Ladies and gentlemen, thank you for standing by, and welcome to Coursera's Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode and please be advised this call is being recorded. After the speakers' prepared remarks, there will be a question-and-answer session. [Operator Instructions] I'd like to turn the call over to Cam Carey, Head of Investor Relations. Mr. Carey, you may begin.

Hi, everyone, and thank you for joining our Q3 earnings conference call. With me today are Jeff Maggioncalda, Coursera's Chief Executive Officer; and Ken Hahn, our Chief Financial Officer. Following their prepared remarks, we will open the call for questions. Our press release, including financial tables was issued after market close and is posted on our Investor Relations website located at investor.coursera.com, where this call is being simultaneously webcast and were versions of our prepared remarks and supplemental slides are available. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP measures to the most directly comparable GAAP measure can be found in today's press release and supplemental presentation, which are distributed and available to the public through our Investor Relations website. Please note, all growth percentages refer to year-over-year change unless otherwise specified. Additionally, all statements made during this call relating to future results and events are forward-looking statements based on current expectations and beliefs. These forward-looking statements include, but are not limited to, statements regarding the potential impacts of trends affecting our industry and uncertainties in the current economic and educational environment. Our ecosystem, platform, content and partner relationships, our anticipated plans and the anticipated benefits thereof, our strategy and priorities and our business model, mission, opportunities, outlook and future intentions. Actual results and events could differ materially from projections due to a number of risks and uncertainties discussed in our press release, SEC filings and supplemental materials. These forward-looking statements are not guarantees of future performance or plans, and investors should not place undue reliance on them. We assume no obligation to update our forward-looking statements. And with that, I'd like to turn it over to Jeff.

Thanks, Kim, and good afternoon, everyone. We appreciate you joining us. I'm pleased to report solid third quarter performance with revenue growth of 24% to $136 million, reflecting our growing prominence among both individual learners and institutions. Learners are coming to Coursera from around the world, seeking job-relevant skills and branded credentials that can unlock the next stage of their career. We added more than 6 million registered learners in Q3. We also grew our Paid Enterprise Customers, including businesses, campuses and governments who are looking to drive powerful cross-sector collaboration to better meet the needs of an increasingly digital economy. One of the critical components of recent success has been the growing relevance of industry micro credentials across our business. In 2018, we had initial success with the launch of our first two entry-level Professional Certificates. And in the time since, we've grown this category in both breadth and depth adding new partners and job roles while creating stronger connections with career and degree pathways. This year, our catalogs expanded scope became the foundation for Career Academy, an institutional offering that brings together our Professional Certificates and guided projects into a solution that businesses, governments and campuses can deliver at scale to help individuals with no college degree or prior work experience start a new career or switch careers into an entry-level digital job. As we navigate the trends shaping higher education, we believe that industry micro credentials provide a turnkey way for higher education systems to upgrade their curriculum and produce graduates of the skills and abilities that employers are looking for. Let's discuss our latest views on the trends at play and their potential impact on the reinvention of higher education and adult learning. The first trend is digital transformation. The forces of technology and globalization have…

Thanks, Jeff, and good afternoon, everyone. We are pleased with our third quarter results, which continue to reflect a diversified business model that benefits from its exposure to multiple levers of growth. In Q3, we generated total revenue of $136.4 million, which was up 24% from a year ago with strong performance in our Enterprise and Consumer segments. For our enterprise consumers, including businesses, governments and campuses, we are helping their learners adapt to a fast-changing skills landscape and evolve with employer needs as well as producing job-ready graduates. And for consumers, we are increasingly becoming a global destination where learners can secure the digital skills that allow them to remain relevant in the workforce and acquire the branded credentials that can unlock their next career opportunities. Please note that for the remainder of the call, as I review our business performance and outlook, I will discuss our non-GAAP financial measures unless otherwise noted. Gross profit was $88.3 million, a 64.7% gross margin, up 29% from a year ago. This margin was approximately three percentage points higher than the prior year period due to the positive changes in our segment content margin rates. Our Consumer segment's content margin rate increased from 68% in the prior year period to 73% this quarter and our Enterprise segments content margin rate increased from 67% from the prior year period to 71% this quarter. The margin expansion we experienced was driven by learners consuming a larger proportion of industry partnered content, which, on average, can have lower content costs depending on the partners' goals, sometimes with associated additional spend in promoting partner brands as part of our sales and marketing efforts. Total operating expense was $98.1 million or 72% of revenue compared to 69% in Q3 of last year. Sales and marketing expense represented…

