Pivotree Inc.

Good morning, everyone, and welcome to Pivotree's third quarter 2023 earnings call. All participants are currently in listen-only mode. Following the presentation, we will open the line for question and answer for the analysts. To ask a question, we would ask the analysts to click on the icon to raise their hand. Before we begin, Pivotree would like to remind listeners that certain information discussed today may be forward-looking in nature. Such forward-looking information reflects the company's current views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking statements. For more information on the risks, uncertainties, and assumptions related to forward-looking statements, please refer to Pivotree's public filings, which are available on CDAR. During the call, we will reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see our MD&A for additional information regarding our non-IFRS financial measures, including for reconciliations to the nearest IFRS measures. Now I'd like to turn the call over to Pivotree CEO, Bill DiNardo.

Thank you, Dennis. Good morning, everyone. Thanks for joining us for our third quarter 2023 conference call. With me today, as usual, is Mo Asher, our Chief Financial Officer. And as we do normally each quarter, we've published a CEO letter in conjunction with our earnings results that's available on our website and filed on CDAR. As I mentioned last year, I was going to start shortening those interim CEO letters, focusing more on an annual longer assessment. But each quarter, we like to try to explain some things that might not be obvious in our financial statements. And you'll hear me talk about a lot of them today. As I said in my CEO letter, we have two things that we need to do right now. One is run a profitable core business. And that means delivering great service to what is a terrific customer base. And that delivers the cash we need to invest in new products and services. The second thing we need to do is allocate that capital effectively to the new products and solutions as they demonstrate progress with customer adoption. And we're doing that as well. I'm proud of how our operating teams have executed to deliver a half million dollar increase in adjusted EBITDA this quarter, despite being down 1.6 million from the second quarter of revenue this year. Now, the steps we've taken to right size the professional services team in light of the current economic environment has not hindered our progress in advancing our product initiatives and the managed services side of our business has been strong. The steady growth we have had in managed services remains a consistent bright spot, and it's tangible evidence that our new product strategy is having a positive impact on our overall results. At $11 million in Q3, managed services grew 5% from the previous quarter, and it's up 9% year over year, with growth from new products and services overcoming the legacy churn impacts. Over the last six quarters, our non-Oracle and legacy-based managed services is up 50%. The bulk of our managed services revenue is, in fact, ARR, and it represents half of our revenues, which is providing stability in this environment as we position ourselves for consistent, profitable growth. Now, one of the things I tried to explain in my letter, and I'll explain it a bit more here as well, it's important to point out that the way we capture our total bookings, it's not really revealing the real state of our business. Because of how we record managed services revenue and in particular ARR bookings, we've classified consumption and transactional revenue in non-recurring. But these revenues and some of our new product offerings are the drivers behind managed services growth. So this quarter alone, approximately 2.8 million of the total bookings falls into this category. Now that's up 55% from Q3 2022. And it speaks to the need for us to better define our revenue and booking lines to reflect the change in our business. We're aiming to correct this for 2024 to report with more clarity. Now, PS bookings were still soft carrying over from Q2 as we've seen some clients reduce spend or put projects on hold over the last few quarters, which was a very similar experience to the one we had during the COVID period. We also continue to see the extended processes for signing new contracts. And that's particularly true with net new clients. where we see some positive signs is that our active clients are maintaining their average monthly spend with us. I'm really also pleased to note that in this last quarter, we received a number of verbal approvals from new client prospects that appear to be well qualified and should close in Q4. Now, despite the PS revenue drag, we did modestly improve our gross margins and we continue to view our PS business as a source for client intimacy, contribution margin and the foundational skills that help drive our new products. So we continue to leverage PS. We will continue to leverage PS into the future. But again, it really is that combination of the skills and the customer insights and the client intimacy that make it a valuable part of our business. And when we run it properly, it produces the cash that lets us invest in our products. So again, lots of good things happening, but still some ground to make up on our PS revenue. Again, as I pointed out earlier, our managed services revenue in Q3 was quite strong. Now, candidly, managed services may not be the best name for this category anymore as our business has evolved. We have multiple revenue types in this category, including subscriptions, licenses, consumption, and transaction-based revenue and monthly service fees. There's frankly too many different revenue types to report all of them. So we have this catch-all category that we refer to as managed services. But we'll do a better job of explaining it and probably renaming it in the new year. Again, we don't currently report our managed service bookings as part of our general metrics package, and we probably should, given how much it reflects the way our new products are currently getting bundled into the services and being consumed. And these bookings results perform very well for us as the quarter's managed services revenue climbs back to historical highs, despite the legacy revenue term. So turning to our new products and solutions, Our non-Oracle MS revenue is now the majority of our managed services and it grew over 50% since Q1 of 2022. Our data suite of automation tools like SKU Builder and Dive represents the most significant revenue increase and has the strongest revenue pipeline among our products. Control Tower has achieved 100% attach rate to all of our order management solution managed services. And we're now seeing increased requests for additional seat licenses and a growing list of new feature requirements being driven by client use cases. It has a low cost of entry and it's really easy to demonstrate value. So we expect to see this accelerate further in 2024 as we broaden both use cases within the order management systems and the platforms that we integrate it to. Now, WMS is a large and complex enterprise software sale, so the healthy top of funnel has been inspiring, but the pace of converting it to licensed signed licenses and implementation agreements is a longer selling cycle than the other ones. The upside in this category, of course, is this is a very sticky application. Once it's installed, clients don't tend to stop paying for the warehouse management systems. So this is, again, one we hold out a lot of optimism for in the long term, but it's going to take a little while to see it really impact short-term revenues. Over 10% of our active clients are leveraging Pivotree IP-based solutions, contributing to our managed service revenue growth. And again, we're seeing more and more of our strategic accounts starting to work with these new products. And again, as I mentioned before, we're starting to see additional seat licenses in some of these categories starting to climb within our existing customer base. Now, let me turn it over to Mo to take you through more of the financial details.

