Altium LLC (ALU) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Altium Investor Call, FY '20 Results. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Kim Besharati, VP of Investor Relations. Thank you. Please go ahead.

Hello, everyone, and welcome to the Altium Investor Call. Joining me on the call today is our CEO, Aram Mirkazemi; CFO, Joe Bedewi; and Senior VP, Finance, Martin Ive. As we are doing this call from San Diego, we're also pleased to have our CTO, Sergiy Kostynsky, join us. As mentioned, this call today is being recorded. Earlier this morning, Altium released to the ASX the company's full year financial results and investor presentation, which we will discuss with investors over the next few days. During this call, Aram and Joe will elaborate on Altium's performance for fiscal 2020. We will also share details of how Altium 365 is accelerating our drive towards market dominance and industry transformation, while also being a catalyst for transforming Altium's business and operational model. Please note, as a reminder, today's call and the Q&A section at the end may include forward-looking statements regarding Altium's products, its future operations or financial performance. Any such statements are based on current assumptions by Altium management and subject to risks and uncertainties that may cause actual events and results to differ materially. Please note that all numbers are in U.S. dollars, unless specified otherwise. I will now pass over to Aram.

Thanks, Kim, and good morning, everyone. I would like to start by acknowledging that the financial year 2020 has been most unprecedented and a highly significant year for Altium. It has been a milestone year and also a transitional year for Altium from market leadership and rapid growth to a new phase of dominance and transformation. This momentous transition is taking place against the backdrop of the world struck hard by a global pandemic. At no time has there been a greater need for a connected world than today. I cannot imagine how the world could respond in a pre-Internet and cloud era to the challenges of this pandemic. While COVID-19 prevented us from reaching a long-standing aspirational goal of $200 million in revenue, it has been a catalyst for rapid acceleration for Altium towards market dominance and transformation. We have successfully launched Altium 365, our new cloud platform, which is causing excitement and gaining strong adoption. This is most heartening and is an early validation of our vision and a strategy for this new digital platform to transform the electronics industry. Altium's versatility and adaptability was demonstrated in fiscal 2020 as we executed successfully across multiple fronts and in varying conditions. We achieved record growth of 17% in our subscription base to exceed our 50,000 subscriber target. We also achieved a strong growth of 15% in new Altium Designer seats sold. Our strategy to drive volume through attractive pricing to support our customers was rewarded and has allowed us to maintain momentum to successfully launch our digital sales platform and Altium 365. I'm pleased that Altium was able to counter the conditions to deliver 10% revenue growth and also to increase dividend to shareholders by 15% for the fiscal year. This is the hallmark of a company that is financially strong, a market leader and operationally robust. At Altium's Technology Day last December, we outlined phases of transformation, and we anticipated gradual adoption due to the conservative nature of the engineering community toward cloud solutions. However, under the current conditions, the way that our customers are adopting Altium 365, it is effectively converging and accelerating these phases of transformation. Since launch, we have already over 2,600 active accounts and around 5,100 active users on the platform. This rapid success has resulted in Altium beginning a process to repurpose the organization to capitalize on the opportunity presented by Altium 365. The reaction of our customers to Altium 365 has been so strong that it is changing the fundamental value proposition of our PCB design tools to compete not only on the basis of superior features and functions, but in being the only PCB design tool that has been extended to the cloud. That is also changing the nature of our selling motion. We are moving from transactional selling to distinct value and volume selling, which will help us in our pursuit of market dominance. We will also add capacity and expand our product growth to support the fast growth of the digital platform. The comprehensive way in which some of our customers are adopting this platform is quickly driving the evolution of our design and collaboration capabilities beyond PCB design. This could result in significant TAM expansion on the design axis for Altium as the platform evolves to become a general-purpose platform to address the multidisciplinary needs of products that are predominantly centered around electronics. This is in addition to the main axis of transformation, which aims to connect electronic design to manufacturing. It