Enghouse Systems Limited ($ENGH)

Good morning, ladies and gentlemen, and welcome to the Enghouse Q1 2026 Conference Call. [Operator Instructions] This call is being recorded on Friday, March 13, 2026. I would now like to turn the conference over to Mr. Stephen Sadler, Chairman and CEO. Please go ahead.

Good morning, everybody. I'm here today with Rob Medved, Chief Financial Officer; and Todd May, VP, Legal Counsel. Before we begin, I will have Todd read our forward disclaimer.

Certain statements made may be forward-looking. By their nature, such forward-looking statements are subject to various risks and uncertainties, including those in Enghouse's continuous disclosure filings such as its AIF, which could cause the company's actual results and experience to differ materially from anticipated results or other expectations. Undue reliance should not be placed on forward-looking information, and the company has no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Thanks, Todd. Rob will now give an overview of the financial and business results.

Thank you, Steve. Good morning, everyone, and thank you for joining us today. I'll begin with a brief overview of our first quarter results for fiscal 2026. Overall, the first quarter reflects a continuation of the operating environment we've seen over the past several quarters. Customer decision-making remains somewhat cautious in certain markets, and activity levels continue to vary throughout the business. Against that backdrop, our results reflect stable operations, continued profitability and strong cash generation. Revenue for the first quarter was $120.1 million compared to $124 million in the same quarter last year. The year-over-year change reflects a combination of factors within our operations, including the timing of product and services activity and normal variability in customer purchasing patterns across our customer base. Maintenance services revenue was lower year-over-year, reflecting expected levels of churn within portions of the installed base, which is characteristic of this type of revenue and something we continue to manage over time. Looking sequentially, revenue was also lower than in Q4. That primarily reflects the timing and inherent variability of hardware-related transactions, which can be uneven from quarter-to-quarter, as well as softer professional services activity as some customers deferred or delayed project starts. We continue to see a degree of customer caution in certain markets, particularly around the timing of larger or more discretionary services engagements, and visibility remains somewhat limited. Recurring revenue, which includes SaaS and maintenance, was $84.6 million and represented 70.4% of total revenue for the quarter. While modestly lower than the prior year, recurring revenue continues to represent a substantial and an important portion of our overall business. It contributes meaningfully to the predictability and stability of our results and remains a key focus as we manage the business through the current environment. From a profitability perspective, adjusted EBITDA was $31.1 million, representing a margin of 25.9%. Operating income was $28.3 million and net income for the quarter was $17.5 million. These results reflect continued attention to cost management and operating efficiency across the organization, while maintaining the flexibility needed to support our various product lines and customer bases. During the quarter, we also continued with targeted alignment and efficiency initiatives in specific areas of the business. These actions are consistent with our long-standing operating model and are intended to ensure that our cost structure remains aligned with current activity levels, while preserving the ability to respond as conditions change. We remain focused on maintaining margins and supporting our recurring revenue base across the portfolio. Cash generation remains a consistent strength of Enghouse. Net cash provided by operating activities, excluding changes in working capital and income taxes, was $31.4 million in the quarter, and we ended the period with $260.2 million in cash, cash equivalents and short-term investments. This level of cash generation and balance sheet strength supports our ongoing capital return activities, including dividends and share repurchases, while also providing flexibility to fund internal initiatives and evaluate acquisition opportunities as they arise. Reflecting the strength in cash generation, yesterday, the Board approved a 3.3% increase in the company's eligible quarterly dividend to $0.31 per common share payable on May 29, 2026, to shareholders of record at the close of business on May 15, 2026. This represents the 18th consecutive year in which the company has increased its dividend. It's also helpful to consider the business mix when looking at quarterly results. Enghouse operates across a range of software markets and solution areas, and performance naturally varies by product and customer group from quarter-to-quarter. In the Asset Management Group, revenue was $52.8 million for the quarter compared to $50.8 million in the same quarter last year, reflecting steady performance and the inclusion of Sixbell, which was acquired during the quarter. Elsewhere in the portfolio, activity levels were mixed, reflecting normal variability in license sales, professional services timing and recurring revenue across a broad installed base. Overall, this mix continues to contribute balance to the consolidated results. Turning briefly to technology trends, including AI. This continues to be an area of active discussion with customers. We are increasingly seeing customers ask how AI-enabled functionality might be applied within their existing systems to improve efficiency, automation or insight. At the same time, many of the environments we serve are operationally complex or regulated, and adoption tends to be gradual and use case driven. In parallel, we are also using AI internally in targeted ways to support efficiency and decision-making across parts of the organization. Our focus remains on identifying practical applications of AI within our platforms, where there is clear customer value and a path to monetization, rather than treating AI as a stand-alone offering. In summary, we are continuing to operate the business with a focus on stability, profitability and cash generation, while remaining disciplined in how we invest and allocate capital. The fundamentals of the business remain sound, and we believe we are well positioned to manage through the current environment. With that, I'll now turn the call over to Steve.

