Earnings Call: Q3 2021

Sep 14, 2021

Earnings release

Good morning, everyone, and welcome to the BlackLine Safety Corp. Fiscal 2021 Third Quarter Results Conference Call. At this time, all participants are in listen only mode. You will have an opportunity to participate in a question and answer session following the formal presentation. Instructions will be provided at that time for you to queue up for questions. I'll now turn the call over to Scott Boston, Black Lion's Corporate Controller. Please go ahead. Thank you. Welcome and thank you for joining us. I'd like to remind everyone that this call is being recorded today, Tuesday, September 14, 2021. Before turning the call over to our CEO and Chair, Cody Slater, I would like to note that some of the information discussed in this call is based on information as of today and contains forward looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward looking statements disclosure in the earnings news release as well as in the company's SEDAR filings. During this call, there will be discussion of IFRS results and non IFRS financial measures. A reconciliation between IFRS results and non IFRS financial measures is available in the company's earnings news release and MD and A, both of which can be found on our website, blacklinesafety.com and on SEDAR. Participants are advised that this Webcast is live and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investors section of our website. Neither this call nor the webcast archive may be rerecorded or otherwise reproduced or distributed without prior written consent from BlackLine Safety Corp. I will now turn the call over to Cody Slater, Chief Executive Officer and Chair at BlackLine Safety Corp. Mr. Slater, please go ahead. Thank you, Scott. Good morning, everyone, and welcome to BlackLine Safety's first earnings call. Today, we will be discussing our 3rd quarter results, which were issued before market opened this morning. With me on the call is Shane Grennan, Chief Financial Officer. To set the agenda for today's remarks, I will start by providing a broad company overview. Shane will then discuss some of the highlights of our Q3 in greater detail, And I'll conclude with closing remarks and some comments on the path forward. This morning, we were pleased to announce our 18th consecutive quarter of year over year quarterly revenue growth, with 35% growth overall and 60% growth outside the Canadian market in Q3 2021 compared to Q3 2020. This represents BlackLine's highest quarterly revenue ever at $12,700,000 Our growth has not only been in revenue, but also in our geographic reach as we now have customers in over 60 countries around the globe, Continuing to play an expanding role in keeping workers safe, while contributing to the digital transformation efforts of industrial workplaces. Our post quarter announcements of contract activity and wins speak to the demand for our connected worker products and services and are encouraging for the continued growth of BlackLine. During the quarter, we took several major steps as part of our long term strategy. Firstly, we completed our graduation to the Toronto Stock Exchange and are now Alberta's largest publicly listed company in the technology sector. The second step was the expansion of the executive team, adding Christine Gillies as Chief Marketing Officer and Brian Sweeney as Chief Technology Officer. BlackLine's success depends on and continues to be driven by a highly talented and committed workforce guided by a world class leadership team. Brian and Christine bring with them a deep experience in high growth SaaS Enterprises, and we look forward to the impact their knowledge will bring to BlackLine. The next step was to deepen BlackLine's product and services sales momentum and continue our expansion Into new markets. Our G7 Exos have gained particular traction and we're responsible for 2 of the largest orders in our company history early in Q4, 1 in North America and 1 in Europe. The Ekso was also recently recognized with a Gold Award for Design from INT Designs in Europe with a product and the Product of the Year Award from Occupational Health and Safety Magazine in the United States. The Ekso is the first of a series of new impactful products BlackLine intends to bring to the market over the coming years. We were not immune, however, to the continued challenges from COVID-nineteen and the Delta variant, which hindered our performance during the quarter. Like everyone, I had hoped we would not still be talking about the pandemic with relation to its impact on our business and our lives. But regardless, it has continued to slow many of our industrial customers as they look to return to full capacity. That being said, since the onset of the pandemic 5 quarters ago, we have seen our overall quarterly revenue grow by 50% globally And 74% excluding the commodity impact of Canadian markets. We may not be out of the woods yet, I'm happy to see the increase in order activity at the beginning of Q4 as more of our customers return to normal business operations. We expect to see the impact of these increased product deployments on this rate of service revenue growth in the coming quarters. A final strategic step involves our own journey with the release of our first ever ESG reports detailing our ongoing efforts to support and strengthen both our own workplace and our impact on the larger community. Amongst the highlights were the expansion of BlackLine Collective, Our forum for businesses to share safety insights and best practices with the addition of U. S.