Proto Labs - Q4 2023

Transcript

Operator (participant)

Greetings. Welcome Protolabs' fourth quarter and fiscal year 2023 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I'll now turn the conference over to Jason Frankman, Vice President, Corporate Controller. Mr. Frankman, you may begin.

Jason Frankman (VP and Corporate Controller)

Thank you, Rob, and welcome everyone Protolabs' fourth quarter and full year 2023 earnings conference call. I'm joined today by Rob Bodor, President and Chief Executive Officer, and Dan Schumacher, Chief Financial Officer. This morning Protolabs issued a press release announcing its financial results for the fourth quarter and full year, ended December 31st, 2023. The release is available on the company's website. In addition, a prepared slide presentation is available online at the web address provided in our press release. Our discussion today will include statements relating to future performance and expectations that are or may be considered forward-looking statements and subject to many risks and uncertainties that could cause actual results to differ materially from expectations.

Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K, for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today. The results and guidance we will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release and the accompanying slide presentation at the investor relations section of our company website for a complete reconciliation of GAAP to non-GAAP results. Now, I'll turn the call over to Rob Bodor. Rob?

Rob Bodor (President and CEO)

Thanks, Jason. Good morning, everyone, and thank you for joining our fourth quarter and full year 2023 earnings call. We continued to execute well on our priorities through the fourth quarter, resulting in a record year and strong financial and operational results. For the full year 2023, we generated revenue above $500 million for the first time Protolabs' 25-year history, while delivering improved earnings, robust cash flow, and returning substantial capital to shareholders. Every day Protolabs, we're guided by our mission, which is to empower the world's most innovative companies to bring their new ideas to market by offering the fastest and most comprehensive digital manufacturing service. We manufacture high quality, custom, complex parts for the next generation of innovative solutions to the world's challenges. I'll now share a few examples of how we enable customers to accelerate innovation across pioneering industries.

First, I want to share two examples from the electric vehicle industry, which is a growing sector of our business. Protolabs has been heavily involved in creating a more sustainable future through the electrification of vehicles with various customers. One prominent EV manufacturer has been Protolabs factory customer for years, as our reliable and rapid lead times help them move fast and bridge supply chain challenges as they introduce new vehicles and options. This customer recently received their first order fulfilled through our manufacturing partner network, which we rebranded from Hubs to Protolabs Network in Protolabs Network manufactured quality injection molded prototype parts, which were beyond our factory's capabilities due to their size and complexity. As EV manufacturers have very different development and supply chain requirements than traditional auto manufacturers, the flexibility of our combined offerings provides the agility and adaptability that EV manufacturers need.

We are incredibly excited to continue our work with this customer and help create a more sustainable future through emissions-free vehicles. In addition to electric cars, our advanced digital manufacturing capabilities also support innovation in the electric aerospace industry. Hinetics, a company that has developed an electric motor for commercial regional jets and narrow-body aircraft, leveraged our manufacturing precision and speed to have a new complex metal component manufactured. This part was 3D printed in our digital factory due to its complex design that maximizes surface area and improves the power-to-weight ratio. Our services allow Hinetics to accelerate innovation in aircraft motors. Protolabs is also involved in rapid innovation in the commercial space exploration sector, where speed to market is critical. Our ability to quickly provide high-quality, precision parts through comprehensive manufacturing services allows companies like Space Inventor to develop satellite systems and advance aerospace technology.

Space Inventor turned to Protolabs in order to meet stringent project timelines. We manufactured several CNC machine components for structural elements and complex brackets in a variety of specialized materials for their satellites. Crucially, with our industry-leading turnaround times, we rapidly manufactured and delivered quality components while significantly expediting Space Inventor's design process. One final example to highlight today comes from the agricultural machinery industry. Protolabs recently worked with a leading equipment manufacturer that drives sustainable progress in agriculture. This customer had an unexpected delay arise at an existing supplier. When supply chain disruptions arise Protolabs always has capacity available to ensure customers can continue to innovate. We provided quality, cost-efficient CNC machine components through both the factory and the network. Protolabs' speed and comprehensive offering allowed this customer to meet scheduled phase gates and keep a critical program on track.

