Q2 2021 Tecsys Inc Earnings Call
Standby a conference operator will be with you momentarily if you require assistance during the conference press the star followed by the zero on your telephone.
[music].
Good morning, welcome to the carpeting sort of where your name.
Our first named EBITDA last time around.
That's from mask, which company you represent.
IRA A.I.E.R.A.
And are you an analyst or with the price.
Yes analysts.
Very well thank you for the selling on transfer now.
Two per cent increase in SaaS revenue per.
Our trailing 12 month [laughter] pardon SaaS bookings are up 159%.
Sure sure prior trailing 12 to a large extent driven by an explosion of business coming from our customer base.
We'll see that the results. We are discussing today continue many of the positive trends we have been reporting throughout this calendar year.
Even during the pandemic demand for Texas software has proven resilient because our software mix supply change resilient.
Per solutions to deliver flexibility, which is especially important these days you're locked down. So we can help our clients switch from in store to home delivery and curbside pickup for retailers with dark stores. We can help enable micro fulfillment for clients managing PV shortages, we build disaster relief emergency warehouse solutions with.
No training on boarding.
And for all the others many of whom are the backbone of our economy is we simply equip them with the reliable and agile supply chain platform that they need to get the job done every day.
In all verticals from converging complex retail to health care companies are realizing more than ever that their supply chains need to be nimble enough to react to challenges and disruptions as they occur.
Our global sales pipeline is brimming with demand from companies looking for the supply chain agility and resilience there software delivers.
Our pipeline conversion is solid across [laughter] across all verticals.
On the notable bookings this quarter, we closed new business with a significant Canadian health care focus Threepl book.
Book significant add on business with two U.S. based hospital networks that expanded broadly into work when it used products and book to complex distribution customer migration to our SaaS platform.
Looking at overall trends for a minute our Q2 bookings were heavily skewed toward basic hills with significant days ago bookings from both health care and complex distribution.
Second our Q4 ended April Thirtyth 2020 bookings were heavily skewed toward new accounts.
Looking at our current pipeline Theres actually a fairly equal weighting.
Of opportunities and base and new accounts. So while there is no question that the pandemic severity is impacted deal timing, particularly in new accounts. We believe that these data points demonstrate both the continued positive execution of our strategy as well as prospect and customer affirmation of our product offering.
As the opportunity in our customer base continues to grow significantly we're supporting this growth through increased investment in customer success as well as cloud operations and customer care.
I'm now going to turn the call over to Mark who will provide further details on our financials for the quarter and year to date.
Thanks Peter.
We are pleased with our results for the second quarter continues to show momentum across all segments.
I will now review the quarter and year to date performance in more detail recall that our fiscal 2021 second quarter ended on October 30, Onest 2020.
Total revenue in the second quarter was a record 30.7 million.
10% higher than 26.0 million reported for Q2 2020.
9% higher sequentially over $28.1 million reported in Q1 of 2021.
Cloud maintenance and subscription revenue increased by 33% year over year to 13.4 million in Q2 2021 up from 10.1 million in Q2 of 2020.
As Peter mentioned in his opening remarks, the increase was primarily driven by a 142% increase in SaaS revenue, which was 5.1 million in Q2 fiscal 2021 up from 2.1 million reported in the same quarter last year.
This increase in SaaS revenue was driven by SaaS bookings in recent quarters and benefited from transaction volume based SaaS fees recognized in the quarter.
Additionally, approximately 0.5 million of the increase was related to a customer cancellation, which had the effect of pulling anticipated future revenues ended the quarter with.
Without this 0.5 million revenue impact SaaS revenue in the quarter would have been $4.6 million.
Well up about 119% compared to the prior year period.
To provide just a bit more color. This cancellation was a complex distribution based customer that recently underwent a turnover of management.
With the new management deciding not to invest in the project.
While we acknowledge of course that our projects are typically quite transformational we are implementing transactional systems of record that affect the core of our customers' businesses. We do not see this cancellation as an indication of any type of underlying trend.
In fact, our net customer attention over the last 12 months through October 31st 2020 has been very high at 112% up.
From an already positive 106% for the 12 months ended April Thirtyth 2020.
Moving on now to professional services or professional services revenue increased by 16% to $11.8 million in Q2, 2021 compared to 10.2 million in Q2 of 2020.
Proprietary products revenue amounted to $1.9 million in the second quarter fiscal 21.
Up 0.2 million or 11% compared to the same period last year.
Proprietary products revenue was driven by license revenue, while we expect license revenue to decrease over time as we continue to ship to size, we do still see some customers that are deciding to consume our products on a perpetual license basis as opposed to be assessed.
We expect this to continue in the short term, but the long term trend is clearly toward hsas.
Third party products revenue decreased to 3.5 million zero point $1 million or 2% lower in comparison to $3.6 million for the same period last year.
