Q2 2022 Tecsys Inc Earnings Call
[music].
Yeah.
Good morning, everyone and welcome to Texas second quarter fiscal 2022 results conference call.
Please note that the complete second quarter report, including M D and E and the financial statements were filed on SEDAR yesterday.
All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards. Some of the statements in 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 this call is being recorded on Thursday December 2nd 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. Joining me today is Mark Miller, our Chief Financial Officer. We appreciate you joining us for today's call.
For those that may be new to our story, Texas brings transformative supply chain solutions that result complex challenges for commercial distribution networks to customers around the world are markets include healthcare and pharmacy e-commerce retail and direct to consumer brands as well as general and converging distribution markets where.
We're the market leader in North America for Health systems.
Hospital supply chain solutions with an end to end value proposition I'd like to begin by summarizing key themes for the second quarter of fiscal 'twenty two.
The results of operations and Mark will then walk us through the financial results in more detail and finally I'll comment on our outlook followed by a Q&A session.
There are two key indicators I'd like to highlight which despite currency headwinds are contributing to our track record of solid accelerated growth.
Revenue, where I'd, just like to touch briefly on growth and quality and our pipeline, where I'll touch on market conditions.
First this is our 11th straight quarter of record revenue as we continue to emphasize SaaS revenue is scaling up relatively quickly due to our ongoing strategic shift to SaaS in all our markets as we continue to mature the SaaS revenue model, we will increasingly create greater revenue visibility and improve the <unk>.
Long term quality of our revenue.
This leads to my second point our pipeline.
As we report results.
Into the second year of the pandemic, while our revenue performance continues to move in a positive direction. This only tells part of the story.
And I'd like to reiterate the growing importance of supply changes as a strategic lever within organizations and how this is being reflected in our pipeline.
Supply chain is everywhere in flux due to the pandemic and are strained due to the general fulfillment trends and shifting trade agreements everywhere. We look in all sectors companies are attempting to bolster technology to become nimbler in the face of new uncertainties and we're seeing the effect of that trend in August we announced that since COVID-19.
And began over 30 healthcare accounts.
Major investments with Texas, helping to resolve operational shortcomings exposed by the pandemic.
September we shared the news of the Australian retail chain at Woolworths, holding subsidiary politics, having leverage Texas software to manage the complex back end supply chain processes behind their Salesforce technology.
In both cases, we are seeing signs that organizations are investing in their supply chain agility and Texas solutions are the chosen vehicle for that agility.
As a result, we are seeing momentum in our pipeline in all lines of business from both new and current customers. Some global customers, who may have started with a single facility are now expanding to multiple jurisdictions and others, who may have started with a few modules are now expanding their texas footprint to better equip their supply chains are.
Our Q2 bookings demonstrates that the impact of the bottlenecks that we were seeing in procurement illegal seems to be abating, and we seem to be returning to a normal deal flow.
Our momentum is strong and while continuing to invest in the expansion of our own services organization. We are also investing in the expansion of our partner ecosystem.
This is beginning to truly help us to respond to increased demand and proactively hedge against growth oriented labor and delivery capacity bottlenecks.
<unk> will now provide you further details on our financial results for the second quarter and first half of our fiscal year over to you Mark.
Thanks, Peter we're pleased with our strong performance in our second quarter ended October 31 2021.
Before jumping into Q2 and first half results as a reminder, last quarter, we began showing SaaS revenue separately from other recurring revenue, namely maintenance and support we're also presenting license revenue as a separate line, including proprietary and third party licenses in that revenue line.
We're presenting hardware on a separate line and this line Likewise includes both proprietary and third party hardware.
And finally, we've combined Reimbursable expense revenue with our professional services revenue line.
We made these changes in order to highlight the areas of the business that are driving our performance and to create greater clarity and the underlying trends in our business.
With that I'll move on to the second quarter results.