These are just four short examples of the innovations we get to accelerate every day in exciting industries, which positively impact the world. We served over 53,000 customers in 2023, and empowered customer innovations in many different applications. I'm proud to say that in 2023, we contributed to the greater good while successfully executing against our business priorities. 2023 was a success for Protolabs. we confirmed that our strategy to combine the factory and network offers is the right one, demonstrated by 70% growth in Protolabs network and continued customer adoption of the combined offering. In the presence of a challenging global manufacturing demand environment that experienced contraction throughout the year, our comprehensive offering enabled Protolabs to take share in our market. Our leadership team executed on our strategic objectives, and I'm proud of what we accomplished.

As you'll recall, we entered 2023 with two priority areas. First, to narrow our focus to drive revenue growth in our two largest services, injection molding and CNC machining. Second, to improve shareholder value through increased profitability. I am pleased to report that we successfully delivered on both of those priorities. On our fourth quarter earnings call one year ago, we stated that we expected year-over-year growth in injection molding for the full year. We met our goal of achieving injection molding growth in 2023, driven by the value we provide as a single source injection molded part supplier, winning larger orders with strategic customers. Investments in digital quality, competitive pricing, and consultative design services have contributed to success with larger production-oriented orders. Collectively, these investments have been key to transforming our injection molding business, allowing Protolabs to serve as a true strategic partner for our customers.

In addition, we continue to win more injection molding orders where our customers benefit from combined factory and network fulfillment. In our other priority growth area, CNC machining, we successfully unlocked greater growth potential through the most complete and comprehensive offer in the industry. CNC machining revenue fulfilled via Protolabs network grew 80% in 2023. Customers took advantage of the combined offer, leveraging lower part prices at longer lead times, improved tolerances, broader finishing options, and larger and more complex part designs through Protolabs network. We also invested to expand our CNC offer in the digital factory, launching scaled plating and anodizing at our best-in-class lead times. Finally, in 2023, we drove shareholder value through improved profitability and returning capital to shareholders. Protolabs' differentiated business model generated significant profitability and cash flow throughout the year.

Both factory and network gross margins improved year-over-year, and 2023 non-GAAP earnings per share grew 6% over 2022. We generated $73 million in cash from operations, the highest in our industry, and we paid back 97% of our free cash flow to shareholders through $44 million in share repurchases. Our strong execution on the strategic priorities set out at the beginning of 2023 provides a robust foundation for continued success in 2024. This year, we expect to grow revenue. To do so, our 2024 priority areas are as follows: First, we will strive to increase revenue per customer by growing the number of customers using the combined factory and network offer, and second, we will drive larger orders in all services. Success in these priority areas will lead to improved financial performance and continued shareholder value creation.

Specifically, we're focused on driving growth in users of the combined offer, which will drive revenue through both the factory and the network. This number increased substantially in 2023, and I expect significant growth in 2024. Our go-to-market teams are aligned and well-equipped to promote and sell the combined offer to existing and new customers. Next, our emphasis on driving larger orders through both the factory and the network includes a shift from prototyping to production, which is a larger overall market. Specifically for injection molding, which has the highest revenue per customer of our four services, we will focus on satisfying the needs of the production customer. With its lower price, longer lead time offer, Protolabs network generates higher average order value than the factory, and we will expand on these larger orders through the network in 2024.

These areas of emphasis highlight the importance of increasing customer share of wallet. Since our initial public offering in 2012, our primary focus was to add new customers while continuing to serve our existing customers in their times of need. While this is still important, our focus with the combined offer is to go deeper with larger strategic customers and serve more of their custom parts needs as a true prototype to production, single-source supplier. In 2024, we will also continue to invest in our most important internal resource, our Protolabs employees enabled us to continue revolutionizing manufacturing and accelerating innovation. Protolabs is a great place to work, and we will improve the employee experience through continued investments in areas like talent acquisition, training and development, and total rewards.

Just a few weeks ago, at our annual kickoff meetings, we introduced a fully refreshed set of company values for the first time in over 10 years to help guide us into the future. We look forward to doing more for, and investing in, our amazing talent at Protolabs this year and beyond. We are encouraged by our strong finish to 2023 and believe we have the right strategy and priorities in place for continued success. Resilient execution in 2023 enabled us to meet our commitments and take share in the market despite headwinds from manufacturing contraction. We remain focused on becoming the strategic partner to the world's innovators, maintaining our industry-leading financial model, and increasing value for our shareholders.

