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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Absolute Software Corporation's First Quarter 2019 Conference Call. [Operator Instructions] Before beginning its formal remarks, Absolute would like to remind listeners that certain portions of today's discussion may contain forward-looking statements that reflect current views with respect to future events.Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements.Any forward-looking statements contained in today's conference call are made as of the date hereof, and Absolute does not undertake any obligation to update publicly or revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable security laws.For more information on the company's risks and uncertainties relating to these forward-looking statements, please refer to the appropriate section of its quarterly MD&A and quarterly financial statements, both of which are available on Absolute's website or SEDAR.I'd also like to remind everyone that this conference call is being recorded today, Friday, November 2, at 8:30 a.m. Eastern Time.I would like to turn the call over now to Mr. Steve Munford, Interim Chief Executive Officer. Please go ahead.
Thank you, operator, and good morning, everyone. Welcome to our Q1 fiscal 2019 conference call. Joining me is Errol Olsen, our Chief Financial Officer.This is a very special earnings call where I have the pleasure of both announcing our permanent CEO, Christy Wyatt, and sharing with you our Q1 results. First, let me kick off and start with the Q1 results, and then I can give more color on Christy and the CEO transition.For the last several calls, I've talked about the market opportunity that Absolute has in solving the challenges that organizations have in protecting against data breaches and maintaining the security and hygiene of their computers.I've also highlighted markets where we feel our solution is the strongest set and where we're efficiently able to address. These markets included health care, distributed enterprises, such as professional service firms, financial service firms, mid-market organizations and the European market.This quarter, in particular, we also see -- seeing growing need and growing demand for our product in government, particularly in the U.S. where we are uniquely positioned to address growing concerns about citizens' data and risk of device traveling to restricted countries.I'm pleased to say that the focus on these combined, with the strong execution from both our channel partners and the Absolute team, is working. At the end of Q1, our commercial and government verticals that represent 65% of our ACV base were growing at 14% year-over-year.Now to illustrate what is driving that demand, I wanted to share with you a couple of proof points or kind of stories from the field that will give you more color on Absolute's value in these targeted verticals.As an example, in September, we landed initial order with a very large service firm in the U.K. What drove this was a senior person in the organization had recently lost a laptop that potentially had GDPR-sensitive data on the device. This caused a disclosure issue and led to the organization reaching out to us for a solution to prevent this from happening in the future. After a quick proof of concept, we are able to get the initial order in less than 4 weeks. And we expect to expand [ in that count ] over the next several quarters. Certainly, a quick sales cycle is a good example of how regulations is creating a burning platform for our solution.Another example. While we have previously shared our success in health care vertical, which now represents 24% of our total ACV base, another vertical that we're seeing a lot of strong growth in is legal. Given the potential reputational impact if client confidential information was ever to be leaked, we're seeing increasing awareness and demand, and now -- and as evidence of this, we now have almost 1/4 of the top 100 global law firms as our customers.And when you think about it, it just makes sense. For a small price, wouldn't you want your lawyer to have Absolute installed on your laptop [ suite ] to ensure that the machine or if the machine was ever lost or stolen, you as a client, your personal information doesn't get into the hands of the public domain? If this were ever to happen for a law firm, there'd be huge reputational risk. That's why we're seeing a lot more demand there.Now I've talked about our partners or OEM partners who we go to market with. We continue to see leverage from our partners. And this quarter, we launched a new product offering to expand into a new market.Specifically, with Lenovo, we launched as partners, ThinkShield release, where Lenovo leverages Absolute's core capabilities to automate endpoint hygiene, reduce the [ attack surface ] and improve compliance. We have already seen some early wins from this partnership and this new go-to-market motion, and we expect it to expand in the upcoming quarters.Now turning to our education market, which represents 35% of our ACV base. We continue to see challenges in this market. And in Q1, we had a decline of ACV of 1% or 8% over the last 12 months, which is a slight improvement to what we've seen in previous quarters, but still not where we want to get to. While the macro trends of cheaper devices