Total revenue was a record $34 3 million, 12% higher than 37 million reported for Q2 2021.
And as Peter mentioned, our 11th straight quarter of record revenue.
As many of you know a significant portion of our revenue about 65% to 70% is denominated in U S dollars as.
As a result movement in currency exchange rates has an impact on our reported revenue and growth.
During Q2 fiscal 2020 to currency exchange movements negatively impacted our reported revenue as the value of the U S. Dollar was weaker compared to the same quarter last year.
In fact on a constant currency basis, using fiscal 2022 currency rates, our second quarter revenue grew by about 18% compared to the same quarter last year.
This unfavorable currency movement materially impacted all revenue lines in the quarter.
We continue to experience strong and diverse revenue streams underpinned by a 28% increase in SaaS revenue up from $5 1 million in Q2 last year to $6 6 million in Q2 of 2022.
On a constant currency basis, SaaS revenue was up about 36%.
I also wanted to note that we're at the precipice of a significant milestone in our transition as a SaaS business.
With our SaaS revenue, representing 44% of our total recurring revenue streams and Q2 fiscal 2022, and we have line of sight to SaaS crossing over the 50% threshold.
It is particularly notable that we've reached this point quite quickly you talked about three years into our SaaS transition.
Maintenance and support revenue for the three months ended October 31, 2021 was $8 $2 million down 1% compared to the same quarter last year.
This decrease was a result of the negative impact of currency movements.
On a constant currency basis maintenance and support revenue actually increased by about 4% compared to Q2 last year.
Our annual recurring revenue at October 31, 2021 was $56 $9 million.
Up 12% from $59 million at October 31, 2020.
On a constant currency basis that increase was about 18%.
Professional services revenue for the second quarter was $13 $1 million, that's up 11% from $11 $8 million reported for the same quarter last year.
Again currency movements created a headwind on revenue growth here, which would have been 17% on a constant currency basis.
Hardware revenue in Q2 fiscal 2022 was $5 $4 million, that's an increase of 2.0 million compared to the same period last year.
And this was driven by solid backlog heading into the current fiscal year.
SaaS bookings are reported on an annual recurring revenue basis and increased by 50% to $4.0 million in Q2 2022 comp.
Compared to Q2 of last year, which was $2 $7 million.
SaaS bookings were highlighted by new customer signings in all our key verticals with three new hospital networks for new debt general distribution and retail customers and some solid base business uptake as well.
Professional services bookings were healthy at $17 $9 million, comparing favorable favorably to $11 5 million in the same quarter last year.
License bookings were $1 million in the quarter compared to $1 9 million in the same quarter last year.
SAS remaining performance obligation also known as RP O or SaaS backlog.
Was $72.7 million at the end of Q2 fiscal 2022.
That's up 21% from $62 million at the same time last year.
On a constant currency basis that growth was 28%.
This notable increase was driven by significant multi year SaaS bookings in the quarter.
Professional services backlog at the end of Q2 fiscal 'twenty, two was $33 $1 million, that's down about 16% compared to $38 7 million at the same time last year and down slightly from $35 1 million at July 31, 2021.
Our professional services backlog remains robust and we expect our delivery team to continue to be very busy in the quarters ahead.
For the second quarter total gross profit was $15 $5 million, that's down about 0.5 million compared to $16 million in Q2, 2021.
As a percentage of revenue gross margin was 45% compared to 52% the same quarter last year.
The decline was the result of unfavorable exchange movements investments to support growth and also change in revenue mix.
The latter in particular with lower license revenue and higher hardware revenue.
Switching now to our expenses for the second quarter operating expenses increased to $13 9 million, that's higher by $1 $3 million or 11% compared to $12 6 million in Q2 fiscal 'twenty one.
Operating expenses increased as we expanded investment in sales and marketing as well as in research and development.
Net profit for the quarter was 0.7 million or five cents earnings per basic and fully diluted share compared to $2 1 million in Q2 last year, which was <unk> 14 per basic and fully diluted share.
