Sleep Country Canada Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
September 14, 2023

There are 8 speakers on the call.

Operator

Good day, and welcome to the Mitek Fiscal 2023 Second Quarter Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Good afternoon, and welcome to Mitek's fiscal 2023 Second Quarter and 1st 6 Months Earnings Conference Call. With me on today's call are Mitek's CEO, Max Carnecchia and Interim CFO, Foaad Ahmad. Before I turn the call over to Max and Foaad, I'd like to This afternoon, Mitek issued a press release announcing its fiscal 2023 financial results for its Q2 and 1st 6 months. This release is available on the company's website at mitechsystems.com.

Speaker 1

This call is being broadcast live over the Internet for all interested parties, Discuss certain factors that are likely to influence the business going forward. Any factors discussed today that are not historical facts, Particularly, comments regarding our long term prospects and market opportunities should be considered forward looking statements. These forward looking statements may include comments about the company's plans and expectations of future performance. Forward looking statements are subject to a number of risks and uncertainties, which could cause actual results to differ materially. We encourage all of our listeners to review our SEC filings, including our most recent 10 ks and 10 Q for a complete description of these risks.

Speaker 1

Our statements on this call are made as of today, September 14, 2023, And the company undertakes no obligation to revise or update publicly any of the forward looking statements contained herein, whether as a result of new information, Additionally, throughout this call, we'll be discussing certain non GAAP financial measures. Today's earnings release and the related current report on Form 8 ks describe the differences between our non GAAP GAAP reporting and present the reconciliation between the two for the periods reported in the release. With that said, I'll now turn the call over to Mitek's CEO, Max?

Speaker 2

Thanks, Todd. Good afternoon, everyone. Thanks for joining us today. We're very excited to be talking with you today Having just released our fiscal 2023 2nd quarter and 1st 6 months results, we expect to file our 10 Q for the 2nd quarter soon and anticipate filing our 10 Q for the Q3 before the expiration of our NASDAQ extension deadline of October 13. With that filing, we will be current with our SEC filings.

Speaker 2

Before I review the 2nd quarter results, I want to take this opportunity to recognize and thank my technicians for their tremendous efforts, which has resulted in an exceptionally strong quarter. You have shown resilience despite the disruptions and distractions presented through the rigorous audit process. Thank you for your commitment Building a stronger Mitek. Now let me talk about fiscal 2023 second quarter results. We recorded record second quarter revenue of $45,300,000 representing growth of 35% year over year.

Speaker 2

We delivered GAAP net income of $4,400,000 for the 2nd quarter and non GAAP net income of $13,100,000 Also, we delivered cash flow from operations of $6,300,000 during the quarter. These stellar Q2 results coupled with our record Q1 results reflect some of our major accomplishments in the 1st 6 months 2023, including being first to market with a multimodal biometric solution to elevate the fight against growing fraud. Beyond just our record revenue and earnings performance in the 1st 6 months of the fiscal year, we have distinguished ourselves as a critical solution In the fight against fraud. So let's dive a bit deeper into our two lines of business, starting with deposits. The 2 major products, Mobile Deposit and Check Product Vendor continue to yield strong revenue growth With deposits revenue increasing 35% year over year, Mobile Deposit continues to gain traction with consumers due to its Check Fraud Defender is a secure cloud based consortium that strengthens the financial institutions' existing fraud prevention.

Speaker 2

Check Fraud Defender uses proprietary image analysis to extract data from stolen checks, Account screens and identification documents sold in criminal channels to provide alerts of potentially compromised accounts. As it is a consortium based, relevant data is shared with all participating banks, making it a powerful offering. We believe Checkfront Defender will continue to grow its growth trajectory and be a growth driver for our deposits business for years to come.

Speaker 3

Before we move on to

Speaker 2

our Identity business, I'd like to provide a quick update on the USAA litigation situation. While Mitek is not a party to any of the USAA lawsuits, we continue to pursue our declaratory judgment action against USAA To prove that our products do not infringe the 4 auto capture patents at issue in the USAA lawsuits As we look to provide support to our banking clients, our declaratory judgment action is currently on appeal To the U. S. Court of Appeals for the Federal Circuit after the District Court found it did not possess jurisdiction to adjudicate our claims. Oral arguments on our appeal are expected late this year or early next year.

