OneSoft Solutions Inc. (OSS) Earnings Call Transcript & Summary

Good morning, and thank you for joining us for OneSoft Solutions Inaugural Financial Conference Call to discuss its financial results for the second quarter of 2023, ending June 30, 2023. On the call today, we have OneSoft's CEO, Dwayne Kushniruk; CFO, Paul Johnston; and President and COO, Brandon Taylor. The call is being recorded. [Operator Instructions] Before management discusses the results, I'd like to remind everyone that certain statements in this call may be forward-looking in nature. These include statements involving known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. For caveats about forward-looking statements and risk factors, please see OneSoft's MD&A for the quarter ended June 30, 2023, and for the fiscal year ended December 31, 2022, which can be accessed on the company's profile at SEDAR+ and on the company's website. I will now pass the call over to OneSoft's CEO, Dwayne Kushniruk.

Good morning, and welcome to everyone on the call. I'm Dwayne Kushniruk, OneSoft's CEO. Since this is our first financial results conference call and because we have attendees who are new to OneSoft, I'm going to start by providing an overview of the company, what we do, our industry, some history and the progress we've made to date. Paul Johnston, OneSoft's CFO, will then review financial information followed by Brandon Taylor, our President and COO, who will discuss operational highlights. We'll wrap up the formal part of the presentation with our outlook for the remainder of fiscal 2023 and then we'll address investor questions. Note that we report in Canadian dollars, so all financial information is presented in Canadian dollars, unless otherwise stated. With that, I want to start by providing a high-level company and industry overview. OneSoft Solutions is a software company that uses cloud computing and machine learning to help oil and gas pipeline companies operationalize their data to increase safety and efficiencies, and to reduce risks and costs. Essentially, we help pipeline companies to manage their assets and realize their common objective of zero pipeline failures. Our mission is to predict pipeline failures, save lives, protect the environment with the assistance of data science and machine learning. By way of history, our current management team sold our last software company start-up in 2014. And that company developed on-premise software applications. We paid most of the gain on sale out to our shareholders and reorganized our company in 2015, to pursue "born in the cloud" software as a service or SaaS opportunities. OneSoft was one of 9 companies selected from 721 candidates, who applied to participate in Microsoft's first accelerator for data science and machine learning. One reason OneSoft was selected was because Microsoft is looking for companies that they thought could drive digital transformation and significant consumption of its Azure cloud platform by enterprise-level corporations. And OneSoft was chosen, the only company chosen for energy enterprise companies. So part of our team actually lived and worked in Seattle for the first half of 2016, where they worked directly with the Microsoft teams, who were tasked with rolling out Azure and Power BI and the other components of Microsoft's new cloud platform. Our prototype SaaS solution, which we call Cognitive Integrity Management, or CIM, was rolled out late in 2016. Phillips 66 signed on as our first customer in January of 2017, and they ran CIM in parallel with their in-house Oracle-based solution that they had developed as an on-premise application over the prior 16 years. By the end of 2017, so the end of the first year, Phillips had experienced the advantages of using cloud computing, machine learning, and they made the decision to proceed with replacing their in-house solution with CIM. They provided their software IP to our company, along with $3 million of funding so that we could incorporate all of this comprehensive functionality that they have developed into CIM to operate on the Azure cloud platform. By the end of 2018, we were able to deliver SaaS functionality that really all pipeline companies need to operate their business. including advanced data analytics that we leverage with machine learning and along with the capability to address regulatory compliance issues and all sorts of operational logistics. OneSoft today owns the IP to that cloud version of Phillips on-premise software, which is now fully embedded in our SaaS solution and used by all of our customers. Essentially, CIM contains cradle-to-grave functionality that all pipeline companies need to operate their businesses, so that integrity management, track monitoring, data analytics and to handle operational logistics. We fast forward to today, and we now have 15 hallmark customers who use CIM. And this list, as you can see, is mostly Fortune 50, 100 and 500 companies. Our client risk also includes 2 of the industry's super majors who both have international operations. It's worth noting