-based Kokosing Materials Inc. We also announced our partnership with the Calgary Zoo, providing our connected safety solution in support of its conservation efforts. Before moving on, I would like to thank our customers, shareholders, vendors, partners and especially our 445 employees worldwide For working together to further our vision that every worker has the confidence to get the job done and return home safe. I'll now turn the call over to our CFO, Shane, to discuss our 3rd quarter results and ESG report in more detail. Thank you, Cody, and good morning all. As a reminder, unless otherwise noted, all figures reported on today's call are in Canadian dollars and reported under IFRS. As Cody said, we achieved a record $12,700,000 in revenue, including product revenue of $5,300,000 which represents a 91% increase from the same quarter last year. We continue to see strong demand for our G7XO area gas monitor, contributing $1,800,000 of product sales in the quarter. Service revenue was up $7,400,000 from $6,700,000 including a 19% increase in software services revenue, which comprises 89% of our total service revenue. We continue to see the investments in our sales team over the past year pay dividends, particularly in Europe, where overall revenue grew 115% compared to the prior year revenue prior year quarter. The revenue in our European region totaled $4,200,000 which equaled 1 third of our total revenue for the Q3. We also saw robust growth in the United States with total revenue coming in just shy of $5,000,000 for the quarter, A 29% increase compared to the same period in 2020. We continue to see encouraging returns from our channel investments in the rest of the world with revenue outside North America and Europe growing 90% quarter over quarter to 700,000. The $5,300,000 of product revenue represents the first time since the onset of the pandemic 5 quarters ago that we achieved over $5,000,000 In fact, this represents the 2nd highest quarterly product revenue in the company's history. However, we did see some major contracts that were expected to be concluded and shipped in Q3, pushed to Q4, which you would have seen in several recent announcements. The team continues to work intently with new digital marketing efforts as well as preparing for more traditional trade shows, which were all canceled due to COVID-nineteen last year. We are, however, looking forward to getting back to key locations where we can interact in person with current and prospective customers. Service revenue was also a record at $7,400,000 driven by recent G7 and G7XO product sales and strong retention and renewal activity. Service level increases contributed growth of $900,000 in the quarter. This increase was offset by customers who renewed fewer active devices due to workforce reductions of $400,000 and only $17,000 from customers who declined to renew this quarter. Overall, total service revenue was up 11% this quarter over the prior year with software services revenue up 19%. Our service margin percentage improved to 70% As we have been able to maintain and even reduce our cost structure associated with our hardware enabled software as a service offering, while consistently growing our service revenues. Product margin for the quarter was negatively impacted by global supply chain shortages, causing increased cost of inputs for the company's manufactured devices. We were able to navigate this With product gross margin of 13% for the quarter with, most importantly, no interruptions to our manufacturing operations. We expect these challenges to continue for the next 12 months at least and we continue to proactively manage our inventory levels and supplier relationships to maximize flexibility and margin where possible, while ensuring we are in a position to meet customer demand for our products. The overall margin percentage was 46%, which was lower than the same quarter last year, driven by a sales mix that was more heavily weighted on the product side versus service. When looking at the company's expenses for the quarter, I would draw your attention to the table in our MD and A, which details the amount of Canada Emergency Wage Subsidy or the CEWS that we received for the quarter, totaling $74,000 compared to 850 2,000 in Q3 2020. While we were happy to utilize this funding to support maintaining a full workforce, We are pleased to note that our growth in the revenue meant we were eligible for a much smaller percentage of wage subsidy this quarter. Since the quarter has ended, we have evaluated our eligibility for the most recent periods and are not eligible for additional funding under this program. Product development costs were up 106 percent to $4,400,000 for the quarter. Excluding the impact of CEWS and increased costs for our new subsidiary, Wearable Technologies. The increase was 64%. We continue to invest in product development As we push to ready G6 for market, accelerate our entry into the construction and light industrial market through wearable technologies And build even more resilience into our back end supporting platform for the BlackLine Live portal to enhance its ability to absorb data. On the sales and marketing side, we saw an increase of 124 percent to $7,400,000 Excluding the impact of CWS and additional cost for wearable technologies, the increase was actually 100%. This growth has focused on broadening our sales team and supporting functions across the United States, Europe and in other international markets. There was also a $408,000 bad debt charge in the quarter related to the settlement of an account that was heavily impacted