NTGR - NASDAQ

Ladies and gentlemen, thank you for standing by. [Operator Instructions] I would now like to turn the conference over to Erik Bylin. Please go ahead, sir.

Thank you, operator. Good afternoon and welcome to NETGEAR's fourth quarter and full year 2024 financial results conference call. Joining us from the company are Mr. C.J. Prober, CEO; and Mr. Bryan Murray, CFO. The format of the call will start with commentary on the business provided by C.J., followed by a review of the financials for the fourth quarter and full year and guidance for the first quarter of 2025 provided by Bryan. We'll then have time for any questions. If you've not received a copy of today's release, please visit NETGEAR's Investor Relations website at www.netgear.com. Before we begin the formal remarks, we advise you that today's conference call contains forward-looking statements. Forward-looking statements include statements regarding expected revenue, operating margins, tax expense, expenses and future business outlook. Actual results or trends could differ materially from those contemplated by these forward-looking statements. For more information, please refer to the risk factors discussed in NETGEAR's periodic filings with the SEC, including the most recent Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today and NETGEAR undertakes no obligation to update these statements as a result of new information or future events, except as required by law. In addition, several non-GAAP financial measures will be mentioned on this call. A reconciliation of the non-GAAP to GAAP measures can be found in today's press release on our Investor Relations website. At this time, I would now like to turn the call over to C.J.