Great. Thanks, Bill. So starting, as always, with revenue, as shown by the blue bars and Bill referred to managed services, revenue continues to deliver positive growth for us. During Q3, we experienced solid growth, increasing 5% sequentially and up 9% year over year. So the primary driver for growth, and Bill touched on some of this stuff, comes with some of the additional volume of SKUs that we were tasked to manage and deliver within our data business. And also the conversion of professional services customers to managed services. So this performance through those drivers both contributed to offset, to more than offset the Oracle and legacy churn, which contributed to the 83.5% net revenue retention. The professional services business declined to 9.9 million in Q3. This was driven by project completions and some temporary pauses on projects and lower overall professional services booking to replenish the backlog. So we are now seeing some of that pause work, that temporary pause that I mentioned, work start back up again in Q4. While professional services decline had an impact on our overall revenue growth, we retained our relationship with our customers by converting professional services to managed services. Approximately 35% of the customers that consume professional services over the past 12 months are currently managed services customers. So overall, we are encouraged by the underlying growth trend we are seeing in managed services through new products and services and our continued relationship with our customers through the conversion to managed services. Now shifting to the profitability of the business, Q3 gross margins was up to 46.2% compared to prior years, 44.9%. The improvement in gross margin was driven by improved profitability within managed services. Managed services gross margins improved to 59%, up from 50% of the same quarter last year. So this improvement was largely attributed to what we mentioned through some of our revenue drivers, the increased demand in our SKU management and deliverables and SKU builder, which is a transactional-based model, as Bill described earlier, which is, again, providing strong gross margins within our managed service business. We also continue to focus on managing our costs around the legacy business to optimize profitability and still meet our commitments to our customers. Professional service margins declined to 32% versus 42% of the same quarter last year. This was driven by a professional service revenue resulting in lower utilization rates as we experienced a pause also on some of the engagements as mentioned. We'll continue to manage utilization in close alignment to our pipeline and the expected demand. So as Bill mentioned, also through our cost discipline and also our commitment to the bottom line during the third quarter, we took a restructuring charge of $400,000 to drive further improvements on our overall structure relative to the revenues. Operating expense at $11.5 million compared to $15.2 million of the same quarter last year. These results are the outcome of some of those efforts. With a gross margin and OpEx management, we delivered another quarter of positive adjusted EBITDA We will remain focused on delivering overall positive EBITDA while also driving our product initiatives forward. With that focus, we will look to repurpose some of our spend to provide additional capacity and funding to support our product initiatives through development work and go-to-market. we believe the investments we are making in products will contribute to future growth in a very meaningful way in the meantime and as demonstrated in these results we remain committed and focused on managing a profitable business while we get to position to scale our priority products now moving on to the balance sheet we ended the quarter with cash inclusive of term deposits of 10.3 million In Q3, we generated $800,000 of positive cash flow, excluding the earnouts and NCIB. And then the main use of cash after the core business operation was to fund the final earnout payment for the bridge acquisition, which was completed in 2021, as well as the NCIB program. In the third quarter, we purchased worth $700,000 to acquire 308,000 shares under the NCIB. As mentioned, the business is managing towards operating cash flow positive, and we believe this will be accomplished while continuing to make the necessary investments into our products. It's also worth noting that our credit agreement with BMO had expired, and we are in active discussions to formalize new credit facility that should be in place, Jim. I'm going to turn it back to Bill now for closing summary.

