over-year. We have used our rights offering money to fund our restructuring, which is now substantially complete. We are focused on our customers and delivering Customer Success. And we are investing $100 million in our products to become the leader in Telco charging in the cloud.So with that, I'm going to turn the call over to Ken. Ken?

[Kenneth James Taylor, CFO & Company Secretary]

Thank you, Danielle, and good morning, everyone. I will now take you through some additional details of our financial results for the fourth quarter and fiscal year ended September 30, 2018. The company's fourth quarter revenues declined by 19% as compared to Q4 '17 due mostly to the timing of renewals of support contracts as support and subscription revenues declined by 18% in the quarter, but by only 4% in fiscal 2018 as compared to fiscal 2017. The decline in total fiscal year revenues of 12% was due mainly to a continued decline in new software and services orders from customers, as the company continues to[Audio Gap] The company will adopt the new IFRS 15 revenue standard commencing with its first quarter 2019 results. The company expects that the transition adjustment associated with adopting the standard will be between $4 million and $5 million of revenue, mainly related to term license agreements that we had planned to recognize in 2019 and beyond. The adjustment will be recognized as a decrease to opening deficit in shareholders' equity. The impact of the company's restructuring efforts can be seen in the reduction of total expenses, which declined by $8.3 million in Q4 '18 relative to Q4 '17, while being able to increase our investment in research and development to improve code quality on existing products and invest in cloud innovation. The company spent $2.8 million and $14 million on cloud innovation in Q4 '18 and fiscal 2018, respectively, and we expect to invest all of our earnings otherwise generated for the next 2 to 3 fiscal years on cloud innovation initiatives. Most of the company's investment in research and development, including cloud innovation, is supplied by DevFactory, which is an affiliate of the company's largest shareholder, ESW Capital. And the majority of the company's personnel are contractors sourced from Crossover, which is another ESW affiliate. The company's Q4 '18 expenses included $7.9 million spent with DevFactory and $6.7 million spent with Crossover. In fiscal 2018, the company incurred cost of $31.7 million and $28 million with DevFactory and Crossover, respectively. The company consumed $14.2 million in cash from operating activities in Q4 2018 as compared to $10.8 million in the same quarter a year ago due to increased restructuring payments, which amounted to $12.2 million in Q4 '18 as compared to $7.8 million in Q4 '17. The company expects to complete its restructuring activities in 2019 with the majority of the cash impact applied to provisions recorded as of September 30, 2018. I'll now pass the call back to Danielle.

[Danielle Rios Royston, Chief Executive Officer]