that some of our customers have recently acquired other pipeline operators. I think in the last year, 5 such acquisitions have been announced. And what this will do, this actually serves to increase the pipeline mileage we have under contract and future revenues. We've also signed our first Australian and Canadian customers, and we are currently engaged with potential sales projects in several international markets. Management believes that we have a significant multiyear head start. And I'm not aware of any other solution that has been commercialized to date worldwide that leverages cloud computing, machine learning and data science. Really, the only competition we encountered today are legacy systems and processes. We believe that our CIM platform has established a new de facto standard that leverages these technologies and reflects the next-generation solution for the industry. Our last capital raise was an $8.1 million net financing that we did in April 2019, and we have since managed our cash very carefully. Our cash at the end of Q2 of 2023 was $5 million, and the company's only debt is above $350,000, which is remaining to be paid for an acquisition that we closed in 2022. I want to emphasize that OneSoft does not develop or operate or sell hardware or any devices. Our business is focused on building this cloud platform that automates the ingestion, the alignment and the analysis of various different data sets, regardless of where this data comes from and how it's collected. This is all data that pipeline operators need to manage and maintain their pipeline assets. I want to talk a little bit about the industry and the markets we are addressing. There are approximately 2.7 million miles of oil and gas pipelines in the United States, which represents about 60% of the global infrastructure. About 660,000 of these miles are inspected using devices called pipeline inspection gauges, or PIGs in the industry vernacular. So these PIGs are inserted in the pipeline, and they collect data as they travel along the pipe using a variety of sensors that look for potential threats to failure. From the outset of our business, we decided to focus on U.S. pipelines first because they are highly regulated. Regulators require that PIGs runs be done at minimum every 5 or 7 years, depending on whether the pipelines transport liquid or gas. Legacy processes to maintain pipelines typically use on-premise software, and about 80% of the operators we've dealt with used Excel spreadsheets to store and analyze their pipeline data. We think this is disadvantageous for a number of reasons. Because on-premise computing can't easily accommodate big data, most of the data collected and as much as 95% in some cases, is filtered out and not even considered for predictive analytics. Analysis is often limited to a single PIG data set with no efficient way to compare current and historic PIG data sets. Today, data is typically siloed at midstream pipeline operators and not easily accessible by all staff responsible for the various operational tests i.e., the roles of the integrity and the risk and the corrosion and the crack and the geohazard personnel are typically not integrated, and data does not reside in a common database that multiple departments can use in access. This all contributes to less accurate and much more time-consuming and costly data management and analysis, which negatively affect operational efficiencies. CIM, on the other hand, represents a revolutionary approach to pipeline and data management. So we harness the supercomputing power of Microsoft Azure cloud platform, which can easily handle big data and advanced data science. This allows us to ingest, align, track and analyze 100% of the data that has been collected and some of this goes back decades, which gives us more comprehensive and accurate analysis. CIM was designed to be vendor-agnostic, meaning that regardless of the source of the data, whether it comes from governments, things like soil types across the U.S. weather data, earthquake data, or collected by PIG vendors or other third-party devices or parties, things like SCADA, satellite, LiDAR. Our proprietary machine learning algorithms can automatically ingest, normalize and align all of this data into a single platform where it is analyzed essentially at the push of a button. Without such automation, data ingestion and alignment represents the bulk of the work effort required to manage and analyze data using legacy systems. With CIM, data is no longer siloed and is accessible in a central repository by all SMEs who need it, whether their roles involved integrity management, risk, corrosion, crack, geohazard, it doesn't matter. The long and short of it is, CIM provides greatly improved data management and thereby increases efficiencies and safety while reducing operational costs. Hopefully, this provides new investors with a good sense of what we do and the market we are addressing. I would now like to pass the call to Paul Johnston, OneSoft's CFO to review the company's Q2 2023 financial information. Paul?