Thanks, Moe. The priorities we set earlier in the year have not changed. And I can't say enough about how proud I am of this team as we transform the business and position Pivotree for growth as a product focused company. But in a declining P.S. revenue environment to produce the kind of cash flows they did in Q3 really is a testament to the quality of the management team and what they did on a daily basis to get their costs under control and continue to serve our clients in an exemplary manner. Now, the team continues to find more ways to operate efficiently, and we remain on a really good path towards delivering improved profitability as we move forward. Now we're advancing our product initiatives and the business units are learning how to position and sell them effectively. And again, this really is a transformation. It's not one we take lightly, nor is it one the market should take lightly. Moving from a services-based business to a product-based business does require a different management approach. And so maintaining a balance between these two has been challenging, but the team is up for it. Now M&A continues to be part of achieving our mission and vision. We'll continue to adapt our approach to be able to find and close on the right deals at the right price. Again, we are very focused on advancing our product needs versus advancing PS. I feel like we've got a lot of the right skills we need. We're not really in the market to go acquire new skills and professional service categories, but we are looking at a number of products that could help advance our products and new services. In the absence of M&A opportunities, we'll continue to invest in product and we'll buy back our own stock as we see the potential returns increase. on these things and how they rival or surpass the returns we could expect by acquiring other companies' stock. So that's the balance in the capital allocation category. Again, that hasn't changed. We'll remain disciplined on these fronts. And probably now the biggest business case that is attracting investment attention is accelerating our products. So there really are three categories ranging from buying our own stock, buying another company and investing in our products. And that's really the management of the board's job to allocate that capital effectively. So on that note, I think we'll turn it over to the analysts, and I want to thank everyone for taking the time to attend the call. We do appreciate you continuing to show your support by attending and asking questions.

Thank you, Bill. We'll now take questions from the analysts. To ask a question, please click on the icon to raise your hand. Our first question comes from Rob Young at Canaccord Genuity. Rob, go ahead.

Rob, you're on mute and off camera. There, you should be able to hear me now.

We can hear you now. So one of the areas I'm hearing from managed service vendors that's relatively strong is the data management side, anything that's a feed into AI. I was curious, is that part of your business, getting an outsized level of interest? Is it driving a lot of the booking? Maybe just give us a little bit of color on that part of the business and how it's doing relative to the other parts.

Yeah, look, I think we've tried not to just jump on the AI and machine learning bandwagon and throw the word around. But the practical reality is automating a data pipeline obviously includes things like machine learning and generative AI, and we leverage those tools. We candidly, I mean, while we may use that as the supporting evidence, Ultimately, what's really selling customers is the outcomes they're getting when they get exposed to these tools. So the reason we saw such a large bump even this past quarter was one of the customers we were doing SKU building for. We blew through all the SKUs they needed done. They expected to do in a year. We did it in about six months. And so they brought back a second wave. And all of that has a lot to do with the automation tools that we've been building in the data business.

Okay. And then on M&A, I think you've said in the past that you wouldn't touch the revolver if you were not positive EBITDA. And so I guess you're positive this quarter, but close to breaking it. I was curious about your thoughts on M&A. If an opportunity arises, would you be willing to use the revolver given where you are now?

The short answer is we still have $10 million of our own cash. And based on the efforts of Mo and the team in terms of producing cash, we spent a significant like $700,000 a quarter alone on NCIB. So we have lots of sources of capital that we can use that doesn't include having to tap the revolver. But the reason we even continue to negotiate and replace it like we are is because exactly that, Rob, I still believe there are going to be opportunities present themselves. I think what's shifted for us a little bit is anybody that's cash flow positive right now, including PS firms, there's no sense of urgency for them to act. I think what you're going to find are, I won't call them necessarily distressed assets, but I think software businesses that have run out of funding are going to find it difficult to replace that capital. And if they help solve some of the product problems that we are overcoming, then we would take a really serious look at those. And I'm optimistic those ones are going to have valuations that will make more sense to us than what we've been seeing with some of the other privates lately. So long winded way of saying, yes, we continue to scour and look for and hunt for the right deals. We just haven't found the ones that meet our requirements yet.

