Q4 2021 Tecsys Inc Earnings Call
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Good morning, everyone and welcome to Texas, our fourth quarter and for fiscal 2021 results Conference call.
Please note that the complete annual and fourth quarter report, including MD&A and financial statements were filed on SEDAR. After markets closed yesterday. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards.
Some of the statements and this conference call, including the question and answer period May include forward looking statements that are based on management's beliefs and assumptions.
Actual results may differ materially from such statements I would like to remind everyone that the call is being recorded on Wednesday June 30th 2021 at 830, a M. Eastern time I would now like to turn the conference over to Mr. Peter Brereton, Chief Executive Officer of Texas. Please.
Go ahead Sir.
Thank you and good morning, everyone. Thank you for joining us on today's call. It goes without saying that the fiscal 2021 was the year like no. Other over this time of COVID-19 has had a profound effect on the entire world.
Unprecedented challenges tested our business and the industry and ways, we could never have imagined last year at this time the.
The entire Texas team came together not only to successfully navigate these challenging times, but also to position the company to emerge from this global crisis, even stronger as we will cover in detail, we closed Q4 with our.
Pardon me, our ninth straight record.
In terms of revenue and the strongest pipeline in company history.
I want to thank for all our employees and partners around the world for the hard work and dedication. They demonstrate every day to support our customers 1 another and their communities. It has been inspiring to see the organization rally together.
Our team is focused on serving our customers delivering on our commitments and bringing new accounts into our customer of community.
Incredibly proud of what Texas has been able to accomplish reflected and our ability to sustain growth trajectory before during and after the pandemic, even stronger both year over year and quarter over quarter.
After market closed yesterday, we issued our fiscal 2021 and fourth quarter and year end financial results and.
A copy of those results is available on SEDAR and on our website at Texas Dot com the.
For the full year results are audited and joining me today is Mark Butler, our Chief Financial Officer.
I will start by summarizing the key events of fiscal 2021, and the results of operations Mark will then walk us through the financial results and more detail and finally I'll comment on our outlook followed by a Q&A session.
First I'd like to review the continued positive momentum and our transition to SaaS.
<unk> oriented organization.
The appetite for SaaS continues to accelerate and we are very pleased with the progress we are seeing.
Transitioning to SaaS has been a strategic initiative for Texas, we continue to see strong results and stronger momentum.
SaaS revenue growth was up 107% and Q4 and off of 113% year over year, 82% of.
Of software bookings were SaaS and fiscal 'twenty, 1 versus 77% prior year SaaS.
SaaS revenue now represents 36% of total cloud maintenance and subscription revenue up from 22% last year.
The pace at which our SaaS business has expanded at a healthy blend.
Of new customers or new accounts and existing accounts choosing to renew their engagement with Texas and convert to SaaS environment. We see this as a strong endorsement of our SaaS offerings and more holistically of our sustained value to our customers.
We plan to continue this 2 pronged approach of SaaS first selling to prospects and SaaS migration and selling to base of accounts.
With regard to bookings and Q4 of SaaS bookings were the second highest quarterly SaaS bookings in company history with only Q4 of last year being higher and those were essentially pre COVID-19 sales driven.
This impressive SaaS momentum solidifies our thesis for value creation on the macro level, we have learned that not only the SaaS improve the quality of our revenue streams and has also made it easier for both new and existing clients to buy our software solutions we.
We see this positive trend continuing and along with our pipeline and believe this bodes well for the future.
The growth of our partner network continues to provide excellent opportunities for Texas, we continue to invest and building a world class strategic alliances program.
And to provide for our partners better governance, co marketing opportunities and assets accreditation tools and resources.
Our success in fiscal 'twenty, 1 was the input influenced and amplified by our growing lineup of partners.
And we are very pleased with our channel success as the vehicle for global influence efficient scalability and rapid brand propagation.
We are seeing early dividends of our investment in this effort in fiscal 'twenty partner influence new account wins represented 22% of bookings this jumped to 46% and fiscal 'twenty 1 the.
And the effects of the pandemic offered Texas, what we perceive to be and acceleration of market opportunities. We have responded to this by increasing investment and channel and direct sales development and marketing programs to boost our ability to gain more market share rapidly and this has proven to be of successful strategy.
We continue to dominate in the health care supply chain space, we anticipated the stress of Covid on the health care spec sector and on their supply chains, and particular would provide additional opportunities for us to partner with new and existing customers to address immediate and long term challenges in this respect we delivered.
We hope the major U S health system established and emergency Offsite warehouse the message, it's unprecedented volume of PPE and Covid related supplies, we supported multiple accounts to enact their emergency preparedness plans within their warehouses, we ramped up services for pop up on the reserve warehouses and our consolidated service model was the.
Applauded the significant value add and the face of these disruptions by long term partners Parkview health Mercy health and others.
At the end of the day, Texas proved to be among the best cloud based solutions available on the market and we were able to turn that into revenue.