Thanks, Rob. The markets in which we operate today continue to be difficult as our customers try to understand the impact of changing tariffs, the impact of the global conflicts and how to best implement AI to monetize their substantial investment. We use AI in a hybrid strategy model, leveraging industry-leading external models for immediate productivity, while building solutions on targeted investment. We continue to implement practical AI, like Rob said, and we've done this for years when new technology comes out. We -- our recently established AI teams have started to implement applications to improve efficiency and many internal solutions, which are now being called AI software that we have developed over the years, again, using technology. When looking at AI, you've got to ask when someone says they've laid off staff or done something, which AI solution allowed this to happen, as many are just attributing AI to all things, the cost reductions, revenue, et cetera. So I thought I'd give a few of the ones we've used over the years and are continuing to use in some form. Virtual agents, which can be monitored, measured and reported on, just like human agents. This is an early activity for us as AI still does not provide the accurate answers in all cases. Agent assist, which is designed to make human agent handling conversations more efficiently, and we use the Google technology for this aspect. Quality management system, which connects our own transcription service to translate voice, e-mails and chat, which allows for analysis of every conversation and will handle the analysis of virtual communications as well. SmartQuality, which enables communication [ that our ] supervisors to analyze how each call is handled and to listen on problematic calls, for example, when a customer or someone raised their voice, it routes it to the supervisor, who then can listen to the call. And of course, the one that's in the news a lot today, R&D development and quality assurance of programming code continues to -- we continue to develop using new AI tools, sometimes with different platforms. For example, Claude recently came out, and is proving to be a little better in developing code than some of the prior AI platforms. On our video features, they also include summarization of videos and automatic multilingual subtitles. This also is a continuing development of our AI usage, again, only to improve profitability and increase productivity and efficiency. We don't do it for fun, we do it because it may -- gives us results. But back to capital deployment. With respect to capital deployment, we are purchasing Enghouse shares using our internally generated funds and our substantial funds on hand. We believe our -- purchasing our company's shares is a good use of our funds. As noted, we have only increased our dividend very slightly this year, reallocating the historical dividend increase to repurchase of our shares. We believe that purchasing our own Enghouse shares seems to be a good allocation of our capital currently. But we continue to see acquisition opportunities, which will have a good return on our investment as well, but the completion of such opportunities requires further risk-based due diligence to ensure our ROI will be achieved and the business of the opportunity will not be seriously disrupted. I would now like to open the call for questions.

[Operator Instructions] Your first question comes from Erin Kyle with CIBC.

I just wanted to start right there on capital deployment and M&A, Steve. So maybe if you can expand a bit further on just what you're seeing from an acquisition perspective? Are targets still expecting higher multiples in this environment? Are you seeing owners holding off on hopes of market recovery? Just how should we think about the pace of deployment for M&A here?

You've got a lot of questions there, but I'll see if I can cover them off. First of all, in the public markets, software, as you can tell, is getting beaten up, firstly, everywhere. Initially, when AI came out, it said contact centers would go to 0 where you wouldn't need people. A lot of -- not our clients, but a lot of contact centers who tried that are now hiring back the staff because it doesn't really work as well yet that they believe it to be. And they -- the applications seem to be more promotional than actual reality. However, how does that impact? Of course, acquisitions or capital deployment, a public company software are reasonably priced, i.e., we believe there's an opportunity there, but they're larger acquisitions, and that's why we tend to hold our funds. In the private market, they still are looking back a year to 18 months. They just still believe that the value is right. And so they're waiting for higher values, but they also haven't really done a lot of work to understand how AI could disrupt their business. So it's taking us a little bit longer to, again, examine and do better due diligence because we don't want to make a mistake. Our commitment is, if we do acquisitions, they'll add to shareholder value, and we want to make sure we do the right ones, but there's quite a few to look at today. It just takes time. It takes a little longer to go through them.