by COVID-nineteen. As we ramped up our product development and sales efforts across the company, including bringing on wearable technologies and expanding to include a facility in France To better serve our European Union based customers, we've added incremental staff and tools corporately in our people services, accounting and finance and enterprise IT teams whose focus is on supporting the continued scaling of the company. We've also added to our operations team that oversees our production lines, Quality management procurement in response to the challenges we've seen across our supply chain. This resulted in G and A increasing 196% to $4,100,000 for the quarter. However, excluding the impact of CEWS and wearable technologies, the increase was actually 117%. The company continues to maintain a strong balance sheet with no debt and a solid working capital position of $35,000,000 including cash and short term investments of $33,100,000,000 One additional topic I'd like to mention is our approach to ESG. Social responsibility is not new to BlackLine. In fact, it's baked into our DNA as our mission is to save lives and get people home safely. We help our customers achieve their own ESG goals by enhancing workplace safety, but we've always focused internally on ESG objectives that help us build Greater resiliency and adaptability into our overall business model and safeguard the value we've created. It's become clear that our investments in worker safety, Talent, environmental sustainability, supply chain resiliency and various risk mitigation programs all help to create a better business model and a better world. We believe that companies who do these things effectively will be the ones to prosper and be fit for the future. We are proud to have issued our first ever ESG report during the quarter and see this as one of the many steps in our commitment to our environmental, social and governance goals. I will leave it there and turn it back over to Cody for our outlook and closing remarks. Thank you for that summary, Shane. As we look forward to the end as we look towards the end of our fiscal 2021 and the start of fiscal 2022, we have many reasons for optimism. We are seeing the early impact of our investments in the expansion of our sales and marketing teams And our European revenue growth of 115%. We see our investments in the United States and other international markets bearing similar fruit in the future. Our service retention remains excellent across our diverse verticals and geographies as we continue to see virtually no customer loss. We see this, along with the increasing velocity of our product deployments, as drivers for even greater service revenue gains in the future. G6, our compliance oriented gas detection product is on schedule for release next summer, which will open BlackLine Safety's This, along with the investment in our software infrastructure, will allow us to deliver more value through data driven insights to a significantly larger addressable market. There is much work to be done, but we strongly believe that we have the team in place to deliver on our future goals. We've grown throughout our fiscal 2020 and Fiscal 2021. And now after our Q1 on the Toronto Stock Exchange, we are starting to see the momentum in product adoption I want to thank everyone now for their attention today and their support for BlackLine Safety. I'll leave it there, and we'll turn the call over to the operator and open it up The first question comes from David Kwan from TD Securities. Please go ahead. Good morning, guys. Good morning, David. Hey, Cody. So obviously, we've seen a flurry here of large deals announced over the last month. I think the most that I've seen in the many years that I've been Following you guys and a bit pleasantly surprising given several of them have fallen in one of, if not the slowest month for you being August. I think you mentioned some of that I think was due to some deals slipping from Q3 to Q4. But I was wondering if anything else has Changed is the business activity picked up since the end of July and deals are moving faster through the pipeline or is there anything else going on? I'd say, David, in general, we're seeing a shortening of the sales cycle, partially as we come out of COVID, But also because we have a larger installed base and more recognition in the market in a series of different industries. Having said all that, This period of COVID has been one where the sales cycle has been hard to predict and it's unclear if we're out of this period yet. But as I say, in general, we're definitely seeing a tightening up of the sales cycle and more momentum to the order book there. Perfect. And how much of that could be attributed to the ramp up in the RSMs that you've brought on in recent I know you mentioned in the past that these new hires have been kind of more seasoned than typically ones that you've brought on In the past, so probably a shorter timeline to hit full quota. How much of an impact are those new sales Hires having on the increase in business that you've seen, maybe not so much in Q3 because the deal has slipped into Q4, but definitely with the Q4 Deal flow that you've announced over the last month or so. Significant for sure. I mean, you can just see that by The growth in the European sales, particularly where we've gone from just having a few RSMs to having a reasonable presence on the ground there. So even definitely the deals flow you're seeing now is being impacted by that, by the new not only the new RSMs, the new channels And just that penetration in the presence in