Digi International (NASDAQ:DGII) Q1 2020 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by and welcome to the Digi International first fiscal quarter 2020 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, CFO Jamie Loch. You may begin.

0:35 Thank you, Lateef. Good afternoon, everyone, and thank you for joining us today to discuss the fiscal 2020 first quarter results of Digi International. Joining me on today's call is Ron Konezny, our president and CEO. Ron will provide his thoughts on our business, and I will follow with the highlights of our financial performance. Following our prepared remarks, we'll take your questions. We issued our earnings release shortly after the market closed. You may obtain a copy through the financial releases section of our investor relations website at digi.com. Some of the statements that we make during this call are considered forward-looking and are subject to significant risks and uncertainties. These statements reflect our expectations about future operating and financial performance and speak only as of today's date. We undertake no obligation to update publicly or revise these forward-looking statements. While we believe the expectations reflected in our forward-looking statements are reasonable, we give no assurance such expectations will be met or that any of our forward-looking statements will prove to be correct.

1:33 For additional information, please refer to the forward-looking statements section in our earnings release today and the risk factor sections of our 2019 Form 10-K and subsequent reports on file with the SEC. Finally, certain of the financial information disclosed on this call includes non-GAAP measures. The information required to be disclosed about these measures, including reconciliations to the most comparable GAAP measures, are included in the earnings release. The earnings release is also an exhibit to a Form 8K that can be accessed through the SEC Filings section of our Investor Relations website. Now, I'll turn the call over to Ron.

2:10 Thank you, Jamie, and welcome to everyone that has joined our call today. We're off to a good start in our fiscal 2020 year, capped by the closing of the Open Gear Acquisition. We welcome OpenGear to the DIGI family. As indicated by the OpenGear acquisition, the growing maturity of our IoT solutions business segment and our annual guidance, DIGI is focused on profitable growth. Because of our low capital requirements and acquisition activities, we've been presenting both GAAP and non-GAAP profitability metrics. The non-GAAP metrics, EBITDA and adjusted EPS, provide our stakeholders with a one-rate view of our operating profitability. Growth will continue to be an imperative will be viewed with a profitability lens for both our organic and inorganic initiatives.

2:56 In that context, I will provide an update on our business segments. Our IoT product and service business segment now includes the results of our OpenGear acquisition. To reflect the integration of OpenGear into Digi and to comply with SEC regulations, we will not be providing standalone results for OpenGear. We are ahead of our new product revenue projections, which we expect to increase from $40 million to $70 million in fiscal 2020, led by our cellular product family and enhanced by new and improved service offerings that complement our products. We continue to experience high win rates on our key accounts and top opportunities with strong performance from our direct sale team. We've commenced deployment of our Smart City project and have a strong funnel built to take the collective experience to other opportunities.

3:44 Both margin improved and operating expenses were well managed to produce strong profitability. We're working hard to improve our channel partnerships to ensure they are supported and enjoy profitable growth while managing inventory levels. With the addition of open gear, we expect fiscal 2020 and our most recent fiscal quarter, second fiscal quarter, excuse me, results to show higher revenue, improved gross margins, and expanded EBITDA margins. Our SmartSense IoT Solutions business experienced subscriber additions closer to both our history and expectations. We added over 3,000 new sites with virtually no subscriber churn during the quarter to end with nearly 67,000 subscribers. We have approximately $15 million in annualized recurring revenue.

4:32 Growth margins improved, reflecting the contribution of higher margins from our growing recurring revenue. We have transitioned nearly all of our customers that were on 2G gateways We continue to progress SmartSense 4.0, which is the destination consolidated mobile web platform. We are adding new sites and expect to transition some existing customers throughout the year. Larger enterprise deals slipped out of the quarter, and we are working hard to compress cycle times to bring value to our customers more quickly. We did not lose many opportunities during the quarter. and we are highly focused on gaining customer confidence and moving quickly to capture ROI. The IoT Solutions business had a modest loss based on lower expected revenues, but we expect growth and a profitable fiscal 2020.

5:23 As indicated last quarter, top line growth will moderate year over year to reflect our focus on building our subscriber count and recurring revenues through bundled offerings. At least a portion of our new customers will elect an operating versus capital pricing model. In any event, Subscriber additions will continue to be a key metric to follow. We expect top and bottom line performance to improve throughout the fiscal year. At the corporate level, we've made progress in our journey to simplify and automate our business model and processes. Software, services, and subscription will continue to be emphasized across our business segment, leading to higher overall annualized recurring revenues. We went live on our CRM ERP system for the entire company in fiscal quarter one, which was an exciting and rewarding accomplishment.