Meanwhile, the retail sector continues to undergo widespread slowdown with significant bandwidth still dedicated to short term tactics over mid term strategy.
Retailers pursuing digital transformation at different paces has widened the gap between retailers able to satisfy customers through e-commerce channels and those still struggling to adjust to post pandemic digital adoption rates.
We expect this market to come to life as the retail industry as a whole re emerges from hibernation.
We believe that retailers will invest heavily to bridge. This digital GAAP and that is the retail industry shifts from survival mode to revival mode, our investment and R&D as well as sales and marketing and will position us favorably moving forward.
The complex distribution market remains a solid source of growth and revenue with positive momentum towards SaaS deployments.
In addition to several new marquee logos, including Canada's largest health care of logistics provider and the Canadian Bank, we have secured new bookings from and international automaker and of global logistics provider of among other notables.
We have also migrated customers the SaaS environments, including 1 longtime customer who reinvested and Texas in order to expand operations from North America to Europe, demonstrating a solid endorsement of the Texas platform.
While we tend to look at year over year performance. We are seeing a number of positive in year trends that are particularly important as COVID-19 eases and the economy.
Opens up again.
The pipeline shifts that we noted last quarter towards more new business versus base business is now manifesting in new customer business driving 73% of SaaS Air bookings in Q4 included and that new business, where 2 new idea and wins in the quarter. Our sales pipeline continues to suggest that solid new.
Business bookings should continue.
All 3 sectors contributed to our performance this year with expansions and renewals by existing customers shoring up the slower pace of new account growth. Our air is up 18% year over year on a constant currency basis, but was impacted by the weakening U S. Dollar since about 2 thirds of our <unk> is in that currency.
Adjusted EBITDA is up by $5.9 million or 58% year over year.
And as our business grows we continue to add to our head count to keep pace with our global head count up 27% over the last year, we continue to invest and operations fairly aggressively in Q4 alone we expanded sales and marketing head count by 12% and continued to invest and development delivery and support capacity.
We should note that this will add to our run rate cost unfavorably impacting profitability, especially as exchange rates have shifted quite substantially creating some margin headwind and travel costs are certainly expected to go up as COVID-19 restrictions ease.
We continue to navigate remote and in person work and anticipate a well balanced returned to work and the weeks and months to come.
While remote implementations have been successful once travel is more normalized we need to evaluate how best to preserve customer satisfaction and speed up our time to go live we are observing some degree of customer fatigue with a full implement from home model and we need to make sure that we do not overburden customer resources to maintain.
And customer satisfaction levels.
Mark will now provide further details on our financials for the year and of the quarter.
Thanks Peter.
We're pleased to be able to report record revenue for both the fourth quarter and fiscal year 'twenty 1.
Recall that our fourth quarter and fiscal 'twenty, 1 year ended on April 30th.
I will now review of the quarter and then after that the year to date performance in more detail.
And the fourth quarter of fiscal 'twenty..1 total revenue was a record $32.4 million, 17% higher than $27.7 million reported for Q4 'twenty in spite of foreign currency headwinds.
The weaker U S dollar, partially offset by the company's hedging of U S revenue gave rise to a net unfavorable foreign currency related revenue variance of $1.3 million and the fourth quarter of fiscal 'twenty, 1 compared to the same quarter last year.
Our largest revenue streams cloud and maintenance and subscription revenue and professional services revenue both experienced strong double digit growth.
Driven primarily by SaaS deployments are cloud maintenance and subscription revenue increased 30% year over year to $13.8 million and Q4, 'twenty, 1 from $10.6 million and Q4 of the prior year.
SaaS revenue and the fourth quarter of fiscal 'twenty, 1 was $5.5 million up 107% or over $2.8 million compared to the fourth quarter of last year.
SaaS revenue represented 40% of total cloud maintenance and subscription revenue in Q4 of 'twenty 1.
And that's up from 25% and the same quarter of last year.
Professional services revenue for the fourth quarter was $12.1 million.
Up 12% from $10.8 million reported for the same quarter last year.
And the fourth quarter of fiscal 'twenty, 1 proprietary products revenue, which we define as revenue and revenue from internally developed products, including proprietary software sold as perpetual licenses and.
And proprietary hardware technology products amounted to $1.3 million, that's down zero point for a million or 21% compared to the same period last year.
This decline resulted from a decline and perpetual license revenue as we continue to focus on SaaS.
Third party products revenue increase and the fourth quarter by 19% to 5.0 million from $4.2 million reported and Q4 of 20.
As mentioned by Peter earlier fourth quarter of SaaS bookings measured on and are our basis for the second highest quarterly SaaS bookings on record at $3.5 million second only to the fourth quarter of fiscal 'twenty, and 'twenty, which was 14% higher at $4.1 million.
And which were largely pre COVID-19 driven sales.
Importantly, Q for fiscal 'twenty, 1 SaaS bookings were up $2.5 million or 252% sequentially from Q3.