Thank you, Ken. So 21 months ago, I joined Redknee. At that time, our revenues were shrinking precipitously, and it shrunk 46% from its peak. Customers were concerned about our future and swapping us out. And people were saying, "Is this company going to make it?" To course-correct, we first raised $80 million in preferred shares from ESW Capital Group to pay the bank debt back. And then we completed our rights offering to create another $77 million to fund our restructuring, and I announced this reset plan. Number one, focus on Customer Success and installed base customers; number two, invest $100 million to revitalize our products; and number three, aggressively execute a restructuring plan to get the cash flow breakeven. First, let's talk about the restructuring. I've spent some money to restructure, and we have substantially completed the restructuring, such that most of our earnings otherwise generated can now go towards our investment in compute -- in Customer Success and cloud data solutions in 2019. What's important to note about our restructuring work is the transformation we went through. As you know, in many people-intensive businesses, like enterprise software, we have to take big severance charges in order to shrink expenses. And because we use our restructuring plans to move our company to use DevFactory and Crossover, services that are essentially on-demand, we can now just stop using these services, and these expenses go away without any severance charges. This is a very important trait since our revenue is still shrinking. We continue to believe that our revenue will stay between the guidepost of $120 million and 25% off of that number, but anticipate that revenues will continue to decline in fiscal 2019 relative to fiscal 2018. And so now that the distraction of restructuring is largely behind us, with the remaining burden primarily on our administrative teams to wind up most of our legal entities around the world, our focus is now on the future and the 2 other elements of our plan: Customer Success and product. So let's talk about Customer Success. This past year, we've moved Customer Success up to 33%. I will repeat that we believe that revenue will converge long term with Customer Success. And while revenue continues to shrink, we will continue to move Customer Success up, and we will continue to improve it. Because the systems we offer are important mission-critical systems, we are showing our customers 3 ways that Optiva truly is a partner that carriers can count on. First, it's the credibility that we can deliver a successful system, and installed base is experiencing that. Second is that we are financially viable. While we expect to invest heavily in cloud innovation, we anticipate doing so without generating significant losses and without requiring additional financing to do so. And third, we have created an exciting compelling vision for the future. And I dare to say, this is where we have made the most progress from where I started 21 months ago. We are now seen as the leading-edge, most aggressive Telco player moving to cloud. The last part of our plan was our commitment to invest $100 million in product. When I started, my thought was that we needed great products, and as I got into it, it became very clear that we had to be the leader in the cloud. 21 months ago, I was told by everyone, including the outgoing CEO, the founders of the company, the entire management and engineering staff, and most of the analyst community that Telco was not going to move to the cloud. And that's how I realized it was the perfect opportunity for this company that needed to turn around, that the cloud was the perfect place to plant our flag. And so thanks to our leveraging of DevFactory, we were able to rearchitect the product for cloud. We developed a strong relationship with Google Cloud as well as our Android group to put us in a position where we are now the leader in Telco charging in the cloud. We are presenting at all the Google conferences, we do joint sales call with Google and we are the only ones that can show a Telco charging system that can be 10x more scalable than an on-premise Oracle system at 1/10 of the cost. And so here is my framework for 2019. When at cash flow breakeven, invest whatever is required to improve Customer Success to 100%. And with whatever is money left over, invest in both sales and marketing and product, so we can be the lending -- leading vendor in the transition to the cloud. And so at this point, we're ready to open up the call for Q&A.

[Operator]

[Operator Instructions] And we'll go to our first caller.

[Robert Young, Director]

Hello. Is that me?

[Danielle Rios Royston, Chief Executive Officer]

I think so.

[Robert Young, Director]

Okay. Great. So you said that you're going to spend $100 million in R&D over the next 2 to 3 years. $86 million of that still to be spent. I think you said that you don't expect significant losses in 2019. In fact, I think you just said that you expect the cash flow breakeven. And you expect revenue to shrink in 2019. So I'm having a hard time understanding where the confidence is coming that you can fund this from earnings and existing capital, which is, I think, what you said in the press release. And so maybe if you could try to bring those things together for me, that would be very helpful.

[Danielle Rios Royston, Chief Executive Officer]

Yes. I mean, we spent basically -- sorry, I didn't catch your name.

[Robert Young, Director]

Sorry. It's Rob Young, Canaccord.

[Danielle Rios Royston, Chief Executive Officer]

I was like, "Is this Rob?"

[Robert Young, Director]

Sorry. I'm not used to having to say who I am. I thought it might have already been said on the call. But anyway, I'll go ahead.

[Danielle Rios Royston, Chief Executive Officer]

No, no, no. Thanks for joining, and thanks for your question. Yes, so in 2018, like I mentioned in the -- in my remarks is that we substantially have completed the restructuring. We've spent approximately $50 million. And if you recall from previous calls, we believe it's $1 spent for $1 generated, roughly. And so -- and you're pretty familiar with those guideposts that we've given over the course of the last 21 months of $90 million to $120 million of revenues. So when we put together a restructuring plan, we put it with that in mind, with that amount of revenue shrink long term and what did our expense level need to be on that kind of revenue basis. And so that really helped us shape the design of the restructuring plan, the funding of the restructuring plan, what we needed to ask for. And so we have run very aggressively in 2018 towards that plan. As I mentioned, it's substantially completed. And from those essentially expense reductions, that's what's helping to fund our plan for investing in basically 2 primary areas, which is Customer Success and our product. And so we believe this is a self-funding investment plan, and we will not have the need to raise additional capital from here on out.

[Kenneth James Taylor, CFO & Company Secretary]

Yes. And I would just add to that, I mean, the flexibility, and Danielle alluded to this in her comments, that we get by using DevFactory and by using Crossover, we have good flexibility in our expenses, so that we can match with revenues and maximize the investment that we have going forward without causing major issues on the bottom line. So that's what gives us the confidence as we move forward.

