Earnings Call: Q3 2022

Nov 8, 2022

You for standing by, and welcome to the alarm.com Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Matthew Zertmann, Vice President, Investor Relations. Please go ahead, sir. Good afternoon, everyone, and welcome to alarm.com's Q3 2022 earnings conference call. Please note that this call is being recorded. Joining us today from alarm.com are Steve Trundle, our President and CEO and Steve Valenzuela, our CFO. Before we begin, a quick reminder, management's discussion during today's call will include forward looking statements, which include, among others, Projected financial performance and key assumptions related thereto, including with respect to the Vivint dispute, potential legal spend and cost rationalization strategies the impact of emerging market dynamics, trends and anticipated market demand The impact of the COVID pandemic, challenging global supply chain dynamics and adverse macroeconomic conditions, Our business strategies, plans and objectives and integration of recent acquisitions and anticipated growth prospects These forward looking statements are based on our current expectations and beliefs and on information currently available to us. These statements are subject to risks and uncertainties, including those contained in today's earnings press release and in the Risk Factors section of our most recent Quarterly report on Form 10 Q filed with the Securities and Exchange Commission on August 9, 2022 And in subsequent reports that we file with the SEC from time to time, including our quarterly report on Form 10 Q for the quarter ended September 30, 2022 that we intend to file with the SEC shortly after this call that could cause actual results to differ materially from those contained in the forward looking statements. Please note that the forward looking statements made during this call speak only as of today's date and alarm.com undertakes no obligation to update these statements to reflect subsequent events or circumstances, except to the extent required by law. Also during this call, management's Commentary will include non GAAP financial measures and provide non GAAP guidance. Management believes that the use of these non GAAP financial measures provides an additional tool for investors to use in understanding the company's performance and trends. However, Non GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Reconciliations between GAAP and non GAAP metrics for our reported results can be found in the financial statement tables of our earnings press release, which we have posted to our Investor Relations website at investors. Alarm.com. This conference call is being web and is also available on our Investor Relations website. The webcast of this call will be archived and a replay will be available on our website. Let's now turn the call over to Steve Trundle. You may begin. Thank you, Matt. Good afternoon, and welcome to everyone. We are pleased to report another quarter of solid results. Our SaaS and license revenue in the Q3 was $133,100,000 Up 12.8% over the same period last year. Our adjusted EBITDA in the 3rd quarter was $40,800,000 I want to thank our service provider partners and the alarm.com team for their continued strong performance. In my comments today, I'll update you on several new platform capabilities that expand our addressable market and talk a bit about our recent Noonlight acquisition. I'll also spend some time addressing the matter related to our patent license agreement with Vivint and close with some of the thinking that has gone into our initial look numbers for 2023. This quarter, we expanded the market for our alarm.com for business video solution with the introduction of third party camera support. We estimate that our commercial video solution will now work with about 80% to 90% of third party cameras that have been installed in midsized and Large commercial settings since 2018. Supporting third party cameras will make it easier for businesses to adopt our integrated solution Without the cost of replacing all the existing installed video cameras, we can also leverage a wider diversity of commercial camera form factors And capabilities to expand the fit for our video solution. For example, we can now address the needs of businesses with specific requirements For Penhole, Fisheye, Thermal and other camera types. To deploy this new capability, the alarm.com video team leveraged Technology created and widely deployed by our OpenEye team for enterprise commercial customers. It's a good portrayal of the ongoing synergies that our 2019 acquisition is producing. We also expanded the applications of our video solution with the introduction of escalated events. This software capability enables our partners Station to receive and respond to events generated by alarm.com's suite of video analytics software. For example, when alarm.com detects a person in a customer's backyard or in the parking lot of a business after hours, we can alert a monitoring station. A monitoring agent can then access video clips and live video feeds from cameras enrolled in the service by the subscriber. The agent can evaluate the situation quickly and dispatch first responders as needed. Escalated events adds a new layer of proactive security section for property owners. It also creates new opportunities and applications for professional monitoring services that our partners provide. Escalated Events expands our suite of software based alarm signaling and emergency response capabilities. We believe we can create new markets for our partners to deliver professional monitoring services, while also enhancing the value of services offered to the typical customer today. Our recent acquisition of Noonlight also gives us further scale in developing these opportunities In the emergency response space, And has organically attracted over 3,500,000 users. During that time, the company's technology has evolved Into a connected safety platform that enables context aware event management and emergency response services. A range of market leading brands and IoT device vendors integrate Noonlight Services into their offerings. We saw a number of appealing things about Noonlight that led to our acquisition. 