Okay, and last question for me is just on the conversion from professional service opportunities into managed services. The big drop in professional services, as you noticed this quarter, but the managed services is up. What is that relationship between professional services as they roll off? uh versus the initiation of new managed services i think you said that there was some piece of there was growth underneath the surface that was offsetting the um the or the older legacy oracle stuff but maybe we just talk about that conversion and then i'll pass the line

Sure. Yeah, look, I think what you're highlighting and this is part of the cultural transition that we've been trying to make. You know, I think everybody got really excited about a great Q4 last year that was loaded with professional services. And when I say everybody, I mean, even my team. Right. There was lots of high fives for hitting quarterly records, both on bookings and revenue. You know, but our board has consistently reminded us and we have to keep looking at that. The revenue on PS is not what's exciting. The client base is. They bring great insights. That revenue produces cash and that cash is helping us invest in those products. And so, you know, focusing too much on the PS revenue top line isn't the right answer. But to the point you've just made, it does lead to the right stuff leads to managed services. The right stuff on PS leads to product based insights, right? And I think what you're going to see is less focused by us on hitting PS bookings records. If they don't come with managed service requirements, if they don't come with the ability to learn and build product around it, then we may be inclined to start walking away from some of those kinds of businesses. And so that we're not going to high five, just pure PS revenue, but we still need those clients. Those clients are critical to drive managed services and products. So, you know, this is why next year, our focus is continuing to recharge the PS business, but it's really about the quality of the PS business that we need to hone in on. And that PS, the quality PS business converts to MS. So, you know, I think most suggested was probably about a third. I think we're being conservative. You know, it was probably higher than 35, but, uh, A big portion of our current PS customers now are converting to MS, and that's what matters.

Thanks for taking the questions.

Yep.

Thank you. Our next question is from John Shaw in National Bank. Please go ahead, John.

Good morning, guys, and thanks for taking my question. Could you maybe share with us what you see out there regarding your customer behavior under the current macro environment? And what is their top priority in terms of IT spending today?

Yeah, I think what I would say to you, John, is it depends on the customer profile. So part of what we've started to see this past two quarters is a lot of our B2B customers are driving the bookings and driving the revenue. And I think a big part of that is our B2B customers are probably the least digitally advanced. So some of the data initiatives, for example, and automating those processes and creating the connections to their systems, both to help them transform the way they sell, but also to drive out some of their operating costs. And so, again, we're seeing things that are transforming the way they sell, trying to expand the channels they sell through. and lowering their cost of operating is where we're seeing the wins. Where we've seen delays or stalls has been more on the retail side. And I think some of what we're seeing there are CEOs and CFOs just injecting themselves into the decision-making process and really demanding more clarity on what value they're going to get for spending on these types of IT projects and which ones of these they can delay or push out you know additional quarters so stuff again in retail that gets attention if you can lower cost lower operating costs accelerate time to market with products that are going to drive revenue, those things all help. I think standing up a new e-commerce platform in retail, we're seeing that stuff continues to delay, which again, by the way, is why our Oracle churn has been probably slower than we expected at points because folks have punted some of those projects of exiting Oracle in favor of just writing it out for another couple of quarters. So these things all kind of go hand in hand.

Okay, got it. Regarding your own IP products, I think Bill mentioned in your letter that it's still early days, but I'm just curious if you can share, if you can comment on the sales cycle of those products.

Yeah, so I think I highlighted at least subtly, Control Tower is a faster selling cycle. In fact, we're finding ways even of delivering freemium type concepts where we can install it, we can demonstrate value, we can do that for low cost or no cost to get folks started. And what we're seeing on that one is as our customers get more comfortable with how to use the information that it's presenting, we're seeing an increased demand for licenses. They want more of their users in their environment to have access to it. So we started to see the pickup on seat sales when we have those in an experienced hand and they start to see value, it starts to accelerate. I think what that team now on go-to-market, and that's what I was alluding to on learning, we need to get it in more hands of more folks, testing, experimenting. We're looking at more ways to give that initial free sample, maybe reduced feature set, And so again, this team is learning how to sell these types of products and they're different than how do you sell a PS solution. So control tower, quicker cycle. Again, the SKU building one is a great one too. Part of what allows us to win there is the speed with which we can demonstrate value. We've had customers now come to us, give us a small data set, say, show us what you can do. And so again, that speed and ability to demonstrate is shortening the selling cycle. WMS, we're starting to see some traction in a category, 3PLs in particular, where we have existing customers. And again, we can prove value quicker. But the broad WMS market, I mean, it's an ocean with lots of complexity. And that selling cycle we have found to this point has taken a lot longer. We've got customers that are using it today, building their hooks into it, but even their process of being able to adopt it is taking nine months to a year of prepping their environments to onboard it. So again, slower selling cycles on the WMS, but extremely sticky once you land them.