Thanks, Erik, and thank you all for joining our call. Today, I'm going to cover the following topics: a recap of 2024, our Q4 highlights, context and impact of our Q1 restructuring and high-level thoughts on our 2025 plans. Later, Bryan will recap financials for the year and quarter as well as our Q1 outlook. I just passed my 1-year anniversary with NETGEAR. And I'm thrilled with the progress we've made over the past year. I'm particularly proud of our team's adaptability given we implemented significant changes in three main areas: our organization, our operating model and our strategy. These changes set us up to achieve our long-term goals. And we've been able to deliver on the business while evolving for the future. On the organization front, we restructured NETGEAR to bring more focus and leadership to our biggest market and growth opportunities. Most notably, we brought in new leadership and capabilities dedicated to our B2B segment, which we call NETGEAR for Business or NFB, a new President, commercial leader, channel leader, product leader and UX leader, to name a few. These established leaders continue to attract great talent at a time when we're seeing significant disruption at other companies in the industry. We also revamped our values and shifted the company's orientation from short-term results to long-term value creation. Other newly hired executives in our legal, strategy, people, corporate development and finance teams are inspiring the rest of our organization to dare to transform, which is our most notable new value. Operationally, after I completed a listening tour in the first quarter, we began taking immediate action to remedy near-term challenges facing NETGEAR. Our first order of business was to eliminate a year's long overhang of excess channel inventory that remained from COVID-driven supply shortages. We were able to accomplish this within one quarter. And that has resulted in cleaner, more efficient operation where we're able to match sell-in with sell-through each quarter. We quickly realized the benefits of this destocking, which can be seen in the lowest DSOs we've had in over seven years with receivables down approximately $29 million or 16% year-over-year. Alongside this effort, we drove an accelerated effort to lower our finished goods inventory and made great inroads to reach our objective of three months of supply, reducing inventory by approximately $86 million or 35% from the prior year. Aside from specific supply challenges related to certain long lead time items, the team has done an outstanding job delivering to demand in this much streamlined operating model that has resulted in consistently strong cash flow generation. In September, we announced an important settlement in a patent dispute with TP-Link. This settlement was a clear validation of our intellectual property and added more than $100 million in cash to our balance sheet. Since then, the government scrutiny of TP-Link as a national security risk has been exposed by Bloomberg and the Wall Street Journal, raising questions about TP-Link's ability to continue to participate in the U.S. market. We are monitoring this situation very closely. Our strong cash position enabled us to buy back over $33 million in stock at an average price of just under $16 per share, representing over a 40% discount to pricing entering this week. Our $409 million in cash and equivalents, which is up $125 million in 2024, serves as a tremendous foundation to pursue the key prongs of our capital allocation and long-term growth strategies, both of which we expect to drive long-term value for investors. On the strategic front, we developed a new North Star for NETGEAR rooted in powering extraordinary experiences. Early in the year, we implemented a significant shift in our home networking strategy focused on product simplification and the impact has been quite favorable. For NFB, we identified some critical resource gaps on the go-to-market side and invested to close those gaps in the second half of the year. More broadly, we completed a thorough 3-year strategic review that clarifies our investment priorities and innovation agenda as we enter the next phase of our transformation. Our focus across all our businesses is on driving differentiation via software and growing our recurring revenue. Now turning to our Q4 highlights. Our strong execution led to another quarter where we surpassed the high end of our guidance range for revenue and operating margin. We also had another strong quarter of cash generation, bolstered by a decrease in DSOs, enabling $13 million of cash to be added to the balance sheet. And we repurchased almost $11 million of shares on top of that. Our recurring revenue grew 25% year-over-year. And we exited 2024 with almost $35 million in annual recurring revenue. This acceleration is attributed to the simplification of our Armor subscription service, value proposition and the launch of our Armor Plus tier last quarter. In Pro AV, we built on the tremendous momentum we have by delivering another record quarter of end-user sales, launching Engage 2.0 and adding almost 50 new manufacturing partners for a total of more than 370. One of our new partners on the broadcast side is Nvidia. Since their acquisition of Mellanox, their focus has been on AI networks, opening the door for us to be one of their managed switch solution providers for the broadcast market. We also made great progress evolving our Insight platform that powers our enterprise WiFi deployments. In Q4, we launched a significant update that enables cloud management for our managed switches and cloud APIs for our integration partners. Both improvements have been long-time requests for our partners and are critical for us to expand our share in this large and growing market. These innovations in Armor, Insight and Engage are great examples of how we're innovating with software. And this momentum will provide a solid foundation for our plans to accelerate these efforts in 2025. In our mobile business, the M7 Pro that was launched at the end of Q3 has been very well received by customers. In Q4, a similar product was launched in Australia in partnership with Telstra. These products set the bar for performance as the first mobile hotspots that combine 5G and WiFi 7. While we drove considerable change in the organization in 2024, shedding old habits and building new muscles, we felt there was a novel opportunity to implement a significant restructuring to further propel our success. This was very much implemented from a position of strength. So I'd like to take a moment to provide the context for this. After completing our 3-year strategic plan, we shifted to creating a detailed annual operating plan for 2025. As part of this process, we wanted to ensure we were set up for success coming into the year. We embraced our dare to transform value and planned a restructuring aimed at achieving the following goals. Funding our investment priorities, primarily focused on our B2B business, reducing our loss position in 2025 and putting us on an accelerated path to return to profitability, targeting cost reductions in businesses that would be a drag on profitability in 2025, reorganizing into a flatter and more efficient organization by reducing layers of management and increasing span of control and unlocking our ability to transform key functions more quickly. All of these goals were achieved with the restructuring we implemented in mid-January, which impacted approximately 50 team members. And when combined with other cost cuts, resulted in a reduction of over $20 million in baseline annual operating expenses. While changes that impact people are always difficult, this restructuring is being well received by our global team. And we're moving forward on building the future with urgency. We expect to redeploy these savings back into the business and invest in our highest opportunities for profitable growth, most of which are in our NFB business this year. As part of these changes, we elevated Graeme McLindin to lead a newly created business unit focused on our mobility products. And we're recruiting for a new leader for our home networking business and a company-wide Chief Technology Officer to further accelerate our technology transformation. Going forward, we plan to report the results of each of our three business units NETGEAR for Business, Mobile and home networking. And we plan to share profitability metrics for each of these businesses given their financial profiles vary quite significantly. For 2025, while we plan to limit our formal guidance to quarterly numbers for the foreseeable future, we remain steadfast on our plans to grow net revenue, expand gross margins and significantly reduce our loss position this year. We expect to deliver on these goals while investing in long-term value creation. Our NFB business will receive most of our incremental investments for the year. And we will be focused on in-sourcing our software capabilities, expanding our product portfolio and most importantly, building a true B2B go-to-market capability that will allow us to grow our share in the sizable AV and enterprise WiFi markets we are disrupting. One unexpected headwind that we expect to impact us in Q1 is short-term supply constraints for certain Pro AV managed switch products. Keeping up with our increasing demand for our Pro AV products has been a challenge given the long lead times of certain components and a key ODM partner has had some operational challenges impacting their ability to deliver on their commitments. While these are being addressed, we expect to an undership in Q1, leading to a more muted top line guidance for NFB this quarter. Despite these short-term supply constraints, we expect double-digit top line growth for our NFB segment this year. In the first few quarters of 2025, the top line of our Mobile view is being impacted by our legacy focus on the premium segment of the market. Like our home networking business, we're transforming our product portfolio to a good, better, best line-up that will address a broader part of the market. We expect these products to launch in the second half of the year with a compelling new companion app that will simplify and streamline the user experience. With the market stabilizing for our home networking products, we're cautiously optimistic about this coming year. If the regulatory scrutiny facing companies affiliated with the PRC were to materialize, we'd expect a significant positive impact to this business segment. Throughout 2025, we will continue to execute on the balanced capital allocation strategy we outlined last quarter. Our priorities remain on organic investments and returning capital to shareholders as opportunistic buyers of our stock at a minimum to cover dilution from our stock issuances. We are exploring acquisition opportunities and remain committed to being ultra-disciplined when evaluating ways to inorganically accelerate our transformation. So in summary, our transformation is working. We had a great 2024, a strong Q4. We implemented a restructuring in January to position ourselves even better against our 2025 goals. And we plan to carry all this momentum forward through 2025. For this year, we expect to grow net revenue, expand gross margins and significantly reduce our loss position. Longer term, we remain focused on driving growth, profitability and most importantly, shareholder value creation. I could not be more excited about what we've accomplished and where we're going. And with that, I'll hand it off to Bryan.