creates headwinds for us, we do believe that there are -- there is still considerable value for our platform, and we believe that there are actions that we can take that will improve the results.And specifically, I've talked in the past about Student Technology Analytics. We're now in various stages of deploying this technology in 8 accounts. As we go through the process of deployment with these early adopters, we are learning more and continuing to improve the product. While we have a few that are up and running and are using the product, we're still too early to declare product market fit -- broad product market fit, that is.Over the next 2 quarters, I would expect that we would have a much clearer understanding of the potential of this product.Site licenses. Within education, rarely is our software used on all devices in the school district. This has been largely because of the way the technology has been previously purchased and funded. Over the last quarters, we have begun talking to a number of our larger districts about a site license that would both simplify the license management, but also give them access to the software across the entire state. This would help them leverage new technologies such as Student Technology Analytics.For the customers, this will allow them to both leverage the power of the platform for the entire state, but also provide 3 benefits for us. One is this implied procurement and license management. There'll be increasingly, I guess, stickiness because it'll be across the entire state. And certainly, the ultimate benefit for us would be an increase in net account ACV for those customers. Now we are moving forward with a number of those proposals, and we do expect to see an impact on that this quarter.Lastly, within the North American education market, we have done some sales realignment. At the beginning of Q1, we changed the structure of the Public Sector sales team.First, we moved the reporting under our North American Commercial VP, who had developed a number of best practices that we felt could be shared in the Public Sector. As part of this, we realigned the sales focus and accountability, essentially dedicating separate resources to both large accounts and then to the small and mid accounts. We did a similar thing in our commercial business last year, which had great results. We expect to see the impact of this in the upcoming quarters.On our last call, I also talked about the focus on operational efficiency and ensuring we are making the right levels of investments in the right areas. Errol will walk through the details of the Q1 results and guidance going forward, but I would like to highlight early evidence of the impact of the team's focus.For Q1, we achieved EBITDA of $4.1 million and a margin of 17%. Highest -- that margin is highest it's been in the last 12 quarters. This is particularly encouraging given that the first quarter of the year is where we have a high level of spending with our global sales kickoff, and this year, we had additional onetime expenses related to the CEO transition. This is another point -- proof point that the leadership team is focused on driving efficiency through improved alignment and execution is working.As I mentioned earlier, I'm sure you have all seen the press release, we are very pleased to announce Christy Wyatt as Absolute's new CEO, and that Christy will be starting on November 26.I've mentioned in previous calls that I thought the ideal candidate was a product-focused CEO with a background in security or IT operations, ideally with endpoint experience and had experience leading a private company where they had to be efficient with resources and also innovate to differentiate against larger competitors.I think those of you who have a chance to read her background would agree with me that Christy is fit -- fits this profile and is ideally suited to lead Absolute for the next phase of growth. Specifically, with her roots in engineering and products experience in both scale organizations for Motorola, Palm, Citigroup, Apple to her experience as CEO at Good Technology and, most recently, Dtex Systems has set her up -- will set her up well for success here at Absolute.Those of you who remember, Good Technologies was an early leader in mobile security, and she led a company -- and she led the company through its successful [ exit ] to BlackBerry. Dtex Systems is an early stage, rapidly growing security company focusing on the insider threat.Christy will be based in Silicon Valley, situated between our 2 main offices or a short flight to our 2 main offices, Austin and Vancouver, and close to a number of our customers, partners and senior leaders. Moving forward, I'm committed to work with Christy and to ensure a smooth transition.And that concludes -- well, my time as Interim CEO will finish later this month. I have never been more bullish on the prospects for Absolute. There is a tremendous team here, and I really enjoyed working with them. I have every confidence that this will -- they will continue to -- continue with the mission and the best days of Absolute are in front of them.Now before I pass over to Errol, I want to give a special thanks to Errol, who has really been my partner over the last 10 months and whose talents go well beyond the numbers and is an incredible asset to Absolute. Errol, over to you.