Adjusted EBITDA was $3 2 million in Q2, 2022 compared to $4 8 million in Q2 last year.
The decrease in profit and adjusted EBITDA compared to the second quarter last year was driven by an unfavorable foreign exchange impact of approximately 1.5 million as well as lower license contribution and higher expenses.
Yes.
Turning now briefly to our results for the first half of fiscal 2022. Our total revenue was $67 5 million, that's up 15% compared to $58 8 million in the first half of last year.
That would be up 21% on a constant currency basis.
SaaS revenue for the first half of 2022 was $12 $2 million, that's up 36% from 9.0 a million in the same period last year.
And that's up 45% on a constant currency basis.
Our profit for the first half of fiscal 'twenty, two was $1 million or seven cents per basic and six cents per fully diluted share.
Compared to $3 3 million or 23 cents per basic and fully diluted share in the same period last year.
Adjusted EBITDA was $5 7 million in the first six months of the current fiscal compared.
Compared to $8 3 million for the same period last year.
Foreign exchange movements had a negative impact of approximately $3 million on profit and adjusted EBITDA in the current six month period compared to the same period last year.
Finally, we ended the second quarter with a strong balance sheet position at October 31, 2021, we had cash and cash equivalents and short term investments of $38 $1 million.
That compares to $45 9 million at the end of the year.
Net debt of 9.0 million compared to $9 6 million at the end of the year.
Cash provided by operations was 0.6 million in Q2, and our Dsos or days sales outstanding and accounts receivable.
Remained solid at 56% at 56 versus <unk> 47 at year end and compared to 73 at the same time last year.
With that I'll turn the call back over to Peter to provide some outlook comments.
Thanks, Mark the positive growth trends, we saw in fiscal 2021 are continuing into fiscal 2022, not only are we reporting record financial performance, but it is encouraging to see the uptick in new accounts and expansion of existing accounts and the overall strength of our pipeline the.
The market conditions give us confidence that we are well positioned to continue capitalizing on our market opportunity.
I'd also like to take this opportunity to thank the T S X for including US in the <unk> 30 that was exciting news for us and I'd like to thank our shareholders and our employees for making this possible in case you didn't see that release in September Texas. It was included in the T. S X 30, with a three year dividend adjusted share price appreciation of 181%.
As an indicator of future performance, we can look at the strength and depth of our current pipeline, we are seeing solid opportunity cycles and great activity across all segments, both among current customers and new prospects.
We are mindful of our delivery capacity and we continue to invest on that front we.
We are also continuing to intensify our channel relationships in both cases, we're taking proactive steps to manage for continued growth.
As we enter the second half of fiscal 2022, we continue to feel confident that the remainder of 'twenty. Two is on a solid growth trajectory underscored by positive trends in our Kpis, while Covid may still presents additional curve balls, Texas has never been in a stronger financial position to weather future set and market volatility if it were to occur.
In summary, I want to remind analysts and investors about our three key operational themes for the remainder of fiscal 2022, which have not changed from our previous analyst call as we entered the fiscal year.
First we will continue to maintain a focus on developing and growing our SaaS revenue model.
We will likewise continue to optimize our internal processes and resources to complement the shift to SaaS to maintain high levels of customer satisfaction as well as improved margins secondly.
Secondly, we will continue to expand our partnership ecosystem.
This is key for us to scale rapidly into the market opportunities that I mentioned earlier, we now are partners working effectively with us in both North America and Europe will continue to invest so that we can enable them more quickly from accelerated training programs to improved onboarding tools, we are determined to make our Si partners very successful.
Thirdly, we plan on investing in all of our sales channels to exploit the momentum and opportunities coming at us.
We also continued to expand and refine our omnichannel business platforms to service evolving needs in the health care supply chain converging distribution and retail market segments.
