Q3 2024 Tecsys Inc Earnings Call
Operator: Good morning, everyone. Welcome to Tecsys' third quarter fiscal year 2024 results conference. Please note that the complete third quarter report, including MD&A and financial statements, was filed on CDAR Plus after market close yesterday. All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards. The company has added a companion presentation to today's call, which is available on its website at www.tecsys.com. 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. However, actual results may differ materially from such statements.
Good morning, everyone. Welcome to Texas is our third quarter fiscal year 2024 results conference call.
Please note that the complete third quarter report, including MD&A and financial statements were filed on SEDAR plus after market close yesterday.
All dollar amounts are expressed in Canadian currency and are prepared in accordance with international financial reporting standards.
The company has added a companion presentation to today's call, which is available on their website at www Dot, Texas Dot com slash investors.
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.
Results may differ materially from such statements.
Operator: I would like to remind everyone that this call is being recorded on Friday, March 1st, 2024, at 8.30 a.m. Eastern Time. I would like now to turn the call over to Mr. Peter Brereton, Chief Executive Officer at Tecsys. Please go ahead, sir.
To remind everyone that this call is being recorded on Friday March one 2024 at 830, a M. Eastern time I would like now to turn the call over to Mr. Peter Brereton, Chief Executive Officer at Texas. Please go ahead Sir.
Peter Brereton: Thank you. Good morning, everyone. Joining me today is Mark Bentler, our Chief Financial Officer, and we appreciate you joining us for today's call. As our results posted yesterday highlight, our company has maintained a solid trajectory of growth this quarter, with a 48% increase in our SAS revenue stream year over year, which Mark will elaborate on in a few minutes. We achieved $4.9 million in SAS bookings for the quarter, marking our most successful quarter this fiscal year so far.
Thank you good morning, everyone. Joining me today is Mark Miller, our Chief Financial Officer, and we appreciate you joining us for today's call.
As a result posted yesterday highlight our company has maintained a solid trajectory of growth this quarter.
48% increase in our SaaS revenue stream year over year, which mark will elaborate on in a few minutes.
We achieved $4 9 million in SaaS bookings for that.
Quarter, marking our most successful quarter in this fiscal year so far despite.
Peter Brereton: Despite a year-over-year decline due to a lumpiness in post-COVID bookings last year, we are encouraged by the positive in-year trend. Our RPO has seen a steady rise, up 23% compared to the same time last year. We've also expanded our customer base, adding five new logos in the quarter and securing new business in the United States, Canada, Europe, and the Middle East. This includes three new health systems, major SAS migrations, and a healthy mix of business across key verticals, underscoring our diversified capacity for sustained growth. I'd like to share some key highlights from Q3 and some context on how we see them supporting value creation. If you're following along on our companion presentation, I'll be speaking on slide three.
Despite a year over year decline due to a lumpiness and post COVID-19 bookings last year. We are encouraged by the positive in your trend or RVO has seen a steady rise up 23% compared to the same time last year.
We also expanded our customer base, adding five new logos in the quarter and securing new business in the United States, Canada, Europe, and the Middle East.
This includes three new health systems major SaaS migrations, and a healthy healthy mix of business across key verticals underscoring our diversified capacity for sustained growth.
I'd like to share some key highlights in Q3, and some context on how we see them supporting value creation is.
If youre following along on our companion presentation I'll be speaking to slide three.
First and foremost we are seeing an across the board pick up in new business and buyer intent spanning diverse markets healthcare providers videogame distributors online pharmacies cosmetics real retailers and farmers supply dealers have all invested in our platform in the quarter.
Peter Brereton: First and foremost, we are seeing an across-the-board pickup in new business and buyer intent, spanning diverse markets. Healthcare providers, video game distributors, online pharmacies, cosmetics retailers, and farm supply dealers have all invested in our platform in the quarter. This diversity is evidence of the growing awareness that the modern supply chain demands modern technology in retail.
This diversity is evidence of the growing awareness that modern supply chain demands.
Technology.
In retail.
Our market position and presence continues to strengthen we signed U S based retailer Attwoods ranch at home, we've expanded our business with a global cosmetics retailer multi company, sorry, a multi country expansion.
Peter Brereton: Our market position and presence continues to strengthen. We signed U.S.-based retailer Atwood's Ranch and Home, we've expanded our business with a global cosmetics retailer in a multi-company, sorry, multi-country expansion, and we've extended our business with Crunchyroll, a Sony subsidiary. In health care, we continue to experience excellent momentum. Despite a general slowdown in the industry these past few years, with many hospitals experiencing negative cash flow until late 2023, most are now cash flow positive.
We've extended our business with crunchy role of Sony subsidiary.
In healthcare, we continued to experience excellent momentum despite a general slowdown in the industry. These past few years with many hospitals experiencing needed negative cash flow until late 2023. Most are now cash flow positive we're seeing a rise in activity in our health care business.
Peter Brereton: We're seeing a rise in activity in our health care business. In addition to migration and expansion business at existing healthcare customers, we've welcomed three new health systems to our roster, among them a marquee name in the U.S. As we've noted in the past, every new logo carries years, if not decades, of expanding base account activity. Speaking of marquee names, this quarter we secured a significant expansion at Roche, one of the world's largest healthcare diagnostics companies with operations in more than 100 countries. This new business bolsters our international presence and cements our standing as a key player in the global market. It also emphasizes the extensive capabilities of our solutions in handling the highly complex regulatory challenges of global logistics.
In addition to migration and expansion business at existing health care customers. We've welcomed three new health systems to our roster among them a marquee name in the U S.
As we've noted in the past every new logo carries years, if not decades of expanding base account activity.
Speaking of marquee names this quarter, we secured a significant expansion at Roche one of the world's largest health care diagnostics companies with operations in more than 100 countries.
This new business bolsters, our international presence and cement our standing as a key player in the global market.
It also emphasizes the extensive capabilities of our solutions and handling the highly complex regulatory challenges of global logistics.
Peter Brereton: As we have discussed in previous quarters and outlined in our guidance, we're committed to ongoing margin expansion. This quarter, our record revenue growth and operational efficiency improvements have positively influenced our profitability metrics. On top of that, early in Q4, we initiated a strategic restructuring to bolster our long-term profitability. Following the end of Q3 and prior to the final approval of the financial statements, we reduced our workforce by about 4% across several departments, which following severance costs of approximately $2.3 million is anticipated to yield annual operating cost savings of approximately $4.6 million.
As we have discussed in previous quarters and outlined in our guidance, we're committed to ongoing margin expansion.
This quarter, our record revenue growth and operational efficiency improvements have positively influenced our profitability metrics on top of that early into Q4, we initiated a strategic restructuring to bolster our long term profitability.
Following the end of our Q3 and prior to the final approval of the financial statements, we reduced our workforce by about 4% across several departments.
Which following severance costs of approximately $2 3 million as anticipated to yield annual operating cost savings of approximately $4 6 million.