6:13 We now have one database to run the company, and we'll get better at both using the system and making it easier for our customers to do business with Digi. We closed $150 million in attractive debt financing to close the OpenGear acquisition without shareholder dilution. We are in compliance with all of our covenants. We expect to lower our debt position as we generate free cash flow, which will help prepare us for potential future acquisitions. We have more work to do to improve our working capital as inventory and accounts receivables increase to end fiscal Q1. We have process improvement and resource changes in supply chain and finance that we expect will produce quick results. The coronavirus outbreak is serious, and we are monitoring the situation closely.

6:59 We have worked with our China-based resources to ensure their safety and health is protected, including closing our offices temporarily in China. In addition, we are monitoring the impact of the outbreak on our supply chain. While most of our manufacturing is outside of China, many raw materials are sourced in the area. It is unclear what impact the coronavirus will have over time, but we work to minimize its impact on our results. Lastly, we consider DIGI to be sensitive to our environmental impact, our social standing within DIGI and our communities, and to a diverse and independent governance model. We are embarking on both documenting our ESG efforts and pushing Digi to do more. Expect future updates on this key initiative as it's important to all of our shareholders and is increasingly becoming a key investment criteria.

7:48 I will now turn the call over to Jamie for more detail on our financial performance.

7:53 Thanks, Ron, and good afternoon, everyone. Starting with some of the key financial highlights that contributed to the financial results of our fiscal first quarter. Quarter revenue performance was $62.3 million, with adjusted EBITDA performance of $6.4 million, which is 10.3% of revenue. Both of those items are better than the top end range from the last guidance that we provided you. On a per diluted share basis, our adjusted EPS was $0.15 per diluted share, also exceeding our quarterly guidance range, while our GAAP EPS was $0.01 per diluted share, compared to our guidance range of a loss of $0.02 to $0.02 gain per diluted share. Finally, we put our cash to work during our first fiscal quarter with the successful closing of the Open Gear acquisition. We funded this acquisition through approximately $38 million of domestic cash on hand, combined with an additional $110 million in proceeds from our credit facility through our lending partners.

8:51 While we now have net debt position on our balance sheet for the first time in company history, we do expect to generate significant cash during fiscal year 2020. Breaking down the results by business segment, I'll start with our products and services business. The financial impact of OpenGear was not material to the overall performance of the business in the first fiscal quarter. Integration efforts are quickly embedding OpenGear into the IoT products and services business. Standalone OpenGear results will not be presented, and we will stay consistent with segment reporting requirements. IoT products and services revenue increased year-over-year 2.5% in the first fiscal quarter of 2020, to 54.6 million. There are several factors that contributed to the growth. While not material, incremental revenue associated with the open gear acquisition, higher sales from our cellular products, and increased services revenue.

9:41 These increases were partially offset by lower sales of other product offerings compared to the fiscal first quarter of 2019. Our IoT products and services gross margins were 48.8%. compared to 47.6 in fiscal Q1 of 19, an increase of 120 basis points. This increase was driven primarily by incremental margin performance associated with the open gear contribution, increased margins in our services category, product mix, and lower manufacturing costs. Shifting to our IoT solution segment. As Ron mentioned, IoT Solutions is now servicing nearly 67,000 sites. That really continues to be the main focus area for us in that business. Depending on which model customers utilize at the time of purchase, either a capital purchase or an OpEx purchase, one-time revenue experience is variability.

10:33 And that can make year-over-year or even a sequential comparison a bit less intuitive than just looking at revenue. So we continue to focus on adding those sites into the business and growing the annualized recurring revenue. With that site count, our ARR finished at approximately 50% of total solutions revenue for the quarter. We finished the quarter with revenue of $7.7 million, down from the prior year of $9.0 million. The decrease is attributed to less one-time revenue recognized by our site additions than prior year, which was partially offset by the growth in our recurring subscription revenue. During the quarter, our IoT Solutions gross margin was 49.5, up 50 basis points compared to the fiscal first quarter of 2019, which was at 49.0%.