Thanks, Ken. Before we open the call for questions, I'd like to expand on an example I shared last quarter as it demonstrates the progress, speed and scale of what is possible on Coursera's platform with system-wide collaboration. In July, I highlighted the recent partnership with Louisiana Tech University and the University of Louisiana Systems. Our initial partnership with Louisiana Tech started as a social impact initiative with the office of student financial assistance via the Louisiana Board of Regions. It was designed to provide low-income high school students and graduates access to Coursera's entry-level Professional Certificates from Google in order to prepare them for college or to begin a digital career. This was followed by Louisiana Tech summer programming series open to faculty and staff that is banded to include professional development opportunities for employees across all campuses within the University of Louisiana Systems. Now the Louisiana Workforce Commission, a state agency responsible for enhancing workforce growth and well-paying jobs for Louisiana residents, is partnered with Coursera to launch Tech Ready Louisiana, a statewide workforce development initiative providing training to thousands of Louisiana. The centerpiece of the program is Career Academy, as our entry-level professional professor certificates were specifically designed to prepare workers without a college degree or prior work experience. Using Career Academy, Louisianians can explore careers develop key skills and competencies, build a portfolio of hands-on projects using actual workplace tools and earn industry-recognized credentials. And many of these credentials have ACE Credit Recommendations, which make it easier for learners to earn credit towards a local or online degree program when they're ready to continue their education. Finally, in recognition of the connectivity challenges that present a real barrier today, the Workforce Commission is making reliable Internet access at nearly 60 sites across the state for learners to complete their Coursera courses. Traditional university degree programs and workforce development initiatives often lack a solid connection to today's in-demand jobs and are often not equipped to adapt to the fast-changing skilled landscape and evolving employer expectations. By leveraging Coursera, an entire system of higher education in coordination with government institutions can foster stronger collaboration with industry by unlocking new development opportunities for students, faculty and staff by diversifying and expanding talent pipelines for employers and by building a more competitive workforce. This is the vision of Coursera's three-sided platform at scale, connecting learners, educators and institutions in a global learning ecosystem designed to keep pace with our rapidly changing world. Now let's open up the call for questions.

[Operator Instructions] Your first question today comes from Brian Peterson with Raymond James. Your line is now open.

So I wanted to start on the enterprise segment. And I'm just curious kind of how the linearity played out through the quarter. And it sounds like you called out some strength in multiple areas. I'm curious if there's any one or two that kind of outperform versus some other areas of that segment.

Brian, this is Jeff. Yes, generally speaking, I would say that we are seeing what some of the other companies who have announced early in the quarter have also been seeing, which is a bit of cyclicality on enterprise spend, especially in more developed markets like Europe and to some degree in North America. What we're seeing, thus, as I kind of mentioned in a couple of the examples there -- we're seeing the government sector continue to go pretty strongly. I think that there's some counter-cyclicality there. And we're seeing a lot of interest as well from education institutions. We're just kind of realizing there might be some counter cyclicality there, and they're thinking about how could we upgrade our curriculum for better graduate placement rates. So, yes, it's nice to have some diversification there. We are definitely seeing a lot of the same macroeconomic things that others are seeing, but I think our diversified model is helping us a bit.

Understood. And just maybe a longer-term question on degrees. I appreciate the macro sensitivity here. But in terms of a lot of your university partners looking at different ways to do this, are we having the conversations now and where we should start to see significantly more programs come in the next few years? I'm just -- how should we think about maybe the longer-term growth rate in that business? Maybe it's hard to say, but just curious to think about the longer-term lens there.

Yes. My sense of this one is there's an overall question about the relative value and demand for the college degree as a credential. I suspect it will be different by region. We're definitely seeing it's different by region. I'm in Bangalore right now and I spent the last 10 days here in India. There is a demand -- the government is trying to shoot gross enrollment ratio up to 50% by 2035. They need 3.3 million more professors to serve 35 million more students. And so a lot of the demographics that folks are seeing in the U.S. is not consistent with what some of the demographic trends are in other parts of the world. And we are seeing college degrees globally be as revered as they have been historically. So when we look at this on a global basis, I think a lot of it is going to be driven by demographic trends. I think that especially when you have rising middle classes, with a real premium on education, you're going to see -- we're going to see a lot of demand for this. So we're very bullish on the future value of a college degree. Another thing is colleges are not sitting still. I don't know, there might have been five or six examples in the scripts about universities putting Career Academy literally into their curriculum, so that when someone graduates, they don't just have a degree, they've got a degree and an industry certificate. I think a lot of people think of college degrees as this static thing that's not going to change. But really, the competition among job seekers is going to be those who have maybe micro credentials and those who have college degree and micro credentials. So I think it's going to almost…

Your next question comes from the line of Stephen Sheldon with William Blair. Your line is now open.