Perpetual license bookings and the fourth quarter of fiscal 'twenty, 1 were zero point $8 million compared to $1.4 million and the fourth quarter of fiscal 'twenty.
Professional services bookings and Q4, 'twenty, 1 were down 58% to $8.7 million from of very high $20.7 million and Q4 of 'twenty.
Professional services bookings are on part linked to SaaS subscription bookings and license bookings and are subject to timing.
Q4, 'twenty 'twenty, 1 bookings were negatively impacted by timing of signature on a large professional services water associated with the fourth quarter of SaaS deal the.
SaaS order was signed in the fourth quarter of fiscal 'twenty, 1, but the professionals and professional services order was signed and the first quarter of fiscal 'twenty 2.
Q4 of 'twenty 'twenty bookings were also positively impacted by a large multi year professional services order associated with the Q4, 2020 SaaS deal.
And April 30th 'twenty 'twenty, 1 our professional services backlog stood at $33.6 million.
It's down slightly from $35 million at April 30 of 2020.
Our professional services backlog remains solid and we believe this backlog will continue to support strength and professional services revenue and the coming quarters.
Total error or at April 30th 'twenty, 'twenty, 1 was $52.5 million up 9% compared to $48.1 million and April 30th 'twenty, and 'twenty and up 3% from $50.8 million at January 31, 'twenty 'twenty 1.
A significant amount of SaaS backlog and IRR is denominating currencies other than Canadian dollars as Peter mentioned.
Foreign exchange movements, primarily of the weakening U S dollar.
I had a 1.5 million and $3.9 million negative impact on air are during the quarter and year ended April 30th 2021, respectively.
On a constant currency basis.
<unk> grew 6% sequentially from Q3, the Q4 and 18% for the year ended April 32021.
Recall that SaaS backlog represents revenue that we expect to recognize on the future related to SaaS performance obligations that are unsatisfied or partially satisfied at the reporting date.
This is also sometimes referred to as fast remaining performance obligation or RP O.
On April 30th 'twenty, 'twenty, 1 SaaS backlog was $65.7 million, that's up 26% from 52.0 million at April 30 of 2020 and.
And up $8.1 million or 14% sequentially compared to January 31, 2021.
For the fourth quarter total gross profit increased to $15.7 million up 22% from $12.9 million reported for Q4 of 'twenty.
Total gross profit margin increased to 49% and Q4 of 'twenty 'twenty, 1 compared to 46% reported and Q4 of 2020.
This increase is driven by a higher service margin and tempered by a lower mix of license and higher mix of third party hardware.
Switching now to our expenses for the fourth quarter.
Operating expenses increased to $13.1 million higher by 0.8 million of 6% compared to $12.3 million and Q4 of 2020.
And while we continue to invest and are for growth. We also continue to see lower travel cost and Q4 of 2021.
With COVID-19 travel restrictions currently easing up and the United States and Canada, We expect travel costs the increase in the coming quarters.
As Peter mentioned, we also expect our run rate cost to increase as we continue investing for growth.
Profit from operations was up 343% to $2.6 million compared to 0.6 million reported for Q4 last year the.
The increase in profits was the result of higher levels of professional services and cloud maintenance and subscription revenue.
As well as lower travel costs.
All of this provided stronger margin contribution and was partially offset by lower product margins and higher R&D costs and higher sales and marketing costs.
Adjusted EBITDA was $3.9 million and Q4 of 'twenty 1.
101% compared to 2.0 million reported for Q4 of last year.
Again, the strong cloud maintenance and subscription as well as professional services contribution of where the performance drivers.
Net profit was 2.0 of million or 14 cents per basic and fully diluted share and Q4 of 'twenty, 1 compared to force 0.4 million or 3 cents per basic and fully diluted share reported for the same period in fiscal 'twenty.
Now I'll provide details on full year fiscal 'twenty 'twenty 1 performance.
Total revenue in fiscal year, 'twenty 'twenty, 1 was $123.1 million.
Up 17% from $104.9 million reported for the previous fiscal year.
This growth was organic and was led by SaaS and professional services revenue.
And comparison to fiscal 2020, the company's parcel of partial hedging of U S revenue more than offset the decline and the value of the U S dollar, giving rise to a net favorable foreign currency related variance of the zero point $4 million.
Lower reimbursable customer related travel and fiscal 2020, 1 due to COVID-19 gave rise to and unfavorable reimbursable expense revenue variance of $1.8 million compared to fiscal 2020.
Adjusting for these 2 items fiscal 'twenty and when revenue growth would have been approximately 19%.
Cloud maintenance and subscription revenue was $52.9 million up 29% from $41.1 million reported for fiscal year 2020.
This increase was driven primarily by SaaS.
SaaS revenue, which is included and cloud maintenance and subscription revenue increased to $19.2 million and fiscal 'twenty 'twenty, 1 up 113% from 9.0 million and fiscal 2020.