Okay. So fair to say they're -- kind of in summary, the acquisition environment does remain attractive, just the due diligence process that you're undertaking in evaluating acquisitions is a bit longer in this environment?

It might even be better than attractive, okay, only because everyone's believing AI is going to take over everything, okay? And the promotion exceeds the reality in our view. So that impacts the market. But it will have some impact. So we've got to analyze that impact when we're looking at acquisitions, which adds another flavor to it because as you also know, AI is changing rapidly every day. So it's not a matter of what it's doing today. We've got to sort of make some assessment what will it do to a business tomorrow.

Okay. That's helpful. And then I just wanted to switch gears just on some of the churn that you called out in the MD&A. Churn from Lifesize, it was mentioned again as a headwind this quarter. Churn there just seemed to be a bit persistent. Is there anything specific to call out there? You did acquire that acquisition a couple of years ago now at this point. So I just want to see if there's anything else to call out?

It's flattening out, on the Lifesize part. And again, a lot of people are trying to assess, should you buy today or wait to see when all this noise clears. There's a lot of noise in the marketplace. But there's nothing really different than before. It's just more of the same, and people are getting more nervous and they just don't know where the future is going. So they're being more careful with their dollars as are we.

Your next question comes from David Kwan with TD Cowen.

I was wondering just on the decision for the dividend increase this year, obviously being less than the 10% plus that we've seen historically. So it sounds like it's more being driven by some allocation that you guys are focusing on the share buybacks, obviously, given how the share price has performed. But is the right way to think about it is that maybe -- is there like a fixed amount that you kind of want to allocate to dividends and share buybacks versus M&A?

Not really. I mean how we looked at the dividend part, we usually increase the dividend, as you pointed out, for 10 years by 10% to 20%, 15% to 20% usually. When we look at things today -- and we didn't do a lot of buybacks. I generally don't believe in the buybacks because what I do is I'd rather use that for M&A or dividends rather than just buy back our own stock. However, looking at where our stock price is today, we always assess where we should deploy the capital, and we concluded that our current stock price is better than a lot of the acquisitions. The value of it is better than a lot of the acquisitions we're seeing, especially in the private market. So we believe it is better to put more to the buyback program, which, again, we haven't done much of, but we're doing more of now. And where to take that from, we decided it was better not to take it from acquisitions, but take it from the dividend part where we've always had substantial increases. We still want to increase the dividend a little bit, which we did. The reason why is because we have a commitment to shareholders that we've increased our dividend every year for over 10 years. So we didn't want to change that because I think they expect some increase. We just lowered the amount so we could apply more to buybacks rather than to the dividend. Just went through an analysis of where we best -- where we can best apply our capital. And we believe our own shares is better, in some ways, better than some acquisitions we're seeing and better than paying more out in a dividend, which is really high because our stock has come down and makes it look very high. It is really more in dollar value than we paid, let's say, last year, but it's high now. So we just use -- we're going to use our cash in a different form, which we always look at. It just so happens -- this year, it's now changed to say the buyback is better than doing any more dividends, but we have a commitment that will increase every year. So we did increase a little bit. And M&A, our own stock seems to be a better buy than some of the acquisitions we're seeing, which is unusual.

No, that's helpful, Steve. So I guess it sounds like you're kind of holding some ammo back for M&A as well versus reallocating it to the dividend?