These efforts will help us to not only minimize customer return, which is already very low but will also help us to expand revenue from current clients as we saw happening again this quarter.
Remember changes what drives our business and the lasting effect of the COVID-19 pandemic on supply chains has accelerated the monumental change that was already underway and continues to turn in traditional supply chain Ted.
With that we will open the call up for questions. Thank you.
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And our first question is from the line of Amir <unk> with Channel partners. Please go ahead.
Peter Mark Good morning, and congrats on another strong quarter.
Thanks.
Yeah. My first question is on the the new restrictions, we're starting to see in different jurisdictions.
The new virus strains do you see that impacting you guys at all yet.
On the delivery front or a bookings.
Yeah.
You know hard to say where.
We came through the <unk>.
Early and much more surprising and drastic phase of the pandemic.
Relatively unscathed, we did see a slowdown in bookings of course, we're a few quarters there.
So it's hard to predict we're sort of watching this this overcrowd wanted to see.
How serious it turns it to be we certainly learned how to navigate around travel restrictions.
I think from a we're doing a fraction of the travel that we used to.
You can see that actually even in our reported numbers I mean, the travel travel costs are down substantially.
So we don't anticipate a major hit there, but I mean I think.
The whole world is trying to figure out what the next two weeks looks like and I guess it could have some impact certainly but.
But so far we've come through quite a number of months of pretty severe pandemic and I have learned how to get business done in spite of it.
Great great.
Maybe Peter you can give us an update on your capital deployment strategy My sense from the last couple of calls is your.
Squarely focused on the organic side.
That evolved at all are you seeing valuation levels that are more conducive to M&A.
Yes, I mean, we continue to look for the right opportunity to two five footprint in Europe, so that that search continues.
I would say is that as time has gone on and valuations are somewhat sort of stabilized.
It certainly looks like there may be some possibilities there so where we're continuing to scratch that.
And the other area. We continue to look is in the is in the U S area for potential sort of.
Small niche.
Health care components that could complement our suite.
So we continue to look at both.
Birdie continues to build out a pipeline for both.
Certainly at this point I would agree with your assessment, our focus and the focus of our management team is on growth.
The business at.
At current growth rates.
Doubles every few years and that.
That creates a lot of a lot of focus to make that are demands a lot of focus to make that happen.
So the focus is still clearly on the organic side.
Fantastic maybe one last one for me can you give us an update on your revenue splits between your different verticals.
I'll have mark take that one.
Yeah sure.
No.
There are split is pretty similar to <unk>.
What it was last quarter.
And now we're at about 35% health care and about 65% are.
Complex distribution.
Great. Thanks, I'll pass to light and congrats again.
Thanks.
Our next question is from Gavin Fairweather with core Mark. Please go ahead.
Oh, Hey, good morning, I thought I'd start out on the idea that you added.
In Q2, nice to see kind of three new logos coming on board. Maybe you can just discuss the profile of some of the new customers in terms of their size and whether theyre thinking kind of end to end out of the gate or starting with point of view.
C C.
Yeah, we actually had the sort of the full variety of that size wise. These are all sort of medium size IV ends. They are part of the you know the.
The 300 ideas that we targeted in the upper end of the market.
So, they're they're all sort of good sized networks.
The in terms of what they are.
Purchasing it literally ranges from one starting with the CSC and others, starting I believe the other two of her correctly are starting on the point of view site.
But in every case the intention is to go full end to end.
But starting in a in a couple of segments of their of their businesses. So they were all sort of pretty.
Well, we would see is sort of good average size Ivy and as you know given our average size footprint or average size deal has moved up pretty significantly in the last few years.
And needless to sort of fit right into the current average.
That's great and then maybe just a couple one on the sales pipeline I guess now you have the kind of through.
The idea that Youre working with.
100 target.
By fiscal 'twenty five.
Given that you have kind of longer sales cycles, I guess I'm curious kind of how many of you might have visibility on that.
Kind of thinking through kind of supply chain.