Solid bookings continued during Q2, SaaS subscription bookings, which we measure on an air our annual recurring revenue basis were $2.7 million, which is a 15% increase over $2.4 million reported in Q2 of last year.
Professional services bookings were up 19% to $11.5 million in the second quarter of fiscal 21 compared to $9.7 million in the same period last year.
Perpetual license bookings finally in the second quarter of fiscal 21 were $1.9 million compared to $1.4 million in the second quarter of fiscal 2020.
Our annual recurring revenue or aerostar.
As of October 30, Onest, 2020, and was up 26% to $50.9 million compared to $40.5 million at the same day in 2019.
Of course for US SAS is the key driver for air our growth and as Weve indicated over the last quarters, we've begun to focus on what we call contracted SaaS backlog as a key performance indicator.
As of October 30, Onest 2020, our contracted SaaS backlog was $60.2 million up 16% from.
From $52 million at April Thirtyth 2020.
As disclosed in our notes to our financial statements, we anticipate that in the second half of fiscal 2021, we will recognize $8.9 million of currently existing SaaS backlog as revenue.
Moving to professional services at October 30, Onest 2020, our professional services backlog stood at 38.7 million up 2% sequentially from July 31st 2020, We believe this backlog will support continued strength in professional services revenue in the coming quarters.
Gross margin was 52% in the second quarter up compared to 50% in the prior year quarter.
Total gross profit increased to 16.0 million up 23% from 13.1 million in Q2 of 2020 due in large part to higher combined cloud and maintenance and subscription and from professional services gross profit of $2.9 million.
Overall gross margin also benefited from strong license revenue.
And the pulled in SaaS revenue mentioned previously.
We expect to continue to invest in our broad cloud maintenance and subscription and professional services business to support growth and this could negatively impact total services margins in the near term we.
We believe that pointed investment here in the short term, we will continue to differentiate us in the market and will set up from margin expansion in the future as the business continues to scale.
Operating expenses increased to $12.6 million higher by $1.8 million or 16% compared to $10.8 million in Q2 of fiscal 2020.
As we've mentioned in the past quarterly earnings calls we are investing in growth and we expect to continue this investment in the coming quarters on.
It is also worth noting that our non reimbursable travel expenses have declined materially in recent quarters. As a result of COVID-19 impacting most notably on sales and marketing expense.
This has had a positive overall impact on operating expenses and profit.
And we expect this trend to continue in the near term.
Profit from operations in Q2, 2021 was $3.5 million compared to $2.2 million in Q2 of 2020.
Net income was $2.1 million or 14 cents per share on a fully diluted basis in Q2 of 2021 compared to a profit of $1.4 million or 11 cents per share for the same period in fiscal 2020.
Adjusted EBITDA was a record $4.8 million in Q2, 2021 up 31% compared to 3.7 million reported in Q2 of 2020.
We ended the quarter with a strong balance sheet at October 31st 2020, we had cash and cash equivalents and short term investments in line with our expectations of $30.5 million. This.
This compared to 36.0 million at July 31, 2020.
We had net debt of $10.2 million compared to $10.5 million at July 31, 2020.
Net cash from operating activities, excluding changes in noncash working capital items was $4.1 million for the second quarter of fiscal 2021 up 75% from the same period last year.
Changes in noncash working capital items reduced cash by $4.6 million in the quarter and this was driven primarily by cash collection timing and seasonality we're.
We're not seeing any material change in collection stemming from the impact of COVID-19.
Turning briefly to the results for the first half of fiscal year.
Through October 30, Onest 2020.
Total revenue was $58.8 million up 17% from.
From 50.3 million reported in the previous fiscal first half.
SaaS subscription bookings increased 85% to $5.1 million in the first six months of fiscal 2021 compare.
Compared to $2.7 million in the first half of last year.
Net profit for the six months of fiscal 21 was $3.3 million or 23 cents per share.
Compared to a profit of $1.1 million or nine cents per share for the same period in fiscal 2020.
Adjusted EBITDA for the six months of fiscal 21 was $8.3 million up 47 per cent compared to 5.7 million reported for the same period last year.
On December 2nd 2020, we declared a quarterly dividend of six and a half cents per share.
Payable on January eight 2021 to shareholders of record at the close of business on December 17 2020.
This represents a half cent increase per share from our previous quarterly dividend and continues our trend of annual dividend increases.
I will now turn the call back over to Peter to provide some outlook comments.
Thanks Mark.
After seven consecutive record revenue quarters, our pipeline suggests to us that demand remains elevated.
All of our business segments.
Into the foreseeable future.
Pipeline is growing again this quarter and sales cycles remain active.
These dynamics continue the trends seen in recent quarters, our pipelines are fueled by change.
And this recent black Friday period as provided another proof point.
Some interesting data, we've been able to collect.