SaaS revenue in fiscal 'twenty 'twenty, 1 grew to 36% of total cloud maintenance and subscription revenue.
Up from 22% and fiscal 2020.
SaaS subscription bookings increased 9% to $9.5 million and fiscal 'twenty, 'twenty, 1 compared to $8.8 million and fiscal 2020.
And the first 2 quarters of fiscal 'twenty, 1 a greater proportion of our bookings were from based customers. We saw this trend shift and Q3 and Q4 with the higher proportion of our bookings coming from new customers.
Professional services revenue increased to 47.4 million and fiscal year 'twenty, 1 up 17% from 46 million and fiscal 2020.
Professional services bookings were down 12% to $44.8 million and fiscal 'twenty 'twenty, 1 compared to $50.7 million and the same period last year.
As I mentioned previously our professional services backlog remains solid and we believe this backlog will continue to support strengths and professional services revenue in the coming quarters.
For fiscal year 'twenty, 1 proprietary products revenue declined 3% for $5.2 million from $5.4 million in fiscal 2020.
Perpetual license bookings in fiscal 'twenty, 1 were $4.3 million compared to $4.7 million and fiscal 'twenty.
We expect the license bookings will generally be generally lower and the future as the shift of SaaS continues and this will have a negative impact on operating profit and the near term.
For the full year fiscal 'twenty, 1 third party products revenue increased 10% of $17.5 million from $15.9 million and fiscal 'twenty.
Total gross profit increased to $60.6 million.
That's up $10.3 million or 20% and fiscal 'twenty, 1 compared to $53 million and fiscal 2020.
The total gross profit margin increased slightly to 49% compared to 48% reported for fiscal 2020.
The increase was driven by higher services margin of 52% comparison to 51% last year.
Partially offset by a lower product margin of 37% and fiscal 'twenty, 1 compared to 40% and fiscal 'twenty.
Now turning to our operating expenses for the full fiscal year 'twenty..1 operating expenses were $49.9 million and increase of 10% compared to $45.6 million reported for the previous fiscal year.
This increase is mainly attributable to added personnel expenses, partially offset by lower travel costs.
We continue to invest and sales and marketing as well as R&D to support growth.
Reduced travel spending spend during the year, which was driven by COVID-19 travel restrictions and resulted in a year on year decline and operating expenses of approximately $2 million.
For the full fiscal year, 2020, 1 profit from operations was up 127% to $10.7 million compared to $4.7 million and reported for fiscal 2020.
For fiscal 'twenty, 1 adjusted EBITDA was $16.2 million up 58% compared to $10.3 million reported for fiscal 2020.
Net profit for fiscal 'twenty, 1 was $7.2 million or fully diluted EPS of 49 cents, a share compared to $2.3 million or <unk> 18 per share for fiscal 2020.
Finally, we ended the year with a strong balance sheet position and April 30th we had cash and cash equivalents and short term investments of $45.9 million compared to 37.5 million and April 30th 2020.
We had debt of $9.6 million of the April 30th 'twenty, 'twenty, 1 compared to $10.8 million last year.
And finally net cash from operating activities.
For fiscal 'twenty, 1 was $19.1 million compared to 10.0 million last year.
I will now turn the call back over to Peter to provide some outlook comments.
Thanks, Mark and.
We enter fiscal 2022, with the strongest balance sheet backlog and sales pipeline ever.
As demonstrated by the bookings, which accelerated in the latter part of the year. We believe that the market conditions are growing more favorable as the economy normalizes and our position and our key markets and strengthening.
We are well positioned at the Nexus of 2 urgent market opportunities and healthcare and the digital economy.
Where the supply chain has become a significant focus for strategic improvement.
This puts Texas and an enviable position to capitalize on the supply chain modernization that is now underway.
With revenue streams and sales pipeline and diversified across 3 sectors. We are encouraged by the potential for ongoing perform performance. The early signs of which appeared in the latter part of the past fiscal year and particular with the return to strength and new customer bookings showing of promising upward projection is the economy.
Reopens.
On the health care front, the stress fractures and the healthcare supply chain, where intensified by the pandemic.
The monolithic and O data and supply chain systems installed and the sector showed significant signs of weakness and provided additional opportunities for us to partner with new and existing customers to address immediate and long term challenges.
Looking forward our own pipeline reveals the massive opportunity ahead of.
The objections to technology that once dominated the sales process have been largely replaced with strategic conversations about how to mitigate risk drive efficiency and leverage data more successfully and.
And the face of unparalleled disruptions, Texas proved to be the among the best cloud based systems on the market capable of handling of the logistical demands of of modern health care supply chain operations, while adhering to regulatory and clinical requirements. We will continue to lead in this space and capitalize on this sizable market.
Turning to converging distribution, we are confident in being able to take advantage of of shifting landscape that is demanding a greater degree of complexity. The pandemic accelerated existing trends and digital adoption, which has been driving short term instability, but that is developing into boardroom discussions around future resiliency and system.
Modernization.