the marketplace, those investments we've made over the last year or 2. But I also even say it's same in Q3, even though Q3 didn't hit the numbers, We'd like to have seen a lot of what came through there was because of those investments we made over the earlier stages of the pandemic. Great. And just two more questions. One on the gross margins. The Q3 gross margin came in a notable below what I was looking for and is down Roughly half from Q2, how much of that was the impact from the supply chain shortages and increased freight charges? It's hard to be specific there when you look at it as to exactly what the impact was. But what we're finding is this is a wide range of products and materials from chips to potting mix to certain plastic components that are Either hard to get or almost impossible to get. So you're shifting to different suppliers and higher cost base. Product mix also impacts that, of course, And just absorption of the amount of product going out, I'm sure your models would have shown us shipping a lot more product in the quarter as well. But the there's no doubt that the there's an impact from such sort of supply chain world today. The other impact you'd see on the supply chain side is the increases Our inventory, that's part of the way we're trying to manage that though is to make sure that we're inventorying up on components that we feel are at risk. So you'll also see that in the balance sheet there on inventory utilizing cash to put ourselves in a better position really as a hedge to make sure that we're able to deliver product. And how should we be thinking about it going forward? Like should we be expecting product gross margins to kind of stay at this level It sounds like you said roughly in the next 12 months or so. Or could we see or were there some maybe some one I negatively impacted the quarter as well and that they could trend back into the 20% to 25% range that we've seen in recent quarters. Really, I'd say, David, as you see the volumes come up in the product, you'll see those numbers get back into that 25%, 30% range We would anticipate there'll still be an impact from some of the supply chain stuff, but I think we've taken a lot of that hit. And again, As you know, with our business base, it's really volume driven. As we bring those volumes up on the manufacturing side, we fully absorb all of our Costs and you'll see those margins return to sort of more traditional levels. Okay. And sorry, one last question on the gross margins. Should we expect any increased cost ahead of the G6 launch? Good question. It's there's mostly that's being seen right now in product development. There will be I think what you'll see in the cost is, again, the same sort of thing in inventory impact as we'll be bringing on the parts and materials to ramp up to build the 6, you're also seeing we've currently invested an extra $0.750000 in our Surface mount lines and other equipment. So there's some additional investments there, but not something not a significant impact to the actual overall gross margin. Okay, perfect. I'll pass the line. Thanks. Thanks, Steve. The next question comes from Doug Taylor with Canaccord. Please go ahead. Yes. Thank you. Hi, Cody and Shane. I'll echo David in Congratulating you on the recent deal flow of some sizable transactions, I think over $7,000,000 in total since quarter end that you've announced. As we think about Those contracts rolling out here in Q4 and into next year. Is there any way you can help us understand the timing and cadence of the rollouts there? And in particular, how they should flow into recurring services revenue, which is, of course, a key watch item, as you know. Sure. Pretty much everything that we've seen announced, Doug, is something that's going to It's either frankly shipped in some cases or shipping this quarter. So look to service really being impacted Q1 Then Q2 next year, depending on when the product really flows out the door here. Typically, we see about a Typical numbers would be about a sixty-ninety day between product shipment and starting to recognize services, particularly on the large orders as customers actually Train, deploy and once it's fully deployed, that's when you'll start seeing that service kick in. I appreciate that. Wondering if you can provide a bit of an update on the wearable technologies. We can see ramp spending there. When Or can you update us on the timetable and when we should be expecting you to be in market with products and so investors can begin to see a return on those investments that you're making right now? Sure. I mean, it's early days in many respects with WTL. We have been Mostly investing in their operations, product development infrastructure and really also in the sales. I'd say, although you may see some early adopter sales over the next 6 to 9 months with WTL, we expect real commercialization of the product to be about a year's time. Okay. Maybe one more for me. Sales and marketing spend had another Meaningful step higher. I know it's been a focus area for you and we're seeing some returns on that. Is Q2 A level that you think is reflective of the amount of spend you'd like to have, should we expect kind of further Increases or and I guess what I'm getting at is when do you think we should begin to see kind of operating leverage in your revenue growth outpacing Your front end loading of sales and marketing spend. I'd say it's fair to say that the rate of growth won't be the same as it has been over the past year. We've made fundamental investments throughout the company to put ourselves into a position