For these recent events the global volume on are distributed order management platform increased by approximately 140% compared to last year for the Black Friday Cyber Monday period, all areas of the world increased from the U.S. and candidate to Europe, and Australia, France was the only exception where black Friday has been postponed by a week.
It will ultimately drive these numbers even higher.
This data shows that COVID-19 has had a profound impact on shifting consumer shopping behavior toward digital commerce, and the Texas supply chain software is.
Moving capable of handling this type of dramatic change.
Our investments in channel and direct sales development and marketing programs are helping us to capture more opportunities as demand increases partners or influence on and growing per portion of our pipeline growth and we had another new partner influenced hospital network go lives on our platform since our last earnings call. We.
We believe that it is starting to become clear that our partner ecosystem is set to have an impact on our growth.
We will continue to invest in these areas. We will also continue to invest in research and development to ensure that we continue to have world class products catering to the needs of our customers as well as our spending partner ecosystem.
We believe that based on that based upon the bookings that Mark just detailed outlook for the remainder of fiscal 2021 appears to be strong.
We are more confident than ever that.
We have the solutions that deliver the agility and resilience that our customers need to be able to react to rapidly changing supply chain debt dynamics.
In summary, I want to remind analysts and investors about our four key operational themes for the remainder of fiscal 21.
First the 142% growth in SaaS revenue this quarter validates our continuing focus on developing and growing our SAS revenue model, which is helping to scale annual recurring revenue streams rapidly recurring revenue has grown to be the largest revenue stream for the past two quarters, which is an excellent foundation for future performance.
Notwithstanding some clients will always choose to buy using capital budget. So from time to time in future quarters.
May see fluctuations in revenue caused by the sale of one time perpetual licenses second.
Secondly, we continue to expand our partnership ecosystem, which is key for us to scale rapidly into the post cobot market opportunities.
We now have partners working effectively with us in both North America and Europe.
We will continue to invest so that we can enable them more quickly and efficiently from.
From accelerated training programs to accrued on boarding tools, we are determined to make our site partners successful.
Thirdly, we plan on continuing to invest in all of our sales channel to exploit the significant opportunities presented to us and finally, we will continue to expand and refine our omni channel business platforms, just serving service the evolving needs and our health care supply chain converging distribution on retail market segments.
These efforts will help us to not only minimize customer churn, which is already very low but it will also help us to expand revenue from current clients as we saw happen this quarter.
Remember change is what drives our business and the COVID-19 pandemic has accelerated the monumental change that was already underway.
Continues to turn in the traditional supply chain on its head.
With that we'll open the call up for questions. Thank you.
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My first question is from Amir is that with the echelon partners.
You May proceed.
Peter Mark Good morning, and congratulations on a another solid quarter.
Thanks, Phil.
Hey, I've got a I've got a few on few questions for you. The first one is you know.
As we look at a growing list of geography, and saying you walk Downs you.
Do you guys foresee any impact on your on operations or has the on ecosystem fully adjusted EPS suppliers claims from you guys.
But the main thing we're seeing ever is that in areas where the.
Depending on what is severe there's no question that its impacting new account business. If you look over the last few quarters I tried to sort of allude to that.
On the script, but if you look over the last few quarters, I mean Q4 day.
New health business was pretty strong, but that was sort of momentum being carried through from the early.
I mean at the quarter end up sort of on the kicked it half way through that quarter. So new business was quite strong.
So you know, we then actually saw more reasonable new business in the summer months as the depending on what give baited as it came back more strongly in the fall we definitely saw on new business slow down.
[laughter], it's been more than offset by existing business, where the relationship already exists and we already sort of know that people, it's already a trusted relationship.
It seems to have virtually no effect on business and so our second quarter was extremely strong on on the base side.
When we look at the next on the second half of the year and we look at what's in the pipeline.
The I mean I mentioned in the script that the you know the pipeline looks reasonably balanced.
It's actually larger on the new account side, but we're assuming that some of that we'll we'll see some fed network effect just some delays on decisions on so based on end of it. So that's why we're saying there they are pretty much balance. So so it definitely affects new account sales.
The whole new account decision, making process et cetera.
But it seems to be temporary it's a given area for six weeks, it's really bad for six weeks. It that it's sort of a base to get in that region and everybody picks up speed and it seems though to that with the vaccine on the horizon.
People are trying even more to just get back to business as usual and are saying, Okay. We're sort of we're in the last six months of the worth of this thing and lets just plan for the future.
Great that's great color, so what I'm thinking about of calendar 2021 in general like what's what's driving that growth is it like the same fundamentals you spoke to or you know like I am seeing force I would be companies that I'm looking at knowledge their clients have like on spends of budgets and 22.
20, which is bolstering 2021 demand are you gave like seeing debt as well.
We haven't noticed that specifically I would say, it's it's more just that.
No. It's it's the fundamentals data we've been talking about I mean.