And uptick and uptick in sales activity in the latter part of the year and top of funnel pipeline growth gives us good indications that the follow on a few quarters should track along the positive trajectory.
In fiscal 'twenty, 2 we look forward to maintaining the strong momentum that has defined this past fiscal year, we expect the accelerating demand for the technology systems that address current shortcomings and legacy supply chain operations and field poised to gain market share as this demand turns to investment we are in an excellent position to be able to pursue major short.
<unk> term and permanent market opportunities and health care and the digital economy and to continue aggressively building our market presence domestically and in key international markets and General, Texas is well prepared and exactly the right time to maximize the emergent opportunities across verticals.
And to best equip ourselves to exploit these market opportunities, we will accelerate investment in channel and direct sales development and marketing programs to gain more market share rapidly the.
Growth of our partner network continues to provide excellent opportunities to us and we believe them to the instrumental as we scale globally.
Our fruitful partnerships are positively impacting our pipelines were partner influence has grown from 7% to 19% of total SaaS air pipeline year over year.
Spending on the success of fiscal 'twenty, 1 we continue to invest and building a world class strategic alliances program and to provide for our partners better governance co marketing opportunities and assets accreditation tools and resources. We expect this pipeline growth will translate into a significant impact.
On growth and new logo wins as we move forward compounded by the idea that partner influenced accounts move more swiftly through the pipeline.
Despite all of the burdens and restrictions that frame of much of our business activity fiscal 'twenty..1 was a very successful year and based on our booking and backlog and our outlook for fiscal 'twenty 2 appears solid.
The dust settles from Covid, we have of well resource sales and marketing organization that has been designed to support additional planned investment of more mature partner ecosystem than ever before and our pipeline and that carries tremendous opportunity by.
By leveraging our team our partners and our existing customers, both our slice of the pie and the size of that by our growing.
In summary, I went and highlight key themes for fiscal 'twenty..2 first we will continue to develop and expand our SaaS revenue model and particular and annual recurring revenue generation.
Pacifically, we would like we will likewise refine our internal processes and resources to complement the shift to SaaS and.
In order to maintain high levels of customer satisfaction.
And we will continue to mature our partnership ecosystem the growth of our partner network continues to provide excellent opportunities to Texas, we see the strategic alliances is instrumental and expanding our global presence and capacity to scale rapidly.
We are excited by the compounding returns of our focus on partners third we will expand our sales and marketing team aggressively and continue to invest and research and development to be and the best position to effectively exploit the accelerating market opportunities.
This accelerated expansion will impact margins on a temporary basis, but given the monumental opportunity that exists as COVID-19 moves into the rearview mirror. We believe the result will be desirable for shareholders.
Finally, we will cross pollinate, our software operating offerings and refine our go to market strategy in order to sharpen the value proposition 2 distinct market segments.
We have incredible software assets that we believe are under leveraged and some of our markets. This will allow us to broaden our software offering to existing customers and attract new customers with a wider scope of industry tailored functionality.
Changes what drives our business and we have just undergone a once in the generation change that is exposed to multiple critical supply chain execution deficiencies, we have an incredible opportunity to address the most pressing challenges today and healthcare and converging distribution markets.
Our target markets are in need of our software is ready and our sales and marketing teams extended by our partners are groomed and geared up and we're looking forward to a great year ahead.
With that we will open up the call for questions.
Thank you if you would like to register a question. Please press the 1 followed by the for on your telephone.
We'll hear of 3 told prompt to acknowledge your request if for your question has been answered and you would like to withdraw please press the 1 and the 3.
And our first question is from AMR Isa from Echelon partners. Please proceed.
And Peter and Mark Good morning, Congrats on another solid year.
Very nice rebounds on the SaaS bookings for the quarter you spoke to a few new logos, but just wondering if the bookings strength is broad based on specific client the contributing the lion's share of GAAP.
Good morning, and it was pretty broad based like there is a number of new accounts and there.
Our cross sectors.
And we were really happy to see 2 new ibm's join us and the quarter, obviously, that's the critical sector for us.
But no there was no theres no elephant and there it was.
It was pretty broad based.
Okay Thats good to hear on.
On revenue mix, it's now a couple of quarters of very strong third party products and anything to read there or is it just where you guys are in the.
The delivery cycle.
Mark I don't know he may want to comment on that.
And generally what we're seeing is debt.
And particularly in the health care sector.
We are starting to see more extensive rollout in clinical areas.
The more extensive rollout of in critical areas is in turn driving some of the sales of additional hardware.
From RFID based product.
2.
2.
Even basic storage type stuff.
For those critical areas. So that's that's having an impact.
And being able to COVID-19 too I think youre going to see a little bit of ebb and flow around third party.
Over and Denmark for instance, there were there were.
The few months were virtually nothing ship because of the country was the locked out and there was some catch up as it came out of lockdown and so so I think youre going to see that and bounce around a little bit.
And Theres also shortages right. So some quarters are impacted by shortages of the chip.