Thank you, Steve. Good morning, everyone. We are pleased to share with you our Q1 financial results, which were headlined by continuing double-digit growth in the Enterprise and Government verticals and a significant expansion in operating margins and cash flow.Q1 total revenue of $24.3 million grew 6% year-over-year, with commercial recurring revenue up 7% over the prior year. The growth in recurring revenue reflects the prior quarter increase in our commercial ACV base as well as a strong sales start early in the quarter.Our commercial ACV base at September 30 was $93.1 million, representing an increase of 5% year-over-year. Sequentially, the ACV base was up $1.6 million from June 30.Existing customer ACV retention during the quarter was 101%, compared to 100% in Q1 of last year. ACV from new customers in Q1 this year was $1 million, which was up from $800,000 in Q1 of last year.And as discussed on previous calls, our typical selling motion is a land-and-expand model, where new customer wins start with a small deployment and expand over time. And therefore, a modest improvement in new customer ACV is representative of a more meaningful revenue improvement over time.The Enterprise portion of the ACV base, which represented 53% of our commercial ACV base at September 30, increased 13% year-over-year and 3% sequentially. The growth in Enterprise continues to be underlined by strong growth in the health care, professional services and financial services markets.You will have seen from our press release and MD&A that we are now splitting the metrics that we publish for our Public Sector business by providing separate data for each of the government and education verticals. The government vertical accounted for 12% of the ACV base at September 30 and increased by 20% year-over-year and by 5% sequentially.Together, the Enterprise and Government verticals represent 65% of the ACV base and are up a combined 14% year-over-year. The education vertical accounted for 35% of the September 30 ACV base and was down 8% year-over-year and down 1% sequentially. As Steve previously discussed, we continue to remain optimistic that this business will stabilize in the near future.Looking now at performance by geography. Our North American ACV base was up 4% year-over-year and was up 2% sequentially. Internationally, the ACV base was up 14% year-over-year and was up 3% sequentially with international growth being driven primarily by the EMEA region. International customers continued to account for 11% of the ACV base.Turning to expenditures. Total Q1 adjusted operating expenses, the calculation of which is detailed in our MD&A and press release, were $20.2 million, which was down 7% from $21.7 million in Q1 of last year. The decrease was driven by lower headcount across all departments, lower marketing program spend and a slightly lower Canadian dollar. Total headcount at September 30 was 471, which compared to 495 at June 30 and 505 at September 30 of 2017.Adjusted EBITDA for Q1 was $4.1 million or 17% of revenue. This compares to $1.3 million or 6% of revenue in Q1 of last year. The EBITDA expansion reflects the completion of the investment phase of the business and our continuing emphasis on cost control as we continue to grow our top line.Operating cash flow in Q1 was $4 million, which compared to operating cash flow of $2.1 million in Q1 of last year. The improvement in cash generation was attributable to a combination of the profit margin expansion and improved sales linearity throughout the quarter.Looking now at our expectations for fiscal 2019. We continue to expect total revenue to be between $96 million and $99 million. We are increasing our expectations for adjusted EBITDA from between 13% and 16% of revenue to between 14% and 17% of revenue. And we are maintaining our expectations for cash from operations of between 10% and 14% of revenue, and we expect capital expenditures for the year of between $3.5 million and $4 million.This concludes our prepared remarks for today. Operator, please open up the call for questions.
[Operator Instructions] The first question comes from Doug Taylor from Canaccord Genuity.
The strong EBITDA performance in the quarter appears due to sales and marketing efficiencies in particular, usually in a quarter where you have higher expenses due to the sales kickoff. And I think I was a little bit surprised by the decline in the number of full-time employees. I mean, is there some shifting around of the expenses [ into ] future quarters? Do you expect to add on some employees after a bit of a decline there quarter-over-quarter? Or should we think of the new cost base as sustainable through the balance of the year?
Sure, Doug. Well, our headcount was slightly less than we had expected. In Q1, we do have a number of unfilled positions. So I think the best way to model going forward, first of all, on a headcount basis, our budgeted headcount currently is just over 500, and that compares to about 400 or exactly 471 at September 30. In terms of our overall expense structure for the rest of the year, we do expect fiscal '19 expenses for the final 3 quarters to mirror our expense base from last year. So the linearity will -- should follow exactly the same as what we saw last year as well.
A couple of things to add on that, Doug, is that we typically operate below our budgeted headcount. It's just the way the business operates. But to your point, we absolutely are seeing greater efficiencies in our -- the sales team and what we've done over the last year in restructuring there. And secondly, as we've talked about in the past, we -- there's been a big investment we made in R&D, and as we have streamlined what we're focused on and as we get through a lot of the kind of legacy replatforming that we needed to do, we see going forward, we don't -- we're not going to need as much resources.
Okay, just to clarify when you say the linearity of expenses through the balance of the year, similar to last year. Last year, Q1 was the high in terms of the adjusted operating expenses. Are you saying that it should be -- year-over-year should be comparable through the balance of the year and that it should actually increase a little in Q2 and through Q4 from the Q1 level? Am I right in understanding that?