Health care side, there's a the pandemic I mean, we already had it frankly of the larger hospital networks, realizing that they needed to have.
Strong end to end supply chain solutions and implemented and that was already driving rising demand and then the pandemic came along and really highlighted that.
If you have a good supply chain solution, you're just lost EBITDA in the face of this kind of an emergency. So so that is sort of elevated the profile of our solution in the health care space and in general distribution.
On the whole industry is changing I mean, everybody is retooling for direct to consumer.
In some cases, they've just run their system as they put in play for White UK, they've got two decades go to them and it's time to time to upgrade but in many cases, it's you know it's.
Its E commerce, it's the direct to consumer trend that is causing everybody to rule to retool from third party logistics providers too.
Brand owners importers distributors, they are all having to retool and they what a lot of them are realizing is it depends on what has put so many retailers under.
That they're not sure really there's a lot of that retail spaces coming back. So the focus now is it.
Again, yet your product direct to consumer you can't count on the retail channel.
On the in the retail space itself, where of course, we have a number of clients on the platform.
That market I would say is still quite distracted I mean, we're we're seeing good base business in there. We just had a very strong black Friday cyber Monday period for the accounts that are on our platform, but on the new account side, there's definitely a lot of distraction I mean day the guys that have.
5100, 150 500 in some cases, you know retail stores brick and mortar stores.
They are obviously quite distracted by the end of it. So we're seeing some distraction there, but we're also seeing a lot of activity at the top of the funnel. So we're thinking that as you get into the January to April timeframe, which is often when retailers sort of make decisions about.
Their next sort of preparing for the next year kind of thing I. It looks like it's going to be quite busy.
Great.
Am I right to assume I'm looking at the us elections that you're expecting probably let's call. It a more muted impact as a result of these elections relative to the last election.
Yes, we don't I mean in some ways are the best outcome for us probably is.
He is a bit of a divided structure right at the end.
In this case, if you know if the Democrats and the White house in the Congress and I.
Republicans have the Senate.
[laughter] that that just creates a stable environment, which in many ways is our best bet for health care.
You know at the same time, even if the Democrats when the Senate.
You know I'm not sure there I mean, they were already the champions of by the Affordable Care Act. So I don't think there they.
They might be planning to tweak it but they don't they don't seem to be putting any open heart surgery or that so so it day so.
So for us it looks to us as though the next few years, we should have a fairly on distracted market.
Great just just another one on like on the cancellation I think you guys mentioned that it was a.
Very client specific as opposed to a trend on but can you give us a color on what drove that wasn't consolidation or financial trouble or were they not satisfied.
No I mean, we see this once in a while we you know it didn't used to show through in our front end tools, because we weren't hsas, we were perpetual license. So if they've already bought the license.
All that happens is sorted they don't use the professional services that they'd book.
So it never showed up but we've I mean for years, we get one of these every couple of years and it's typically somebody that.
I thought they wanted a new solution shop, the market bought a new solution started getting into implementation and realize that the project was bigger than they thought. It was you know it's got more impact on their business I mean, we do sell as Barclays political we sell core system of record application. So it is it is a big change for any business.
You know that that is implementing it and if they're right.
Hey, if that Didnt sort of register clearly it up with them at the time, they get into it and end up saying you know what we were not ready we don't have the right people, we don't have the right staff.
Whatever.
And they decide to just.
Good day on their existing platform. So that's what happened in this case I say I think the last one that happened like this was a couple of years back when it happened once in a while I. It's just that now in the SaaS world, you're going to see the little lumps because it they signed a five year agreement.
If a year into the project they decided to cancel.
Suddenly the next four years of revenue recognized.
Great and maybe one last one some thoughts on M&A just wondering then.
No you know like how I caught a cold would change the M&A landscape for you guys in terms of valuations on the way you guys approach M&A in general.
You know a lot of companies in the past with him.
Really purchase another one without breaking breads with.
With the CEO of the targets I I'm, just wondering like how critical our face to face meetings for you guys and are they starting up.
You know were I mean, we can there's really no change on the M&A front I mean, we continue to kick the tires. It from different opportunities. We continue to look for opportunities to expand our geographic footprint.
There there is no question I think it would be hard to finalize a major transaction with it.
Being able to to get some type of face to face understanding of what business you're buying.
And so on a but.
But it hasn't had any effect, yet and I mean, I think in fact, we're all getting so used to.
The new meetings on Zuma ringcentral or teams are.
Whatever it is I mean, I mean yesterday I you know I had a meeting with our board members that were in southern California, Some in Texas.
Texas, some in Toronto et cetera, and 10 minutes. After the call I was waiting face to face with the customer in Portland, Oregon.
So we're all getting pretty used to that and so I don't I don't know that that'll have a major effect on it or not I think it's really just back to the core issues of valuations are high right now on our business is.