is important to note that this new TAM expansion is distinct to opportunities that I have spoken about previously in relation to the main axis of transformation. Perhaps the most significant impact of Altium 365 on our business is that it is seamlessly changing the nature of our revenue at multiple levels. At the most basic level, we are seamlessly moving from software maintenance to software-as-a-service. This transition will not have any short-term revenue impact since our recurring software maintenance revenue, which is the largest portion of our revenue, is already prorated on a linear basis. Another portion of our revenue is associated with NEXUS and Concord Pro, which is growing strongly and is already term-based. Both are being positively impacted by Altium 365 as it enables companies to reduce complex on-premise deployment overhead by moving to the cloud. We expect that this portion of our revenue will grow at an accelerated rate. As our customers transition to Altium 365, we will have all of our term-based revenue prorated on a linear basis. We expect that the impact of this will be very little as currently the on-premise component of NEXUS and Concord Pro represents a small portion of our total revenue. Beyond NEXUS and Concord Pro, we do not expect any significant short-term conversion from perpetual licensing to term-based licensing for our mainstream customers as many of our customers are very sensitive to change and place great value on their perpetual license. However, we anticipate that as our customers get comfortable with Altium 365 and the aids and benefits of working in the cloud and discover the power of the new digital platform, they will naturally transition to term-based licensing. We have developed an internal model that shows the transition of Altium's revenue from perpetual licensing and software maintenance to term-based licensing and SaaS subscription, which we will share with you at various stages. There is one more exciting front to our efforts relating to Altium 365 that I would like to mention, and that is in China. Altium 365 China is being built from the ground up specifically for the China market. It is built on local infrastructure, Ali Cloud, and has integration with WeChat and Alipay, and is deeply connected to domestic component and manufacturing suppliers with strong emphasis placed on supply chain management rather than manufacturing. It is in the late stages of preparation for launch. However, we are working on means to ensure its launch and long-term prospects will not be affected by the current geopolitical conditions. Moving on from Altium 365, I would like to update you on our partnership with Dassault Systemes, which is an important strategic partner for our end-to-end market dominance objectives. Prior to COVID-19, we were deep into business discussions with Dassault Systemes to develop a new model for our partnership based on the 3DEXPERIENCE platform. With the onset of COVID-19, these discussions had slowed down until recently when Dassault Systemes indicated that they would like to recommence our discussions regarding the new model for the partnership. As part of these discussions and to facilitate the strong foundation to build our new partnership, we have decided to bring our SOLIDWORKS agreement to an end, and it will unwind over the next 3 years. Both parties are in support of this and are eager to move on to the next phase of this partnership. I will provide further updates as we progress. One thing that has been on the mind of many of you is our long-term aspirational targets for 2025 and our adherence to the Rule of 50 under COVID conditions. I would like to share my thinking about the impact of COVID-19 on Altium's long-term aspirational targets of achieving 100,000 subscribers and $500 million by 2025. The first thing that I would like to highlight is that these targets are related to our journey of dominance and transformation. Our strategy of transformation through dominance requires a critical mass of professional PCB designers to adopt Altium 365. These targets are a measure of this critical threshold, and we remain committed and are confident that we will achieve both. However, currently, based on our internal modeling, the effect of COVID-19 may extend the achievement of $500 million revenue target by 6 to 12 months. I would like to also confirm that we remain committed to the Rule of 50 at every step along the journey. I view the Rule of 50 not as a ceiling, but rather as a floor for our journey of dominance and transformation. As we move through the latter years to fiscal 2025, I anticipate that not only do we manage the business to the Rule of 50, but go well beyond. During the current COVID-19 conditions and the pre-vaccine world, however, we will strive to meet the Rule of 50, but we will need to contend with the evolving conditions. Currently, we are operating on the basis that fiscal 2021 would be a pre-vaccine world. And as of fiscal 2022, the post-vaccine world will begin to take effect. I will now hand over to Joe to share more color on Altium's fiscal 2020 performance.