No, sorry. I meant just for the final 9 months of the year. So last year, our expense base was actually fairly flat over the final 3 quarters of the year, and we should see something very similar this year.
Relative to Q1, it could be actually higher versus lower last year?
Yes, you're right. You're right. And your call out about typically Q1 is a higher expense base, that's very accurate from what we've -- has happened over the last few years. This year, there's a little bit of -- the one other shift is just in marketing programs where, typically, we would see a lot of marketing happening in the first quarter of the year, and some of that has been shifted into other quarters. So Q1 is actually lower this year compared to the final 3 quarters, which is not the same pattern that we saw last year.
That's what I was getting at. That's helpful, and pretty effective cost management. If I move on to billings, it didn't quite track to your growth projections, and I know they can be lumpy. Historically, they've been stronger in Q1 and Q4 as you call it in your disclosure although that hasn't been the case in the last couple of years. In any event, can you talk through the factors we should consider in evaluating the relationship between the billings and, ultimately, how that drives the top line growth? Is there any onetime or shifts in there that we should consider?
Sure. The biggest shift in billings is our average prepaid contract term and historically, that's averaged around 36 months when it's weighted against on a TCV weighting basis. That's come down now in the last 12 months. It's down to 33 months. And so the impact there is our total billings will be coming down a little bit when we compare our ACV billings to our TCV billings, that TCV over ACV is coming down a bit, and it changes the seasonality a little bit. So typically, our billings have been strongest in Q1 and Q4. That's been a reflection of the heavy buying quarters for education. So 2 things are happening. One, as education becomes a smaller piece of the overall business, that weighting into the first and fourth quarters is coming down. And then, secondly, the average contract term in the Enterprise is lower or shorter than it is in education. So when you work through all of that, what we're seeing is just more consistent billings through the year and less lumpiness in the first and fourth quarters.
Now that trend of a shorter contract term on average has been ongoing now for a couple of years, and I understand it continues to progress. But ultimately, you have to show a book-to-bill of north of 1 to support the growth profile, if I'm mistaken. And when do you expect that, that relationship will become more meaningful?
It's -- I mean, I think it is -- I mean, that's all about sales acceleration, obviously. And so when we look at -- as we run the business now and we really focus on our ACV billings and not our total billings. Certainly, total billings remain very relevant for our cash flow. But total billings are not indicative of top line growth. So we're focused on the annual recurring component of our total billings. And certainly, we see that ratio is improving when we compare our ACV billings [ over ] our ACV expiries, we've seen very meaningful improvements, particularly in Q4 and Q1, the most recent 2 quarters.
Okay. I appreciate the new disclosure on the education vertical specifically, and you have a lot of encouraging things to say about the education market. I'll once again try and pin you to a time line before you think that some of these initiatives are going to mean a bottoming for that business.
I would say we're getting more traction and a lot more positive sales momentum. So last quarter was better than the previous quarter, and we certainly expect to see that continued improvement this quarter.
Okay. Steve, I'm not sure if you're going to be on any future calls, but just wanted to say thanks for the -- we appreciate the steady hand over the last couple of quarters.
Thanks very much. Yes. Thanks.
Your next question comes from Thanos Moschopoulos from BMO Capital Markets.
On the education business, given that you just went through a [ deep ] renewal period, should the ACV stabilize over the next couple of quarters kind of just by default since there'll be a lot less contracts up for renewal?
I think that's a fair expectation, that's right. And Thanos, I think, what you're pointing out here is that when we have fewer contracts up for renewal, less of the business is exposed. And with that weighting in Q4 and Q1 that we're now through, I think that's a fair way to look at the business and set expectations.
Great. Steve, maybe just to clarify. So, I mean, I you launched the analytics product, it's just that the product is too new to have had that large of an impact this time around. Clients still kind of getting familiar with the functionality, was that the issue as to why it didn't have more of an impact?