You know is very busy organically I mean, if you look at.
If you look at the booking trends I mean, we're showing right now.
You know the the actual revenue growth the sort of 18% this quarter I think it was 16% last quarter, but but if you look at the book will trends I mean look at the last six months or look at the last 12 months, how many quarters are lumpy, but if you look at any kind of a slightly more extended time period.
Bookings are rising at least 50% year.
So the focus of the business is very much around.
Growing the business to meet that organic demand I mean, you can you can only continue to grow bookings that you know at 50 plus percent and and grow revenue. It only 18% for so long I mean at some point. This whole thing has to start to catch up as we get into more of these projects is on right. So so thats. The you know that.
Just taking the lion's share of our focus so we continue to poke around look for good opportunities that would support our overall strategic plan.
But what I would say the organic growth rate now is very hot, especially if you look at that point on that.
Right.
Great I'll pass the line congrats again.
Great Thanks ever.
As a reminder to register for question you May press, the one from a buy before.
And our next question is from the line of Gavin Fairweather from Cormark. Please go ahead.
Hey, there good morning.
Yes.
Just wanted to start out on that on the distribution side. I think this is the second quarter in a row, where you called out on a migration out of your kind of on premise all but can you maybe just refresh.
Cressa on on that side the GAAP. They you know what portion of that base. It may be EBIT that it's where they're thinking about an upgrade on looking at thoughts and kind of how much how much from data and starting to percolate index on.
Yeah, Theres actually I would say, there's very little of it still in our pipeline I mean, we did one in Q1, we signed one in Q1, we signed another one in Q2.
And I wouldnt be that surprised if it remains at that kind of a cadence.
Cadence you know for the time being there's a lot of exist I mean, we've got if you look at our complex distribution base. There is 150 accounts out there that are sort of sizable enough to make.
You know to be sizable SAS opportunity. We've got hundreds of other accounts are there as well, but if I look at the ones that are sort of sizable enough that that would be a significant there's there's about 150 of them out there.
But the bulk of them are sort of still quite happy on their on premise solutions that they've implemented over the years and are sort of we're keeping them posted on what's happening with the SaaS offering and.
And so on and I would expect that.
Some time, probably about a year from now I think we're going to start to see a more rapid movement in that base, a five day, but right now it tends to be people that were you know they were already going through a transition any way maybe they were they brought in from like the people that have sort of reassess their whole situation and are looking to to modernize the platform. So we're.
We're seeing that happen, but it's I think it's going to remain a relatively low case for a while and the bulk of our SaaS business growth in Hsas will be new accounts.
Well, then maybe yes, maybe didn't swung from a higher level I mean, just given kind of E commerce, Jeremy distribution and retail.
Moving so fast from its opportunity going on I guess curious here on a higher level take on deposit market share is evolving what you're thinking about.
Maybe a competitive perspective on that maybe kind of put somebody you made.
Maintaining your win rate based on what.
I think if you're running around 40%.
Yeah. The win rate is remaining quite constant or we just looked at again this last quarter. It it held steady.
So the you know we're we're seeing in fact, where we're looking at potentially turning to pick up the investment as well on the sales side of that space because what were seeing is.
So that the.
The market is moving on there is a lot of activity, we're seeing a lot of inbound oh leads coming into that space. We're seeing a lot of activity. The analysts are also reporting a lot of activity in that space.
And the you know that the competitive landscape.
Is relatively light I mean, if you look at if you want to talk pure supply chain execution you have.
On your usual suspects you know you've got your red hat on and.
Blue Blue on Yonder solutions Youve got a.
Some other sort of lower end solutions. If you talk the broader supply chain platform. So you are really supporting sort of ERP getting into sort of ERP for distribution.
Or converging distribution.
You know there is the again the the competitive landscape is relatively light you've got you know net suite a share.
Turning to sort of be all things to all people you've got work on safety at the high end of the market you've got stage of that before with some stuff at the lower end of the market.
Microsoft dynamics rattling around in there too.
But if you look at the 200 million to $10 billion sort of market space.
It's remarkably wide open on.
So [laughter]. So that's on back if you go back to the sort of post white to care. There were there are dozens of companies competing in that space, but most of them with and you know acquired and those bases are just being sort of maintained on long term, but but theres really you know those companies are all over the new account business. So.
So it's a remarkably open space.
We've spent the last six or eight months really building out our our healthcare sales team but.
But we are looking at now ramping up the investment in the conflicts distribution and converged distribution sales team, because where we're seeing a lot of activity and competition.
Not not very intense at all.
That's helpful. On I think you know this quarter you called out.
On the transaction revenue growth.
Transaction based revenue from the out of the South line with maybe the net Black Friday that you that you cited can you give us any sense of kind of the sensitivity to maybe lot line to the transaction for anixter and pulp that variable.