Thank you, Aram. Good morning, everyone. Altium has delivered a strong result for fiscal 2020 during COVID-19. Revenue growth of 10% to $189.1 million, surpassing our 50,000 subscriber target and meeting the Rule of 50 on a reported EBITDA basis are all fantastic achievements. I'm pleased to report that despite the challenging environment, Altium remains in a good financial position. Profit before tax grew by 12% to $64.6 million. As we supported our customers and our partners through COVID-19 with extended payment terms, receivables increased approximately $15 million, and we experienced an increase of $4.1 million in tax payments due to expiration of tax credits. This resulted in our operating cash flow declining by 18% to $57 million for the fiscal year. Notwithstanding this, our cash balance grew by 16% to $93.1 million. We continue to actively manage our cash collections process. The release of Altium 365 in May, together with attractive pricing, has underpinned strong growth in new Altium Designer seats sold of 9,251, up 15% and delivered 17% growth in the subscription base to achieve 51,006 subscribers. The fact Altium 365 provides enhanced capability for our customers and adoptions are tracking ahead of expectations reinforces our pursuit of market dominance and enhances our recurring revenue model. Our key regions, the U.S., EMEA and China, delivered solid performances for fiscal 2020, albeit below double-digit growth. All regions were impacted by COVID-19, which resulted in small- to medium-sized businesses conserving cash in the latter stage of the fiscal year. The impact of lockdowns and our customer transitions to remote operations extended decision and purchasing cycles. China recovered from COVID-19 to deliver a solid performance in Q4 to achieve 7% annual growth to $21.3 million for the full year. Our China team pushed strongly in Q4 following lockdowns in the latter part of January through March. We will continue to scale our license compliance business in China through fiscal 2021. Our NEXUS product for the agile enterprise delivered a strong performance with 133% revenue growth to $15.5 million. The NEXUS customer base is growing to include deals closed with Tesla, Bosch, SpaceX, iRobot and Xylem, to name a few. Many of these deals come from Altium Designer customers and are part of our controlled approach to increasing term-based revenue. Turning to other parts of our business. Octopart held up for the year as COVID-19 drove increased search for electronic parts, and our cost per click rates negotiated with electronic components distributors were maintained. Octopart grew by 6% to reach $19 million in revenue. Octopart increased its unique visitors to its site during the year and brought in 121 new API customers, in addition to building its CAD model data to over 1 million parts. Our TASKING business was uncharacteristically flat for the fiscal year as the automotive industry was impacted by COVID-19 and lockdowns in Europe and the U.S. Our TASKING business is the #1 supplier of compiler software for Infineon, a large European semiconductor manufacturer, for its AURIX TriCore chipset for the automotive industry. From early June, large car manufacturing production plants in Germany and Sweden reopened. TASKING's pipeline of opportunities is solid as it moves further into fiscal 2021. I am pleased to report that Altium maintained strong control over its operating costs. We adjusted to the pandemic conditions and operating expense growth was restricted to 8% at $113.5 million for the fiscal year. Altium reported an EBITDA margin of 40%, 35.8% if we exclude the impact of AASB 16 leases and the PCB:NG remeasurement of contingent consideration. We finalized the legal lawsuit with the founders of PCB:NG. In February, we reported a write-back of $2.3 million related to PCB:NG contingent consideration. The final write-back is a total of $2.9 million for fiscal 2020. PCB:NG has been moving forward with tooling, installation and factory optimization to be operationally stronger and better aligned with our transformative agenda than it was at the time of the acquisition. In the future, we remain committed to delivering to the Rule of 50 on an annual basis. Turning to tax. Altium continues to leverage opportunities to increase shareholder value by optimizing our worldwide tax structure. The U.S. Tax Cuts and Jobs Act in 2018 required changes that were incorporated into our 2018 tax calculations. The reform also included a deduction in the U.S. related to foreign-derived intangible income, FDII. The deduction reduces the U.S. tax liability for foreign-derived income. Altium would not have seen a benefit for this deduction in 2018 due to the existence of prior tax credits. However, Altium recently completed a restructuring that will allow us to take advantage of the deduction moving into fiscal 2021. This new tax deduction will decrease our effective tax rate beginning in fiscal '21 to a run rate between 22% and 25%, down from our previously stated 27% to 29%. Fiscal 2020 was impacted by a onetime revaluation of the deferred tax assets and the deferred tax liabilities, which caused an accounting charge of $16.4 million to tax expense. The positive impact of the FDII deduction will be to reduce the amount of cash taxes paid. It will also have a positive impact on EPS in fiscal '21 and in future periods due to the lower effective tax rate. Reported earnings per share, EPS, are negatively impacted in fiscal 2020, falling to $0.236. Normalized EPS, which we have been -- stated net of the accounting adjustments for the future value of the deferred tax asset, increased year-over-year to $0.4245. In the normalized metric is a representative of the operationally driven current tax charges to tax expense, removing the future valuation aspects of the deferred tax assets. Lastly, as Aram mentioned, our move to Altium 365 has started a transition of our revenue from perpetual license and software maintenance subscriptions to term-based licensing and SaaS subscriptions. Our current rate of recurring revenue is 60% of our total revenue, and we expect this will grow significantly over the next few years. We have developed an internal model for this transition and will share details of the modeling with you. Due to a large portion of recurring revenue and as our Altium Designer subscription revenue is already prorated on a linear basis, we do not expect any material short-term revenue impact. This wraps up the formal part of this call. I will now pass over for Q&A.