Peter Brereton: Additionally, we are committed to strategically investing in areas with high growth potential to not only increase revenue but also to strengthen our competitive position in the markets we serve. Turning briefly to our leadership in the market, I'd like to take a moment to highlight some recent initiatives we have undertaken around market engagement since the Texas User Conference last quarter. As an example, we have proactively capitalized on substantial growth opportunities in the perioperative space, the pharmacy sector, and other sub-verticals to strengthen our market presence. Building on the strong partner engagement and customer enthusiasm from our user conference, we've initiated a series of regional events targeting these sub-verticals, including workshops and thought leadership forums. Partners, customers, and prospects have been coming together for learning and relationship building while viewing Tecsys as a leading resource as they modernize their supply chain technology.
Additionally, we are committed to strategically investing in areas with high growth potential.
Not only increase revenue, but also to strengthen our competitive position in the markets we serve.
Turning briefly to our leadership in the market I would like to take a moment to highlight some recent initiatives we have undertaken around market engagement since the Texas user conference last quarter.
As an example, we have proactively capitalized on substantial growth opportunities in the perioperative space, the pharmacy sector and other sub verticals to strengthen our market presence.
Building on the strong partner engagement and customer enthusiasm from our user conference. We have initiated a series of regional events targeting these sub verticals, including workshops and thought leadership forums.
Partners customers and prospects have been coming together for learning and relationship building, while you in Texas as a leading resource as they modernize their supply chain technology.
Mark J. Bentler: This strategy is showing early signs of having a positive impact on our pipeline, which remains robust heading into Q4. I'll now hand it over to Mark to provide further details on our third quarter financial results as well as financial guidance on several key metrics. Thanks, Peter.
This strategy is showing early signs of having a positive impact on our pipeline, which remains robust heading into Q4.
I'll now hand, it over to Mark to provide further details on our third quarter financial results as well as financial guidance on several key metrics.
Yeah.
Thanks, Peter we're very pleased with our record performance in our third quarter ended January 31st 2024.
Mark J. Bentler: We're very pleased with the record performance in our third quarter, ended January 31, 2024. I'll start with slide four and focus first on SAS. SAS continues to be the key driver for our growth, and we believe it is the key driver for value creation. SAS revenue growth is driving our recurring revenue, and during the third quarter, our recurring revenue was 52% of total revenue and 63% of total non-hardware revenue. Reported SAS revenue growth in Q3 of fiscal 2024 was 48%, reaching $14.2 million in the quarter. That 48% growth number was stellar, but it was also helped by about three percentage points of tailwind from foreign exchange and about seven percentage points of tailwind from one-time recognition of deferred revenue related to the completion of a product performance obligation. This was also called out in our MD&A.
I will start with slide four and focus first on SaaS.
SaaS continues to be the key driver for our growth and we believe the key driver for value creation.
SaaS revenue growth is driving our recurring revenue and during the third quarter. Our recurring revenue was 52% of total revenue and 63% of total non hardware revenue.
Reported SaaS revenue growth in Q3 of fiscal 'twenty 'twenty, four was 48%, reaching $14 $2 million in the quarter.
That 48% growth number was stellar but it was also helped by about three percentage points of tailwind from foreign exchange.
And about seven percentage points of tailwind from one time recognition of deferred revenue related to the completion of a product performance obligation.
This was also called out in our MD&A.
Mark J. Bentler: I just wanted to highlight those points to help you triangulate our year-to-date reported SAS revenue growth number of 43 percent to our revised slightly upward SAS revenue guidance range for the full year of 37 to 38 percent. I'll speak a bit more about our financial guidance in a moment. Total revenue for the quarter was a record $43.8 million.
Just wanted to highlight those points to help you triangulate our year to date reported SaaS revenue growth number of 43% to our revised slightly upward SaaS revenue guidance range for the full year of 37% to 38%.
I'll speak a bit more about our financial guidance in a moment.
Total revenue for the quarter was a record $43 $8 million, that's 13% higher than the same period last year.
Mark J. Bentler: That's 13% higher than the same period last year. However, on a constant currency basis, total revenue growth was 10%. I'm going to come back to professional services revenue on the next slide, but first, I want to point out the significant decline here in license revenue, which was down about $0.7 million compared to Q3 of last year. This is really the back end of our transition to SaaS, and soon we'll have very little comparative adjustability but a drag from licensed revenue. For the third quarter,
On a constant currency basis total revenue growth was 10%.
I'm going to come back to professional services revenue on the next slide but first I want to point out the significant decline here in license revenue, which was down about zero point $7 million compared to Q3 of last year.
This is really the back end of our transition to SaaS and soon we will have very little comparative adjusted EBITDA drag from from license revenue.
For the third quarter.
Mark J. Bentler: Gross margin was 45% compared to 44% in the same period last year. Combined SAS maintenance, support, and professional services gross profit for the three months ended January 31st, 2024 was 48%. That's up compared to 47% in the same period of fiscal 23. SAS margin expansion was the driver, and we're pleased to report that this continues to track as planned. Net profit in the quarter was relatively flat at $759,000 compared to $888,000 in the same quarter last year.
Gross margin was 45% compared to 44% in the same period last year.
Combined SaaS maintenance support and professional services gross profit for the three months ended January 31, 2024 was 48%.
It's up compared to 47% in the same period of fiscal 'twenty three.
SaaS margin expansion was the driver and we're pleased to report that this continues to track as planned.
Net profit in the quarter. It was relatively flat at 759000 compared to 888000 in the same quarter last year.
Mark J. Bentler: Adjusted EBITDA was $2.6 million in Q3 fiscal 24, compared to $2.8 million in the same period last year. Relative to the third quarter of fiscal 23, despite solid growth in our SaaS business, lower professional services and license revenue negatively impacted current quarter profitability, which is a good transition to slide five. Professional services revenue for the third quarter was $13.0 million.
Adjusted EBITDA was $2 6 million in Q3 fiscal 'twenty four compared to 2.8 million in the same period last year.
Relative to the third quarter of fiscal 'twenty three despite solid growth in our SaaS business lower professional services and license revenue negatively impacted current quarter profitability.
Which is a good transition transitioning to slide five.
Professional services revenue for the third quarter was $13.0 million.
Mark J. Bentler: That was actually down 4% from $13.6 million reported for the same quarter last year and up only slightly on a sequential basis from Q2. However, professional services backlog continues to be strong at $36.7 million as of January 31st, 2024. As we indicated last quarter, we expect professional services revenue to tick up sequentially in Q4 as we see project activity increase. Turning now briefly to our results for the first 9 months of our fiscal year 2024, our total revenue was $127.3 million, that's up 14%, compared to $111.2 million in the same period last year, and that's up 11% on a constant currency basis. SAAS revenue for the first nine months of fiscal 24 was $37.7 million.
That was actually down 4% from $13 6 million reported for the same quarter last year.
And up only slightly on a sequential basis from Q2.
Professional services backlog continues to be strong at $36 $7 million at January 31, 'twenty 'twenty four.
As we indicated last quarter, we expect professional services revenue to tick up sequentially in Q4, as we see project activity increasing.
Turning now briefly to our results for the first nine months of our fiscal year 2024.
Our total revenue was $127 3 million, that's up 14% compared to $111 2 million in the same period last year.