[Danielle Rios Royston, Chief Executive Officer]

And then just to add one more thing to what Ken said is, and it works both ways with DevFactory and Crossover. If we have an unexpected surprise on the revenue side, and it does go lower, as Ken mentioned, you can crank down those expenses pretty much on $0.10 within a few days. But on the flip side, let's say things were going extremely well. We had unexpected additional orders that we weren't planning in 2019, on the flip side, we can also crank it up really easily. And so that's the beauty of this plan that, really, the related parties, as much questions and concerns I get from people about these 2 partners and how critical they are to our success, that if we were in the same position 12 months ago or if we were in a position without having these partnerships, we would sort of be kind of, I'll say, old school managing the company with just legions and legions of people, whereas, in both directions, cutting cost or increasing capacity takes a long time and is usually very expensive. And so that's the beauty of this model, and it works and we're really excited about it.

[Robert Young, Director]

Okay. So if I think of it from a modeling standpoint, I guess, this is a little bit tricky, but you're going to balance the R&D spend that you have through these variable cost resources to 2 knot 2, whatever your revenue is. And that's -- so that's why you're saying that you don't expect significant losses because you can essentially adjust the business so that, that's the way it's operating. Is that a good way to think of it?

[Danielle Rios Royston, Chief Executive Officer]

That's a good way. It's very dynamic at this point, right? I think, 21 months ago, we had a lot of burden with a lot of people, where releasing them was very expensive. We're now out of that situation. And so, yes, I think that's a really good way to model it.

[Robert Young, Director]

Okay. Gross margins were stronger than I was expecting. Last quarter, you had the -- you had some accounting changes where you pulled forward -- or not pulled forward, you put some customer loss provisions than in previous quarters and so. But you, again, have strong gross margins above where you thought you would be. And so I was wondering, is that the restructuring getting better? What's causing that?

[Kenneth James Taylor, CFO & Company Secretary]

Yes. I mean, look, our -- overall, our efforts to reduce cost have an impact on margin, But I wouldn't read too much into margin fluctuation up and down. I mean, a good chunk of our margin -- of our costs are people costs, right? So there's not -- as revenue moves up and down, we mentioned the flexibility earlier. But you can get some variation in margin from period to period and it's not necessarily tied to any particular trend. And it's really related to our cost reduction, right? So in terms of reading too much into it, I wouldn't read too much into it at this stage.

[Danielle Rios Royston, Chief Executive Officer]

And I think our mix of revenue has been changing, right? We've talked about kind of a slowdown in orders that we've had over the last several years. We are delivering projects and getting them across the line and kind of clearing that. And so the mix of revenue, I think, is changing. And so that also influences our gross margin. But I would expect that at professional services, for example, projects pick up, as we start to get more work, that would change and influence that number as well.

[Kenneth James Taylor, CFO & Company Secretary]

Exactly, yes.

[Robert Young, Director]

Okay. So we should continue to think of gross margins maybe in the mid-60s or low-60s as opposed to where it's been the last 2 quarters.

[Kenneth James Taylor, CFO & Company Secretary]

Yes. I mean, we don't guide on the specifics. I think the thing to think about is in terms of where we have provided any color is really on that top line range that Danielle spoke about earlier and where we would anticipate being on the bottom line, which is without significant loss, as we mentioned, right? So there can be some variability in between, but we're not going to guide specifically on any of those.

[Robert Young, Director]

Okay, okay. In the release, you'd said that you had completed a number of projects, I think 8 in total. Maybe give a little bit color on that. Was any of -- I don't suppose any of those were related to the Optiva charging engine in the cloud, would be the first question. Then the second piece, I know that the deferred revenue declined, despite the completion of these projects. And so I was -- I would have expected some of that to move into sort of a subscription agreements or something like that. And so despite the fact that you had closed so many projects, the deferred revenues ticked up. So maybe if you can help me with those 2.