Speaker 2

Along with our efforts, There have been some positive developments in the matters related to USAA as the U. S. Patent Trial and Appeal Board, The PTAB has invalidated 5 of the USAA patents that they have been relying on to sue various financial institutions, 2 of which are related to auto capture. We expect the PTAB to invalidate more of USAA's patents in the coming months As they continue their review of additional USAA patents, including one additional USAA patent related to AutoCapture. We also intend to continuously to continue to vigorously prosecute our case as Mitek invented all of its core technology And we believe our products do not infringe on any USAA packs.

Speaker 2

Turning our focus now to the Identity line of business. We're pleased to report a robust 35% year over year growth in identity revenue, which is a remarkable achievement considering the challenging macroeconomic Conditions we face. This outstanding performance underscores the increasing importance of identity verification in today's digital landscape. In the era of ongoing digital transformation, organizations are constantly striving to deliver seamless and secure online experiences for their customers. Identity verification has emerged as a crucial component of every customer interaction and journey.

Speaker 2

It plays a pivotal role in ensuring regulatory compliance, Detecting and preventing attempted impersonation fraud and enhancing the success rate of customers onboarding with minimal friction. We have positioned ourselves strategically to meet the growing demands of our customers, whether it's at the point of initial customer onboarding Or during the reverification and authentication process for returning customers, MyVIP, our leading identity verification and authentication Leverages the power of AI with multimodal biometrics to provide our customers consumers with the utmost convenience And highest levels of security to meet the growing demand of the digital savvy consumer. Mitek's verified identity platform, My VIP is a fully integrated identity platform that leverages our IP in biometrics, capture, Computer vision and data intelligence and presented to the customer via a low code implementation platform. In the first half of fiscal twenty twenty We added mypass to its capabilities. Mypass is the industry's 1st multimodal biometric solution for continuous identity authentication.

Speaker 2

MyPass combines voice and face recognition using sophisticated live use detection technology to defend against digital and deep fake attacks in real time. With the onslaught of machine driven fraud attacks, voice and face biometrics used together with built in liveness checks Are becoming the strongest and most effortless means to authenticate someone's identity online. Combining the 2 biometrics is a significant security improvement beyond the face recognition only system many use today. Authenticating digital identities with mypass also reduces the risk associated with on device stored biometrics, which can easily be compromised, shared between people or overwritten with a simple passcode. Mypass is delivered via a Developer friendly SDK, which makes it easy to embed into a variety of customer use cases, such as simple account information updates, password resets, Device rebinding and high risk financial transactions.

Speaker 2

Experts estimate that more than 80% of hacking breaches Involve the use of stolen passwords or credentials, fraud that can cost a large company 1,000,000 of dollars a year. By moving to a more secure passwordless approach to digital account authentication, companies can both increase customer loyalty and reduce their own risk for identity theft and account takeover attacks. Staying with account takeover, And highlighting our tremendous work in biometrics, Gartner predicts that in 2023, 20% of successful Takeover attacks will leverage Deepfakes. Mitek's latest innovation, ID. Live Face Plus addresses the growing security threat Hosted to the institutions and consumers by deepfakes and digital injection attacks.

Speaker 2

IvyLive Face Plus adds detection of digital Objection attacks where fraudsters use hardware and software hacks to substitute a biometric capture with a fake digital image. It is the 1st known product to help ensure proper self capture on both desktop and mobile devices with a frictionless approach That eliminates user abandonment caused by complicated security checks. As deepfakes have become more realistic and easier to produce, Injection attacks are an increasingly common method used to smooth biometrics. The innovative approach to combating peak face Utilized by ID LiveBase Plus will help our customers stay ahead of this increasing problem. Also in the first half of the fiscal year, a packet was awarded to Mitek's IDR and D subsidiary for their novel approach To securing virtual assistant and chatbot sessions on a mobile device.

Speaker 2

The method involves the collection Multiple biometrics throughout a chat session without adding prompts or tasks for the user. It provides a unique method To enable an intelligent chatbot to continuously confirm a person's identity and that they are in fact a live human being, while maintaining a natural user experience. The timing of the patent award coincides with the launch and rise of the popularity of ChatGPT, A chatbot prototype that demonstrates dramatic advancements in conversational intelligence. The technology opens the door to a variety New applications where interactive human to machine collaboration is productive. From a large multinational banks to government agencies, Our customers and partners use our identity verification solutions to enable effortless and safe experiences for new and returning consumers.