Yes. It's a new -- Student Technology Analytics is kind of a -- it's a big -- I mean, it's a big value-add that we've created and it's, to some extent, a different user that will use the information coming out of that than our typical buyer. So it's not only -- we've got a sales cycle to get us into accounts, but then we've got to get it up and running and get it working. It's a really new use case. So as I mentioned, we have 8 accounts now that have bought it, and in various stages of deployment. We have a couple that are very happy and using it, and we've got a lot more proposals out there. And it helps support some of the [ site license ] proposals that we have. But I think, realistically, you really want to see more customers using it every day and just extremely, extremely happy [ with the fact that we can market it ] . So I think, realistically, we've got another quarter or 2 before we can do that.
Great, and then on the government side, can you maybe expand a little in terms of the types of agencies and departments where we're seeing the traction? More weighted towards state and local versus federal? Or what's driving [indiscernible] in recent quarters?
Yes. So it's actually both. Different use cases. In federal, we're seeing some of the agencies' bias for, specifically, our geolocation and tracking capabilities. And I mentioned the use cases where devices -- the government being very concerned where devices can physically go and using our tools to track that, and there's some federal regulations on that. State and local, there's just a growing awareness of system data. And that can be system medical data or it can just be general system data. So we've seen some wins in polling stations, some [ laptops ] from polling stations. We've seen some wins in more correctional services, more health-related services and state and local business. So I think if you think about distributor organizations that have high-value data on their devices, there are many government agencies that have that. So -- and I would say, over the last year, we're really building our -- we're increasing our focus in that vertical, and we're building some skills. We recently brought in a very senior person from Dell to join the team, who spent their whole career selling into the government market. So yes, I think there's a lot of use cases there for us.
Great. One last one for me. Errol, you mentioned the dynamic around Enterprise contracts being of a shorter duration. How big of a delta is that versus education?
The average contract term, it's about, on average, about 2/3 of the average contract term in education. So Enterprise contracts are typically, on average, about 2 years. Education is just over 3 years.
Okay. Great. I'll echo Doug's commentaries. Steve, I think the company has done well under your leadership, and congratulations on the hire, Christy, and the transition.
Thanks very much. I just wanted to kind of add one thing on the contract term. I mean, one of the motions that we're really trying to encourage is selling what we call Enterprise licenses. And these are multiyear licenses. And although the billings happen over the 3 years, they're contractually tied to pay every 3 years. In fact, in many cases, there are built-in increases. And we just see that, especially for enterprises, there is a more natural sales motion than trying to get them to prepay deals up-front. So I just want to emphasize that a lot of this is a strategic shift for us.
Your next question comes from Blair Abernethy from Industrial Alliance.
And as well, Steve, thanks very much for the efforts this year. It certainly helped to shift the momentum in the business again. I want to ask you to just give us a bit of a high-level view on the OEMs and particularly this ThinkShield product with Lenovo. Maybe if you can give us a little bit of color in the -- into the go-to-market and, I guess, the pricing or the revenue opportunity around that for Absolute versus what you're just doing normally with Lenovo. And then, more broadly, are there other OEM programs? Are there other things in the works that could get Absolute bundled into more of the Enterprise sales?
Yes. So just at a high level, the OEMs or what we call our channel are just a real key asset that we have and a really important part of our go-to-market. Now for -- and particularly HP, Dell and Lenovo, they -- if you look across them, there's a common theme where they want to add more value to the box and, specifically, security is a way they think they can add value to their customers, and they think it's an important part of the ingredients of moving beyond just selling bare-metal with an operating system. So all those 3 OEMs will have different go-to-market strategies, different product sets around security. And for us, it's coming out with a pricing packaging, adding to what they're doing, maybe being a separate part that they go-to-market with, and figuring out that go-to-market sales motion where we really tie ourselves to their [ insight-selling ] or their field selling machines and target either specific verticals or a specific place. So we have a very, very strong relationship with Dell. There's a number of different product or product suites that we're in, and we're very, very tied in with their sales team, and we continue to expand that. Similarly, with HP, again, maybe different sales motion or different product lines. But again, we've got deep relationships there. I would say Lenovo is recently just been doubling down on its activities around security. And we've been able to get into a number of programs, both in them just selling our solution stand-alone, but also us getting into some of their proprietary products, like the ThinkShield initiative, and being a component there, which gives us a small amount of revenue when they sell us there. But then it allows us to get in and expand our full product suite with them.