Thank you, C.J., and thank you, everyone, for joining today's call. We once again delivered both revenue and operating margin above the high end of our guidance range. These results were driven by strong end-user demand for products across both sides of the business, with our Pro AV managed switch products driving a momentum on the NFB side and further penetration of our broader WiFi 7 portfolio picking up momentum for our CHP business. For the quarter ended December 31, 2024, revenue was above the high end of our guidance range at $182.4 million, down 0.2% on a sequential basis and down 3.3% year-over-year. In addition, with strong working capital management in Q4, we generated approximately $19 million in free cash flow and ended the quarter with nearly $409 million in cash and short-term investments, net of $10.7 million in stock repurchases during the period. As a reminder, in the first half of the year, we took decisive action to accelerate destocking of the channel to better position both sides of the business for more predictable performance aligned to the market trends. We started to reap the benefits of these efforts in the second half of the year with improved linearity in Q4. As such, we lowered DSOs to 80 days, our lowest level in over seven years, down from 88 days in the prior quarter, which was a strong contributor to our cash generation in the quarter and a sign of our strong operational execution. After successfully putting the destocking behind us, we entered the second half of the year well positioned to match sell-in with sell-through at our channel partners. Consequentially, in Q4, the NFB segment grew healthily to $80.8 million in revenue for the fourth quarter, up 2.9% sequentially and up 14.9% year-over-year. Impressively, although we were chasing supply of certain products throughout the quarter and unable to capture the full market potential of this business, our Pro AV managed switch products once again saw end-user demand grow double-digits year-over-year to record levels. Momentum is clearly building behind NFB's growth trajectory, bolstered by the investments we've made in the business. We not only grew our strategic manufacturing partnerships by almost 50. But I'm pleased to share that we have also joined two broadcast alliances, further expanding our reach into this new vertical. In CHP, our premium products outperformed the broader market. And we continue to see great performance for our recently released WiFi 7 offerings that help fill out our good, better, best strategy and are tailored to capitalize on the accelerating WiFi 7 upgrade cycle. We saw further improvement in the U.S. consumer networking market performance in Q4, which experienced a low single-digit contraction year-over-year, outperforming our expectations coming into the quarter. In Q4, the CHP business delivered net revenue of $101.6 million, down 14.2% on a year-over-year basis and down 2.6% sequentially. Service provider revenue was $19.8 million, in line with our expectations. It's clear that the NETGEAR brand is resonating in the market with our recently introduced Nighthawk 5G and WiFi 7 mobile hotspots, Nighthawk WiFi 7 routers and Orbi WiFi 7 mesh products, each performing well and receiving warm customer reviews. With our additional new product introductions planned for release throughout 2025, we expect the full benefits of this new strategy to build over time. We exited the fourth quarter with 556,000 recurring subscribers. And we generated $8.7 million in recurring service revenue in the quarter, a year-over-year increase of 24.5%. We continue to see increased emphasis placed by consumers on cybersecurity protection, privacy and premium support, further substantiating our belief that focusing on increasing our recurring subscriber base is the optimal strategy to add high-margin revenue to the CHP business. For the full year 2024, NETGEAR net revenues were $673.8 million, down 9.1% compared to the prior year ending December 31, 2023. The ongoing uncertain macroeconomic environment, elevated interest rates, significant destocking of the channel and the competitive landscape of the retail consumer networking market impacted our top line and profitability. As a result, we had a full year non-GAAP operating loss of $49.6 million, resulting in non-GAAP operating margin of negative 7.4%. We believe many of these factors will improve in 2025. And combined with how we're positioning NETGEAR to take advantage of the highest growth market opportunities in front of us, we anticipate that they should result in revenue growth, expanded gross margin and meaningful improvement in our profitability in the coming year. From this point on, my discussion points will focus on non-GAAP numbers. The reconciliation from GAAP to non-GAAP is detailed in our earnings release distributed earlier today. Non-GAAP gross margin in the fourth quarter of 2024 was 32.8%, down 220 basis points compared to 35% in the prior year comparable period and up 170 basis points compared to 31.1% in the third quarter of 2024. This marks the second consecutive quarter that we have achieved gross margin above 30%. As we continue to benefit from an improved mix of NFB products, which delivered segment gross margin of 43.9% and improved product mix from our WiFi 7 line-up, along with decreasing impact of older, more expensive inventory, both -- enabling CHP gross