Okay. Maybe lastly, a modeling question to Mo. So do you think that Q3 OPEX is going to be a good benchmark for future quarters?

Yeah, I think as I mentioned, there's... I think we've done quite a bit of the heavy lifting today, and I think that's probably a good benchmark for the most part. But I think I will caveat that we will still look always to kind of continue to look at our operations and how we can get more efficient. But on the other side, we are also looking to invest in some of the products like R&D has been great. an area that will likely get some funding and we'll look to find money within the business to repurpose there, as well as supporting the go-to-market as we all know with products, you need a strong go-to-market. And as we continue to progress and get excited about some of the indicators around our products, I mean, that's an area that we'll probably get more funding. Again, we'll still deliver our overall EBITDA commitment, but within OPEX, those are probably two line items that we'll likely get some additional funding as we continue to look at our business and repurpose and prioritize our capital.

Okay, thank you.

Thank you. Our next question is from Daniel Rosenberg at Paradigm Capital.

Good morning. My first question is around the temporary pauses that you mentioned. I was just curious if there's any risk around these profiles or what efforts are you making to mitigate any risks that these pauses go longer than expected? How can you accelerate these coming back online?

Yeah, the ones I mentioned, I talked about, I think we're past those. I would say kind of where we are in Q4, those that have been paused are back up and running now. So I think we've overcome that. I wouldn't say that we're living with those in Q4 now. So expect that to be minimized going forward. So I would say it's been mitigated, and hopefully we'll kind of start seeing a kind of continuation and start ramp up on the PS side.

Okay, good to hear you. And then in terms of the focus on the managed services and products, I was just wondering if you could give any specific highlights on what you're aiming to improve upon or any heavy lifting that you've done in the past quarter that we'll be starting to see the results of in the near future. Yeah.

Yeah, I mean, look, there's a lot of heavy lifting behind the scenes of building product roadmaps and really pushing the team to get out and sell in the market differently. You know, I think. The evidence will be when you start to see the managed services bookings accelerate and the margins improve. And so I think this is a market we live in now that's a show me market, don't tell me. So we've been very cautious, Daniel, about projecting too far forward. I think we're going to be evaluated every quarter on seeing that number move. And so we're optimistic. The pipeline is quite full with opportunities in those categories. The team is executing on things today, right now, you know, that are driving those revenues in those managed services. So I think you'll start to see that number moving. But in those three categories of control tower, WMS and data, there are lots of activities that we've been investing in from whether it's a development or go to market category. I think, again, next year, what Mo's attempting to do is create a little bit more transparency into how much of this current P&L is actually being invested in those activities so that you can better align whether you feel like the returns we're getting in that managed service line are reflective of the level of investment. It's a little opaque right now. You can't really see how much money we're spending on those things. And so we're going to try and create a little bit more visibility for you for 2024 in that area.

Okay, thanks for the context. My last question is around the B2B, B2C trends that you mentioned. So it sounds like B2B remains strong. Is it fair to say that B2C is slowing or is it staying at the kind of same cadence that you had seen in prior quarters? Any changes to your view on what you're seeing on the front lines of demand?

Again, I think what you see in our results, particularly in professional services, is commerce had been lagging for some time and that a lot of commerce business has been in the past B2C. I think what you're seeing is, you know, and what you will start to see, commerce has started to loosen up now. Contracts are getting signed. And because a big chunk of our high quality customers are B2B, we've seen an increase in conversations with those customers around commerce solutions, as an example. I would say our retail commerce and other aspects of our B2C have been flat or down. And so right now, B2B across all of the business categories for us is the driver of growth.

All right. Understood. Thanks for taking my questions.

Yeah.