Speaker 2

To quote our customer, Virgin Money, who are a proud digital first bank with a clear ambition to disrupt the status quo, It is of paramount importance that Virgin Money platform and the digital experiences the bank's customers encounter are world class. We want our smart digital tools to put our customers in control and with Mitek, the journey helps our customers to Successfully passed KYC where traditional name address checks have failed. We at Mitek are proud of the positive impact we are making and we remain dedicated to advancing our technologies and delivering even greater value To our customers in the fight against digital identity fraud. During the first half of the year, our marketing efforts were Concentrated on building momentum, we bolstered our digital presence and increased brand visibility through a series of global events, Resulting in thousands of meaningful customer engagements. Our sales and marketing teams are not simply product sellers.

Speaker 2

They are dedicated to cultivating relationships and crafting We firmly believe that this approach sets Mitek apart

Speaker 4

and is a

Speaker 2

vital element of our future ready strategy. As we continue to innovate and adapt the evolving digital landscape, our Identity line of business remains a cornerstone of our success. We are committed to delivering solutions that exceed our customers' expectations in an increasingly interconnected and security conscious world. Looking ahead, I want to acknowledge the difficult macroeconomic environment and its impact on new enterprise spending. While we have delivered significant growth in the first half of our fiscal year, due to the timing of large deals, we do not expect the same type of growth To continue in the second half of our fiscal year, we along with many other enterprise software companies are seeing customers Our pipeline extends sales cycles and delaying purchases in an effort to control expenses in this challenging environment.

Speaker 2

While this posture continues, we will experience slower growth than we have, but we remain well positioned to capitalize On our new business pipeline and the significant market opportunity ahead of us once conditions begin to improve. Having said all of that, We are reiterating our annual guidance, which calls for revenue growth of 18% year over year at the midpoint And for the non GAAP operating margin in a range of 30% to 31% for the full fiscal year. Now I'll turn the call over to Fuad to discuss the financial results in more detail. Following Fuad's remarks, we'll open the call to questions.

Speaker 4

Fuad, please go ahead. Thanks, Lex, and thank you, everyone, for joining us this afternoon. I'll start with our Q2 of fiscal 2023 revenue and operating results. For the Q2 of fiscal 'twenty three, Mitek generated $45,300,000 of revenue, a 35% increase year over year. Software and hardware revenue was $25,300,000 up 39% year over year.

Speaker 4

The increase in software and hardware revenue is primarily due to the growing contribution of IDR and D and continuing mobile deposit reorders. As we have previously noted, IDR and D is transactional in nature and is part of our identity business. However, since it is offered on premise, we put that revenue into Services and other revenue, which includes transactional SaaS revenue, maintenance and professional services, was $20,100,000 for the quarter, up 31% year over year. Moreover, our transactional SaaS revenue increased 33% year over year to $13,900,000 Driving this growth in the transactional SaaS revenue was increased mobile verify volume as well as The addition of HUYA revenue. Deposit revenue for the 2nd quarter increased 35% year over year $28,800,000 driven by mobile deposit reorders.

Speaker 4

Identity revenue also increased 35% year over year $16,600,000 driven by the addition of Reju SaaS revenue and strong contribution from ID R and D and Mobile Verify products. We delivered software and hardware gross margin of 99% for the quarter. Gross margin on services and other revenue was 72% And total gross margin for the quarter was 87%, consistent with gross margins in the last year of the second quarter. Total GAAP operating expenses, including concept revenue, were $37,400,000 compared to $30,800,000 in Q2 of last year. This increase is due to the investments to grow our identity business and the additional costs associated with the acquisitions of Gilead as well as higher G and A expenses Related to enhancing our back office systems and teams.

Speaker 4

Sales and marketing expenses for the quarter were 9.6 $1,000,000 compared with $9,200,000 a year ago. R and D expenses were $7,500,000 compared to $7,100,000 last year And our G and A expenses were $10,100,000 compared to $6,100,000 a year ago. The increase in G and A expense is primarily the result of onetime fees associated with our delayed filings, addition of resources to our corporate services team to accommodate a rapidly scaling business And certain one time restructuring and executive separation expenses. GAAP net income for the quarter was $4,400,000 or income of $0.10 per diluted share. Our diluted share count was 45,600,000 compared to 46,100,000

Speaker 2

a year

Speaker 4

ago. Turning to non GAAP results. Non GAAP net income for Q2 of fiscal 'twenty three was $13,100,000 or $0.29 per diluted share Compared to a non GAAP net income of $9,700,000 or $0.21 per share for the same period last year. We believe non GAAP net income provides a useful measure of company's operating profitability and cash flow by excluding amortization and acquisition related costs, Stock compensation expense, one time or non recurring litigation expenses, amortization of debt discounts and issuance costs, Resruption costs and the related tax impacts of those items. A reconciliation of GAAP to non GAAP presentation is provided in our press release issued earlier today.