And that's up 11% on a constant currency basis.
SaaS revenue for the first nine months of fiscal 'twenty four was $37 7 million, that's up 43% from $26 3 million in the same period last year.
Mark J. Bentler: That's up 43% from $26.3 million in the same period last year and up 39% on a constant currency basis. Our adjusted EBITDA for the first nine months of fiscal 24 was $6.8 million compared to $7.0 in the same period last year. Basic and fully diluted earnings per share were 11 cents in the first nine months of both fiscal 24 and fiscal 23. We ended Q3 fiscal 2024 with a solid balance sheet position. We had cash and short-term investments of $33.2 million and no debt. Q3 net cash provided by Operating Activities was $2.3 million, and during the quarter, we used $1.5 million to repurchase shares under our NCIB. Additionally, the board yesterday approved a quarterly dividend of 8 cents a share.
And up 39% on a constant currency basis.
Our adjusted EBITDA for the first nine months of fiscal 'twenty, four was $6 $8 million compared to 7.0 in the same period last year.
Basic and fully diluted earnings per share were 11 cents in the first nine months of both fiscal 'twenty four and the fiscal 'twenty three.
We ended Q3 fiscal 'twenty 'twenty four with a solid balance sheet position, we had cash and short term investments of $33 2 million and no debt.
Q3, net cash provided by operating activities was $2 $3 million.
And during the quarter, we used $1.5 million to repurchase shares under our N C I b.
Additionally, the board yesterday approved a quarterly dividend of eight cents a share.
Well with respect to financial guidance and now moving to slide six.
Mark J. Bentler: Well, with respect to financial guidance, and now moving to slide six. Based on our Q3 results and our Q4 outlook, we are revising full year 2024 guidance to, number one, tighten the range on total revenue growth to between 11 and 14 percent. Number two, tighten the range and increase the high end of SAS revenue growth to between 37-38%. And number three, tighten the range on the short-term adjusted EBITDA margin to between 5% and 6%. We expect to provide updated guidance for fiscal 2025 as part of our Q4 and full year fiscal 2024 earnings call. I'll now turn the call back to Peter to provide some Outlook comments. Thanks, Mark.
Based on our Q3 results and our Q4 outlook. We are revising full year 2024 guidance to number one tightened the range on total revenue growth to between 11 and 14%.
Number two tightened the range and increased the high end of SaaS revenue growth to between 37 and 38%.
And number three tightened the range on short term adjusted EBITDA margin to between five and 6%.
We expect to provide updated guidance for fiscal 'twenty 'twenty five as part of our Q4 and full year fiscal 2024 earnings call.
I'll now turn the call back to Peter to provide some outlook comments.
Thanks Mark.
Over on slide seven, which although we walked them through you can see the Texas stable growth continues through the third quarter of fiscal 2024 with a strong balance sheet, a solid backlog and a strong sales pipeline as mentioned earlier, our target markets are showing widespread buyer intent and we have a highly capable sales team with the <unk>.
Peter Brereton: Over on slide 7, which I'll now be walking through, you can see that Tecsys's steady growth continues through the third quarter of fiscal 2024 with a strong balance sheet, a solid backlog, and a strong sales pipeline. As mentioned earlier, our target markets are showing widespread buyer intent. And we have a highly capable sales team with the tools and talent to capitalize on a market that's ready to invest in new technology. Our expanded health care offering and growing footprint gives us confidence that the health care sector will continue to serve as an important growth engine for us.
Tools and talent to capitalize on a market that is ready to invest in new technology.
Our expanded healthcare offerings and growing footprint gives us confidence that the health care sector will continue to serve as an important growth engine for us.
Peter Brereton: Our converging distribution and retail business presents a significant market opportunity. We continue to refine our sweet spot and position ourselves for market share growth amidst shifting supply chain dynamics, which are driven by factors like aging legacy systems, digital adoption, and a realization that heightened consumer expectations are here to stay. In summary, I want to remind analysts and investors of some key themes for Fiscal 24 and beyond.
Our convergent distribution and retail business presents a significant market opportunity.
We continue to refine our sweet spot and position ourselves for market share growth amid shifting supply chain dynamics, which are driven by factors like aging legacy systems digital adoption and a realization that heightened consumer expectations are here to stay.
In summary, I want to remind analysts and investors is some key themes for fiscal 'twenty four and beyond.
Peter Brereton: First, a sustained commitment to our expanding SaaS revenue model, which will drive changes in the way we deploy solutions and delight customers. Second, a continued strategic partnership approach characterized by deeper and stronger alliances. This helps us tap into new opportunities and fuels our scalability around the world. Third, an emphasis on advancing and deepening our healthcare vertical, covering both MedSurg and Pharma. We continue to solidify our position as the go-to provider for healthcare supply chain solutions.
First a sustained commitment to our expanding SaaS revenue model, which will drive changes in the way, we deploy solutions and delight customers.
Our continued strategic partnership approach.
Characterized by deeper and stronger alliances this helps us tap into new opportunities and fuels, our scalability around the world.
Third an emphasis on advancing and deepening our health care vertical covering both med surge in pharma, we continue to solidify our position as the go to provider for health care supply chain solutions.
Peter Brereton: Lastly, a continuous evolution of our distribution and omni-channel business platform that takes advantage of innovative technologies and the power of data. As a final point, I'd like to stress across our markets, we'll continue to focus on customer success. We have long stood by the philosophy of customers for life.
Lastly, a continuous evolution of our distribution and Omnichannel business platform that takes advantage of innovative technologies and the power of data.
As a final point I'd like to stress across our markets will continue to focus on customer success, we have long stood by the philosophy of customers for life.
Operator: A big part of that formula is to deliver value quickly, build trust with our customers, stay connected, and expand on value delivery. With that, we'll open the call up for questions. Thank you. If you are an analyst and would like to register a question, please press the 1-4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3.
Big part of that Formula is to deliver value quickly build trust with our customers stay connected and expand on the value delivered.
With that we'll open the call up for questions. Thank you.
Thank you.
You are an analyst and would like to register a question. Please press the one four on your telephone.
You will hear at three tone prompt to acknowledge your request a pure question has been answered then you would like to withdraw your registration. Please press. The one followed by the three once again to register a question. Please press the one four on your telephone.
Operator: Once again, to register a question, please press the 1-4 on your telephone. One moment please for the first question. Our first question comes from Amr Ezzat with Echelon World Partners. Please proceed, and Peter, Mark. Good morning.
One moment please for the first question.
Yeah.
Our first question comes from AMR as that with echelon wealth partners. Please proceed.
And Peter Mark Good morning, Thanks for taking my question.
Peter Brereton: Thanks for taking my question. I appreciate your comments on the restructuring, but can you elaborate on the factors that drove that decision? It seems like your comments on macro are pretty rosy.
I appreciate your comments on the restructuring.
But can you elaborate on the factors that drove that decision it seemed like your comment on the macro.
Our pretty rosy. So I wonder are you seeing some of that strength abate in fiscal 'twenty five.