Nice result here. On the fourth quarter, it looks like your guidance hasn't changed much for revenue relative to the midpoint of prior guidance, and it also assumes a bigger loss. So -- is that mainly conservatism and maybe factoring in some increased uncertainty? And then have your investment plans changed at all where you're maybe ramping investments more than you had previously forecast here at the end of the year?

Thanks, Stephen. Firstly, we were happy with the results. As we look to Q4 versus the implied guidance last time, it's consistent, as you said, with our implied guidance. So we haven't forecast anything above that. As you know, we've generally done a good job of hitting our guidance. So we're thoughtful in that selection. From an EBITDA and profitability standpoint, we target an annual number as we always remind people, and we spend more at the end of a particular year. Now we're mindful of costs and especially the operating structure and fixed costs as we enter the new year because we're setting up for the new year always. But where we have opportunities to do things and enhance revenue for the future, we tend to keep investing. So if you will, when we have a beat one quarter, you should expect us to guide lower to the same annual target. And that's been something we've done consistently. But as a public company, this is -- I know you understand Stephen, but for everybody on the call, something we've done consistently since we've been public as well as pre public. We've been doing this for a long time. It's the way we happen to run the Company operationally to try to maximize growth and to grow and win our markets for the long term. So that's what you're seeing there, the mechanical action between the current quarter and then still keeping the same annual guidance for the year. We'll, of course, update that for '23, this coming quarter. And once again, one of the very important things to understand is the way we manage our fixed costs so that we're set to spend appropriately and have flexibility for the following year. That's something that's near and dear to our processes internally.

Got it. Yes, that's helpful. And then it sounds like you're pretty optimistic about the opportunity with Career Academy. So just curious what engagement has looked like so far with them although clearly, it's early since you just launched it this year? And have you seen stronger traction with certain types of institutions relative to others?

Yes. Stephen, this is Jeff. We're pretty excited about it. We are certainly seeing different levels of traction across different types of institutions. For the last -- since we've been public, we've seen the Professional Certificates themselves drive a lot of the growth in the Consumer segment. I think it just speaks to the basic learner demand for this type of learning product. And then when we think about institutions, we think about, well, they're kind of conduits to deliver that kind of learning experience and credential to learners through a channel. When we think about what types of institutional channels have the kind of learner audience that's looking to start a career or switch a career it kind of goes governments for sure. They're really helping work for invest development program, but trying to help people get a bridge to all the incredible job and career opportunities that are being created by digital technology, even as that technology is automating jobs and creating dislocation. So I think it's kind of a government is saying, well, look, we're going to have more dislocation than we thought because of technology, but maybe with these types of industry credentials, we can help more of our people take advantage of and get a share of the kind of opportunity that's coming from that technological change. The second, I would say, is campuses, where maybe for years, maybe decades, employers have been saying to educational institutions and systems, frankly, hey, it'd be really nice if your graduates had some more job relevant skills when they graduated. But affecting the change of helping these educational institutions have the agility to figure out how might we create curriculum that can help produce those types of adults I mean, to some degree, Career Academy provides a pretty…

Your next question comes from the line of Tom Singlehurst with Citi. Your line is now open.

It's Tom here from Citi. Congrats on the results. One question and then a follow-up. Actually, I'm going to start with consumer. Obviously, just keeps on getting better and better and micro-credentials and professional qualifications is the main driver of that. Just interested in what's happening sort of behind this with more plain vanilla university partner content. Is this still performing how you'd expect? Is there any sort of obvious cyclicality or any sort of changes in how the content is consumed and sort of some purchase rates and things like that? That's the first question, if that's okay.