11:19 The main driver is the larger percentage of revenue from recurring compared to one time, and this continues to demonstrate the leverage in our business model as recurring revenues grow in the business segment. To wrap up, I want to touch on a few additional balance sheet items. Our fiscal first quarter cash position ended at $49 million. Our ending AR position landed at $81 million, which is up from approximately $56 million at the end of our fiscal year in September 30, 2019. We had a handful of collections that spilled over in the first part of January. We believe this is the result of customers managing their year-end cash positions combined with the holidays, and we already now have cash in hand on those collections. Our inventory position, which includes the incremental addition of open gear, has increased to $47.3 million, up from our year-end position of approximately $40 million.

12:09 And finally, our ending debt position as of the fiscal first quarter of 2020 is at approximately $107 million, That puts us at a total debt leveraged position of approximately 2.5 and a net consolidated leveraged position of under 2.0, both well within our internal targets. Let's now discuss the upcoming quarter. We expect revenue of 72 to 78 million with adjusted EBITDA of 11 to 13 million. We expect GAAP EPS to be 0.7 to 11 cents per diluted share. while our adjusted non-GAAP EPS to be 29 to 33 cents per diluted share. That quarterly guidance supports no update to our full year guidance that we have previously provided of revenues between 310 and 325 million and adjusted EBITDA of 45 to 50 million. That guidance includes our previous guidance for open year of 45 million in revenue and 15 million in adjusted EBITDA.

13:10 We recognize that the guidance above does have a heavier weight on the back part of the year which is not unexpected. Our newly acquired open gear business has historically had a seasonality that is more weighted to the back half of the calendar year. We also expect similar seasonality in the IoT products and services business and if you combine that with our continued focus from our sales teams on more project based revenue, our year becomes more back end loaded. We are maintaining our non-GAAP EPS guidance of $1.14 to $1.27 per diluted share. However, We are updating our GAAP EPS targets. As we now work through our purchase accounting and our debt position, we now see the impacts on the new amortization associated with the intangible assets created, combined with the interest expense from the credit facility, neither of which were included in our previous guidance. As such, we are moving our EPS guidance to 31 to 41 cents per diluted share.

14:11 That completes our prepared remarks. At this time, Ron and I are pleased to take your questions. Lateef, could you please provide instructions to our callers? Yes, sir. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Again, that's star 1 on your touchtone telephone. Please stand by while we compile the Q&A roster. Our first question comes from Scott Searle of the Roth Capital. Your line is open.

14:44 Hey, good afternoon. Thanks for taking my question. Congratulations on the Open Gear transaction closing. Hey, Ron and Jamie, just to follow up on your comments and the guidance into the March quarter, it does seem even more back-end loaded. I was hoping we could work through a little bit more details and qualitative comments in terms of how you're expecting an Open Gear to ramp itself up. It's more of a seasonal business. Is there anything else that's really changed on the margin? And is the coronavirus and any sort of impact kind of factored into that seasonal impact as well, and then I had another follow-up.

15:16 Yeah, I'll just make some comments, and then maybe Jamie can offer any additions as well. You know, historically, Open Gear has had a ramp. They have been growing, and they ramp throughout the year sequentially, so we think that will continue as well inside of Digi, so we have their revenue ramping. And we also, we knew that first quarter was going to be a lighter quarter for us, so we're seeing the ramp continue based off that quarter. We did a little bit better than we thought we would. initially, but we do see both the Digi IoT business as well as solutions ramping throughout the fiscal year as well. So you've got three entities that we're expecting sequential quarterly improvement. On the coronavirus, you know, right now we haven't felt any specific impact in terms of delivering products and services.

16:03 We do have some suppliers in China in particular that have been told to stay home and not go to office for a week or two. and that's not going to have any material impact on us but I don't think any of us know how serious this will get and if there will be any continued extensions of the Chinese New Year holiday. If the extensions go long enough then we certainly get worried and so that's the kind of stuff we're monitoring very closely. We don't generate a ton of revenue from China but we are dependent on them from a supply chain perspective.

16:35 And if I could, Ron, just follow up on open gear, maybe a little bit more granularity I think it's heavily skewed towards a data center, but there's a lot of branch office built into there as well. I was wondering if you could give us a little bit of color in terms of the demand trends that you're seeing right now, both from an end market standpoint and a geographic standpoint, and ultimately what is the growth rate in the market here for out-of-band solutions? Thanks.