[Danielle Rios Royston, Chief Executive Officer]

Yes. We've had several long running projects. I think the longest project that we just completed was, I think, 4 years old, if you can believe that, and that's phase 1 delivery of something. We had a lot of projects when I first came in that -- and I've described as -- I described them as being in a ditch. My colorful language, I always like to use. And they were. They were just -- they were late. They weren't in line to the customer. They were over budget. Some of them were unprofitable. And they just weren't -- we weren't delivering. And we've spent pretty much this entire fiscal year doing what we needed to do to get them back on track. Now they're still late. We can't really change that, and some of them are -- have overspent relative to the original estimate. But they're done, and that's great. Now we recognize revenue on a percentage completion basis. And so we've been recognizing revenue on these projects all along, in some cases, over the course of 4 years or multiple years. And so you don't really see that uptick even though they're done. You might see our unbilled revenue balance go down. And so what's nice is that we're getting it -- and this in my remarks as well, we're getting them across the line, and customers are beginning to believe, yes, we have the capability to execute on the things that we said we would do. This will lead to changes in answers on Customer Success, which I am definitely looking forward towards. And then it builds up belief that we can execute against our cloud plan in the future. You're correct. None of them were for -- around the cloud product, that's still pretty new. They're really more around what was sold -- I mean, pretty much even prior to my tenure. So these projects are longer than I've been here. They've been in progress ever since -- since I joined. And so it's really just kind of cleaning it up, getting across the line. As I've mentioned, Customer Success is a one-by-one, customer-by-customer long journey. And so it's nice to get them across the line, and it kind of frees us up to do more things and start to sell cloud and do those -- sell the vision.

[Kenneth James Taylor, CFO & Company Secretary]

Yes. And on the deferred revenue side, I mean, that really is related to the timing of renewals on our recurring revenue. So I mean, you will see that -- where variability on that is when there's a lot of renewals that obviously spikes up. And then revenue is recognized during the year.

[Robert Young, Director]

Okay. And last one for me, and then I'll let other people ask questions. The -- Ken, for me, the phone blanked out when you were talking about the IFRS changes. And so, just in case, if that was for everybody, I thought maybe if you could just quickly go over that again, and then I'll pass the line.

[Kenneth James Taylor, CFO & Company Secretary]

Yes, sure. We think the impact is going to be about $4 million to $5 million of revenue that we would have otherwise recognized in '19 and beyond. That will be moving back essentially as a reduction in our opening deficit, so sort of income, but moved backward. And so it's pretty limited. We're still completing our work on it, but that's where our estimate is right now. And it really relates to our term-based licenses. And under IFRS 15, it's really -- it's determined at what point if you'd really pass control up. So that's -- that would have had us recognize revenue earlier on those particular contracts. So fairly limited, like I said, and we'll give more color and there's more color in our disclosures as well.

[Robert Young, Director]

So that's revenue that you would have recognized in the future that you're just taking out of retained earnings.

[Kenneth James Taylor, CFO & Company Secretary]

Yes.

[Operator]

And we'll go to our next caller.

[Brad Hathaway]

This is Brad Hathaway from Far View. So 2 questions for you, and I'll just do them one at a time. The first question is, again, I'd like to dig into that $100 million a little bit more because, I guess, there's $86 million still to go. That's a big number over the next 2 to 3 years. And you're not really that profitable right now and you expect revenue to decline. So I guess, I don't see, even with the flexibility of DevFactory and whatnot, how you can afford to invest that $86 million or make cash flow breakeven. So what am I missing there?

[Danielle Rios Royston, Chief Executive Officer]

Yes. Brad, this is Danielle. Yes, so as I was describing with Rob, we've invested substantially in our restructuring. We leveraged our rights offering raise to fund that restructuring. And our view -- kind of a good rule of thumb is $1 spent on restructuring is $1 saved on expenses. And I think that holds true for what we've done. Most of our restructuring money was spent on severance. And you can see in our annual circular the reduction in the employee levels and the worker levels that we have across our company. And so that's been great. And so that essentially turns into an opportunity to invest, right? We could choose to flow through to the bottom line or take those what would be earnings and invest in this vision. And so if you participated on our call last time, I talked about this is, is that while we would like to be a little bit further along on Customer Success, we would like revenue to be not declining. This opportunity around cloud is so exciting that we feel -- and it's also timely, that we need to start investing now. So the savings that we would generate from our restructuring, we're essentially just funneling into continued investment in Customer Success and investing to our growth strategy of sales and marketing and in revitalizing our products towards being cloud-native. And so that will be self-funding from the earnings we would have otherwise put out there. So that's where -- that's how it came in.