<unk> and that kind of thing and then suddenly we get a bit of of catch up and it all blows out. So so I think that number is just going to bounce around for a while.
Okay.
And on on professional services I guess, you guys maintain closer record numbers and that's despite the FX.
The ones.
Are you are you at the maximum maximum utilization now.
And then related to that you've been seeing a lot of companies in and out of tech struggle with labor shortage of I T.
Whats challenges are you guys spacing and the how are you dealing with it.
We are.
We are near capacity I would say now and professional services, but we're not at it we.
And it pretty dramatically during the year.
During fiscal 'twenty 1.
There were times during the year, where we were sort of.
And really short on resources, we caught up towards the end of the year.
We're now seeing.
Booking of services.
Rolling in.
Fairly strongly at this point so the the sort of the little bit of capacity. We have available there I think will get taken up in the next sort of 60 to 90 days. So we're back to recruiting again in that space. I mean, we never really stopped the sort of slowed down around the Q4, we're picking up the pace again now.
In the.
Okay.
And what you had a second part of that question of what was the second part of the question yes.
Just like we're seeing a lot of like.
Labor shortage like if you could write all of them and Salt Lake and.
And maybe like cost inflation.
Yes.
We're doing okay on that front, we we brought in to a couple of dedicated recruiters that have joined our HR team last year, we added another 1 and the U S. A few.
A few months ago.
And that team is just doing a phenomenal job for us.
It is an active market you've got to be competitive the you've got to be of great place to work you've got to provide good career opportunity.
Thankfully.
We do that.
And we provide good good career opportunity for sort of a fun place to work and with these 3 recruiters as well as of course, Mark and I being such a nice guidance just help each of you want to work here.
Yes.
Fantastic.
On the I believe it was you Peter you said debt.
And Q4 alone you you've had a 12% head count to increase and sales and marketing I see like quarter on quarter of the sales and marketing expenses.
The 11% just wondering how much of that head count increases already reflected in your Q4 numbers.
Yes, it's there's.
A lot of those hires.
Definitely not fully loaded into into that quarter, which was kind of the point of that.
That comment and.
In fact, 1 of those hires even started in Q1 of of.
Of this year, so that hasn't quite caught up to that run rate number yet.
Okay.
Maybe 1 last 1.
And maybe you could give us an update on.
The capital allocation strategy, you're sitting on a good amount of cash and the business is now generally you can get free cash flow as well.
I think last time, you've updated us a couple of quarters ago, you guys had your hands for executing on organic opportunities and that's the message that you took.
So what are you guys thinking now and how do your M&A pipeline looking.
And we're actually putting on an increased focus on on building out the pipeline.
In the.
In the Western Europe to further expand and western Europe.
But our overall sort of position hasn't changed if you look at our bookings over the last few years take sort of the last 3 years and it's a bit tricky because you are.
You're the.
The first year of those let's say last 3 years was much more license revenue based and then we begin the transition to SaaS and this was last year with the most.
It was pretty much SaaS, but if you if you sort of normalize for that and say, okay. What are the bookings how many new seats are we selling how many new.
<unk>.
Human beings coming onto the platform kind of thing and and normalized for the shift in revenue strategy.
We've been growing our bookings at sort of 50%, 50% to 60% of year over the last 3 years. So.
What we're seeing is it's taking a couple of years for that to turn into.
Revenue growth. So we've seen the the actual revenue growth numbers for decline and we've seen pretty strong claim on the SaaS side. So we're looking at that and saying.
And when you're growing your bookings at 50% of year.
You don't really need acquisitions to create huge value for shareholders.
At the same time.
And in support of those bookings, we still need stronger coverage and western Europe, So and so we're trying to sort of balance that off.
Verde is back working very aggressively on trying to build out of pipeline of opportunities and in Western Europe.
If we if we tap into that cash pile I think that's where it will probably go.
But the.
The focus still and the.
He is very much protecting and enhancing that that organic growth.
Great. Thanks, I'll pass the link.
Thank you.
Our next question is from the Nick Agostino with Laurentian Bank Securities. Please proceed.
Yes, good morning, I guess, a couple of questions for me.
When we look at the professional services number obviously, it's a little bit of the.
Bookings for that as it declined quarter on quarter.
Can you talk about day that it was.
Somewhat timing related the SP.
And part and then I think Mark you highlighted just basketball youth signed into fiscal Q4, but the professional services on it.
And the time until fiscal Q1.
The correctly can you just quantify maybe how much of that that piece of business was on the third.
Yes, I wouldn't take I would say.
Wouldn't be comfortable commenting on the on a on a particular deal size, but.
I would sort of color it this way.
Our our current quarter P.
P. S bookings right now like as of the end of June our are almost caught up to to what we did and and Q4 of last year.
Okay.
Helpful and then.
Last week.
And we talked of the pipeline activity.
If I think about fiscal Q3 towns of like it.
The dropping up towards the scalar and second.