I want to thank our more than 2,400 employees for delivering excellent 2023 results and positioning the company for success and value creation in 2024 and beyond. Thank you for your continued commitment to Protolabs. Dan will now provide fourth quarter and full year financial information, as well as our outlook for the first quarter of 2024. Dan?

Dan Schumacher (CFO)

Thanks, Rob, and good morning, everyone. Our financial results begin on slide 13 of the slide presentation. Looking first at fourth quarter performance, revenue of $125 million grew 7.2% year-over-year in constant currency. Protolabs Network revenue was $22.5 million in the quarter, up 49% in constant currencies. Looking at revenue by service on Slide 15. Fourth quarter injection molding revenue grew approximately 14% year-over-year in constant currencies, as we saw an increase in larger parts orders. CNC machining grew 4% year-over-year in constant currencies, driven by continued growth Protolabs network. Fourth quarter 3D printing revenue grew 3% year-over-year in constant currencies. Sheet metal revenue declined 8% year-over-year in constant currencies.

Fourth quarter non-GAAP gross margin decreased 70 basis points sequentially to 45.3%, primarily due to lower factory volume. Fourth quarter Protolabs network non-GAAP gross margin was 33.6%, compared to 33.7% in the third quarter. Fourth quarter non-GAAP diluted net income per share was $0.46. Adjusted EPS came in higher than our guidance midpoint of $0.30 for several reasons. First, higher than expected volume. Revenue came in at the top end of our guidance range. Next, gross margin exceeded our expectations in the fourth quarter, due largely to stronger than anticipated revenues and injection molding, one of our higher margin services. Lastly, our fourth quarter selling, general, and administrative expenses were below forecast, driven partially by lower incentive compensation. Turning to cash flow and balance sheet highlights on Slide 16.

Cash flow from operations was $17.2 million, and we repurchased $4.9 million of common shares in the fourth quarter. On December 31st, 2023, we had $110.8 million of cash and investments on our balance sheet and $0 debt. Now, let's look at some of these results for the full year, which begin on Slide 18. Total revenue increased 5% over 2022 in constant currencies and excluding Japan. At $504 million, total revenue surpassed $500 million for the first time in our history. Both factory and network gross margins increased year-over-year. However, total company GAAP gross margins were flat at 44.1% due to a higher mix of network revenue.

Protolabs Network revenue of $82.6 million grew 69% year-over-year in constant currencies, and Network gross margin for the full year was 30.6%, compared to 25.8% in 2022. We served 53,464 customer contacts in 2023, and revenue per contact increased 9% over 2022. 2023 non-GAAP earnings per share increased 6% to $1.59, and we generated $83.2 million in adjusted EBITDA. Cash generated from operations in 2023 was $73.3 million, up from $62.1 million in 2022. Our business model generates industry-leading cash flows, allowing us to invest in organic growth and return capital to shareholders. During 2023, we paid 97% of our free cash flows to shareholders through share repurchases.

Turning now to forward-looking guidance. We will continue to guide on a quarterly basis due to the quick turn nature of our business and continued macroeconomic uncertainty. Our guidance for the first quarter of 2024 is outlined on Slide 23. We expect to generate first quarter 2024 revenue between $120 million and $128 million. This guidance reflects a softer start to 2024 due to December and early January order levels being lower than historical periods. However, recent performance has been more in line with historical trends, and our guidance assumes that will continue through the end of March. We expect foreign currency to have between $500,000 and $1 million dollar favorable impact on revenue compared to the first quarter of 2023. Moving to earnings guidance.

We anticipate non-GAAP add backs in the first quarter to include stock-based compensation expense of approximately $4.5 million and amortization expense of $1 million. We currently estimate a non-GAAP effective tax rate of 21%, ±50 basis points in the first quarter. In summary, we expect first quarter non-GAAP earnings per share between $0.26 and $0.34. That concludes our prepared remarks. Operator?

Operator (participant)

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Brian Drab with William Blair. Please proceed with your questions.

Brian Drab (Partner and Equity Research Analyst)

Good morning. Congratulations on a really solid year in a tough environment.

Dan Schumacher (CFO)

Thanks, Brian.

Brian Drab (Partner and Equity Research Analyst)

Hey, so first, just, there's no significance really in the terminology changes there from, you know, now you're using customer contacts, and previously, it's a longer term. You know, you need product developers, engineers served. I guess it's just being more efficient with words or is there any difference in those terms?