Thank you, Dwayne. I'm Paul Johnston, and I'm OneSoft's CFO. I will present the financial results for the periods ending June 30, 2023. I remind you that all figures reported are in Canadian dollars. Before highlighting the specific details of the quarterly financials, I first want to start by highlighting the progress OneSoft has made in growing revenues over the past 7 years. This chart illustrates Q2 was another solid quarter with revenue up sequentially and year-over-year. We're extremely proud that we have been able to produce a compound annual growth rate of 74% over the last 7 years and by 55% in fiscal '22 over fiscal '21. In Q2 2023, revenue was $2.5 million and increased by $1,165,000 or 87% over Q2 2022. The increase was driven by customers expanding their use of CIM by $582,000 and by the acquisition of IM operations on June 30, 2022, which contributed revenue of $521,000. Gross profit increased by $989,000 or 109%. The increase was due to the higher sales volume and the moderation of direct costs, which allowed the gross margin to increase to 75.9% from 68%. Operating expenses, net of cost capitalized increased by $453,000. The company increased the number of staff since June 2022, and wage increases have been selectively granted. [Indiscernible] trade shows and more visits to prospective and current customers increased expense. Higher professional fees related to the 2022 audit and the cost of a withholding and sales tax study in a South American country also drove expense. Expenses capitalized and software development costs declined in the quarter as new product development slowed with staff being more engaged on functionality requirements requested by existing customers. Other expenses increased $111,000 due to higher stock compensation, amortization and foreign exchange loss. These were offset by higher interest income and a payment of $37,500 for the company as a legal action the company conducted over the last 2 years related to a software license agreement was settled in the company's favor. The company also gained 2 patents in this action. Due to the much higher sales revenue and gross profit, the net loss reduced by $426,000 or 43% from $984,000 to $558,000. I now draw your attention to the financial results for the 6 months ended June 30, 2023. Revenue increased by 80% to $4.7 million from $2.6 million in this period last year. Greater use of CIM by existing customers generated $1.1 million of this increase and IM operations contributed $853,000. New customers added $164,000 of revenue. Gross profit increased by 91% to $3.5 million from $1.8 million this period last year, driven by the higher sales volume and proportionately reduced direct costs. The gross margin rose to 73% of sales from 69% last year. Operating costs increased by $709,000 or 21%. Cost was primarily attributable to the increase in staff complement, salary increases and higher accruals for year-end incentives. Higher trade show attendance and sales travel caused cost to increase. Higher accruals for professional fees for the annual audit and related issues also caused expense to rise. Expenses capitalized as software development decreased by $109,000 in 2023, as staff were engaged with software enhancements demanded by our customers. The net loss decreased by 41% to $1.2 million from $2 million in this period last year. The higher sales revenue and gross margin were the primary factors causing the reduction in the net loss. Looking at our balance sheet. Cash increased to $5 million on June 30, 2023, due to improvements in the company's cash flow. Trade receivables increased by $418,000 due to 2 customers. The company believes it will collect these accounts in Q3 2023 and reduce accounts receivable to more normal levels. The company's only debt was $353,000 as at June 30, 2023, and was incurred to acquire IM operations on June 30, 2022. The working capital at June 30, 2023, was $864,000 versus $1,429,000 million as at December 31, 2022. The working capital reduction was primarily caused by the increase of $1,670,000 million in deferred revenue. Deferred revenue exists at OneSoft due to the company requiring its customers to pay the annual cost of their CIM contracts at the start of the contract fiscal year. We report the payment as deferred revenue and then gradually recognize it as earned revenue as the services stated in the CIM contract are delivered to the customer. The prepayment of contracts is a very good source of financing for the company. The table shows that in the 6 months ended June 30, 2023, the company received $5.1 million in payments from its customers and $3.4 million of services were delivered in the same period. The company believes its cash of $5 million and accounts receivable of $711,000 and expected future cash receipts are sufficient to finance company operations, and there will be no need to incur additional financing unless a special situation, such as an acquisition or merger opportunity were to arise. On this slide, we're showing our adjusted EBITDA. This is a regulatory requirement that we give prominence to -- or that we show the composition of our non-GAAP figures compared to GAAP figures. So we present this for your information. Now moving to our guidance for 2023. We are reiterating our guidance for 2023 and continue to forecast revenue to be $10.1 million, up 47% year-over-year. We anticipate the loss to be $1,297,000 million and adjusted EBITDA loss is forecast at $28,000. Please refer to our Q2 2023 interim financial statements and management discussion and analysis published on SEDAR for more information. This concludes my overview of the financial results. I will now turn the meeting over to Brandon Taylor, President and COO of OneSoft for operational remarks.