Patients over the next few years.
Yeah, I mean, we.
You never know exactly there's there's changes that happened in these businesses, sometimes there's changes on boards of directors that suddenly changed focus or change of CEO that suddenly changes focus, but but you know.
From what we can see we we believe we know sort of where the we have the names of what we think are the next 'twenty.
We expect to come in over the next.
A year and a half or so so we will we will see how that plays out.
But certainly this market is accelerating as we anticipated it slowly was starting to accelerate the pet dedicated slowed down for a bit.
It's.
Jerry it's back to a decent clip.
I mean here, we are still in pandemic really and yet in the first six months of the fiscal year, we've already signed five new networks. So it's.
Love the momentum that's building there.
Certainly we think we know the names of the next 20 years will join us.
That's that's great color and then I guess I'm curious how much interest are you seeing on SaaS migrations out of the base and we've talked about it in the past and you've gotten the odd one kind of here and there but.
Are you seeing increased appetite from the on Prem installed base.
We are.
And probably.
It's always more is a little bit more than we anticipated. So we'll see how that unfolds.
Focus has been on new accounts and sort of driving the new accounts as business first feeling that our existing account base was sort of.
Quite happy to continue to run their existing software on Prem and just upgrade from time to time zone.
But you know.
There's a lot of threat out there and a lot of a lot of companies are looking at you know with some of the ransomware issues happening and so on are saying.
Hey, how fast can I get this stuff off by servers into the public cloud in a better protected and so so.
So we're seeing an uptick in interest in that.
And youre seeing it in the further drop in license fees.
You know I mean license fees this last quarter down to a million Bucks I mean.
Q2 is typically a fairly strong booking quarter for us.
So to have the license fees down another 50% from Q2 last year. It kind of tells that story I mean, the kids the the last.
Year, and a half or so of the license fees have largely come from the base.
And the basis is starting to.
Starting to shift to into a SaaS conversions is there is there a path forward. So we think you'll continue to see sort of license fees driving closer and closer to zero.
And the SaaS bookings.
Replacing that is that they start to move.
That's great and maybe one for Mark the services gross margins I guess first half of your fiscal year have kind of moved.
Maybe a little bit lower than where you were running.
Over the course of.
'twenty one.
Can you disaggregate that into some some underlying trends at play between building capacity for further pro serve delivery versus FX.
FX versus.
The SaaS optimization that you guys are working on in the background.
Yeah, Yeah on the services side, that's that's really a combination of those two factors one is and it's kind of that kind of impact in equal parts.
It's the FX impact.
Now on the on the on the mismatch we have on the revenue side in USD and cost side and in cab, that's putting some pressure on the comp.
And then the other thing and it's like I said, it's about roughly kind of half and half impact.
The other part of that is sort of scaling up scaling up the business.
Hum.
Deliberate capacity.
And just on that last point.
The last couple of quarters, you've been delivering around $13 million a quarter in services.
Services bookings number this quarter or do you feel like you have the delivery capacity to be.
Maybe 14, 15 and $16 million in.
Services in a quarter or is that kind of where we're going to be heading in the next few quarters.
I would say in the next few quarters.
Yeah. That's that's that's what we're.
From what we're saying in the trends, we're seeing you know, that's where that's kind of where we're expecting.
This to go where we're growing head count and services you'll rack.
Recognize that.
Last year, we grew we grew that team pretty.
Pretty significantly.
The beginning part of this year, we've continued to grow that team although.
At a slightly slower pace and that's not because necessarily we wanted to grow more slowly, but it is a pretty competitive.
It's pretty competitive hiring environment environment that.
But that we're seeing now over the last really over the last couple of quarters. So.
So we continue to recruit there and continue to build.
<unk> team.
To support what we expect to be continued.
Continued increase in demand and services.
Awesome. Thanks, so much I'll pass along.
Our next question is from Nick Agostino with Laurentian Bank Securities. Please go ahead.