Rob Bodor (President and CEO)

Yeah, thank you for the question. I think, you know, what we're looking to signal is that, what we're seeing is, while in the past, our customers were primarily engineers and product designers, given that our business was primarily a prototyping business, you can see that a lot of our growth in 2023 came from increase in production, right? And customers using us more deeply for higher volumes and taking the prototyping business that they've been used to using us for and converting that into production, staying with us through the product life cycle. And so, we just found that naming all our customers product designers is probably, you know, not correct anymore, right? So that's why we made that change.

Brian Drab (Partner and Equity Research Analyst)

Yeah, that makes sense. And it, it, it's a good segue into my next question, is that, you know, when you look at the revenue per contact, then, you know, this year is up 10%. And I guess that, that's mainly attributable to your success going deeper with these, enterprises, you know, that going deeper with the big customers and doing more production work. Is that a trend, I guess, that we should continue? You know, as you're looking into 2024 now, do you, do you expect that you could, you know, grow that revenue per contact, substantially again in 2024?

Rob Bodor (President and CEO)

Yeah, absolutely. I'm very pleased with our increase in revenue per customer in 2023. I think it's a strong indication of the success of our strategy. And, you know, I wanna recognize the work of our sales and marketing teams in terms of how they've engaged with our customers to make sure that they're aware of our broader capabilities in terms of production, right? The investments that we've made into expanding our offering, both in the factory and in the network, now allow us to work with our customers outside of prototyping. You know, we've had... We served 53,000 customers last year, and our customers are used to partnering with us and relying on us for their prototypes.

Now we can transition that prototyping work into production work, and we're starting to see good traction in that. We will continue to report average revenue per customer and are driving to increase that number.

Brian Drab (Partner and Equity Research Analyst)

Okay, great. And then I just want to be really clear on this, or make sure that I'm clear on it. You know, you said in the guidance that you're assuming, I think what you're saying is that you saw the typical seasonal softness in December and January, and your guidance assumes that you don't see the seasonal, the typical seasonal uptick in March. You're kind of assuming that seasonal softness persists through the first quarter. Am I understanding that right?

Dan Schumacher (CFO)

Brian, this is Dan. Thanks for the question. Let me reframe. So we saw lower than historical levels starting to, like, mid-December, and then that persisted into January, and so things did not pick up at the same historical time. It was later than usual, but we're happy with where the levels are now, both from an order and a quoting perspective, and the guidance assumes that will be at those levels through the quarter.

Brian Drab (Partner and Equity Research Analyst)

So you saw a December that was lower than typical?

Dan Schumacher (CFO)

Second, second half of December. And I don't know,

Brian Drab (Partner and Equity Research Analyst)

Yeah.

Dan Schumacher (CFO)

Brian, you know, we, we're talking to customers, you know, a lot of them were away for a longer period of time than historical, both within Europe and the U.S. I don't know if that had something to do with the timing of the holidays, of where they were from their budgets, right? As they closed the year and started the new year. But it was lower than... We normally see a seasonal dip, but that dip was lower than what it had been in prior years.... But now we're back on course. Yeah.

Brian Drab (Partner and Equity Research Analyst)

Okay. Okay. And then just in closing for me, I just want to say, you know, at the beginning of the year, when you know, we were talking about growing the Injection Molding business for the full year, and you've just done $45 million in Injection Molding in the fourth quarter, I think a lot of people were skeptical. So, you know, congrats on achieving that goal. It seemed like a stretch goal at the time, but I'll talk to you more later. Thank you.

Dan Schumacher (CFO)

Thanks so much.

Rob Bodor (President and CEO)

Our next question is from the line of Jim Ricchiuti with Needham and Company. Please proceed with your question.

Jim Ricchiuti (Senior Analyst)

Hi, thanks. Good morning. Dan, I just want to go back to the way Q4 started off. You talked about some slowing in activity in the early part of October, and then, you know, clearly things picked up. And I'm just wondering, as you're shifting more toward production-oriented business, it sounds like, you know, you're seeing some almost similar trends in the current quarter. Is there any change in the linearity of the quarter with respect to, you know, what you're doing on the production side of the business?