And second quarter for <unk>.
Or at least the beginning of the quarter was very strong and I think halfway through the quarter.
The activity was equal what you did for you.
And if I recall correctly.
Maybe August.
And how the the rest of the quarter played out and more importantly.
Just the Q1 is looking for you.
Pipeline.
Good day.
Yes, and Muni.
The.
I mean, the the sales activity the pipeline of activity is actually.
<unk>.
I mean, the the entire sales team is very very busy right now so the.
And there seems to be of catch up in demand that has happened.
The projects that were originally intended to be.
Initiated in calendar 2020.
The decisions were made to delay until they were sort of out of the worst of the pandemic and back to some sense of normal those seem to be now going into high gear.
At the same time, there is still all of the usual challenges of actually finally getting the deals signed these are these tend to be fairly complex legal agreements and.
And legal teams right now are backlogged with getting.
Getting agreements done and it's.
It's not only purchases like ours that were held up but a lot of projects were held up as those are all now being green lit.
The you end up with just the contracting and procurement process, becoming the bottleneck. So we're working through that now we were pleased to see what closed in Q4.
If you look at Q4 of 'twenty, 1 versus Q4 of 'twenty.
Got it.
And once you adjust for currency.
I don't know what the final math would be but once you adjust for currency Q4 of 41 might have even been ahead of Q4 of 'twenty.
And as we come and did come.
Come into Q1 of 'twenty 2.
We don't know yet how the quarters again and of course, we still have of months ago, and our our quarter and are still somewhat hockey stick in terms of.
And how the bookings come in.
But the the.
And the pipeline activity is certainly.
Very exciting I don't remember of June.
Where we were anywhere near this busy.
Okay. That's helpful. Thank you for first line.
Thanks.
As a reminder, if you would like to register for a question you May press. The 1 followed by the for.
Yeah.
Our next question is from the line of John Shaw with the National Bank. Please go ahead.
And as John from National Bank, Congrats on the strong quarter for yourself and the first question is the with vaccine rollout and the opening of the North America and part of Europe.
Could you. Please just give us the update on your business activity quarter, so far.
And in other words, how would you how should we look at the growth trajectory and the post pandemic scenario.
Oh.
Yeah. The tested tough question anymore, because we've got all of these needs various.
And sort of all of these various factors that come into effect the growth trajectory.
And then last year fiscal 'twenty, 1 we had an effect of exchange rate really of the good above 35 on the U S dollar.
If you look at where we're at today and that's and that was a combination of sort of actual exchange rate through the year and our hedging strategy gave us an effective rate of about 135.
This year.
To have an effect of exchange rate of what sort of 123, something like that so youre dropping from 135 to 123 of it.
12 points down on 70% of our revenue so that that sort of pulls the the revenue trajectory down.
On the other hand.
As I mentioned, we've had sort of.
3 years of very substantial bookings growth.
And that is sort of washing through into revenue.
And our pipeline is not only larger than it's ever been but it's moving faster than it's ever been we're seeing even and health care, we're seeing deals enter the pipeline and get through the contracting and 6 months, we've never seen that happen.
The typical healthcare deal and in a few years ago was 18 to 24 months to get it from initial contract signing so so a lot of changes happening.
We don't give forward.
Projections.
And beyond sort of we do give a bit of of projection on what we think professional services revenue will be and the next quarter.
Thats more predictable for us, but we don't give sort of overall growth projections going forward, but.
So we're looking at this year and saying it.
Looks like a pretty exciting year, we expect the strong year for bookings.
And the actual revenue number will be impacted by currency.
But the.
All of it all it looks like a good year for for value creation, and I'm, sorry, if that.
Seems like an evasive answer, but I think thats about the best I can do for you.
Yes that sounds great. Thanks.
Speaking of healthcare I guess the.
And that actually draw the lot of interest from the investor because the back from the rollout maybe just give us. Some detailed example of how taxes solution could play in and the administration of vaccine does that require any modification or just the plug and play.
No that was I mean, we were we actually rollout of small module to help some of our customers with actual vaccine administration, but but in fact.
Due to the speed with which this thing hit and.
Even the these the uncertainty around timing of vaccines and then when they finally rolled out the rollout.
So on mass.
The most customers and organizations.
And governments.
Stuck with whatever they had.
So we've seen we actually were involved and a lot of discussions with a lot of clients, but in the and most of them.
Just stuck with.
And I say whatever.
Electronic medical record system, they had or in some cases literally using spreadsheets and.
And paper based systems to track this stuff.
So we didn't really ended up doing much of business directly related to the vaccine distribution and there's a little bit of it but not not a lot.
Okay that sounds good and I'll pass the line. Thank you.
Our next question is from the line of Steven Li with Raymond James. Please go ahead.
And then thank you.
On the health care again.
How many sales reps you have currently and maybe how many do you expect by you and this year.
Yes.
And we started.