margin to increase 300 basis points sequentially to 43.9%. Compared to the prior year period, our profitability in the current period was impacted by higher cost inventory and our use of air freight as we began to operate at leaner inventory levels and chase supply in response to strong demand. Total Q4 non-GAAP operating expenses came in at $63.9 million, up 1% year-over-year and up 15.7% sequentially. As a reminder, non-GAAP operating expenses were lowered in the third quarter by the $10.9 million of legal fee adjustments pertaining to the TP-Link settlement. Our headcount was 655 as of the end of the quarter, up from 638 in Q3. Our non-GAAP R&D expense for the fourth quarter was 10.5% of net revenue as compared to 9.9% of net revenue in the prior year comparable period and 11% of net revenue in the third quarter of 2024. To continue our technology and product leadership, we are committed to continued investment in R&D. I'm pleased that we delivered profitability above the high end of our guidance range, enabled by the strength of NFB, the success of our new product introductions within CHP in recent quarters and improved top line leverage. Our Q4 non-GAAP operating loss was $4.2 million, resulting in a non-GAAP operating margin of negative 2.3%, a decline of 370 basis points compared to the year ago period and a decline of 320 basis points compared to the prior quarter. Our non-GAAP tax expense was $1.2 million in the fourth quarter of 2024. Looking at the bottom line for Q4, we reported non-GAAP net loss of $1.6 million, resulting in a non-GAAP loss of $0.06 on an earnings per share basis. Turning to the balance sheet. We ended the fourth quarter of 2024 with $408.7 million in cash and short-term investments, up $13 million from the prior quarter and equating to $14.27 per share. During the quarter, $21.5 million of cash was provided by operations, better than our expectations, which brings our total cash provided by operations over the trailing 12 months to $164.8 million. We used $2.5 million in purchases of property and equipment during the quarter, which brings our total cash used for capital expenditures over the trailing 12 months to $9 million. The fourth quarter marks our sixth consecutive quarter of positive cash generation. In Q4, we resumed our share repurchase program and spent $10.7 million to repurchase approximately 423,000 shares of NETGEAR common stock at an average price of $25.20 per share. This brings our stock repurchases for the full year 2024 to $33.6 million or $15.96 per share. We have approximately 3.4 million shares reserved in our current authorization. And our fully diluted share count is approximately 28.6 million shares as of the end of the fourth quarter. Now I'll cover our outlook for Q1 2025. We expect to continue to see more predictable performance that is aligned with the market for both of our businesses now that our destocking and inventory reduction actions are substantially completed. However, with NFB, although end-user demand for Pro AV line of managed switches remains strong, we are facing lengthy lead times for supply, which will limit our ability to capture the full top line potential of this growing business. On the CHP side, we are seeing signs of market stability and expect to experience normal seasonality in the retail portion of this business. We expect revenue from the service provider channel to be approximately $15 million in Q1, down on a sequential basis. Accordingly, we expect first quarter net revenue to be in the range of $145 million to $160 million. In the first quarter, we expect to maintain a gross margin performance similar to what we reported in the fourth quarter. However, with our seasonally lower top line, we expect our first quarter GAAP operating margin to be in the range of negative 16.4% to negative 13.4% and non-GAAP operating margin to be in the range of negative 10% to negative 7%. Our GAAP tax expense is expected to be in the range of $1 million to $2 million. And our non-GAAP tax benefit is expected to be in the range of $1.5 million to $0.5 million for the first quarter of 2025. Moving forward, as we orient this business to deliver long-term growth and expand profitability, we will continue to pursue a lean operating model and maintain a focus on investing in the areas of the business with the biggest growth potential. As C.J. mentioned, we enacted a significant restructuring in Q1 that drove cost reductions throughout the organization, yielding a reduction in annual operating expenses of approximately $20 million or over 8% of our annual expense in 2024. This savings will enable roughly the equivalent level of investment into the areas that will drive long-term profitable growth and generate shareholder value, most of which are in our NFB business. Also, in light of the news this week, we think it's important to address the newly contemplated tariffs potentially affecting imports from China, Canada and Mexico at some point head on. We had been anticipating these tariffs for some time and are pleased to report that based on information known to date, our business should not be materially affected. However, this new trade landscape is evolving in real time. And we are staying vigilant to ensure we are aware of new developments to help minimize their impact, if any, on our business going forward. And with that, we can now open up for questions.