1st, Noonlight allows alarm.com to participate more broadly in the IoT market. Noonlight's fast growing SaaS offering enables IoT device vendors to incorporate emergency response capabilities into their solutions. Many of these vendors provide devices as stand alone products that have not traditionally been monitored by the security channel. 2nd, We see opportunities to leverage technology across the Noonlight and alarm.com platforms and create new markets for our service provider partners. For example, New Life API simplifies the incorporation of emergency response services into nearly any IoT device. Integrating emergency response capabilities with existing products such as FlexIO, Connected Car and shooter detection systems would meaningfully expand their use cases and value proposition. Lastly, Noonlight's founders and leadership team share many aspects of our management and technology philosophies. They are committed to a growth strategy driven by expanding their platform through R and D. Noonlight will continue to operate independently. The team will focus on exceeding the expectations of their current and prospective customers and expanding their services platform. Shifting gears, I want to address the Vivint matter and how it relates to our initial look for 2023. As you know, Vivint recently notified us that it will stop paying alarm.com the royalty fees associated with the patent license agreement that we reached with Vivint In 2013, we have filed for arbitration under our agreement. We expect the arbitration process, which is confidential and not open to the public like traditional litigation to take about 12 to 16 months. We intend to continue Aggressively defending the investments we have made in our technology over the course of 20 years, including our global patent portfolio of over 600 issued patents And additional patents pending. As we previously disclosed regarding the Vivint matter, alarm.com believes that Quarterly SaaS and license revenue and total revenue will be impacted by approximately $6,000,000 per quarter, Beginning with the Q4 of 2022 and through 2023, the patent license Revenue from Vivint was projected to grow somewhat more slowly than the rest of alarm.com's fast revenue. In the first half of twenty twenty two, alon.com's Fasten license revenue, excluding Vivint, grew 14.7% As our longer term investors know, we typically conclude our Q3 call by providing An early initial look for how we think the business will perform in the following fiscal year. The emergence of the Vivint matter in the last few weeks has made that objective more challenging. Nonetheless, we are going to again provide our current thinking for the year ahead. Steve Valenzuela will speak further about our 2023 estimates in a few minutes, but I wanted to provide some commentary as well. For this year's initial look estimates, we have budgeted conservatively and assume no license revenue from Vivint in 2023. We have also budgeted for potential significant additional legal expenses related to Vivint in the range of $16,000,000 to $20,000,000 in 2023. At this early stage, we do not know exactly what our legal costs will be in 2023. However, We do not want to find our legal options constrained by our budget or our financial outlook. We want to be positioned to deploy a full legal budget without surprising our investors next year. The combination of these potential expenses with the loss of patent license revenues meaningfully impacts our 2023 adjusted EBITDA estimates. Fortunately, these legal costs are not core to the business' operation And at some point in the future, when the matter is concluded, they will subside. Since receiving Vivint's notification, I've been asked several times, what adjustments are you going to make in the rest of the business? I've answered by saying that I liked our growth strategy I heard from Vivint, and I still like our strategy today. This news doesn't change our core strategy in any way. In the last few years, we have successfully expanded the alarm.com platform and diversified our revenue streams. We've also increased our level of investment in R and D Such that we are building for the future, while also maintaining profitability. As a result, we have created strong businesses in Commercial Intrusion and Access, Residential and Commercial Video and Energy Management, we have established toeholds in the HVAC channel, the multifamily housing segment, The active shooter detection vertical and most recently with our acquisition of Noonlight, the non traditional monitoring space. We've built an international business that now serves over 50 countries globally and installs over 200,000 systems annually. We've done all this