[Operator Instructions] Your first question today comes from the line of Lucy Huang from Bank of America.

I've just got 3 questions. So firstly, you mentioned that you're now promoting the term license in the business. Just wondering if you can give us some thoughts on whether you think, over time, this is a more preferable model versus a typical onetime license, say, plus subscription? And do you think there's a possibility that you may be pushing this revenue model a bit harder down the track? And then just secondly, in terms of your FY '25 target of $500 million revenue and also 100,000 subscribers. So you mentioned that there's around a 6- to 12-month potential delay. Just wondering where you think, I guess, the delay would come from. Do you think it's mainly subscriber growth? Or do you think it's a fact of moving to the term license model or pricing? Or do you think it's a function of both? And then just thirdly, in relation to the Altium online store. Since launch, if -- can you tell us or give us an indication as to what proportion of new sales have come through the online store? And what are the economics of selling online versus direct? Are we seeing better efficiencies through this model?

Okay. Thanks, Lucy. I'll take your first question related to the move towards term. I guess I would like to share our thinking about the move to terms. It's -- we think of our company as a hybrid company. We have software that -- it's a software product, and then we have Altium 365, which is software-as-a-service. They together represent our offering. So it's a hybrid system. Now as far as our move to term, we believe that, that naturally is going to be helped by Altium 365. Essentially, Altium Designer is going to be needing Altium 365 for all collaboration and access to cloud and the network. However, the Altium Designer software will remain as a perpetual software. We do not have any intention to force our customers to switch from perpetual to term, and this is a fundamental thing for us. For a platform company on the cloud, there is no greater asset than that of customer trust. So our recent promotion around term-based licensing is pretty much motivated by the fact that we believe under COVID, some customers could benefit by having access to term-based licensing. Now it is true that I think just as our customers get more comfortable with 365, it might make sense for them to go on term. But there is no move such as Adobe's or Autodesk's in terms of forcing our customers to switch to term. But I think in our case, it would naturally occur.

Your second question related to the 2025 target, and where will the impact be? You're talking about the slip. It's really -- I'll let Aram add color, but it's really around the uncertainty around COVID and the base that we're starting with today. So being conservative, we want to make sure that we understand the impact of that moving forward. And you see in the investor deck, we have a range of possibilities on revenue out in time, something we've never shown before, but to give a perspective on how we're doing it and we have modeling to support that range. But we still are operating in what Aram mentioned is a pre-COVID environment -- pre-vaccine environment, excuse me. And in that environment, the uncertainty is very strong. So we're seeing solid uptake as we move forward. We've maintained very strong momentum. 365 looks to be an impetus to move things towards a more recurring model for us on a natural basis, but we're not going to eliminate perpetual as we move forward.

And the last part of your -- or the last question was to the digital sales...

Digital. Yes. It was about 10% of our sales in May, June.

Right. The key thing about that is that it's the last component of our man-out-of-loop strategy, which essentially was designed to be able to go after a large volume. To get to 100,000 subscribers, we had to evolve our transactional sales, along the 2 axes of: one, to go after volume; and one, to go after value. And man-out-of-loop is essentially the platform and the mechanism and the strategy for going after volume. And Altium store is the final component which we launched in last quarter, FY '20, and it has been very successful. In fact, it has extended our reach as well. 95% of purchases there are new logo. They're new customers who are buying from many places around the world. So we're very excited about the effect of this digital sales.

And the other side of it is, it is absolutely going to help us in the quest for operational spending control and Rule of 50 as we go forward because it's a much more efficient model. So that was part of the strategy also. So taking the opportunity to implement it and drive it forward has been very helpful with reach as well as convenience for our customers.

Wonderful. I just had one follow-up question, if I can, on the term license model. So in terms of every new logo sale that you make moving down the track, do you think that will most likely come from term or perpetual? I'm just thinking in this environment, that term is the more palatable way to pay for the software. And just wondering whether you think structurally, this is something you will see increase over time. So kind of every new sale is now a term rather than a perpetual plus subscription?