The fiscal 'twenty, 1 with 5 dedicated health care care reps, we ended fiscal 'twenty, 1 with 10 dedicated health care reps.
And at this point, Mark I think and our plans we expect to end fiscal 'twenty 2 now with sort of 2014 or 15 rate I think is the current Duffy.
And so we've actually we had been talking about trying to get to 12 by the end of this past year and then to be at 20 by the end of this coming year.
We're seeing that the.
The efficiency of it.
Of a given.
Given rep is rising enough.
And that we think.
Of the 10, we ended the year with and the sort of 14 or 15 by the end of this coming year is more appropriate given the volume of business that it seems that of single Rep can drive.
Mhm.
Is it the straight line relationship for even better and based on your comments.
And in 6 to 7 new Ibms, but right now and you double your head count. So once the up to speed you fully expect to sign 14, and 15 Ibm's, but yeah.
That's.
The active in fact I mean.
You look out over the next few years I mean, we're currently in the low forties wherever we of 44.45 by the end or something like that.
We our objective here is over the next sort of for years to get to a 100 ideas.
And we think if we can get to 100, IV and that puts the CNA and.
On a position, where we effectively sort of 1 of the health care supply chain market.
That just puts you in such an unassailable position so.
So that's the objective to get there.
And we would have to get to that kind of level and that's what we're aiming towards.
If if 2 years from now we're closing sort of 12 to 15, a year and by 3 or 4 years from now and we're closing 18 to 20 a year.
That would be I think that would be a very good result.
Okay, that's great. Thanks, Peter.
Our next question is from Gavin Fairweather with core Mark. Please proceed.
Oh, Hey, good morning.
Good morning, good morning.
I just wanted to start out on the channel you provided some good stats in terms of the number of partner influenced deals.
And the pipeline and I guess, the part curious on the service delivery side.
And what maybe proportion of the services are being implemented and deliver now by channel versus your internal team and I expect that specifically on the call I've.
And just given some.
Some of your commentary around running pretty flat out on your internal capacity.
Yes. The interesting question I mean, we try to estimate that a little bit based on what we know of our partners' revenue.
Off of our projects.
Hard to be precise because of course that revenue doesn't go through our books.
But if I were to hazard a guess based on projects that are going on and now I would say somewhere around 30% of the of the services is now being carried by.
By our partners.
What makes it harder even harder to judge of course is some of the work being done by our partners is work that in other cases is actually done by the clients themselves and they just after the side or are they going to do it with their own and those people are they going to use.
The consultants to help them get it done so so it is hard to be precise.
But it is rising.
And we got the Avalon right here in Toronto and Montreal for instance, they are at a point where they can do.
The 70% to 80% of the project.
So we're typically still involved in.
Actual software config and that kind of thing.
But they are carrying the bulk of the project and and the number of cases.
And are there cases of some of the larger size. They are tending to focus more on project management change management.
And user training that kind of thing and we still carry.
A more substantial portion of those projects. So it varies but if I were to give you a number I think it would be around 30% of the total work being done is now being handled by partners.
That's great. That's really helpful. And then maybe for Mark I mean, the south of there are continued to grow really quickly here, you're now over 20 million on on that.
Our base can you just comment on kind of the gross margin profile at your current level of scale and and how yeah.
And you think about the medicinal kind of margin of left.
Is that revenue line continues to growth.
Yeah, I mean, we're still.
We're still suboptimal on our on our SaaS margins for sure at these at these levels of of scale, I mean, where we're running SaaS margins that are sort of sub 60%.
And we think.
We think with scale, we're doing some things with our development investment to make the platforms.
And operate more efficiently on public cloud infrastructure on AWS, and Azure, which is the public cloud infrastructure that we use.
And we think that will bring them on.
On the cost of of that portion of our of our of our SaaS business down.
And and and we also think that as we.
Many of the to scale up and size or our ability to to get.
To get better pricing.
The pricing and discounting on that those infrastructure costs are are going to increase so we're focusing a lot development of energy on this as well as making sure that our cloud operations team can can scale you know and.
Creating that organization of investing and that organization. So so that it's robust and can scale well.
And and and I think that's where we see real potential and going from.
Sort of sub sub 60 to 2 to.
The high high sixties, I think is probably.
Probably reasonable maybe even conservative.
Great. That's it for me congrats on all of your progress.
Thanks, Thank you and this.
Mr. Barrington, we have no further questions at this time you may continue with your presentation.
Great. Thank you well that concludes the.
A question and answer session. So thank you for taking the time to join us on today's call.
Somehow of this Q for year end call always seems to be of very long script. So I apologize for that as we try to sum up Q4 and the full year.
But I promise of the Q1 script will be shorter and <unk>.
And if you have any of the questions. Please don't hesitate to give the Mercury I call. We look forward to talking to you at the end of the summer to discuss our first quarter results.
And have a great day.
And that does conclude the conference call for today and thank you all for your participation and kindly ask that you. Please disconnect your lines have a great day.
Okay.
And then.
[music].