Speaker 4

Now turning to the balance sheet. We generated 6 point $3,000,000 in cash flow from operations during the 2nd quarter, bringing our total cash and investments to $114,500,000 as of March 31, 2023. For the 1st 6 months of fiscal 2023, which includes the record first quarter results we reported earlier this month, We report $91,000,000 of revenue, a 38% increase year over year. Deposits revenue for the 1st 6 months increased 47% year over year to $59,000,000 driven by solid mobile deposits Re orders and signing of a large multiyear contract in the Q1 has locked in favorable pricing for us over 4 years. Due to the unique terms of this contract, we recognize additional license revenue related to the future periods of approximately $7,000,000 in the Q1.

Speaker 4

IDENYJU revenue for the 1st 6 months increased 24% year over year to 32,000,000 Driven by addition of Huya revenue and strong contribution from ID, R and D and Mobile Verify products. Moving on to guidance. As Max noted, we are reiterating the fiscal 2023 guidance we provided earlier this month. We expect revenue for the fiscal year ending September 30, 2023, to be in the range of $169,000,000 to $171,000,000 An increase of approximately 18% year over year from the midpoint of the guidance range. In addition, we expect full year fiscal 2023 non GAAP operating margin to be in the range of 30% to 31%.

Speaker 4

In closing, we are pleased with the 2nd quarter results, which included a record second quarter revenue as well as solid operating margins. Operator, that concludes our prepared remarks. Please open the line for questions.

Operator

Thank you. We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jake Roberts with William Blair. Please go ahead.

Speaker 5

Hey, thanks for taking the questions and congrats on the results. I know the check business is lumpy and you expect growth to decelerate through the year just given the timing of deals, The growth in that segment has been very durable. If you look at stack rank growth drivers, what would be the highest contributors The conversion of more checks to mobile deposit, check fraud defender layering deeper into the model or price increases starting to be more meaningful. Just would love to kind of Really understand what's driving growth in that segment this year.

Speaker 2

Sure, Jake. I would stack price from highest impact to lowest Mobile check deposit adoption. So the online banking apps on your phone And use of that for depositing checks instead of going down the branch, number 1. Number 2, check private tender and number 3, Price increases in that order. I think over time, check for the vendor as it becomes a more significant part of our business, Certainly has an opportunity to move up that lead table.

Speaker 5

Okay, helpful. And then given these results For the quarter ended March, could you talk more about when you started to really feel the impact from the macro on those transactional volumes? Did you actually see any headwinds in Q2? Or did that become a lot more pronounced in Q3 and Q4? And then from your comments, it seems like ID verification may be getting more impacted The Mobile Deposit, but would love to kind of hear that the puts and takes that you're seeing in each business as it relates to the macro?

Speaker 2

Yes. I think we've probably seen it going all the way back to you may not see it in the numbers, but the revenue numbers, but we've seen it probably going all the way back to November, December of last year, just the nature of How revenue gets formed in each of those businesses being so different, there's kind of a lag in The way some of the contracts come up for deposits, so it's not as pronounced there. But I think Those are contextualization I would give you for both lines of business.

Speaker 5

Great. Sounds good. Thanks for taking my questions.

Speaker 2

You got it, Jake.

Operator

Your next question comes from Mike Grondahl with Northland Securities, please go ahead.

Speaker 3

Hey, guys. Thanks. Mobile ID And mobile deposit both grew 35%. Is there really anything to call out for either of those, So high growth rates sort of what drove it or anything one time?