Thanks, Daniel. Thank you. Our next question is from Jesse Pitlack at Coremark Securities. Please go ahead, Jesse.

Hey, good morning, guys. Morning. Just on the SKU builder, sounds like you're seeing some pretty good traction there. Can you maybe just provide some context or commentary on how many customers are maybe using it? How long have they been using it? And just kind of insights that you could share.

Yeah, it's every customer... has a need for SKU building in some form because everybody that we work with sells something. I think what we're finding are the B2B customers with large inventories of SKUs right now are the ones that are most interested in what we're doing. I would say and part of the reason, again, we've been cautiously optimistic, but we haven't been euphoric is it's a handful of customers that are driving significant revenues in this category. So, you know, somewhere close to let's call it 10 of our large customers are the ones that are spending the most money in this category with us. But I would say upwards of 40 customers that we're doing work for in data are all qualified targets for this. And it's more a case of getting this in their hands, showing them examples of how they can use it. And I expect our penetration and SKU building is going to go up dramatically this year.

Okay. And can you maybe just talk about the scalability of the product? Like I was thinking, as you kind of build SKUs in one industry, you could probably transport that to other customers in the same industry. Is that a fair way to think about it?

Yeah. So in an oversimplified view of the world, Our data team has two important tasks. One is to sell SKUs to customers, complete, finished, high-quality SKUs that let those customers sell those products more effectively. So high-quality SKUs are more findable when searched for. They're more relevant in terms of the information they provide. And when all that information is good, the probability of a customer buying and clicking to buy goes up. So our data team's job is to sell more SKUs But the second challenge that they're attacking is they need an inventory of completed SKUs. It's a bit of a misnomer to call it SKU building. And the reason we do it right now, because for most of our customers, that's what it is. We are building SKUs for them with an automated and manual process combined. As we build our inventory of built SKUs, a lot of the information in those are publicly available information that is aggregated. Our ability to sell a completed SKU goes up. The probability of a complete or near complete skew in our inventory starts to climb and so it's really a two-pronged approach create inventory of completed product and sell products again the sell part could include build it could include clean up a big part of what we do for customers today is enrich completed skus for them i've told you in our product day we have customers that are buying just the license to our dive tool Because they're bringing us SKUs that are relatively built, there's enough data in there that we can enrich them and clean them up with a fully automated non-manual process. Many of our current customers are bringing us messy, incomplete, and that's a combination of automation and manual. So, yeah, this is a great question, Jesse. It's a bit of an arms race to see who builds the best inventory of completed SKUs, because if you attack industry verticals, there should be some resellability.

Okay, great. It sounds like it's something that could probably really snowball for you in time.

In time, yep. But again, our team is super cautious. They're really talking more about the building process today. But five years from now, after we've built the billion SKUs, it may be a very different conversation. Got it.

And maybe just a question for Mo. You know, as you think about maybe the Q4 revenue trend for MS, I guess, can we maybe walk through some of the puts and takes? Obviously, you've had some really good MS growth the past few quarters. Q4 is typically seasonally strong, and you are seeing some traction with your products that are offsetting the churn. But given the commentary on kind of what you're seeing on the B2B and B2C sides, can you just maybe help us reconcile how you think Q4 is going to shape up?

You're on mute, Mo. Okay. Yeah, I mean, obviously managed service has always given us the visibility that we need, as we can see from some of the trends that we've seen. So I do see us going with the spike that we had in Q3 with the SKU, obviously volume that we had was a significant contributor there. And seeing that kind of outside of the business kind of continues momentum into Q4. Holiday peak season could provide some upside as well. And for managed services, there's still that, you know, that reduced visibility as any professional services business. So at most, I'd expect that to be steady right now. We are seeing, as I said, ramp up on some of the pauses, maybe some upside potentially there as we have some of these new bookings. And as Bill mentioned, commerce is starting to come to the table and sign up for more work. Starting to look for that to get ramped up. So potentially some upside on the professional services business. Q3, we had the big growth there. I'd expect that to carry on to Q4. All right. Thanks. I'll pass it.

Thanks, Jesse. Looks like we don't have any further questions, Bill, so I'll turn it back to you.

I will just thank everyone for, again, continuing to show an interest in our business. Thank our analysts for showing up every quarter with us and asking some great questions. And as we lead into the holiday season, I guess we won't see many of you again until the new year. So I hope you have a terrific and safe holiday. Thanks, everyone, for attending.