to enable the significant growth we're really looking for here. So I'd see that growth leveling off and being more reflective of sort of overall corporate growth going forward. The next question comes from Amir Ezzat with Echelon Partners. Please go ahead. Good morning. Congrats on your inaugural call. I'm just wondering How discussions with customers are evolving in light of the Delta variance. Do you guys like to see risk on the cadence of your recent contract wins? Or do you feel the discussions are still very fruitful Relative to say like last quarter or 2 quarters ago? At this stage, I'd say they are very fruitful. We definitely saw we saw a pickup in the cadence at the end of Q2, but that Shifted pretty dramatically in Q3 with the Delta variant. But as you can sort of see from the deal flow that's been coming through now that We seem to be we're seeing customers get back to it, maybe let's call it a new normal, but of course, a business where things are starting to flow. That sort of pushes everything along in this last year and what's happened in Q3 with Delta. But It's been a long road with the pandemic here and I hate to say we're out of the woods yet, but we are In our European markets, our North American markets, we're seeing customers start to get back to a normal cadence in their business And start to look, you particularly see that in the larger deal flow. The smaller ones are easier to manage and handle through this, but the larger deal flow is what I think you're going And we see that in a much better position than it's been since the beginning of the pandemic. Great. No, I think new normal is a good way to put it. Then just a follow-up on the margin front. So when I look at the product margin Coming in at 13%. Is it fair to assume that this is a trough number? Yes, I think that's fair to assume. Okay. Sorry, Ameren, go ahead. Sorry, go ahead. No, I was just following on for that, saying, I would say it is a trough in the base. I think a lot of the impacts we've talked about from that supply chain side are there. And as we see revenue from product sales ramp up, then we'll absorb more of the overall costs in the operation labor and you'll see the margins improve. Okay. Then maybe lastly, you can give us a bit of color on Christine and Brian joining the executive team and what they sort of bring to the company. Then like are there any other gaps that you guys see within your executive team? Really, so for both if you think about both Brian and Christine, I mean, both Areas we really needed to put some strength and horsepower behind. From the marketing side, Christine brings a huge wealth of background knowledge and experience in that software as a service side. But really, I think when people think about marketing, you think a lot about the sort of brochure, ad, Website side of what the company is doing, a lot of Christine's background is in demand lead gen from the demand side. And that's where we're going to see a huge impact there for sure, already are. We're seeing lots of things accelerated. You'd have actually seen a brand new website launch today. So excellent impact there. And the context of the CTO role, Brian coming on board, his background from Amazon to Microsoft to Hulu is exactly down the path we really need. Most people don't recognize the degree to which we truly are a software company and having someone read in that space with that kind of experience It's a fundamental shift for us and we're seeing that impact. In both cases, they both hit the ground running and the impact has been excellent. As we look forward, are there additional spaces within the C suite that we'd be looking at strengthening? Nothing really particular right now. I think right now we've got the team. We really want to take the company for the next reasonable period of time here. Thanks. I'll pass the line. Thank you. The next question comes from Chris Thompson with PI Financial. Please go ahead. Great. Thanks. Good morning. Cody, just on the outlook, you said in your MD and A, you're beginning to see demand turning, so it's a bit more slow than you'd initially anticipated. And If I look out to consensus revenue estimates for next year over $90,000,000 just like to get your sense if you think that's a little bit optimistic or if you think You have line of sight to achieve that type of revenue growth next year. If we look towards the next year going forward, those are numbers that Those are definitely numbers that are within the realm of what our range of expectations are. There's lots of challenges going forward, and we still don't Again, I will highlight again the risks to those kinds of numbers based on what is happening in the world of the pandemic. But between the Sales cadence we have today between the new products coming down the pipeline and really bolstered by that strengthening of our Sales and marketing reach, those are still numbers within which we're comfortable. Okay. That's good to hear. And just on the new product launch, is the G6 Still slated for launch in early calendar 2022? Full launch for We're currently looking to see the full launch of the G6 in the summer of 2022. There's We'll be you'll see the product in the market prior to that as far as just preliminary entry into the marketplace, but full launch Really based a lot around material supply and availability will be summer of 2022. If I look at risks on the G6, The risks really aren't on our development side. They're actually just on that material side. Okay. Is it fair to say is that pushed out a little bit then from our last Discussion or is that