Peter Brereton: So I wonder, are you seeing some of that strength and base in fiscal 25? No, no, we're not. We, you know, we came through. I mean, to some extent, this was a matter of analyzing the business now that we feel that the pandemic is totally behind us. I mean, as you know, that our various industries were very substantially affected by the pandemic. You know, healthcare was majorly distracted, general distribution was having issues with factory supply and shipping containers and labor and all kinds of things, and retail was, of course, massively side-swiped.
No no. We're not we we came through I mean to some extent this was it.
Matter of analyzing the business now that we feel that we're serious.
The pandemic is totally behind us I mean as you know there are various industries were very substantially affected by the pandemic.
No.
I mean health care was majorly distracted general distribution is having issues with factory supply and shipping containers and labor and all kinds of things in.
Retail was of course massively sideswiped so.
Peter Brereton: So there were a lot of things we continued to sort of, you know, invest in over the last few years while we tried to ascertain sort of what the post-COVID world was going to look like. As we've come out the other side of that, we now feel we're just playing into the new normal. And we did a review of the entire business from one end to the other and decided where we were sort of over-investing in the new world and where we were. And we've also identified some areas where we're under-investing, frankly. So we made the decision to make those changes.
So there was a lot of things we continue to.
Sort of.
Investigate.
In over the last few years, while we tried to ascertain sort of what the post Covid world is going to look like.
As we promote the other side of that we now feel we're just playing into the new normal.
And we did a review of the entire business from one end to the other.
And decided.
Where we were sort of over investing for the new world and where we were.
And we've also identified some areas, where we're under investing frankly.
So we made the decision to make makes those changes are never easy changes to make.
Peter Brereton: They're never easy changes to make, but we felt like it was the right thing to do to get the business in absolute sort of best fighting form for the new environment we find ourselves in. There's areas, I mean, we don't see any sort of exceptionally large areas of investment, but you will continue to see over the next few quarters, you'll continue to see us invest in key strategic areas as we continue to invest for growth. Fantastic.
But we felt like it was the right thing to do to get.
Get the get the business, an absolute sort of best fighting form.
For the for the new environment, we find ourselves in.
There is areas I mean, we don't we don't see any sort of exceptionally large areas of investment, but you will continue to see over the next.
The next few quarters, you'll continue to see us invest in key strategic areas as we continue to invest for growth.
And you can tell us then.
Mark J. Bentler: Then if I were to think about the pace of realizing the $4.6 million of annualized savings, do we see the full impact of that starting in fiscal Q1? Yeah, you'll, I mean, you'll see the restructuring charge hit in Q4. You'll also pick up, call it, two out of three months of benefit hitting Q4, because the changes were made in February. And then, you know, all of that, of course, you know, full benefit, of course, hitting Q1. Fantastic
If I were to think about the pace of realizing the.
The $4 6 million of annualized savings.
Do we see the full impact.
Starting in fiscal Q1.
Yeah, you'll I mean, youll see the restructuring charge hit Q4, Youll always yield pick up call. It.
Two out of three months of benefit hitting Q4 after.
The changes were made in February.
And then.
All of that of course, the full benefit of course hitting in Q1.
Fantastic then you haven't updated your fiscal 'twenty five EBITDA guidance.
Mark J. Bentler: Then you haven't updated your fiscal 25 EBITDA guidance on like post restructuring. Is that a measure of you guys being conservative, or should we look for an update next quarter? Mark, take that one.
Like post restructuring has got a measure of you guys being conservative or should we look for an update next quarter.
Let mark take that one.
Mark J. Bentler: Yeah, we're gonna we're gonna update that next quarter. Amr, we're expecting to, you know, kind of review our budget cycle. And as Peter mentioned, there are some investment areas that we will make, but our intention was, was very, very clearly to not mess with that guidance right now but address it after we report our Q4 results. Fantastic.
We're going to we're going to update that next quarter.
Or where we're expecting to you know.
Kind of review through our through our budget cycle and as Peter mentioned, there's some investment areas that we that will make but our our intention was was very very clearly to not mess with that guidance right now but address it after we report our Q4 results.
Got it and then safe to assume there is a an upwards bias right.
Peter Brereton: And it's safe to assume there's an upward bias rate. I would expect so. Okay, shifting gears to professional services. I mean, I know fiscal Q3 experiences like that seasonal dip. But I think we're all hoping for a bit of a rebound from the previous quarter, you know, like we'll see it next quarter, it seems like, but can you outline the dynamics at play there? And am I right to assume that you guys also thought that we'd get a bit of a rebound like this quarter sequentially? Hi Amr, I know that a lot of the analysts thought we'd see a quick rebound in Q3. But I think I actually mentioned in the Q2 call that typically, when these slowdowns happen, it takes a couple of quarters to rebuild, and it's following a totally normal trajectory. You know, this seems to happen every few years.
I would expect.
Okay sure.
Shifting gears to professional services.
I know fiscal Q3 experiencing like that seasonal dip.
But I think we're all hoping for a bit of a rebound from the previous quarter.
You know like we will see you next quarter it seems like but could you outline the dynamics at play there.
Am I right to assume that you guys. Although all the thoughts that we've got a bit of a rebound like this quarter sequentially.
Yeah.
Hi, MRI.
I know, there's a lot of the analysts thought we'd see a quick rebound in Q3, I think I actually mentioned in the Q2 call.
Typically when these slowdowns happen.
It takes a couple of quarters to rebuild and it's following a totally normal trajectory.
This seems to happen every few years, we ended up with a bunch of large projects that end and some new large projects that are starting and you sort of get into this bit of this valley in between.
Peter Brereton: We end up with a bunch of large projects that end and some new large projects that are starting, and you sort of get into this bit of this valley in between. The thing is, in the early stages of a large project, you don't have that many resources deployed yet. You're sort of doing your process confirmation workshops and that kind of thing and nailing down exactly how the stuff's going to be deployed, but you're not yet into the full-blown, full-team effort. So it's honestly, it is. And I think we didn't explain that clearly enough in the Q2 call because we seem to have left some confusion out there, so I apologize for that. But it's actually following a pretty normal trajectory.
But the thing is in the early stages of a large project you don't have that many resources deployed yet youre sort of doing your process confirmation workshops and that kind of thing and nailing down exactly how this stuff still be deployed but youre not yet into the full blown full team.
<unk>.
So it's honestly, it's it's and I think we didn't explain that clearly enough in the Q2 call because we seem to have left some confusion out there so I apologize for that but.
But it it's actually following a pretty normal trajectory it dropped off in Q2.
Peter Brereton: It dropped off in Q2, but we're seeing all the new projects starting to kick in in Q3, so you see a slight uptick in Q3, and we expect to be back to a more normal run rate going forward. Fantastic. Then maybe one last one for me.
It's we're seeing all the sort of the new projects starting to kick in in Q3. So you see a slight uptick in Q3, and we expect to be back to a more normal run rate going forward.
Fantastic and maybe one last one for me can you give us an update on the capital allocation strategy and what you guys are seeing.