Yes. Tom, this is Jeff. I'll take this one. Yes, I think it sort of depends on the segment. In the consumer channel, we clearly still have a lot of people who are coming and taking university courses. But often, those are not as career relevant courses and more often taken without paying for it. So you just sort of get the videos, but you don't actually get the -- don't get the credential. Most of the consumers, I think, are more career-focused and they're looking for that job training. And so disproportionately what they're paying for in the consumer channel is the industry content. When you look at other channels though, notably the Coursera for Business channel, there are a lot more advanced topics in business technology and data science from universities. They're a bit more cutting edge, and they're doing pretty well. So I would say that -- what universities are generally doing well at is some of the more advanced content in business and technology and data science in Coursera for Business. And frankly, in the Coursera for Campus channel, some of those advanced courses are being used as stand-alone electives where maybe a university doesn't have a large data science staff. I mean, imagine a university, say, in Indonesia, and they haven't really hired up a really big data science staff and maybe there's nobody on faculty who understands the intricacies or doesn't offer a course on deep learning. Well, the university courses on Coursera often touch on these sort of advanced courses, and they could be pretty handy to offer stand-alone electives as part of the university curriculum because they come from a notable university and they're in a cutting-edge field that's not currently part of the course offerings of that university.

Make a lot of sense. And I guess that possibly explains why the gross margins for Consumer tickled above Enterprise. Maybe that's one of the factors there?

I think that's fair, Tom. Yes. Yes.

Second question, on degrees, I mean, I suppose the obvious implication is that the sort of relative weakness in degrees is the other side of the coin of super strong growth in industry market credentials, especially -- or at least in the U.S. But the question is really this, you made a very adequate point about the opportunity internationally, which I totally agree with. But in the U.S., is there any need to sort of pause the rollout of degree programs? I'm just interested in whether it's taking up disproportionate amount of capital that sort of put your shoulders to the wheel on the degree side? Or is that something that can sort of be developed throughout necessarily in the version as sort of setting in too much capital?

Yes. Tom, I think since the time that we have gone public, obviously, through COVID, there are a lot of atypical phenomenon and signal incent it's often hard to parse out what's going to be more enduring and what's going to be more temporary. During that time, unprecedented time, we brought a lot of agrees on platform, and we are learning about, well, which ones resonate with learners and which ones don't resonate so much, and what features of degrees are resonating with learners and frankly, which features of degrees are not. I don't think that it's so much about slowing the pace of bringing degrees on platform, but I do think that there are certain types of degrees and certain types of features that we are understanding are very attractive, especially to working adults. And in the script, we mentioned BITS Pilani, and that -- the features that we described there are the kinds of features that universities are looking for -- that working adults are looking for. And a lot of that has to do with affordability in demand skills, integration of industry content, a convenient ability to start to degree. So you could start at any time online. The way that you have to go through the application process, can it be more performance-based? That's what we're finding is degrees that have those features are performing better than degrees that don't. And so what we're really doing is focusing more of our attention on degrees that have those features currently on platform, on changing degrees that are on platform to adopt more of those features and then sourcing new degrees that have those features. Because we're hearing learners tell us -- we've done quite a bit of research on this in the last six months or so. And working adults are looking for something a bit different than the traditional on-campus degree. I think what we're going to see is that Phase 1 of online degrees, let's kind of just take what was on campus and put it online. And I think Phase 2 is going to be, add some additional features that really work better for working adults. And as those types of degrees come online, I think they're going to better meet the need of a large portion of working adults who want to get a degree, but the does go to really kind of work for them. Ken, I don't know if you want to add anything to that?

Yes, I would just a little bit. Yours is more interesting part, but to get to the capital part of the equation, which is very important and a differentiator on our approach to the business, which is that, yes, while we're investing in go-to-market on degrees, it's not that expensive we believe in the long-term outlook to say the least, as Jeff was talking about. But very importantly, in the near term, there's not a huge capital burden. And there's a misconception out there due to the OPM, the traditional OPM industry historically that would have huge capital commitments before implementing these various programs, the programs, the degree programs. From a marketing cost standpoint, we are much lower priced because we generate our own users, 75% of which are free, as we've talked about ad nauseam almost since the IPO, but super important to understand that differentiation. And secondly, the servicing costs for us are much lower because we act as a platform not doing the production. And that's what's enabled us to compete the way we do. It also keeps -- it keeps the degrees program from sucking up a lot of working capital and net capital we don't share the problems that some of the traditional LPMs did earlier in their existence and perhaps some degree today.