Lucy, as I mentioned in the formal part, we don't really expect any significant shift away from perpetual to term. The last 2 months that we've had a term on our website, we've had some sales, but nothing at the level that is going to change the nature of our revenue away from perpetual licenses. Essentially, it is really making our software accessible to a different segment of the market who are -- who would probably not find a CapEx of around $10,000 is something that they can actually spend, but an OpEx of $3,000, they can access our software at that level. But the answer is that we're not really thinking that this is going to replace our perpetual licensing in the short term, medium term.

Your next question comes from the line of Garry Sherriff from RBC.

Just a couple of quick questions for me. One, pricing. Can you just give us an update? I know you were doing some pretty aggressive price discounting. Where are we currently with that? And what are the expectations, I guess, over the next quarter or 2? Secondly, that delay, that 6 to 12-month delay to the sales target, so that -- so we're talking, what, a 5% to 23% change, are we, to your 2025 sales target? I just wanted to confirm that. And the final question was in relation to the Dassault partnership, SOLIDWORKS in particular. Can you just remind us what the sales contribution was from SOLIDWORKS for FY '20?

Yes, I'll start with the last one because it's the easiest one. The contribution from SOLIDWORKS was their minimum contractual obligation of $2 million. Related to the flight path, I think, to 2025, again, it's about risk, and there's a variability in there and the lower base we're starting from. So we're still planning and the $500 million is still very much on the table, but in conservative mindset, we're saying we may extend that 6 to 12 months. It depends again on how this short-term COVID period works because that's the basis for your starting point, that are inflexible.

Okay. Well I'll take the discounting, which is your first question. The key thing to appreciate is the subtlety of our strategy of our transformation through dominance and how we're executing against that. Dominance and transformation are closely connected, but they're not the same thing. Dominance is about momentum and kind of taking no prisoner attitude while transformation is about capitalizing on opportunity and value creation. So I guess I'm known for using cricket analogies, and I'm going to use the cricket analogy and see how it goes. I think it's very important to actually appreciate our strategy and the way we're executing against it, particularly in the next 5 years. We have changed our strategy. As I explained that in November in Sydney that we were pursuing market leadership for 7 years, and line and length was our strategy, again, a cricket analogy. And then now we are pursuing transformation through dominance. Now you can think of transformation as batting, and you can think of dominance as bowling. I hope you follow cricket. Because what we see in the next 5 years is like a test match. And for us to win it, we need to take 20 wickets. No matter how many runs we make, we won't be able to win the test match unless we take 20 wickets. And this means that we have to be prepared to pitch the ball up and occasionally to drop it short. We might give a few runs away here and there. But we are not going to win by playing defensively. We did not want to lose much momentum under COVID. Now that has played very well for us. We have taken a wicket, that was a key wicket and that is launch of Altium 365, and it's off to a great start. We have exceeded 50,000 of subscribers, and we also launched digital sales. So we're very pleased with that. But it is -- you've got to appreciate that our pricing strategy is for the winning of the test match rather than maintaining an average run rate like a 1-day cricket.

Okay. I think that's somewhat clear. Just in terms of that price discounting, so I mean, it was 40% price discounts in place until the 30th of June, and then that was tapered back to, it looked like 10% to 25% type discounts on average back in July. I'm just wondering where it's currently sitting. Is it still at that 10% to 25% discounting range, I guess?

Yes. It's in that range. It's going to target back up as we move forward. I mean part of that is we introduced the term, and that's another element that had not been promoted in the past heavily. And term is something that we think will support our perpetual license for the folks who want license, the people who need a better pricing arrangement look to go to term. The key point of the discounting is really momentum, maintaining the momentum. And you see it in the number of seats we sold, and you see it in 15% growth, which is very solid growth. And you see it in our subscribers, we had record growth of 17% to get over 50,000 -- to 51,000. So that momentum sets us up for recurring revenue going forward. And 365 sets us up to continue increased renewal rates as we move forward. So you see upside in renewal rates and you see recurring revenue increases because of 365.

Okay. And Joe, did you say that the price discounting was going to go back up? Did I hear that correctly?

It's around 10% and we're sliding it back up as we move into September.

Your next question comes from the line of Siraj Ahmed from Citi.

I have 3 questions, but I'll start in order. Just with the first one. Joe, I was just a bit confused about the current environment. Looking at your -- the path to FY '25, I think revenue growth for next year is like 6% to 12%. Just keen to -- can you just touch a bit more on just what you see in the current environment? I think you said there's strong momentum. I was just a bit confused.