Dan Schumacher (CFO)

Yeah. So, thanks for the question, Jim. This is Dan. Let me kind of walk you through what we were seeing. When I talked on the last quarter call, what we were seeing was softness, specifically in CNC, is what I pointed out. But in the fourth quarter, as you could see from the results, we had really strong injection molding orders and larger orders in the quarter, right? As we closed out the quarter, as I was just talking to Brian about, you know, that holiday dip was lower than it normally had been, and then it was slow to kind of rebound into January.

In terms of, like, seasonality and what we're seeing, you know, for sure, as we get some of these larger orders coming in, you know, that can disrupt maybe what some of the seasonal trends are as we see strength in that area. Let me flip it over to Rob to talk a little bit about, you know, what we're seeing in those production orders.

Rob Bodor (President and CEO)

Yeah, yeah, thanks, Dan and, Jim. You know, I mean, I'm pleased with our performance in Q4 overall, with the growth we saw there and in 2023 as a whole, right? And I'm particularly glad that we could, you know, have that kind of performance in the presence of contraction in the manufacturing sector, right? And I think we attribute it to our ability to have, you know, done more production work with our customers across all of our services and seeing that growth. But in particular, in injection molding, I think that's really been successful for us with more and more of our customers to be able to, you know, do those larger orders.

As I look forward, I expect that we will have more and more of those larger orders, and that'll help to, you know, create more of that, consistency, right? As we look at the business going forward.

Jim Ricchiuti (Senior Analyst)

The other thing I'm struck by, Rob, is I feel like this is the strongest growth you've shown in the U.S. for some time, and I assume that's you know, what you're describing as really is driving to accelerating growth in the U.S., which, you know, frankly, over the last year or so, have been... You know, the growth rate's been somewhat tepid, and it picked up quite a bit, it seems like, in the U.S.

Rob Bodor (President and CEO)

Yeah, I'm very pleased with the fact that, you know, we're getting traction with our customers as a result of this, this strategy. So thank you.

Jim Ricchiuti (Senior Analyst)

Which of these production? Yeah, if you think about your last question for me, but think about you, you know, what you're trying to do in terms of driving more production business through the company, through the network, where are you seeing the most traction in terms of verticals? And you highlighted some use cases, but I'm just thinking in general, if any one vertical market vertical is more receptive to this.

Rob Bodor (President and CEO)

Yeah, in the fourth quarter, we saw strength with aerospace and with automotive, you know, kind of per some of the examples that I shared, in the use cases in the prepared remarks. And medical continued for us.

Jim Ricchiuti (Senior Analyst)

Thanks a lot.

Rob Bodor (President and CEO)

Thank you.

As a reminder, if you'd like to ask a question, you may press star one. The next question is from the line of Greg Palm with Craig-Hallum Capital. Please proceed with your questions.

Greg Palm (Senior Research Analyst)

Hey, good morning. I'll offer my congratulations as well to a good end to the year. I'm curious, as we think about the guide for Q1, and specifically sort of the bridge from Q4 to Q1, you know, revenue at the midpoint, flat to down a little bit, but profitability, you know, whether it's EPS or Applied EBITDA, down pretty substantially from Q4. So can you just maybe help us understand, is that, you know, higher OpEx? Is that lower margins? Maybe some of the puts and takes associated with that.

Dan Schumacher (CFO)

Yeah, great. Thanks for the question. So a couple of things are going on quarter-over-quarter. One, we do expect gross margin to come down quarter-over-quarter. There's a couple of reasons for that. First, we expect to have a higher mix of the network business in the first quarter compared to the fourth quarter. When I talked about that blip that impacted the factory business more, that's that softening at the end of December, start of January, impacted the factory business more than it impacted the network business. So we're gonna have a headwind from a mix perspective. Second, you mentioned it, but the volume, we expect the volume at the midpoint to be down quarter-over-quarter because of that softness we saw.

In addition, because the factory business is gonna be a little bit softer, their margins are gonna be a little bit lower from fourth to first quarter, because of, you know, not having as much volume to absorb those costs. And then last, SG&A will be up quarter over quarter. We have some timing things as we start out the year. Some of those are accounting-ish, dealing with incentive comp in terms of payroll tax accruals, vacation accruals, those type of things, as well as increased investment in the network as it grows. Those things create a headwind quarter over quarter in SG&A.