Peter Brereton: Can you give us an update on the capital allocation strategy and what you guys are seeing in terms of like M&A and valuations and how that's evolving? Yeah, I mean, our focus at this point is organic. You know, we feel like we've spent enough time poking at M&A. And it's not like we don't continue to be, you know, opportunistic. And if we see some great opportunities, we would certainly take a look at them. But, you know, at this point, we see a lot of activity in our markets. And our focus is very much on driving towards, you know, Rapid Organic SAS Revenue Expansion, SAS Gross Margin Expansion, and EBITDA Expansion. We see all of those on the horizon. Honestly, the organic picture has never looked better.
Just like M&A and valuations and how that's evolving.
Yeah, I mean, our focus at this point.
Is organic.
We feel like we've spent enough time poking at M&A and it's not like we don't continue to be opportunistic and if we see some great opportunities. We would certainly take a look at them but are are at this point, we see a lot of activity in our markets and our focus is very much on driving tool.
Words.
Rapid organic SaaS revenue expansion.
SaaS gross margin expansion.
And EBITDA expansion and we see all of those are.
On the horizon and it's.
It's <unk>.
Honestly the organic picture has never looked better we're very excited about what we're seeing and we're for the time being we're keeping our focus on that.
Peter Brereton: We're very excited about what we're seeing, and we're, for the time being, keeping our focus on that. Fantastic. Congratulations on the quarter. Thanks, everyone.
Perfect Congrats on the quarter.
Thanks Sam.
Thanks Omar.
Okay.
Our next question comes from Andy Union with Raymond James.
Peter Brereton: Our next question comes from Andy Nguyen with Raymond James. Please proceed. Hi Peter, Mark, thank you for taking my questions. Just a follow-up on the workforce reductions. Can you elaborate on what area was experiencing the headcount reduction? What division?
Please proceed.
Hi, Peter and Mark Thank you for taking my questions.
Follow up on the workforce reductions can you elaborate on what area was experiencing the head count reduction.
What division.
Peter Brereton: Yeah, we're not actually specifying that in the market. There's, you know, from a competitive standpoint, that would probably not be a good thing for us to do. But it's, you know, we can just tell you that it was done selectively, it was done based on the skill sets that we think we need going forward and the areas where we thought we had perhaps a little too much of each skill set. Some of the people we were able to redeploy in other areas of business; we did that where it was possible. And where it was not possible, you know, they left the organization, but we're not getting specifically into which particular product lines were touched more than others, gotcha. No, no, no worries.
Yeah, we're not we're not actually specifying that generally in the market. There is from a competitive standpoint that would probably not be oh.
A good thing for us to do.
Got it.
We can just tell you that it was he was done selectively it was done based on the skill sets that we think we need going forward.
And the areas, where we thought we had perhaps a little too much skill set.
Some of the people, we were able to redeploy in other areas of business, we did that where it was possible.
And where it was not possible.
They left the organization, but we're not we're not getting specifically into which.
Particular product lines were touched more than others.
Gotcha, no nowhere doors.
And my other question is who we surrounding the SaaS.
Peter Brereton: And my other questions will be surrounding the SAS AR booking. And I know it's lumpy over quarter quarters, and it's actually up sequentially. But on a 12 month basis, it's actually down. So how much should we read into this? I think what I mean our read into it and you know we can all sort of read it differently our read into it is that the is that the cash the negative cash flow experienced by almost all u.s. based hospital network networks throughout calendar 2023 definitely had a short-term slowdown on the on our growth and booking rate in that market you know it continued to perform we continued to add new networks we continue to drive new opportunities within the base etc but overall we think it created a slowdown it is comparing as we mentioned in the prepared remarks it is comparing to a very weird lumpy period so it's it's a little bit hard to compare like if you if you look back over the last few years we did I mean go back I think three years or might be four by now but I think it was three you know we did like 8.8 million in SAS bookings and then we did like nine and a half and then we jumped to 12 and then we jumped to 16 point something and and those those sort of lumpy jumps were also driven just by timing as they as a whole pandemic sped up and slowed down and distracted the market and then let up again and so on so it's made for very weird comparables but still if I come back to sort of a trailing 12 versus prior to a trailing 12 you are mainly comparing calendar 23 to calendar 22, And Calendar 23, the American hospital community, by and large, ran cash flow negative and began holding back on their spending. We had a number of projects that even right up into the tail end of the calendar year where, you know, it was sort of all systems go until it got to the final finance committee who just said, no, we're too cash flow negative, got to hold off on that project for now.
Booking and I know, it's lumpy over quarter over quarter, and it's actually up sequentially, but I'll, let trailing 12 month basis.
We doubt so how much should we read into this.
But I think what I mean, our read into it.
We can all sort of read it differently or read into it is that the is that the cash the negative cash flow experienced by almost all U S based hospital networks throughout calendar 2023.
It definitely had a short term slowdown on the on our growth in booking rate in that market.
It continues to perform we continued to add new networks, we continue to drive new.
Opportunities within the base et cetera, but overall, we think it created a slowdown it is comparing as we mentioned in the prepared remarks. It is comparing to a very weird lumpy periods. So it's it's a little bit hard to compare like if you. If you look back over the last few years, we did I mean go back three years or.
It might be for right now, but I think it was three we did like $8 8 million in SaaS bookings and then we did like nine and a half and then we jumped to 12 and then we jumped to 16 point something.
And and those those sort of lumpy jumps were also driven just by timing as it is the whole pandemic sped up and slowed down and distracted the market and then let up again and so on so it's made for very weird comparable.
But still if I come back to sort of a trailing 12 versus prior toilet trailing 12, you are mainly comparing calendar 'twenty three to calendar 'twenty two.
In calendar 'twenty three.
The American hospital community by and large ran cash flow negative.
And began.
Holding back on their spending.
We had a number of projects that even right up into the.
Tail end of the calendar year.
Where it was sort of all systems go until it got to the final Finance Committee, who just said net were two cash flow negative got to hold off on that project for now so we've continued to see that.
Peter Brereton: So we've continued to see that. The hospital community by and large moved to cash flow positive starting in about November. And I mean, you can get that out of Becker's report or there are other industry publications out there where you can see that the whole industry shifted back to cash flow positive as sort of elective surgeries picked up again and everything kind of returned to normal. So, so we're now feeling an accelerated pipeline momentum as we head into our, you know, we're now in our fourth quarter of our fiscal year and heading into fiscal 25. So, you know, we're feeling good about where that came from, but there's no question there, there was definitely some suppression in calendar 23 versus calendar 22. Gotcha. Thank you so much. I'll pass it along.
The hospital community by enlarged move to cash flow positive.
Starting in November.
And I mean, you can get that out of Becker's report or there's other industry publications out there where you can see that the whole industry shifted back to cash flow positive as sort of elective surgeries picked up again and everything kind of returned to normal. So so we're we're now feeling a accelerated pipeline minimum momentum as we.
Head into our.
We're now in our fourth quarter of our fiscal year and heading into fiscal 'twenty five.
So we're feeling good about where it's at but there's no question. There was definitely some suppression calendar 'twenty three versus calendar 'twenty two.
Gotcha. Thank you so much I'll pass it along.