Yes, that's right. The other thing, I think if you look at the marketplace, some of our very large competitors are having trouble, okay? Their stocks are down quite a lot. But more so, you have a company like Mitel, a competitor, went into bankruptcy a couple of months ago. You have a buyer that tries to get out, which is a $2 billion contact center type company, can't really get out in the market these days. You've got many of them going out of the small business area that we're in because they can't make it profitable. Well, we're making it profitable, and we're running things well to do all those things, although it's tough. You can't pick on -- you can't take on any business just to make yourself look like you're growing at a loss. So we are careful in that area. We continue to be. But when it comes it down to our capital allocation, but we believe more should be as a result in repurchasing our shares than are adding to our dividend. We aren't taking the dividend down, we just aren't adding like we have in the past, and we still want to keep our powder dry for acquisitions. And there are some pretty large ones out there that are reasonable value for us, but you've got to convince people to sell at that value because although it might look like a good value on the market, often they say they're worth more than where they are just like we do. That's why we're buying back our own shares.

No, that's great. I guess in that vein, just kind of looking at the buybacks versus M&A versus dividends and just the opportunities I see to deploy more capital on the buyback side, would you not consider then a substantial issuer bid?

We always look at substantial issuer bid, but then I give up a lot of my cash. And as I just said, there's some larger opportunities that I might need that cash for. They're not here. You can never depend on them. But if you look in the market, there is opportunity to do larger deals. The question is what benefit you're going to get if everyone believes contact centers are going to be eliminated, which we do not. We do not see that. We see that changing actually. As I said, we -- the AI has moved on from contact centers because now after staying there for so long and it's not happening, they got to come up with a new thing and now it's all software is going to be eliminated. Well, we'll see. I don't see that happening either. We see AI as another tool that helps us do things better, both software development makes the contact center better, makes our agent answer the customers better. We see it as a valuable resource in a hybrid model with the other things that we do. So we're seeing it a little differently, but we don't see -- the market is treating like it's going to be -- it's going to eliminate contact centers as an example. We don't believe that will happen. It's like the driverless cars today. I'm looking out the window right now, I don't see very many, but I see a lot of cars where there's digital features, looking in your blind spot, stopping automatically when you're backing up and someone's behind you. There's a lot of things that has enhanced over the last 10 years as they talked about having driverless cars, and we'll all be sitting in the backseat while cars drive us around. That may happen in the future. You have to be in the game, but it takes a lot longer than the market thinks. And it -- sometimes it doesn't happen. You look at electric vehicles. They were all be all and end all. And as I was coming in this morning, I heard again of another company, I think it was Honda or something, writing off billions of dollars again because their EV isn't quite working because in all these systems and software, people are involved. Sometimes people want to talk to a person, not a machine when they go into a contact center, unless it's a very easy question because they want to explain it and get the proper answer back, and that still is a little ways off. But we're working towards it. We have to be in it. It's an important thing to be involved in. It's an important thing to look at. And we are certainly doing all those things to keep up with the technology. But in a practical way, not a promotional or -- I'll call it [ hype ] way, where the promotion far exceeds the reality today. But that doesn't mean that won't change in the next couple of years. And we, therefore, have groups that do AI. We have people learning AI. So it changes, we can catch up quickly and be involved.

That's great color. And then just last question for me. How much, I guess, of the targeted $2 million to $2.5 million in cost savings from the restructuring did you realize this quarter? And how should we think about margins playing out for the balance of the year?

We still have -- we were still -- it's interesting. When we do restructuring because we are in many countries, sometimes it takes 6 months, you've got to keep the people fun and pay them. And again, you'll see some restructuring we're continuing to look at and do. Some have -- you have to have consultations with them, and that can take a month or 2 to do, so it delays some of it. So again, that's another item that we've got to look at. So we're approaching it, again, like everything we do. We try and approach it in a practical manner, and it's continuing to do. We still have some more restructuring still to do going forward. We match cost and revenue. If revenues get tougher or something happens, we have to match the cost of that revenue, and we look through all our businesses. We measure everything. We're like a baseball team. We don't know how many times they're up, how many we hit for, how many times do they walk. We measure everything in our business, and we always look at it to see where we could make further efficiencies improvement. The other thing I'll say is turnover is minimal in this market now, at least for us, I hear write-offs of everyone else that they claim to be AI is why they're doing those layoffs. What I would say to you, which is an interesting question. When they say that, you should ask what software solution that they actually do in AI that allowed the layoffs. You might find that AI wasn't the cause of the layoffs in many cases. But that's a good question to ask. You did some AI. What's that solution that caused Amazon to lay off 30,000 people? I mean tell us what it was, if the cause of the layoffs were AI. We find AI is doing it, but not those type of numbers, unless they just were overstaffed and they're fixing a problem. We get that.