Speaker 4

Yes. I wouldn't say

Speaker 2

there's anything one time. It seems like Q2 FY 'twenty three was the quarter of 35%, right? 35% growth in both lines of business and then overall For the company,

Speaker 4

in the Noble Identity

Speaker 2

business, I would tell you, the Verify business, the Identity business, we definitely had greater impact in the revenue from long time existing That had increased volumes and increased usage. I think that was a contributor there for sure. We have The banks that had some real big successful Marketing campaigns for acquiring new customers. And then in Mobile Deposit, we had I wouldn't call it an outlier. We had a couple of big contracts.

Speaker 2

But every quarter, we typically have a The team has just done a wonderful job of smoothing out as best as possible the big contracts that come in that way.

Speaker 3

Got it. And then going back to the March quarter, you had that Contract extension with the large reseller and they got a 4 year price lock. Can you talk about the price increase that you got there? And are there other large Retailers where you think you could get a similar price increase?

Speaker 2

Yes, I'd remind you, Mike, We've been on the I don't call it just it's more a principled approach to pricing, right? If we kind of go back to 4 years ago When the team undertook this endeavor, we primarily sell the Global Deposit solution through a channel resellers and the historical nature of those relationships was very inconsistent And it was hard to it was kind of hard to see a through line as to how pricing works. And as we've adjusted pricing in those contracts that come up,

Speaker 4

We've done it on a

Speaker 2

much more principled approach and that's allowed us in many instances to increase pricing. What you saw in the Q1 number and Claude reiterated today in the prepared remarks Kind of outside contract that we ended up with, we're very proud to have. It was the reengineering of a long standing That had probably been not one of our best. And so I'm not going to go into any of the specifics other than to say we got them to what we think The general market for our product and our resellers is and Yes, that's good for the market and we think it's good for the partner and certainly it's good for Mitek and our shareholders.

Speaker 3

Got it. Are there other large retailers you got to play catch up on?

Speaker 2

We're 4 years into this. There may be 1 or 2 left, but I don't think you'd I wouldn't model in anything like as extreme as what we saw in the Q1 results.

Speaker 3

Got it. And lastly, Max, now that you're almost caught up With your filing, what two things are you going to be most focused on?

Speaker 2

I'm going to Disney World. Yes. Just kidding around there. Yes, certainly, we're coming up on the end of our fiscal year. So not only do we want to get current, but we want to finish our Y 'twenty three strong, so we're focused on that, focused on getting our annual operating plan in place.

Speaker 2

And then we're going to be focused on kicking off, right, getting everybody armed, aimed and excited about The opportunity that's before us and the adjustments and the improvements that we have to make for FY 'twenty four.

Speaker 3

Got it. Okay. Hey, thanks guys.

Operator

Our next question comes from Allen Klee with Maxim Group. Please go ahead.

Speaker 6

Yes, good afternoon. In Identity, Strong growth. Trying to understand to what degree I remember that Maybe it was a year or 2 ago, there was 1 quarter where a marketing campaign of a bank ended and it had some impact. Is there anything of that the strength is maybe not recurring because there's kind of a shorter term contract That might be ending or do you just think that you're just being a little cautious on macro overall? Thank you.

Speaker 2

Sure, Helen. Well, I think 2 things. And first, the example you're using, I think it was A little over 12 months ago, we had a one of our partners supports a gaming customer, online gaming. And the gaming company introduced a new game and there was an age verification requirement. We use that as an example of some of the episodic nature of transaction volumes in our identity business.

Speaker 2

And that was very popular game and you had to verify that you're over 13 years old to be able to play They just weren't going to repeat the next quarter because unless there was a new spectacular blockbuster game. We see that the banking community when they run marketing campaign, I don't think there's anything here to call out. We had strong transaction volumes with the banks as I indicated. I think the other thing that I neglected to indicate is obviously we got the benefit of The HUYA acquisition, so we had the HUYA team with us for the I think it was almost the full quarter on a year over year same store basis comparison. Correct.

Speaker 6

That's helpful. Thank you. And then for your full biometric solution, can you give us an update of Kind of where it stands in terms of where you are in going to the market and How we can think about maybe the sales process and what the size Of those deals could potentially be compared to what you've been doing before? Thank you.

Speaker 2

No problem. So yes, Obviously, you would imagine that MyPath, the multimodal biometric solution, which allows you to use both Responding liveness of both of those biometric attributes, to have a very high assurance, very low friction way Authenticating who's on the other side of that device. And with Aligness, obviously, It's not an AI or a bot or some sort of recording or a replay. But back to your question, That's a very new thing. We announced it at Money 2020 last year.