Thanks, Paul, and welcome, everyone. As Paul mentioned, I'm Brandon Taylor, the President and COO of OneSoft. I'd like to go into more detail and explain some of the new additions that we added and the recent released MD&A. And also I'd like to give everyone a general update just on operations. One of the metrics that we used to measure success here at OneSoft is the number of miles under subscription. And our January guidance, we included miles under subscription and miles currently generating revenue. We use this internally as well as investors have given us feedback that kind of helps them kind of understand where we're headed. This quarter, we added another line item, miles operated by customers. And as I go through my section here, I'll explain where that's going to be important. So this -- the 2.7 million total miles in the U.S. that Dwayne mentioned, this represents the total miles operated by our customers. So if you look at kind of where we are today, we have roughly 17% of the [indiscernible] miles and 7% of the total miles in the U.S. In July, subsequent to the quarter end, we announced the addition of another customer, which is going to add another 18,000 miles, 16% increase to our miles and subscription. We plan to continue to release these 3 metrics for investors to follow our overall progress. And it's important on the total operated miles as we get into different modules kind of [Indiscernible] from a TAM perspective. In past MD&As, for those new to the company, we published a familiar Geoffrey Moore's, Crossing the Chasm. We use this model as both kind of a measurement on where we are in our journey as well as to help kind of facilitate and communicate that to the investor community. In May, we held strategic planning sessions where we developed a strategy to market and sell into [indiscernible] part of that early majority customers. During our sessions, we stack ranked all of our modules represented as these [indiscernible] in this diagram to basically help evolve CIM into that whole solution, which is what we're going to need as we kind of go through [indiscernible] early and late majority. And I'll detail those modules in more detail on the next slide, but our objective was to rank these by total revenue opportunity, the time to that revenue, which is super important and development effort. As well, we transitioned our marketing and sales business processes to focus more on the economic buyer, very strong emphasis on ROI, is the compelling reason to buy, is presented within this model [indiscernible] we just finished the financial ROI and cost savings calculator that's pretty sophisticated with enough historical background from existing customers that projects out and calculates net present value, internal rate of return, modified rate return, et cetera and overall cost savings from the process of current operating stat. As Dwayne mentioned, 80% of our prospects that we've seen historically are running Excel and outsourcing work. So it helps them understand how CIM, Cognitive Integrity Management, is going to save them money. We plan to use this through the entire sales process going forward. We've also streamlined our internal marketing and sales business processes. We built new tools, a lot of back-end stuff related to CRM, refreshed our collateral to showcase that market share within the industry, application proliferation and just the general trend among the industry that adoption of CIM is their standard integrity management solution. And then finally, on this slide, I thought I would mention that our relationship with Microsoft, Dwayne alluded to at the beginning of coming out of accelerator, we consider them a very significant key vertical partner, is gaining mind-share within that organization. They've recently built up their energy sales team, and they've designated OneSoft as their go-to for midstream pipeline operators and are actively bringing us into more deals at the CIO and SVP level. A little bit about our modules. I'll focus here, these are more kind of [Indiscernible] around this whole solution. These are the ones that we're actively working on. And the objective here is to single-source this for vendors for all functionality that pipeline operators need. And today, I'm just going to touch on the areas that we are already in market with or close to launching. We've provided updates on all of these in our MD&A, and I encourage you to read through those. We're continuing to enhance core [Indiscernible] for both existing customers and during onboarding process for new customers. Lots -- these are Fortune 50, 100, 500 enterprise companies, big implementations. Lots of recent development effort has been focused on integrations with their other systems such as SAP, et cetera, went down with those. We expect that the work that we do there can be applied to other customers, which will increase our stickiness and just our continued competitive moat as we keep expanding. Regarding internal corrosion, we launched this last June and have now 2 customers with orders out to a few others. And what work is being done on the new ROI model that I mentioned, specific to this module, customers are actually helping us build out that ROI model to help basically support their internal business case that they take to management. Crack management has been [indiscernible] to launch in H2 of this year. Important note there is in May, we signed a technology sharing agreement with Ted Anderson. He's a well-recognized expert who sits on lots of industry committees that publish the latest standards around pipeline crops, which is a unique problem in the industry. That work is actually going into CIM with the initial launch focused on the larger operators who run these PIGs, these tools that are specific to finding cracks. Due to time, I'll let you read about external corrosion, risk management and bending strains in MD&A. To ensure that we deliver on this road map, which has become very apparent in our strategic planning sessions and looked at that, we filled all the positions which included a product manager, a developer and an account executive. These have included in our budget. And as Paul mentioned, we are still on track to achieve the guidance we provided in January. Finally, I thought I would touch on, we've included the slide as we get a lot of interest from investors related to AI. It seems to be the topic. So we provided more information on this in the MD&A, but I'm going to briefly summarize kind of where we are. The reality for us is the AI [Indiscernible] around data today and particularly in this industry, if you look at how we go through implementation, a lot of these pipeline [Indiscernible] Excel and PDF and data is in different various states. But we see this as an investment and opportunity to leverage this in our solutions in the future. It's just going to require a lot of incorporation of lots of different type of data sets. We're very streamlined on the PIG data, which we call in-line inspection, 7,000, 8,000 in different [Indiscernible] inspections, but we need lots of other types of data sets to [Indiscernible] opportunities. And we believe that's going to start happening as we roll out additional modules. As an example, when we launched internal corrosion, we're now able to gather -- ingest [indiscernible] which they put on the pipeline that data, chemicals that they inject into the pipeline and sampling data, which will be aligned to all of our other data sets that will help us basically leverage that [indiscernible] improve our predictive analytics. This is why we believe for now, it's super important for us to build out that whole solution on the items that we've noted here. And at that point, AI will be beneficial to our customers. And we think it's going to be a very significant and unique differentiator regarding it. It's the large and continuing increasing amount of data. For those new to the story, what OneSoft is doing with the industry is pretty unique. There's not another vendor where operators across horizontally integrity management have given a vendor such as OneSoft into a solution to their data. So we're aggregating that across as Dwayne showed 15, as we acquire new customers as an example since [indiscernible], Energy Transfer just acquired Crestwood, right? So lots of activity happen in the industry there. We believe that this is going to help us pursue those AI opportunities and Microsoft being open AI on their platform to leverage that. Finally, before I wrap up and turn this back to Dwayne, I wanted to mention that we're holding our inaugural user group event, the first week in October. We're expecting 60 users from our customers to join us at the Microsoft Technology Center in Houston. I will hold in-depth working sessions on each of the functionalities and some breakout sessions on new modules to help kind of further advance fees towards commercial launch. We're setting up the steering committee for the first time kind of the Director and VP level within this customer base to make sure that our road maps are aligned to where they need to head strategically and where they have budget and all of that. So we're looking very much forward to that. And I'll have more information on the outcomes of that in future calls. Again, thank you for joining. I'll now hand it back to Dwayne to wrap up.