Your next question comes from Kevin McVeigh with UBS.

I wonder -- obviously, AI has been in the market. And obviously, there's a lot of questions on it, but just from a different perspective, from a funding perspective and from a budget perspective, are the clients deploying it in parallel with your solutions? Just in terms of any shifts in behavior you'd call out because I happen to agree with you that it's going to be an enabler as opposed to wholesale displacement. But are you seeing in terms of running parallel with you folks? Or any specific behaviors you'd call out?

Yes. I'll give you -- this is an odd thing to say, but I'm going to -- I'll tell you anyway because we're pretty open. The applications are hard to see how to monetize AI. So we set up these 2 consulting groups, and we believe if we work with customers, maybe we'll see an AI application that works. There's a study done by 55 major companies. And we're in the small business, lower end of the market. So it's harder for us to do, where 95% of the proof of concepts didn't work. At least today, it's improving every day, and it didn't work. So we believe if we do work for customers, we might come up with a terrific application that we can take to all our customers because maybe we're not smart enough to see it, but maybe there's somebody there who could point us in the right direction. So part of that is why we set up the 2 AI professional services groups to work with their customers to help them with proof of concept because we have the talent to do it, and we want to learn AI. And from that, maybe we'll pick up some good ideas. It's always good to get good ideas from others. You just don't know where they come from, but we find if we do those services, we might find some that we could use throughout the whole business. So that's why we did that. On our own, we're having difficulty seeing today how that works, seeing the virtual agent. People are getting frustrated and after about 3 times of asking things, they actually hit a button, get me to a human being who I'll talk to about this. So there's still some of that. That can change because it's growing rapidly. We understand that, and we're trying to take a practical approach to it. So that's why we're doing it the way we're doing it.

That makes a lot of sense. And then just as you think about, kind of when -- obviously another change in the industry a long time ago, shift from voice to some software, right? Has it been at the same pace in terms of how you're recognizing the revenue? Or I guess, more so just, I guess, the cost and what you're able to charge for kind of the -- because obviously, that almost feels like a more dramatic shift when you went from live agent to software. Just any thoughts on -- just some perspective because I was trying to understand what's happened in the past to try to parallel what could potentially happen with AI.

Yes. The good news is, at least for our management group, there's got a lot of changes over the years. I mean it used to be called a help desk where you phoned in and got a help. Now it's -- we have many things. It could come SMS messaging, it could come in as an e-mail or they could call in. And in fact, when they do call in, we -- I'll give you a little example. We use software that translates that voice into digital so we compare everything together to see how an agent is doing. We don't want to miss out on that part of it. Now in doing that, we started using Google to do that translation. Too expensive. We couldn't do it. So we wrote in about 3 months, our own system, which does the translation. Costs went down by 80%, 8-0 percent, not 8%, 80%. So there's a lot of things we're trying to learn by doing this and how to get efficient in doing it. Some of it, we use the platform people because they're very good at it. But some areas, it's too expensive to do. So we are looking at all those aspects, how to analyze better. Like when we have a virtual agent, you've got to -- you're going to charge more for a virtual agent than you are for one that isn't because you're taking -- they're taking advantage of not having a person there. But you got to be careful, the virtual agent has to be reasonably good or else they'll say, what am I doing here? So we're developing that over time. That's a very early stage on that virtual agent for us because we're still trying to get the software to do that properly. And remember, you've got to tie that to, say, a large language model. We actually use a small language model because our customers are smaller. We don't have giant contact centers of thousands of people. They generally average between 50 and 250 agents. So it's a smaller base on which to deliver. So -- and therefore, we're a smaller time frame. You don't want to keep history for 10 years. We can do something like an agent monitor them for a month or 2 and do an analysis on how well they answer calls. Even the virtual agent, how many times did it actually answer or did it move you over to a real person. So we're still -- it's still new. We're trying it all. You have to be there. We're learning a lot by doing it, but there's a lot of moving parts right now. And it takes some time. And in doing that, you're doing that while still marketing and still trying to add revenue and value with what you've got today. Again, I think 70% of our revenue is recurring, but some of that is older revenue on-prem. And there are some customers who are going back on-prem. The latest thing for AI is they don't think SaaS is going to work getting more. You got to read all the stuff. I'm reading it, trying to learn as I go. And there's a lot of different views out there right now. And the true answer is they don't know. And we don't know. So we're trying to keep our finger in all the games. So we're there when a trend sees is really working, we want to be there to get on it quickly. So that's what we're trying to do rather than just spend a lot of money trying to experiment with stuff. We're more like to make money, and we'll be there a little late, but we'll get there quickly because we're still involved in the game.