Okay, great. And just geographically, I mean, you talked an example about the U.K. customer. What is your thinking? Or what is the business looking at geographically over the next years, next couple of years? Do you think it's more of a -- you think that business can grow faster than the core U.S. business? Or just some thoughts there would be helpful.
Yes. So last year, we did some -- we continued to kind of evolve our international plan. We really reduced our investment in Asia. We're down from having a team in-region to having one person supporting the region through partners and supporting the region from Vancouver here, and that's brought some efficiencies. And we're seeing steady results here, but it's not an area that we see we want to invest in. South America, there are increasing regulations that look similar to GDPR emerging in some of the South American countries, specifically, Mexico and Chile. So we have a steady investment in there and some very good partnerships with some of our OEMs down there. Europe, as you [ highlight in the highlight of my example ] , we see as a tremendous opportunity on the back of GDPR. And just a general European concern over data and data privacy, we continue to expand the team there. We have a great leader and we -- and -- but in Europe, it's not -- you don't have to expand the people kind of on a one-to-one basis with the revenue. There's a lot of leveraging again through the partners. Europe is much more a partner-led selling motion, and so we're reinvesting, but specifically in enabling both the OEM partners with other partners in Europe. But you're right. It's our fastest-growing region and, just proportionately, it is the region that we continue to invest in.
Your next question comes from David Kwan from PI Financial.
I also want to echo the other guys' comments on the good work you've been doing, Steve. And on that note, I'm just curious on what your role is going to be with the company going forward.
I'm not walking out the door when Christy walks in on the 26th. I'll be here to hand the baton and ensure a smooth transition. And still discussing with the board of what would make sense on a long-term basis, but nothing's sort of firmed up yet.
But, I guess, to reiterate, you're still going to be involved. It just remains to be determined as to what exactly your role will be, Steve. Is that fair?
Yes, yes.
Perfect. On the STA side, I know you've talked about it being a bit early, and I guess as we get through the [ school ] year, you'll get a better sense of how customers are using it. Have you looked at maybe kind of giving it away to your customers to get them to use it and, hopefully, see the value in that and then hopefully, maybe in a year's time, you can sell them on it. And one way, I guess, to help stem the churn in that business?
So we're definitely using it as part of the site license value proposition, which is essentially getting us broader in organization accepting lower unit economics to do that and including Student Technology Analytics. So that's really bundled together in that sales motion. I don't know if you call it giving away, but it's certainly kind of bundling it into that. If we just gave it away to all our existing customers, the reality is people, if they didn't see value, they wouldn't turn it on. So we're better off to, when we're in the sales motion, to explain it, get buy in. We're certainly not trying to be greedy in the economics of it because of the reasons you said, right? We see it as a way of adding value and broadening our exposure into account and getting stickier versus the specific revenue for that module, day 1. So there's a nuance there, but it's not widespread giving it away, but we are bundling it.
I guess, more or less whether you give it away or bundle it, at least you're kind of flagging it to those customers and, obviously, showing them how to use it. And hopefully, like I said, it's something that could help stem that churn that you've seen.
Yes. And just the pace at which we're going into these accounts and getting product margin validation, I do want to highlight, I mean, education is not -- it takes time, right? It's not the fastest-moving market. And this is a new value proposition that, quite frankly, is they probably haven't seen before or they'd have to come together with a bunch of other products to get what we're showing them. So we're not walking and ripping, replacing something else. It's a new value that they can get, and it's a slow-moving market. So I wouldn't say were discouraged by the pace. I would say if we're realistic, this is how this market works, and it just takes a bit of time.
And what kind of feedback have you been getting from your customers who've been using it? Like do you think that there are minor refinements, I guess, to the platform in terms of what customers are looking for? Are you seeing at least in terms of engagement with customers, giving feedback as to maybe some more material changes that they'd like to see to the platform, which may also take some time to implement but ultimately, could help bolster the business longer term?
Yes. I would say that the change -- so we're -- we're getting good feedback because this is a new category, new product, it wasn't like we could say, hey, here's a competitor, let's do it like this or better. We've kind of had to find what their requirements look like, and we've really been doing that with their customers and their early adopters. I would say the refinements are not -- it's not science. It's reporting ease of installation. It's how we interpret the data and how we kind of correlate and make conclusions from that data. So I wouldn't call it tweaking, but it's just refinements like it was a version 1 and now we're working it through, and it will be better next time. But it's not -- technically, it's working. It's just helping people get the value from it.