Yes, the strong momentum is around dominance in terms of seats and in terms of subscription. So customer reach is what we were striving for in this period as well as giving our customers the ability to meet capacity needs in a tight cash environment for them, which is why we also introduced terms. The range of 6% up going into next year, 6% to 12%, is really a function of uncertainty as we move forward. And how long does COVID last? Things are opening up in certain areas, but they're also still continuing to be very uncertain, especially in the U.S. and in different states as well as the election conditions, things like that, that we've talked to in the past. We're still very cognizant of that and want to make sure that we incorporate that into the model moving forward.

Got it. That's understandable. Got it. So -- but would it be fair to read through that you're actually performing better than what -- the 6% to 12% right now? Or you're essentially in line?

I would say that we're performing the way we expect to perform for the first couple of months. Things are looking good. We're still strong in the U.S. Europe is normal. It's kind of off a bit in the first months as holidays are going on. Even though they're not traveling, there are still holidays occurring in Europe. So it's kind of interesting. That model is about the same. We're not significantly different than we were in FY '19 at the beginning of the year, pre-COVID, in terms of how we're ramping in run rates.

Got it. Got it. And so you're not seeing -- so just coming back to term-based licenses, you're not seeing a big sort of shift towards term-based license because that's got a -- that's positive for subscriptions, but just, it's got a revenue recognition comparable to [ license ].

Right. It changes -- it does adjust recognition. No, we're not seeing a major shift to term. Term was an intro to allow us to fulfill our whole pricing strategy and we're looking at it as a transition mode because we really want to show the fact that Altium 365 is now capability-driven. So it isn't just a maintenance subscription anymore. It really is a capability-driven subscription that provides service. And if you're not on 365, you don't get that capability. So it's much more in line with that, and it's a much better recurring revenue model for us.

Got it. Aram, just 2 questions for you. Just first one, so looking at the EBITDA ramp-up as well, you still -- it looks like cost growth is going to slow to 6% next year. Just keen to understand how you think about the short term versus medium term in terms of R&D and development. Would have thought that given you have a large TAM opportunity, cost growth -- you should continue to invest in cost. Yes, if you could just talk to that. And secondly, just keen to understand where we are on the Altium 365 monetization. You did touch on China. I didn't quite get the complete picture. If you could address those 2 things, please.

Sure. So as I said with the Rule of 50, it's a floor, and you can see in the next 3 years is quite conservative. We've just been, I guess, focusing on the conditions that we're in and also the fact that we've got to invest in the platform, and there are many opportunities, as you said. So you can say that in the pre-vaccine world, we do our best to stay above Rule of 50, but there's so many uncertainties around that, that we can't really -- yes.

You can see in the investments that we've done in the second half of the year, when pandemic was hitting, we toned down everything that we needed to do. We went remote. We did all of those things. We increased some software to support the remote move. But we also shifted resources into the internal investment around 365 rather than hiring resources. So we were pretty agile on making those shifts. And you see we continue to invest in 365 and in R&D, and that will continue moving forward. There's always stress on the Rule of 50, but it is -- I mean, line and length is ingrained in this company. So they understand line and length very well and it's a DNA-type thing, I believe. Rule of 50 is a way of expressing that and it's still allowing us to do the investments. So there is serious consternation around where we put our money. I think we can manage to it. It really depends on how the opportunities go and the uncertainty in the first -- this first year, FY '21.

Sure. And I think my last one was just on Altium 365 monetization, just next steps. I think there's the Pro mode as an enterprise mode, et cetera.

So the monetization, if you -- I guess as far as the monetization is concerned, if I were to just describe it in a very short way, it would be through premium services. There will be 3 different types of premium services related to users, partners and manufacturers. But it's not too early right now to describe the exact way of monetizations, but those are the axes. You can think of -- for example, as a premium service, you can think of Amazon Prime, for example, is a premium service. Everybody can go to Amazon and purchase things, but Amazon Prime is a premium service. We'll have that for users, which currently we're not charging users, we're only charging seats. And also [ apps that ] will be running on this platform. Partners who want to have their applications connected to this platform. Again, it will be through a premium service. And the same applies to all manufacturers, where they will be connecting to Altium 365, and there will be a cut associated with that. So that's the general philosophy about the platform and monetization.

Your next question comes from the line of Josh Kannourakis from UBS.