Can you just speak.
And maybe the progressive conversations you're having when it comes to your pharma.
And your.
Ibsa's maybe.
Conversations you might have with the new IV Ns, obviously, you talked about having visibility.
Over the next year and a half maybe what conversations are looking like on pharma, both with existing and potential.
On the on the idea.
Okay.
Yeah. It continues to be a relatively small portion.
A lot of pharmacy in the hospital space is still in a very traditional mindset.
So we still see overall I would say pharmacy is maybe 10% of the conversations that are happening with the with the networks right now.
<unk>.
Were actually fine with that.
We think over the next couple of years, we'll probably add a couple more.
Pharmacy implementations.
As we sort of look at this over a five to 10 year horizon, we're sort of expecting.
80% to 90% of our bookings to come from the areas, where we're already well established in.
CST.
Lab.
Or nursing station delivery et cetera.
With sort of 10% to 20% coming from the pharmacy side.
Our expectation, though is as you get out to sort of years, four and five pharmacy starts to become more significant. So that's that's what we're working towards we're continuing to invest in that.
We're looking to produce so we're still looking to produce some documentation showing what the savings are that that drives.
Theres also.
We also need to continue to build up some of our own.
Pharmacy expertise, so we're working on that as well.
And then you spoke earlier about the sort of the importance of the partner ecosystem.
Maybe talk to are you having conversations present.
To keep on adding.
And if so any of those conversations.
Yeah.
S.
Sites that have been engaged in a wait and see.
Then just if you can highlight maybe partner contributions in the quarter.
Specifically on the <unk>.
Yes.
Maybe if they play the game.
On your debt.
Yeah, I mean in terms of conversations with US I mean, those continue and the funding is of course the entire tech community is challenged with the workload right now so so the biologics the size are not looking to create sort of brand new partnerships, but what they are looking to do is satisfy.
Their existing clients and when their existing clients develop a need they have.
End up sort of looking out in the marketplace to figure out who to work with for that particular need. So we are seeing that.
Hi.
Most sort of actively in health care.
This past quarter.
I don't honestly remember it was either one or two of them are mixing it up with first quarter in my mind here, but.
Out of the five we've signed so far this year two of them were brought to us by our partners.
And that's obviously a significant factor in.
In continuing to expand our market presence.
The beauty of course that is those partners remain involved.
To assist with the implementation, particularly a lot of the client side work around project management and.
In some cases interface work and.
And testing and so on.
So that that is going very well on the on the general distribution side, we continue to look for more boutiques.
We have our greatest success in the general distribution space with sort of smaller boutiques that focus very much on supply chain and in often end up with for 15 at 15 or 20 clients of their own that they worked with extensively over a period of time to implement various solutions and we've got a couple of those now.
Our Jamie O'halloran, who heads up our.
Our partner initiative.
Is something that he's working on quite extensively is building out that that particular piece.
Of the you know the.
When we look at the next two.
We are four or five years, we can see that that pool that whole general distribution spaces is beginning to go into a technology renewal phase, replacing the sort of 20 year old systems that were put in for Y two K and in many cases they rely on.
Consultants that they know to guide them as to which system to look at so so we're building out our presence in that ecosystem is critically important to to being <unk>.
Of the play for these for these new accounts.
Pipeline wise.
Right now we're currently at about 25% of our pipeline is what we consider the partner influenced.
Okay.
Okay, and then maybe just one last one for me.
Obviously.
<unk> three <unk>.
If I recall properly.
Towards the top end of what you guys have done it.
Is that right.
I mean does that.
Some of the legal bottleneck.
A baby.
Or are you starting to see that.
So Paul look back.
And we will bet.
Really.
Celebrating sales cycle on the health care side.
The improvement in its bill.
And I think last quarter, you suggested that you might not need to do for a while.
Of course.
As big as you originally thought go after it.