Yeah, I'll leave that one yeah.
Hey, though it's not huge.
No it's not a it's not super Super material number at this stage as Peter mentioned.
It's it's going to be you know you're talking about hundreds of thousands of dollars across the course of a year. There right. Now. So you know there is a little bit of it'll.
It will create a little bit of variability in our in our profit line going forward, but it's not that material.
Okay, and then maybe you did acquire pot line. Peter can you just give an update on on the pharmacy solution I think it too long now.
Or maybe one line one on one on a going live on the data coming out about it and where do you think you're out in terms of being able to take that out on as rock from the information that you felt across the base.
Yeah, we're we're getting there that I mean, we're you're absolutely right. We've got one live on one or both.
Two alive the.
You know I would think if everything stays on track, we should be able to be talking with the second go live at our next call.
But we're also seeing no increased activity I mean, there are multiple pharmacy solutions on.
Opportunities now in the pipeline I.
No.
As we look at our you know our next trip of six to nine month pipeline anything so we're on.
We're seeing activity in there we're seeing.
You know the the account that has gone live is now able to just sort of chat with other other hospital networks and talk about sort of what they're seeing and so on they are not yet ready to sort of publish any of those results but on.
There absolutely lots of anecdotal gains.
So we're seeing we are seeing.
Very good good opportunity there.
Great up offline. Thank you.
Thanks.
Our next question is from the line of Deepak Kaushal with Stifel. GMP you May proceed.
Hey, guys. Good morning, Thanks for taking my questions I've got a couple and low on if I may.
Peter Mark maybe I'll start with on the health care side.
On the call good vaccine distribution on there's been a lot of talk about industry gearing up to start to distribute these vaccines worldwide.
Im just curious what opportunities are you seeing at your level and how do you expect this big machine to kind of roll through and talk to your business would be licensing is a onetime projects any kind of insight we help there.
[laughter].
Great question Deepak I.
I'm going to give you an answer that might sound really evasive, but I'm really trying not to be.
We just don't feel like we are engaged right now in vaccine discussions every single day.
With hospital networks.
With large international systems integrators.
With state level governments.
Like it is non stop.
And yet.
Theres still a lot of destiny are in that space far more than you would think based on I mean, if you read the press right now it sounds as though sort of vaccine distributions been turned over the military and there you go problem solved.
At at the ground level, there's still a ton of work to be done at a lot of things been figured out.
And it's in each segment right. So there is there is the distribution of ER and of course, it's cold chain. So you you need proper track and trace you need it affected you know this all comes under the drug supply chain Safety Act. So their security Act. So you've got you know careful management of the of the whole pedigree.
Pedigree of the product and then that is for the cold chain. So you're talking sort of book distribution to up at the share to the start of the supply chain and then you've got state level distribution, which is oh logistical.
You know massive logistical project to get the vaccine Devry Hospital clinic Pharmacy, you know walk in centre shopping malls wherever they're going to be given and yet most of these vaccines require two vaccines. So you have to actually keep track of the individual patients.
And make sure that the same type of vaccine gets into the same arm. The second type. So there's a there's a lot of process to be set up here on that.
And and that that last phase, which is sort of the.
Sort of final freezer to arm phase.
You know.
We're also in discussions, but right I mean, I mentioned that earlier. So we're we're in discussions with each segment of the chain.
And.
It looks as though within the next sort of 30 days.
Some of those projects are suddenly going to go into very high gear.
But like we're not even like in our in our own internal planning for the second half of the year. We just have a giant question mark over that piece we're.
We're sort of planning the whole rest of the business without but recognizing that that may come and if it comes it's going to come very fast.
And it.
It will be quite debt be quite large so so we just don't know yet.
And it there's still a lot of logistical issues to be worked out.
Interesting that's that's very helpful. So, but like as CEO and when you think of the opportunity to two on.
Change the business or improve the business dramatically in this process you just throw more bodies at it do you work with system integration partners on this.
Like how do you prioritize how you go at this problem.
Im not going on.
Yes.
Yes, I mean, it will have to be done.
Done with Esas or eight losers, there's just too much work to be done to quickly.
Do you know get virtually any of this debt alone. So our people will be very focused on you know assuming we do win some of that business our people will be involved.
Primarily at the platform level setting up the platform configuring the platform.
And then training the size for you know for the rapid rollout.
We have produced.
An app that is specifically, it's sort of a point of use app, which goes on the end of our supply chain platform and is specifically dedicated to that final.
Fringe to arm.
Days.
To track the patient track the dose.
And sort of very efficiently get it from the refrigerator TDR.
With that.
On a super simple and efficient debt.
The phone based solution Android phone based solution for the clinician to use so we've we rolled that out as well we are sort of rush that through R&D and that's a that's being shown no in the in the marketplace and so on so there's.
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But to do this effectively it's going to have to be a team effort I mean, I remember what do we want to.