Very helpful, and congratulations on the execution.

[Operator Instructions] Your next question comes from Paul Treiber with RBC Capital Markets.

Just had a question on -- you mentioned earlier that you're expanding the due diligence on acquisitions just regarding AI. Can you share some thoughts around what your checklist is or evaluation criteria to assess AI risk or AI resiliency for acquisitions?

To get that, Paul, you're going to have to give me an acquisition and be involved in it because it's not a little list. And again, it's not just doing AI. We're looking at all aspects of the business, but we've got to sort of see what's the risk of the it, the business being disrupted by AI. That's a lot of things to look at. So that also means you got to know what AI can do and what it can't do right now. But what's that going to be like in a month? What's that like going to be in a year? So we're taking it a little slower on that when we're looking at some of the deals. And some of them aren't in -- even AI, we don't think will change much there. And maybe we're wrong. So we got to assess that and looking at the risk of any deals now. Another factor you have to look at -- one of the key things they do in valuations, they always say, well, what's the terminal value? And that could be at 5 or 10 years out. If you do a valuation, there's always a terminal value. It's pretty hard to tell what that is today. And therefore, we're probably a little risk adverse, that may be positive, but it may be a negative because it means we should be a little -- if we took a little more risk, we might get more done. Investors might like that, shareholders might like that, but I have to live with it. They don't have to fix it if it doesn't work. So we're careful. And maybe that slowed us down more than it should. But opportunities are actually greater because everyone's worried. Remember, the promotion by everyone out there is contact centers, as an example, are going to be eliminated. That's not going to happen, okay? Like cars aren't eliminated -- driverless cars, they haven't taken over. And that's 10 years when they've told me that initially because as an old guy, I go through all that stuff and remember it. So there is -- there's a lot of work, still more work to be done to say -- and if you do, do it as -- our investors are going to say what they spend their money on that for, keep the cash because we don't think in 5 years, it's going to be worth anything. So we got to assess all those things, and we do it the best we can, and it changes very rapidly every day.

The second question is just on the AMG side of the business. I think a lot of the talk has been on IMG and the dynamics there with AI. In terms of AMG, what have you been seeing in terms of customer interest in AI and either uptake or delays regarding new software deployments just related to AI uncertainty?

Yes. Certainly, and I should mentioned this too, we always talk a lot about contact center because it seems to be the thing in the market. Our contact center revenue is down quite a bit in the sense of our total revenue these days because with the other revenue from our transportation, our new deals that we did and our networks have been increasing, while the contact center has been going down because of Lifesize and things that we bought in that space that we're trying to fix up. So we -- our contact center is a little bit smaller. But your question about, let's say, networks or AMG. AMG is really networks and transportation. There's less of an issue there right now, but there's a lot. They want to have a system, AI that goes through and maybe guesses if a person is going to go off the system. But you're talking, let's say, a person renewing their Internet or even their phone, $30 a month. That's what they -- so it's not as big to really apply to know that 1 or 2 customers go off. So you've got to do it slightly differently. There's less comments from our other areas on AI, but it still impacts them. They still wonder where it's going. The big one in networks is how do you detect fraud? How do you detect cyber? How can AI do that? That's the plus. The negative is how is AI going to change that, so you've got more risk on cyber, et cetera, because the bad guys are going to use AI as well to disrupt your organization. So if you use more of it, they might be able to implant it somewhere and get it. So all these factors are still talked about, a lot of thinking going on them. We look at it, we did -- we've set up groups in both AMG and IMG to do AI, small groups, 4 to 5 that we want to do. We have people who've been doing it internally. So we're just going to focus their knowledge a little bit more and go out to customers and say, look, we have a group who knows this stuff. We're not as expensive as the California teams who are out selling this service for them. It costs millions. So we can help you with your projects, and maybe we learn something by it. We may get an application from it. And we're on top of the direction of where a lot of people are going. So we have -- we did it by having this service that we just set up in January. It's starting to show a little bit of traction, but it's very new. But it's really done to help us learn more and help us come up with good projects that customers want that we can apply AI to and maybe take to other customers that we have as we learn from work we're doing with customers. And the good news for me is they actually pay for it. So that's good, too. I don't -- it's a big cost to do the AI like many are doing and spending money on. We actually at least cover our costs in doing that type of a professional services business.