Your next question comes from the line of Ryan MacDonald with Needham. Your line is now open.

On a greater Jeff, perhaps to start with you. On Coursera for Business, it was interesting the comment you made about North America, really the platform being focused as a career development benefit versus Europe being more of a sort of a re-skilling tool. I'm curious how that's evolved over the last six months. And as you think about those use cases, when you speak to CHROs, what sort of level of prioritization are they putting on those types of initiatives, especially given they're in their budget planning process for next year? And given the macro, we tend to see some budget cuts on the L&D side of things. But would really like to know sort of from your viewpoint and from your conversations, where does the prioritization lie in terms of investing in expansion of those types of initiatives going into next year? And how do you feel positioned wise if we start to see some consolidations or some tighter budgets?

Brian, great question. And it's evolving. It's Evolving. The Career Academy offering is fairly recent for us. And so it's pretty new, and we're only getting some, I'd say, early indications of how this offering will fit into the greater agenda for learning and development departments. I think you're right, though. I mean, L&D budgets are tightening. Generally speaking, historically, it's been a fairly discretionary spend, generally speaking, I think it's continued to be more discretionary and cyclical than other parts of our business, some of the other segments. And at least that's what we're seeing. In terms of where their priorities are going to be, it feels to me, and I do talk to a lot of CHROs, and Europe is really holding on to their first strings, it seems. And they -- which is interesting because during COVID, I think there was a lot of emphasis on just generally putting a lot of online learning and development programs out there to support workforces who are going through the whole shutdown process, at least office closures in Europe. I think that what's happening in Europe now is causing a contraction of the L&D spend, when we think about -- well, when they take those -- when they take those dollars that they're going to spend, what are they doing with them, I do feel like they're focusing on consolidating to fewer players. I think it's going to make it harder for smaller players and more niche players to be as successful. And there is computing demand. I think there's a lot of things that L&D folks have to figure out or try to put their spend against. One is continue to build tech talent and data science talent. I mean, that's really important. I think that's some of the least discretionary money that needs to be spent. And so I don't see that really going away as much I think the general broad-based learning programs that aren't really role-specific and don't really dial into critical job roles that need critical skills. I think those are on the more discretionary side. So I think L&D is kind of putting the money against what job roles need which skills to drive the business agenda that the CEO and the C-suite execs are talking about. And I think that's generally data science, technology and also some of this workforce re-skilling programs. And that re-skilling is -- I think they're just starting to see how they might do that at greater scale.

That's really helpful. And maybe as a follow-up and just more focused on the collaborations you talked about between the industry and university partners. What is the strategy there in terms of -- is this really a goal of trying to drive sort of more of the professional certification type learners into degree programs over time? And if so, how do you think you bridge that gap or sort of shift that learner into sort of that more longer duration program over time? And then if it works, what sort of efficiency could this create in terms of your sales and marketing line item?

Yes. I think this is -- the answer that I'll provide is a bit of a continuation to an answer that I provided earlier to, I think it was Brian, when he asked. When Coursera started 10 years ago, it was all about MOOCs, massively open online courses. And I think that what people saw was, "Oh my gosh, these MOOCs are going to threaten degrees, maybe they'll replace degrees." And even today, bootcamps and all these other types of micro credentials, people often think, "Oh, they might replace degrees." We've always had the opinion perhaps because we were started by two university professors that there was going to be a much more nuanced portfolio of credentials out there. The way that people learn and the credentials that matter to employers is going to broaden, it's not like one credential is going to be all the other ones. And that's what we're seeing. We're seeing not only a portfolio of credentials, some very quick and cheap and have less employability signal and some that are longer and more robust and have more employee belly signal. And so not only are there more credentials out there, but I would also say that the way that those credentials stack into each other. How one credential, say, from an industry can count towards another credential from the university. So I think that really it's been quite some time, really, I think, since we launched our first degree of University of Illinois. This idea that you could go from a MOOC to a degree has been something we've been working on quite a bit. I think what's happening in the last year or two is that we're just formalizing and building out that capability. So it's not just a MOOC to a degree, it's…

Your next question comes from the line of Matt Saltzman with Morgan Stanley. Your line is now open.

So my question is around Coursera for Business and just kind of the go-to-market motion. I'm curious if there's anything that you all can share on how big the web-enabled sales component is today? And if you expect kind of the mix of leads to change over time? And also just anything you can share on how that performance is different from the direct sales effort.