Thank you. [Operator Instructions] And your first question comes from the line of [Logan Katzman] with Raymond James. Your line is open.

Hi guys, this is Logan on for Adam. Thanks for taking our question and C.J., congrats on the one year mark. Maybe to start, can you touch a little bit more on the supply constraints you guys are seeing in the NFB side of the business? Maybe if you could give us a little bit more detail on how the situation emerged, and steps you guys are taking to work through it; that would be super helpful? Thank you.

Yes, hi Logan, good to hear from you. Thanks for the congrats on the one year. Yes, this actually started before I joined. And to be clear, it's really in one product category, our managed switches that fuel our Pro AV business. And there was some lower optimism for that category exiting 2023. So that led to some lower forecast. And as we implemented some of our new strategies. The team was able to really accelerate demand for that product category back to historical levels, if not above. And so that led us to chase supply, which is always better to chase supply than it is to chase demand. And we actually didn't think we were going to have an issue. We had - even though we're well within our lead times, these are products that a lot of the components, you're looking at almost a year's lead time. But we're working with an ODM, our key ODM working with our key partners. They're working to pull it forward, and commitments were made that just weren't - didn't materialize. And so that started really in Q3. We thought we'd make it up in Q4. We're on a path to recovery now. It's just going to take Q1, and some of Q2 to get back on track. In fairness to our partner, these were incremental demand signals within lead times. And this is coming at a time we were - our partners have lived through a lot of variability working with NETGEAR. And so we had - some of our historical practices contributed to the situation. But we're on the right trajectory now. We're doing everything we need to. And we'll get back on track in the next quarter or so.

Awesome, that's super helpful. Thank you. And kind of going off that still, how do you see revenue seasonality playing out throughout 2025?

Sure, Logan. Let me just start, I guess, and reiterate some of the movements within the guidance for Q1. Obviously, we just talked about supply constraints on managed switch within NFB, which is obviously going to create a situation where we're shipping in less than, we think the real demand is there. So that's a little bit of a headwind there. The CHP retail market seasonally is down mid-teen percentage-wise. And we're expecting normal seasonality to play out as we're seeing some promise with regards to stability in that market. And then lastly, the service provider revenue at $15 million, as I mentioned in the guidance, as we kind of work to expand to a good, better, best product line-up within our mobile business unit. As we progress through the year, I think that the - if you get to Q2. We'll expect some relief from the supply situation on the managed switch, so that should be favorable. Throughout the year on the CHP side, I would say normal retail seasonality is expected at this point, which is relatively flat when you get to Q2 to Q1. And so service provider revenues for the year, we're probably looking at something closer to $75 million and that's comparative to 2024, of roughly $90 million. And again, that's due to the timing of when our new products will be introduced. But I think all those things factored in there, we'll start to see sequential uptick throughout the year progressively.

Awesome. Yes, super helpful, thank you. Another question, I couldn't help, but notice you sound a little bit more bullish on the TP-Link front here. And obviously, we've seen some headlines and news articles come out around that. Can you just share a little bit, about how you're prepping operationally for a potential ban if that does happen, and any impacts that could have for the year?