100 IBM.
And the next three to four years do you still stand by that given the performance.
Yeah, I mean, the the rate at which we are signing new ideas first of all is.
I think there is a little bit of a catch up the tap in there as we sort of got through some of those procured bottlenecks.
At the same time, when I look at the pipeline.
The pipeline is extremely active and there is there is.
A greater number of opportunities in the short term pipeline then.
And frankly, we've ever seen.
So.
It's hard to say I mean, as you know our bookings tend to be a bit lumpy, but certainly at this point.
It feels like we're back to a run rate of <unk>.
If I take for instance, the first half of the year, we closed five in the first half of the year can we do five in the second half of the year.
From what I can see in the pipeline it certainly looks like weekend so it.
That's a fairly normal run rate at this point.
Contributing factor the whole market is moving more quickly there's a lot more.
There's a lot more focus at a board level throughout I mean, not only the hospital market that the general business market, but specifically within hospitals, the supply chain and supply chain management and suddenly a board level issue.
Coming out of the pandemic, so that I think thats out putting some heat under it and then add to that the fact that.
Our our health care sales team.
Is twice the size that it's been even a year and a half ago.
So we've grown that sales team substantially which in turn means of course, we're involved in many more conversations that in turn drive board.
Opportunities.
We are closed so so I think it's a combination it's the market its the theory of procure with bottlenecks and it's the fact that our sales team is twice the size it was a year and a half ago.
In terms of your last question.
We're continuing to look at that in terms of how fast we grow that team.
Hi.
We still we still think ultimately to get to a point, where you've got no more than 10 accounts per rep.
Makes sense.
But we're continuing to watch that and we're going to let this initial investment in health care sort of mature for a bit on the on the.
On the sales side.
Although we will probably accelerate the sales team growth a little more on the converging distribution side is we're seeing that market opportunity also eating out.
And I would just add to that that we you know with the pretty significant investment that we've made in the sales team up until this point of time, we are starting to see some productivity starting to starting to improve but these are these.
These folks that have been around now for a number of quarters have had time to weigh into the markets.
I know the product.
The way forward and they've had time to sort of start doing some selling and we're starting to see that you know the productivity.
Impact of that existing sales team, but we also believe that that there's there's there's more productivity to come here where on the come on the front end of that improvement.
Thanks, Kevin.
Our next question is from Andy <unk> with Raymond James. Please go ahead.
Thank you guys.
So I just wanted to touch on the free cash flow.
Generation for the first half I know as we turned into positive.
I shouldn't cash from operations had positive this quarter, but still a bit under onemain could you. Please touch on that like give us some more color isn't too.
What's going on in the background.
Sure.
I mean, we expect we expect positive cash flow from operations.
We do have some seasonality in our cash flows, which which tend to make Q1 are our low point in Q4, a high point.
So that's you know that's pretty normative for us.
And on the short term our expectation is to is to continue to invest to grow the business.
But to remain profitable.
So that operating cash flow positive operating cash flow it at some level as kind of our expectation, but we're not right now looking to drive that number up or looking to invest in the business to.
Now to capture what we believe is very significant.
No growth opportunity.
We do we do as you would've seen we just declared a dividend of seven cents a share that's going to be paid in January and now calls are pretty long trend of paying out.
Up paying out dividends.
Which would sort of expect to continue.
In General and then finally in terms of Capex.
The capex, we spend less than 2% of our revenue here.
And that's what we sort of expect or what would see them in the near term I think.
Business scales up over time, we're not a capital intensive.
Type of business. So I think that that number as a percentage of revenue eventually goes down all the time, but that's kind of picture.
Gotcha. Thank you I'll pass along.
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And our next question is from John <unk> with National Bank. Please go ahead.
Hey, good morning, guys I just have a question on the heartbeat revenue growth I know on a year over year basis, it's quite strong, but if you compare to last quarter. It dipped a little bit is that just seasonality or is it because.