Sure, Matt. You've been close to the model to test by WES. WES has not been a big area of emphasis. It's a different way to serve smaller purchases, departmental. So just to eliminate PO, the hassles often of dealing with bigger companies. And so WES is something that's kind of a natural offshoot of what we do anyway. We have the platform because of consumer and then we capture WES independently. WES has been steady for some quarters and years. It's not a huge part of the business. It's a part of the business that's still important to us, so we continue to serve it. There's still ongoing investment to allow that infrastructure -- but we keep it to minimum. And the -- it serves as a gateway and an ability to upgrade. So it can be part of a land-and-expand strategy, but not something that we hit directly as an investment. So we enable it, but it's a smaller part of the business and serves the broader needs.

Got it. So just to make sure I'm understanding it correctly, direct sales, you guys are typically going more at kind of the higher level, I don't want to necessarily say C-suite, but a high level of the organization, and then at the more departmental, call it HR, level that might manage a separate learning and development budget, that's kind of where web-enabled sales can come into play more often?

Yes, there could be a couple of different possibilities. It's really just smaller departmental when you're doing something for the whole entity that tends to be over an enterprise sale, right? The vast majority of the deals are multi-hundred thousand. They're six-figure deals, sometimes seven figure. WES tends to be a much smaller price point. So it could be ahead of engineering, ordering for group of 12 people, or departmental engineer. It could be someone in L&D, but the L&D deals tend to be bigger deals, are corporate-wide, so really more departmental and operational. And sometimes they're trials, they're samples, they're looking at evaluating.

Your next question comes from the line of Brett Knoblauch with Cantor. Your line is now open.

Just on the industry content that is higher from a content or segment margin perspective, but it also sounds like you guys then have to invest more on the marketing front to drive demand for the industry content. I guess, if you account for that incremental marketing investment, what is the margin differential between the industry and the, I guess, the university content?

Brett, it's an important question actually because it's something we're very focused on. The industry credentials have been great for us across all the different parts of the business. It's part of what Jeff talked about, even as it relates to the degree, it's a stackable portion. So it's something we're focused on. It's also been very successful, so the margin profile matters. As we've discussed regularly, they tend to have a higher gross margin profile because the objective of the industry partners is often for their publicity purposes, for pushing for their platforms, their business, how they make money, that's what they care about. They're not as focused on revenue dollars from learning, right? It's not what they do. It's not their primary business. That said, if the numbers are a little bit across the board, but it tends to even out not far from where they do for the standard media, right? They want us to invest at a reasonably heavy level where we're using their brand and to market and promote what they do. That's why they're doing it. And so, the overall economics when you drop it down to, say, an EBIT line, are relatively similar. That's very broad base, to be clear. It varies quite a bit depending on the partner. But in generalities, you can expect, we're investing a fair amount below the line as well.

Perfect. Understood. And I guess what would be the pathway to generate leverage there if there's a constant need for additional marketing spend to drive demand for either the academia or the industry content. I guess the broader question is, can you just give some longer-term thoughts on how we should be thinking about you guys profitability?

Sure. Well, path to profitability is something we think about, and it's pretty complicated. We look at how we're scaling, which is part of your question here. You do get more scale over time. It's hard to answer your question discretely just because of the way the expenses do flow. So, we invest in the different programs for the industry partners and sometimes for the university partners. We also invest even when there isn't a mandate, if we're just being paid as a rev share to maximize and grow those revenues. So, it's looking for continued areas where we get leverage over time. As we grow the Company as our brand grows, it helps. We don't have to -- we won't have to invest at the same rate going forward. And I expect you're going to start to see some of that scaling relatively soon. As we've said, we focus on EBITDA and we focus on leverage. And I think you're going to start to see some more leverage. We're not providing guidance for '23 yet. But it's consistent with how we've been thinking about it, we're getting closer to a point where we really start to show some leverage. And profitability matters to us. It's -- if you will, it's in vogue right now with Wall Street with interest rates and so it's not how we run our company quarter-to-quarter. But we're also paying attention. We're also naturally at a point with the Company where I think you're going to see some more drop down towards the bottom line.

Yes. Thanks, Brett. And that wraps the Q&A for today. A replay of this webcast will be available on our Investor Relations website, along with the transcript in the next 24 hours. We appreciate you joining us. Take care.

This concludes today's conference call. You may now disconnect.