Peter Brereton: Thank you. Our next question comes from Gavin Fairweather with Cormark Securities. Please proceed. Oh, hey, good morning.
Hey, thanks.
Thanks.
Our next question comes from Gavin Fairweather with core Mark Securities. Please proceed.
Oh, Hey, good morning, Thanks for taking my question, maybe just to start out on the distribution business I know, you've kind of thought or called the fall timeline. When some of your pipeline activity would start to translate into bookings I know you called out a few kind of impressive new logos in this quarter. So maybe just give us an update on how that business is trending.
Peter Brereton: Thanks for taking my question. Maybe just to start out in the distribution business; I know you kind of soft circled the fall as the timeline when, you know, some of your pipeline activity would start to translate into bookings. I know you called out a few kind of impressive new logos this quarter. So maybe just give us an update on how that business is trending. And whether you think you can build upon this momentum in a quarter that, Yeah, we think we can. I mean, there's no question healthcare has taken a lot of our attention over the last few years. But in the meantime, the general distribution market is, you know, picking up speed again. As you mentioned, Gavin, we saw an increase in the pipeline; we saw an increase in pipeline activity.
And why do you think he can build upon this momentum and according to that.
We think we can I mean, there's there's no question healthcare has taken a lot of our attention over the last few years, but in the meantime, the general distribution market is.
Picking up speed again, as you mentioned Gavin we saw an increase in the pipeline. We saw an increase in pipeline activity and then this quarter. We finally began to see some some new accounts.
Peter Brereton: And then this quarter, we finally began to see some, you know, some new accounts start to sign and move into our customer base. I, there are good opportunities in that market. And the competitive landscape has actually shifted quite a bit. I don't want to get into sort of speaking specifically about some of our competitors or former competitors here on this call.
Start to sign and move into the move into our customer base.
There's good opportunities in that market and the competitive landscape has actually shifted quite a bit.
I don't want to get into sort of speaking specifically about some of our competitors are former competitors here on this call, but but there's a number of significant players in that market as a result of acquisitions merger activity et.
Peter Brereton: But, there are a number of significant players in that market that, as a result of acquisitions, merger activity, etc., have really refocused away from the market that we generally compete in. So we're finding it to be a more open market space as well. So not only is it more active, with the sort of, you know, business by and large returning to normal, but the competitive landscape has actually opened up somewhat as well. So we're in our sort of annual planning cycle right now for fiscal 25. And, you know, one of the decisions that we've got to make is sort of how much to turn up the investment in that market because it's definitely becoming a more, more interesting active market. Are you seeing win rates perking up? No, I would say not yet.
Et cetera have really refocused away from the market that we generally compete and so we're finding it to be a more open market space as well so not only is it more active.
With the sort of business by and large returning to normal.
But the competitive landscape is actually opened up somewhat as well. So we're in our sort of annual planning cycle right now for fiscal 'twenty five and you know one of the decisions that we've got to make us sort of how much to turn up the investment on that market because it's it's definitely becoming a more a more interesting and active market.
Are you seeing win rate picking up.
I R. No I would say not yet I would say our win rate is remaining somewhat constant.
Peter Brereton: I would say our win rate is remaining somewhat constant. At the same time, there's just more deals starting to go down. So it certainly looks like our wins will probably go up.
As you know is it at that.
The same time our.
Theres just more deals starting to go down so it certainly looks like it.
Our wins will.
Our number of wins will probably move up.
Mark J. Bentler: But now, the win rate at this point is remaining relatively constant, but we do think there's some things we can do there to improve that win rate. So we're looking at that. I would just add to that, Gavin, that it was a pretty good quarter. I mean, one quarter does not a trend make, but it was a pretty solid booking quarter for that part of our business. And one of the things that made it pretty interesting was that we booked new logos in there, we booked expansion deals in there, and we booked a pretty big migration deal in there. And over the last couple of quarters, we've seen some migrations in that part of the business. And of course, as you all know, we've got a bunch of ARR that's legacy maintenance and support ARR in that side of the complex distribution business, and it's just interesting to see that starting to, what feels like, pick up on the migration side. Yeah, I appreciate that; it's good to hear.
But now win rate at this point is remaining relatively constant, but we do think there's some things we can do there to improve that one right. So we're looking at that.
I would just I would just add to that Gavin that.
Add to that Gavin that was a it was a pretty good I mean, one quarter does not a trend make but it was a pretty solid booking quarter for that that part of our <unk>.
Our business and one of the things that made it pretty interesting when we book new logos in there we booked expansion deals in there and we booked a pretty big migration.
Deal in there and over the last couple of quarters. We've seen some migrations you know in that amount in that part of the in that part of the business and of course as you. All know we've got a bunch of IRR. That's you know legacy maintenance and support are are in that side of the complex distribution business and it's just interesting to see.
With that starting to what feels like starting to pick up on the on the migration side.
Yeah.
Yeah I appreciate that good to hear maybe shifting gears to health care.
Peter Brereton: Maybe shifting gears to healthcare, I'm curious if you can update us on how many of your audience have bought a pharmacy today. I still think that it's probably still, you know, early days and a modest number, but I'd be curious for your thoughts on, just now that you have more of the data and the white papers and, you know, calculations around savings, how many of your customers do you think could buy it in the next three years? Believe me, we would love to know the answer to that question.
I'm curious if you can update us on how many of your audience. The BOP pharmacy today I still think it's probably still.
Early days and a modest number but I'd be curious to hear your thoughts on now that you have or the data in the white paper then calculations around savings how many of your customers do you think you could buy it in the next three years.
Yeah.
Believe me, we would love to know the answer to that question.
We are seeing a lot of interest we actually yesterday.
Peter Brereton: We are seeing a lot of interest. We actually yesterday ran a sort of a thought leadership meeting down in Dallas, where we invited healthcare providers to send their pharmacy leadership teams over for a day of discussion on what we're doing and what's happening in the market and the opportunities there. Not counting our folks, just counting customer folks, we had over 40 people show up for that. We'd have been happy with 12.
In a sort of a thought leadership.
Meeting down in Dallas.
Where we invited.
<unk> care providers to send their pharmacy leadership teams over to for a day of discussion on what we're doing and what's happening in the market and the opportunities there.
No I Didnt county, not counting our folks just.
Counting test for folks we had over 40 people show up for that.
We would have been happy with 12.
Peter Brereton: We had some very good attendance. So the interest there continues to rise as we get sort of more and more data and can prove out sort of the, you know, the savings there. So, I mean, you know, it's different than, for instance, the CSC work we do, the Consolidated Service Center work we do. I mean, that model only applies to maybe half, maybe 60% of the market because in some markets across the US, it doesn't make sense to run your own consolidated service center. So that particular offering is, it sort of only really applies to a smaller slice of the market, but pharmacy is everybody. I mean, there's nobody that doesn't or couldn't save millions of dollars and improve the quality and consistency of their care by implementing a good pharmacy platform.
So we had some very good attendance.
So the interest there continues to rise.
As we get sort of more and more data and can prove out sort of the savings there.
So.