Greg Palm (Senior Research Analyst)

Okay, that is helpful color. Rob, I think I, I heard you mention in the prepared that you do expect revenue growth on a year-over-year basis. I'm not sure if I missed it, but I didn't hear any commentary on whether you think that profitability, whether it's EPS or EBITDA, will, will also grow on a year-over-year basis. Do you, do you care to comment on that?

Rob Bodor (President and CEO)

Sure. Yeah, thank you. So yeah, we're coming off of a strong year, right? In, in which we grew despite challenging economic conditions with contraction in the manufacturing sector. We were able to take share last year. I'm very pleased with that, and we expect to do that again in 2024. I'll let Dan talk, you know, so on the revenue side, I'll let Dan respond regarding EPS.

Dan Schumacher (CFO)

You know, when I talked about on the call in terms of how 2023 played out, we had improved the growth margin, both in the factory and in the network. From a factory perspective, we're deploying more and more automation into our factory. We have more robotics that are going on within our factory that allow us to vary our labor as volume comes through. On the network side, we also improved our margin in 2023, and that's through improvements in our AI-enabled pricing algorithms that we have within the network. We expect to do that in a similar basis, Greg, next year, right? So there's more automation we can bring into the factory. We have more productivity projects in the factory to make them more efficient.

And we also expect on the network side that we're gonna continue to work on those AI algorithms to continue to maximize the margin we have in this environment. Now, that being said, if you noticed last year, our overall margin was flat. So we do expect the network to grow more than what the factory is in 2024, and depending on how that plays out, will kind of tell us if we're if our margins are gonna stay flat or not, right? So we're driving to offer the solution to the customer that they want in this period of time, and we feel that is that is the business model, that is the best way for us to grow. But that that may have some impact on margin as we go through 2024.

Greg Palm (Senior Research Analyst)

Okay. Well, understood. And then lastly, as it relates to kind of this broader strategic initiative, you know, what kind of data or metrics are you tracking that gives you some sort of success, you know, a sense for the success of this, you know, combined offering and the strategy associated with that? I mean, like, what's more important? Is it growing new customers? Is it growing wallet share with existing accounts? How do you view that?

Rob Bodor (President and CEO)

Yeah, great question. So of course, we wanna grow both our new customers and our existing customers. And, yeah, and we've got initiatives in place, and our salespeople are focused, and our marketing teams on really on driving both of those. But what I would say from a existing customer standpoint is, you know, we've got the largest customer base in our industry. You know, last year, we served 53,000 customers, from individual entrepreneurs to the Fortune 500, right? Within the Fortune 500, we serve 85% of the companies in our target industries. And so we've got a great customer base of innovative customers. I think there's a tremendous opportunity for us to grow and expand within our existing customer base, right?

Our customers are used to relying on us for their prototyping. They've been telling us for years that they'd love to use us more, and we just haven't had offers in the past. We've now put together, between investments in the factory and the network, offerings that serve them for production, that allow them to go from prototype through production, through end of life, that allows them to use us for quantity one or quantity of millions, right? We haven't had that capability in the past, and I think there's just tremendous opportunity for us to grow with our existing customers. And so what we're measuring to make sure that we're on top of that, I mean, we talked about the number of our customers. We talked about average revenue per customer.

We also talked about tracking, you know, the number of customers that are using the combined offerings, right? Buying from both the factory and the network. And there's a, you know, number of other things kind of internally that we look at to make sure that we're making this progress. But I'm quite pleased with the progress that we showed last year along these lines.

Greg Palm (Senior Research Analyst)

At some point, you know, some of those KPIs associated with, you know, number of customers, you know, using, you know, either or both of the services, is that something that you might start disclosing?

Dan Schumacher (CFO)

Yeah, great. The answer is yes. You know, I think, you know, in this industry, in this space, right, being able to, you know, serve a customer more, get more of their wallet share of our existing customers is, you know, is gonna generate a more profitable business long term, rather than having to continue to chase the new customer every year. Of course, we're still gonna grow new customers. We're doing that, but for sure, in the future, we will share some of these metrics.

Greg Palm (Senior Research Analyst)

Okay. Best of luck. Thanks.

Rob Bodor (President and CEO)

Thanks, Greg.

Dan Schumacher (CFO)

Thank you.

Operator (participant)

Thank you. We've reached the end of our question and answer session. This will also conclude today's conference. You may disconnect your lines at this time. We thank you for your participation, and have a wonderful day.