17:00 Those are good questions. What OpenGear has experienced, they've really started off with strong results in what we call core data centers. and the growth of the edge has really outpaced the growth of core data centers. For a lot of people, we tend to think of data centers as being the hyperscalers like Amazon and Google and Facebook. But there's a lot of investment going on across various industries in both cloud as well as hybrid cloud and increasingly edge deployments. More and more companies are looking to have intelligence closer to where activities are being generated in reducing latency and improving responsiveness of their solutions. So we expect those secular trends to continue.

17:48 We do believe up in here their growth rate, which has been in double digits, is outpacing the market's growth rate for Audubon, which has been estimated to be 7% to 9%. So we do think that they've been taking share. Great. Thank you. Thank you. Our next question comes from Anthony Stas of Craig Hallam. Your line is open.

18:15 Hey, guys. Great job on the gross margins. I'm curious, maybe for Jamie, if you think there's a shot in fiscal 20 on a quarterly basis that you could cross over that 50% mark, and maybe a little bit more detail on what drove the strength on the gross margin side in December, then I have a couple of follow-ups.

18:34 Yeah. Thanks, Tony. I think Margin improvement is something that we've kept an eye on. It's nice to see that flow through. I think one of the risks on crossing over that threshold at an aggregated level, and it sounds funny to say that it's a risk, but depending on that mix in the solutions business, if there's a lot of capital purchasing that takes place, those equipment margins will spike up a revenue number, and those come sub-50 sometimes, and so that could... placed some pressure there. If it's more OpEx dependent, then I think we would have a better chance. I think we continue to see the margin improvement activities that we're taking on the products and services side. We have good mix.

19:22 We are seeing good cost actions continuing to flow through, especially as we moved our manufacturing to third parties. And so it is definitely something that I think is in eyeshot, but probably a little too early for me to give you a firm commitment on, but I do think it's a possibility.

19:39 Okay, thanks for that. And then, Ron, you know, I know you've only had OpenGear under your belt for about a month. I'm just curious what kind of cross-sell opportunities you're seeing. Also, if there's any kind of cost of goods synergies or best practices that you folks are learning from the OpenGear experience team, and then also, I didn't hear much talk about the legacy product strip. I'm just curious if that's expected to be down sequentially for March.

20:02 Yeah, those are all really good questions. We're off to a really fast start with the integration of the OpenGear team. And again, a lot of it is because we share some DNA with Digi, with OpenGear, and with Accelerated. So culturally, it's been a really good fit. We absolutely are learning things from OpenGear and how they do with channel, how they go to market, how they focus on their customers. And we have identified some great opportunities to do some account mapping. There are several customers where they've been invited from an out-of-band perspective and those same customers, many times retail, are looking for business continuity. So we think there's going to be some opportunities to really collaborate between the two on the go-to-market as well as we have been working to consolidate our supply chain operations in terms of We've established a strategic sourcing group for that very purpose. So we do think there's opportunity for us to enhance our cost of goods and hopefully continue to capture that in gross margin percentage.

21:05 We're also working closely with our contract manufacturer strategy to make sure we get good spend and low transformation rates there.

21:14 Okay, then last question. on the IoT Solutions Group being down sequentially in the December quarter. I'd love to hear just a little bit more on why that happened, and then do you expect that group to be up, flat, or down sequentially in the March quarter?

21:29 Yeah, we had some nice subscriber additions, so we were happy with the subscriber additions. The mix of the subscriber additions didn't have quite as much one-time revenue up front. We had a good chunk of those that shows the bundled model, which, of course, you know, depresses your top-line revenue. even though, again, it builds nice subscribers in ARR. We do expect sequential improvement, not only in FP2 but throughout the year. We have some larger enterprise deals, in particular in the food segment that we expected to have closed and they slipped into future quarters. So as I mentioned in my comments, we don't feel like we are losing opportunities as much as we're not getting them to move more quickly and making sure they understand the ROI. Great. Thank you.

22:17 Thank you. Our next question comes from Mike Walkley of Canaccord Genuity. Your line is open.

22:25 Great. Thanks. Ron, just build on that last question. As we think about the IoT solutions business, I know it can be lumpy depending on whether the customers buy up front or not, but is there another way we can think about maybe how to track the health and growth of the businesses or is a site addition, do you think $3,000 to $4,000 a quarter kind of a good run rate, or do you think some of these large projects that you're bidding on that you should see bigger site additions throughout the year in terms of sequential site addition growth?