What are we on the project years ago to do the H one N on rollout in the U.S.
I mean that ended up being a joint.
Joint effort.
With.
You know the third party logistics company, providing warehousing.
And on transportation companies stepping up.
Number 80 on T. ran fiber optic to that place in 24 hours, which was you know as opposed to the normal for a number of months. It takes to get that done. So what so I mean, it's going to have to be the same kind of massive team effort to get it done.
And and obviously I mean, it is a huge business opportunity for EPS, but relatively short term I mean, as we saw with each one and what I mean, you. It ends up being a massive project, but a year later it's done.
Assuming it successful force so [laughter]. So that's there that's our thinking.
And it will you know there is no question it could impact other projects in the business to some extent, but I think at the same time, everyone recognizes that the humanitarian crisis going on and and recognizes this one needs to rise to the top.
Okay. That's very helpful. Thank you looking forward to seeing how that.
Gets rolled out hopefully getting my arms very quickly [laughter].
Everybody it was too.
Yeah, and everybody else is.
Going to the pipeline can you give us.
Some good color on that on the balance of new and existing any.
Any kind of metrics you can give us on size or sales coverage ratio or growth.
HM.
Just trying to get into context, how big the pipelines going on relative to what you're you're converting to revenue.
And bookings growth.
Yeah. The I believe we don't give the specific numbers around that I can tell you, though that the pipeline held quite steady in spite of the strong bookings I mean, obviously bookings come on the pipeline. So in in in spite of the strong bookings over the last six months the pipeline held quite steady from sort of April.
So to October and then surge some in November so the total pipeline.
Ted I mean, when we're measuring total pipeline. We're talking we are talking hundreds of millions of dollars. When you look at total pipeline. So it rose about another 10%.
Just in November so I or from late October to late November I guess was the measurements we were looking at there. So it you know over.
Overall.
The pipeline trend continues to move up it's a little bit you know part of what's driving the bookings of course is that the pipeline.
Hi flooding.
Local pipeline size, but you also from a pipeline duration.
And as we're continuing to get seen shortening the sales cycles.
You know you end up being able to convert more business out of a similar sized pipeline just because the deals are spending less volume in the pipeline right. So your momentum tire going through that pipeline. So so that.
But but overall its.
It's you know.
The pipeline assays.
Held steady for six months and then.
Bit of a nice pop.
In November.
November October November time period.
Got it. Thank you and then on a quick question for Mark just on on margins you guys continue to come in ahead of what I expect 60% EBITDA this quarter.
Yeah, I think you said on a 2025 target of.
On 20% plus.
You guys managed to that kind of target.
And we'll invest accordingly, or you just let the numbers grow and and see potential that surpass that and then I'll pass it on thank you.
Yeah. It's a good question Deepak I mean were where you know the 60% that we saw on this quarter is a is a high number.
For US you know where are our investment strategy.
And mix in our mix expectation of revenue.
Is it was a little bit a little bit off in Q2, we had pretty significant license bookings in the quarter, which would souped up to the margin there and we had the you know the 500 half a million pull in on the SaaS, which which souped up the adjusted EBITDA margin.
On there.
And and we continue to invest in and sales and marketing and in R&D you know on from an Opex perspective.
So so you know I think the the prior targeting that we have discussed you know on an a.
Multi year kind of scenario.
Tom that we have on the wall. It is 20% on EBITDA margin or low 20% EBITDA margin level.
And that's still that's still our drumbeat.
I think you know as we go through the next number of quarters, we'll we'll there's a good chance that we you know that we could see some some lumpiness that continues as we alluded to on the call around around license bookings.
That'll impact.
GAAP margin in an absolute way.
In the short term.
But we're still we're still thinking that that target that we've talked about is still the target on the wall and and and.
We're still on the page of.
Invest now invest now for growth.
And on EBITDA will you know EBITDA will flow.
Okay, great. Thanks, again for taking on my question.
No.
Our next question from depots can think that Nick I click Dino with Laurentian Bank Securities. Please go ahead.
Thank you. Thank you.
So I guess first question just picking up on on Deepak question.
How should we look at the shorter term or the near term margins I think on the last call you guys were still saying you're going to operate the business around around 10% level, but we did see the last two quarters, where you posted certainly above that level and I'm just wondering how I understand the the longer term how should we be looking at the debt.
Near term margins around the 10% or should we be thinking more 12, 13, especially and then adding to that question as we hopefully get into this whole stack seen era, how does that how.
How does what you've been able to achieve in the first half of the year from a cost savings how much of that do you think is going to be sticky in the near term.
So from my perspective, you know the I don't look at what happened in this quarter as as cost savings really flowing through I mean, there was arguably there's the impact from from travel right. So.
Our our plan and outlook was travel costs would you know six months ago eight nine months ago. When we were planning on this.