Okay. As it relates to the changes that you talked about in the sales team, in the past, there's been probably more significant changes. But do you expect any kind of near-term disruption from the realignment?
No. I think one thing that the -- and the realignment was really just in the education space and not anywhere else in the organization, education North America. And I think one other thing that the company has done really well over the last couple years is that it's brought in new sales leadership that's implemented change and has evolved. It's done it in a very staged way and a way that we haven't had to stand up in front of investors and say, "Hey, jeez, it's a tough quarter because we had a big sales realignment." It's been very steady and thoughtful. And so what we've done in education is just a continuation of that.
Okay. Last question, Steve. You guys are, obviously, focused primarily on Enterprise side and maybe increasingly in the government side. But on the Enterprise side, we've seen that growth in the ACV kind of in the low double-digit range like when do you think we could really kind of see an acceleration kind of achieve and go to the 20% range, hopefully?
I would say we're not going to get specific, but we are seeing that type of rate growth in what I would call our core target verticals. So whether that's health care, whether that's professional services, financial services. So I think as, over the last 6 months or last 9 months, as we get really focused on the verticals, I think we see an acceleration and, eventually, that will come through for that whole segment. So I -- does that have potential, yes? Does it happen overnight? No, but we are still seeing a steady progression. And the other thing I'll highlight, and I'm not sure if this came across, but one of the changes that we made to our sales strategy is we're really focusing on landing and expanding, and we're not trying to swing for the fence on the first deal. We talk about, internally, about getting design wins. So getting into an account and finding a section of the business where there's executives or specific team and getting our product in there and then expanding over time. And we've seen that pattern work well for us in a number of our large Enterprise accounts today. And I think, in the past, potentially, we're trying to go for large lumpy deals, and that was just creating a lot of lumpiness in our business, quite frankly, and a lot of deals that we just couldn't get into or cross the finish line. So it's a long-winded answer of saying is that I think we are seeing that type of growth rate in the core verticals. I think that eventually becomes a larger and larger part of our business. And I think the way we're going into these accounts, which is land and expand, probably means that it's not going to happen overnight in a single quarter, but it's going to gradually come up as we get into accounts and as we expand. Like this quarter, we had over $1 million of net new logos. But I think, Errol, what was the largest deal in there? Certainly nothing over...
Still under $100,000.
Under $100,000 with a lot of $10,000 or $20,000 initial orders from larger accounts, and those we aim to grow over time. It's like the services, U.K. service firm that I talked about.
Yes. And just to add an anecdote to that, we have a large accounting firm who is a customer of ours who made an initial buy about 6 quarters ago, and that initial purchase was under $100,000, and that single customer now represents close to 1% of our total ACV base. And I think that really illustrates the power of that land-and-expand model.
And last question, kind of when you talk about this land-and-expand strategy, can you talk about maybe kind of what percentage of the opportunity that you would get kind of an initial sale, and then maybe how long it would take for you to get to, say, half of the footprint?
Yes. So a couple of things. So I don't want to lead you to believe that all of that $1 million was a Fortune 500, $20,000 order because various verticals in there and some are small businesses that we got potential day 1, and others were like what we've been discussing. What typically happens is that we get in on a -- they come out with a new design for -- or essentially new image or a new configuration for a set of laptops that they -- and then we get put on it, either put on it with the intention to roll it out over time to all their -- as they replace all their machines or as a, if you will, an experiment or a trial. And once you get it on a machine, it typically -- and you get validated, you show value, it's going to take maybe 2 years, 2 to 3 years to get fully implemented. Depends on the organization, and depends on the burning platform. If there's a compliance issue, if there's a regulatory compliance issue, it will happen quicker. If it's a -- if they're using it as something added to reduce risk or help with operational hygiene, it'll take longer.
I have no further questions in queue. I turn the call back over to the presenters for closing remarks.
Great. Thanks, everyone, and thanks for the questions. Just to reiterate, it's an exciting time here. We've got an enormously skilled new CEO coming, Christy. I think she's going to be wonderful for the business and really drive it to the next stage of growth. I thoroughly enjoyed working here and working with you, guys. So thanks a lot, and thanks for the support. Bye.
Thank you, everyone. This will conclude today's conference call. You may now disconnect.