[Brad Hathaway]

I guess, just maybe -- just to quickly follow up on that. I mean, because you're not that profitable, really, in Q4 of '18, so are there...

[Danielle Rios Royston, Chief Executive Officer]

I would say not at all profitable.

[Brad Hathaway]

Yes. I mean, I thought I was trying to be delicate. Would the -- are there restructuring savings that have not flowed through the numbers yet that we really haven't seen? I would have thought that kind of they would have -- that most of them would have kind of gotten into the number already.

[Danielle Rios Royston, Chief Executive Officer]

Okay.

[Kenneth James Taylor, CFO & Company Secretary]

And then -- I mean, we're continuing to -- I mean, we're -- our comments, I guess, regarding forward-looking are the ones that we've made so far. It's -- when we look at our cost, certainly, yes, we're -- we will focus our cost on our investment. And they can be reductions in other line items to make that happen, right? So some of that is restructuring and incurred as charges. Some of it is not. Some of it is just revectoring spend that we have spent this year that we would spend another year.

[Danielle Rios Royston, Chief Executive Officer]

Yes. And then just the restructuring process didn't -- it wasn't all complete on October 1 of fiscal '18. It really did take the full year. And I'll take you back to a call that we had, maybe with the last call or maybe even the call before that, where we discussed eliminating, for example, our Germany engineering staff. That process, if you know anything about labor laws in Germany, is a lengthy negotiation process with works counsel to exit people in that country. And so for Germany, for example, those people didn't exit until 6 months into the fiscal year. So in terms of seeing earnings or profits, as you are describing them, yes, it's been this like -- we've been pretty aggressive and we've moved pretty quickly, but everything didn't happen at the beginning of the year. And so it happens and fully realized on an annualized basis. So no, you haven't seen that.

[Brad Hathaway]

Got it. Okay. That helps, so that there's still some more, kind of, to come. Okay, that makes sense.

[Danielle Rios Royston, Chief Executive Officer]

Correct, yes. And so -- yes, go ahead.

[Brad Hathaway]

Yes. Great. And then the second question was kind of completely changing gears. But you obviously have -- there seems to be some excitement about what revenue could be in 3 years. I would just love to take kind of a big -- and I'm picking 3 years kind of out there, but I'd love to take a step back and say over the midterm kind of how you view Redknee, just big picture strategically -- I'm sorry, I'm using old name. But how do you view Optiva strategically versus where it is today, kind of how you see the big picture evolving over the next few years for Optiva?

[Danielle Rios Royston, Chief Executive Officer]