I mean, it's different than for instance, the CSC work, we do the consolidated service Center work, we do I mean that that model only applies to you.
Maybe half maybe 60% of the market.
In some markets across the U S. It doesn't make sense to run your own consolidated service center. So so that particular offering is.
It's sort of only really applies to a smaller slice of the market, but pharmacy, it's everybody I mean, there is there's nobody that doesn't.
Couldn't save millions of dollars and improve the quality and consistency of their care.
By implementing a good pharmacy platform so.
Peter Brereton: So we're pretty excited with where that's at. How many we can win over the next three years, I think that's the big question.
So we're pretty excited.
Cited with where that's at how many we can win over the next three years I think that's the big question. Some of that is going to depend on sort of how rapidly.
Peter Brereton: Some of that's gonna depend on sort of how rapidly some of the current projects underway achieve success. I think there are a lot of eyes watching those projects to see how quickly they achieve their objectives. But it's certainly, it's looking like, it's a wide open opportunity for us. Can you remind me how much that market is greenfield? Like, I think McAspin has a point solution for that, but how many of the IDNs have nothing?
Some of the current projects underway achieved success I think theres a lot of eyeballs watching those projects to see how quickly they achieve their objectives.
But it's at.
Certainly it's looking like it's it's a wide open.
<unk> for us.
Could you remind me what's not marketed freak out like I think Mckesson has a point solution for that but how many of them have nothing in place.
Peter Brereton: Yeah, it is largely greenfield, and it's not that we don't overlap a bit with point solutions. I mean, there are solutions that are focused really on the pharmacy buy side, that are, in essence, sort of drug portals to help hospitals buy the drugs they need. And then there's other solutions that are sort of dispensing cabinets and hardware to manage the drugs and sort of, try to at least make sure that you're only sort of spitting out the drugs to the right clinician with the right authorization for the right patient, etc. We seem to be, at this point, the only player in the market that is again offering an end-to-end platform that goes all the way from forecasting and demand planning through the procurement process And then, you know, just in time, dispensing them out to the various hospital locations and right to the patient bedside.
Yeah. It's it is largely greenfield because and it's not that we don't overlap a bit with point solutions. I mean, there are solutions that are focused really on the pharmacy buy side.
That you know are in essence sort of drug portals to help.
Hospital networks by the drugs they need.
And then Theres other solutions that are sort of dispensing cabinets and hardware to manage to manage the drugs and sort of.
Try to at least make sure that you are only sort of splitting out the drugs to the right clinician with the right authorization for the right patients et cetera.
Right.
But.
We seem to be at this point would be the only player in the market that is again offering an end to end platform that goes all the way from forecasting and demand planning through the procurement process to the.
We're receiving managing our central pharmacy, with 340, <unk> price management, which that alone just that whole 340, <unk> price management things worth millions.
And then.
Just in time dispensing out to the various hospital locations and right to the patient bedside. So so nobody else is covering that full end to end picture.
Peter Brereton: So nobody else is covering that whole end-to-end picture, and I think that's really why we're starting to see the kind of momentum building in this market that we are seeing. Great to hear. And then, just lastly, for me on the partner side, you know, I appreciate your comments around, you know, big, you know, implementation, timing shifts, quarter to quarter. But I am curious, you know, how much more of the services load is being taken on by implementation partners? And then, secondly, on the partner side, maybe you can touch on Oracle. I think previously you alluded to maybe a shifting of the nature of the relationship there. So, I'm curious for any update on that. Yeah, there are a couple of comments there.
I think that's really why we're starting to see the kind of momentum building in this market that we're seeing.
Great to hear and then just lastly for me on the partner side.
David Your comments around you know big.
Implementation timing quarter to quarter, but I am curious how much more of a services allowed is being taken on by implementation partners and then secondly on the Americans.
Well I think previously you had.
Alluded to maybe shifting of the nature of that relationship there. So curious for any update on that front.
Yeah, there's a couple of comments here I mean in terms of partners in general.
Mark J. Bentler: I mean, in terms of partners in general, you know, they continue to have a significant influence on the pipeline. But from the standpoint of how much of the implementation load they're carrying, that's always harder to measure, just because, of course, that revenue doesn't flow through our books. But when we look at the number of people involved in the market, you know, it looks to us as though our partners right now are carrying roughly 30% of the implementation workload, and that number is rising.
They continue to risk with significant influence on the pipeline.
From the standpoint of how much of the implementation of load they're carrying that's always harder to measure just because of course that revenue doesn't flow through our books, but when we look at sort of the number of people involved in there in the market.
It looks to us as though they're our partners right now are carrying roughly 30% of the implementation of workload.
And that number is rising.
Mark J. Bentler: So I mean, even when you see our staff's revenue rising at the rate that it's rising and yet look at our professional services growth, you can see that more and more of that work is moving into partners. But at this point, it's still only about, and this is only an estimate, but we estimate that it's about 30% of the total work at this point. You're in terms of Oracle. I mean, we continue to have a great partnership out in the field with Oracle. We're finalizing interfaces to the Oracle platform for so there will be, you know, standard standardized, out of the box supported interfaces to that platform.
So I mean, even when you see our SaaS revenue rising at the rate that it's rising and you have to look at our professional services growth you can see that more and more of that work is moving it to partners, but at this point, it's still only about and this is only an estimate but we estimate that it's about 30% of the <unk>.
Total work at this point.
In terms of Oracle I mean, we continue to have a great partnership out in the field with Oracle, we're finalizing interfaces to the Oracle platform before the so there'll be standard standardized out of the box supported interfaces to that platform.
Mark J. Bentler: And they continue to be a great, great partner with us in the field, particularly in health. Great, that's information I can... All right, thanks, Gavin. Thanks, Gavin.
And they continue to be a great day.
Great partner with us in the in the field, particularly in health care.
Great that's it for me thanks.
Alright, Thanks, Kevin Thanks, Kevin.
Our next question comes from John Chow.
Operator: Our next question comes from John Shao, with National Bank. Please proceed. Hey, good morning, and thanks for taking my question. So Peter, could you maybe talk about your customers this quarter in terms of their size, the type of deployment they're having, and where they're from, your partners, channels, or internal? Sure, I mean the internal. Let me see. Show. Two of the wins this quarter were in the state of Texas. I'm not going to go much beyond that because then I'd be saying specifically which ones they were, but they were point of use OR, cath lab, and general supplies projects that we won down in the state of Texas. One was a very nice win in Canada, out in British Columbia.
With National Bank. Please proceed.
Hey, good morning, and thanks for taking my question. So Peter could you maybe talk about your customer win this quarter in terms of their size the top deployment, they're having and where they are from your partners channels or internal.
Sure I mean the.
Yes.
Let me see.
So two of the wins this quarter were in the state of Texas.
I'm not going to go much beyond that because then I'd be saying, specifically, which ones. They were but they were a point of views.
Oh, our Cath lab general supplies.
Yes.
We went down in the state of Texas, One was a very nice win in Canada.
It was actually in British Columbia.
And.