Speaker 2

It's now in full production and available. We've got a couple of customers for it. We've got even more, not just pipeline, but folks who are testing it and using it To figure out how they're going to insert it into their production environments, hard for me, I think just based on the amount of data we have, Probably hard for me to give you a sense of what we think the average deal size is going to be, but there's a pretty wide swing there as to the place where we can add value. We certainly could find smaller opportunities in midsize businesses where we're going to manage that service For them, maybe in conjunction with MyVIP, and that's going to be something that's maybe $50,000 or €50,000 a year, where we've got some much larger opportunities where this could be not just 100 of 1,000, but 1,000,000 of dollars a year and more oriented towards a true subscription as opposed to a transaction pricing mob. Hopefully, that's helpful, Alan.

Speaker 6

That's great. Thanks. My last question, it sounds like you're doing great on the patent side. What should we from the outside be kind of looking for over the next 6 to 12 months of news flow related to what's going on?

Speaker 4

Yes. There are 2 things

Speaker 2

I would keep an eye open for. The first is the ongoing PTAB rulings. So having that Patent Trade Office rule on the patents that are out there that USAA is using to try Campaign against the banking industry, so more news there. Obviously, we're not involved in that, but we're following And then as we indicated in the prepared remarks, we still have our declaratory judgment action that's on And we do expect over the course of the next 6 months to hear something in that matter.

Speaker 6

Okay, great. Congratulations. Thank you.

Speaker 2

Thanks.

Operator

Our next question comes from Scott Buck with H. C. Wainwright. Please go ahead.

Speaker 7

Good afternoon, guys. Thanks for taking my questions. First one, Max, on the macro, is it just as simple as Folks getting better visibility around what the Fed is going to do and interest rates and what else is out there that Potentially alleviate some of these potential customer concerns.

Speaker 2

Gosh, Scott, I think you're giving me way too much credit To be the global economist here, what we hear from our customers is things are slowing for them, right? We're a B2B company And for B2B2C, I mean, obviously, there's end consumers on the endpoint of the device, but we're mostly going through Those banking institutions are through partners and they're the ones that are seeing loan growth and mortgage refinancing and elocs and Credit card delinquencies, that's where they're seeing the slowdown. Now that's a big part of our business is helping these customers grow their Portfolios and grow their revenues with the broad dimension of where we're playing, where we've been growing, when The economy slows, broad goes up. And so there is, I would call it, silver lining, but there is a positive side to this. It's think that the negative side outweighs the positive

Speaker 7

No, that's fair. I appreciate that color. Second one, if you could talk a little bit about capital allocation. You're starting to build a fair amount of cash back onto the balance sheet here. What are you thinking about in terms of use cases?

Speaker 7

Is M and A back on the table or thinking about paying down some of the debt? What is kind of your thoughts?

Speaker 4

Maybe I'll take that and I'll ask Mac to jump in. I think at this point, The first thing we got to do is kind of get completely current on our filings, right? So before we start thinking about potential M and A Or even stock buyback, I think we have to be current on our filings and we're going to get hopefully, as Max said in his prepared remarks, before the filing, it is unlikely that we committed to NASDAQ, which is October 13. So I think that's Got to be, it has to be and is our priority right now. And then after that, I think then we Do open up for business again, so to speak.

Speaker 4

So I think that's the way I'd say it. But for now, our capital allocation, the way I'm thinking about it is more focused internally, I'll be invest wisely and efficiently to grow the business. Max alluded to the AOP, we're going through that exercise. We're making sure that The capital that we have available that we're allocating that prudently internally and prudently meaning efficiently, right? So right now that's the focus, that outward focus.

Speaker 4

I think that's going to be not until we get ourselves current on the pilots.

Speaker 2

Yes. I think Scott, the only thing I'd add to that is just because of the very favorable terms of that convertible debt, it's hard for me to imagine We would prepay that or pay that down prematurely. Not to say it's impossible, but there's some circumstance that we wouldn't be interested in doing that. But it's Under course and speed current doesn't make any sense.

Speaker 7

Yes. That makes sense guys. I appreciate the color. That's it from me. Congrats again on the results.

Speaker 2

Thanks, Scott. Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference Back over to Todd Kehrli for any closing remarks.

Speaker 1

Thank you, operator, and thank you, everyone, for joining us today. We look forward to updating you again next

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