Yes. Thanks for that. I was about to correct you. Yes. Optiva, I love the new name. It's so fresh. And our colors and the logo, it's super exciting, I think. I think our vision is really exciting. So again, I think I talked about this pretty extensively on our last call, but I'm always happy to talk about it again because I think it's really exciting. And I talked about it today in my remarks. So whenever I hear something is impossible or no one's going to do it or you're crazy, it actually makes me more excited that maybe I'm onto something really good. And when I start -- I'm not from Telco. If you know anything about my background, I'm new to this industry. Since I've been in this role, it's pretty much the sum total of experience I have in Telco. And so I've been learning on the job and I've been learning mostly by talking to customers, right? It's always the best way to learn about the business, learn about their experience, why did they use our products and what did they wish was different. And a couple of things were bubbling up. And mostly it was how do we make this very complicated stack of an application easier to manage and less expensive, right? And when we looked at the total cost of ownership of managing the system, the Optiva portion was a small fraction, right? Our customers are spending in lots of other areas. And I recall, it's frankly dumb spend, right, like hardware or database spend with Oracle, right? Oracle is famous for getting their clouds into you and then jacking up prices and then you're pretty much stuck. And so that kind of started my wheels turning. And a trend that we see in pretty much every other application -- software application space is the trend towards public cloud. And so I started to ask people about it. And again, everyone is like, "You're nuts. You're crazy. It'll never work. Telco will never do it." But I -- like I said, I felt like this was a perfect place for us to plant our flag. It was differentiated enough in a way that competitors couldn't easily pivot to copy us. And it was exciting enough to customers with a vision to becoming more scalable and repeating the total cost of ownership by multiples over what we were doing. And so I just started talking to people about it, talking to customers. And the customer reaction was pretty strong, and it was pretty strong and pretty quick. And so it's been this kind of evolving journey as I learned more and kind of deepening my understanding of working with the engineers. Ken has really worked. What do we need to do with our products? Forming the deep relationship with Google that I talked about, talking to the different cloud vendors that really settling on Google because I think that Google public cloud platform is uniquely positioned for Telco because they have their own private network. The Spanner database is differentiated, as well as the Android operating system runs in about 80% of the handsets in the world. And so I just felt like this was the perfect mix. But I got to crouch start in terms of setting everyone's expectation. It's not like they're going to go to our website and click buy, add it to their shopping cart and check out for a couple of million dollars, right? These sale cycles take a very long time. Without this, the transformative shift to the public cloud, which I'll talk about in 2 seconds, normal sales cycles take 18 to 24 months just running it old school on premise. Now what I'm bringing to them is a completely different way of deploying. It's a different deployment model. This is new to them. People really don't know about how public cloud works and what the benefits are in Telco. And so I have the benefits of being the leader because I'm first, and my message is getting out there. And when people think public cloud, they think Optiva. But the downside of that is I'm the one that's having to educate everyone. So I'm bringing Google with me on sales call, right, mostly technical resources to explain about public cloud, how it works, what are the benefits. And so I'm hoping it's still 18 to 24 months, but it could be longer, and so I want to couch. You mentioned sort of this long term, this is where we're going. I think is a really exciting message. I'm getting great feedback from customers. But I'm going to couch that with expectation setting in that this isn't going to be kind of like I don't think a 2019 thing. I mean, we're obviously could invest pretty heavily to get there on sales and marketing, and we're doing that today. But it could be 24 months to -- before we start really seeing things impact the numbers.

[Operator]

And we'll go to our next caller.

[Steven Li, Senior Vice President]

Yes. Can you guys hear me?

[Danielle Rios Royston, Chief Executive Officer]

I can. Thank you.

[Steven Li, Senior Vice President]

It's Steven Li from Raymond James. The support revenue has declined due to timing of renewals. Does that mean it might pick up next quarter once these renewals come in?

[Kenneth James Taylor, CFO & Company Secretary]

Yes. I mean, we don't give quarter-to-quarter guidance on that. But yes, as -- you're right. There's timing. I mean, the biggest thing on the year-to-year comparative was that 1 year ago, there was some that were later that artificially inflated Q4 '17, if you want to call it that. So yes, we do get some variability there. Obviously, our sales team works really hard to make sure that those come in as expected. And we don't have delays, but you can get some bumps in that. And as I mentioned in my remarks, for the year, we're pretty consistent year-to-year. So those support revenues have been pretty stable for us.

[Steven Li, Senior Vice President]

Right. And has there been any customers that discontinued support during the quarter?

[Danielle Rios Royston, Chief Executive Officer]

Who gave notice or something, off the top of my head, I don't think so. As I've mentioned in other -- in previous calls, we have some customers that had given us notice even before my tenure that continue to remain a customer of Optiva. We keep thinking, okay, this is the last year. Let's plan for the revenue to decline. And then, for example, if we just had 2 customers that we thought were going to end in actually this coming quarter and they've decided to extend for another year. And so I believe that these customers are still leaving. They've purchased another system. They're implementing it. They're not going to just not start to pay for. So currently, they're paying 2 vendors. And so their plan remains to switch to the other vendor. But our other competitors struggle. They're late. And so that is -- their struggles are my benefit, at least, in the short term as customers continue to renew. So I do believe that they will eventually leave. And so we got to make hay while the sun shines and take advantage of this opportunity to replace the revenue before it leaves. And so that's what we're trying to do.

[Operator]

[Operator Instructions] And at this time, there are no further questions.

[Danielle Rios Royston, Chief Executive Officer]

All right. Thank you, everyone, for joining, and have a great new year. See you soon.

[Kenneth James Taylor, CFO & Company Secretary]

Thanks, everyone.

[Operator]

The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.