while Also continuing to treat our service provider partners as a top priority. Each of these businesses leverage our competencies in IoT, AI, user oriented design and multi tenant high availability cloud SaaS. We have great teams in place in these areas too And they are developing technology that does good things for people, keeping them safer, literally saving lives, making people more efficient and reducing the energy footprints of individual properties and across entire communities. We believe that in each of these areas, We can build multi $100,000,000 businesses. So I feel good about where we are headed and the strategy we plan to continue to pursue. We'll do some modest cost rationalization to enable us to produce ample cash even as we address litigation matters, but I don't see us changing our core strategies. In summary, I remain confident with our trajectory. I'm pleased with our Q3 results and with the execution of our plans throughout the year. I especially want to thank our service provider partners and our team for their hard work and our investors for their continued trust in our business. And with that, let me turn things over to Steve Valenzuela to review our financial results and provide guidance. Steve? Thanks, Steve. I'll begin with a review of our Q3 2022 financial results and then provide our guidance before opening the call SaaS and license revenue in the Q3 grew 12.8% from the same quarter last year to $133,100,000 This includes Connect software license revenue of approximately $6,500,000 for the 3rd quarter, Down as expected from $7,900,000 in the year ago quarter. Our SaaS and license revenue visibility remains high With a revenue renewal rate of 94% in the 3rd quarter. Hardware and other revenue in the 3rd quarter was 83,000,000 Up 11.8 percent over Q3 2021. Video camera sales continue to be the main contributor to growth in hardware revenue. Total revenue of $216,100,000 for the 3rd quarter grew 12.4% year over year. SaaS and license gross margin for the Q3 was 86.2%, up about 100 basis points Over the same quarter last year, due to some modest scale benefits, hardware gross margin was 19.1% for the 3rd quarter, An improvement from 17.7% last quarter and up from 15.2% During the same quarter last year, as we started to see some modest relief in shipping costs and our price increases took effect. However, this is still below our historical gross margins of 20% to 22% as the global supply chain continues to be challenging. We expect hardware gross margins for the 4th quarter to be in the range of 18% to 19%. Total gross margin was 60.4% for the 3rd quarter, up from 58.2% in Q3 2021 Due to the improved SaaS and license and hardware margins, turning to operating expenses. R and D expenses in the Q3 were $55,600,000 compared to $44,100,000 For the Q3 of 2021, mainly due to employee related expenses, we ended the 3rd quarter with 981 employees in R and D, up from 8 19 employees in the same quarter last year. Total headcount increased to 1699 employees in the 3rd quarter compared to 1482 employees a year ago. Sales and marketing expenses in the 3rd quarter were $23,100,000 or 10.7 percent of total revenue Compared to $22,600,000 or 11.7 percent of revenue in the same quarter last year. Our G and A expenses in the 3rd quarter were $28,000,000 up from $18,700,000 in the same quarter last year, mainly due to increased legal fees, employee related expenses and travel costs. G and A expense in the Q3 includes non ordinary course litigation expense of $3,100,000 Compared to $1,600,000 for Q3 2021. This quarter also includes acquisition related expenses of approximately $700,000 for acquisition of Noonlight. Non ordinary course litigation and acquisition expenses Are part of our adjusted measures and are excluded from our measurement of our non GAAP financial performance. Non GAAP adjusted EBITDA in the 3rd quarter was $40,800,000 up from $37,600,000 in Q3 2021. In the Q3, GAAP net income was $18,300,000 compared to GAAP net income of $13,500,000 For Q3 2021, non GAAP adjusted net income was 30,100,000 or $0.55 per diluted share in the 3rd quarter compared to $27,400,000 or $0.53 per diluted share For the Q3 of 2021, we ended the Q3 with $621,300,000 of cash and cash equivalents. During the Q3, we used $31,900,000 to acquire an 85% controlling interest in Newlight, which excludes $4,900,000 in post closing pullback provisions. As I now turn to our financial outlook, I want to remind listeners that beginning with the Q4 of 2022, our guidance going forward excludes Vivint Patent license revenue from our financial results. As we indicated in our press release, we expect the impact on our SaaS and license revenue And our earnings and cash flow to be approximately $6,000,000 per quarter. We also expect to incur significant additional legal fees As we enforce our patent license agreement in this matter, for the Q4 of 2022, we expect SaaS and license revenue of $130,500,000 to $130,700,000 For the full year of 2022, We expect SaaS and license revenue to be between $516,300,000 to $516,500,000 Compared to our prior guidance of $518,500,000 to 519,000,000 We are projecting total revenue for 2022 of $840,300,000 to $842,500,000 Compared to our prior guidance of $828,500,000 to $859,000,000 which includes estimated hardware and other revenue $324,000,000 to $326,000,000 We currently project our non GAAP tax rate for 2022 To remain at 21% under current tax rules, EPS is based on an estimate of $55,000,000 weighted average diluted shares outstanding. We expect full year 2022 stock based compensation expense of $50,000,000 to 52,000,000 Finally, while we are in the initial planning stages, I will provide some early thoughts in 2023 With a few important caveats, there could be further disruptions from the ongoing challenges with our global supply chain And we are in the early stages of evaluating legal measures to enforce our patent license agreement with Vivint. These factors, among other unforeseen events, could impact our guidance and results in the New Year. With that said, we currently estimate our SaaS and license revenue for 2023 will be between 548 To $550,000,000 excluding the previously mentioned patent license revenue, total revenue for 2023 Could range between $873,000,000 to $875,000,000 We currently project our non GAAP adjusted EBITDA for 2023 to be between $110,000,000 to $125,000,000 As Steve Trundle noted, Our 2023 EBITDA outlook assumes that we retain a lot of flexibility in our legal strategy and reflect some of the higher costs we anticipate incurring during the year, which are not part of our normal ongoing operating costs. In 2023, we plan to continue to invest in our growth initiatives, including our newest acquisition New Light, which has strong growth prospects with 50% or better growth anticipated, but will initially have a modestly negative impact on our earnings as we invest in their business. We will provide our initial guidance for 2023 when we report our Q4 2022 financial results early next year. In summary, We are focused on continuing to invest in market leading smart property solutions, while delivering profitable growth. And with that, operator, please open the call for Q and A. One moment for our first question. And our first question comes from the line of Brian Ruttenberg from Imperial Capital. Your question please. Yes. Hi. Thank you very much for taking my call. In terms of the Vivint, I'm sure you're going to be getting a lot of Questions around this. But how long was the contracts that did last? Was it perpetual and they just, discriminately cut it off? Or was there a certain period of time that it was going to end? And maybe you can walk us through the process. Hey, Brian. This is Steve Trundle speaking. So I wish I could walk you through the entire process. Unfortunately, the agreement itself is confidential. The terms of the agreement are confidential. So That's why I spent some time in my prepared remarks kind of providing what insight I could there, But we can't comment on the actual terms of the agreement, unfortunately. So Okay. Maybe then as a follow-up, I was on the ADT call, excuse me, And they said that your agreement is very much in place. Is there any other large agreements out there Besides ADT and Vivint, that is a very large percentage of your business or is it a bunch of small contracts? No. Well, in terms of licenses, there are other licensees. I would say that the Revenue under licenses from Vivint was a high majority of license revenue, probably in the 90% plus range. And as we articulated, I think, when we discussed the ADT agreement, that The license component of that actually kicks in as they transition to a Google based platform at a later point in time. Great. Thank you very much. Yes. Thank you. One moment for our next question. And our next question comes from the line of Saket Kalia from Barclays. Your question please. Okay, great. Hey, guys. Thanks for taking my questions here. Steve Trundle, maybe for you. Maybe just picking up on ADT, I was wondering if you could talk to kind of how we're thinking about ADT impact next Sure. That's a revenue. By the way, thank you for providing that preliminary look to 23%. That's very helpful at this point in the year. I know that ADT is It's very early. The impact there is going to take a while, but maybe you and Steve Valenzuela can just help level how we're thinking about that ADT impact at least for in your preliminary Sure. So this is Steve Tunnell speaking. Yes, we I think when we announced the Sort of revised agreement with ADT, we anticipated at that time that ADT would Create all professionally installed accounts on the alarm.com platform through the end of 2022. We now believe that's going to be probably a longer period of time, and we almost have to look to ADP themselves For exactly what their internal plans are, but the relationship is very healthy. We're working together on a lot of different fronts. And I know when we put together our initial look numbers, we assumed that Through at least the Q1, that professionally installed systems would be on the alarm.com platform. And then we began to taper that expectation somewhat as we go into the Q2. I think our Best guess at this point is that we'll probably expect it to be more or less business as usual. And this is based at some level ADT's communications, again, it's sort of their plan, but I think business as usual until the middle part of the year. Sorry, go ahead, Steve. I was going to factored in less hardware revenue for next year from ADT. They've not been a major contributor hardware revenue, but we have factored that into our guide for 2023 for hardware revenue. It's a modest impact. Yes. Got it. That's very helpful. Steve Valenzuela, maybe for my follow-up for you. I know that there's some normal course Litigation expense, there's some, of course, non normal course litigation expense like Vivint. Can you just