Travel was going to be acts and now it's completely it's evaporated so.
Theres been some some pickup there for sure and.
And we think that will continue.
Continue at least for the short the very short term.
And it'll come back I don't think it will come back at the same level, but but it'll come back. It will take you know another another two or three quarters, probably for that to start to turn but it will start to turn on Meanwhile, we will continue to invest in sales and marketing and R&D we.
We talked about our cloud and broader services organization that you know right now is the time to get that right. It's time to build the base and the infrastructure that can support and create delighted customers and and where we're bringing them on and shifting over to hsas and and really clear critical that they're they're they're happy on successful on that process.
And you know.
I think that the numbers that you referred to that we had spoke about the force kind of targeted.
Levels in the near term our are still.
You know sort of what we see in the near term.
So that comes through it it could make that number a little bit.
A little bit bouncing, but our expectation is to continue to invest in the short term.
You know what will it be as low as a as 10% in the next.
On the next couple of quarters.
Maybe but but that's kind of where we're at.
Okay, and then on the partner from you guys alluded to earlier that they're bigger influence on the business I know work day has had on.
Certainly bring brought some customers to you already I'm just wondering on the T. PMG side can you just maybe remind us.
Where are they as far as are they.
At a level now where they're able to contribute to the top line to your growth or are they still in a ramp stage from a learning perspective.
And where do you see them, having the when do you see them, having impact and really what markets do you think that that would be most beneficial.
Sure.
Yes, I mean, I think the KPMG is.
Continues to work with us in the in the field. They are involved in a couple of deployments I wouldn't say there yet.
Sure at this point they have not yet at this point driven top line.
For us.
But I think we're very close to that stage with them.
Overall, if I back up and look at the overall picture like at the end of Q1.
We figured that our total pipeline was about 13% partner influenced and you know partner influence is that it's a bit of a softer from I mean, it doesn't necessarily mean that they brought you. The deal. It just means that you are in the deal and they are also in the deal.
And but you know they are a factor in the deal.
So that was about 13% in Q1 as we ended Q2 when looked at and again it was up to about 17%. So.
If you look at when you consider that two years ago, It was pretty much zero.
We feel like hits, it's starting to have a significant impact and it you know it on the effects.
The number of deals to get into but it also affects your your win rate on the deal and also affects the timeline that you know the length of the sales cycle. So so we're we're pretty happy with where that's going we continue to invest in that in building on that ecosystem of the person who joined us.
Few months could have for four months went up maybe to focus specifically on further building out that ecosystem is doing a great job.
So so we're.
Were you know overall pretty happy with where that's going on I would I would think within the next quarter or so we're going to be able to start talking about.
Some other other partners that have actually driven deals.
That that are starting to impact our top line.
And then just one last question as pointed Barrick is a.
Yeah sure you keep on investing into term you got to keep hearing and just wondering I know you've got some.
Some nice plans over the next few years to bring on more people from a headcount perspective to help on the sales side. I think you suggested you're going to do to beef up on the complex distribution.
Alongside your healthcare and I guess my only question is do you see that that spend will be steady or do you envision a time period over the next couple of years, where you where you might be accelerating it or vice versa.
Taking a pause and will be there.
We are now we expect it to be fairly just fairly steady we feel like thats. The most effective way to grow the sales team.
He has to basically continue to hunt for great people to add to the team and when you find them Adam.
So you know for instance in this quarter in our Q3 a week.
We've already had a couple of new sales people start.
And we'll continue to do that so I don't think you're going to see any real sort of stair step there I think it's going to be a pretty steady growth in that number over.
Over a period of time and I mean, what.
There's you know as Mark has alluded to there's a number of reasons why.
EBITDA is coming in as high as it is it has but like at a macro level what keeps happening is every quarter, we keep on overage.
Over achieving on revenue.
And being slightly behind on our hiring plan.
And you know where we are working to.
Find ways to accelerate the hiring further to sort of catch up with the revenue line to be able to take further advantage of the opportunities out there.
But you know it's those two line items that are.
Need to sort of.
We obviously want the revenue line to grow faster than the cost line, but but generally speaking a lot of our revenue growth will be further enhanced by adding some of these people overtime. So we continue to invest in people additional people as we grow the top line, but say quarter after quarter. It seems like that top line growth faster than we're able to bring the staff on.
So I.
I guess, we just end up apologizing to investors from.
Too much revenue in two little cost.
I don't think you'd be net apologize for that but thanks for that color. Okay.
Okay. Thanks.
Thanks.
And there are no questions at this time I turn the conference back over to you.
Uh huh.
Okay.
Thank you very much.
Operator, and thank you all for taking the time to join US today on this call.
As always if you have additional questions. Please don't hesitate to give me or mark recall.
We'll be happy to I have a follow up discussion thanks and have a good day.
Thanks.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your line.
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