Thanks, Brandon. So looking ahead, we believe that we are very well positioned. We have a leading solution in the market, and we're spreading that CIM can save money and help to eliminate pipeline standards. Given the way that customers are onboarded, we have real good visibility regarding anticipated growth over the next few years with our existing and new customers that we expect to onboard on to CIM. Management's optimism is based on the organic growth of existing customers. We know they're going to increase their use of CIM as they continue to onboard their pipeline miles over the next few years and increased use by our customers who are acquiring more pipeline assets. And also we're confident that many new customers will be brought on in both the U.S. and global markets based on sales situations we're currently involved in. I'm going to wrap it up. I'd like to thank everyone for taking the time to tune in today for our first quarterly conference call. I'm now going to pass the call back to the operator to start the Q&A session.

[Operator Instructions] I would now like to hand the floor to [indiscernible], who will moderate the Q&A session.

Thank you, Dwayne, Paul and Brandon. We had a lot of questions here. So thanks, everyone, for submitting questions throughout the call. We'll try to get to all of them. But as the operator suggested, if we don't, we will get back to you via e-mail. So we'll start going through these. In the first question. In the MD&A, you mentioned your customers Phillips 66, Energy Transfer and ExxonMobil have made 4 acquisitions and their miles will be onboarded to CIM. Denbury provides CO2 pipeline miles. Does this imply that CO2 miles or hydrogen would be addressed by CIM and PIGs? Additionally, Energy Transfer recently acquired Crestwood, do you anticipate them being onboarded as well?

Brandon, would you like to take that?

Yes, sure. So on the question about CO2. As long as the pipeline operator runs these PIGs, these in-line inspection tools, and that's applicable to the solution, that's basically the benchmark in which we use. And they will run that to inspect the condition of the pipe and probably more frequently just from the perspective, the CO2 and hydrogen are much more invasive on certain types. So yes, they'll -- we'll get mileage from that, and they'll start using CIM to basically inspect the type. Regarding Crestwood, yes, Energy Transfer has in their previous acquisitions, they've just brought them into their integrity group and started loading their miles, both from [Indiscernible] perspective, we would expect the same thing with Crestwood when that deal closes, take some -- they've announced that, but as you know these take time. So it will take some time to get through that process.

Another question about customers. Are the miles from the 4 new pipeline operators acquired by OneSoft existing customers incorporated into the updated KPIs yet?

I'm not sure I understand the question. Can you repeat that, sorry?

Yes. So the miles from the 4 new pipeline operators acquired through the acquisition, are they incorporated into the updated KPIs yet?