22:55 Yeah, Mike, great question. We are really focused on that subscriber count because we think it's closely tied to annualized recurring revenue. It's a high margin portion, and most investors will look at the margin on that Recurring run rate business that both is growing and we're retaining and keeping customers happy. 3,000 to 4,000 site ads have been something we've publicly commented as our target, and I think we can go further in certain periods when we get larger enterprise deals that complement that sort of run rate business.

23:34 Great. Thank you. And just going back to the stronger seasonality in the back half of the year, thanks for sharing kind of the open-gear seasonality. Is part of the seasonality, too, some of these smart city potential deals in the pipeline? Maybe you can comment on the one how it's rolling out. Is that more back half weighted? And do you think, given your pipeline, you might have some others maybe that add to that back half of the year revenue trajectory?

23:58 Yeah, that's another good question. And the first large smart city and a number of other people.

24:28 Last question for me, and I'll pass it on to Jamie. Just a little housekeeping. Can you just help us maybe with the purchase accounting, just kind of what you're modeling now for the non-gap-to-gap walkthrough for amortization and interest expense?

24:45 So, Mike, thanks. It's a good question. I'm not ready to do that. We are still working through that. As you know, we've got a couple of quarters before we finalize. finalized that. So we've got some prelim numbers that are on the book based on a first pass on the valuation. But we will continue to work through that in terms of our Q2 numbers. And as we finalize that, I'll be a little bit more ready to actually give you the sort of what we project on a permanent go-forward basis. But right now, it's awfully early in the purchase accounting cycle.

25:21 Okay, understood. But thanks for the updated non-GAAP EPS guidance. Good luck with the year and thanks for my question. Thanks, Mike. Thank you. Our next question comes from Jason Smith of Lake Street. Your line is open.

25:38 Hey guys, thanks for taking my questions. Just want to follow up on some of the previous questions on some of the deals and the IoT solutions that slipped out of the December quarter. Curious if you could just quantify how much revenue that related to and provide some color on why those deals got pushed.

25:58 Yeah, as I mentioned, I think one of our opportunities is to help customers that have not had an opportunity to deploy IoT projects in the past to help them have success. And many times we're helping getting them trained, and then they're on their own for a period, and we're going to have to have boots on the ground during those key testing periods to make sure they understand how the system works. If they run into problems, we're there to advocate for them and for the solution. So I think that's the big challenge we have in front of us, the opportunity is to help customers have success initially and gain confidence in the rollout. I don't have specific numbers for you, but the pipeline is very strong. It's the best it's ever been in terms of the opportunities that we're chasing.

26:46 The key for us is to help customers gain the confidence that they can get this ROI quickly as they look at the initial pilots that typically start these enterprise deals.

26:59 Okay, that's helpful. And then just lastly, curious your thoughts on what inventory looks like in the distribution channel.

27:08 It's really around 20 million, which is pretty standard for us, so there's no excessive inventory in the channel, or neither is it necessarily, you know, particularly at a low point. Okay, thanks a lot. That number, of course, excludes any open gear, but open gear generally does not have a ton of inventory on the channel. Thank you. Our next question comes from Greg Burns of Sedoti Income. Please go ahead.

27:38 Good morning or afternoon. When you guided for this quarter, were you assuming any open gear in that guidance?

27:49 No, we did not. We did not. So we had, I think, nine business days of open gear that we had not previously incorporated in. We expected a January 1 close date in our guidance.

28:01 Okay. Then could you let us know just – I assume it's a small number, but how much revenue and did it contribute anything to EPS?

28:11 Yeah, Greg, it is a small number, and because it's embedded in the segment – I think the best I can tell you is that it was not material to the quarter in terms of revenue or in terms of EPS. So it was not material. But because of the way we've got it integrated, right now we wouldn't be able to carve it out because it's cutting into our segment reporting as we've laid it out.

28:38 Okay. And then... In terms of the solutions business, I think you'd mentioned the ARR was about $15 million at the end of the year, at the end of the fourth quarter. Similar type number this quarter, despite the psych growth. Are ARPOs declining, or why aren't we seeing a little bit of sequential growth?