kind of always that you Yes, it pushed out at least that is pushed out a quarter and a half kind of thing from the last times we were talking. Okay. That makes sense. And just last for me, maybe for Shane on the R and D, I think you had Your product development costs, I think you had about $500,000 of consulting fees in there. Is that going to go away? Should we Assume that steps down a little bit next quarter, the product development expense line? For that particular project, Chris, that will be an ongoing one for a number of quarters here as the back end development for BlackLine High portion continues. Okay. Roger that. Thanks for taking my call guys. Have a good day. Thanks, Chris. Thank you. The next question comes from Brian Fast with Raymond James. Please go ahead. Thanks. Good morning, guys. You can now count 5 of the 12 UK Water Authorities at the BlackLine customers. Can you just characterize the remaining opportunity there? Sure. As you say, there I think the point even another point I'd make just on that 5 is that there has been of every only 5 RFPs have been less in that market in the last 3 years. And we've won every single one of them. We anticipate over the next, call it, 9 months, another 2 to 3 of those RFPs Pleased to be less in the of scale in that market, bringing up to 8 in total that would have been released. And it's Our view that we'll continue to see that same level of success on those ones as we go forward. It's proven to be an excellent market for us. And with each customer win, we just strengthen our position within that market space. Yes, that seems fair. And then just moving on, you've had the Ekso in the market for almost a year in Europe and for much of 2021 in North America. Can you just talk about which end markets you've seen the greatest adoption of the product and I guess where you see some of the better opportunities? Yes, it's interesting really. Europe, the initial launch in Europe, we're seeing it in Europe and primarily in industrial Which is sort of a little bit different than what we might have expected initially, but that's great. It's a pretty wide variety of Different kinds of applications. In North America, the biggest market we're going to see is within the Petrochemical market and the refining side. And although we've been in the market for a reasonable period of time, it's only in the last Last quarter that we saw the Ekso with internal pumps be fully approved for the North American market. So that's where that Yes, the pickup of some of those large orders that you're seeing is coming from. I think we're starting to Given the success we've had today, I don't want to say we're scratching the surface of the opportunity for HEXO, but we just see that as a market that's going to continue to build and build for us. It will we talk a lot about the commodity impacted side of the oil and gas space, but refining is a market that We're not in, in a great degree and the Ekso will drive that and that's something I'd look to watch over the next few quarters. The next question comes from John Hsiao with National Bank Financial. Please go ahead. Hey, Cody and Shane. I just have a question on the foreign exchange. So So would you be able to comment on the constant currency revenue growth for this quarter? I know for other companies that report in Canadian dollar, they all I'm just curious how much revenue growth has been impacted by FX this quarter? Given that, John, some of the particular revenue growth this quarter were in Europe And United States, so it would have been more heavily impacted than other quarters, but that does depend on the proportion of sales in farm Versus the Canadian markets, given our reporting in Canadian dollars. Okay. That makes sense. And my other question is, for the notable client wins Zack Blackmon announced the subsequent quarter and particularly around the G7 XL. What is the revenue mix between Product and service. I have a good understanding of the mix for G7, but would you be able to provide some color on the Axo product? Sure. Just for clarity of the deals we've announced so far this quarter, 2 of them have been G7 deals. And as you say, those are heavily weighted towards service. And 2 of them have been EXO deals and the EXO deals will Heavily weighted towards hardware, almost sort of the opposite ratios really at the end of the day where you're looking with the Ekso The service component of the of those announcements will be in the 10% range. Okay. My last question is, it seems like the supply chain issue Has already made some of the largest like chip supplier to increase their price. As a user builds parts in chips, Would you think that BlackLine will increase the product and service price going to the New Year just to maintain the margin? The good thing about our business is I shouldn't say that one of the good things about our business is the service side. Just the margin there, as you've seen it even grow during this period of time, isn't impacted by any of those supply chain issues. So Given that that's the real focus of our growth into the future, we're not as it would not be our intent to pass on impacts on Product side to our customer base because we're really looking to see more devices in the field to see that service revenue rate growth increase into the future. Okay. Thanks. I'll pop the line. The next question comes from Raj Sharma with B. Riley. Please go ahead. Hi, good morning, guys. I had a couple of questions. You said Canada was an issue and outside of Canada, your total revenues grew by 60%. Could you give us some color on