remind us, I mean, that EBITDA, that preliminary EBITDA guide for 2023, What's sort of excluded from non GAAP EBITDA? What's included? I think that EBITDA number is still a little bit lower than what we were You mean adjusted for Vivint. So I just wasn't sure I wanted to make sure we were clear on kind of what was being excluded versus included? Yes. It's most of that legal number that Steve Sundar threw out of $16,000,000 to $20,000,000 most of that It is affecting adjusted EBITDA for next year because of the nature of that legal spend. So it's not adjusted out Of the adjusted EBITDA like some of our legal is and it gets into technicalities, but we've assumed when we've put together the initial book for 2023, Most of that legal spend would be hitting adjusted EBITDA, in other words, reducing our adjusted EBITDA. And that's one of the reasons why the adjusted EBITDA guide Is lower for 2023. Just to sort of bring that through. So We don't actually know at this point, Saket, exactly what legal measures we may pursue. So we have to assume that those incremental costs Would not be adjusted out at this juncture. And so you have that Sort of expense that I mentioned in my prepared remarks, Steve just indicated the majority of that. We're at least at this point, we're assuming would adjusted out. And then you have, of course, the actual top line $24,000,000 component that, Of course, no longer flows into adjusted EBITDA. And then the only other thing I think we've mentioned is that we did acquire Newnlight in the 3rd quarter And are planning to invest into that business throughout 2023 because it's a high growth business. So there's probably $5,000,000 or $6,000,000 of investment we're making there that's a new investment as well. And those are all factored into the initial look That we provided you. Got it. Very clear. Thanks, guys. I'll go back in queue. Thank you. Thank you. One moment for our next question. And our next question comes from the line of Mark Kash from Raymond James. Your question please. All right. Thanks for the question. This is Mark on for Adam. So maybe just to kind of circle back to these last 2 and maybe ask in a different way. With Vivint refusing to pay, I guess what's to stop ADD from pursuing a similar strategy in 'twenty three and beyond? Is there anything you can talk about if it's broadly different about the contractor relationship that makes the outcome less likely? I would just I guess, I would just say that our relationship with Vivint is a very positive Relationship where we I'm sorry, with ADT. We're collaborating to service Millions and millions of subscribers every day. So we're working together. It's much more of a win win oriented type of relationship and you contrast that with Vivint who filed a suit against us While we were on our roadshow during the IPO has been more or less Just a little bit more of a problematic relationship and that's probably my overall view. Okay. I think that's helpful. Thank you. And if I could ask a follow-up, I know you just acquired Nuummite Balance sheet is very healthy and valuation is coming down. And I was wondering if you could just talk about the M and A philosophy and would you consider something larger to perhaps Diversification in areas like international, commercial and how do you weigh those different adjacencies? Thank you. Yes, absolutely. So we continue we did just finish this acquisition. We continue to look at various opportunities. The opportunities are becoming, I'd say, Increasingly more attractive to us now. We're seeing some rationalization on valuation. International, as you just mentioned, It is in fact a area where we have some level of focus and have been looking at various Opportunities that may help us accelerate what is already a pretty healthy expansion internationally, But that is a domain that we are looking at. We continue to look at the energy domain. We continue to look at Video domain and then we are always looking for, attractive sort of acqui hire, but usually much smaller opportunities. Does that answer your questions? Yes. Thank you so much. Thank you. One moment for our next question. And our next question comes from the line of Dylan Hesselman from ROTH. Your question please. Hey, guys. Thanks for taking my question. Just to start, I'm wondering if you could comment a little bit more about commercial and the cadence of growth there. I think Coming a little bit more out of the pandemic earlier in this year, you mentioned seeing better growth there. So I'm just curious what the cadence looks like there. And is that sort of 80% to 90% camera adaptability, if you want to call it, like The main pain point you were seeing in terms of trying to get better penetration? Yes. The cadence there is Pretty good. As I mentioned last quarter, we're pretty focused on the particularly the S and B TAM, which we put at around 5,500,000 Subscribers in North America. The velocity that we have with the OpenEye business It's strong. The business continues to grow its SaaS revenue at a nice pace. So generally, we're continuing to see Good progress on the commercial and small business side. In terms of the specifics, camera support is a meaningful OpenEye has done a great job through time of supporting a range of different third party manufacturers with their cloud based video solution. In the alarm.com commercial part of the business, which tends to serve us a smaller customer, not as much an enterprise, You can sort