29:02 I think we actually, correct me if I'm wrong, Daniel, but I think we're approaching $15 million. Yeah, so the reality is we're kind of

29:11 We're kind of directionally guiding to that number, Greg, and so we said it's approaching. It's a function of rounding. So when you really break it down, the sites times the ARPU. Now, the ARPU on the incremental sites is down a little bit, as Ron kind of talked about, based on what the site ads were, which you have different ARPUs based on the verticals you're filling. So it's not anything that's artificially low or lower than the acceptable range. It's in the range based on the verticals that we provided and that we actually talked about this pre-call. We do run into this area where you kind of get a nuance of approaching to 15 and it doesn't look like it moved, but if you took it out past that decimal point on 15 million, you'd see that there was actually a pretty decent move on it.

30:01 Yeah, and our pools are generally holding, you know, both on an aggregate level as well as per vertical.

30:06 Okay, thanks. And lastly, what was the rate on the debt?

30:12 It's a tiered structure on the debt based on our leverage position. The coming out was 2.25 plus L, and then as our leverage goes down, it will stagger itself down from there.

30:26 Okay, thank you.

30:27 Yeah. Thank you. Our next question comes from David Gearhart of First Analysis. Your question, please.

30:38 Hi, good afternoon. Thank you for taking my questions. My first question relates to the IoT solution business. I know you've said that it should ramp sequentially as you go through the year. In the past, you said 20%. Last quarter, I think you said 15% plus. Can you give us an update on that estimated growth rate that we should kind of think about as a CAGR?

30:57 Yeah, there's really no update to that estimate from last quarter, kind of consisting with our reiteration of annual guidance. So we do expect, and it is going to vary depending upon what portion of the market elects a bundled or OpEx pricing model. But with the take rates we've assumed, which are going to be more directed towards the food or restaurant segment, that we'll still be able to hold those expectations.

31:27 Got it. And then lastly from me, it's been a while since you've talked about the mature legacy business as part of Digi. Wondering if you could give us an update in terms of where it stands in terms of absolute revenue and the percentage decline so maybe we can model out the drag and kind of when you should see relief from that drag.

31:46 Yeah, it's a really good question because what's happening is the open gear portfolio really fits nicely into that product family. There's also some active dialogue on the sales forces of Digi and OpenGear. What set of products do each sales force want to take advantage of? It's a little bit early, and we want to be very sensitive to how OpenGear runs their business and vice versa. In our model, we assume a 5% to 10% decline in our network business, which is consistent with with previous years. We have done some new product introductions or Anywhere USB and Connect IT, which we think can have the potential to moderate that type of trajectory, but we also are reviewing that with the OpenGear team to make sure we've got a good go-to-market.

32:38 There are a number of Digi customers, for example, that could benefit from the OpenGear solution, and in some cases, as I mentioned earlier, we could complement the OpenGear solution with selling the routers from from our DigiPortfolio.

32:55 Thanks for that, Collin. That's it for me. Thank you. Again, to ask a question, please press star 1 on your touchtone telephone. Again, that's star 1 on your touchtone telephone to ask a question. Our next question comes from the line of Dick Ryan of Doherty. Your line is open.

33:15 Thank you. Just a housekeeping one, Jamie. I'm not sure I caught if you provided the services revenue in the corridor.

33:24 Are you, Dick, for solutions or inside of IoT products and services?

33:29 Inside product and services.

33:32 No, we haven't carved that out. Typically, we report just the segment, and so we reported that, but we didn't call out services standalone. I'll tell you that, you know, we have seen growth in there, and, you know, but we haven't traditionally carved that outside of the segment.

33:55 Okay, thank you. Ron, your ESG documentation, obviously that's kind of an investment focus people are looking at. What are your expectations for your documentation? When will you provide it, and what are you hoping to do there?

34:12 Yes, it's a good question. We're early in this journey, and I think the good news is we have a number of actions and accomplishments that we have already accomplished. implemented or have taken advantage of that are consistent with, I think, some really nice ESG programs. And we expect really on a quarterly basis to give at least some updates on the program and have it documented on our website. And again, a lot of these things, we just moved into a gold lead headquarters. We do have a diverse independent board We're active in many of our communities and with our employees. And so we're going to provide data to back up these things in addition to the spirit of our policies. One of the challenges you've seen from some announcements is they're bold on ambition but lack maybe some data points.

35:10 And one of the objectives we have is to really provide data to back up any statements that we have.

35:17 Okay, great. Thank you. Thank you. At this time, I'd like to turn the call back over to Ron Konezny for closing remarks. Sir?

35:29 Thank you, Lateef. In closing, I want to thank the entire Digi team, our customers, and our partners. We are steadfast in our commitment to profitable growth and to building shareholder value. Thank you and have a good evening. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.