Peter Brereton: And that was of a similar nature to the two down in Texas. Partners were involved in... I believe all three of those, certainly two out of the three partners were quite substantially involved. From a size standpoint, they were fairly typical initial deals, right around our, if I look at the average of the three deals, they'd be right around our average healthcare size now. Now, I'm trying to remember now. You had a string of questions there, did I cover them? Yes, yes. Thank you so much for that.
That was of a similar nature to the to the two down in Texas.
Partners were involved in.
I believe all three of those certain two out of the three.
Partners were quite substantially involved.
<unk>.
From a size standpoint, they were fairly typical initial deals.
Right around or if I look at the average of the three deals that would be right around our average.
Our average.
Health care size now.
The.
I'm trying to remember now you've had a string of questions. There did I kept rhythm.
Yes, yes. Thank you so much for that and for the SaaS growth. This quarter, how much of that is coming from existing customers versus new because you still have a pace that customers on maintenance contracts. So how long do you think that may take time to.
Peter Brereton: And for the SaaS growth this quarter, how much of that is coming from existing customers versus new ones? Because you still have a base of customers on maintenance contracts. So how long do you think it's going to take them to fully transition to SaaS? And how should we think about their acceptance rate? Yeah, so the answer is yes. Just want to make sure I'm off mute.
To fully transition to SaaS and how should we think about the acceptance rate.
Yeah.
So the yes.
Yeah sure just want to make sure I'm off mute yeah.
Mark J. Bentler: Yeah. Yeah, so the new business in the bookings in the quarter was, It was a little bit less than 50%; it was only about 40% new business and roughly 60%, you know, expansion and migration business. In terms of how those migrations are going, you know, in healthcare, we're, you know, we've got much more of the migration has already happened, you know, in the last prior 12-month period ending Q3 of fiscal 23. We had quite a bit of migrations that happened in that period.
Yeah, so the new business in the in the bookings in the quarter was.
It was a little bit less than a 50%, it's only about 40% new business and and.
Roughly 60% expansion and migration business.
In terms of like how those migrations are going you know in health care, where where you know we've we've got much more of the migration has already happened in the last in the last the prior 12 month 12 month period, ending Q3 of fiscal 'twenty, three we had quite a bit of migrations that happened in that period.
Mark J. Bentler: So the pace of migrations there is slowing down because, you know, what's left in our base of ARR from legacy maintenance and support is getting smaller on the healthcare side. There are still some more migrations that will happen there, and I think they'll probably continue to happen over the next couple of years, but it's getting quite tapped out there. On the complex distribution side, it's a different story, you know, still a big chunk of our maintenance and support revenue is complex distribution, and those are ripe to migrate. And like I mentioned a little bit earlier, over the last couple of quarters in particular, we've seen some real interesting movement there on migrations out of complex distribution, but I think the tail on that migration, you know, turn is definitely, you know, it's And we'll probably be talking about that for, I wouldn't be surprised if we're talking about that for, you know, four or five years.
So that the pace of migrations there is slowing down because you know what's left in our base of a R. R from legacy maintenance and support as is getting it's getting smaller on the healthcare side.
There's still some more migrations that'll happen there and I think they'll probably continue to happen over the next couple of years, but it's getting it's getting quite a bit tapped out there on the complex distribution side. It's different it's a different story you know still a big chunk of of our of our maintenance and support revenue is complex distal.
And those are ripe to migrate and like I mentioned a.
A little bit earlier.
Last couple of quarters in particular, we've seen some real interesting movement. There on on migrations out of out of complex distribution, but I think the tail on that migration.
<unk> is is definitely.
Definitely multiyear so I mean, we'll probably be talking about that for I wouldn't be surprised if we're talking about that for you know four.
Four or five years.
Okay got it and last question from me is regarding the Heartware continue to post strong results I know, it's not part of the core growth story, but could you maybe put us the direction of the Hartford going to 2025.
Mark J. Bentler: The last question for me is regarding the hardware continuing to post strong results. I know it's not part of the core growth story, but could you maybe point us in the direction of the hardware business going to 2025? Yeah, I mean, 2024 was a substantial, a substantial year, you know, a lot of a lot of projects in in, in, hospital projects were delivering, you know, we delivered a lot of hardware there. Q3 was a, the one we just reported was, was pretty high watermark on that part of the business. And you know, they had some of the prop tech hardware in there and some some storage stuff, mostly healthcare-related stuff, driving that, you know, as hospitals roll out into different, you know, different rooms and different, different theaters and additional hospitals, you know, the onsite hardware tends to deliver.
Yeah, I mean 'twenty 'twenty four was it was it was a substantial a substantial here and a lot a lot of projects and in hospital projects. We're delivering you know we delivered a lot of hardware in their Q3 was a dumb one we just reported was was pretty high watermark on on.
On that part of the business and had some of the prop tech hardware in there and some storage stuff, mostly health care related stuff driving that.
As hospitals roll out and to and the different you know.
Different rems and different different theaters and additional hospitals.
The onsite hardware.
It tends to deliver.
Mark J. Bentler: So it'll really depend on, you know, project, it's kind of variable; it'll depend a lot on project timing, because hardware tends to deliver on the back end of projects. And so it'll, it'll, it'll really depend on, you know, on timing, there. So it's a bit hard to, I know, it seems a bit evasive, but it's, as we always say, that's notoriously, sort of hard, hard to call. I wouldn't expect, you know, a significant upward trend on hardware. When we think about that, we think about it, you know, generally, a little bit, you know, a little bit flatter growth, but maybe not, you But we'll, we'll see, you know, it really depends on the projects, the type of projects that are moving, whether the networks decide to buy hardware from us or, or, or independently.
So it'll really depend on you know project. It it's kind of variable it'll depend a lot on project timing that hardware tends to deliver you know on the on the backend.
Of projects.
And so it'll it'll it'll really depend on on you know on timing there sorry, it's a bit hard to another it seems a bit evasive, but it's it's as we always say that's notoriously.
Sort of hard hard to call I wouldn't expect.
You know a significant upward trend on hardware you know when we think about that we think about it.
Generally you know of.
Little bit you know a little bit flatter growth, but maybe not you know not substantial growth, but well, we'll see you know it really depends on the projects the type of projects that are moving.
Whether the the network's decided to buy hardware from us or or or independently.
Mark J. Bentler: So there's quite a few variables there, John stands for Color at the top of the line. Thank you. Gentlemen, there are no further questions at this time. OK. Well, thank you all for joining us for these financial results on this call. And, as always, if you have additional questions, please don't hesitate to reach out to Mark or me, and we'll look forward to talking to you sometime around the end of June when we release our Q4 numbers. Thanks, and have a great day. That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.
So there's quite a few variables there John.
Thanks for the color of copper line.
Thank you.
Gentlemen, there are no further questions at this time.
Great well. Thank you all for joining us for these financial results on this call and as always if you have additional questions. Please don't have helped or hesitate to reach out to Mercury Ryan We will look forward to talking to you sometime.
Sometime around the end of June when we release, our Q4 numbers.
Thanks, and have a great day.
Yeah.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.
Okay.
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Yeah.
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Uh huh.
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Yes.
Yes.
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