Canada and how soon do you think and what the impact of the Canadian Customers are and how soon do you see that sort of stabilizing? Sure. I mean, really one of the things to look at is Really our investments in that sales and marketing side. We're currently not investing in the Canadian market. We're investing in other markets outside of Canada. And it's really just simply opportunistic. Those are where the greatest opportunities for growth are. It's not that there aren't opportunities in Canada, but Our view is that for every dollar we invest in Europe or the United States or international markets, we'll get a better return than we will off the Canadian side. Canada has had The world's had the impact of the pandemic, but Canada has also had the impact on the core industry here of the oil and gas Space of the impacts on the commodity markets themselves. Commodities have But we don't see that marketplace recovering to the growth it had before. So we'll still see growth in Canada. It's just that it's not going to be at the And eventually, Canada just becomes a smaller and smaller marketplace for us as we as a percentage of our overall market. I I mean, we're Canadian. I'm not we definitely are it's an important market for us and The customers there are important for us as well too. It's just not the biggest opportunity for growth for us in the future. Got it. And then Cody, out of the announced deals, in fact, we'd Thinking back on the last question, someone asked, was announced deals that there are about $7,000,000 or so deals that are being announced That all fall in the Q4. How much of that is product? And I know you just mentioned G7 deals and more service. But could you but how much is that service over the entire 4 year contract that you're listing as a deal 1? I mean, how much would we see that, for example, in a particular quarter of an announced deal? It's so varied on deal from deal, Raj. That's a really that's not that's a question that's really not Easy to answer. You really can't give a straight answer to except going through each individual deal, which We don't tend to do because we don't want to sort of highlight the breakdowns of those from a competitive aspect. But suffice it to say that in the G7 world, Again, it varies by market, by customer. We can wind up with deals that are 1 year service contracts, 3 year service contracts, etcetera. So It's a pretty big mix at the end of the day. But the one thing I would say is you'll see the product impact in the quarter, but no service impact at all until at least the Q1 of 2020 2, yes. Got it. So in a particular G7 deal, most of the announced contract would be a service Revenues which you wouldn't see in that quarter, you would see that over the period, the length of the contract. Even that can be interesting because in North America, we'll typically sell a large deal with a 1 year service contract. So hardware and service are pretty balanced, But in Europe, we'll typically sell them with 3 to 5 year service contracts. So you're right, the majority of the deal would be in the service side. Got it. And then just lastly, I know you said that there is almost no Cody, you said there's almost no Yes. I mean, in that space, workforce production, we haven't lost you're right. Like we Look at the service in 2 real core aspects for current customer base. 1 is service reductions are where we maintain the customer, but they just have less employees. So there's less business within that particular customer base. That's mostly been a Canadian oil and gas story as companies have Taking the business tact over this last period of time of significantly reducing their workforce as The commodity prices were hit and again that's an area where I don't think we'll see a real recovery in that, but we've never lost the customer there. The $17,000 we refer to is actual customers that we no longer the customer is actually no longer a customer. So In fact, in most of those cases, it's if we look at the 17, more than half of that is from companies that went bankrupt actually. So the company doesn't exist anymore. So as a company, we just when you talk about those large logos, we don't lose them. And that retention has been really key to that to the growth and for the future for us. Got it. And then these workforce reductions, do you have any sort of visibility on this, because this is a big element of The churn of your service customers. Do you see do you expect this going at this rate for the next 4 quarters or is it pretty much done? It's a couple of quick a couple of points on that. What happens with the workforce the impact of the workforce reductions is it depends on when the customer renews their contract. If you think about someone with a 1 year, 2 year, 3 year contract, They may have reduced their workforce 6 months ago, 9 months ago. And we won't see the impact until their contract renewal. So it's a little bit it's not so much market dependent as timing of the contract renewal dependent. We don't believe in the market itself. We're seeing the same kinds of workforce reductions. So that should be either Again, we'll still see some impacts based on the contract renewal dates, but the true impact on the overall service flow Going forward, I think should be minimized. Great. Okay. Thank you for answering my questions. I'll go offline. Thanks. This concludes the question and answer session. I would like to turn the call back over to BlackLine Management for closing remarks. I'd just like to thank everyone today for their questions and their participation. And we'd like to wish you all