of think of Open Eye Schools, Institutions, Hospitals, Large Footprint Deployments. Oftentimes, alarm.com typically with its Commercial Video is servicing a somewhat smaller footprint location. And Even there though, ripping out all the existing cameras creates a real impediment to getting the software deployed. You have to sell through A replacement for, call it, 8 cameras on a restaurant to actually light that restaurant up with our commercial video solution. So Being able to support a wider range of cameras, at least those that have been installed since 2018, we think will Allow our service providers to be a little bit more nimble and effective in closing a wider range of opportunities that they see. Great. Thank you. And then as a follow-up, if look quickly at the fiscal year 2022 or 2023 Preliminary projections and sort of try to normalize for the Vivint impact. How do you think about sort of that delta Of growth coming from your core SaaS business versus, the contribution from Newmont? Yes. You're already sort of normalizing and probably seeing that the number we put out It's not it's a little higher than what you would get if you simply deducted the amount that we are taking out For the dividend matter, yes, there's a contribution twofold there. First, the core business is performing a little stronger than We probably previously expected, so there's some contribution from that. And then there's A modest contribution, call it, right around $5,000,000 that we're expecting From Newnlight. Got it. Is that $5,000,000 the annual number or per quarter? Yes, that is. Okay. Thank you. I'll jump back in the queue. Sure. Thank you. Our next question comes from the line of Willow Miller from William Blair, your question please. Hi, all. This is Willow on for Matt Pfau. Thanks for taking my questions. So given the current environment, how are you thinking about investments and expenses next quarter and next year? Are there any areas you're considering pulling back on, Especially if legal fees are higher than expected? Yes. Good question. I'll start with that. We will do some, what I think I call, modest cost rationalization across the business. We like to produce cash and we like to produce as much cash as we can. So we are going to have some higher expenses on the litigation side and It would be probably prudent to pull in some costs elsewhere When we think we can do that without impacting one of our growth strategies. So we've already done most of that work in our initial look. And as I said, there'll be some modest either cost postponement in some cases or Some cost cuts here and there, but we're not planning any sort of wholesale dramatic reduction of costs. We think that the things we're investing in In terms of growing the business internationally, growing the commercial business, really launching the Moonlite business further, all on They are all very rational places to invest so that we're growing over the next decade. And we think that most of these Higher cost in 2023 are temporal in nature. So you would really kind of hijack the company if you overreacted those costs and then you come out of it and you don't have them anymore. So that's kind of how we're thinking about it. Okay, great. Thanks. Thank you. One moment for our next question. And our next question comes from the line of Jack Vander Aarde from Maxim Group. Your question please. Hi. This is Jack O'Dare calling in for Jack O'Darete. Thanks again for taking my question. Just a quick check on Vivint. I got the 2023 range, but I was wondering, is there any estimated 4Q 2022 impact of legal expenses? And then I have one more follow-up. Yes. We do have factored in some legal expenses in our guidance for Q4 2022. We haven't really broken that out, but it is factored in our EBITDA guide for the quarter. And of course, we factored in $6,000,000 less. So if you take the you can take the $6,000,000 less from Vivint right that comes right off the bottom line, Plus there is some factor in there for legal expenses that we're not assuming are adjusted out of adjusted EBITDA as well. That's factored into our guidance. And then of course, there's some costs in there for New Light. As we talked about, it's less than $1,000,000 of impact on our EBITDA for Q4. Perfect. That's how you can do our guidance for Q1. Yes. And then Actually, I missed just the for the 2023, the preliminary, I missed the bottom range of the EBITDA. Do you mind Mentioning that again. The 2023 initial look for EBITDA, just want to clarify, 2023, right? Yes. Okay. So we set a range of $110,000,000 to $125,000,000 adjusted EBITDA for 2023. It's a wide range because of the variability of the various matters that Steve talked about. Yes. Thank you so much. And then actually I have one last question, a little bit of a turn. I'm just wondering if you could share any color on The tax rates for video camera services and analytics on new camera installs? Thank you. Yes. The video attachment rate continues to progress continues to do very well. The attachment rate in Q3 was over 50 percent for video and over 70% of those were video analytics. So we continue to see very good progress in video. And you can tell that as well with our hardware revenue, where hardware revenue is continuing to perform quite well, Mainly driven by cameras sales. That's amazing color. I'll jump back in the queue. Thank you, guys. Thank you. Thank you. This does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.