Yes, great question. So maybe just a quick update since we; lots happened since our last earnings call. So the CISO of Microsoft posted a blog post on LinkedIn. And on the Microsoft blog that really exposed kind of TP-Link's role, in some of these typhoons that the U.S. is facing. And that led to Bloomberg and Wall Street Journal doing fairly thorough kind of reporting on the multiple different angles here, from a governmental investigation perspective, the Department of Commerce, the DOJ. And so we're reading the same news you all are reading. But given the hawkishness of the new administration, we are starting to look at making a small investment in supply, given some of the lead times of our products to be in a better position should an exclusion actually happen. And as we've talked about before, like if an exclusion were to happen, that would require a significant working capital investment. We're not talking about doing that in the advance of any decision. But we are talking about being a little bit more prepared. So in future quarters, you might see a little increase in our finished goods inventory just in anticipation of a positive outcome there for us. And when a decision is made, I think there tends. If you look at what's happened with like EV software, and drones and Kapersky, there tends to be a decent waiting period between the decision, and the final determination of that decision. And so we have some time to operationally prepare more aggressively if that were to come to pass.

No, that makes sense. That makes sense, awesome. Well, thank you. Another question here, looking at your guys' restructuring efforts, $20 million in savings here, but also you guys talked about some of your investments into 2025. Can you just elaborate just in another way, just what exactly your investment priorities are in 2025?

Yes, great question. So one important way to frame this, or simple way to frame this, is if you think about the focus of our historical business, it's been consumer-centric and it's been device-centric. And so, we're making investments largely focused on our B2B business. And we're - the three main areas there are: one, to build a world-class B2B go-to-market capability. That's everything from the right tools to generate track, activate leads, marketing capabilities, building out a stronger brand on the B2B side. If you go to our website, there's significant work underway to revamp that. It needs a lot of work, sales coverage, pre and post-sales support. There's, just a lot of opportunity, which is really positive, because we've had the success we've had without a lot of that. And so go-to-market investments on the B2B side are a big part of it. The other is software, right? We've had a legacy of being great at devices. Our new mission, reason for existing is to power extraordinary experiences. You can only do that with great software these days. And so, we're doing a lot of work to in-source kind of that critical capability. And that's happening across the business, not just on NFB, but most of the effort is - and most of the investments happening on the NFB side. And there's puts and takes there, right, because we have external vendors. So we reduce the cost of those expenses, while we build up our internal teams. And then the last is filling product gaps. So on the NFB side; we have a fairly robust portfolio of capabilities. But there are a few things missing in terms of delivering a full solution to our IT Enterprise customers. And so, we're actively building out those products. Those are the real three main investment areas. And again, it's mostly focused on the B2B side.

Awesome, yes, super helpful. And yes, 2025 seems like an exciting year for NETGEAR for sure. Last question from me here. You guys have a strong cash balance coming out of '24. Can you share any updates to your capital allocation priorities, or any shifts in those priorities?

Yes, great question. Maybe before I answer that, look, just to make sure you and our investors are aware. So we're planning on a go-forward basis to be providing more details on our different segments. You'll see that in our press release for this quarter, we had segment results. We got some good feedback from you all and from investors. Next quarter, as we enter into - start reporting in 2025, you'll see three segments. So we'll have NFB as it exists today. And then what CHP is today, we're going to break that into two. One is home networking and the other is mobile. And most of what you see in service provider today falls in the mobile category, though there is a retail business associated with that. But on to capital allocation no change in our priorities, so just to recap it, we're making the organic investments. We were aggressive in our restructuring very much from a position of strength, to basically self-fund those. So we're excited about our ability to do that. The share repurchases remains a priority of our capital allocation strategy. We repurchased about $33 million this year. We're going to continue to pursue share repurchases. And then, we are looking at acquisition opportunities. As I've said before, we're going to be ultra-diligent in our evaluation of those. But if there's ways for us to accelerate our transformation, the few areas I've talked about previously is companies that have great software that can accelerate that part of our transformation. And bring an acceleration to our recurring revenue growth. Product adjacencies - that fill some of those gaps that I talked about, and then scale. We suffer from a lack of scale in a couple markets and segments. So those are the three things that we're considering. But that really aligns exactly with what we've talked about before.

Great. Yeah. Thank you. That's, that's all I got. And I know I appreciate the extra incremental breakout on the segments this quarter. So looking forward to what's to come next quarter.

Awesome. Thanks, Logan.

And there are no further questions at this time. I would like to turn the call back over to Mr. C.J. Prober for closing remarks.

Thank you. Yes, I just want to give a big shout out to our global team. As I said at the outset of our call, we are making all of the hard decisions, and doing the hard work to both transform the business, while delivering on the business quarter-over-quarter. So a big shout-out to the team for their adaptability and the urgency with, which we're approaching the transformation. I couldn't be happier about the progress we've made in 2024, and look forward to carrying that momentum forward this coming year.