Issues by your hardware providers and also did you see any challenges sourcing the hardware in the past quarter.
Yes, John that quite a joke.
Hardware revenue.
Sorry, it's a hardware revenue yeah, yeah right, Yeah, that's something that's a pretty lumpy one for us.
That's a pretty lumpy one for us John and Mike.
I think it was.
It's sort of it's sort of ticked down a little bit, but it's still been at pretty pretty robust for us historically, they're still pretty pretty robust levels of hardware going on here and those deliveries are happening where we continue to.
The book, a reasonable amount of hardware and we had a pretty big backlog.
Coming into the year, what kind of what is the future.
It looked like there I mean, we still have very very significant.
Hardware backlog, we are on the other hand.
We're starting to see the impacts of well that sort of starting to see but we're dealing with some supply.
Supply chain issues in some areas.
Of our hardware our hardware delivery business. So that can have an impact on on sort of short term volatility on delivery timing and things like that.
But these kind of hardware levels that we've seen in the last couple of quarters.
We've got backlog to support.
The continuation of that kind of level in general for the next for the next quarter or two.
Okay.
And my another question is on investments and growth initiatives I think is normal.
Two quarters in sales investments were started now if you look back how would you summarize the return of investments so far or just still too early to tell.
Are you referring to investment in sales and marketing or were you, referring more sort of across the board investments in growth.
And the sales and marketing.
Sales were anything yet.
I mean, if you look at bookings as we look at bookings this past quarter, we booked 4 million SaaS.
Plus plus the million of license.
If he's in currency adjusted terms, if that was actually a second highest second highest booking quarter ever.
And in.
In currency adjusted terms it was actually the highest booking quarter ever. So so we feel like where the investment is paying off we invested marketing early and then sort of brought on the investment in the sales team to take advantage of the additional lead Gen and demand Gen created by by the marketing push.
And we feel it's paying off.
We're not only seeing the ryzen bookings in this most recent quarter.
As I mentioned earlier, we're seeing a very strong pipeline and and we're pleased to see that the the new account members that have joined the team in the last 12 to 18 months. They are on the board and contributing deals.
So and I don't mean to me that's always one of the questions. You know we've been in this business a long time when you grow the sales team.
You have to ask yourself, where you're just Jerry you just spreading the same results over it over more people or are you actually getting more results, but but from what we're seeing now it's actually driving more results in.
The pipeline is moving more quickly and.
The new guys are getting on the word. Meanwhile, the existing team is continuing to contribute so.
So I mean, I think it's kind of an interesting.
Time period, we're coming into now as it looks as though are our base accounts are beginning to migrate to SaaS.
New accounts, who are joining us and the size of the new accounts as such that every new account that joins US now brings with it substantial expansion opportunity.
Which for those of you that have followed us for a while you would know that on the general distribution side that didn't used to be the case typically that we were dealing with smaller companies and sort of once you've sold the mirror what if it was one and done.
But that's no longer the case that typical accounts were signing now across the different markets are all much more substantial with good expansion opportunities inside them.
Post initial deal so so it certainly looks like it's.
It's paying off we're pretty pleased with how its growing our investment from here, we are continuing to invest more in building out our our cloud team and cloud capabilities.
That's putting some weight on on so some of the cloud margins in the short term.
But the cloud revenues the SaaS revenues are scaling up so quickly.
We think that'll normalize again pretty soon.
Thanks, I'll pass the line.
Okay.
And Mr. Burton It appears we have no further questions. At this time you may continue with your presentation or closing remarks.
Thank you so that concludes the question answer session and thank.
Thank you for taking the time to join us on today's call.
As always if you have any additional questions. Please don't hesitate to give myself a market call and goodbye for now and we'll look forward to talking to you again next quarter. Thanks.
Thanks.
And that does conclude the conference call for today, we thank you all for your participation and kindly ask that you. Please disconnect your lines.
Great day, everyone.
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