And then just one last question for me. Just on Lifesize, I believe you had a new updated version of Lifesize coming out early this year. Could you speak to the customer interest and feedback and maybe pipeline for that new offering?

Sure. I think -- look Lifesize, it was an interesting project. We made our payback very quickly on that one because if you remember, we bought it out of bankruptcy. We didn't take on liabilities. And even though the revenues dropped, we're still doing quite well. The new product, their product was a good start that we had for that business. But as we get into it, they have some third-party products incorporated. They're taking a little longer to get out so we can get better margin on that product. So we're still doing that. It's still got some work to do. And again, then we got to introduce the sales staff how to sell this new type of product. All that's going on. It all takes a little longer than everyone thinks. We're trying to build some AI into it. It's just taking a little bit longer, but that's still our plan. We're very close to doing better there, and hopefully, we'll get better traction from our revenue side from it because virtually right now, we haven't done that much because you don't want to put it out there in a customer with third-party products that cost a lot and then tell the customer you want to take those out and put a new one in. They are not so happy with those types of changes. So in some ways, it's slowed down as we make those changes and get the product better before we start putting it in customers. But we are starting to do that now. Hopefully, we'll show some traction on that, but there hasn't been much on it yet.

There are no further questions at this time. I will now turn the call over to Mr. Stephen Sadler for closing remarks.

Well, I want to thank you all for attending the call and your continued support. It's a very interesting technology environment today, and we're handling it in the usual manner, trying to practically do it, not at the bleeding edge, but we're certainly in the game, and we certainly are positioning for the future as well as for the present. And again, you can see that being with the platforms. Three weeks ago, Copilot was good, Gemini was good, and now it's Claude. Like if you start picking on one and putting it on your systems and they change that, what are you going to do? Go change all your systems? It's still a new area, and we certainly believe that it will help. We believe it will improve efficiency. You got to find the right application to do it. And you can't die in the process, which, again, many of our competitors are having some trouble. They're all doing AI because they believe that's what -- and what investors want to hear. We're trying to say, live through it, do the AI, but let's at least make our cash flow from what we're doing. So it's a little different approach, maybe not as fancy as the others, but steady. And if it all blows up, we'll be last man standing. So that's what we're -- want to make sure that we're going to be there no matter what. And if it takes off, we're going to get there quickly because we are spending time and money trying to get paid a little bit for by the professional services group. We're spending time and money trying to at least keep up with the technology, which is going very quickly. So we'll have to see where it all goes. But I think as another company said in one of their calls, we're in inning 1 and not at the end of inning 1. We're at the start of inning 1, and we've got to see how it all fares out and where the -- where you can use technology like we have in the past to make the investment. This time, that technology is called AI. In the past, it's been called other things. For example, we had to go to the cloud with SaaS, now they're saying SaaS will be eliminated. Yes, I'm not so sure. We just built that area up, so that'd be a little unfortunate, but we are still trying to figure out how best to use it to add value for shareholders, and it's not easy, and it's in a very fast-changing environment. So that's sort of where we're at on. It's an honest view. But we're not being left behind. And I haven't said much in the past because I don't want to promote something that I'm really experimenting with in many ways right now. So thank you, everybody. And again, I look forward to seeing you in the future.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.