Yes. both miles are reported as of June 30. And those are -- I want to point out those are estimates. Those vary on a daily basis, but that's sort of a snapshot of where it was at June 30.

If 18,000 miles were added as under subscription from the new customer, can you talk about how much is operated by this customer? What's the total figure? Brandon?

It was around -- yes, I think it was around 73,000.

True. I would point out that, that would be their mileage in several countries. And the -- typically, a company like this will onboard one region at a time. So we don't want anyone to have a misconception that we're going to be dealing with another 73,000 miles overnight. That will take some time.

Okay. Moving on to the new modules. What kind of difference will it make having risk management, corrosion and crack commercially available? Do you foresee most of your current clients embracing these modules? And then as a follow-up, can you make any comments around how this would increase the TAM?

I'll start, and then I'm going to pass this to Brandon. So I think it's important to understand, when we started this company in 2016, when we started writing our prototype product, it was essentially Brandon and Tim and a few of our key developers got together in the room and basically [indiscernible] out what we thought the CIM platform should be. What's different with these new modules, if we're developing now is the input and the feedback is all being driven by our customers. So it's not -- we're far beyond where we were in 2016, where we had an idea that we wanted to build, hoping we could sell it. I think the thing has turned 180 degrees, and we now have our customers telling us, yes, we also need that, we also need that. Any meeting we go to with our customers, if we're meeting the integrity team on the 11th floor, they're going to say, oh, we've got to take you up to the 13th floor because geohazard strain people want to talk to you, and so on. So we're in a different situation today and very opportunistic for us because our customers are telling us what they want and what they're going to adopt. That also goes back to the user conference that Brandon referenced in October. It's really a working conference. What do these customers need that are going to help us provide the input and feedback for where we need to go. And it's -- we're pretty confident that anything we're building today, it's not built [indiscernible]. It's built to fulfill and no one needs. We're very transparent with our customers. We're figuring out how to price this and so on. Brandon, do you have anything to add to that? You're in the firing line with customers.

Sure. Right. So to Dwayne's point, right, we're a customer-driven organization from a road map. So we used to have H1, H2 roundtable meetings. We've evolved to where we've got enough functionality across different departments within an integrity team that we're now at the steering committee level to help them kind of drive that. So we meet with them to help basically stack rank with us on this is important. This is where I'm getting pressure from regulators, all of that happens. The question on what the impact is we anticipate that we build these -- they're still selling that has to happen on each new module. You got to remember, 80% of these people are running Excel. This is net new to them. And there's really 3 things that we've kind of concluded in industry is to help them reduce the risk, which CIM does. We have to be able to quantify that, save them money, hence, why we're in that stage where we are now about financial cost savings, and we're building those modules, and we're doing that on each new module as well. So it's super important that we continue to do that and then help them generate revenue that at some point, we'd like to be able to show them that they can increase pressure, run the pipeline longer, all of that kind of stuff would be kind of the third quarter [Indiscernible]. We anticipate that they're going to adopt. We have customers now that are adopting internal corrosion [indiscernible] we want it to go, but they are adopting. They're actually working with us to help build those internal use cases. It should be noted that our ROI model and customer gave us theirs as kind of the baseline to help start that process. We sensed that with a couple. So that's the kind of collaboration we're getting with these customers. They want to -- they just kind of build internal use case for it. And then the biggest thing is just about change, so process. These are big Fortune 500 companies. We're a small company. We do it much more agile. They don't. It's like moving titanic in some cases. But once they make the change, they make the change. So we're very encouraged by what we see. [indiscernible] exciting from that perspective. These are road maps that have multiple phases. We're very disciplined in how we do what we call minimally viable, get to a license point and then we go phase 1/2 through et cetera, Crack is an example, I'll use on this call. Our initial release will be about what they call pressure cycle fatigue analysis, and that will be around operators that run these Crack tools. Now smaller operators that we have, customers they actually don't run Crack tools. They just need to do pressure, that's going to be Phase 2. So there will be adoption and we get to that because we get to this whole solution. So we've got revenue all the way marked now through each one of those phases just increments on the consumption economic model. I hope that answered the question.

That's great. It covered also a couple of other questions. Just -- so it actually helped me eliminate a couple. So I guess the next one here is talking about how you're going to be spending in the second half. Will the additions and enhancements be focused on Crack corrosion and risk? Or are there new modules that you've decided to develop? Just trying to understand the second half spending on R&D.